2019 (9) TMI 426 - AT - Money Laundering

Tribunal overturns attachment order, finds property unrelated to crime.

Rajeev Jain, Kanchan Bala, Monika Jain Versus The Deputy Director Directorate of Enforcement, Jalandhar

The Tribunal allowed the appeals, setting aside the provisional attachment order and the adjudicating authority's order regarding the property in ... Money Laundering - Provisional Attachment of property - order to vacate the property - VAT refund availed on the basis of forged and fabricated documents - It is the contention of the appellants are that they were not a party before the adjudicating authority though they are the owner of portion of the property in question - HELD THAT:- The offences are of the year 2012- 13. Whereas the property in question was acquired in the year 2011 by Smt. Seema Garg. It is the contention of the respondent that the property in question has been attached as value thereof. There is no allegation that the property in question has been acquired out of proceeds of crime. When the case was registered the appellants and others have already purchased the property in question and in actual physical possession of the same. There is no rebuttal from the side of the respondent in this regard - The property in question was attached without affording opportunities of the appellants. The appellants are bona fide purchasers. In the present case, the case of the appellants are in a better footing as the property in question has been acquired prior to the alleged commission of offences by the husband of Smt. Seema Garg and there is no allegation that the proceeds of crime has been used in any manner to acquire the property in question - There is nothing on record to show that any prosecution complaint with respect to property in question has been filed. The provisional attachment order coupled with order dated 20.10.2016 of the adjudicating authority to the extent of property in question purchased by the appellants is set aside - application disposed off. Issues Involved:1. Validity of the notice issued under Section 8(4) of the Prevention of Money Laundering Act (PMLA), 2002.2. Ownership and attachment of the property in question.3. Bona fide purchaser status of the appellants.4. Applicability of the Supreme Court judgment in Suraj Lamp and Industries (P) Ltd. vs. State of Haryana.Issue-wise Detailed Analysis:1. Validity of the notice issued under Section 8(4) of PMLA, 2002:The appeals were filed against the notice dated 09.11.2016 issued under Section 8(4) of PMLA, 2002 by the Enforcement Directorate, which required vacating the property following the confirmation order dated 20.10.2016 by the adjudicating authority. The property in question was attached under Provisional Attachment Order (PAO) dated 09.05.2016 arising from ECIR no. ECIR/06/JLZO/2013.2. Ownership and attachment of the property in question:The property, 'Housing no. B-19-306 measuring 405 sq yards at Gehlewal, Major Sham Lal Road, Ludhiana,' was originally owned by Smt. Seema Garg and was sold in portions to the appellants before the initiation of proceedings by the Enforcement Directorate. The appellants argued that they were not party to the adjudicating authority's proceedings and had purchased the property through registered sale deeds after clearing the mortgage with the Bank of India. The Enforcement Directorate's attachment was based on the claim that the property was still legally owned by Smt. Seema Garg at the time of attachment.3. Bona fide purchaser status of the appellants:The appellants contended that they were bona fide purchasers who had paid the full consideration through legal means and had no knowledge of any criminal activity associated with the property. They argued that the property was not acquired from proceeds of crime and that the sale transactions were genuine. The Tribunal noted that the property was acquired by Smt. Seema Garg in 2011, before the alleged fraudulent VAT refund claims made by her husband in 2012-13. The Tribunal found no evidence that the appellants were involved in any criminal activities or that the property was purchased using proceeds of crime.4. Applicability of the Supreme Court judgment in Suraj Lamp and Industries (P) Ltd. vs. State of Haryana:The respondent relied on the Supreme Court judgment in Suraj Lamp and Industries (P) Ltd. vs. State of Haryana, arguing that the property transaction through power of attorney was invalid. However, the Tribunal found that the power of attorney was executed genuinely to facilitate the sale and not for any fraudulent purpose. The Tribunal referred to the Delhi High Court judgment in Pace Developers and Promoters Pvt. Ltd. vs. Govt. of NCT, which clarified that genuine transactions through power of attorney are valid if registered properly.Conclusion:The Tribunal concluded that the property purchased by the appellants was not connected with proceeds of crime and was acquired before any alleged offenses by Smt. Seema Garg's husband. The provisional attachment order and the adjudicating authority's order dated 20.10.2016 were set aside to the extent of the property in question. The appeals were allowed, and all pending applications were disposed of without any cost.