TaxTMI 
TaxTMI 
2010 (8) TMI 947
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....2002 for the sake of brevity) read with Notification No. GSR.441(E)dated 1st July, 2005. 3. Briefly stated, sometime on 8th December, 2006, a complaint was filed by the Mumbai Zonal Office of the Narcotic Control Bureau(for short "the NCB") bearing Complaint No. NDPS Spl. Case 192/2006. As a consequence of the said complaint, the Deputy Director, incharge of Mumbai Zonal Office, issued the impugned provisional attachment orders against each of the Appellants. He not only took into account the copy of the abovesaid complaint but also statements of bank accounts, report forwarded by the NCB and statements of the Appellants. After considering the material available with him he was of the view that action against the Appellants and others ought to proceed under the provisions of the Act of 2002. For, he had reason to believe that the Appellants herein as well as others were in possession of properties of crime. Further, they had directly or indirectly indulged in money laundering. They had invested the money received by them through the specified Demat account held with Infrastructure Leasing and Financial Services Ltd., Mumbai. Further, he was of the opinion that the stated propertie....
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....sional Attachment Order is passed in this case at this crucial stage, it may result in frustrating proceedings relating to confiscation under Chapter III of the Prevention of Money Laundering Act, 2002(15 of 2003) NOW THEREFORE, I, order that the properties mentioned in the Annexure to this order are provisionally attached for a period of 90(ninety days) and further order that you shall not remove, part with or otherwise del with such properties without my previous permission. Details of Properties Movable properties Immovable Properties 1 Shares held by Shri Radhamohan Lakhotia in the Demat Account No. 1601480000009377 held with Infrastructure Leasing enclosed annexure Nil Infrastructure Leasing enclosed annexure. SEALED AND SIGNED ON THIS 9TH DAY OF MARCH, 2007 Sd/- 09.03.2007 (ATUL VERMA) DEPUTY DIRECTOR MUMBAI ZONAL OFFICE DIRECTORATE OF ENFORCEMENT, 2nd floor, Mittal Chambers, Nariman Point, Mumbai. SEAL To (1) Shri Umesh Bangur, Bldg.No.11-B, Flat No.501,502, Kalpak Estate, An....
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.... (a) the Shri Umesh Bangur, Bldg. No.11-B, Flat No.501, 502, Kalpak Estate, Antophill, Mumbai -400 037 is in possession of proceeds of crime; that part of the said money has been parked with Shri Radhamohan Lakhotia, that the said Radhamohan Lakhotia had invested the money so received in shares through Shri Radhamohan J. Lakhotia(HUF) in the Demat Account No.16014800000048216 held with Infrastructure Leasing and Financial Services Ltd., Mumbai which is more particularly detailed below; (b) that the said Shri Umesh Bangur has been charged of having committed the schedule offence under section 23 & 27 (a) of the NDPS Act, 1985 in Complaint No.NDPS Spl. Case No.192/2006 dtd. 08.12.2006 filed by the Mumbai Zonal Office of the Narcotics Control Bureau; and (c) that the said Shri Umesh Bangur has invested the proceeds of crime through Shri Radhamohan Lakhotia for the purpose of laundering to project the said proceeds as untainted property; that the properties detailed below are likely to be concealed, transferred or dealt with in such a manner that, I have reason to believe that if no Provisional Attachment Order is passed in this case at this crucial stage, it may result in frustra....
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....ata Consultancy 26.06.06 BONUS 21.10.06 50 50 10 110 82788 0 10993 93781 8 Mutual Fund Franklin India Smaller Cos. 2199901736686 13.01.06 30000 300000 1152393 AND "PROVISIONAL ATTACHMENT ORDER-3/2007 (under sub-section(1) of Section 5 of the Prevention of Money ig Laundering Act, 2002) In exercise of authorization dtd.07.02.2007 issued by the Director of Enforcement under sub-section (1) of section 5 of the Prevention of Money Laundering Act, 2002 (15 of 2003) read with Notification No.GSR.441(E) dated 1st July, 2005, I, ATUL VERMA, Deputy Director, incharge of Mumbai Zonal Office make the following order: WHEREAS on the basis of material placed before me such as copy of complaint No.NDPS Spl.Case No.192/2006 dtd.08.12.2006 filed by the Mumbai Zonal Office of the Narcotics Control Bureau, statement of bank accounts, report forwarded by the Narcotics Control Bureau and statements of Shri Radhamohan Lakhotia in case of ECIR/04/MZO/07 dtd. 24.01.07 and on its examination, I have reason to believe- (a) the Shri Umesh Bangur, Bldg. No.11-B, Flat No.501, 502, Kalpak Estate, Antophill, Mumbai -400 037 is in possessio....
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....akhs along with interest or the appreciated rate should not be parted with. Copy to:- (1) Shri R.M.Sharma, Chairperson, Adjudicating Authority Chairperson, Adjudicating Authority, Room No.408, A-Wing, 4th Floor, Shastri Bhavan, Dr. Rajendra Prasad Road, New Delhi-110001. (2) The Director, Directorate of Enforcement, Head Quarters, NEW Delhi. (3) igThe Additional Director (PMLA), Directorate of Enforcement, Mumbai." IN APPEAL NO.529 OF 2010 "PROVISIONAL ATTACHMENT ORDER-4/2007 (under sub-section(1) of Section 5 of the Prevention of Money Laundering Act, 2002) In exercise of authorization dtd.07.02.2007 issued by the Director of Enforcement under sub-section (1) of section 5 of the Prevention of Money Laundering Act, 2002 (15 of 2003) read with Notification No.GSR.441(E) dated 1st July, 2005, I, ATUL VERMA, Deputy Director, incharge of Mumbai Zonal Office make the following order: WHEREAS on the basis of material placed before me such as copy of complaint No.NDPS Spl.Case No.192/2006 dtd.08.12.2006 filed by the Mumbai Zonal Office of the Narcotics Control Bureau, statement of bank accounts, report forwarded by the Narcotics Control Bureau and statements of Smt. As....
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....400 706. (3) M/s. Infrastructure Leasing & Financial Services Ltd.(DP:14800) IL & FS House, Plot No.14, Raheja Vihar, Chandivali, Andheri(East), Mumbai-400 072. Copy to:- (1) Shri R.M.Sharma, Chairperson, Adjudicating Authority Chairperson, Adjudicating Authority, Room No.408, A-Wing, 4th Floor, Shastri Bhavan, Dr. Rajendra Prasad Road, New Delhi-110001. (2) The Director, Directorate of Enforcement, Head Quarters, NEW Delhi. (3) The Additional Director (PMLA), Directorate of Enforcement, Mumbai." ANNEXURE TO ATTACHMENT ORDER Sr. Name of the Date of No. of shares Purchase value 1 Peerless Shipping 24.05.06 3601 583145 2 Glenmark Nov'06 feb 07 1620 931500 Total 1514645 4. As required by section 5(2) of the Act of 2002, the authorised Officer forwarded the copy of the Provisional Attachment orders alongwith the material in his possession to the Adjudicating Authority in the manner provided by the said provision. The Adjudicating Authority on receipt of the provisional attachment orders considered the question as to whether the provisional attachment orders w....
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.... their job successfully and must have received their payments. Such payments are not dependent on the final outcome of the operations i.e. whether cocaine has reached the indent final destination and has been sold or not. It has then analysed the factual position emerging from the record that M/s. OPM International Private Ltd. was regularly importing from Ecuador through the same route with the active involvement of the same persons and firms who are controlled by the close relatives and had close nexus with each other. It held that it was obvious that all payments in question were remitted from the account of R.P.Modani. Further, no reliable material was produced by the Appellants, who were obliged to do so, to persuade the authority to take the view much less prima facie view that money remitted from the account of Shri R.P.Modani was out of his legitimate earnings. On the other hand, the material on record would indicate that the amount in the account of Shri R.P.Modani was not legitimate. On this analysis the adjudicating authority opined that the money in question in the hands of the Appellants was proceeds of crime. It then adverted to three different stages before the prov....
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....viz. (i) M/s.OMP International Pvt.Ltd., Mumbai (ii) Mega International Pvt.Ltd., Singapore (iii) M/s.Royal Globel Exports Pvt.Ltd., Singapore, and (iv) M/s. SSMS Exports, Ecudor, S.A. The Managing Director of M/s. OPM International Pvt.Ltd. Shri Omprakash, Nogaja(accused No.1) in NDPS Cases is a ral brother of one of the Directors of M/s. Royal Globel Exports Pvt.Ltd. Shri Manek Maheshwari. The other directors M/s. OPM International Pvt.Ltd., Shri Umesh Bangur (defendant herein and accused No.2) in NDPS Case is real brother of the wife of Shri Manek Maheshwari i.e. Smt.Madhubala Maheshwari and Smt. Trupti Modani, wife of Sri R.P.Modani. Smt. Madhubala Maheshwari and Smt. Nirmala Biyani @ Neelu (W/o Shri Shambu Prasad Biyani, another director of M/s. Royal Globel Exports Pvt.Ltd.) jointly hold 74% shares of M/s. OPM International Pvt.Ltd. Shri Manek Maheshwari of Royal Global Exports had paid the freight charges of the consignment of timber in which Cocaine was seized, inspite of the fact that the consignor was M/s. Mega International Pvt.Ltd., Shri Rasha Mohan Lakhotia and Smt. Asha Lakhotia w/o Shri Radha Mohan Lakhotia and Sister of Shri R.P.Modani. 14. R.P.Modani is resid....
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....remittances of Rs. 8.45 crores is not justified. This is more particularly so because of his other investments i.e. holding of 49% equity in M/s. Trupti International Bangkok, holding shares worth 74 lakh Thal Bath etc. as required. Further the documents at page 4 and 5 of the compilation of documents annexed to the reply of defendant no.2 Shri Radha Mohan J. Lakhotia indicate the uneconomic transaction i.e. Smt. Madhubala Maheshwari and Mohit Maheshwari have transferred US$ One lakh each to R.P. Modani which in turn was transferred by him to his NRE A/C, which was placed at the disposal of Umesh Bangur and it was further transferred in the guise of gifts etc. As an upshot of the above discussion and findings it is held that the properties, detailed in the respective provisional attachment orders, which are the subject matter of the above detailed respective complaints, are involved in money laundering, consequently this Authority hereby confirms the attachment of the properties detailed in the respective provisional attachment orders. Order that the attachment shall (a) continue during the pendency of the proceedings relating to scheduled offence before a Court; and (b) become f....
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....pellants. The grounds which were urged before the Appellate Tribunal have been reiterated even before this Court. 7. Before we proceed to examine the same, we would deal with the scope of present appeals. The present appeals have been filed under section 42 of the Act of 2002. It provides that any person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the High Court on any question of law or fact arising out of such order. Indeed, going by this provision, it may appear that the appeal will have to proceed on question of law as well as fact as if it is a first appeal. However, considering the scheme of enactment since the appellants have exhausted one statutory remedy of appeal before the Appellate Tribunal against the order passed by the Adjudicating Authority, the remedy of appeal under section 42 of the Act of 2002 is in the nature of Second Appeal. However, we would not express any final opinion on this plea pressed by the Respondents. At the same time, we are in agreement with the argument of the Respondent that the findings on facts recorded by the Deputy Director, which has been confirmed by the Adjudicating Authority and in the appeal befo....
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....volved in money- laundering.-- (1) Where the Director, or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that-- (a) any person is in possession of any proceeds of crime; (b) such person has been charged of having committed a scheduled offence; and (c) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter, he may, by order in writing, provisionally attach such property for a period not exceeding ninety days from the date of the order, in the manner provided in the Second Schedule to the Income-tax Act, 1961 (43 of 1961) and the Director or the other officer so authorised by him, as the case may be, shall be deemed to be an officer under sub-rule (e) of rule 1 of that Schedule: Provided that no such order of attachment shall be made unless, in relation to an offence under: (i) Paragraph 1 of Part A and Part B of the Schedule, a report has been for....
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....ng in Bangkok since 1993-1994. He held NRE Account No.06-104-1181 and NRO account No.027 with Bharat Overseas Bank Ltd., Fort Branch, Mumbai. The activities of the said R.P.Modani has come under scanner after the seizure of 200 kgs. of cocaine. It is stated that the NCB is pursuing for registration of scheduled offence against him. That process has taken some time as R.P.Modani is resident of Bangkok. The said properties in the hands of the Appellants have been acquired by them out of the amounts received from the said accounts of R.P.Modani, who incidentally is related to the appellants. 11. The question is whether section 5 can be invoked against a person who is not named as an accused in the commission of a scheduled offence? Sub-section (1) of Section 5 will have to be read as a whole conjointly with the other provisions of the Act already referred to hitherto, including section 8 thereof. Section 5 authorises the Director or any other officer not below the rank of Deputy Director authorised by Director for the purposes of the said section to resort to action of "attachment of property" if he has reason to believe and the reason of such belief has been recorded in writing arr....
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....ught into force, accepting the argument of the appellants would result in a pedantic approach and limiting the plenitude of action of attachment and confiscation of proceeds of crimes only in the hands of the persons who have been charged of having committed a scheduled offence and none else. Whereas, the Act has come into being to prevent money laundering and to provide for confiscation of property derived from or involved in, money laundering and for matters connected therewith or incidental thereto. It is the outcome of the Political Declaration and Global Programme of Action, as annexed to the resolution S-17/2 adopted by the General Assembly of the United Nations at its seventeenth special session on the twenty-third day of February, 1990. It has come into being also on account of the Political Declaration adopted by the Special Session of the United Nations General Assembly held on 8th to 10th June, 1998 which called upon the Members States to adopt national money-laundering legislation and programme. The term "money-laundering" has the same meaning assigned to it in Section 3 of the Act of 2002. It essentially refers to the tainted property which is derived from criminal ac....
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....cheduled offence. It is not possible to countenance this submission. We are conscious of the fact that penal provisions should be strictly construed. At the same time, we cannot overlook the language of 34 section 5 as applicable at the relevant time. In our opinion, clause (a) refers to "any person"- whether he has been charged of having committed a scheduled offence "or otherwise". The only requirement is that that person should be in possession of any proceeds of crime. The governing factor is possession of any proceeds of crime by a person. Taking any other view may defeat the legislative intent. In as much as, a person who has been charged of having committed a scheduled offence can successfully defeat the object of the enactment of attachment and confiscation of the proceeds of crime by transferring it to some other person who is not so involved with him in commission of stated scheduled offence. In our opinion, on fair reading of section 5 (1) read with section 8 of the Act, it postulates two categories of persons against whom action of attachment of property can be proceeded with. The first category is any person who is in possession of any proceeds of crime. A person fall....
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....ver". The offence of money-laundering under section 3 of the Act of 2002 is an independent offence. It is committed if "any person" directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property. Further, it would create a piquant situation as a person who is not charged of having committed a scheduled offence even if can be proceeded for offence of money laundering and even if such person is in possession of any proceeds of crime, no action of attachment and confiscation of the proceeds of crime can be resorted to qua him- albeit the proceeds of crime are in his possession. If the argument of the appellants were to be accepted, even the expression "whosoever" appearing in section 3 and 4 of the Act will have to be limited to person who has been charged of having committed a scheduled offence. The object of the enactment of 2002 would be completely defeated by such approach. Besides, the view that we propose to take is reinforced also from the purport of section 8 of the Act of 2002. It provides that the Adjudicating Authority if ....
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....tioned in the schedule under that Act. The aims and objects for enacting the said act envisages as under : "The Prevention of Money Laundering Act, 2002 intends to make money laundering an offence under Section 3 thereof and provides for punishing which extends to imprisonment as well as imposition of fine under Section 4. This part, the scheme of the Act envisages attachment of all properties involved in money laundering, i.e. where the proceeds of the crime which fall within the scope of the Act have been invested in property-movable or immovable, tangible or intangible- and attempts have been made to show that the property is untainted." 16. We find force in the argument of the respondents that the legislation has predicated two parallel proceedings. One, with regard to the attachment of the properties derived and obtained from the proceeds of crime and its confiscation after the guilt of the person in schedule offence is established before the concerned Court. The second action contemplated by the Act is, prosecution and punishment for commission of offence covered by section 3 of the Act and upon being found guilty, impose punishment under section 4 of the Act. From the sche....
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....onsignment was intercepted, 200 kgs. Cocaine was recovered. In this connection, NCB, Mumbai arrested Shri O.P.Nogaja, Umesh Bangur, both directors of M/s. OPM International Pvt.Ltd. And Vijay A. Throve, Managing Director of M/s Mayur Clearing Agency, the Customs House Agent under NDPS Act, 1985. The department initiated investigation in the case when it was revealed that there were four firms involved in the smuggling of cocaine, namely, (i) M/s. OPM International Pvt.Ltd., Mumbai, (ii) M/s. Megha International Pvt.Ltd., Singapore, (iii) M/s. Royal Global Exports Pvt. Ltd., Singapore and (iv) M/s. S.S.M.S.Exports, Ecuador, S.A. It was revealed that all the three foreign based companies at Sr.Nos. (ii) to (iv) above were held by another holding company based in Singapore. It was further revealed that persons behind the said firms were not only common, but close relatives having interests in each others business. Inter-relation and nexus between them has been stated by the department as under : "(a) The Managing Director of M/s. OPM International Pvt.Ltd., Shri Om Prakash Nogaja(accused No.1 in NDPS case) is a real brother of one of the Directors of M/s. Royal Global Exports Pte.Lt....
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....the said money to different individuals and firms have been detailed in the complaint. It is evident that proceeds of crime has been transferred by Shri R.P. Modani and placed at the disposal of Shri Umesh Bangur which was further transferred in the guise of gift to close relatives viz. Shri Radha Mohan Lakhotia, Smt. Asha Lakhotia. Shri Shyam Sunder Modani and Shri Niwas Modani and also in the guise of purchase of shares of unlisted company, viz. M/s. Shubh Laxmi Syntex, for creating further layers to facilitate laundering of money. 18. We have already adverted to the order of provisional attachment and the same has been reproduced as a whole pertaining to the respective appellants. We have also reproduced the relevant part of opinion recorded by the Adjudicating Authority while confirming the order of provisional attachment. The Appellate Tribunal has upheld the opinion so recorded by the Authorised Officer as well as the Adjudicating Authority. That being concurrent finding of fact, needs no interference in the present appeals. We shall presently briefly indicate our reasons to sustain those decisions. The Appellate Tribunal has found that various parties i.e. companies, their ....
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....llate Tribunal has found that there was no infirmity in the order of provisional attachment issued by the Deputy Director and subsequently confirmed by the Adjudicating Authority. The view so taken by the Appellate Tribunal in our opinion, is a possible view. If the said opinion is to be upheld, the argument propounded by the Appellants that the provisional attachment order and confirmation thereof by the concerned authorities is on the basis of assumption and presumption falls to the ground. 19. We shall now revert back to the argument that the provisional attachment of properties is sans any material to show that the said properties are derived from the transaction of import of 200 kgs. of cocaine. Counsel for the Appellants vehemently argued that the Respondents have not been able to even remotely show that the properties under provisional attachment were acquired out of the sale proceeds of cocaine transaction in question, which in fact happened in June, 2006. Whereas the properties provisionally attached were already acquired by the respective appellants between November, 2005 to May, 2006. The argument though attractive has been rightly repelled by the Authorities below on ....
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.... In as much as, the fact whether R.P.Modani has still not been charged of having committed a scheduled offence will not extricate the appellants who have been named as accused in offence under section 3 of the Act of 2002. The burden of proof that properties in their possession are untainted properties, as per Section 24 is on the person accused of having committed offence under section 3 of the Act of 2002. The Appellants cannot absolve themselves by saying that the amount received by them was from the NRE account of Shri R.P.Modani. That is not enough. It was necessary for the appellants to further establish that the amount so disbursed from the account of R.P.Modani was equally untainted amount. 20. Suffice it to observe that there was enough material before the Authority as also the Adjudicating Authority to initiate action under section 5 of the Act of 2002 of provisional attachment of the proceeds of crime. The Apex Court in the case of Aslam Mohd.Merchant v/s. Competent Authority & ors. reported in JT in 2008(7) SC 446: 2008(14) SCC 186, in paragraph-29 has expounded that whenever a statute provides for reason to believe, either the reasons should appear on the face of the ....
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....m Bhagad & Ors. Vs. State of Gujarat & ors reported in (1996) 8 SCC 574, no interference is warranted. That was a case dealing with section 7(A) of Terrorist and Disruptive Activities(Prevention) Act, 1987, whereunder the properties to be attached was of persons, who were involved in the offence under that Act. It was reasonably believed that the property to be attached was derived from the commission of terrorist activities or was acquired by the process of terrorism. Even in that case, the decision which was impugned before the Apex Court by way of appeal under Section 19 of the TADA Act was an order of provisional attachment during the pendency of the trial in relation to the TADA offence. The Apex Court opined that at this stage, it will not be appropriate to interfere with the conclusion reached by the designated court. Following the same principle, we have no hesitation in rejecting the challenge of the appellants. Significantly, complaint has been filed under section 3 of the Act of 2002 against the appellants, being Case No.1 of 2008, before the Designated Judge under the Prevention of Money Laundering Act, 2002, Sessions Court, Mumbai, dated 25/8/2008. It gives graphic de....
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....e appellants for offence punishable under Section 3 of the Act of 2001. For the same reasons the opinion of the Authorities below arrived at for the purpose of passing order of provisional attachment of proceeds of crime in possession of the appellants herein would be unexceptionable. Taking any view of the matter, the satisfaction recorded by the Authority and confirmed by the Adjudicating Authority which has been upheld by the Appellate Tribunal, is founded on cogent material to justify the said opinion. As a result, no interference is warranted with the concurrent view taken by the three Authorities below on the factum of satisfaction and recording of reasons to believe that the properties placed under provisional attachment were proceeds of crime and that the same were likely to be concealed, transferred or dealt with in any manner, which may result in frustrating any proceedings relating to confiscation of such proceeds of crime. 21. The Appellate Tribunal has also noticed that there exists many enactments like The Smugglers and Foreign Exchange Manipulators(Forfeiture of Property) Act, 1976(SAFEMA), Terrorist and Disruptive Activities (Prevention) Act, 1987, the Prevention ....