TaxTMI 
TaxTMI 
2010 (8) TMI 947
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....002 (hereinafter referred to as the Act of 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....
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.... 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 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 Po....
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...., 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 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 detail....
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.... 2 Glenmark 22.12.06 100 62452 3 Honeywell 23.02.07 26.02.07 75 210 285 127340 356132 483472 4 Idea Cellular 12.02.07 344 25456 5 Larsen & Toubro 26.06.06 28.06.06 18.07.06 BONUS 50 25 50 125 250 105116 51522 10330 0 166968 6 Power Finance Corp 01.02.07 136 11560 7 Tata 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 befor....
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....riman Point, Mumbai. SEAL To (1) Shri Umesh Bangur, Bldg.No.11-B, Flat No.501,502, Kalpak Estate, Antop Hill, Mumbai - 400 037. (2) Shri Radhamohan J. Lakhotia, A:4/502, Alak CHS Ltd., Sector-19 A, Nerul, Navi Mumbai -400 706. (3) M/S EV Homes, 303, Vardhama Chambers, A-Wing, Sector-17, Vashi, Navi Mumbai- 400 703. With further directions to M/s. E.V.Homes that if the title of this property is not transferred to Shri Radhamohan J. Lakhotia, no further transfer to be allowed and the advance of Rs. 11 lakhs 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....
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....Account No.1601480000009417 held with Infrastructure Leasing and Financial Services Ltd., Mumbai as per enclosed annexure Nil Smt. Asha Lakhotia. ISSUED AT MUMBAI 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, Antophill, Mumbai - 400 037. (2) Smt. Asha Lakhotia, A:4/502, Alak CHS Ltd., Sector-19 A, Nerul, Navi Mumbai -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 ....
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....e of 200 kgs. of cocaine, which is the subject matter of complaint under NDPS Act dated 8th December, 2006. It has placed reliance on section 23 to buttress this opinion. It has also adverted to section 2(u), which is very wide and would cover any person even if he is not accused of a scheduled offence or not directly involved in the commission of such scheduled offence. It opined that it is a notorious fact of which a judicial notice can be taken that in any illegal activity one gets paid after performing his role successfully. The cocaine was successfully loaded and smuggled out of Ecuador and reached India. The overseas persons have carried out 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 wa....
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....oceeds of crime were likely to be concealed, transfered and dealt with in such a manner that may result in frustrating any proceedings relating to confiscation of such proceeds of crime. On that finding, the provisional attachment order was directed to be continued during the pendency of the proceedings relating to scheduled offence before the Court and to become final after the guilt of the person is proved in the trial and order of such trial Court becomes final. We think it apposite to reproduce the relevant extract of the decision of the Adjudicating Authorities, which reads thus: "13. There are four firms involved in this smuggling of Cocaine 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 bro....
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....e disposal of his brother in law Shri Umesh Bangur. It is also on record that the entire amount was transferred into the account of various firms and individuals for no economic reasons such as gifts, purchases of shares, etc. Thus the above suspected proceeds of crime having changing hands with Chartered Accountants S/Shri R.P.Modani, Umesh Bangur and Radha Mohan Lakhotia. In reply, it has been contended on behalf of accused that Shri R.P.Modani has earned over US$ one million out of salary and business which is equivalent to Rs. 4.5 crores approx. Prma facie there is no reliable evidence therefore. Even assuming it to be reliable, the legitimate sources of the 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 tr....
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....h may result in frustrating the proceedings relating to confiscation of such proceeds of crime. Accordingly, Appellate Tribunal confirmed the opinion of the Deputy Director as well Adjudicating Authority regarding provisional attachment of the properties in question. 6. This common decision is the subject matter of challenge in the present appeals. Notably, besides the three appeals before this Court from the Judgment under appeal, it is noticed that six other appeals filed by the other persons who were common to the transaction in question were also decided by the same common Judgment. For the time being, only three appeals have been filed by the above named appellants. 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 ....
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....nterest in, such property or assets, wherever located. The definition clauses also defines "scheduled offence" to mean the offences specified in Part A of the Schedule; or the offences specified in Part B of the Schedule, if the total value involved in such offences is thirty lakh rupees or more. In so far as the case on hand is concerned, it is common ground that it is covered by paragraph-2 of the Part A of the Schedule. We shall now turn to section 5 of the Act around which the entire argument revolves. Section 5 of the Act "as was in force" at the relevant time when the provisional attachment order was passed in March, 2007, the same read thus: 5. Attachment of property involved 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....
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....eds in the context of wording of Sub-section (1) of Section 5 to the effect that the said action can be resorted to only against a person who has been charged of having committed a scheduled offence. 10. Admittedly, the appellants are not named as accused in any scheduled offence. However, action has been resorted to against the properties in question referred to in the Provisional Attachment Orders which were incidentally in the hands of or possession of the Appellants, on the basis that the same are proceeds of crime. For, the same had originated from or its acquisition could be directly traced to amount received by the appellant from the account of one R.P.Modani who is a non-resident Indian and residing 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 th....
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....002. In our opinion, the thurst of section 5 is to attach every property involved in money-laundering irrespective of whether it is in possession of the person charged of having committed a scheduled offence or any other person- provided however it must be shown to be proceeds of crime and further, that 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 the Act. 12. Going by the definition of "person" occurring in Section 2(s) and on conjoint reading of section 2(u), which also refers to "any person"; coupled with the purpose and intent for which the enactment has been brought 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 th....
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....legislature, there was no reason to insert clause (a). In that case, the Legislature would have simply provided for any person who has been charged of having committed a scheduled offence and in possession of any proceed of crime, such proceeds of crime can be attached and confiscated, subject to fulfillment of the specified conditions. 13. The Appellants however, have placed emphasis on the expression "such person" used in clause (b) of section 5(1) of the Act. According to them, the word "such" is prefix to the word "person" in clause (b). That is not superfluous, but is ascribable to the person referred to in clause (a). Which means that even clause (a) deals with person who has been charged of having committed a scheduled 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....
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....Court constituted under the NDPS Act. In so far as the person who is not named in the scheduled offence, there can be no question of filing of any report or complaint for taking cognizance. That stipulation has no application to the person who is not a person having been charged of a scheduled offence. The view that we propose to take is reinforced from the purport of section 3 and 4 of the Act of 2002. The same deal with the offence of money-laundering and punishment for money-laundering respectively. Both these provisions, even on strict construction, plainly indicate that the person to be proceeded for this offence need not necessarily be charged of having committed a scheduled offence. For, the expression used is "whosoever". 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 off....
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.... of 2002 effected by the Prevention of Money-Laundering (Amendment) Act, 2009 (Act 21 of 2009) would also throw light on the point in issue. According to him the amendment to proviso below sub-section (1) of Section 5 is only declaratory and clarificatory. However, we cannot rest our conclusion on the basis of the amended provision which had no application to the case on hand at the relevant time. Accordingly, we do not wish to dilate on this argument any further. 15. We however, find force in the argument of the Respondents that the Act of 2002 has been enacted by the Parliament with intent to cause deterrence to the assets and properties which are derived and obtained from the proceeds of crime generated out of the act of crime mentioned 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 procee....
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....resorted to against the appellants under section 5, on account of reference made by NCB, Mumbai to the Director of Enforcement for investigation under the Act of 2002. The reference was the consequence of the reported scheduled offence in respect of which complaint was filed by the NCB, Mumbai before the Court of Special Judge for NDPS cases, Greater Mumbai on 8th December, 2006. The said case pertains to seizure of 200 kgs of cocaine on 3/4 June, 2006 from a container originated from Ecuador, South America declared to contain teak wood imported by M/s. OPM International Pvt.Ltd. The importer placed the order for supply of the said consignment with M/s. Megha International Pvt.Ltd. Singapore and the consignment was shipped from Ecuador. When the consignment 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....
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....und to have been transferred to various individuals including relatives and firm for no economic reasons by placing the funds at the disposal of Shri Umesh Bangur in the form of signed blank cheque leaves. The modus operandi adopted by way of handing over signed blank check leaves to him. Part of the said checks alongwith some pay-in-slips and signed blank check leaves of SB NRO A/c. No. 6.106.197 (old A/c. No. 27) jointly held by said Shri R.P. Modani and his wife Smt. Trupti Modani with M/s. Bharat Overseas Bank, Fort Mumbai were recovered from the residence of Shri Umesh Bangur during the search of his residence by NCB. Thus the said Shri Umesh Bangur was found to be in possession and control over the money lying in the said accounts. The details of transfer of 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....
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....on to the consignment in which cocaine was seized. For all these reasons, the opinion formed by the Authority that the remittances in the NRE account of R.P.Modani was the proceeds of crime is reinforced. After having recorded this finding, the Appellate Tribunal proceeded to hold that there was sufficient material to make out prima facie case that all appellants have received proceeds of crime from the same account of R.P.Modani. The Appellate Tribunal has also adverted to the fact that offence is already registered against the appellants under section 3 read with section 4 of the Act of 2002 in respect of which process has been issued to the appellants. The said order issuing the process has been confirmed right up to the High Court. In the circumstances, the Appellate 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....
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....f R.P.Modani by way of gift, no other justification is offered. The fact that the amount has been disbursed from NRE Account and such remittance is permissible in law does not and cannot legitimise the transaction, until it is established that the amount so gifted by R.P. Modani itself was not tainted funds. The real question is whether the funds in the account of R.P.Modani were tainted or otherwise. The burden to prove that fact is on the appellants themselves, by virtue of Section 24 of the Act. The argument of the appellants that the provisions regarding presumption and burden of proof will have no application as the said Shri R.P.Modani or for that matter M/s.Royal Global Exports Pte. Ltd. has still not been charged of having committed a scheduled offence, is of no avail. 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. T....
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....tached, was proceeds of crime. Thus understood, from the circumstances spelt out in the order of attachment as well as by the Adjudicating Authority and has been upheld by the Appellate Tribunal, the action under section was inevitable. There is material on record which goes to show that prima facie link is established that the properties attached are proceeds of crime and the so called gifts/money received by the appellants from R.P. Modani were not from the legitimate source. At this stage, it is enough to consider whether the prima facie view so expressed by the Authorities below is a possible view or manifestly wrong. In our opinion, it is not possible to take a different view of the matter. If so, keeping in mind the observations of the Apex Court in the case of Mamad Hassam 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 ....
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....tted that he was in possession of signed blank cheque leaves of the said NRE and NRO accounts of R.P.Modani and that he was transferring money from the said NRE account by using the signed blank cheques. He also stated that by virtue of having signed blank cheques, technically he was in possession of the money in the account of R.P.Modani and he could have transferred the same, if he wanted, though he did not do so. Notably, on the basis of the case made out in the said complaint the trial Court has already issued process against the appellants. The appellants have unsuccesfully challenged the same right upto this count. The fact that the said orders have been allowed to become final is not in dispute at all. It presupposes that prima facie material on record to proceed against the 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 wh....