TaxTMI 
TaxTMI 
2015 (12) TMI 1083
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....of M/s. Global Trade Finance Limited, Coimbatore, availed loan facilities to the tune of Rupees Fifteen Crores. On coming to know of this fraud, one B. Surendran, Vice President and Branch Head of M/s. SBI Global Factors Limited, Coimbatore lodged a complaint against the said R. Manoharan, Proprietor of M/s. Bhagavathi Textiles Mills, G. Srinivasan, S. Arivarasu and others. The said complaint was registered on 07.10.2010 in FIR No.RC.09(E)2010-BS& FC/BLR under Sections 120-B r/w. Sections 420, 467 and 471 of IPC and Section 13(2) r/w. Section 13(1)(d) of the Prevention of Corruption Act, 1988. After investigation by concerned Police, CBI, BS & FC Bangalore, filed charge sheet in C.S.No.6 of 2011 dated 26.07.2011, before the Court of Special Judge, CBI against R. Manoharan, Proprietor of non-existent M/s. Bhagavathi Textiles Mills, G. Srinivasan, S. Arivarasu, K. Vignesh and others for the offences committed under Sections 120(B) r/w. Sections 420,467,468 and 471 of IPC and Section 13 (2) r/w Section 13(1)(d) of Prevention of Corruption Act, 1988 before the Court of Special Judge, CBI cases, Coimbatore. (ii) In the investigation, one G. Srinivasan was found to be main accus....
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....ement corroborated this statement of G. Srinivasan. P. Venkatachalapathy, P. Rajendiran and K. Vignesh in their statement stated that the lands referred to above belonged to G. Srinivasan and they are Benami owners. As per the instructions of G. Srinivasan, they executed power of attorney appointing P. Ayyappan as their power agent. They did not receive any money from G. Srinivasan and did not pay any money to G. Srinivasan or anybody else. (vi) G. Srinivasan filed a complaint against P. Ayyappan, Gunaseelan and appellants, which was registered as FIR No.57/11, dated 30.08.2011, by District Crime Branch, Dindigul, alleging that P.Ayyappan and his men, came to his office at Udumalpet and took all the documents and forced him to give power to P.Ayyappan, with regard to 165 Acres at Chathirappatti Village. K.Vignesh, P.Venkatachalapathy and P.Rajendiran also gave power to Ayyappan who using the power sold the lands to Gunaseelan. The said Gunaseelan in turn sold the property to the appellants. (vii) The Deputy Director of Prevention of Money Laundering Act, Directorate of Enforcement, respondent herein considering all the materials before him held that there are reas....
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....Deputy Director, PMLA, Department of Revenue 2010(5) Bom CR 625, held that property represent the proceeds of crime and are involved in Money Laundering and consequently up-held and confirmed the attachment of the properties. (xii) The appellants challenged the order of adjudicating authority dated 07.09.2012 by filing 7 appeals before Appellate Tribunal, Prevention of Money Laundering Act at New Delhi. The Tribunal by the judgment dated 05.09.2014 dismissed all the appeals. (xiii) Against the said order, the appellants have filed the Civil Miscellaneous Appeals. 4. At the time, the appeals were taken up for hearing, the learned counsel for the respondent raised a preliminary objection that the appeals can be heard and decided only by a Division Bench of this Court. The learned counsel for the Respondent relied on the judgment 1997(3) SCC 261 [L. Chandrakumar v. Union of India]. 5. Per contra, the learned Senior Counsel appearing for appellants contended that appeals are filed as per section 26 of the Prevention of Money Laundering Act, 2002. The said Section does not contemplate that only Division Bench can decide the appeal. When the intention of Legislatu....
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..... Srinivasan and not his Benamies. They were un-aware of the alleged fraud committed by G. Srinivasan and that the property in question is proceeds of crime. They are bonafide purchasers for valuable consideration. They verified the title of the property in the hands of Gunaseelan and then only, they purchased the property. The Appellants are agriculturists for generations owning lands and cultivating it. They were regularly getting income from cultivation. The sale consideration paid by them is legally obtained from the agricultural activities, sale of their lands acquired by inheritance and by partition. They also borrowed monies from friends and relatives. They are no way connected with G. Srinivasan. They are not Benamies or relatives or employees or Benamies of Manoharan and G. Srinivasan. There is nothing on record to show that their vendor Gunaseelan is Benami of G. Srinivasan and that he did not pay any sale consideration to G. Srinivasan through power of attorney Ayyappan. The respondent did not dispute the statement of Gunaseelan recorded under Section 50(2) of the PMLA 2002. Having accepted the purchase by Gunaseelan, it cannot be said that the property in question conti....
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....bal 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." 17(h) That Shri Rajendra Prasad Modani (R. P.Modani) is the brother-in-law of said Umesh Bangur and real brother of the appellant. He and his wife Smt. Trupti Modani (sister of Shri Umesh Bangur) both resident of Bangkok, found to have remitted a total amount of Rs. 8.45 crores on different occasions into the NRE account No. 6.104.1181 (old A/c. N o. 10233/4) with Bharat Overseas Bank) and the entire amount was found 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 chek leaves to him. Part of the said checks along with some pay-in slips and signed blank cheque leaves of SB NRO A/c. No.6.106.197 (o....
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....t 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. 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....
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....ings we cannot be oblivious of the fact that the Petitioners and others, whose assets are being subjected to the processes under Chapter III of the Act, are alleged to be closely related to or employees of the individual (s) who orchestrated the massive scam and that these persons had traded in the shares of SCSL (with a presumptive insider information) when those shares had a peak value, achieved on account of the criminal conduct of Sri Ramalinga Raju, and others. 40. Section 24 inheres on a person accused/charged of having committed an offence under Section 3, the burden of proving that proceeds of crime are untainted property. Section 23 of the Act enjoins a presumption in inter-connected transactions that where money-laundering involves two or more inter-connected transactions and one or more of such transactions is or are proved to be involving in money-laundering, then for the purposes of adjudication or confiscation under Chapter-III, the Act enjoins a rebuttable presumption that the remaining transactions form part of such interconnected transaction." 8. Per contra, the learned counsel for the respondent contended that; (i) The Proceeds of Crime ....
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....s:- "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 there of. Section 5 authorises the Director or any other officer not below the rank of Deputy Direct or authorised by Direct or 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 arrived at on the basis of material in his possession. That action is intended to freeze the proeeds of crime, which property, is derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence or value of any such property until the criminal action for the scheduled offence is taken to its logical end against the accused name therein. The proceeds of crime means any property or assets of every description, whether corporeal or incorporeal, movable or immovable, tangible or intangible and includes deeds and instruments evidencing titl....
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....o it in Section 3 of the Act of 2002. It essentially refers to the tainted property which is derived from criminal activity relating to a scheduled offence. Such tainted property may travel at different levels or by way of circular transactions for being eventually projected as untainted property in the hands of or possession of person other than the person charged of having committed a scheduled offence. That involves direct or indirect involvement of person or persons other than the person(s) accused of having committed a scheduled offence. Such other person(s) may directly or indirectly attempt to indulge or knowingly assist or knowingly is a party or is actually involved in any process or activities connected with the proceeds of crime and projecting it as untainted property. If such is the nature of activity, the Act of 2002 is intended to deal with the same sternly. In a given case a person can be in possession of any proceeds of crime without his knowledge that the property held by him is tainted. That person may not face prosecution under Section 3 of the Act of 2002. But even in his case, an order of attachment of the proceeds of crime can be invoked and later end up with ....
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....be proceeded with. The first category is any person who is in possession of any proceeds of crime. A person falling in this category need not be a person, charged of having committed a scheduled offence. The second category is of a person who has been charged of having committed a scheduled offence. Besides, being charged of having committed a scheduled offence, that person is found to be in possession of any proceeds of crime. In either case, it is open to take recourse to Section 5 of the Act if the specified Authority has reason to believe and reason for such belief is recorded in writing that the 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. Indeed, the proviso to Sub-section (1) as was applicable at the relevant time envisaged that no order of attachment can be made unless, in relation to the offence under paragraph 1 of Part A and Part B of the Schedule, a report has been for warded to a Magistrate under Section 173 of the Code of Criminal Procedure, 1973; or paragraph-2 of Part A of the Schedule, a police report or a complaint has been f....
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....nforced also from the purport of Section 8 of the Act of 2002. It provides that the Adjudicating Authority if has reason to believe that "any person" has committed an offence under Section 3, may serve notice upon such person calling upon him to indicate his source of his income, earning or assets, out of which or by means of which he has acquired the property attached under Section 5(1) of the Act. Once again, the legislature has unambiguously used the term "any person" and not person charged of having committed a scheduled offence. Indeed, any person referred to in this provision is a person who has committed an offence under Section 3 of the Act of 2002. He may not necessarily be a person charged of having committed scheduled offence. The proviso to Sub-section (1) thereof stipulates that where a notice under the said sub-section specifies any property as being held by a person on behalf of any other person, a copy of such notice shall also be served up on such other person. Suffice it to observe that even Section 8 contemplates adjudication to be done by the Adjudicating Authority after provisional attachment order is passed under Section 5 of the Act and upon receipt of compla....
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....movable, immovable, tangible, and intangible and includes deeds and instruments evidencing title to or interest in such property or assets wherever located. 39. The contention by the Petitioners that attachment and confiscation of proceeds of crime in possession of a person who is not charged of an offence under Section 3 or who has no knowledge or information as to the antecedent criminality are arbitrary and unfair legislative prescriptions in misconceived." 9. I have heard the learned Senior Counsel appearing for the Appellants and learned counsel appearing for respondent and carefully perused all the materials on record, the judgments relied on by the learned Senior Counsel appearing for the appellants and the learned counsel for the respondent and their arguments. 10. The following issues arise for consideration in these appeals:- (i) Whether the property in the hands of persons prosecuted for criminal offences and/or scheduled offence alone can be attached; (ii) Whether the property in the hands of subsequent bona fide purchaser without knowledge of crime purchased by legal consideration can be attached. (iii) Whether property purchas....
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....erson as a result of criminal activity relating to a scheduled offence or the value of any such property. Section 3. Offence of money-laundering - Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected [proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming] it as untainted property shall be guilty of offence of money-laundering. Section 4. Punishment for money-laundering - Whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine Provided that where the proceeds of crime involved in money-laundering relates to any offence specified under paragraph 2 of Part A of the Schedule, the provisions of this section shall have effect as if for the words "which may extend to seven years", the words "which may extend to ten years" had been substituted. Section 5. Attachment of property involved in money-laundering - Whether the Director or any other off....
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....2011] 164 Comp Cas 146 (AP) (supra) and paragraphs 17, 17h and 19 of the judgment reported in 2010 (5) Bom CR 625 (supra), as extracted above. 18. Per contra, the learned counsel for the respondent contended that by subsequent transactions, the property will not loose its character of 'proceeds of crime'. The persons, who purchased the property out of amounts obtained by fraud try to project the property as untainted property by subsequent transactions. In the present case, the appellants failed to prove that sale consideration paid by them was obtained by legitimate means. The appellants failed to file any application for filing additional documents at Appellate stage and has not given any reason for not filing those documents before Adjudicating Authority. 19. Considering the rival contentions and the judgment relied on by the learned Senior Counsel, I am inclined to accept the contentions of the learned senior counsel. 20. As per the Sections 23 and 24 of PMLA, 2002, there is a presumption that property in the hands of Appellants is proceeds of crime. But the appellants have a right to rebutt the said presumption. 21. The said sections read as follows:- ....
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....her he was connected with G.Srinivasan or the sale consideration is legitimate or not the property in the hands of Gunaseelan cannot be termed as proceeds of crime. 23. Further, the appellants have given statements under Section 50 of the Act. They have categorically stated that they possess agricultural lands, cultivate Gloriosa Superba seeds and sell the same and derive considerable income. They have named the persons to whom they have sold the Gloriosa Superba seeds and produced Bank statements. Some of the Appellants have stated that they sold their lands and borrowed monies to purchase the property in question. There is nothing on record to show that the respondent had verified these statements. Especially, the respondent has not verified the Bank statement produced by the Appellants to ascertain the genuineness of the same and whether the money deposited came from genuine purchasers or from the persons involved in fraud and Money Laundering. The respondent does not allege that Appellants are Benamies of G. Srinivasan or no sale consideration passed to the vendor. 24. Considering the materials on record and judgments reported in 2010 (5) Bom CR 625 (supra) and [2011] 164....
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....above arguments vehemently raised by the defendants, the complainant without disputing that the deals are bona fide heavily relied on the judgment of the Bombay High Court, dated 05.08.2010 in Mr. Radha Mohan Lakhotia v. Deputy Director, PMLA, Directorate of Enforcement, Mumbai in first appeal no. 527/2010. In this case it held by the Bombay High Court that the property bought without the knowledge that the same is tainted could be subjected to Provisional Attachment Order. 23. In the instant case the only point to be decided is whether the properties bought by any person against clean money and without any knowledge that properties have been acquired directly or indirectly through scheduled offence could be subject matter of provisional attachment order. 24. It is an admitted position that the Defendants (D-2 to D-8) had no knowledge that the properties in the hands of the vendor was proceeds of crime. They have also verified the papers relating to these properties before the deal. No point has been raised with regard to the financial capability of these Defendants to buy these properties. However, the Bombay High Court decision in Radha Mohan Lakhotia has been p....