TaxTMI 
TaxTMI 
TaxTMI 
2015 (12) TMI 1083
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....vailed 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 accused and he only availed the loan projecting R. Manoharan as....
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....jendiran 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 reasons to believe that property measuring 165 acres in the hands of appellants is part of procee....
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....re 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 Legislature is that appeal has to be decided by a Division Bench or by Full Bench, the same has been incorporated in the Appeal provisions itself. I....
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....re 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 continued to be proceeds of crime. The respondent can only proceed against the sale consideration as the property in question lost its character of proceeds of crime. Th....
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....e 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 (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 Ba....
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....nt 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 the appellants to further establish that the amount so disbursed from the account of R.P. Modani was equally untainted amount." (ii) [2011] 164 Comp Cas 149 (AP) : [2011] 108 SCL 491 (A....
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....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 in possession of the hands of persons can be attached pending conclusion of criminal proceedings. It is not correct to state that the property in the hands of persons prosecuted for criminal offences and/or scheduled of....
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....sions 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 title to, or interest in, such property or assets, wherever located which has been drived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence or the value of such property. The proceeds of crime may be o....
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....ly 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 confiscation there of depending on the outcome of the criminal action against the person charged of having committed a scheduled offence. The action of attachment is not in relation to a person as such but essentially to freeze the proceeds of crime. The interpre....
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....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 filed for taking cognizance of an offence by the Special Court constituted under Section 36(1) of NDPS Act, 1985. This proviso essentially is directed against the second category of person covered by Sub-section (1), namely, person who has been charged of having committe....
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....is 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 complaint under Section 5(5) of the Act. We are not referring to other provisions mentioned in the said Section 8(1), as we are dealing only with the case arising under Section 5 of the Act. Considering the above, we are of the considered opinion that there is no merit in the....
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....ed 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 purchased bona fide with legal sale consideration looses the character of proceeds of crime and the sale proceeds in the hands of vendor only can be attached. 11. Point No. 1:- The learned Senior Counsel for appellants contended that the proceedings initiated against appellants for provisional attachment of property in question ....
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....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 officer not below the rank of Deputy Director authorised by the Director for the purposes of this section, has reason to believe (there as on for such belief to be recorded in writing), on the basis of material in his possession, that- 14. There is no restriction in respect of person in possession of proceeds of crime. Section 5 does not restrict that property in the hands of persons involved in Money Laundering alone can be atta....
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.... 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:- "23. Presumption in inter-connected transactions Where money-laundering involves two or more inter-connected transactions and one or more such transactions is or are proved to be involved in money-laundering, then for the purposes of adjudication or confiscation (under section 8 or for the trial of the money-laundering offence, it shall unless otherwise proved to the satisfaction of the Adjudicating Authority or the Special Court), be presumed t....
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.... 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 Comp Cas 146 (AP) (supra), I hold that appellants have rebutted the presumption that the property in question is proceeds of crime. The respondent failed to prove any nexus or link of Appellants with G. Srinivasan and his benamies. Once a person proves that his purchase is genuine and the property in his hand is untainted property, the only course open to the respondent is to attach sale proceeds in the hands of vendor of the appellants and not the property in the hands of genuine legitimat....
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....y 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 pressed into service to make out a plea that the properties could be attached in such circumstances under the PMLA." Provisional attachment was sought to be continued only based on the judgment of Bombay High Court in Radha Mohan Lakhotia's case. 26. A reading of paragraphs 21 to 24 clearly reveals that both the Adjudicating Authority as well as Appellate Authority failed to properly appreciate the facts and findings in Radha Mohan lakhotia's case. In that case, the Department had placed substantial and acceptab....