TaxTMI 
TaxTMI 
2017 (8) TMI 798
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..../s J.M.D. Media Pvt. Ltd. Ahmedabad Rs. 1,89,00,000/- 2. Jay Bungalow, Ishavashyam Society, [Near Rupmadhuri Society, Nr. Lav Kush Society] Vastrapur, Ahmedabad situated at Survey NO. 398 (Paiki) of T.P. Sheme No. 5, Final Plot No. 213 (Paiki), Sub-Plot NO. 4/A (Paiki), 4/B (Paiki) and 4/C of Mouje Vejalpur of City Taluka. M/s Alive Hospitality and Foods Pvt. Ltd. Ahmedabad Rs. 2,15,00,000/- In the present case, we are concerned with property of serial no. 1 i.e. Vishal House. 2. The facts of the case - as submitted by the appellant - are as under: In 1991-92 Anand owner association (NTC) purchased a plot of land in an auction carried out by Income Tax Department and constructed a building thereon having 19 units. In 1992, the said 19 units were purchased by way of allotment and issuance of share certificates of Anand Owners Association by different persons Kantaben, Dipak S Mehta, Subhaschandra, Subhaschandra C Mehta HUF, Pradeep S. Mehta, Vishal Plastomer Pvt. Ltd., Drishtkumar D. Mehta, Jaikumar D Mehta, Vishal Kumar P. Mehta which included purchase of share certificate of 3 units of the said property by Shri Jagdish Ishwarbhai Patel, HUF (through its Karta....
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.... and to secure the competitive market value. Similarly other mortgaged properties were also put up for auction sale. 2.6 The appellant company gave bid for 16 units in Vishal House. Other investors gave their separate bids. The appellant's bid for Rs. 1,89,00,000/- was accepted. 2.7 On 04.09.2009, the SBI issued the sale certificate dated 04.09.2009 favouring the appellant company. Original title deeds were handed over by the SBI to the appellant and appellant was put in possession of the stated 16 units. Subsequently conveyance deed was executed between the SBI and the appellant company in respect of those 16 units that had been mortgaged. Conveyance deed as was executed was registered. 2.8 In October 2010, the appellant desired to sell those 16 units in Vishal House. Negotiations were held with Shri Jadish Ishwarbhai Patel, HUF, Shri Krushabh Jadishbhai Patel HUF and Shri Ankit Jadishbhai Patel HUF (respondents 4, 5 and 6.) who agreed to purchase it for a sum of Rs. 2,09,00,000/- 2.9 In August 2011, Public notice in respect of 16 units was issued in the newspaper inviting objections to the sale of mortgage units. Respondents No.4, 5 and 6 also got search conducted through....
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....ring the period 2005 to 2006 by abuse of their official position. 4. On 15.03.2012, Directorate of Enforcement on the basis of the report under section 173 Cr.P.C filed by the CBI allegedly initiated its own enquiry. It recorded statement of various persons under section 50 of the PML Act and collected various documents during the course of investigation. On the basis of the investigation carried out, the ED concluded that Vishal House and Jay Bungalow have been acquired out of the proceeds of crime and have been projected as untainted money. The ED also concluded that these proceeds of crime were likely to be concealed, transferred or dealt with in such a manner which may result in frustrating further proceedings i.e., confiscation etc. and therefore passed the provisional attachment order. 5. The Deputy Director then filed a complaint under section 5(5) of the Prevention of Money Laundering Act, 2003 seeking confirmation of the provisional attachment order. The complaint was registered as OC No. 133 of 2012. Notice of the complaint was issued and JMD Media Ltd. amongst others appeared before the Adjudicating Authority. After hearing, vide order dated 10th July, 2012; the Adjudi....
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....ting the appellant's contention that, when it was not charged for any scheduled offence and did not even have any knowledge of the activities of the persons who were charged under the charge sheet, there could be no action against any property of the appellant under the provisions of Section 5 the act and has failed to appreciate that the fining of the Adjudicating Authority in this regard is clearly contrary to the clear provisions of Section 5 of the Act. (iv). The Adjudicating Authority has erred in holding that the statements of the Directors of the appellant and that of the respondent no. 7 showed that all of them were consciously into activities of layering and integration of proceeds of crime and were involved in money laundering and were under the wings of the respondent no. 7. (v). The Adjudicating Authority has failed to appreciate that there is absolutely no connection or nexus, between the allegations made in the charge sheet dated- 26.11.2009 and the purchase of the Vishal House property by several persons in the year 1991 or the subsequent purchase of the subject property by the appellant in the year 2009 in the auction sale conducted by SBI and hence the subject pr....
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....odged on 31.01.2008, that is, much prior to the aforesaid amendment to the Schedule to the Act. Prior to its amendment, the Schedule to the Act did not contain the provisions pertaining to the offences alleged to have been committed as per the charge sheet (being offences under Sections 120B, 420, 468, 471 and 477A of the Indian Penal Code and Section 13 of the Prevention of Corruption Act) and hence the said offences were not "scheduled offences". In view of this also, the respondent no. 2 had no jurisdiction to provisionally attach the subject property. (ix). The Adjudicating Authority has committed an erred in relying upon Section 23 of the Act and holding that in the instant case, the presumption under Section 23 had not been discharged by the appellant. The Adjudicating Authority has failed to appreciate that, in the present case, the respondent no. 1 had not established any money laundering or any inter connected transaction of which any transaction was involved in money laundering and hence the said provision could not be applied to the present case. (x). The Adjudicating Authority has also wrongly in relying upon Section 24 of the Act and in holding that the burden in thi....
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....ower was classified as non-performing assets in terms of guidance and directives issued by RBI. 6. 19.09.2008 Under SARFESI Act, bank had taken over the possession of the aforesaid property. 7. 27.08.2009 The said property was put to auction/sale under SARFAESI Act, which was purchased by one Ms. JMD Media Pvt. Ltd. 8. 04.09.2009 After receipt the entire auction amount, SBI confirmed the sale in favour of the purchaser and issued sale certificate of even date 9. 05.09.2009 Sale certificate and original title deeds as well as peaceful possession were handed over to JMD Media Pvt. Ltd. 10. Appellants came to know of inclination of M/s. JMD Media Pvt. Ltd. and owners of other three units of the said properties to sell the same. 11. 30.06.2010 Chief Inspector of Registration, Gujarat State, Gandhinagar issued a Circular conveying that where properties have been attached under section 5(1) of the Prevention of money Laundering Act, 2002, the properties mentioned in the Attachment order should not be registered without prior approval of the concerned Department. 12. 13.12.2010 A Sum of Rs. 6,00,000/- was initially paid to M/s. JMD Media Pvt....
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....ts of letter dated 21.7.2011. 21. 04.01.2012 Appellants addressed a letter to the Joint Registrar, Ahmedabad-III explaining the position and requesting for registration of the Sale Deed. 22. 10.01.2012 Sub-Registrar, Ahmedabad-III addressed a letter to Enforcement Directorate seeking clarification. 23. 30.01.2012 As The Sale Deed Was Not Being Registered By The Sub-Registrar, Appelalnts Filed A Writ Petition Bearing SCA No. 1059 Of 2012 In The Hon'ble Gujarat High Court praying for various reliefs on which the Hon'ble Court was pleased to issue notice. 24. 15.03.2012 Joint Director, Enforcement was pleased to issue provisional attachment order no. 2 of 2012 attaching the property. 25. 11.04.2012 Joint Director, Enforcement filed a complaint bearing Original Complaint No. 133/2012 in provisional attachment order No.02/2012 under section 5(5) of prevention of Money Laundering Act, 2002. 26. 10.07.2012 Adjudicating authority was pleased to pass an order confirming the provisional attachment of property. 27. Appellants filed appeals challenging the said order in the Tribunal. 28. 09.10.2012 Appellants received a notice from the Dire....
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....timate sources. Similarly, these units were not proceeds of crime when these were mortgaged with the Bank to secure the loan taken by VEOL. These units were also not proceeds of crime at the time of taking over by the State Bank of India under Securitisation Act in September, 2008. The units can also not be construed to be proceeds of crime when bids were invited for sale. These units were purchased by the appellant for a consideration of Rs. 1,89,00,000/-. The source of this amount is traceable to loans received from different companies in 6 different trenches whose details are as below:- Rs. 10,00,000/- Rs. 17,00,000/- Rs. 48,00,000/- Rs. 18,10,000/- Rs. 2,15,000/- Rs. 67,80,000/- Rs. 26,00,000/- It is alleged by the appellant in the present appeal that all these payments were obtained from different and independent parties and cannot be construed to be the proceeds of crime. The details of the amounts so received have been given in the reply filed before the Adjudicating Authority and are at pages 51 to 59 of the paper book before the Hon'ble Tribunal. The statements of the ex-directors of the appellant were recorded under threat and duress and are of no consequen....
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....o believe and hence no material could have been placed before the Adjudicating Authority. The issuance of notice under Section 8 of the Prevention of Money Laundering Act, by itself was bad in law. 13. It is submitted by the appellant that offences under Sections 120B, 420, 471 and 477A of the Indian Penal Code and Sections 13 (2) of the Prevention of Corruption Act were not scheduled offences on the day they are alleged to have been committed. FIR was lodged 31.01.2008 and the offence if any ought to have been committed prior thereto. In fact, the allegation is that the loans were taken by adopting dubious means in 2005-06. The alleged offences came to be incorporated in the schedule by the amendment effective from 01.06.2009. Offence, if any, had been committed in 2005-06 and at that time these were no scheduled offences. The amendment of 2009 is not retrospective. 14. Even before the passing of the provisional attachment order on 15.03.2012, the property had been passed on to 3 HUFs as detailed in the memo appeal. The appellant being desirous to sell 16 units in Vishal House, negotiated with the 3 HUFs through their Kartas and the deal was struck at Rs. 2,09,00,000/-. A Public....
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....ion is coram non-judice. It is non nest-void ab inito. It's invalidity can be set up whenever it is sought to be enforced or acted upon. The defect of jurisdiction sticks at the very authority. 15. The submission of the appellant is that whatever was necessary for execution of the sale deed had already been done by it and nothing further remained to be done by the appellant. Only a ministerial work had to be carried out by the Sub-Registrar for registering the property. In addition to what has been submitted, the appellant also adopts the submissions made on behalf of the purchasers - Respondents 4, 5 and 6. 16. During the course of hearing, the appellant placing reliance on the said sequence of events /facts - vehemently pleaded that no allegation had been made against the appellant/defendant no. 4 i.e. JMD Media Pvt. Ltd on 10.12.2011. Mentioning further that the sub-registrar informed the appellant that the sale deed cannot be registered in view of notice dated 21.07.2011 raised by the Enforcement Directorate, attention was drawn to the fact that he was not way connected with M/s Vishal Exports Ltd and further argued that even if the sale deed had not been registered, the mer....
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....FR Software, etc. Smt. Falguni Bhatt was also director of other Vishal Group firms, i.e. Alive Hospitalities, VikalpRasayan, Mandakini Hydro Power, DF Hydro Power, etc. Her husband Rakesh Bhatt was also director of M/s. FFR Software, etc. along with Shri PravinHalwadiya. It revealed that the property i.e. Vishal House, Ahmedabad was owned by M/s VEOL & its Directors and relatives thereof. The subject property was auctioned by the State Bank of India and the same was purchased by M/s JMD Media Private Limited whose one of the director was Shri Pravin T. Halvadiya (childhood friend of Shri PradeepS.Mehta). During investigation it revealed that JMD Media Private Limited had received the funds from M/s VikalpRasayan Private Limited (Group company of VEOL). M/s VikalpRasayan Private Limited had received funds from M/s VEOL, Vishal Builders and VIOL. It is evident that to save from the clutches of PMLA, the property was purchased by so called JMD. It appears prima-facie that the same was purchased from the funds of M/s VEOL after doing interlink transactions. The fund flow chart in regard of the same is as below The fund flow from the de-facto owners and their other group firms to M/s....
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....pellant as well as the respondent. As regards the appellant's contentions that "reasons to believe" were absent in the instant case, a perusal of the show cause notice confirmed the arguments of the respondent that the reasons to forming to such believe was on the basis of sufficient material existing in the form of CBI Chargsheet alongwith accompanying documents as well as material gathered by the Joint Director through his own information including the statement of Directors of various companies do find place in the said showcause notice. The other contention of the respondent that the fact that the designated court had taken cognizance of the charge sheets filed lends further credence to the said "reasons to believe" as also a matter of word. 20. As regards the other contentions of the appellant that there was no evidence or material to show that the said property i.e. Vishal House had been purchased out of proceeds of crime, as it is a matter of record that the investigation revealed that Vishal Exports Overseas Limited (VEOL) had misused the credit facility given to it by Punjab National Bank and it was only on failure on the part of VEOL to the payment of the loan amount tha....
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..../party without prior approval of the Enforcement Directorate. In support of his contention that the said agreement dated 24.10.2011 was a sham document, the learned counsel for the respondent place reliance on the following facts:- (1) After having paid a sum of Rs. 6 lakhs to M/s JMD Media Pvt. Ltd. on 13.12.2010, it was only in April, 2011 that the Respondent 4,5 & 6 through their Advocates had given a notice in the newspaper as regards any person having objection to the sale of the said property and implying hereby that the fact that there was some issue relating to the property in question was in the knowledge of the seller as well as the buyers and;- (2) Though the appellant received a communication from his Advocate that he had not received any claim or objection to the sale of the said property only on 22nd September, 2011, an amount of Rs. 5 lakhs had been further received by the appellant on 9th June, 2011 itself; (3) As per the statement of Shri Ankit Patel on 07.02.2012, 13.02.2012 & 15.02.2012 wherein Shri Ankit Patel had stated that he had received a call from Shri Pradeep Mehta in August, 2011, wherein Mr. Mehta had insisted for an early finalization of the deal wh....