TaxTMI 
TaxTMI 
2017 (8) TMI 799
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....itration in case of any dispute. 3. Supplementary Agreement dated 30.12.2007 also entered into between the same parties to extend the time frame to 31.3.2008. This agreement records that the 2nd Respondent has paid a sum of Rs. 3.36 crores. It also records that the transferors have handed over share certificates and duly executed transfer deeds for a total of 30,000 equity shares. 4. The second Supplementary Agreement dated 9th July, 2008 entered into between the parties to further extend the time to 31.10.2008. This agreement records that the 2nd respondent has paid a sum of Rs. 4.67 Crores and that share certificates for 8550 equity shares had also been handed over. 5. It was admitted on behalf of Shri P. Karuppusamy who was then Managing Director of appellant that he had received payments amounting to Rs. 3.58 crores from the said Shri G. Srinivasan. 6. Shri P. Karuppuswamy, (then) Managing Director has received the advance amount from the respondent no. 2 on behalf of the appellant's company (who would be referred hereinafter as the appellant). 7. Since the transaction was not completed by Respondent No. 2 on 05.01.2009 as per agreement, the appellant invoked the arbitrati....
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.... agreements dated 23.2.2007, 30.12.2007 and 9.7.2008 entered into between the petitioners and opposite party shall stand cancelled. 2. The opposite party shall return possession of the mill with all accessories and machineries to the petitioners. He shall return all the documents and deeds that were given to him as per the agreement dated 23.2.2007. (Description of the mill given in the schedule) 3. The Opposite Party shall retransfer the equity shares to the respective petitioners. 4. The Opposite Party is liable to pay the accrued compensation of Rupees eighteen lakhs till 30.06.2009 and thereafter at the rate of Rupees one lakh per mensem till possession of the company is handed over. The Opposite Party is liable to pay interest to the Petitioners at 12% per annum to any delayed payment. 5. The Opposite Party is liable to pay Arbitratin costs of Rs. 1,35,000/- to the Petitioners. 6. In the event of non compliance of any of the above directions 1 to 5 in the award, the Petitioners are at liberty to move the Jurisdictional Court at Coimbatore or at Namakkal Court for enforcing the award since the property is situated at Namakkal. 10. Separately, pursuant to the written....
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....awn on nonfunctional. fictitious buyers / debtors, it had, by cheating GTFL, wrongfully obtained funds to the tune of Rs. 25 crores through Trade Finance and diverted it for purposes other than intended. Shri G. Srinivasan and others were thus charged to have caused a wrongful loss of Rs. 28.60 crores to GTFL and corresponding wrongful gain for themselves. 12. In the meanwhile the said award was challenged by filing of an appeal by the 2nd respondent under Section 34 of the Arbitration and Conciliation Act, 1996. The said objection/appeal was dismissed by the Principal District Judge, Tirupur on 05.10.2012 in favour of the appellant and against the respondent no. 2. The award becomes rule of the Court and as per settled law, it becomes a decree which is enforceable in law by filing of execution. The respondent no. 2 was also restrained in the interim petition being no. O.P. no. 63/2013 from alienating the movable and immovable properties of the appellant's company. 13. Joint Director, Enforcement Directorate on 22.09.2014 passes an order of provisional attachment of the immovable property viz. the premises of the mill belonging to appellant company which was the subject matter of....
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....to the appellant to file petition to arrest the 2nd Respondent to put into civil prison to realize the above share certificates. 21. In the present appeal, no reply has been filed by the respondent no. 2 to the appeal. Counsel for the appellant has made oral submissions. He has also filed list of dates and events and written submissions. The respondent no. 1 has referred various documents, the reply file to the appeal and few decisions in support of its case. He has also filed a written submission of synopsis. 22. The contention of the Appellants is that except the amount of Rs. 1,00,000/- received by them on 23.2.2007, no other amount was received by them by means of cash is without any corroboration in as much as the reconciliation of receipts furnished by Appellants was not infallible. 23. The case of the respondent no. 1 in its pleading is that the attached immovable property in question which is possessed by the appellant is involved in the offence of money laundering, as the same was purchased out of proceeds of crime committed by the respondent no. 2. The appellant has received the tainted amount from the respondent no. 2. Therefore, it is immaterial if the award is passe....
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....ques dated 09.07.2008 & 28.07.2008 claimed by the Appellant to have been dishonoured nor does the value of cheques reconcile with the amount specified in the break-up therein. 27. It is submitted on behalf of the respondent no. 1 that in the present case, it cannot be denied by the Appellant that the proceeds of crime had been received by them in the form of part sale consideration of the subject property of the Provisional Attachment Order and therefore, the attachment to the extent of the proceeds of crime, that is quantified to be around Rs. 5.01 crores is correct in terms of the provisions of PMLA, 2002. 28. It is submitted that the crime proceeds in the form of the property could be in the name of any person, who was not involved in a scheduled offence, it is submitted that Shri G.Srinivasan had illegally availed loan facilities by falsification of documents and diverted the loan amounts to other than the intended purposes, invested in the property of the Appellants and subsequently projected the property as untainted one. Therefore, it is evident that the property under the possession of the appellant is nothing but a tainted property embroiled with the proceeds of crime an....
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....lusion that atleast one of the inter-connected transactions is proved by the investigating agency to be involved in money- laundering". 30. It is submitted by Mr. Matta that in order to attach a property involved in an offence of money laundering, by the competent authority in terms of Section 3 & 5 of PMLA, 2002 it is not a necessity that the persons, who possess the property, should have been charged of a scheduled offence as contended by the Appellant. In other words, the crime proceeds in the form of the property could be in the name of any person, who was not involved in a scheduled offence. 31. It is argued by Mr. Matta that under Section 24 of the PMLA, 2002 the person accused of having committed the offence and in this case, the appellant who are claiming the possession of the attached property, needs to prove with supporting evidence and material that the subject property under attachment is not involved in money laundering activity. Thus, in any proceedings under the PMLA, the burden of proving that the property confirmed for attachment under section 8 of the PMLA is not illegally acquired/possessed property shall be on the person only. 32. It is also argued by Mr. Ma....
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.... form of any property which involved in money laundering possessed by any person shall be attached under the PMLA, 2002. 35. He also referred the case of Shri V.M. Ganesan & Another Vs the Joint Director, Directorate of Enforcement & Others in W.A. Nos. 1625, 1626 of 2014, the Hon'ble Division Bench of High Court of Madras has also confirmed and decided the legality and validity of the Order dated 17.11.2014 passed by the Hon'ble Single Judge of the Hon'ble High Court of Madras that the proceeds of crime, involved in money laundering possessed by any person (need not be an accused in the schedule offence) could be attached under PMLA, 2002. 36. In its pleadings, the respondent no. 1 has also referred to the' provisions of Section 23 of PMLA, 2002, wherein "where money laundering involves two or more interconnected transactions and one or more such transactions is or are proved to be involved in money laundering, then for the purpose of adjudication or confiscation under Section 8 or for the trial of the money laundering offence, it shall unless otherwise proved to be the satisfaction of the adjudicating authority or the Special Court, be presumed that the remaining transactio....
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....dge, second appeal before the High Court and Special Leave petition filed by the respondent no. 2 before the Hon'ble Supreme Court were dismissed during the pendency of criminal proceedings and PMLA proceedings. The respondent no. 1 and CBI never appeared or become party before the Court when the arbitration dispute was being considered between the appellants and respondent no. 2. 40. Admittedly in the Arbitration Proceedings, as affirmed under Section 34 of Arbitration and Conciliation Act (Arbitration Act) and further confirmed under Section 37 of the Arbitration Act and Article 136 of the Constitution, a direction was given that, a) The 2nd Respondent cannot ask for repayment on the consideration paid by him. b) The agreement between the Appellant and the 2nd respondent is cancelled. c) The 2nd respondent shall return the possession of the mills with all accessories and machineries as well as documents and deeds. d) The 2nd respondent shall re transfer the equity shares e) The 2nd respondent is liable to pay the accrued compensation till 30.06.2009 and further compensation till possession is handed over. 41. It is also a matter of fact that the mill was declared as a sick....
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....editors, he has settled PF dues, Commercial tax dues and a small amount of ESI remains to be paid. With regard to the theft of power, the appellant was acquitted in the criminal case which acquittal was upheld by the High Court, Madras in Crl. R.C. No. 691 of 2003 dated 6-4-2004 and upheld by the Hon'ble Supreme Court in Crl. Appeal No. 1962 of 2008 (S.L.P (Crl. No. 3878 of 2004) dated 25.11.2008. In Civil proceedings under the Electricity Act, a fine was levied but that has also been set aside by the Hon'ble High Court of Madras and it is pending in Writ Appeal No. 1705 of 2014 at the instance of Tamil Nadu Electricity Board. 46. The Award rendered by the Arbitrator has become final between the parties up to the Supreme Court. There are no allegations on behalf of any of the respondents that the award was obtained by fraud or by making mis-representation. No proceedings of such nature are pending in any court. 47. The appellants have argued that the effect of the civil proceedings i.e. the Award is that neither the money paid to the appellant can be treated as proceeds of crime nor the property which is the subject matter of attachment can be treated as acquisition of proceeds o....
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....probate, etc., jurisdiction A final judgment, order or decree of a competent Court, in the exercise of probate, matrimonial, admiralty or insolvency jurisdiction which confers upon or takes away from any person any legal character, or which declares any person to be entitled to any such character, or to be entitled to any specific thing, not as against any specified person but absolutely, is relevant when the existence of any such legal character, or the title of any such person to any such thing, is relevant. "42. Relevancy and effect of judgments, orders or decrees, other than those mentioned in section 41 Judgments, orders or decrees other than those mentioned in section 41, are relevant if they relate to matters of a public nature relevant to the enquiry, but such judgments, orders or decrees are not conclusive proof of that which they state. "43. Judgments, etc., other than those mentioned in sections 40 to 42, when relevant.- Judgments, orders or decrees, other than those mentioned in sections 40, 41 and 42, are irrelevant, unless the existence of such judgment, order or decree is a fact in issue, or is relevant under some other provision of this Act." 49. It is q....
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....dmissible in evidence before the criminal Court in proof or disproof of the fact on which the prosecution is based?" Finally, after considering the various decisions, the Court held thus: "There is no reason in my judgment as to why the decision of the civil Court particularly in an action in personam should be allowed to have that sanctity. There appears to be no sound reason for that view. To hold that when a party has been able to satisfy a civil Court as to the justice of his claim and has in the result succeeded in obtaining a decree which is final and binding upon the parties, it would not be open to criminal Courts to go behind the findings of the civil court is to place the latter without any valid reason in a much higher position than what it actually occupies in the system of administration in this country and to make it master not only of cases which it is called upon to adjudicate but also of cases which it is not called upon to determine and over which it has really no control. The fact is that the issues in the two cases although based on the same facts (and strictly speaking even parties in the two proceedings) are not identical and there appears to be no suffici....
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....t. Ltd., M/s East West Fabrics, M/s P.V. Enterprises, M/s Mithul Textiles and M/s Milan Tex Fabrics had furnished false/fake and fabricated sale bills/invoices drawn on non-functional, fictitious buyers / debtors to fraudulently obtain funds to the tune of Rs. 20 crores through Trade Finance by cheating-GTFL and diverted it for other purposes. S/ShriR.Selvakumar, G.Srinivasan, P.Venkatachalapathy and R.Manoharan were thus charged to have caused a wrongful loss of Rs. 23.85 crores to GTFL and corresponding wrongful gain for themselves. 52. The offences evolved being scheduled offence under the PMLA Law, a case was registered ECIR No. 03/2011 and 04/2011 both dated 03.01.2011 and conducted investigation in the matter under PMLA, 2002. In the investigations conducted, the money trail to the extent of Rs. 5.01 crores from out of the money fraudulently obtained by R2 and others to the appellant in the present case for transfer of the subject property to them has been established - this is set out in Para-8 and 9 of the original complaint filed before the adjudicating authority while seeking confirmation of the related PAO. As the tainted money to the extent of Rs. 5.01 crore is establi....
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.... any reasonable precaution on the legitimacy of the payee or the genuineness of the source of fund. Moreover, on mere payment of a small part of the total consideration, the possession of the entire immovable property in question including the factory was handed over by the appellant to the respondent-2, from which it appears that the appellant was in a clearing hurry to complete the transaction. These points raise doubt about the bonafides of appellant in the matter as regards his contention that he was totally unaware of the tainted nature of the amount paid by the respondent as sale consideration of the property in question. 55. The property, if involved in an offence of money laundering, is liable to be attached by the competent authority even if the person, under whose possession such property is lying, was not charged of having committed a scheduled offence. The property involved in an offence of money-laundering is liable for attachment by the competent authority in terms of Section 3 & 5 of PMLA, 2002 and it is not a necessity that the persons, who possess the property, should have been charged of a scheduled offence as contended by the Appellant. 56. Under these circumst....
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.... 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 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 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 beli....
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....is mentioned as Rs. 4.67 Crores. 60. Regarding the remaining amount of Rs. 34,49,900/-, it is submitted by the respondent that these amounts were transferred to different bank accounts of SASMPL and/or of Shri P. Karuppusamy after the second supplementary agreement dated 09.07.2008 in the months of July and August 2008. This amount of Rs. 34,49,900/- is also denied to have been received by the appellant. 61. In view of the above, we are of the view that as held in the award granted by the Arbitrator between the parties which has become final, the appeals against the same having been rejected upto the stage of the Supreme Court, the amount paid by R2 to the appellant in terms of the agreement between the parties has to be taken as Rs. 4.67 Crores. Consequently, the proceeds of crime that may have been invested in the subject property is also required to be taken as Rs. 4.67 crores. Even otherwise in the written submissions field by the appellant, an admission is made having received the amount of Rs. 4.67 crores. 62. Before concluding, we may also refer to the submissions of the learned Advocate for the respondent that in terms of Section 8(5) of the PMLA, the matter of confiscat....