TaxTMI 
TaxTMI 
2017 (8) TMI 1011
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....dha Group of companies under the chairmanship of Shri Sudipta Sen and controlled and managed by Sudipta Sen and his close aides, had mobilized money from the common public under false promises of high returns and failed to return the invested money to the investors and thereby had committed offences under Section 402 of IPC which is a scheduled offence under PMLA, 2002 and thereby a case of money laundering was initiated against them. 2.2 The Proceeds of Crime were identified to be worth thousands of crores of rupees and this money had been utilized by Shri Sudipta Sen in funding the various investments made by the Saradha Group of companies in immovable assets, movable assets, shares, Investments in various companies in order to acquire the controls of the companies and so on, as detailed in the PAO no 377/2014 dated 13.02.2014 and PAO dated 04.04.2014. 2.3 The proceeds of crime were mobilized by four companies of the Group, namely, M/s Saradha Realty India Limited, Saradha Tours & Travels Pvt ltd, Saradha Garden Resort & Hotels Pvt. Ltd and Saradha Housing Pvt. Ltd (hereinafter referred to as the said four companies). 2.4 During the scrutiny of bank accounts of Saradha G....
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....ubmitted by the defendants and the complainant and also giving the parties an opportunity for personal hearing, the Adjudicating Authority confirmed the related attachment order. Being aggrieved with the same, the appellant has filed the present appeal qua the amount available in the appellant's Bank Account as on 25.09.2014 that was attached under the related PAO and confirmed in the impugned order. 3 In its appeal filed under Section 26 of the PMLA the appellants have contended that they are a company duly incorporated under the provisions of the Companies Act, 1956 and is involved in promotion of football in India. It is closely and professionally associated with Mohun Bagan Athletic Club. The appellant, like other professional outfits in the field of football has to keep and maintain a competitive Football Team comprising of professional football players, coach and his support staff including the medical team. Besides, for the purpose of running its office, it also has to employ a number of staff for diverse activities. In the circumstances, managing a professional football team also warranted huge expenses. For the said purpose, the appellant is dependent on financial suppo....
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....e to keep their contractual commitment beyond the football season 2010-11. However, the appellant being in dire financial straits, persuaded the co-sponsor to make payment of the unpaid amounts contained in the dishonoured cheques and the said co-sponsor from time to time kept paying in piecemeal, making thereby a total payment of Rs. 1,94,50,000/- to the answering defendant, all however by A/c. Payee cheques. 3.4 The appellant further submitted that on its part, the appellant, at all material times, made payment of the dues of the players and other professional personnel attached to the Football team and the Club. All such payments were made by A/c. Payee cheques and also duly disclosed to the Income Tax and/or other relevant authorities. Applicable TDS against all payments was also deducted and paid to the Income Tax authorities. Neither the appellant ever intended nor required to possess or hold back any amount out of the sponsorship and co- sponsorship payment it received nor to conceal the same before any Authority, as alleged or at all. 3.5 Vide the instant complaint, the authorities purported to seek confirmation of the attachment of amount of Rs. 32,11,997/- lying in ....
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.... 700001 was requested to not allow debit from the Account No. 153010200032577 maintained in the name of M/s. United Mohun Bagan Football Team Pvt. Ltd. The present Balance in the said account is Rs. 32,11,797/-. Since the said amount is involved in the activities of money laundering, it is liable for provisional attachment." 3.7 It was submitted that from the allegations made in the body of the complaint no case was made out against the appellant company under Section 420 of I.P.C., the Scheduled Offence in this case. Further, even assuming the aforesaid allegations to be true without admitting them, under no stretch of imagination, the appellant could be alleged to have committed an offence of money laundering defined U/s.3 of the Prevention of Money Laundering Act, 2002, (said Act/PMLA, for short) and punishable U/s.4 and therefore, the bank account of the appellant company is not liable to be attached, provisionally or otherwise, under Section 5(1) of the said Act. 3.7.1 In support of the above arguments, appellant has placed reliance on the judgment of the Hon'ble Madras High Court in M. Saraswathy & Anr. Vs. The Registrar, Adjudicating Authority and Anr. - 2013-1 L.W. (C....
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....a distinct corporate personality and distinguishable from any other corporate person with the prefix of Saradha or otherwise, from the allegations made in the complaint, it was not clear even at this stage whether the co-sponsor has particularly been involved in the offence of Money Laundering. (d) Therefore, the allegations made in the complaint in general and those made against the appellant company in particular did not suggest far less substantiate that the money received by the answering defendant from the co-sponsor were proceeds of illegally laundered money. (e) Moreover, no allegation was made in the complaint about M/s Sangvad Pratidin Television Pvt. Ltd or M/s Bengal Media Pvt. Ltd. It was argued that the order of provisional attachment of the bank account of the appellant company and to investigate and prosecute it for economic offence under the said Act for having indirect and benign association with certain corporate entities not even made accused in the present case and were illegal per se. (ii) The appellant company at no time whatsoever was in possession of the money received from the co-sponsor or, from any other sponsor or other co- sponsor. The said mon....
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....n any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money laundering." 3.8.1 In the light of the above definition of Money Laundering under the PMLA the judgment of the Hon'ble Supreme Court in the case of Koppula Venkat Rao vs. State of A.P. (2004) 3 SCC 602 (Para 10), was referred in which while interpreting an attempt to commit an offence' it was held inter-alia held as under:- "10. An attempt to commit an offence is an act, or a series of acts, which leads inevitably to the commission of the offence, unless, something, which the doer of the act neither foresaw nor intended, happens to prevent this. An attempt may be described to be an act done in part-execution of a criminal design, amounting to more than mere preparation, but falling short of actual consummation, and, possessing, except for failure to consummate, all the elements of the substantive crime. It is submitted in the facts and circumstances of the present case, the appellant could on no reasoning be said to have attempted to indulge in any process or activity connected with the proceeds of crime. 3.9 Similarly, no al....
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....trated the offence of money laundering as defined in Section 3 of the said Act. 3.13 It is further argued that merely by introduction of the Saradha Agro Production Pvt. Ltd, a unit of Saradha Group to the appellant as a co-sponsor by Shri Sanjay Bose who has not been consciously made an accused/defendant in the present case and who as on the date of the alleged introduction was not even a member of the Board of Directors of the answering defendant would make the answering defendant guilty of money laundering as defined in Section 3 and punishable under Section 4 of the said Act. They also submitted a copy of Form- 32 with the Registrar of Companies (RoC) Kolkata vide SRN: B27820901 dated 21.12.2011, signifying re-structuring of its Board of Directors and from which it was evident that Shri Sanjay Bose was inducted as a Director in the Board of the Defendant No.16 only on 21.11.2011. 3.14 On the basis of the above arguments, it has been contended that the impugned order dated 03.03.2015 is unsustainable and may be set aside. 4. During the oral hearing, the learned counsel for the appellant reiterated the arguments made in the appeal. It was mainly contended that the appell....
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....therefore the attachment of the same and its confirmation vide the impugned order was un-sustainable, not being as per the provisions of the PMLA, and was required to be set aside. 4.2 The learned counsel for the appellant also referred to the additional affidavit dated 11.08.2015 filed by the appellant wherein the copies of the tabular chart showing the monthly receipt, payments and balance in the Bank Account No. 153010200032577 maintained by the appellant with Axis Bank Ltd., Dalhousie Branch, Kolkatta (the said Bank A/c, for short), during the period September, 2010 to March 2013 was filed alongwith the yearly Audited Accounts of the company/appellant for the FYs 2010-11, 2011-12, 2012-13 and the Bank Statement for the said Bank Account for the period 1st April 2014 to 30th September, 2014. As per the details in the tabular chart, the opening balance in the said Bank Account in the month of September, 2010 was Rs. 94,32,837.81/- and the closing balance as on 31st March, 2013 was Rs. 15,97,254.45/-. During this period, in addition to the amount of Rs. 1,94,50,000/- received from SADL, the appellant received a sum of Rs. 27,99,75,389/- from the main sponsor and other co-sponso....
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....his submissions. 5. Responding to the arguments of the learned counsel for the appellant Shri S.A. Saud, Advocate learned counsel for the respondent submitted that the scope of the present proceeding is limited to safe keep the properties of either the accused person or the ones to whom the trail of proceeds of crime leads to for the duration of the trial under the Act. Since this Hon'ble Appellate Tribunal cannot pass an order charging, convicting or discharging/accusing the defendant from the offence of money laundering, hence, the merits of the matter i.e. the criminal case is not required to be looked into at this stage from that angle. At this stage the existence of prima facie case against the defendant for either having generated proceeds of crime or being in receipt of the same is to be seen and the appellant's challenge to the Adjudicating Authority's order is required to be rejected or allowed in the background of the above. It was submitted that admittedly the appellant had received financial contribution from the Saradha Group of Companies who are accused of having committed the scheduled offence of cheating under Section 420 of the IPC. Therefore, the submissions ma....
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.... on the ground that the issue decided in the said case was limited to the extent whether provisional attachment, order could be confirmed without issuing notice prior to attachment which is not the issue is the present case. 6. Responding to the argument from the respondent side that the letter dated 26.06.2010 terminating the co-sponsorship agreement dated 20.09.2010 beyond the Football Season 2010-11 could not be taken cognisance of as the date of the letter (viz. 20.06.2010) was prior to the date of the agreement (20.09.2010) sought to be terminated by it, the learned advocate for the appellant submitted that this was obviously a typographical error. The said letter only terminated the agreement dated 20.09.2010 beyond the Football Season 2010-11 and stated that they (SADL) would not be paying any amount for the new Football Season 2011-12 onwards. It was contended that in any case, it is not even the case of the respondent that any amount over the amount of Rs. 1,94,50,000/- was received by the appellant from SADL or any other units of the Saradha Group, which is less than the amount of Rs. 2 Crores required to be paid by SADL to the appellant for the football season 2010-11....
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....oor, Clive Row, Kolkata-700001. The amount attached in the present case qua the subject appellant is the sum of Rs. 32,11,797/- as available in the said Bank Account as on 25.09.2014. It is the case of the respondent that the Saradha Group of Companies had mobilized vast sums of money from the common public under false promises of high return and failed to return the invested money to the investors and therefore had committed offence under Section 402 of I.P.C. which is a scheduled offence under PMLA 2002. As there was intermingling and intermixing of funds between different companies/units of the Saradha Group, the amount received by the appellant from SADL was part of proceeds of crime and therefore the amount outstanding in the said Bank Account as on 25.09.2014 when such inquiry was undertaken in respect of the appellant was also part of the proceeds of crime and therefore, liable for attachment and confirmation under the PMLA. 9. On examining the referred co-sponsorship agreement dated 20.09.2010 entered into by the appellant with M/s Saradha Agro Development Ltd (SADL), it is observed that the same provides for the payment of Rs. 2,00,00,000/- for each of the football seas....
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....ions from sponsors/co-sponsors for its activities and such sponsors/co-sponsors being limited in number, it could not have embarked on a roving inquiry to ascertain the business of the co- sponsor or reject some co-sponsors on mere suspicion. Further, no concrete evidence has been brought on record by the respondent to show the direct or indirect involvement of the appellant in any activity connected to money laundering, of their having nexus with the Saradha Group of Companies or of their being aware of the appellant company having been engaged in the committing of the alleged scheduled offence. The only allegation in this regard is that the appellant was introduced with the Sardha Group of companies by Dr. Srinjay Bose, a Director of the company who was also involved with Sangvad Pratidin Television Ltd., a company which had financial dealings with Bengal Media Pvt. Ltd, a company under the umbrella of Saradha Group of Companies This contention however, does not stand to scrutiny as on the date of the agreement viz. 20.09.2010, Shri Srinjay Bose was not a Director in the appellant's company and in actual fact, he became a Director of the said company at a much later date viz. 21.....
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....aju S/o B. Ramalinga Raju Vs. Union of India (UOI), in Writ Petition Nos. 10765, 10769 and 23166 of 2010. In this case, the petitioner had challenged the vires of certain provisions of PMLA. Challenging section 2(1)(u) of PMLA it was contended that the expression "Proceeds of Crime" as defined/understood/interpreted by the Enforcement Director is likely to target bonafide purchasers/ transferees of the property who have no knowledge/nexus/participation in any criminality associated with a property. It was also contended that while a property in the domain, custody or possession of any person who knowingly assists or participates in the criminal activity of a person accused of a scheduled offence would constitute proceeds of crime but property in the domain, custody or possession of a person who is a bonafide purchaser/transferee of such property without knowledge of or participation in the malfeasance cannot constitute proceeds of crime. Upholding the vires of the provisions of section 2(1)(u) of the PMLA, 2002 and allaying the apprehensions of the petitioner that property of bona fide purchasers may be subjected to attachment and confiscations, the Hon'ble High Court observed as f....
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....or, considering that these payments were received in terms of a bona-fide agreement between the parties and in consideration of promotional services of good value provided by the appellant to SADL and the Saradha Group of Companies and there is no allegation, much less any evidence to show the involvement of the appellant in the alleged illegal activities of the Saradha group of companies, such payment in the hands of the appellant would not constitute the proceeds of crime and only the promotional services received by SADL and the Saradha Group of Companies could be so considered. In other words, the amount lying in the Bank Account of the appellant as on 25.09.2014 that was attached in the case would not constitute proceeds of crime in the hands of the appellant. Pertinently, it is not the case of the respondent that the amount attached in this case is towards the value of the proceeds of crime. 13. In this context it is noted that the entire amount of Rs. 1,94,50,000/- from SADL and others units of the Saradha Group was received during the period Sept. 2010 to October, 2012. Apart from these funds, the appellant also received contributions from the main sponsor and other co. ....
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....nal the case of Jitender Kumar Lalwani v Dy Director, PMLA in FPA-PMLA-37/AHD/2009. In said case, the appellant( Jitender Kumar Lalwani) had purchased shares of IDFC from a person (Sh. Parag P. Jhaveri) who was accused of commission of scheduled offence under PMLA and it was alleged that shares of IDFC were proceeds of crime as the allotment of shares in questoin was obtained by the said person by committing the alleged schedule offence. It was also alleged that the appellant therein (Jitender Kumar Lalwani) provided funds to the said Mr. Jhaveri for subscribing IDFC shares and he knew of the offence being committed by (that person) as well as criminality attached to IDFC shares. The appellant claimed that he was a bona fide purchaser as he did not know Mr. Jhaveri prior to purchase of IDFC shares, he had not provided any funds for subscribing IDFC shares, he did not know about the offence committed by Mr. Jhaveri or the criminality attached to the allotted IDFC shares, he purchased shares in good faith for valuable consideration and explained the source of purchase. After careful consideration of the facts and circumstances of the case, this Tribunal held that the appellant was a ....