TaxTMI 
TaxTMI 
2018 (2) TMI 1059
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....10.2012 (PAO) in ECIR/09/HZO/2011. PAO passed corresponding to CC No. 8 of 2012 before the Special Judge for CBI Cases, Hyderabad (CBI Case). By this common order, we propose to decide all the above said five appeals. 2. Two appeals have been filed by M/s Jagati and M/s Janani: 1. FPA-PMLA-435/HYD/2013 - M/s.Jagati Publications Pvt.Ltd. 2. FPA-PMLA-436/HYD/2013 - M/s.Janani Publications Pvt. Ltd. 3. The rest of three appeals have been filed by private parties i.e. companies Aurobindo and Hetero & Group companies/investors. 4. Following private parties 3. FPA-PMLA-474/DLI/2013- Hetero Drugs (for short Hetero) 4. FPA-PMLA-462/DLI/2013- APL Research Centre. 5. FPA-PMLA-463/DLI/2013- Aurobindo Pharma (for short Aurobindo) (Herein after they would be referred as private parties) 5. The allegations against the private parties in Appeal nos. FPA- PMLA-474/DLI/2013, FPA-PMLA-462/DLI/2013 & FPA-PMLA- 463/DLI/2013 against Auroindo Pharma by CBI/ E.D contend that 75 acres of land in Industrial Development Area (IDA) Jedcharla was allotted by Andhra Pradesh Industrial Infrastructure Corporation (APIIC), IDA at the instance of the then Y.....
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....he list of properties attached) valued at Rs. 9,71,50,640/-. b. 0.35 Acres of land situated at Village Lakshmipuram, Bhogapuram Mandal, District Vizianagaram, Andhra Prades (Serial No. 9 of the list of properties attached) valued at Rs. 2,30,060/-, which is incorrectly mentioned as being situated in Krishna District. c. 5 Acres of land at Village Borapatla, Hathnoora Mandal, Medak District, Andhra Pradesh (now State of Telengana) (Serial No. 42 of the list of properties attached) valued at Rs. 16,27,500/-. 10. It is alleged by Aurobindo that substantial portion of the properties attached involves properties of APL Research Ltd., which is a 100% subsidiary of Aurobindo Pharma Ld. Pertinently, APL Research Centre Ltd. has not been accused of any crime whatsoever, whether of any Schedule Offence or any offence under the PMLA, nor is it alleged to be in possession of proceeds of crime. 11. It is submitted by Aurobindo Pharma Ltd. that a fixed deposit No. 0033605 dated 29.08.2012 for a sum of Rs. 3 Crores owned by the Aurobindo Pharma Ltd. (Serial No. 6 of the list of properties attached) owned by the appellant has also been attached by Provisional Attachment Ord....
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....n account of it being 100% subsidiary of Aurobindo Pharma Ltd., despite it not being (i) connected with the impugned allotments of land; (ii) accused of any scheduled offence; or (iii) in possession of any proceeds of crime. 15. As per respondent no.1, the private parties are in possession of the proceeds of crime although their case is that no reasons have been provided by the Respondent No. 1 for provisional attachment of the assets of appellants despite it not being in possession of proceeds of crime. 16. The allegation against another company Trident by the CBI/E.D. was that an extent of Ac 30.33 in Pashamylaram, Medak dist was transferred from Aurobindo to Trident by wrongly projecting Trident as a fully owned subsidiary and thereby paying discounted transfer rate to APIIC. It was alleged by the respondent no. 1 that a benefit of Rs. 4.3 crore was conferred on Trident with resultant loss to APIIC. 17. It is not denied by the Hetro, APL and Aurobindo that they have made investment into the appellant companies i.e. Jagati, Janani for alleged benefit. Investor Alleged benefit (Rs. Cr) Investment into Jagati Investment into Janani Aurobindo & promoters 8....
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....nture. However, since APIIC had decided to develop the SEZ on its own, the appellant requested for allotment of 75 acres of land in the proposed SEZ. This was pursuant to the prior discussion between the appellant and APIIC. 20.3. As 250 acres of the 954 acre were earmarked for development of Special Economic Zone for Pharmaceutical Formulatins, the appellant and Aurobindo Pharma Ltd. were roped in as „Anchor Clients‟ for the said SEZ. Notably, as per the extant policy, land within the SEZ area could only be allotted on „a lease basis‟ as will be evident from Mr. B.P. Acharya‟s statement, which is extracted below for the ease of reference: "As regards the rate offered the Board of APIIC vide its first resolution passed in January 1974, has delegated "full powers" to the M.D. considering various aspects such as the land of development, importance of the project, etc. In case of SEZ, the allotment, as per the SEZ Rules has to be only on lease basis, whereas the other industrial parks, land is allotted on outright sale on freehold basis." [Emphasis supplied] 21. Out of the aforesaid 250 acres, 75 acres of the said land was allotted....
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....ul gain to the Appellant does not arise. 24. It is argued on behalf of Hetro that Hetero was allotted un- developed land, which it was required to develop in its capacity as the Co-Developer as per the case who was stated that even as per the computations contained in the internal file notings of APIIC, the net usable area available to the Appellant and its subsidiary was less than 45 acres and as such the cost incurred by the Appellant towards lease premium per acre would increase. The computation of per acre cost to the Appellant referred by Hetero is given below: Total for 75 Acres Per acre cost for of 45 Acres NUA Lease Premium Paid Rs. 5.25 Crores Rs. 11.6 Lakhs Cost of Construction and development of land Rs. 4.49 Crore Rs. 9.9 Lakhs Compensation paid to erstwhile farmers Rs. 1 Crore Rs. 2.22 Lakhs Total Cost Rs. 10.74 Crores Rs. 23.58 Lakhs/acre 25. M/s. Hetero Drugs Ltd., a leading pharmaceutical company in India and the world‟s largest producer of Anti-retroviral drugs, with a current turnover of Rs. 3,300 Crores. Similar is the position of Aurobindo. 26. It is also the case of the Hetero that the cost to t....
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.... them. It was alleged by them that due process has not been followed rather all investigating agencies including ED and Adjudicating Authority while passing the orders have not understood the matter and facts of the case. 29. The Respondent no. 1 and the Ld. Adjudicating Authority have found fault with allotment process on these grounds, viz. a. That the allotment was made on the same day as the application by the appellant viz. 17.11.2006; b. That no advertisements were issued by APIIC for allotment of the land; c. That oral directions were given by the then Chief Minister Mr. Y.S.R. Reddy, to Mr. B. P. Acharya (VC, APIIC), who then orally directed Mr. T.L. Ramachandran (CGM, Projects, APIIC) to allot the land in favour of the Appellant on concessional rate. 30. In reply, it is submitted by the appellants that the finding that the file was processed in one day is contrary to the record in as much as the letter dated 12.09.2017 clearly indicates that prior discussions were ongoing between the Appellant, Aurobindo Pharma Ltd. and APIIC, at least two months prior to the in-principal allotment, for setting up of the pharma SEZ. This fact is again corro....
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....tion, that the Court would have to decide whether the action of the Government is reasonable and in public interest. 32. It is not denied by the respondent no. 1 that the land was allotted to the appellant as an „Anchor Client‟ to encourage other investors to make investments, given that it is a leading pharmaceutical company in India. The allotment of land was not cancelled. 33. It is submitted by the appellants that the Reliance by the Ld. Adjudicating Authority on purported oral directions given by the then Chief Minister Mr. Y. S. R. Reddy, to Mr. B.P. Acharya (VC, APIIC), who then orally directed Mr. T.L. Ramachandran (CGM, Projects, APIIC) is merely observations in as much as no evidence was placed before it the form of statements of witnesses or documents to support such an assumption. 34. Prima facie, it appears to us that if the allegations made by the Respondent No. 1 are taken to be correct, then it would be a case where the Appellants have paid a bribe of Rs. 29.50 Crores for obtaining a benefit of Rs. 21.5 Crores, as per the Respondent No. 1‟s quantification, which is not in practical and possible. 35. It is not denied by the respondent no....
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....e recent judgement rendered by the Division Bench of Delhi High Court on 11.01.2017, in the case of J. Sekar Vs. Union of India & Ors. in WP(C ) 5320/2017 in para 48 the aspect of attachment of property for value thereof has been dealt with. 48. The above definition is to be read with Section 2(1)(b) which defines „property‟ to mean any property or assets "of every description, whether corporeal or incorporeal, moveable or immoveable, tangible or intangible" including title to or interest in such a property and their assets, wherever located. The explanation to Section 2(1)(b) defines property to mean property to mean property of any kind used in the commission of an offence under the PMLA itself or of any scheduled offence. Therefore, the expression „value of any such property‟ would be a value equivalent to the value of a property derived or obtained directly or indirectly by any person as a result of criminal activity. The property itself may no longer be available but the equivalent value of such a property, whether held in cash, etc., would be available for attachment. 40. The Hon‟ble Bombay High Court therein reiterated the mandatory ....
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.... in any manner, which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under the Act." [Emphasis supplied] 41. In paragraphs 54 & 56 of Aslam Mohammed Merchant vs. Competent Authority, where the Hon‟ble Supreme Court of India held as under: "54. Non- application of mind on the part of the competent officer would also be evident from the fact that a property named `Rose Villa' which was the subject matter of the decision of this Court in Fatima Amin, was also included herein. Once the show cause notice is found to be illegal, the same would vitiate all subsequent proceedings. ... 56. Submission of Mr. Singh that the appellants have not been able to discharge the burden of proof which was on them from the impugned orders, it would appear that they have utterly failed to prove their own independent income; they being close relative of the detune as in terms of the statutory requirements, it was for them to show that they had sufficient income from those properties." [Emphasis supplied] 42. In the present case, even assuming that the preconditions as given under Section 5(1)(a) and (b) ha....
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....e Respondent No. 1 at Rs. 7.55 Lakhs and the attachment has been limited to Rs. 5.89 Lakhs, which is not only incorrect but also inexecutable. Furthermore, there is nothing in the Provisional Attachment Order to indicate as to why the Respondent No. 1 did not seek to secure this meagre amount by attachment of money instead of proceeding against admittedly unconnected immovable properties belonging to the appellant. 46. In the impugned order, the Adjudicating Authority has not compared the difference between the sale and lease. It is not denied by the respondent no. 1 during the course of argument that it was lease and no sale. The entire investigation, the attachment and the subsequent actions against the appellant had proceeded on a complete misconception and failure to appreciate the natural distinction between freehold property and leasehold property. The finding are totally erroneous. The nature of a lease have been compared to price fixed by Price Fixation Committee of Andhra Pradesh Industrial Infrastructure Corporation ("APIIC") for the purpose of sale of non-SEZ land and thereby resulted in a loss to the exchequer. 47. The Appellants i.e. private parties well establis....
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....nani. 53. It is alleged by all the private parties appellants/investors that the investments made with Jagati and Janani are genuine investments that have no nexus to the allotment of land or the alleged undue benefit granted. The Adjudicating Authority did not appreciate the sound logic and reasoning provided by Mr. Mr. M. Srinivasa Reddy, Director, M/s Hetero Drugs Ltd., in his statement under Section 50 of the PMLA, 2002, to demonstrate the bona fide commercial investments made by the Appellant. The relevant extract of his statement is as follows: "Looking at the future potential of real estate companies and boom, we invested in Janani Infrastructure at the Premium Value of Rs. 102 per share. ... With regards to Jagati Publications they have informed us that in their business plan, they can achieve circulation of 5 to 6 Lakh copies at the time of the launch as they have more than 10 Lakh Congress workers who they felt would subscribe to the newspaper." [Emphasis supplied] In fact, in the present case, Jagati Publication‟s circulation is far in excess of those projected. 54. It was the case of investors i.e. private parties that ....
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....ereof. There is a force in the submission, and we agree with the suggestion given on behalf of private parties that prima facie both the order passed by ED and Adjudicating Authority are contrary to the scheme of attachment u/s 5 of the Act. 58. The prima facie properties of the private parties of appellant could not have been attached for value thereof. Rather the private parties ought to have been directed to deposit the said amount in order to secure the interest of the respondent. Similarly the impugned order does not deal with the facts and law applicable to the present case as per earlier discussions; therefore the impugned order is bad as well and the provisional attachment order is liable to be modified. 59. Alongwith the written submission, the appellant, i.e. Hetero has filed the affidavit securing the relevant amount. 60. Admittedly the following properties of the appellant, i.e. Hetero & company have been provisionally attached by the respondent no. 1 not as proceeds of crime, but, admittedly as the equivalent value of the alleged proceeds of crime purportedly in possession of parent company of the appellant, which has been quantified by the respondent no. 1....
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....d contentions of the appellant on merits in the instant appeal, the appellant company is willing to furnish a fixed deposit for a sum of Rs. 5.60 crores in lieu of release of the aforementioned immovable properties at Serial Nos. 1, 2, 3 and 5 above from provisional attachment under PMLA. 63. Aurobindo has also filed the affidavit by way of undertaking offering to deposit the requisite amount in order to secure the amount. 64. The following properties of the Aurobindo company and its subsidiary viz. APL Research Ltd. have been provisionally attached by the respondent no. 1 not as proceeds of crime, but, admittedly as the equivalent value of the alleged proceeds of crime purportedly in possession of the appellant, which has been quantified by the respondent no. 1 at Rs. 12.90 crores. a. 95.095 Acres of land situated at Village Kota Bhogapuram, Bhogapuram Mandal, District Vizianagaram, Andhra Pradesh owned by APL Research Centre Ltd. (Serial Nos. 7, 8, 10 to 41 of the list of properties attached) valued at Rs. 9,71,50,640/-. b. 0.35 acres of land situated at Village Lakshmipuram, Bhogapuram Mandal, District Vizianagaram, Andhra Pradesh owned by APL Research Ce....
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....roperties shall stand released. 68. The impugned order and the provisional attachment order is modified to the extent that the Aurobindo shall deposit for a sum of Rs. 9.90 crores by way of FDR with the respondent no. 1 and a sum of Rs. 5.60 crores by way of FDR with the respondent no. 1 within six weeks from today as deposit of the said amount the attachment of all the attached properties in view of the attached properties shall stand released forthwith as we are of the considered of the opinion that the provisional attachment order has been passed contrary to the facts and law. The same is not sustainable particularly when the appellants are prepared to secure the amount. The said deposit of private parties shall without prejudice and will be treated as securities against the attachment of properties. 69. The all appeals filed by the private parties and MPs are disposed of. No costs. 70. Now, we shall deal with the appeals filed by Jagati and Janani. The attachments against the Jagati and Janani were effected as under:- i) M/s. Jagati Publications Pvt. Ltd. - Fixed Deposits worth for Rs. 14.5 Crs. ii) M/s. Janani Publications Pvt. Ltd. - Land and pro....