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2019 (1) TMI 832
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.... 2002, for confirmation of the Provisional Attachment Order (PAO) No. 19/16 dated 02.09.2016 in ECIR/CEZO/03/2016. 2. The Appellants are five brothers along with the company, M/s Pothys Private Ltd. (which is a close-knit company) where the only shareholders are the brothers and their father and running an organization in the field of textile business for more than 85 years. 3. By this common order, I propose to decide all appeals. The facts which are common in all the appeals are taken from the Appeal no. FPAPMLA- 1624/CHN/2017 filed by Shri Ramesh Pothy. 4. The subject matter of property purchased by Appellant (jointly being brothers measuring 12,945 sq. feet) which is attached by ED, under PMLA, hereinafter would be referred as Pothys. The subject property is the access to a larger extent of land in the back portion which was purchased for constructing a commercial building. 5. The subject property was purchased by the Appellant jointly from one Ms. Dhanalakshmi Sridhar, in and by a Sale Deed dated 29.02.2016, for a consideration of Rs. 5,30,74,500/-. The said Ms. Dhanalakshmi Sridhar is the daughter of one Mr. Sridhar Dhanapal, (who was facing criminal prosecution b....
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....ft with no other option but to purchase the said 12,945 sq. feet from Ms. Dhanalakshmi or give up the whole project. 9. The payment was made in four tranches. Details of the payments made are as under: 31.12.2015 An advance payment of Rs. 2 Cr. by way of RTGS transfer from the City Union Bank A/c No. 51202001008681 account of Pothys to Mrs. Kumari's HDFC A/c No. HDFC0000879. 13.01.2016 An advance amount of Rs. 1.65 Cr. through RTGS from the City Union Bank A/c No. 51202001008681 account of Pothys to Mrs. Kumari's HDFC A/c No. HDFC0000879. 23.02.2016 An advance payment of Rs. 1.35 Cr. through RTGS from the City Union Bank A/c No. 51202001008681 account of Pothys to Mrs. Kumari's HDFC A/c No. HDFC0000879. 29.02.2016 A final payment of Rs. 25,43,755/- to Ms. Dhanalakshmi at the time of execution of the Sale Deed was made by way of cash, which is duly reflected in the Sale Deed. 10. The source of funds were that they are into retail business and their sources of funds are reflected from the bank details and statements who produced documents such as Bank Statement of account and also individual income tax returns before the Adjudicating Authority to show th....
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....ng to investigate the properties illegally obtained by fugitive Sridhar Dhanpal, aged 43 years, S/o. Dhanapal, (No. 12-B, Ellappa Nagar, 1st Street, Sevilimedu, Kanchipuram) from PMLA angle, this office vide letter dated 07.03.2016 has requested for the copies of all the FIRs lodged against Sridhar Dhanpal and other relevant documents for the purpose of investigation under PMLA into the aforesaid illegally obtained properties by Sridhar Dhanpal. The above mentioned copies of FIRs lodged against Shri Sridhar Dhanapal were obtained from the office of superintendent of Police, Kanchipuram. It has been found that a large number of complaints were lodged against Sridhar Dhanapal, Male, a notorious criminal for his involvement in 5 murders, 10 attempt to murders, kidnapping for ransom and also many prohibition cases with B1 Police Station at Sivakanchi, B3 Police Station at Kanchi Taluk, B2 Police Station at Vishnu Kanchi and M4 Police Station, Red Hills, Kancheepuram District, Tamil Nadu and 19 FIRs were filed by the respective Police Stations against Shri Sridhar Dhanapal. Shri Sridhar Dhanapal has been evading the judicial proceedings in India for past 3 years and a ....
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....roperties purchased by the appellant were not mentioned. 14. In order to give evidence under the provisions of section 50(2) and 50(3) of PMLA, 2002, necessary summons were issued to accused, his wife and Shri Ramesh Pothy and statement were recorded except Sridhar who did not appear and the details of the same are as follows: Sr. No. Name of the person summoned Date of issue of summons Whether appeared or not 1. Shri Sridhar 21.03.2016 He did not appear for any of the Summons served on him 08.08.2016 16.08.2016 22.08.2016 2. Smt. Kumar, W/o Shri Sridhar 21.03.2016 She did not appear for any of the Summon served on her 08.08.2016 16.08.2016 22.08.2016 3. Ms. S. Dhanalakshmi, D/o Shri Sridhar 12.03.2016 Appeared on 16.03.2016 rendered her voluntary statement 4. Sh. D. Senthil, Younger Brother of Sh. Sridhar Appeared on 26.05.2016 rendered his voluntary statement. 5. Sh. Ramesh Pothy Managing Director of M/s Pothys Private Ltd. 04.04.2016 Appeared on 12.04.2016 rendered his voluntary statement. 15. The main findings out of investigation under PMLA, 2002 as per the case of ....
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....d by Ms. Dhanalakshmi Sridhar vide Document No. 18/2016 by a Sale Deed registered on 04.01.2016. Both the immovable properties acquired by Ms. Dhanalakshmi Sridhar for a total consideration of Rs. 5,20,08,500/-, were sold together under the Document No. 1184/2016 to Shri Ramesh Pothy and to his 4 brothers for a sale consideration of Rs. 5,30,74,500/- on 29.02.2016. An amount of Rs. 5,00,00,000/- has been credited by M/s Pothys Private Ltd., wherein Shri Ramesh Pothy is the Managing Director, in three tranches (Rs. 2 Crores on 31.12.2015, Rs. 1.65 Crores on 13.01.2016 and Rs. 1.35 Crores on 23.02.2016) into the Bank Account No. 50100001455442 held by Smt. S. Kumari with HDFC Bank as mentioned above, for the purchase of immovable properties from Ms. Dhanalakshmi Sridhar, vide Document No. 1184/2016 registered with Joint II Sub Registrar, Kanchipuram, for a sale consideration of Rs. 5,30,74,500/- on 29.2.2016. Out of the balance amount of Rs. 30,74,500/- , an amount of Rs. 25,43,755/- was paid by the Shri Ramesh Ptohy and 4 brothers to Ms. Dhanalakshmi Sridhar on the day of Registration and the remaining amount of Rs. 5,30,745/- was deducted being 1% TDS of the sale ....
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....n the nature of money laundering and it stands to reason that the immovable property transacted in the Sale Deed vide Document No. 1184/2016 registered with Joint II Sub Regsitrar, Kanchipuram, is involved in money laundering. 16. In para 20 of PMLA investigation with regard to attached property has come to the following conclusion: - "In view of the foregoing and based on the materials available in my possession I have reason to believe, that Shri Sridhar and Shri D. Senthil and their associates, who have committed offences vide various FIRs registered by various Police Stations at Kanchipuram, Tamilnadu have derived proceeds of crime and have laundered the same by buying and selling immovable properties. One such immovable property as detailed below in the Schedule, which was acquired by laundering the said proceeds of crime by Shri Sridhar in the name of his wife, Smt. S. Kumari and immediately the said property was settled/transferred to her daughter Ms. Dhanalakshmi Sridhar and subsequently sold to Shri Ramesh Pothy and his 4 brothers that too below the guideline value prescribed by the Government and instead of making payment to the actual seller viz. Ms. Dhanalak....
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....gainst Shri Sridhar, Shri D. Senthil and their Associates are in the form of the above said immovable property valued at about Rs. 6.47 Crores (approximately) and the said properties are involved in money laundering. In the light of foregoing discussions, I also have reasons to believe, based on the materials available in my possession that if the said proceeds of crime in the form of immovable property involved in money laundering is not attached immediately, under Section 5(1) of PMLA, 2002, the non-attachment of the said properties are likely to frustrate any proceedings under PMLA, 2002. Therefore, I order that the aforesaid property specified at Para 20 above, totally valued at Rs. 6.47 Crores (approximately) are attached provisionally in terms of Section 5(1) of PMLA, 2002, for a period of 180 days (One Hundred and eighty days) and further order that the same shall not be transferred, disposed, removed, parted with or otherwise dealt with, until or unless specifically permitted to do so. 17. On 02.09.2016 the Enforcement Directorate issued Provisional Attachment Order. The said order was confirmed by the Adjudicating Authority on 29.12.2016, the appellants have challenged ....
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.... of late Sridhar. Not only that, the respondent has also filed prosecution complaint against Ramesh Pothy knowingly that his name is neither mentioned in the FIR nor in the charge-sheet and no charges are framed against him under the schedule offence. The respondent has filed large number of documents, however, later on, it was agreed to decide the present appeals as per pleadings which were available before the adjudicating authority on the date of passing the impugned order. 22. In the counter affidavit filed by the Respondents, the statement given by Mrs. S. Kumari on 01.12.2016 has been reproduced which clearly indicates that the Appellants have paid the total sale consideration for the subject property and the same was credited in her bank account in HDFC Bank at Kancheepuram. The relevant portion of the statement are reproduced:- "....I purchase the said landed property from various owners and got the same registered in my name and also the remaining portion of that property was purchased in the name of my daughter Dhanalakshmi, then transferred the entire landed property in the name of the daughter Dhanalakshmi, who subsequently sold the same under one single doc....
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....ated 17.01.2017 to this effect to the Joint Director, Directorate of Enforcement. 28. It is submitted that despite establishing his innocence in the matter and demonstrating that they are not involved in any money laundering, the Appellants are put to serious hardship since their project for opening the new showroom is getting stalled and the huge property behind the said attached property is rendered useless and the recent media news referring to the proceeding against the Appellants under PMLA, apart from causing them serious monetary loss, is also causing a dent to their reputation developed over decades of commitment and hard work. 29. Under the Transfer of Property Act and the Registration Act, there is no method or process to either find out about the existence of any FIR nor there is any provision to mandatorily disclose the existence of any FIR against the Vendors or their family members. The No Encumbrance Certificate which is issued in the state of Tamil Nadu does not have any such clause whereby the FIR against the relatives or family members of vendors are reflected. 30. The respondent for the first time in the rejoinder, the Enforcement Directorate refers t....
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.... that during the pendency of appeals, they will not use the passage, therefore the interim order was become infructuous and it was agreed by both the parties to argue the main appeals. 34. This tribunal on various occasions asked the counsel for the respondent and IO (who once appeared before us) that is there any cogent and clear evidence available in order to show that any of the appellants were aware before the transaction that late Sh. Sridhar and his family members were involved in many serious offences and many FIR's are pending. There was no clear answer except it was stated that he was hard-core criminal and they must be aware. 35. Section 8 (1) of PMLA, states as follows: 8. Adjudication.-(1) On receipt of a complaint under subsection (5) of section 5, or applications made under sub section (4) of section 17 or under sub-section (10) of section 18, if the Adjudicating Authority has reason to believe that any person has committed an offence under section 3 or is in possession of proceeds of crime, it may serve a notice of not less than thirty days on such person calling upon him to indicate the sources of his income, earning or assets, out of which or by mean....
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....aser. He dealt with the matter as the purchasers are accused in the schedule offence and they are charged with the offences which in fact is untrue. 39. The officer who has passed the impugned order is neither (judicial member) and (legal expert), he was not even law-graduate. He, without involving legal member in the bench, has passed the order in such complicated matter in a mechanical manner and stereotyped order is passed. 40. In the final judgment passed on 22.09.2015 delivered by the Hon'ble High Court of Sikkim Gangtok in W.P. (Crl) No. 02/2015 in the matter of ‗EIILM University vs Joint Director ED' , the Hon'ble Court by allowing the petition, passed the following directions in para-19 of the Judgement:- "(i) The Respondent No. l shall take appropriate steps with the concerned authorities of the Central Government for appointment of the Judicial Member of the Adjudicating Authority urgently within a period of 3 (three) months and not later than that; (ii) On appointment of the Judicial Member, the Chairman of the Adjudicating Authority shall constitute the Bench consisting of a Judicial Member keeping in view the observations made above having....
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....a Judge of the Supreme Court, nominated by the Chief Justice of India, we have reason to believe that the Committee would take care to ensure that Administrative Members are chosen from amongst those who have some background to deal With such cases." 43. In the present appeals, the appellants have produced documents such as Bank Statement of account and also individual income tax returns before the Adjudicating Authority to show the means of the funds for purchase of the subject property. 44. The amounts shown as credits in the Bank account filed before the Learned Adjudicating Authority are the credits of short term loans availed by the Appellants' Company from City Union Bank Ltd. Further the Appellants being in the retail business, the credits to the Appellants' Company Bank account is by transactions reflecting through Credit/Debit cards (referred as POS {point of sale} transactions) and cash deposits of daily collections. The certificate of the Bank for having credited the Short Term Loan to the Bank account and also the regular cash deposits from the sales in the retail outlets. However, there is no finding after discussions of these documents. Only the vague findings a....
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....n 07.09.2017] In light of the prevalent Guideline Value at the time of the sale, comparative sale deeds of the time, as well as revision of the Guideline Value as per Appellants, they have paid fair market value from their legitimate sources of income. 49. The Adjudicating Authority have miserably failed to consider since the subject property was purchased bona-fidely by the Appellants with legal sale consideration. Therefore, the said property losses the character of proceeds of crime and the sale proceeds in the hands of vendor only could have been attached. The counsel for the respondent does not dispute that the appellants have made the untainted amount to the sellers i.e. the wife and daughter of Late Sridhar. Nor it is the case of respondent (even there are no proceedings of respondent ) that the original vendors who had sold the property to the family member of Late Sridhar were originally purchased by them from proceed of crime. In fact, it appears prima facie that they have sold their own properties which were purchased by themselves. There is no material on record to show that any action is brought by any of them, except allegations mentioned in the FIR and in the p....
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....tly by more than one person, such notice shall be served to all persons holding such property. (2) The Adjudicating Authority shall, after- (a) considering the reply, if any, to the notice issued under subsection (1); (b) hearing the aggrieved person and the Director or any other officer authorised by him in this behalf, and (c)taking into account all relevant materials placed on record before him, by an order, record a finding whether all or any of the properties referred to in the notice issued under sub-section (1) are involved in money-laundering: Provided that if the property is claimed by a person, other than a person to whom the notice had been issued, such person shall also be given an opportunity of being heard to prove that the property is not involved in money-laundering, section 58 B or sub-section (2 A) of section 60 by the Adjudicating Authority (4) Where the provisional order of attach" 56. There are judicial pronouncements whereby it has been laid down that the innocent parties can approach the Adjudicating Authority for release of property by showing their bonafides in their dealings with the property. In the case of Sushil Kumar Katiyar (Appellan....
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....demonstrate that he neither directly nor indirectly has attempted to indulge nor with knowledge or ever assisted any process or activity in connection with proceeds or crime and the question of his involvement does not arise as he is third party, then the Tribunal/ Adjudicating Authority can consider the said plea depending upon whether there exist bona fide in the said plea or not and proceed to adjudicate the plea of innocence of the said party. 57. This is due to the reason that Section 8 allows the Adjudicating Authority to only retain the properties which are involved in money laundering which means as to whether properties attached are involved in money laundering or not is a pre-condition prior to confirming or attachment by Adjudicating Authority. Therefore, at that time, if the plea is raised that the party whose property is attached is innocent or is without knowledge of any such transaction with respect to money laundering, then the Tribunal can consider the said plea and proceed to release the said property out of the properties by holding that the said property is not involved in money laundering. 58. For the purposes of determining whether the proper....
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.... of the petitioners. B. RE: KNOWINGLY ASSISTS OR KNOWINGLY IS A PARTY: In JotiParshad v. State of Haryana, MANU/SC/0161/1993 : 1993 Supp (2) SCC 497 the Hon'ble Supreme Court has held as follows- "5. Under the Indian penal law, guilt in respect of almost all the offences is fastened either on the ground of "intention" or "knowledge" or "reason to believe". We are now concerned with the expressions "knowledge" and "reason to believe". "Knowledge" is an awareness on the part of the person concerned indicating his state of mind. "Reason to believe" is another facet of the state of mind. "Reason to believe" is not the same thing as "suspicion" or "doubt" and mere seeing also cannot be equated to believing. "Reason to believe" is a higher level of state of mind. Likewise "knowledge" will be slightly on a higher plane than "reason to believe". A person can be supposed to know where there is a direct appeal to his senses and a person is presumed to have a reason to believe if he has sufficient cause to believe the same." The same test therefore applies in the instant case where there is absolutely no material or circumstantial evidence whatsoever, o....
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....r, cannot be penalized for no fault of his. Therefore, it cannot be the Scheme of the Act whereby bona fide person without having any direct/ indirect involvement in the proceeds of the crime or its dealings can be made to suffer by mere attachment of the property at the initial stage and later on its confirmation on the basis of mere suspicion when the element of mensreaor knowledge is missing. 60. Similar principle has been laid down by Chennai High Court in the case of C. Chellamuthu (Appellants) Vs The Deputy Director, Prevention of Money Laundering Act, Directorate of Enforcement (Respondent) MANU/TN/4087/2015 decided on 14.10.2015, relevant portion of which are reproduced below:- " 20. The said sections read as follows:-- "23. Presumption in inter-connected transactions Where moneylaundering 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 purposes of adjudication or confiscation (under section 8 or for the trial of the moneylaundering offence, it shall unless otherwise proved to the satisfaction of the Adjudicating Authority or the Special Court), be....
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....hom they have sold the GloriosaSuperba seeds and produced Bank 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. 23. Considering the materials on record and judgments reported in MANU/MH/1011/2010: 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. Srinivasanand 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 proceed....
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....hout the knowledge that the same is tainted could be subjected to Provisional Attachment Order. 23. In the instant case the only 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 though 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. 25. A reading of paragraphs 21 to 24 clearly reveals that both the Adjudicating Authority as well as Appellate Autho....