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2019 (6) TMI 1149
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....ed on 04.12.2001, the company owned and controlled by I. Syam Prasad Reddy. (c ) Embassy Realtors (erstwhile Dynasty Developers) is a group company of, and owned and controlled by Jitender Virwani. Shyam Prasad Reddy and Jitender Virwani worked on project from 2002-2005. (d) Vide GO No. 123, Housing (HB.II.1) Department dated 13.05.2004, the Special Chief Secretary, Housing Department has been made the Chairman of HPC in place of DG, NAC. Notification of Expression of Interest dated 22.02.2004 and criteria. It was alleged that the criteria mentioned at page 136 was completely flouted by the defendants and its consortium agreement dated 10.03.2004. 3. Properties attached by ED i) 1Shri Jitendra Virwani - Rs. 19,00,00,000/- (FDs/TDs) ii) M/s. Embassy Property Developments Pvt. Ltd.-Rs. 25,05,57,469/- (FDs/TDs) 4. List of dates and events submitted by the respondent are as under: Date(s) Events Relevant Page No(s). 02.08.1994 Erstwhile Embassy Realtors Pvt Ltd. (hereinafter referred to as "ERPL") was incorporated for the purpose of real estate development. 28.01.2004 The Andhra Pradesh Housing Board (her....
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....d. Page 41, Para 39 of Complaint. 22.01.2005 Shri I. Syam Prasad Reddy informed APHB of the incorporation of Cyberabad Hitech Integrated Township Corporation Private Limited ("CHIDCO") for implementing the Kukatpally Housing Projects. Page 39, Para 37 of Complaint. 28.02.2005 APHB signed the Development Agreements with SPVs viz. M/s CHIDCO Private Ltd. and M/s Vasantha Projects Private Ltd. which were represented by Shri I. Syam Prasad Reddy for Kukatpally Housing Projects and Gachibowli Housing Projects respectively conferring on them the development rights of both the projects. Page 43 para 42 of the Complaint. 01.07.2005 The Prevention of Money Laundering Act, 2002 came into force. 10.03.2005 A Technical Services Agreement was entered into between Dynasty Developer Private Limited ("DDPL") and CHIDCO. Page 53, Para 55 of Complaint 31.03.2005 Restructuring of Allotment of shares of the Embassy Consortium was submitted to APHB. Page 44, para 43 of the Complaint. 20.03.2007 Letter by the Respondent herein was sent to APHB for exit of ERPL, predecessor of Embassy Properties Developers Pvt. Ltd. (hereinafter referred to as ....
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....ed the Reply to the present Appeal and Stay Application preferred by the Appellant. 5. After hearing both parties and long discussions, the impugned order was passed against the appellant and in view thereof. The attachments are ceased to exist. It is alleged on behalf of respondents that despite of several follow-ups, the Respondent received a reply from HDFC Bank after eight months on 06.03.2019 that the release of the properties of the Respondent had been declined based on the directions of the Appellant to not release the attached bank accounts of the Respondent. Subsequent thereto vide letter dated 'NIL' concerns were raised over the refusal by HDFC Bank to unfreeze the accounts of the Respondent, but to no avail. The Respondent thereafter filed M.P. No. 5915 / 2019 in Appeal No. 2474 of 2018 praying for directions against the Appellant for releasing the properties of the Applicant in the form of accounts with the HDFC Bank. 6. By order dated 15.04.2019 passed in the present Appeals noted that the "I.O. after taking the instructions from JD makes the statement to withdraw its communications issued to the banks which were sent by the letter dated 13th January....
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....ct of Kukatpally Project, it was declared to APHB that a Special Purpose Vehicle (SPV) shall be formed for the successful completion of the project on award of the project to the consortium with equity participation of (a) Indu-51% (b) Embassy-20% (c) Soma- 14% (d) Unity-1% and (e) Avinash-14% with details of roles and responsibilities of each of the members was also mentioned. M/s Embassy Realtors Private Limited was designated as the technical member for the purpose of satisfying the technical criteria. (e ) Embassy-Unity consortium formed an SPV in the name and style of M/s Cyberabad Hitech Integrated Township Development Corporation Private Limited (M/s CHIDCO Private Limited) for implementing the housing project on Ac.50.00 at Kukatpally. Shri I Syam Prasad Reddy through his letter to APHB sought approval for restructuring of the equity holding with (i) M/s Indu Projects Limited-51.25%; (ii) M/s Embassy Realtors Private Limited - 34.75% and (iii) Mr. Avinash N. Bhosale - 14.00%. (f) The shares in M/s CHIDCO Private Ltd were allotted to M/s Embassy Realtors Private Limited & Other shareholders on 23.03.2005 i.e. after the declaration made by I Syam Prasad Redd....
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....ember needed to continue till completion of the project and exit midway through was not envisaged therein and the request was not in tune with the spirit of the agreement and also in the light of undertakings in the MOU and letter of acceptance by the individual consortium members. The company made a request on 23.03.2007 to become a 100% owned subsidiary of M/s Indu Projects Limited and enclosed a letter dated 20.03.2007 of M/s Embassy Realtors Private Limited indicating their inability to continue in the project due to their other commitments. APHB had not sent any reply to the company. (k) Without obtaining the approval from APHB, both Shri I. Syam Prasad Reddy and Shri Jitendra Virwani have negotiated between themselves and finalized the exit deal, in gross violation of the terms and conditions of allotment of the project. (l) Shri I. Syam Prasad Reddy representing M/s CHIDCO Private Limited and Shri Jitendra Virwani representing M/s Dynasty Developer Private Limited, (M/s DDPL - presently renamed as M/s Embassy Property Developments Private Limited), entered into an agreement dated 10.03.2005 for providing additional technical services to develop 30.00 Lakh S....
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.... informed APHB that they have constituted a SPV i.e., M/s Indu Eastern Province Projects Private Limited, with shareholding by M/s Indu Projects Ltd - 74% and M/s Embassy Realtors Private Ltd - 26%, however, M/s Embassy Realtors Private Limited had never been the shareholder in their company and it never invested its funds in the purported SPV. (p) It is further submitted that no technical expertise was ever provided by M/s Embassy Property Realtors Private Limited in the development project and it never participated in the project development at all. M/s Embassy Realtors Private Limited exited from the consortium even without the consent of APHB and the same was in gross violation of the MOUs entered, development agreements undertaken and letter of acceptance submitted to APHB. (q) Therefore, Shri I. Syam Prasad Reddy and M/s Indu Projects Limited, who are otherwise not eligible to bid and win the housing projects on their own, as per the eligibility criteria notified in February 2004, became successful in getting housing projects at Kukatpally and Gachibowli from Government of Andhra Pradesh under the cover of Embassy-Unity consortium with the active connivance ....
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.... are inseparable with the other monies involved with the companies, as such value equivalent to the proceeds of crime are attached from the funds available with the aforesaid companies/ persons. (f) Further, it proves beyond doubt that Shri Jitendra Virwani used his companies as conduit to receive the Proceeds of Crime and projected the same to be untainted and thus, ultimately enjoyed the fruits of proceeds of crime through the account of his companies. 11. Beneficial Ownership as per appellant: i) M/s Embassy Realtors Private Limited and M/s Dynasty Developers Private Limited were the group companies of Embassy Group and Shri Jitendra Virwani was the Chairman of Embassy Group. These two companies got amalgamated and formed a new company namely M/s Embassy Property Developments Private Limited. Shri Jitendra Virwani is the Managing Director of this company. ii) Shri Jitendra Virwani was controlling the business affairs of M/s Dynasty Developers Private Limited and M/s Embassy Realtors Private Limited and as such in terms of Section 2 (1) (fa), he was the beneficial owner of the said Proceeds of Crime which were received by his companies i.e. M/s Embas....
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.... amalgamation proceedings of ERPL into the Respondent Company by the Hon'ble High Court of Karnataka and as such the Respondent Company cannot be prosecuted for any criminal liability, if at all, either of the DDPL or ERPL. 13. The learned senior counsel appearing on behalf of respondents has argued that the main job of the appellant is to trace out the proceed of crime and take action as per law. It is not the duty of the authorized officer to patch the discrepancies, if any, occurred during the course of business activities and change of hands. 14. As far as schedule offence is concerned, the said issue has to be decided by the Special Court as per its own merit. This Tribunal does not wish to express any opinion on merit. The question in the present appeals is only to consider as to whether the respondents are involved in money laundering or not or the respondents have acquired the properties from proceed of crime. The other aspects where the criminal liabilities are involved are to be determined by the Special Court as per merit of the case. 15. The Adjudicating Authority in the present case found many gaps in the manner in which the Appellant herein had - without form....
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....pondent herein. (Copy of the Order dated 25.01.2010 is annexed with the Appeal). (e ) That the Adjudicating Authority has duly considered the balance sheets of DDPL and duly noted the expenditure incurred towards the construction and development works under the purview of the technical services agreement between DDPL and CHIDCO. (f) Adjudicating Authority has correctly noted that the purchase of the Villas by Mr. Jitendra Virwani cannot be said to be a criminal activity, as the Appellant has failed to establish any illegality thereto for the said Villas had been sold legitimately and without lowering of prices from the market value of the villas. (g) Tthe Adjudicating Authority has analysed the application of key legal principles in various relevant judgments and legal precedents in arriving at the conclusion that in the present set of facts and circumstances and the properties of the Respondent cannot be attached. 17. This tribunal is only concerned at this stage as to whether the impugned order passed by the Adjudicating Authority is sustainable or not. 18. The conclusions arrived at by the Adjudicating Authority of the properties of the Responden....
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....signing, development and marketing of residential and commercial properties. However, by agreement dated 23.03.2009, titled as cancellation agreement, DDPL expressed that it had rendered services as per the agreement referred for Villas completely, partly for apartment and commercial properties and that DDPL be compensated for the services already rendered. It was inter alia agreed by CHIDCO to compensate DDPL by paying compensation of Rs. 20 Crores. The said cancellation was acted upon as is indicated from the records relied upon and payment of Rs. 188780000 was made to Dynasty Developers Pvt. LTs. vide cheque dated 26.03.2007. A duly "discharge receipt" was issued by Sh. Narpat Singh Choraria, Director of DDPL. The allegations made in the charge sheet goes to the extent of alleging that everything done in relation to the development agreements, after procurement of the contracts, are all illegal activities. The said allegations cannot and need not be gone into conclusively by this Authority, but the fact remains that APHB has not made any grievances in the matter. The concerned V.C. and M.D. of APHB Sh. S.N. Mohanty is in fact absolved of the charge under Section 13(2) r....
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....he payments received from M/s Indu Project Ltd./CHIDCO stated to be proceeds of crime, as such with the ERPL/DDPL, much less in January stated to be proceeds of crime, which could not have been transferred being an illegal corpus and as even otherwise pointed out in the facts and circumstances that no such proceeds of crime existed in the hands of ERPL on the date of merger." and "None of the proceeds have gone into any account of Jitendra Virwani from the receipt of Rs. 28.70 Crore by Embassy Realtors Pvt. Ltd. Similarly none of the proceeds have gone into the account of Jitendra Virwani from the receipts of Rs. 20 crores by DDPL. It is not shown to be so, i.e. that proceeds travelled to Jitendra Virwani. The PAO in respect of the amount of Rs. 28.70 Crore received by M/s Embassy Realtors. Pvt. Ltd. and Rs. 20 Crore received by M/s Dynasty Developers Pvt. Ltd., is already considered above and it is concluded that in respect of the PAO for the said proceeds, the proceeds having been gone to ERPL and DDPL and which were exhausted and both the entities having been merged into EDPDL, the attachment for the said amounts cannot be sustained. The attachment of the te....
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....5. In response whereto, it is submitted on behalf of respondents that the said presentation of facts are without any clear, cogent and direct evidence, the appellants are trying to twist the facts and giving the incomplete picture. It is stated that at the time of establishing M/s CHIDCO Pvt. Ltd., which is an SPV, the company was yet to begin its operations, likewise the share value of the M/s Indu Eastern Province Project and M/s Vasantha Projects Private Ltd. had not gained momentum for the reason that the entire project had not commenced then. After commencement of the project and after executing the substantial works, the goodwill of the Respondent Company went up and sold their stake in M/s CHIDCO Ltd. at the market value that existed at that time. As by then the value of the shares has risen due to the effort of the Respondent Company, in the normal course the share fetched the said value, therefore the same cannot be termed as a plan hatched or orchestrated to grab the housing project, the allegation that Mr. Jitendra Virwani was paid handsome amount is denied. 26. It appears from the impugned order that the Adjudicating Authority has held that no proceeds of crime....
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....lusion that M/s Dynasty Developers Pvt. Ltd. received an amount of Rs. 20 crore from CHIDCO as technical service. In this regard it needs to be noted that it is not the case that no development work has taken place." And thereupon conclusively holding that the provisional attachment order cannot be permitted to be continued and it ought to be vacated. 32. It is a settled principle of law that upon amalgamation between two Companies the transferor Company dies a civil death which is akin to death of an individual. Where after, the criminal proceedings if any stands abetted. Thus, the transferee Company can no longer be prosecuted or cannot be held to be liable for the criminal acts of the transferor company. 33. The adjudicating authority has duly considered this position in law and its applicability to the facts and circumstances to the present matter is evinced from perusal of the contents of the impugned order at Page Nos. 182 to 188, wherein prior to reaching the conclusion that the properties of the Respondent herein cannot be provisionally attached, the Adjudicating Authority noted as below: "The counsel has cited the decision of Delhi High Court in Nicholas ....
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.... Bond Lipton (India) Ltd. and Anr. V. State of H.P. and Anr. Decided on 24.03.1995. The Hon'ble Madhya Pradesh High Court (Hindustan Lever Ltd. V/s The State of Madhya Pradesh D/o 23.11.2017) while considering the impact of merger in the case of Brooke Bond Lipton India Ltd., merging with Hindustan Lever Ltd. concluded that: It is settled law that a criminal liability of transferor company into the tranferee company cannot be transferred or fastened on transferee company upon its amalgamation, because with the amalgamation, the transferor company suffers a civil death and it is ceased to exist. In the present case, the offence is occurred on 21.12.1996 and the Brooke Bond Lipton India Ltd merged with the Hindustan Lever Ltd on 20.3.1997. Thus, the Brooke Bond Lipton India Co. Ltd. committed the alleged offence before its merger with the petitioner Hindustan Lever India Co. Ltd. Consequently, the petitioner cannot be prosecuted. This view of mine is strengthened by a decision rendered in Hindustan lever Co. Ltd." 35. There is a force in the submission of respondents that PMLA being a penal statute cannot have any retrospective effect or a retroactive op....