TaxTMI 
TaxTMI 
2019 (6) TMI 1149
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....rasad 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 (hereinafter referred to as "APHB") invited Expression of Interest (hereinafter referred to as "EOI") for taking up Jo....
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....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 'EPDPL') from the consortium. Page 52, Para 54 of the Complaint 23.03.2007 Cancellation of the Technical Service Agreement between DDPL and CHIDCO. Page 53, Par....
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....tachments 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 2019, 6th August, 2018 and 21st August, 2018 and January 2019. Let the said letters be withdrawn by the appellant within 10 days. The undertaking given by I.O. is duly accepted. 7. The order dated 15.04.2019 passed by the Appellat....
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....tails 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 Reddy regarding shareholding pattern of M/s CHIDCO Private Limited. It means that at the time declaration of APHB, M/s Embassy Realtors Private Limited was not the shareholder of M/s CHIDCO Limited. However, Shri I. Syam Prasad Reddy had fraudulently induced APHB to enter into Development Agreement conferring the devel....
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....ed 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 Square Feet in the housing project at Kukatpally for a payment of Rs. 30.00 Crore. Both of them entered into cancellation deed 23.03.2007 i.e., on the date of Shri I. Syam Prasad Reddy addressed letter to APHB on converting M/s CHIDCO Private Limited, as 100% owned company of M/s Indu Projects Limited. Through this deed, the parties mutually agreed to settl....
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....at 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 of other accused persons including Shri Jitendra Virwani. 10. Benefits received by Shri Jitendra Virwani as per the case of the appellants: - (a) After awarding of Housing Project at Kukatpally by APHB to Embassy Unity Consortium, as per the negotiations between Shri Jitendra Virwani and Shri I Syam Prasad Reddy, M/s Embassy Realtors Private Limited was allotted 6.95 Lakh equity shares i....
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.... 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 Embassy Realtors Private Limited and M/s Dynasty Developers Private Limited. Shri Jitendra Virwani in his voluntary statement under Section 50 (3) of PMLA, 2002, admitted that he is looking after day-to-day affairs of the all companies of Embassy Group with the help of staff of respective companies/ firms which amply substantiates that he was the beneficial owner in respect of these companies i.e. the person controlling the affairs of M/s Dynasty Develop....
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....f 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 forming even the remotest of reasonable beliefs - proceeded to attach the properties of the Respondent herein, against which the Adjudicating Authority has noted as under:- "The Provisional Attachment Order in respect of the amount of Rs. 25,05,57,469 is illegal and cannot be permitted to be continued. The Provisional Attachment Order for the said amount needs to be vacated and is hereby vacated. The PAO in respect of the said amount of Rs. 25,05,57,469 is not confirmed." and ....
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....egality 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 Respondent not being involved in money laundering are results of the extensively and eruditely employed reasoning of the Adjudicating Authority. 19. It is rightly held by the Adjudicating Authority by quashing the provisional attachment order and there is a valid argument of the respondent to the following effect:- (i) No reasonable belief was formed by the Appellant against the Respondent in the Provisional Attachment Order dated 03.01.2018 passed under section 5(1) of the Prevention of Money Laundering Act, 2002. (ii) No criminal liability of the tr....
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....evelopers 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/w 13(1)(c) and (d) of Prevention of Corruption Act, in as much as by the order dated 15.11.2017 of Hyderabad High Court, the proceedings against the said S.N. Mohanty for the offences punishable under Sections 13(2) r/w 13(1)(c) and (d) of Prevention of Corruption Act are quashed. The said order of the Hon'ble High Court was passed on 15.11.2017 i.e. prior to the passing of the Provisional Attachment Order. The same assumed significance, as the Hon'ble High has thereby appreciated, considered the material and gave the findings. [...] Irrespective of all the allegations made in the Charge-....
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.... 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 term deposit in the name of Jitendra Virwani to the extent of Rs. 19 Crore need to be examined with reference to the allegations made against him, in his individual capacity. The Joint Director formed a conclusion that Sh. Jitendra Virwani got allotted three villas bearing nos. 118, 218, and 219 at Kukatpally projects for himself and his family members and by selling them at a premium at a later date, he benefitted to tune of Rs. 1.46 Crore, which proceeds of crime were utilized by him over a period of time. The Joint Director has also concluded that the proceeds of crime received by Sh. Jitendra Virwani were utilized....
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....he 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 are available with the Respondents and as such no property of the Respondents is involved in money laundering based on the facts and materials placed before the Adjudicating Authority. It is also held by the Adjudicating Authority that the business transactions were fair, and in the normal course thereof did M/s Dynasty Developers Pvt. Ltd. and M/s Embassy Realtors Pvt. Ltd. had made profits, as is discernible from the above quoted excerpts of the impugned order. 27. The Appellant has also submitted that the proceeds of crime were ultimately received by the Respondent Company. Neither has the Appellant was able in establishing any....
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....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 Piramal India ltd. vs. S. Sundranayagam D/o 23.08.2007. While dealing with the effect of amalgamation between the companies, the Hon'ble High Court pointed our decisions reported in re Skinner (1958)3AllE.R.273, wherein it was opined as under: ......schemes and orders made by virtue of section 206 and section 208 of the Companies Act, 1948 can only transfer such rights, powers, duties and property as are capable on being lawfully transferred by a party to the scheme if no such sections of the companies Act existed. It is not necessary in a scheme to exclude specifically from its operations things capable if such transfer as general words in the scheme and....
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....ton 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 operation. It is apparent from the contents of the complaint that the alleged offences stated to have been committed between the years 2004-2005. The fact remains that if considered that the alleged offence if at all committed by Jitendra Virwani on behalf of ERPL, predecessor of Respondent by entering into Development Agreements dated 28.02.2005 with APHB and forming SPVs for Kukatpally Housing Projects and Gachibowli Housing Projects was way before the PMLA came into force which was on 01.07.2005. Thus, the development agreements which is considered as the root of "proceeds of crime" was entered not only before the inclusion of scheduled offence in PMLA but before the PMLA coming into force. Thus, of....