TaxTMI 
TaxTMI 
2020 (2) TMI 1258
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.... process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money laundering. 3. Section 5 of the Act, provides that where an Officer not below the rank of Deputy Director has reason to believe on the basis of the material in his possession that any person is in possession of any proceeds of crime and such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime, he may order for a provisional attachment of such property for a period not exceeding 180 days. 4. The order passed under Section 5 (1) comes up for consideration before the Adjudicating Authority who is appointed under Section 6 of the Act. Section 6 of the Act provides that a person shall not be qualified as a member of the Adjudicating Authority in the field of law unless he is qualified to be appointed as a District Judge or has been a member of the Indian Legal Service and has held a post in Grade - I of that service. In the field of Finance, Accounta....
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....ing Act cases in respect of offences under the Act. The said criminal case has arisen out of ECIR/CEZO/8/2014, on the file of the Assistant Director, Directorate of Enforcement, Chennai Zonal Office. Case in ECIR No.8 of 2014 was registered on 26/9/2014 by the Assistant Director in the office of the Joint Director, Enforcement Directorate, Chennai Zonal Office. Based on a complaint by Bank of Baroda, Central Bureau of Investigation, Bank Securities & Fraud Division, registered a case of criminal conspiracy, cheating and criminal misconduct against one R.Subramanian, Managing Director, M/s. Subiksha Trading Services Limited, K.P.Vairavan, the then AGM and Branch Head, Bank of Baroda, Corporate Financial Services Branch, Chennai and M/s. Subiksha Trading Services Ltd., having its registered office at No.146, II Floor, R.K.Mutt Road, Mandaveli, Chennai, vide FIR No.18/2013, dated 26/7/2013. After the investigation, CBI had filed a charge sheet in C.C.No.9635 of 2014 dated 13/8/2014 against the said accused for having caused a loss of 77.39 crores to Bank of Baroda, for offences under Sections 120 (B), 420 of the Indian Penal Code which are Scheduled Offences, as defined under Section ....
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....res of land at Marakanam village, Villupuram District, acquired by R.Subramanian and available in the name of one of his group companies M/s.TTSL and Shri.R.Subramanian, has kept the same untainted in the name of one of his group companies M/s.TTSL. Investigation further revealed that an immovable property in the form of Residential house is available in the name of his wife Smt.Srividya Subramaniam, at No.2/583, Singaravelar Main Road, I Cross Street, Chinna Neelankarai, Chennai 41. 20. Verification conducted with the records of the 10.4 acres of landed property at Markanam revealed the following: a. the property at 10.4 acres of land at Marakanam Vilalge, Vilupuram District was initially purchased by Smt.Srividya Subramanian, wife of Shri.R.Subramanian, who had purchased the land in small parcels in the year 2004. b. Smt.Srividya Subramanian and her husband Shri.R.Subramanian entered into a partnership deed in the name of "ARESS INVESTMENTS" in the year 2008. As per the covenants, this property goes to the partnership deed. c. In the year 2009 the said partnership deed was dissolved with mutual consent and the rights of the property were given ....
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....ferred to TTSL vide sale deed dated 12/6/2014. f. As per the report of jurisdictional DRO, Chennai the stamp paper of the said sale deed dated 12/6/2014 was in the name of KASIR ARUL ANANDA and not in the name of TTSL as mentioned in the said stamp paper and hence it appears that the said said deed document is not valid. (g). S.Shri Augustine and Shri.R.Venkataramanan, the two current Directors of TTSL and as per the ROC they are Directors w.e.f.10/8/2014 and 14/3/2015 had stated that they were employees of TTSL and that they are not aware of the details of TTSL and signed all the documents relating TTSL at the instance of R.Subramanian. h. Shri Augustine, Director of TTSL who signed the sale deed documents on 12/6/2014 is not Director of the Company as per the DIR-12 report filed with ROC (he is director w.e.f.10/8/2014) and hence it appears that the said sale deed document is not valid. (i). The following observations confirm that the entire process was a stage managed by R.Subramanian on sensing the clutches of attachment initiated by Bank of India against the 10.40 acres of land at Marakanam. Shri Augustine was a not a director on th....
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....eline value being Rs. 2.55 Crores) have been identified as the properties acquired and enjoyed by R.Subramanian in the name of others. The certified records pertaining to these landed properties have been obtained from the jurisdictional Sub-Registrar, Marakkanam and the sub- Registral, Neelankarai respectively. The details of immovable properties acquired as above, which tantamount to the value of the part of the proceeds of crime involved in the Charge sheet in File No.RC-4(E)/2013 CBI/BS & FC, Bangalore in C.C.No.9635/2014 dated 13/8/2014 is illustrated below:- 24. The investigation conducted under the provisions of PMLA, 2002 primarily revealed that: a) STSL and R.Subramanian suppressed the details of sundry creditors in the stock statement, not submitted the quarterly progress reports, External Rating, Balance-sheet, etc., for the period 2007-08, utility certificate for phase-IV expansion, submitted and manipulated utility certificate for phase-V expansion to the bank authorities and not cooperated for post sanction verification of the loan, thus fraudulently violated the conditions of Cash Credit loan and Term loan. b) STSL and R.Subramanian had men....
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....Section 8 (3) of the Act. The consequence of passing a final order of attachment i.e., 8 (3) of the Act is that under Section 8 (4) be taken for taking possession of the properties. As stated above, the Rules prescribe that if the property is in occupation of any person including the owner, then the person in occupation of the property has to be evicted by resorting to the Prevention of Money Laundering Act. The petitioner therefore, challenges Section 8 (4) of the said Rules stating that it amounts to depletion of property rights and is in violation of 300 A of the Constitution of India. 10. Heard Mr.R.Subramanian, learned counsel for the petitioner and Mr.N.Ramesh, learned Special Public Prosecutor for the respondents. 11. It has been contended by Mr.R.Subramanian, learned counsel for the petitioner that till it is not finally decided that the property attached is a proceed of crime, the occupant cannot be denied the possession and enjoyment of the property. It is argued that the provisions of the Act and the Rules framed thereunder by which the owner has been forcefully evicted is manifestly arbitrary. According to the petitioner, there is no nexus between the object sough....
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....at are outlined below: (a). The United Nations Convention against illicit traffic in Narcotic Drugs and Psychotropic Substances, to which India is a party, calls for preventing of laundering of proceeds of drug crimes and other connected activities and confiscation of proceeds derived from such offence. (b). The Basle Statement of Principles, enunciated in 1989, outlined basic policies and procedures that banks should follow in order to assist the law enforcement agencies in tacking the problem of money-laundering. (c). The Financial Action Task Force held in Paris from 14 to 16 July, 1989, to examine the problem of money-laundering has made forty recommendations, which provide the foundation material for comprehensive legislation to combat the problem of money-laundering. The recommendations were classified under various heads. Some of the important heads are - (i). declaration of laundering of monies earned through serious crimes, a criminal offence (ii). to work out modalities of disclosure by financial institutions regarding reportable transactions (iii). confiscation of the proceeds of crime (iv). declaring money-l....
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....on inter-concected transactions (h). vacancy in the office of the Chairperson of the Appellate Tribunal, by reason of his death, resignation or otherwise, the seniormost member shall act as the Chairperson of this Act to fill the vacancy, enter upon his office; (i). the appellant before the Appellate Tribunal may be authorised to engage any authorised representative as defined under Section 288 of the Income-tax Act, 1961 (j). the punishment for vexatious search and for false information may be enhanced from three months imprisonment to two years imprisonment, or fine of rupees ten thousand to fine or rupees fifty thousand or both; (k). the word 'good faith' may be incorporated in the clause relating to bar of legal proceedings. The Central Government have broadly accepted the above recommendations and made provisions of the said recommendations in the Bill In addition to above recommendations of the Standing Committee, the Central Government purposes to: (a). relax the conditions prescribed for grant of bail so that the Court may grant bail to a person who is below sixteen years of age, or woman, or sick or inform; ....
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....e Director or any other officer not below the rank of Deputy Director authorised by the Director for the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that- (a) any person is in possession of any proceeds of crime; and (b) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter, he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and eighty days from the date of the order, in such manner as may be prescribed: Provided that no such order of attachment shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person authorised to investigate the offence mentioned in that Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or a similar report or complaint....
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....ons made under sub-section (4) of section 17 or under subsection (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, he 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 means of which he has acquired the property attached under sub-section (1) of section 5, or, seized or frozen under section 17 or section 18, the evidence on which he relies and other relevant information and particulars, and to show cause why all or any of such properties should not be declared to be the properties involved in money-laundering and confiscated by the Central Government: Provided that where a notice under this sub-section specifies any property as being held by a person on behalf of any other person, a copy of such notice shall also be served upon such other person: Provided further that where such property is held jointly by more than one person, such notice shall be served to all persons holding such property. (2) The Adjudicating Authority shall, a....
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.... involved in the money-laundering or which has been used for commission of the offence of moneylaundering shall stand confiscated to the Central Government. (6) Where on conclusion of a trial under this Act, the Special Court finds that the offence of moneylaundering has not taken place or the property is not involved in money-laundering, it shall order release of such property to the person entitled to receive it. (7) Where the trial under this Act cannot be conducted by reason of the death of the accused or the accused being declared a proclaimed offender or for any other reason or having commenced but could not be concluded , the Special Court shall, on an application moved by the Director or a person claiming to be entitled to possession of a property in respect of which an order has been passed under subsection (3)of section 8, shall pass appropriate orders regarding confiscation or release of the property, as the case may be, involved in the offence of money laundering after having regard to the material placed before it. (8). Where a property stands confiscated to the Central Government under sub-Section (5), the Special Court, in such manner as ma....
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.... 16. The final order of attachment is passed after due hearing is given to all the parties concerned. Further Order under Section 8 (3) of the Act by which attachment becomes final is subject to an appeal to the Appellate Tribunal under Section 26 of the Prevention of Money Laundering Act. The chairman of the Appellate Tribunal is a sitting or a former Judge of the Supreme Court of India or a High Court or a person who is qualified to be a Judge of the High Court. Order of the Tribunal is subject to a further appeal to a High Court or any question of law or fact, under Section 42 of the Act. This order of adjudication under Section 8 (3) is amenable to challenge before the appellate Tribunal under Section 26 and to a further challenge to the High Court under Section 42 of the Act. There are adequate safeguards before the order of attachment attains finality. Once the order under Section 8 (3) attains finality and the opinion of the adjudicating authority that the property must be restrained from being dealt with by the owner of the proceeds gets finalised, the procedure under Section 8 (4) is followed for securing the property. Section 8 (5) provides that on the conclusion of the ....
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....roperty of one already before the court, or of one whom it is sought to bring before it'. It is used for two purposes: (i) to compel the appearance of a defendant; and (ii) to seize and hold his property for the payment of the debt. It may also mean prohibition of transfer, conversion, disposition or movement of property by an order issued by the court." 152. The legislature has thought it proper to change the nature and character of the interim measure. The property obtained by ill-gotten gains, if prima facie found to be such by the authorised officer, is to be confiscated. An accused has no vested right as regards the interim measure. He is not protected by any constitutional right to advance the plea that he cannot be made liable to face confiscation proceedings of the property which has been accumulated by illegal means. That being the litmus test, the filament of reasoning has to rest in favour of confiscation and not against it. Therefore, we are of the considered view that the provision does not violate any constitutional assurance." 19. The Act has been made to combat a special problem which is plaguing the country. The instant Act was brought about to prevent ....
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....view of this presumption, which is contained in Section 24 of the Act, it cannot be said that Rule 4 and 5 of the Prevention of Money Laundering (Taking Possession of Attached or Frozen Properties confirmed by Adjudicating Authority) Rules, 2013, which has been framed for achieving the directions issued under Section 8 (4) of the Act is manifestly arbitrary. The Hon'ble Supreme Court in Y.S. Jagan Mohan Reddy v. CBI [Y.S. Jagan Mohan Reddy v. CBI, (2013) 7 SCC 439, has observed as under:- "34. ... The economic offences having deep-rooted conspiracies and involving huge loss of public funds need to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country." 20. When an attempt is made to project proceeds of crime as untainted money and also when the burden of proof is on the accused to show that the property has not been purchased out of the proceeds of crime, it cannot be said that the mandate given by the Act and the Rules to evict the person in whose name the property stands from the property is manifestly arbitrary. 21. The Hon'ble Supreme Co....
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....le 300-A, is extracted below. "300-A. Persons not to be deprived of property save by authority of law.-No person shall be deprived of his property save by authority of law." It is settled law that Article 300-A ensures that no person shall be deprived of their property, except in accordance with law. In the case of Jilubhai Nanbhai Khachar v. State of Gujarat, 1995 Supp (1) SCC, the Hon'ble Supreme Court explained the meaning of the expression, "deprivation of the property of a person," as under: "48. The word 'property' used in Article 300-A must be understood in the context in which the sovereign power of eminent domain is exercised by the State and property expropriated. No abstract principles could be laid. Each case must be considered in the light of its own facts and setting. The phrase "deprivation of the property of a person" must equally be considered in the fact situation of a case. Deprivation connotes different concepts. Article 300-A gets attracted to an acquisition or taking possession of private property, by necessary implication for public purpose, in accordance with the law made by Parliament or a State Legislature, a rule or a statutory order ....