TaxTMI 
TaxTMI 
2020 (2) TMI 1258
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....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, Accountancy or Administration, the member must pos....
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....he 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 2 (1) (y) of Prevention of Money Laundering ....
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....quired 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 back to Shri.R.Subramanian as per the covenants. d. As per the documents avail....
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.... 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 the details of registration on 12/6/2014. The stamp paper of the said deed is not in the name of TTSL as mentioned Ther....
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....rties 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 mentioned raising of money through equity in their documents even after their application for IPO being rejected in January, 2008. c) As per the bank transaction statements, the loan amounts were placed and ....
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....operty 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 sought to be achieved and the Rules framed and that the Rules are therefore, manifestly arbitrary. It is further contended that attachment has been defined under Section 2 (1) (d) of the Act and the purpose of attachment is only prohibition....
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.... 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-laundering to be an extraditable offence and (v). promoting international co-operation in investigation of money-laundering (d). The Police Declaration and Global Programme of Action adopted by United Nations General Assembly by its Resolution No.S-17/2 of 23rd February 1990, inter alia call....
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....resentative 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; (b). levy of fine for default of non-compliance of the issue of summons, etc. (c). make provisions for having reciprocal arrangement for assistance in certain matters and procedure for attachment and confiscation of property so as to facilitate the transfer of funds involved in moneylaundering kept outside the country and extraction of the accused persons from abroad. The Bill seeks to achie....
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.... 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 has been made or filed under the corresponding law of any other country: Provided further that, notwithstanding anything contained in clause (b), any property of any person may be attached under this section if the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section has reason to believe (the reasons for such belief to be recorded in writing), on the basis of material in ....
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.... 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, 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 per....
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....der 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 may be prescribed, may also direct the Central Government to restore such confiscated property or part thereof of a claimant with a legitimate interest in the property, who may have suffered a quantifiable loss as a result of the offence of money-laundering: Provided that the Special Court shall not consider such claim unless it is satisfied that the claimant has acted in good faith and has suffered the loss despite having taken all reasonable precautions and is not involved in the offence of money-laundering. Provided further that the Special Court may, if it thinks fit, c....
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.... 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 trial of an offence under Money Laundering Act, the Special Court finds that the offence of Money Laundering has been committed, it shall order that such property involved in Money Laundering or which has been used for commission of the offence of Money Laundering stand confiscated to the Central Government. Section 8 (8) provides that where a property stands confiscated to the Central Government under sub-Section (5), can be restored to the claimant from whom the property was taken away by the offender who had legitimate interest in the property. Section 9 provides that after the order of confiscation ....
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....rds 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 legitimising of the money earned through illegal and criminal activities by investments in movable and immovable properties. It had come to light that terrorist outfits and smuggling gangs have been depending upon the money laundering to finance their operations and the money for such operations are arranged through laundering. The Statement of Object and Reasons reads that money generated through illegal activities is ultimately inducted and integrated with legitimate money, resulting in purchasing of movable and immovable property. The object of the Act is that holders of properties acquired out of proceeds of crime shoul....
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.... 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 Court in SHAYARA BANO Vs. UNION OF INDIA {(2017) 9 SCC -1} has held that test of manifest arbitrariness to invalidate legislation under Article 14 of the Constitution of India must be something done by the legislature capriciously, irrationally and/or without adequate determining principle and also when something is done which his excessive and disproportionate, such legislation would be manifestly arbitrary. Paragraph 101 of the said judgment reads as under:- "101. It will be noticed that a Constitution Bench of this Court in Indian Express Newspapers (Bombay) (P) Ltd. v. Union of India [Indian Express Newspapers (Bombay) (P) Ltd....
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....sed 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 having force of law. It is inherent in every sovereign State by exercising its power of eminent domain to expropriate private property without owner's consent.........." (emphasis supplied) Article 300-A protects the private property of a person from Executive Action. The Hon'ble Supreme Court in K.T. Plantation (P) Ltd. v. State of Karnataka, (2011) 9 SCC 1 has held as under: "168.Article 300-A proclaims that no person can be deprived of his property save by authority of law, meaning thereby that a person cannot be deprived of his property merely by an executive fiat, without any specific legal authority or without the support of law made by ....