TaxTMI 
TaxTMI 
2021 (9) TMI 370
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....rovisional attachment of immovable properties under Section 5(1) of the Prevention of Money Laundering Act, 2002 (for short "PML Act"). In view of intertwinement of facts, both petitions are taken up together. 4. The litigation has chequered history. However, brief necessary facts to decide the dispute may be noted, which are as follows:- 5. Pursuant to a reliable information, the Central Bureau of Investigation (CBI), Anti Corruption Bureau (ACB), Mumbai registered an FIR No. RC0262020A0012 dated 23rd September, 2020 wherein it has been alleged viz :- "1. That M/s. Mack Star Marketing Pvt. Ltd. (Mack Star) is a joint venture company of M/s. Ocean Deity Investment Holdings Ltd. (A company incorporated under laws of Mauritius, having its registered office in Mauritius) and certain privately held Indian companies owned and controlled by Shri Sarang Wadhawan and Shri Rakesh Wadhawan, Promoters, M/s. Housing Development & Infrastructure Ltd. (HDIL). 2. That M/s. Ocean Diety Investment Holdings Ltd. (ODIL) holds 78.09% share capitals of M/s. Mack Star Marketing Pvt. Ltd. and the Housing Development and Infrastructure Ltd (HDIL) and Mr. Waryam Singh, Former Chairm....
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....tion and took 6 loans of Rs. 200.3 crores from Yes Bank Ltd. during the period from 2011 to 2016 in the name of Mack Star Marketing Pvt. Ltd. without approval or the knowledge of Investors. 6. That most of this loan amount was used in order to discharge liabilities owed by the HDIL group and the Wadhawan to the Yes Bank Ltd., and thereby prevented them from being NPA. 7. That although M/s. Mack Star Marketing Pvt. Ltd. was sanctioned a loan of Rs. 200.3 Crore, but only a sum of Rs. 138 Crore was credited in the current accounts of M/s. Mack Star Marketing Pvt. Ltd. and the remaining 64 Crores was directly transferred for the settlement of liabilities owned by HDIL Group to Yes bank through bank accounts of HDIL. Further, Rs. 135 Crores was also transferred from the Yes Bank Accounts of M/s. Mack Star Marketing Pvt. Ltd. to the bank accounts of M/s. Housing Development and Infrastructure Ltd., M/s. Privilllage Power and Infrastructure Private Limited and M/s. Sapphire Land Development Private Limited all HDIL Group Companies, on the same dates of loan disbursement. The Companies used more than Rs. 96 Crore of the money to pay their liabilities with the Yes Bank Ltd....
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....ithout the approval of its majority shareholder (i.e. the Investor). The said unknown officials of Yes Bank Ltd. deliberately avoided alerting the Investor about these fraudulent loans and disbursed these loans to Mack Star without the satisfaction of a key condition of Yes Bank's sanction letter. It is also revealed that they did not verify the enduse of these loans. The entire circulation of funds was happening within the Yes Bank System (i.e. loans disbursed by Yes Bank into Mack Star's Yes Bank account were immediately diverted to Yes Bank accounts of HDIL group companies, which used these funds on the same day to discharge liabilities owed by these HDIL group companies to Yes Bank)." 6. An offence came to be registered under Sections 120B, 409, 420 of Indian Penal Code, 1960 and Section 13(2) r/w section 13(1) (d) of the Prevention of Corruption Act, 1988 against Mr. Sarang Wadhawan, Mr. Rakesh Wadhawan and others (for short "Wadhawans"). It is alleged that Wadhawans have committed the aforesaid offences, which are scheduled offences under para 'A' of the schedule to the PML Act (as amended). On the basis of the aforesaid information and documents, the respondent found that....
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....ushal Doshi were identified in Atlantis building at Andheri (W), Mumbai. Since the proceeds of crime have been illegally and fraudulently obtained by Doshis through their beneficially owned company M/s. Sunlight Housing, were not available for attachment, as the two properties sold by M/s. Sunlight Housing, being Flat No.1001 and 1002, 10th floor, Atlantis building, Oshiwara, Andheri (W), Mumbai 400 012 were directly owned by Kaushal Doshi, which represents the value of proceeds of crime in terms of definition of Section 2(1) (u) of PML Act, was liable for attachment. It is the contention of the respondent that remaining 5 properties in Kaledonia building namely; office unit Nos.103, 104, 202-B, 501-A and 504-A were still in possession of M/s. Sunlight Housing and the same were liable for attachment in terms of Section 2(1)(u) of the PML Act. 10. Cash amount of Rs. 1.40 Crore was recovered from the residential premises of Mr. Mukesh Doshi as proceeds of crime in terms of Section 2(1)(u) of the PML Act and the same was attached vide the instant provisional attachment order in value thereof to prevent it from being transferred / concealed or otherwise which might have resulted int....
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....ners have filed a reply before the adjudicating authority. 15. The second limb of his argument is that in view of a consent decree passed by this Court on 16th March, 2021 in Commercial Suit (L) NO. 370 of 2020 which has already been communicated to the respondent no.1, the respondent no.1 chose to ignore the same. In view of the said consent decree, the officials of the respondent no.1 are not empowered to provisionally attach the subject flats in defiance of the said consent decree. 16. In order to invoke Section 5 of the PML Act for attachment of property in the form of provisional attachment order, the requirement of law is that there should be reason to believe and the same should be recorded in writing of such belief 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 under Chapter III of the PML Act. 17. Mr Ponda would argue that except by invoking writ jurisdiction of this Court, there is no provision in PML Act to challenge an order of provisional attachment as there....
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....No.10807 of 2021 dated 17th June, 2021 (Coram : S.C. Gupte & M.S.Karnik, JJ.) wherein the petitioners - M/s. Sunlight Housing have already approached this Court seeking similar relief qua the same provisional attachment order dated 9th April, 2021. He would argue that since the petitioners have not challenged the show-cause notice under Section 8 of the PML Act, there is no question of now challenging the impugned provisional attachment order in respect of the subject flats. Mr. Venegaonkar has also drawn our attention to the facts that the subject flats were not at all in existence in the year 2010 and the said property came into the hands of the petitioners in 2020, which totally falsifies the contention of the petitioners that they have acquired the subject flats in the year 2010. 22. At the first blush, the arguments of the learned Senior Counsel for the petitioners may appear attractive, nevertheless, a deeper scrutiny would reveal its hollowness in view of the complexity of the matter. 23. At the outset, the provisional attachment order No. 6 of 2021 dated 9th April, 2021 itself is so comprehensive, which augment the documentary evidence in the form of extracts of bank ....
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....ate time. 28. The learned Senior Counsel would argue that the subject flats are clean and untainted properties legitimately obtained through barter system. If that being so, why the petitioners did not produce any material or documentary evidence to substantiate their contentions despite opportunities given by the respondent - E.D. A bare look at the charts depicted hereinabove, prima facie, revealed an illegal and fraudulent activities amongst Wadhawans and Doshis, who transferred the subject flats in Kaledonia building to Mukesh Doshi's M/s. Sunlight Housing. It is the contention of the respondent - E.D. that during the course of investigation it has been revealed that M/s. Sunlight Housing has not paid any consideration against purchase of either of the 7 office units in Kaledonia building. Though it has been claimed by the beneficially owners of M/s. Sunlight Housing namely; Mukesh Doshi and Kaushal Doshi as well as its Director Ankit Doshi that approximately Rs. 76.87 crores had been paid by M/s. Sunlight Housing to Mack Star for purchase of said 7 office units in Kaledonia building, however, in fact after having scanned the relevant bank transactions, it is revealed that t....
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....sing transferred Rs. 5 Crore to M/s. Mack Star on 02.09.2016. Through M/s. Mack Star this amount of Rs. 5 Crore was transferred to six different Wadhawan group companies / entities one by one on the same day i.e. on 02.09.2016 and reached to M/s. Capetown Exports and M/s. Harsh Propcon. Through seven different Doshi's group companies / entities including M/s. Capetown Exports and M/s. Harsh Propcon, this amount of Rs. 5 Crore reached back to M/s. Sunlight Housing (another Doshi Group Company) :- When the amount of Rs. 5 Crore reached back to M/s. Sunlight Housing after circulating through 15 companies / entities, this same amount was again transferred by M/s. Sunlight to M/s. Mack Star on the very same day i.e. on 02.09.2016; and from M/s. Mack Star to six companies / entities of Wadhawan Group again on 02.09.2016; and from Wadhawan Group to seven companies / entities of Doshi's Group (other than M/s. Sunlight) again on 02.09.2016; and finally from Doshi's Group to M/s. Sunlight Housing on the very same day i.e. on 02.09.2016. In this way, this one amount of Rs. 5 Crore was rotated / circulated approximately 16 times (most of the time as a single amount of Rs. 5 Crore and someti....
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....e said transaction were concluded in a single day i.e on 02.09.2016. On clubbing the above transactions, it shows that this single amount of Rs. 5 Crore was rotated among 15 companies/entities which resulted in amount of Rs. 994.28 Crore vide 223 no. of transactions in a single day i.e on 02.09.2016. 12. Investigation has revealed that this whole facade of Money Laundering was conspired by two group companies i.e Wadhawan Group and Doshi's Group. Wadhwan Group includes Mr. Rakesh Kumar Wadhawan & Mr. Sarang Wadhwan whereas Doshi's Group includes Mr. Mukesh Doshi, Mr. Kaushal Doshi & Mr. Ankit Doshi. To justify the movement of funds from Wadhawan Group of companies viz. M/s Awas Developers & M/s Bidco Studs to Doshi's Group of Companies viz. M/s Capetown Exports & M/s Harsh Propcon, the Wadhawan and Doshis entered into another conspiracy under which M/s Awas Developers & M/s Bidco Studs allegedly acquired preferential shares in M/s Capetown Exports & M/s Harsh Propcon respectively. For acquiring these preferential shares M/s Awas Developers & M/s Bidco Studs transferred approx. Rs. 38.82 Crore & Rs. 38.04 Crore respt. to M/s Capetown Exports & M/s Harsh Propcon res....
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....tribute the constructed area proportionately; D) The Promoters through their Architect submitted a proposal for development of the CTS Nos. 1/A/283 to 1/A/286 to Slum Rehabilitation Authority ('SRA') which was duly approved and SRA has issued LOI bearing No. SRA/DDTP/0164/KW/PL/LOI dated 16th May, 2011 read with revised LOI bearing No. SRA/DDTP/244/L/PL/LOI dated 8th June, 2017; E) Architect has submitted a proposal in SRA for scheme on the said Property and said other Property. Thereafter building plans were passed and amended from time-to-time for construction of the building to be known as "Atlantis" consisting of Basement + Ground (pt.) and Stilt (pt.) + A3 to A9 + 10th to 12th + 14th to 21st + Fire Check Floor + 22nd to 27th + 28th (pt.) upper floors on the said Property which has been duly sanctioned by SRA, who have granted approvals as and by way of Intimation of Approval, as well as the various Commencement Certificates (hereinafter referred to as 'the said Building');" The Executive Engineer-I of S.R.A. by its communication dated 9th June, 2020 to M/s. Crystal Pride Developers granted occupation certificate for Atlantis building of the petitioners. ....
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....f any criminal activity relatable to the scheduled offence;] (3) Inserted by the Finance Act, 2015 (20 of2015), Section 145(i) (w.e.f. 14-05- 2015); (4) Inserted by Act 13 of 2018, Section 208(a) (w.e.f. 19-04-2018), vide G.S.R. 383 (E) dated 19.04.2018) (5) Inserted by the Finance (No.2) Act, 2019, section 192(iii) (w.e.f. 01.08.2019) 21. ....... 22. ....... 23. The same provision came up for interpretation before a Division Bench of the High Court of Punjab and Haryana in the case of Seema Garg v. The Deputy Director, Directorate of Enforcement decided on 06.03.2020 in PMLA No.1, 2 & 3 of 2019 (O&M). These are appeals filed against the order of attachment, which had been affirmed by the Appellate Tribunal. In these cases, the property had been purchased prior to the commission of the scheduled offence. The question that arose before the Court was whether such property could be brought within the definition of Section 2 (1)(u) and could be attached under Section 5 of the Act. The Division Bench, after considering the judgment of the erstwhile High Court for the State of Telangana and the State of Andhra Pradesh at Hyderabad in the case ....
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....being available for being attached/confiscated, either on account of their dissipation in the hands of the person holding the property or on account of the property being moved out of India and the reach of the authority under the Act, does not appear to have been contemplated. This issue was addressed by Act 20/2015, whereby the words "or where such property is taken or held outside the country, then the property equivalent in value held within the country" were added. This amendment contemplates only one situation, namely the proceeds of the crime being moved out of India. In such a situation, the amended definition permitted the attachment of property, in India, equivalent to the value of the proceeds of the crime, which were moved out of India. Later, by Act 13 of 2018 the words "or abroad" were added. By virtue of this amendment the property, which was moved abroad, could also be attached and confiscated. This amendment did not envisage a situation of dissipation of the property in the hands of the person holding the property. 28. Viewed from this perspective, the amendments would be unnecessary if the term "or the value of such property" was understood to authorize t....
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....ld that ambit of "value of any such property", that this term is not the same as the term of "property equivalent in value" held within the country or abroad, which appears in the 3rd limb and the same meaning cannot be given to both the terms. The Andhra Pradesh High Court is in agreement with the view taken by the Division Bench of the High Court of Punjab & Haryana in Seema Garg (supra). The Andhra Pradesh High Court, apart from concurring with the view expressed by Punjab & Haryana High Court also supplement its reason by the rule of Heydon's as explained by the Hon'ble Supreme Court in Bengal Immunity Co. Vs. State of Bihar AIR 1955 SC 661. As such, in the case at hand, the subject flats were in the hands of the petitioners in 2020 and, therefore, squarely fall within the definition of proceeds of crime and can very well be attached or confiscated under the Act. 40. Even otherwise, it is a provisional attachment and the matter is pending adjudication before the adjudicating authority. We are afraid, we can not buy the argument of the learned Counsel for the petitioners that the subject flats are clean and untainted property and, therefore, not liable to be attached, given t....
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....undering the AA will confirm the attachment of such property and record a finding to that effect. Thereupon, the attachment of such property will continue during the pendency of the criminal proceedings. It will become final after an order of confiscation is passed either under Section 8(5) or 8(7) PMLA, or Section 58B PMLA or Section 60(2A) PMLA by the special court constituted for trial of the offences under the PMLA. Under Section 8 (4) PMLA, upon confirmation of the order of provisional attachment, the Director or other officer authorized by him shall "forthwith take the possession of property attached". 32.Section 8 (5) PMLA states that upon conclusion of the trial where the special court finds that the offence of money-laundering has been committed, it shall order that the property involved in money-laundering shall stand confiscated to the Central Government. If it finds to the contrary, then under Section 8 (6) it shall order the release of the property to the person entitled to receive it." 42. The Delhi High Court has explained the scheme of PML Act and it has rightly been observed that the over all scheme has to be borne in mind before proceeding to examine t....
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....sional attachment order. There is a second tier of safeguard since the AA will again have to apply its mind before issuing an SCN regarding such continued provisional attachment. The confirmation of the provisional attachment is preceded by a hearing and the application of mind by the AA to all the facts and circumstances. (v) A third level of safeguard is that the order of the AA is further subject to review by the AT and then again by the High Court. With there being so many levels of judicial review, there can be very little scope for arbitrary or whimsical decision-making in the matter. The second proviso does not render otiose the first proviso nor does it provide for exercise of unbridled or arbitrary powers by t he authorities under the PMLA. Reliance is placed on the decisions in B. Ramaraju v. Union of India (2011) 164 Company Cases 149 (AP), Dr. V.M. Ganeshan v. Joint Director (2015) 1 MLJ 870, Usha Aggarwal v. Union of India (2017) SCC-Online (Sikkim) 146, Radhey Mohan Lakhotia v. Deputy Director 2010 (5) BomCR 625, Gautam Khaitan v. Union of India 218 (2015) DLT 183. Decision on constitutional validity of the second proviso to Section 5(1) 45.....
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.... 50. What attracts Section 5(1) PMLA is the person being in possession of any proceeds of crime. That person who is in possession of proceeds of crime need not be the person who is being tried for the scheduled offences or even PMLA offences. Or he may be a person accused of a PMLA offence as described under Section 3 PMLA. That is because, under Section 3 PMLA, any person who attempts to indulge or knowingly assists or knowingly is a part of or actually involved in concealment, possession, acquisition or use and projecting a claim the property constituting a proceeds of crime as an untainted property "shall be guilty of the offence of money-laundering". While the element of mens rea is not dispensed with, it is possible that a person who commits the offence under Section 3 PMLA is not himself or herself facing trial for any scheduled offence." 43. Thus, viewed from the perspective of the ratio laid down by the Delhi High Court, the respondent herein and the competent Authority has rightly passed the provisional attachment order and is following the procedure as contemplated in the PML Act. The Authority has yet to reach its final conclusion. The ratio decidendi of the j....
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....encies arising in the instant writ petitions and, therefore, there is no question of invoking the writ jurisdiction of this Court. Rather, we have discussed as to how the petitioners have approached this Court mala fide by suppressing not only material facts but also by suppressing the earlier petition being Writ Petition (L) No.10807 of 2021 qua the same impugned provisional attachment order. 48. On the similar point of alternative efficacious remedy, Mr. Ponda has pressed into service following case laws :- (i) State of H.P. and Ors. Vs. Gujarat Ambuja Cement Ltd. and Anr. (2005) 6 SCC 499. (ii) Commissioner of Income Tax Vs. Chhabil Dass Agarwal (2014) 1 SCC 603. (iii) Maharashtra Chess Association Vs. Union of India & Ors. (2020) 13 SCC 285. 49. In case of Gujarat Ambuja Cement Ltd. (supra) it has been held in para 17, which reads thus :- "17. We shall first deal with the plea regarding alternative remedy as raised by the appellant-State. Except for a period when Article 226 was amended by the Constitution (Forty second Amendment) Act, 1976, the power relating to alternative remedy has been considered to be a rule of self imposed limita....
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....rror is such, as, if not corrected at that very moment, may become incapable of correction at a later stage and refusal to intervene would result in travesty of justice or where such refusal itself would result in prolonging of the lis. (8) The High Court in exercise of certiorari or supervisory jurisdiction will not covert itself into a Court of Appeal and indulge in re-appreciation or evaluation of evidence or correct errors in drawing inferences or correct errors of mere formal or technical character." 52. Similar is the view taken by the Hon'ble Supreme Court in the case of Maharashtra Chess Association Vs. Union of India & Ors. (2020) 13 SCC 285. We extract para 21 and 22 of the said judgment, which read thus :- "21. The principle that the writ jurisdiction of a High Court can be exercised where no adequate alternative remedies exist can be traced even further back to the decision of the Constitution Bench of this Court in State of U.P. V. Mohd. Nooh, AIR 1958 SC 86 where Vivian Bose, J. observed : (AIR p.93, para 10) "10. In the next place it must be borne in mind that there is no rule, with regard to certiorari as there is with mandamus, that it....
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.... Court will not entertain a petition under Article 226 of the Constitution if an effective alternative remedy is available to the aggrieved person or the statute under which the action complained of has been taken itself contains a mechanism for redressal of grievance still holds the field. Therefore, when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation." 54. Indubitably, the petitioners have not challenged the show-cause notice and are only seeking to challenge the provisional attachment order. The reason assigned by the petitioners is that the present challenge was filed before this Court on 28th April, 2021 i.e. much prior to the show-cause notice dated 17th June, 2021 and thus, the same will remains alive inspite of the show-cause notice. 55. We do not agree. The petitioners cannot thwart the due process of law and halt the investigation under the guise of raising insignificant things. We have already discussed the scheme of the PML Act. The petition has been filed on mere issuance of the provisional attachment order dated 9th April, 2021 under Section 5 of the PML Act. The resp....
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....that having seized the property under Section 17 of the PML Act, the State was bound to apply for continuation of seizure under sub-section (4) of that section, and not exercise powers under Section 5 of the PML Act. The initial search followed by seizure may well be under Section 17 of the PML Act, but if the Director had reason to believe that the seized property was proceeds of crime and was likely to be dealt with by the person from whose possession it was seized, the Director may still choose to act under Section 5 of the PML Act and order its provisional attachment. The two provisions, namely, Sections 5 and 17 are not mutually exclusive alternative powers; there is no reason why they cannot be simultaneously resorted to. 4. It would be too hyper-technical to suggest that on the date when the order was passed under Section 5 of the PML Act, that is to say, on 9 April 2021, there had to be a reason to believe that the property was likely to be dealt with, and not anterior to that case, particularly when search was made under Section 17 or seizure was ordered under that Section. We are concerned here with one unitary transaction, namely, search of the Petitioners' prem....
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....ame is disposed of accordingly. ============= Document 1 M/s Sunlight Housing Development Pvt. Ltd. Rs. 7.17 Crore For 202B Rs. 15.15 Crore For 501 A & 504A Rs. 54.55 Crore For 101 to 104 Rs. 76.87 Crore M/s Serveall Construction Pvt. Ltd. Rs. 76.87 Crore Rs. 54.65 Crore M/s Mack Star Marketing Pvt. Ltd. Rs. 76.87 Crore Sarang Wadhawan Rs. 52.65 Crore Rs. 107.30 Crore Rs. 107.30 Crore M/s Housing Development & Infrastructure Ltd. Rs. 38.82 Grore Rs. 54.65 Crore Rs 13.82 Crore Rs. 22.22 Crore M/s Sapphire Land Development Pvt. Ltd. Rs. 76.87 Crore Rs. 24 22 Crore M/s Awas Developers & Construction Pvt. Ltd. Rs. 38.82 Crore Rs. 38.82 Crore M/s Capetown Exports Pvt. Ltd. Rs. 38.82 Crore M/s Bidco Studs Pvt. Ltd. Rs. 38.04 Crore Rs. 38.04 Crore M/s Harsh Popcon Pvt. Ltd. Rs. 38.04 Crore Document 2 M/s Awas Developers & Construction Pvt. Ltd. (Ac No 944378194) Rs. 38.82 Crore (8 transactions) M/s Bidco Studs Pvt. Ltd. (Ac No 6451472386) Rs. 38.04 Crore (11 transactions) M/s Capetown Exports Pvt. Ltd. (Ac No 886076163)....