TaxTMI 
TaxTMI 
2022 (7) TMI 657
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....ssued by respondent No.3. 3. Be it stated that by way of the impugned summons dated 11.11.2021 issued under sub-sections (2) and (3) of Section 50 of the Prevention of Money Laundering Act, 2002, respondent No.2 called upon the petitioner to furnish complete details regarding his policies bearing Nos.MO22000752, MO22002114, 3018724Z and 3018697D held with RL360 Insurance Company Limited, UAE, including present status and valuation as well as details regarding source for the premium amounts paid for the above insurance policies. 4. By the Provisional Attachment Order No.11/2011 dated 25.11.2021 issued under the first proviso to sub-section (1) of Section 5 of the Prevention of Money Laundering Act, 2002, respondent No.3 ordered provisional attachment of the above insurance policies, further ordering that those shall not be transferred, disposed, removed, parted with or otherwise dealt with, until or unless specifically permitted to do so by respondent No.3. 5. F.I.R. bearing No.RC-35-2011-A-0018 dated 17.08.2011 was registered by the Central Bureau of Investigation (CBI) against Sri B.P.Acharya, IAS, Chairman & Managing Director of Andhra Pradesh Industrial Infrastructure C....
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....e was registered as Crl.P.No.3935 of 2016. By a detailed order dated 05.01.2018, this Court allowed Crl.P.No.3935 of 2016 and quashed the proceedings in C.C.No.6 of 2012 against the petitioner. Petitioner (accused No.13) was acquitted and his bail bonds stood cancelled. 10. CBI filed Special Leave Petition before the Supreme Court against the aforesaid order dated 05.01.2018 being S.L.P. (Crl) (Dairy) No.29628 of 2018. By order dated 24.09.2018, the delay in filing the Special Leave Petition was condoned and notice was issued. It is stated that the said S.L.P. is still pending before the Supreme Court but no stay has been granted. 11. Respondent No.1 filed a complaint dated 12.04.2019 under Section 45 of the Prevention of Money Laundering Act, 2002 (for short, 'PMLA' hereinafter) which was registered as Enforcement Case Investigation Report (ECIR) No.08/HZO/ 2011 before the Special Judge for Offences under the PMLA (PMLA Court). In this proceeding, petitioner was arrayed as accused No.12. Allegation against the petitioner was the same as in the CBI case: that petitioner had knowingly received USD 3,90,000 as part of excess amount paid towards purchase of villa plots. ....
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....he petitioner Sri Koneru Madhu and hence attached. The property under question i.e., the insurance policies taken by Sri Koneru Rajendra Prasad have been transferred to Sri Koneru Madhu in the months of July and August, 2021, after quashing of proceedings against Sri Koneru Madhu by this Court. It is contended that the same was done with the intention of alienating the proceeds of crime and Sri Koneru Madhu was in the process of surrendering the insurance policies. 19. Summons under Section 50 of the PMLA were issued to Sri Koneru Madhu to explain the source of funds for the premia paid for the insurance policies because presently Sri Koneru Madhu is managing the said companies and has access to all the records of such companies. 20. Denying the allegation that issuance of summons is an attempt to overreach the orders of this Court, it is stated that complaint was filed by the Enforcement Directorate after thorough investigation and probing the role of Sri Koneru Madhu. 21. Again it is reiterated that while proceedings against Sri Koneru Madhu have been quashed, proceedings against Sri Koneru Rajendra Prasad are still in vogue. Sri Koneru Rajendra Prasad along with his wif....
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....stigation against Sri Koneru Rajendra Prasad. 25. Referring to Section 65 of the PMLA, it is submitted that Section 173(8) CrPC is very much applicable to investigation, attachment etc., under PMLA. Adverting to Section 44(1)(ii) explanation of PMLA, respondents have stated that the assignment/transfer of insurance policies to Sri Koneru Madhu immediately following quashing of prosecution against him is a deliberate attempt by Sri Koneru Rajendra Prasad to alienate the proceeds of crime. Thereby Sri Koneru Rajendra Prasad had projected the proceeds of crime as legal monies and possession of the same by Sri Koneru Madhu constitutes the offence of money laundering as defined under Section 3 and punishable under Section 4 of PMLA. 26. Denying that there is any overreach of the orders of this Court, it is contended that it is Sri Koneru Rajendra Prasad who along with his wife Smt. Koneru Vimala Devi who assigned/transferred assets in the form of insurance policies to Sri Koneru Madhu with the intention of alienation of assets, the source of which is suspected to be out of proceeds/funds of offshore entities in which the proceeds of crime have been allegedly intermingled. Further,....
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....i Koneru Rajendra Prasad and Smt. Koneru Vimala Devi has been made the beneficiary of the insurance policies in the normal course. The same has no connection whatsoever to the quashing of proceedings by this Court against the petitioner. Respondents have failed to demonstrate any connection/link between the insurance policies and the alleged proceeds of crime in the impugned Provisional Attachment Order. 31. Denying that petitioner had not submitted explanation to the impugned summons, it is stated that the petitioner had submitted response to the summons on 18.11.2021 requesting the respondents to withdraw the summons in view of quashing of proceedings against the petitioner by the High Court. That response was not considered by the respondents. Petitioner has denied the submissions of respondents that Section 173(8) CrPC is applicable to an investigation under the PMLA. Finally petitioner has contended that issuance of impugned summons and passing of the impugned Provisional Attachment Order attaching four insurance policies is clearly an abuse of the process of law. There is no material at all for respondent No.3 to have reason to believe that the insurance policies are proce....
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....ither under the IPC or under the PMLA. Though the investigating agencies have filed Special Leave Petitions before the Supreme Court, no stay has been granted. Therefore issuance of summons to the petitioner in the same ECIR is nothing but an abuse of the process of law. Neither is there any predicate offence nor any scheduled offence against the petitioner. 33. Mr. Prakash Reddy, learned Senior Counsel further submits that there are no new materials available with the respondents to exercise purported powers of further investigation. As per the impugned Provisional Attachment Order, the basis of issuance of summons is the ostensible discovery of certain insurance policies held by the petitioner. Enforcement Directorate has alleged that the premia of these insurance policies is being paid from one M/s.Rescom Holdings (earlier Trimex International FZE). The connection or link between the main offence and the impugned summons is based entirely on the alleged statement that the co-accused has diverted funds into M/s.Rescom Holdings. However in the entire complaint of the Enforcement Directorate qua the petitioner which has since been quashed, the only reference to alleged diversion....
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....Appellate Assistant Commissioner of Income Tax, Calcutta (1972) 3 SCC 234 2. Mohinder Singh Gill v. Chief Election Officer (supra) 3. State of Haryana v. Bhajan Lal (1992) Supp 1 SCC 335 4. Union of India v. Ashok Kumar (2013) 16 SCC 147 5. Satyam Computer Services Limited v. Directorate of Enforcement 2018 SCC Online Hyd 787 6. Seema Garg v. Deputy Director of Enforcement 2020 SCC Online P&H 738 7. HDFC Bank Limited v. Government of India Manu/BH/0417/2021 36. On the other hand, Mr. Anil Prasad Tiwari, learned Standing Counsel for the Enforcement Directorate appearing for the respondents stoutly defended the impugned summons and the impugned Provisional Attachment Order. He submits that respondents have acted within the four corners of the law in issuing the summons and thereafter passed the Provisional Attachment Order. According to him, the present writ petition is premature in as much as validity of the attachment is yet to be decided by the adjudicating authority. Once reference is made to the adjudicating authority, the said authority will adjudicate after hearing the petitioner and thereafter pass an order recording a ....
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....eld outside the country, then the property equivalent in value held within the country or abroad. The Explanation clarifies that 'proceeds of crime' include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence. The aforesaid expression being relevant, the same is extracted hereunder: 2(1)(u) "proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad. Explanation.- For the removal of doubts, it is hereby clarified that "proceeds of crime" include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence. 39.3 "Scheduled offence" is defined in Section 2(1)(y). "Scheduled offen....
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....nvolved in money- laundering is not attached immediately under this Chapter, the non-attachment of the property is likely to frustrate any proceeding under this Act.] Provided also that for the purposes of computing the period of one hundred and eighty days, the period during which the proceedings under this section is stayed by the High court, shall be excluded and a further period not exceeding thirty days from the date of order of vacation of such stay order shall be counted. (2) The Director, or any other officer not below the rank of Deputy Director, shall, immediately after attachment under sub-section (1), forward a copy of the order, along with the material in his possession, referred to in that sub-section, to the Adjudicating Authority, in a sealed envelope, in the manner as may be prescribed and such Adjudicating Authority shall keep such order and material for such period as may be prescribed. (3) Every order of attachment made under sub-section (1) shall cease to have effect after the expiry of the period specified in that sub-section or on the date of an order made under [sub-section (3)] of Section 8, whichever is earlier. (4) Nothing in this sectio....
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....ichever is earlier. 42. We will revert back to Section 5 of the PMLA a little later. 43. Let us now deal with the charge against the petitioner as accused No.13 brought by the CBI in C.C.No.6 of 2012. We have already noted the substance of the allegation qua the petitioner. However we may extract the same as was summarised by this Court in Criminal Petition No.3935 of 2016 filed by the petitioner for quashing the charge against him in C.C.No.6 of 2012. In the order dated 05.01.2018, this Court summed up the charge against the petitioner by the CBI in the following manner: 2. The brief case of the prosecution is that a Joint Venture Company by name M/s Emaar Hills Township Private Limited (EHTPL-A3) was formed in 2003 between Emaar Properties PJSC, Dubai(Emaar-A2) and M/s APIIC to develop 353 acres of land in Gachibowli in the ratio of 74:26 in profits in 2006. M/s Emaar, the partner of M/s EHPTL without the knowledge of APIIC in violation of agreement of various Government rules entered into partnership with another sister company known as M/s EMAAR MGF (A4) to develop the same piece of land in Gachibowli in the ratio of 75:25 in revenue i.e. M/s EMAAR MGF-A4 w....
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....lots was fixed by M/s Emaar Properties PJSC, Dubai with M/s Stylish Holmes Real Estates Pvt. Ltd., at Rs.5,000/- per Sq. Yd., as per the instructions of Shri Koneru Rajendra Prasad-A6, Shri T.Ranga Rao-A14 as Director of M/s Stylish Holmes, sold the villa plots by collecting excess amounts from the buyers ranging from Rs.4,000/- per Sq. Yd. to Rs.45,000/- per Sq. Yd., over & above the rate of Rs.5,000/- per Sq. Yd. and it is the criminal breach of trust and cheating and to commit the offences there was a criminal conspiracy and as part of their nefarious plan, the excess money over & above the documented price of Rs.5,000/- per Sq. Yd was collected of an amount of Rs.96,01,75,000/- by Shri T.Ranga Rao and Shri Rajendra Prasad from about 82 or so villa plot buyers in cash only; however two of such buyers viz., Shri P.S.Parthasarathy and Shri Challa Suresh, since deposited in to the account No.8900056630, US $ 250,000 and US $ 140,000 respectively towards part of excess payment in the bank accounts of the petitioner- A13-Shri Madhu Koneru (S/o Shri Koneru Rajendra Prasad-A6) maintained at Dubai and Shri T.Ranga Rao, Shri P.S.Parthasarathy and Shri Y.V.Prasad in their respective state....
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.... other accused and liable to face trial for the accusation of criminal conspiracy, leave about with any other offence therefrom, from the material on record, even taken on its face value, from his allowing of any such amounts remitted in to his account without immediate refund? 45. Thus from the above, we find that after exonerating the petitioner from the offence of criminal breach of trust and cheating this Court examined as to whether petitioner was in any way privy to any criminal conspiracy punishable under Section 120-B IPC with any other accused. On a thorough consideration of the materials on record, this Court held as follows: 15(c). Here coming to the case on hand, it is not even a case of separate conspiracy between A6 and A13, the father and son, from entire case of prosecution, for not a version that with that separate conspiracy they hatched any plan to commit another offence or part of any offence in any larger conspiracy. Even for arguments sake taken as such, it at best when shows A6-asked the two buyers to remit the excess amount into the bank account of his son- petitioner-A13-Madhu at Dubai, for none of the statements of Ranga Rao, Parthasarthy and S....
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....nspiracy as held by the Apex Court in the decisions supra, for nothing that can be shown even of all means adopted and illegal acts done in furtherance of the object of conspiracy hatched from any circumstances relating to the period prior in time than only one circumstance in seeking to infer conspiracy from at a later point of time a part of the amounts of two so called buyers out of nearly hundred buyers amounts remitted to his account was not immediately returned to the two, but allowed to remain in his account as an alleged offence, which is when no way suffice to any prudence to say same was in furtherance of the alleged conspiracy to draw any inference of the alleged conspiracy. Undisputedly from the settled legal position, there must be a meeting of minds resulting in ultimate decision taken by the conspirators regarding the commission of an offence and where the factum of conspiracy is sought to be inferred from circumstances, the prosecution has to show that the circumstances give rise to a conclusive or irresistible inference of an agreement between two or more persons to commit an offence. For that the acts and conduct of the parties must be conscious and clear enough t....
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....Act against the Petitioner (Accused No. 12)? 2) Whether there is 'schedule offence' to be proceeded with against the Petitioner under the provisions of Prevention of Money Laundering Act in view of the Order of this Court in Crl. Petition 3935 of 2016 dated 05.01.2018? 3) Whether the amendment of PML Act, in the year 2009 so far as 'schedule offences' is concerned, can be applied to an act committed prior to amendment? 50. While deliberating upon question Nos.1 and 2 as extracted above, this Court adverted to the accusation made against the petitioner in the complaint filed by the respondents before the Special Court which may be extracted as under: "L. Role of Sri Koneru Madhu (Accused No. 12) S/o Sri Koneru Rajendra Prasad in Money Laundering Offence: i) He is an NRI and his father Sri Koneru Rajendra Prasad was a Director in EHTPL. He received an amount of USD 1,40,000 from Sri Challa Suresh and USD 2,50,000 from Sri PS Parthasarathy, who have purchased villa plots in EHTPL, as part of excess amount received from villa plot buyers. ii) Later he returned the amount of USD 2,50,000 to Sri PS Parthasarathy in the guise....
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....ments of M/s Stylish Holmes, Shri Tummala Ranga Rao, M/s Southend Projects & Foundations Pvt. Ltd. Sri N. Sunil Reddy, Sri Koneru Rajendra Prasad and also from other persons who were associated with the transactions and their voluntary statements ..." It is therefore, as rightly contended by the Learned Senior Counsel for the Petitioner, other than the material collected by the CBI, the ED did not collect, nor did any further investigation to collect some more material to charge the petitioner with the offence under sec. 120B and Sec. 420 IPC. This Court in Crl.P.No 3935 of 2016, wherein the present petitioner was figured as Accused No. 13 made a clear observation vide Para 17 at page 40 as below: "From the above, when it is not a case of the Petitioner-A13 was privy to any conspiracy with M/s Emmar Properties, Public Joint Stock Company (PJSC), Dubai, from the time of their entering the MOU, much less even party to agreement between M/s Emmar and its subsidiaries and M/s Stylish Homes and not even privy with Ranga Rao-Director of M/s Stylish Homes and nothing even of any material with substance to say any privy between A6-Rajendra Prasad and the Petitioner-A13, l....
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....s privy for their committing those offences alleged from any agreement or abetment/instigation from the allegations in the charge sheet that though rate of selling the villa plots was fixed by M/s Emaar at Rs. 5, 000/ per sq. yd. as per the instructions of Shri Koneru Rajendra Prasad - A6, Shri T. Ranga Rao-A14 as Director of M/s Stylish Holmes Real Estates Pvt. Ltd., sold the villa plots by collecting excess amounts from the buyers...." Thus, this Court upheld the contentions of the Petitioner herein who is the Petitioner-A13 in Charge sheet filed by CBI that no offences are made out under sec. 120B, 409 and 420 IPC and quashed the charge sheet against him. This Court is called to examine the same facts which were considered by this Court in Crl P. No.3935 of 2016, in this case which are arisen out of the Complaint filed by the ED under PML Act. The contention of the learned Standing Counsel for the Respondent is that this case is independent and has no relevance with the result of Crl.P.No. 3935 of 2016 is lacking force and logic because the ED can proceed only for those offences which are 'scheduled offences' under the IPC. This Court, on facts cannot take....
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....surance Company Limited, UAE including the present status and valuation. Petitioner was also called upon to furnish complete details regarding source for payment of premia amounts for the said insurance policies. 57. As already noted earlier, petitioner had replied to respondent No.2 on 18.11.2021 contending that the ECIR under which the summons were issued was already quashed by this Court qua the petitioner. He also pointed out that the charge sheet filed by the CBI against petitioner was also quashed by this Court qua the petitioner. Therefore issuing summons to the petitioner in the same ECIR was contrary to the above two judgments of this Court. Accordingly petitioner requested respondent No.2 to withdraw the summons. 58. That brings us to the Provisional Attachment Order No.11/2021, dated 25.11.2021 passed by respondent No.3 brushing aside the above reply. It is seen that respondent No.3 considered the following while passing the impugned order: (i) Copy of FIR No.RC-35-2011-A-0018 dt. 17.08.2011 registered by CBI, Hyderabad against M/s Emaar Hills Township Pvt.Ltd. and Others. (ii) Copy of Charge Sheet No. 01/2012 dated 01.02.2012 (CC No.06/2012) in F....
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....g after the business operations of entities established by his father in Dubai and he is owner of all the companies established by his father in Dubai; that his father has setup a company in Dubai and later in the year 2005, it was transferred to his elder brother Madhu Koneru and the name of the company was later changed to M/s Trimex International FZE, which was subsequently renamed as M/s Rescom Holdings, Boulevard Plaza, Tower 1-Downtown Dubai-Dubai-United Arab Emirates. He furnished the details of his bank accounts held outside India viz., Abu-Dhabi Islamic Bank and Emirates NBD. 6.5 He also furnished the details of insurance policies held in his name outside India. He informed that he had five insurance policies outside India, out of which one was being surrendered; and the premia for all these policies were paid by his brother Shri Madhu Koneru, from his business income, as a gift or being paid by M/s Rescom Holdings, Dubai and that 4 out of 5 insurance policies have completed their tenure before 6 years. 6.6 It is pertinent to mention that when questioned to furnish the source of funds utilized for purchasing the above insurance policies, Mr. Pradeep Koner....
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....es mentioned above. Thus, Shri Rajendra Prasad Koneru and Shri Madhu Koneru failed miserably in discharging the burden of proof cast upon them u/s 24 of the PMLA, 2002 section 24 of the PMLA, 2002 provides that: "24. Burden of Proof.--In any proceeding relating to proceeds of crime under this Act,-- (a) in the case of a person charged with the offence of money-laundering under section 3, the Authority or Court shall, unless the contrary is proved, presume that such proceeds of crime are involved in money-laundering ; and (b) in the case of any other person the Authority or court, may presume that such proceeds of crime are involved in money-laundering". 6.11 The assets in question are matured insurance policies which are located in UAE. Once their existence has been revealed to the investigating department, it gave opportunity to the respondents to explain the source of the funds. The beneficial owners have provided no evidence to establish the genuinity of the source of funds and if no action is taken by invocation of section 5 of the PMLA, there is a possibility that the impugned funds may be layered and alienated to frustrate any proceedings r....
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....n writing, on the basis of 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, before he provisionally attaches such property for the limited period not exceeding 180 days. 65. Thus the sine qua non for exercising power under sub- section (1) of Section 5 is that the attaching authority must have reason to believe, which must be recorded in writing. Such reason to believe must be formed on the basis of material(s) in his possession that any person is in possession of proceeds of crime and that such proceeds of crime are likely to be concealed etc. Therefore the material in possession of the attaching authority must pertain to the above two aspects and on the basis of such materials he must form the reason to believe. In other words, the reason to believe must have a direct nexus or live link with the materials in possession pertaining to the above aspects. 66. The expression reason to believe has been subjected to numerous judicial pronouncements. It i....
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....mation. 68. In S.Narayanappa v. Commissioner of Income Tax, Bangalore (1967) 1 SCR 90 : AIR 1967 SC 523 : (1967) 63 ITR 219, Supreme Court again had the occasion to examine this expression in the context of Section 34 of the Indian Income Tax Act, 1922. Reiterating what was held in Calcutta Discount Company Limited (supra), it was pointed out that the expression reason to believe does not mean a purely subjective satisfaction on the part of the Income Tax Officer. The belief must be held in good faith: it cannot be merely a pretence. It is open to the Court to examine the question as to whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief. To that extent, action of the Income Tax Officer in starting proceedings under section 34 is open to challenge in a court of law. 69. Supreme Court in Sheo Nath Singh (supra) held that there can be no manner of doubt that the words reason to believe suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Income Tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The Income....
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....unds. If the authority acts without jurisdiction or there is no existence of any material or conditions leading to the belief, it would be open to the Court to examine the same though sufficiency of the reasons for the belief cannot be investigated. 72. A Division Bench of the Delhi High Court in J.Sekhar v. Union of India 2018 SCC OnLine Del 6523 was examining challenge to vires of Section 5(1) of PMLA. In that context Delhi High Court held that reason to believe cannot be a rubber stamping of the opinion already formed by someone else. The officer who is supposed to write down his reason to believe has to independently apply his mind. It cannot be a mechanical reproduction of the words in the statute. When an authority judicially reviewing such a decision peruses such reason to believe, it must be apparent that the officer penning the reasons had applied his mind to the materials available on record and has on that basis arrived at his reason to believe; the process of thinking of the officer must be discernible. The reasons have to be made explicit. It is only the reasons that can enable the reviewing authority to discern how the officer formed his reason to believe. 73. H....
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....h reference to the language used in the order itself. This salutary principle was reiterated and re-stated with great emphasis by a Constitution Bench of the Supreme Court in Mohinder Singh Gill (supra). Supreme Court held that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. If that is allowed, an order bad in the beginning may, by the time it comes to the Court on account of a challenge, gets validated by additional. grounds later brought out. It was succinctly put that 'orders are not like old wine becoming better as they grow older'. 77. On the above principle the explanation given by the respondents in the affidavit cannot be accepted. However, the affidavit is a give away in the sense that it is a clear admission on the part of the respondents that the provisional attachment of insurance policies is based on suspicion that those may have been obtained through the proceeds of crime of Sri Koneru Rajendra Prasad which is untenable and impermissible. 78. That apart, it is trite that for allegation of mon....