TaxTMI 
TaxTMI 
2024 (4) TMI 115
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....isional Attachment order No.4/2020, file No.ECIR/HYZO/09/2018 issued by the Enforcement Directorate, under Section 5(1) of Prevention of Money Laundering Act, to the extent of the properties mortgaged by respondent No.6-m/S. Singaraya hills Green Power Genco Pvt. Ltd., to the petitioner Bank as illegal, arbitrary, unjust and violation of Article 300-A of Constitution of India. 3. The Writ Petition vide W.P.No.9441 of 2021 is filed by M/s. Agri Gold Farm Estates Pvt. Limited for a writ of certiorari calling for the records pertaining to the Provisional Attachment Orders 04/dated 21.12.2020 in proceedings ECIR No. ECIR/HYZO/09/2018 passed by the Directorate of Enforcement and the consequential proceedings in OC No.1391 of 2021 pending before the Adjudicating Authority, under the provisions of PML Act and quash the same being illegal, arbitrary, violative of principles of natural justice. 4. The writ petition vide W.P.No.16770 of 2021 is filed by Sai Fortune Apartment Owners Association for writ of mandamus declaring the action of respondent nos.1 and 2- Union of India, rep. by Secretary, Ministry of Finance and the Director of Enforcement in issuing the provisional attachment order....
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.... mortgaged by M/s. Agri Gold Farm Estate India Private Limited to the petitioner Bank, later filed another writ petition vide W.P.No. W.P.No.7987 of 2021 challenging the Provisional Attachment order No.4/2020, file No.ECIR/HYZO/09/2018 issued by the Enforcement Directorate, in respect of the subject matter of the above writ petitions. Thus, the common thread that pass through all these writ petitions is the provisional attachment order passed by Enforcement Directorate and filing and pendency of Original Complaint (OC) before the Adjudicating Authority. 9. As much as the issue involved in all these writ petitions is similar, these writ petitions are heard together and being disposed of by this common order. 10. The facts that are essential for disposal of all these writ petitions can be summarized as under: (i) M/s.Agri Farm Estates India Private Limited and its associate/subsidiary companies purchased various large extents of lands suitable for real estate ventures and converted/developed such lands into residential/farm plots and had sold, registered, transferred, allotted several lakhs of plots to customers including 'Fortune Helapuri Apartment' constructed in the year 2010.....
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....Infra Projects Pvt. Ltd., (writ petitioner in W.P.No.5183 of 2022) became the successful bidder and accordingly the entire bid amount was deposited to the credit of the R.P.No.01/2018 in O.A.No.968 of 2016 on the file of the Debts Recovery Tribunal, Visakhapatnam. (iv) On 02.01.2015, the SHO, Pedapadu Police Station, West Godavari District, Andhra Pradesh, registered a case against M/s. Agri Gold Farm Estates India Private Limited under sections 120B, 420 IPC, section 5 of Andhra Pradesh Protection of Depositors of Financial Establishments Act, 1999 (for short, APPDFE Act) and Section 45 of the RBI Act and Sections 3,4 and 5 of Prize Chit & Money Circulation (Banning) Act, 1978 and the Government of Andhra Pradesh by invoking the provisions of Section 3 of the APPDFE Act, 1999 issued G.O.Ms.No.22 and G.O.Ms.No.23 of Home (Arms & SPF) Department, dated 20.02.2015, G.O.Ms.No.73 of Home (Gen A2) Department, dated 05.06.2015, G.O.Ms.No.21 of Home (General-A2) Department, dated 29.02.2016 and G.O.Ms.No.39, Home (General-A) Department, dated 15.02.2019 and attached the properties of the Company. Thereafter, the CID, Andhra Pradesh filed petitions before the Special Court, Eluru designa....
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....itors of Financial Establishment Act, 1999 by the investigating agency in the predicate offence or the Provisional Attachment Order under Section 5(1) of the Prevention of Money Laundering Act, 2002 by the Enforcement Directorate or both. 11. The contents of the counter affidavit filed by the Competent Authority-CID, so far as they are relevant for adjudication of these writ petitions, can be summarized as under: (i) The Agri Gold Construction Company, which constructed Helapuri Apartment, Fathebada at Eluru, is one of the accused company in Crime No.3 of 2015 of Pedapadu Police Station. The said property was attached under Section 3 of the APPDFE Act vide G.O.Ms.No.23, dated 22.02.2015 and the said attachment was made absolute by the Special Court-cum-PDJ, Eluru on 23.09.2015. Merely because the flats in the subject Apartment were purchased prior to registration of Cr.No.3 of 2015 of Pedapadu Police Station does not absolve the fact that the subject property was purchased and constructed by an accused company in the said crime with the amounts collected from the depositors as such the subject apartment is one of the derived proceeds of crime. The petitioner Association of flat ....
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....its received from the depositors under Section 10 of the Act r/w. the Rules framed thereunder. The said proceedings of the administration of property and the auction of the said property so as to primarily first cater to the meeting of the payment dues to the respective depositors or securing the return of the monies deposited by them are conducted under the supervision of the designated special Court under the provisions of the APPDFE Act, 1999. The allegations against the accused in crime registered emanate from the violation of Section 5 of the APPDFE Act, 1999, which is not a schedule offence under PMLA Act. Therefore, the objectives sought to be achieved under the State Act cannot be frustrated by the supervening orders of attachment issued under the PMLA more specifically, in the context of the primary objective of the State Act inter alia to mitigate the hardship of depositors who have suffered on account of the default of the accused in repaying the dues arising from such deposits. Therefore, to subserve the ends of justice and to ensure that there is no frustration of the objectives of the State imposed upon it under a validly made State Law to protect the interest of depo....
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....s of agents and promised them 20-25% commission on the amount of deposits arranged by them. It is also observed from the investigation under PMLA that the Directors of Agri Gold Group have established various companies in Dubai, UAE and Cayman Islands.The Enforcement Directorate issued a Provisional Attachment Order (PAO) No.04/2020 dated 24.12.2020 and PAO No.12/2021 dated 30.11.2021 and has provisionally attached various movable properties worth Rs. 4109.13 Crore and various immovable properties worth Rs. 31.99 Crore of Agri Gold Group, its promoters/ Directors and other connected persons respectively. Further, investigation is under progress to trace the remaining Proceeds of Crime amounting to more than Rs. 2000 crore. The entire amounts collected by Agri Gold group into their different companies in the form of their unregulated Collective Investment Scheme, are from general public under the pretext of real estate business. All the properties purchased by the Companies and the Directors and other family members, are from these public funds only. The Enforcement Directorate had attached the properties under Section 5(1) of PML Act, 2002 and clearly justified the reasons for such....
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....mes under Collective Investment Scheme and despite instructions from SEBI, the group collected deposits by dubious means. From the investigation conducted by the respondent department so far, it leave no doubt that the accused had indulged in money laundering. Provisional Attachment orders were passed as stipulated in Section 5 of PML Act by the Authorized Officer of the Department and Original Complaints were filed before the Adjudicating Authority (PMLA) praying for confirmation of the attachment orders. The Adjudicating Authority as per Section 8 of the Act is proceeding with the adjudication proceedings, including issuance of show cause notice to the accused of the crimes, for which they can file a written counter/reply to the Original Complaints filed by the Enforcement Directorate. After following due procedures and after hearing both sides, the Adjudicating Authority would confirm/not confirm the Provisional Attachment orders as stipulated under Section 8(2) and 8(3) of the PML Act, 2002, by order in writing. If any party, aggrieved by the said order , can approach the Appellate Tribunal (PMLA) by filing an Appeal under Section 26 of PMLA,2002. If any party is still aggrieve....
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....8(f) of the Transfer of Property Act and accordingly it had filed CrlMP No.1220 of 2015 in Crime No.3 of 2015 before the Special Court under APPDFE Act, 1999 at Eluru under Section 3, 7(3) of the APPDFE Act to raise interim attachment to enable the petitioner to proceed against the mortgaged properties and the said petition is still pending. The learned counsel for the petitioners would further submit that since the lands were purchased with the credit facility availed by the company from the petitioner Bank, the bank is having first charge and as a first charge holder, the petitioner bank is having priority of charge over others. Therefore, the attachment orders passed by the investigating agency in the predicate offences as well as the Provisional Attachment Order passed by Enforcement Directorate in relation to the property which were purchased with the credit limit advanced by the petitioner bank and mortgaged to the bank are illegal, arbitrary and unconstitutional. Accordingly, prayed to allow the writ petitions vide W.P.Nos.4043 & 4044 of 2019 and W.P.No.7987 of 2021. 15. Sri S.Vivek Chandrasekhar, learned counsel for the petitioner, while reiterating the contents of the wr....
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....hat , G.O.Ms.No.23, dated 20.02.2015 issued by the Government clearly mentions that the plots and other properties which were already sold and registered in the name of the buyers prior to registration of the offence are not attached. A public Interest Litigation vide PIL No.193 of 2015 was filed praying to appoint a committee to enable sale of properties belonging to Agri Gold Group of companies to mobilize and disburse amounts to the depositors as refund of their money. As per directions of the PIL, a committee was constituted vide order dated 09.10.2015 and some of the properties were sold excluding the properties which were sold and registered to the members of the petitioner association in W.P.No.11520 of 2023 and finally the High Court of Telangana vide final order dated 25.02.2022 directed that all the issues are to be dealt with by the Principal District Judge, a special Court to deal with all the matters pertaining to the attachment made by the 5th respondent- Home Department. The special Court vide its orders dated 16.03.2023 had observed that the properties which are already sold to plot owners/ flat owners should be out of ambit of the attachment. Thus, the issue of att....
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....s with a retired judge of High Court and vide final orders dated 25.02.2022 in the said PIL, the High Court, Telangana directed that all the issues are to be dealt with by the Principal District Judge, a special Court to deal with all the matters pertaining to the attachment made by the 5th respondent-Home Department. The Enforcement Directorate is respondent No.8 in the PIL and it is aware of all the proceedings and orders passed in the said PIL. Thus, the Enforcement Directorate is bound by the orders passed in the PIL and are estopped from registering ECIR/HYZO/09/2018 and in passing Provisional Attachment Orders. The reasons to believe mentioned in the Provisional Attachment Orders are not at all sustainable and they do not meet the requirement of Section 5 of PML Act. The learned counsel for the petitioners further submitted that though there is a statutory remedy provided under Section 8 of PML Act, 2002 to agitate before the Adjudicating Authority, since the Provisional Attachment Orders are passed in violation of the series of orders passed by the High Court in PIL No.193 of 2015 and attaching the properties which were already auctioned by this Court and since the same are....
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....edings under the PMLA being under the Central Enactment, in the context of the specific provisions of these respective Acts being in addition to existing laws and in derogation thereof would not be a pointer to investing the Enforcement Directorate with supervening powers of attachment to frustrate the objectives of the State Act. The learned Advocate General would further submit that the accusation made against the accused clearly discloses that he had collected deposits from depositors in contravention of Section 5 of the APPDFE Act, which is not a schedule offence under the PML Act. In the FIR, the accused was charged with IPC offences along with the main charging provision under Section 5 of the APPDFE Act. By that reason alone the proceedings of crime which are detectable during the course of investigation on the basis of such predicate offence, does not render the subject matters to be in the sole domain of the Enforcement Directorate to enforce the provisions of PML Act. The learned Advocate General further submitted that the objectives sought to be achieved under the State Act cannot be frustrated by the supervening orders of attachment issued under the PML Act more speci....
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....n of Special Court designated under the APPDFE Act. Accordingly, prayed to quash the Provisional Attachment Orders of the Enforcement Directorate and so also the consequential proceedings pending before the Adjudicating Authority under PML Act. In support of his contentions, the learned Advocate General placed reliance on the Soma Suresh Kumar vs. Government of Andhra Pradesh and others [(2013) 10 SCC 677] and Subrata Chattoraj vs. Union of India and others [2014(8)SCC 768] 21. Whereas, Sri Josyula Bhaskar Rao, learned Standing counsel for Enforcement Directorate, while reiterating the contents of the counter affidavits further contended that the writ petitions are not maintainable, in view of availability of efficacious alternative remedy. The Prevention of Money Laundering Act contains a mechanism and the persons aggrieved of Provisional Attachment Orders may approach the Adjudicating Authority and prove that the properties attached are not involved in money laundering. Further, the orders passed under Section 8(3) of the Act confirming Provisional Attachment are appealable before the Appellate Tribunal contemplated under Section 26(3) of the PML Act and if aggrieved by the ord....
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....al with the newly found properties by way of further transfer/sale to their known persons so as to avoid any further attachment in future and there is also likelihood that they may buy back the properties being auctioned as per the orders of the High Court in WP (PIL) No.193 of 2015 through their known persons/ benami persons at a cheaper rate, which may entirely defeat the interest of the depositors and frustrate the proceedings under the PML Act. Thus, there is reason to believe for attaching the properties by issuing Provisional Attachment Order as per Section 5(1) of the PML Act. In support of his contentions, the learned Standing Counsel for Enforcement Directorate relied on the decisions (1) The Deputy Director, Directorate of Enforcement vs. Axis Bank and others (Orders dated 02.04.22019 passed in CRL.A.No.143/2018 and batch passed by Delhi High Court), (2) B.Rama Raju vs. Union of India (Orders dated 04.03.2011 passed in W.P.Nos.10765, 10769 & 23166 of 2010 passed by Division Bench of this Court), (3) Union Bank of India vs. Satyawati Tondon & Ors. (Orders dated 26.07.2010 passed in SLP(C) No.10145 of 2010 by Supreme Court of India) (4) Mr. John Kennedy vs. M/s. Martin Pro....
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...., dated 20.02.2015 and G.O.Ms.No.73 of Home (Gen A2) Department, dated 05.06.2015 and G.O.Ms.No.21 of Home (General-A2) Department dated 29.02.2016 and attached the property of the company worth thousands of crores situated in the State of Andhra Pradesh, States of Telangana, Karnataka & Odisha. Thereafter, CID filed petitions before the Special Court, Eluru seeking confirmation of the attachment. The Special Court, Eluru passed orders on 23.09.2015 by attaching all the properties of the company covered under G.O.Ms.No.22, 23 and 73. Later, the CID filed petitions before the Special Court, Eluru for confirmation of attachment of the properties in respect of other properties covered in other G.Os. and the same is pending adjudication before the Special Court, Eluru. 24. The material would disclose that Telangana Agri Gold Customers and Agents Welfare Association filed Public Interest Litigation vide PIL No.193 of 2015 on the file of the High Court of Judicature at Hyderabad, for the state of Telangana and the State of Andhra Pradesh praying to issue a Writ Order or Direction more particularly one in the nature of Writ of Mandamus declaration the inaction of the respondent in not ta....
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....6th October, 2015 before this Court. They shall also place the notifications/ advertisements to be placed on interest to conduct E-auction of the properties covered by Schedule-II. In other words, the extent, mode and manner of advertisement of properties shall be specifically stated in these details. iv. The Registrar (judicial) shall open a separate account for depositing or crediting the sale proceeds realized from these properties. He shall open the account on receipt of the first Cheque/DD/pay order. It is made clear that the Company/C-1 shall accept the consideration only by Cheque/DD/Pay order or through RTGS and in any case n ot by cash. This Court shall take a serious view of the matter, if it is revealed that cash has been accepted by them. v. The E-auction is directed to be undertake under supervision of the Committee constituted by this Court and it shall be the responsibility of the Committee and C-1 to maintain complete confidentiality of E-auction details and every care is taken to avoid inside trading of information for direct, indirect, collateral or advantage in conduct of E-auction. vi. The Chairman of the Company and Agri Group shall make available to C-1 ....
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....long with batch of writ petitions was disposed of on 20.05.2022 and relevant portions of the common orders are extracted hereunder for sake of expediency: "A statement at bar has been made that a Special Court i.e. the Court of Principal District and Sessions Judge, Eluru has been constituted for the cases related to Agrigold Farms Estates India Private Limited, Akshaya Gold Farms Villas India Limited et., and the matters are pending before the said Court. He (Sri P.Govind Reddy, learned Special Counsel for the State of Andhra Pradesh) has also informed that the competent authority was also appointed long back in the matter. Meaning thereby, all claims in respect of the depositors are to be adjudicated by the Special Court constituted for the purpose. Learned Senior Counsel Sri P.B.Vijay Kumar has stated before this Court that various orders have been passed in the present cases and other connected matters from time to time and the Special Court be directed to consider those orders also while passing orders in respect of disbursement of amount. Not only this, he has stated that an amount of Rs. 50,42,70,521/- is lying with the Registry of this Court and therefore, the amount be....
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....case the accused is found guilty of the schedule offences. The said contention was refused by the learned Standing Counsel for Enforcement Directorate that PML Act being a central legislation that too subsequent to the State Act, with a specific provision contained therein as to the overriding effect of the Act over the other laws for the time being, the provisional attachment orders shall have precedence over the attachment orders made under the State laws. 29. In view of the above contentions, it is necessary to evaluate the aims and objects of both the Acts to ascertain as to the procedure envisaged under which law would better serve the purpose of meeting the obligations of the depositors, whose hard earned money was collected by the accused luring them of high returns to amass wealth. 30. The statement of Objects and Reasons of Andhra Pradesh Protection of Depositors of Financial Establishments Act, 1999 read as under: "Instances have come to the notice of the State Government, wherein a number of unscrupulous financial establishments in the State are cheating innocent, gullible depositors by offering very attractive rates of interest, collecting huge deposits and then van....
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.... of attachment:- Any financial establishment or person whose property has been or is about to be attached under this Act may, at any time, apply to the Special Court for permission to give security in lieu of such attachment and where the security offered and given is in the opinion of the special Court, satisfactory, and sufficient, it may cancel the ad-interim order of attachment or, as the case may be refrain from passing the order of attachment. 10. Administration of property attached:- The Special Court may, on the application of any person interested in any property attached under this Act and after giving the Competent Authority an opportunity of being heard, make such orders as the Special Court considers just and reasonable for,-- (a) Providing from such of the property attached as the applicant claims an interest in such sums as may be reasonably necessary for the maintenance of the applicant and of his family, and for expenses connected with the defence of the applicant where criminal proceedings have been instituted against him in the Special Court under Section 5; (b) Safeguarding so far as may be practicable the interest of any business affected by the attachmen....
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....t 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 his possessi....
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.... is that they have collected deposits from the depositors by making false promises of high returns by contravening Section 5 of the APPDFE Act. As rightly contended by the learned Advocate General, the said provision is not included in the schedule offence under PML Act. 39. The prime intention of any legislation more particularly in the matters relating to economic offences would be to restore back the position or status of victim or deceived as much as possible by recovering the property illgotten from the accused. Mere confiscation of the property to the State would not serve the purpose of legislation, if it would not come to the rescue of the victim. 40. The Prevention of Money Laundering Act, though a self contained code and provides for appeal over the decisions taken by the Adjudicating Authority, did not contain any provision in pari materia with that of Sub Section (4) of Section 6 of the APPDFE Act, which comes to the rescue of the depositors that were deceived by the accused, which would always to be the prime intention of any legislation dealing with economic offences in relation to private individuals. The provision contained in PML Act for confiscation of the prope....
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....ansfer of Investigation to the Central Bureau of Investigation (CBI) in terms of this order shall not, however, affect the proceedings pending before the Commissions of Enquiry established by the State Government or stall any action that is legally permissible for recovery of the amount for payment to the depositors. Needless to say that the State Police Agencies currently investigating the cases shall provide the fullest cooperation to CBI including assistance in terms of men and material to enable the latter to conduct and complete the investigation expeditiously." 45. The Enforcement Directorate may go on investigating the case initiated by it into the offences said to have been committed by accused. However, in view of the reasons given above that the attachment made under the provisions of the APPDFE Act would subserve the interest of the depositors, the Provisional Attachment Orders passed by the Enforcement Directorate are liable to be quashed, for the reason that the same would deter the primary objective of the APPDFE Act in mitigating the hardship of the depositors. 46. All the depositors are natives of this State and the properties attached are situated in this State a....
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....o the properties covered by the attachment made by the investigating agency in predicate offences, are also quashed to that extent. 50. The Enforcement Directorate is at liberty to participate in the proceedings before the Special Court, Eluru under the provisions of APPDFE Act for taking necessary action on the surplus of the amount of the sale proceeds of the auction of the attached properties in accordance with the provisions of the PLM Act. Further, the Enforcement Directorate is free to deal with the properties, which were not attached by the investigating agency of the predicate offence and are covered under Provisional Attachment Orders impugned in these writ petitions, in accordance with the provisions of the PMLA Act. 51. Accordingly, (a) Writ Petition Nos.4043 & 4044 of 2019 filed by Union Bank of India (corporation bank) and Writ Petition No.5183 of 2022 filed by M/s.BLG Infra Projects, are disposed of and the writ petitioner can raise all the grounds that are available to the Bank in relation to G.O.Ms.NO.23 and 39 before the Special Court in relation to the properties mortgaged to the bank by M/s. Agri Gold Group and were purchased by M/s.BLG Infra Projects in E-au....