TaxTMI 
TaxTMI 
2011 (6) TMI 1040
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....authorized shares, as per guidelines issued by Securities and Exchange Board of India (hereinafter referred to as SEBI). The entire IPO process has to conform to the Disclosure and Investors Protection Guidelines, 2000, issued by SEBI. 2. Investors subscribe to the IPO in the prescribed application form. To subscribe to the IPO, an applicant must have bank account and the demat account, whose numbers are to be mentioned in the application. Demat account is an electronic account of a beneficiary, opened and maintained with any of the approved Depository Participants (hereinafter referred to as DP). Shares allotted to successful applicants in the IPO, are electronically credited to their respective demat accounts. Demat accounts are opened by the DPs only for those applicants who hold an account with a bank also. Opening of a bank account and the demat account has to be in compliance with "Know Your Customer" (KYC) norms prescribed by the Reserve Bank of India and SEBI, respectively. 3. During the year 2005, Infrastructure Development Finance Company Ltd. came out with an IPO - opened for subscription from dt. 15.07.2005 to dt. 22.07.2005. In this IPO 40,36,00,000 (forty ....
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....ounts, filing applications in retail category for subscription of shares in an IPO, receiving allotted shares in fictitious/benami demat accounts, pooling these shares in one demat account by off market transfers before the listing of shares and transferring these shares to financiers in off market transaction. These individuals/entities including Sh. Parag Priyakant Jhaveri, Sh. Dipak Jashvantlal Panchal, Sh. Purshottam Ghanshyamdas Budhawani, Sh. Manoj Gokulchand Seksaria, Sh. Kantilal Jitmal Jain were referred to as "key operators" by the SEBI in its report. The persons who provided the finance for IPO subscription and were the ultimate beneficiaries in the scheme of cornering of retail allotment were referred to as "financiers" by SEBI in its report. 6. During the investigation it was found that based upon fraudulently prepared/forged documents, a large number of bank accounts and demat accounts were clandestinely opened by the key operators in fictitious/benami names, and using the identity of the said bank accounts and demat accounts, the key operators put in applications in the said fictitious/benami names while subscribing to the IPO and thus predatoril....
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....to 2035, 2037 to 2046, 2051 to 2060 and 2071 to 2080, in the same bank branch. He procured data from internet to create purportedly legitimate identity in respect of the said demat account holders, which were otherwise held in fictitious names. Thereafter, he added a list of 10 fictitious names to 30 out of 40 of the said accounts as joint account holders, so as to increase the number of demat accounts and subscribe to the IPO of IDFC and Yes Bank on a much larger scale. 11. After fraudulently creating the aforementioned identities and forging the identification documents, as aforesaid, he opened 13,200 demat accounts by submitting applications in the names of fictitious persons, along with forged bank introduction letters using their forged signatures and used aforesaid demat accounts to subscribe to the IDFC IPO and in this manner with the help of fraudulently prepared documents, clandestinely cornered 35,14,392 shares of IDFC, which were actually reserved for allotment to genuine Retail Individual Investors. The shares, so allotted to the said demat account holders, were first transferred to the demat accounts of i) M/s. Sugandh Estate and Investment Pvt. Ltd., (Demat Account C....
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....key operators for fraudulent acquisition/cornering of a large number of IDFC IPO shares reserved for RII category. The funds provided by the Respondents were adjusted by way of transfer of proportionate no. of shares of IDFC in the demat accounts of the Respondents and refund of balance funds by cheques. 15. As a result of investigation and proceedings started under the Act, the properties were attached and complaint was filed with the Adjudicating Authority under Section 5(5) of the Act. The matter was placed before the Adjudicating Authority, who declined to confirm the order of provisional attachment by detailed order which is now being assailed before us in the present proceedings. 16. The Ld. Counsel for the Appellant vehemently contended that while declining to confirm the provisional attachment order dt. 03.07.2008, the Adjudicating Authority has not taken into consideration the submissions made on behalf of the Appellant and on the other hand Adjudicating Authority had taken cognizance of certain non-est claims in support of the purported contentions of the Respondents. He submitted that the order of the Adjudicating Authority is bad in law and in the appeal memorandum/co....
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....He further submitted that story concocted by the Respondents before the Adjudicating Authority is exposed in view of the following arguments: i. In the statement recorded under the Act on dt. 12.6.2008, the Respondent no. 2 while mentioning about his business relationship with Dhiren H. Vora, has gone at length explaining about stock market investments through him. On the other hand, he has not mentioned anything about the said relationship involving extending of funds as loan on interest basis. ii. In the second statement recorded under the Act on dt. 14.6.2008, the Respondent no. 2 provided further details about his and Respondent no. 1's stock market transactions with Dhiren H. Vora and his associate companies. Here too, he did not make any mention of providing funds on loan basis or interest thereon. iii. In the statement recorded under the Act on dt. 27.2.2008, Dhiren H. Vora while answering to question no. 16 and 27 has stated about the funds extended by Respondents for deploying in stock market through him. He has also no where mentioned about receipt of funds on loan basis or interest payable thereon to the Respondents. iv. The Respondents has filed copy of ledg....
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....6.2008 and his statements were recorded under section 50(2) & (3) of PMLA, wherein he, inter-alia, disclosed his business association with the above named Shri Dhiren H. Vora and his associate companies, with regards to providing him funds for investments in stock market-both primary as well as secondary market, that during the period 01.04.2005 to 31.08.2005 he had provided funds/finances aggregating to Rs. 2,18,75,000/- to M/s. Zenet Software Ltd., Ahmedabad, and in consideration thereof, received shares of various companies, including 55,680 shares of IDFC worth Rs. 19,57,893/- as off market transaction, he also disclosed having provided funds/finances aggregating to Rs. 37,92,50,0000/- from his company M/s. Lok Prakashan Ltd. (Respondent No. 1) to the above named three companies, as under:- a) M/s. Excell Multitech Ltd., Ahmedabad - Rs. 17,37,50,000/- b) M/s. Taurus Infosys Ltd., Ahmedabad - Rs. 10,57,50,000/- c) M/s. Zenet Software Ltd., Ahmedabad - Rs. 9,97,50,000/- That, against the above funds/finances, his company (Respondent No. 1), had received shares of various companies allotted in IPO including 3,35,160 shares of IDFC for value of Rs. 1,17,47,358/- from the abo....
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....fraudulently prepared documents). Q. No. 3: Please clarify the specific arrangement with the different parties wanting to deploy funds in IPOs. A. 3. Whenever any party (financier) wanted to subscribe to IPO in retail individual investor category he would provide the necessary amount of funds to SEIPL by way of cheques/banking channels only. These funds were then deposited in SEIPL's Vijaya Bank Ambawadi branch C/A No. 2036 and HDFC Bank Navrangpura branch C/A No. 0062000026487. Subsequently cheques were issued from HDFC Navrangpura branch C/A No. 0062000026487 to Vijaya Bank's SEIPL current A/C No. 2036 which was used as a main account for receiving/refunding funds from/to different financiers with respect to different IPOs. After the receipt of amount in this Vijaya Bank Ambawadi Current account no. 2036 cheques were issued for making application in those particular IPOs for respective applications made through different demat accounts all which were held with M/s. Karvy Stockbroking Limited Ahmedabad/Hyderabad (KSBL). On allotment of shares, shares to the extent allotted were credited to respective demat accounts which were transferred to SEIPL demat account No. 14....
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....do not have any personal business transactions with either Dipak Panchal or Parag Jhaveri but our family promoted companies where my mother Saryuben H. Vora was one of the director till 2006 had business relation with Shri Parag Jhaveri and Shri Dipak Panchal. During this business association my family promoted companies had deployed/extended funds to Sugandh Estate & Investment Ltd. and Roopal N. Panchal (sister in law of Dipak Panchal). These funds were put by them in stock market. Q. 13: You have stated that these funds were deployed by your family promoted companies. Which were these companies? A. 13: These companies are as under 1. Excell Multitech Limited; 2. Taurus Infosys Limited; 3. Zenet Software Limited; 4. Seer Finlease Limited; 5. Sujal Leasing and Finance Limited. .... .... Q. 16: Please state the source of funds which were used to deploy as explained above in stock market through Shri Parag Jhaveri and Dipak Panchal? A. 16: Most of the capital/funds belonged to these companies only however some of the funds were extended by M/s. Lok Prakashan Ltd., Ahmedabad, Bahubali Shah, Shreyans Shah, Smrutiben S. Shah for deploying in stock market through o....
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....bullish about the investment in stock market. Q. 12. When did you first provide him finance for investing in stock market and till date how much finance has been given to him? A. 12. I have been extended funds to him from time to time. Details of these funds shall be furnished by me within 7 days. Q. 13. You are hereby shown the Transaction statement in respect of your Demat account number 10255355 held with AXIS Bank Ltd. DP ld. IN300484 having a closing credit balance of 1,58,789 shares of IDFC Ltd.. Please go through the same and explain the source of credit entries in respect of IDFC Ltd. shares in your said account. Please also explain the debit entries. A. 13 I have seen and gone through the Transaction statement in respect of my Demat account number 10255355 held with AXIS Bank Ltd. DP ld. IN300484 and in token of same I have put my signature in today's date on the same. The credit of 55,860 shares of IDFC Ltd. as on 10.08.2005 was received from the Demat account number 10009298 of Zenet Software Ltd. held with H. Nyalchand. As regard to other credit entries of 1,27,929 shares on 11.08.2005 and 1,00,000 shares on 19.08.2005 and debit entries of 1,00,000 shares on....
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....nteen crore thirty seven lac fifty thousand only) was provided to M/s. Excell Multitech Ltd. M/s. Taurus Infosys Ltd. In all between 02-04-2005 to 31-08-2005 a total amount of Rs. 10,57,50,000/-(Rupees Ten crore fifty seven lac fifty thousand only) was provided to M/s. Taurus Infosys Ltd. M/s. Zenet Software Ltd. In all between 02-04-2005 to 31-08-2005 a total amount of Rs. 9,97,50,000/-(Rupees Nine crore ninety seven lac fifty thousand only) was provided to M/s. Zenet Software Ltd. As regard to the funds provided by me to Dhiren Vora, I state that I had given him one cheque number 136881 dated 07.07.2005 for an amount of Rs. 2,18,75,000/- favouring M/s. Zenet Software Ltd. This cheque was issued by me from my saving account number 5009013662 held with Citi Bank, C.G. Road Branch, Ahmedabad. I further state that as of now only these details are readily available with me. I request for some time to verify my records to ascertain all details regarding funds provided to various companies of Dhiren Vora by myself as well as Lok Prakashan Ltd. as it was a running account. Q. 4. Please state the manner in which you received back this finance amounting to Rs. 2,18,75,000/- pr....
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..... Taurus Infosys Ltd., Shri Dhiren H. Vora) and the Financiers (M/s. Lok Prakashan Ltd. and Shri Bahubali Shantilal Shah - Respondents No. 1 and 2 respectively) and that the role of the each was complementary and supplementary to each other; b) Respondent No. 2, who is also a Director of Respondent No. 1 is well conversant with the nuances of stock market-both Primary as well Secondary; c) In the IDFC IPO, Respondents had applied for allotment of shares in HNI category and were aware of the maximum limit upto which RII category shares could be applied by any person; d) Shri Parag P. Jhaveri (Key Operator) has disclosed the scheme of financing/funding of various IPOs including IDFC by a number of financers-intermediaries, including Shri Dhiren H. Vora through the afore-named three companies, besides about disbursal of the allotted/cornered shares. He also disclosed the financing of multiple applications under RII Category of IDFC IPO by the afore-named three companies who had deployed funds/finances through Dhiren H. Vora; e) Shri Dhiren H. Vora (intermediary), in turn admitted the above relevant specific arrangement of deployment of funds/finances, as disclosed by Shri Para....
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....ents filed written replies and also made oral submissions, wherein it was claimed, inter-alia, that they had made investments, in normal course for acquiring IDFC shares, which investments were purely for investment purpose and they had lent money to Dhiren H. Vora & his associate companies, and further that since Dhiren H. Vora & his associate companies, on being asked to return the said funds, expressed their inability to do so, and therefore, transferred 55860 IDFC shares in the name of Respondent No. 2 and 335160 IDFC shares in the name of Respondent No. 1. It was further claimed that the said financial transactions were of giving loans and advances on interest and also that they were not aware of any fraudulent act of Dhiren H. Vora & his associate companies. It was further claimed that "the said Dhiren H. Vora in his statement dated 27.02.2008 before the officers of Enforcement Directorate has categorically admitted that he borrowed the funds from these Defendants through banking channels only and that he transferred some shares to these Defendants after receiving the shares of IDFC from Roopal Panchal, the seventh Defendant herein. It is also pertinent to note that nowh....
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....ces thereof. He was, therefore, well aware of the advantages of going in for deployment of substantial funds in the IPO in RII category vis a vis as an High Networth Individual (in short HNI) category. He contended that the Adjudicating Authority conveniently accepted another false plea taken by the Respondents while pleading before the Adjudicating Authority that there was no advantage for Respondents to go in for acquisition of the RII category shares as they could have acquired the same without any problem even as an HNI category applicant. This claim of the Respondents is completely incorrect when seen in the context of the conclusion drawn by SEBI in its order dt. 12.1.2006 inter-alia, to the effect that whereas the retail portion of the IDFC IPO was over subscribed by 5.27 times, the non institutional portion was oversubscribed by 56.53 times. Hence, the probability of acquiring these shares through RII category was 10 times more than that from HNI category. 29. The Counsel submitted that the order of the Adjudicating Authority is in conflict with its own findings given in Original Complaint No. 11 of 2008 and Original Complaint No. 17 of 2008 in which the provisional Attach....
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....nd his associate companies towards settling their dues. They further contended that the Respondents invested the money with a view to get interest @ 15% p.a. and in fact charged interest and credited the same in their books of account and reflected in their income tax returns and paid tax thereon. It was submitted that all the transactions of purchase of shares from Dhiren H. Vora & his associate companies, sale of these shares, capital gain on sale have been duly accounted for in the books of accounts of the Respondents and the same have been duly declared in their income tax returns also. This clearly shows that the Respondents are bona fide investors in good faith and for valuable consideration. They drew our attention to the copies of ledger accounts, bills, vouchers for transactions with Dhiren H. Vora and his associate companies showing that the transactions were purely of finance, money advanced and money received back including IDFC shares as repayment, interest charged/receivable, share purchase bill, income tax return papers etc. 32. The Counsels submitted that Respondents did not know Dipak J. Panchal or Parag P. Jhaveri or about their fraudulent cornering of shares of ....
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....orcement, Ahmedabad (FPA-PMLA-37/AHD/2009). He argued that the facts of the present case are similar to the facts in the case of Jitender Kumar Lalwani (supra), therefore, the appeal should be dismissed on this ground. 36. The Counsels argued that Respondents cannot be proceeded under the Act because they have not been charge sheeted for commission of scheduled offence. They submitted that as per section 5 of the Act, the Appellant is empowered to pass provisional attachment order only if he has reason to believe that a person is in possession of any proceeds of crime, that such person has been charged of having committed a scheduled offence and that such proceeds of crime are likely to be concealed or transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime. They submitted that as per section 5(1) of the Act, all three significant and essential conditions are required to be satisfied before passing an order of provisional attachment. They submitted that none of the conditions laid down in section 5(1) of Act are attracted in the case of Respondents. They submitted that neither the Respondents nor th....
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....to and relied upon various judgments and contended that provisions of the Act should be strictly interpreted. 38. The Counsel for Appellant argued that Dipak J. Panchal and Parag P. Jhaveri have been charged with having committed the scheduled offence under section 467 of I.P.C. besides other offences and the Respondents are in possession of proceeds of crime and these facts were recorded in the provisional attachment order as well as complaint filed before the Adjudicating Authority. He further argued that the Respondents are covered by the provisions of section 5(1) of the Act and relied on this Tribunal's Judgment which has been upheld by the Bombay High Court in the case of Radha Mohan J. Lakhotia & Others vs. Dy. Director, PMLA (First Appeal No. 527, 528 & 529 of 2010) where it has been held that the property which is proceeds of crime and is in possession of any person, even though he is not charged of having committed a scheduled offence, can be attached. He further submitted that it is the Appellant's reasonable belief that he is of the opinion that property is likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proce....
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.... and conditions except that funds were given for short term at 15% rate of interest. It was observed that funds were provided when any IPO was open for subscription and on twelve occasions, the repayment of funds was partly by way of transfer of shares allotted in different IPOs and remaining by way of issue of cheques. Respondents did not produce any document showing that they were authorized to carry out financing activities, any resolution authorizing board of directors/managing director to extend unsecured loans/inter corporate deposits to Dhiren H. Vora & his associate companies. Similarly Respondents could not explain why no document was executed to give such large amount of fund as interest bearing unsecured loans/inter corporate deposits on regular basis and why no interest was charged/received on these transactions in the financial years 2003-04 & 2004-05, why the interest charged for the FY 2005-06 was not received till date, why no legal steps were taken to recover the interest. They also failed to explain that when on earlier occasions/first occasion, Dhiren H. Vora & his associate companies failed to refund loan(s) on time and the loan(s) was/were partly adjusted by fo....
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....ondent made provision for interest receivable from Dhiren H. Vora & his associate companies towards the end of annual exercise to close the books and much later than the entries for provision of interest receivable on all other bonds/deposits made in normal course. 43. As per the provisions of Income Tax Act, 1961, if during the year interest payable/paid is more than the limits prescribed under that Act, tax is to be deducted at source by the person making payment of interest and in the present case, tax was deductible at source (in short TDS) by all the three companies i.e. Zenet, Taurus and Excell but Respondents have neither accounted for any amount on account of TDS in their books nor filed copies of TDS certificate in prescribed Form 16A. The Respondents have also not filed any confirmation from Dhiren H. Vora & his associate companies confirming receipt of loan/inter corporate deposits, interest payable, tds deduction, repayment of loan, sale of shares etc. All the documents filed by the Respondents are prepared/maintained at their end only. This is unfathomable and raises strong presumptions against the argument advanced by the Respondents and shows that the transactions f....
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....05 to each of three companies i.e. Excell, Zenet and Taurus and Respondent no. 2 transferred Rs. 2,18,75,000/- on 07.07.2005 to Zenet which were adjusted/repaid as follows: 50. The Demat accounts of the above companies shows receipts, transfers and balance of shares of IDFC and IL & FS as follows: 51. The argument of the Respondents that in the course of usual investment business activity, they lent money to Shri Dhiren H. Vora and his associate companies and when they asked Dhiren H. Vora and his associate companies to refund the amount, Dhiren H. Vora and his associate companies expressed their inability to issue cheques and therefore transferred 335160 & 55860 shares of IDFC and the balance amount by cheques, have no force. From the above charts, consider the case of Excell Multitech Ltd., as contended by the Respondents, they gave this company Rs. 4,37,50,000/- on 7.7.2005 and when asked for repayment, Excell transferred 19,350 shares on 27.7.2005 for a sum of Rs. 25,72,002/- as it did not have funds available with it. The Demat account statement shows that on 27.7.2005, Excell had a total no. of 47,650 shares of IL & FS, out of these shares, why only 19,350 shares were given....
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....,100 (266*350) shares were allotted. Out of these 55,860 shares were transferred to the Respondent no. 1 which is 60% of the total shares received i.e. 93,100*60% and remaining 40% shares were retained by the intermediary company/key operator. 53. The contentions of the Respondents that Dhiren H. Vora in his statement dt. 27.2.2008 has categorically admitted that he had been borrowing funds from Respondents to invest in shares and he transferred some shares to these Respondents for discharging his legal liability are not correct. The correct facts are that Dhiren H. Vora in reply to question no. 16 admitted that funds were extended by the Respondents for deploying in stock market through his companies i.e. Excell, Taurus and Zenet. In the same reply, he stated that the Respondents had deployed these respective funds through banking channel only. The words "Respondents had deployed these respective funds" clearly indicate that Dhiren H. Vora & his associate companies have not borrowed these funds as contended by the Respondents. Further, Dhiren H. Vora in his statement in reply to question no. 21 stated that after receipt of IDFC IPO shares from Dipak J. Panchal and Parag....
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....credit of refund money in these bank accounts the same were further transferred to SEIPL bank account no. 2036 with Vijaya Bank Ambawadi Branch and from which the funds were refunded back to respective financiers by the way of issue of cheques only. All these receipts/deployment/refund of funds were duly recorded in books of SEIPL. Q. No. 9: What was the basis of funding by these financiers for subscribing to IPO of IDFC in particular and other IPO in general? A. 9. whenever any IPO was announced the interested financier had extended the funds based on application money required for each application under RII category. At that time for RII category application money per application had upper ceiling of Rs. 50,000/-. This was also the case for IDFC Ltd. IPO. I further furnish the details of funds received from respective financiers as under: I further clarify in response to each of the application for IDFC IPO 266 shares per application were allotted against application for 1400 shares each. These 266 shares were allotted @ Rs. 34/- per share and balance amount of Rs. 38,556/- per application was refunded. I Further state that as explained in reply to question 3 above thes....
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....no force. It was pointed out by the Appellant that the subscription in HNI category was 56.53 times as compared to 5.27 times in RII category and subscriber in RII category had 10 times better chances to get shares in RII category. It was noted that Respondent no. 2 allegedly provided funds to the tune of Rs. 1,66,60,000/- (i.e. Rs. 2,18,75,000/- paid on 7.7.2005 minus Rs. 8,26,560/- & Rs. 43,88,440/- being refunds by way of transfer of shares of IL & FS and cheque no. 159170 on 27.7.2005 and 4.8.2005) for subscribing in RII category of IPO of IDFC and got 55,860 shares whereas he paid Rs. 24,58,88,000/- for subscribing in HNI category of IPO of IDFC and got 1,27,929 shares which fully justifies the contention of the Appellant. It was also noted that Respondent no. 2 took loan from J.M. Financial Products P. Ltd. to pay application money for subscribing under HNI category and paid total interest thereon amounting to Rs. 16,08,697/-. Thus, the cost of acquisition in RII category to the Respondent no. 2 was Rs. 35.05 per shares whereas cost of acquisition under HNI category including interest on loan was Rs. 46.57 per shares, which is much higher than the cost per share under RII cat....
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....IPOs, they were aware of the end use of the funds and they received the shares cornered by the key operators as per their mutual understanding with Dhiren H. Vora and his associate companies and receipt a 3,91,020 shares of IDFC cannot be held as a bona fide purchase in good faith for valuable consideration. 58. Further, Jitender Kumar Lalwani case (supra) is also of no help as the facts of the present case are different from the facts in the case of Jitender Kumar Lalwani. In the case of Jitender Kumar Lalwani, payments for purchase of shares were made after transfer of shares in his demat account whereas in the present case funds were deployed by the Respondents through Dhiren H. Vora & his associate companies for funding applications in fictitious/benami names for subscribing shares offered in the IPOs and shares cornered by the key operator as a result of these funds were received by them in their demat accounts. 59. The argument of the Respondents that provisions of section 5(1) of the Act are not attracted as they have not been charged for commission of scheduled offence has no merits. Any person who is in possession of proceeds of crime and even if not charged for commissi....
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....en charged of having committed a schedule offence is accepted it will lead to absurdity/advance the mischief and a person who is in possession of proceeds of crime but not charged of having committed a schedule offence, though covered within the definition of section 3 r/w section 2(u) of the Act, will be free to transfer, conceal or deal with such property in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under the Act and the provisions of the Act will become otiose. It is true that all the penal statutes should be construed strictly and the court must see that the thing charged is within the plain meaning of the words used, but it must also be borne in mind when the context in which the words are used is important. The legislative purpose must be noted and the statute must be read as a whole and it should be interpreted in such a way so that the purpose of the legislation is allowed to be achieved. The court must work on the constructive task of finding the intention of parliament by referring not only to the language of the statute but also from a consideration of the social conditions which gave rise to it and of t....
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....4(1) SCR 371), the Chief Justice of India, Sinha observed as follows: The court must ascertain the intention of the Legislature by directing its attention not merely to the clauses to be construed but to the entire statute; it must compare the clause with the other parts of the law, and the setting in which the clause to be interpreted occurs. 61. The definition of 'offence of money laundering' in section 3 read with section 5 shows that any person who directly or indirectly is a party or is actually involved in any process or activity connected with the proceeds of the crime and projecting it as untainted property is covered under the Act and therefore any person in the possession of proceeds of any crime even if he is not charged for the commission of scheduled offence is covered under the Act. It has been held in the M. Pentiah v. Veeramallappa Muddala, (AIR 1961 SC 1107 (p. 1111)) that the court must strongly lean against a construction which reduces the statute to a futility. A statute or any enacting provision therein must be so construed as to make it effective and operative 'on the principle expressed in the maxim: 'ut res magis valeat quam pereat'. I....
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....der this section if the Director or any other officer not below the rank of Deputy Director authorized 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 possession, that if such property involved 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. 63. It is true that every statute is prima-facie prospective unless by express words or by necessary implication made to have retrospective operative operation. The presumption against retrospective operation is not applicable if the declaration to statute or an amending Act is for clarification or to clear meaning of a provision of the statute. It removes doubts existing as to the meaning or affect of the statute as held in Central Bank of India v. Their Workmen, (AIR 1960 SC 12, p. 27). In Punjab Traders v. State of Punjab, (AIR 1990 SC 2300, p. 2304): Apex Court held that an amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this na....
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....iven. In this case, a proviso was added only to clarify the existing provisions of the Act. 66. It is argued by the Respondents that the properties of a person that can be attached under section 5 of the Act are specified in that section itself. It should be proved that the person who hold the property must have possession of any proceeds of crime specified under the Act (section 5(1)(a)) and 'such' a person was in possession of 'such' proceeds of the crime and 'such' person has been charged for having committed scheduled offence under section 5(1)(b) and 'such' proceeds of the crime are likely to be concealed or dealt with in a manner which may result in frustrating proceedings for confiscation. It is argued that the word 'such' used in sub-clauses (b) and (c) of section 5 are conjunctive 'and' used after clause (b) shows that all the three ingredients should be satisfied to attract section 5. It is also pointed out that section 8(3) provides that when the Adjudicating Authority confirm the attachment of the property made under sub-section of (1) of section 5, it should record a finding that the attachment of properties shall contin....
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....quot;suppress the mischief, and advance the remedy, and to suppress all evasions for continuance of the mischief. To carry out effectually the object of a statute, it must be so construed as to defeat all attempts to do or avoid doing, to an indirect or circuitous manner that which it has prohibited or enjoined; quando aliquid prohibetur, prohibetur et omne per quod devenitur ad illud" 69. It was held in Kanwar Singh Vs. Delhi Administration - (AIR 1965 SC 871): as follows: It is the duty of court in construing a statute to give effect to the intention of the legislature. If, therefore, giving a literal meaning to a word used by the draftsman, particularly in a penal statute, would defeat the object of a legislature, which is to suppress a mischief, the court can depart from the dictionary meaning or even the popular meaning of the word and instead give it a meaning which will 'advance the remedy and suppress the mischief. 70. In interpreting provisions of economic statute like Customs Act, Foreign Exchange Regulation Act, the courts have invariably resorted to the Hyden's rule. The Apex Court in State of Maharashtra v. Natwarlal Damodardas (AIR 1980 SC 593: 1980(4....
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....ery description, whether corporeal or incorporeal, movable or immovable, tangible or intangible and includes deeds and instruments evidencing title to, or interest in, such property or assets, wherever located - which has been derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence or the value of such property. The proceeds of crime may be or can be in possession of "any person". Be it a person charged of having committed a scheduled offence "or otherwise". In the case of any other person in possession of proceeds of crime, if it is also found that he has directly or indirectly attempted to indulge or knowingly assisted or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property, he shall be liable to be prosecuted for offence under section 3 read with section 4 of the Act of 2002 - in addition to suffering the action of attachment of the proceeds of crime in his possession. Attachment of proceeds of crime in possession of any person (other than the person charged of having committed a scheduled offence) will, therefo....
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.... In that case, the Legislature would have simply provided for any person who has been charged of having committed a scheduled offence and in possession of any proceed of crime, such proceeds of crime can be attached and confiscated, subject to fulfillment of the specified conditions. Repelling similar contentions at the end of paragraph 13, the court held as follows:- Considering the above, we are of the considered opinion that there is no merit in the argument of the appellants that action under section 5 of the Act could not have proceeded against them, as they were not charged of having committed a scheduled offence. 73. In this case, it has been specifically stated that Dipak J. Panchal and Parag P. Jhaveri were charge-sheeted for committing crimes scheduled under the Act and proceeds of such crime (shares) were held in the demat accounts held in the names of Respondents. So in effect, the property attached is the property of Dipak J. Panchal and Parag P. Jhaveri who are charged with the crime and if they are acquitted, automatically attachment of the property will cease. Other party is issued with a notice as the attached property is in his name and they cannot complain la....
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....not put forward any defense once it is proved that property was acquired by the detenu - whether in his own name or in the name of his relatives and associates. It is to counter-act the several devices that are or may be adopted by persons mentioned in Cls. (a) and (b) of S. 2(2) that their relatives and associates mentioned in Cls. (c) and (D) of the said subsection are also brought within the purview of the Act. The fact of their holding or possessing the properties of convict/detenu furnishes the link between the convict/detenu and his relatives and associates. Only the properties of the convict/detenu are sought to be forfeited, wherever they are. The idea is to reach his properties in whosoever's name they are kept or by whosoever they are held. The independent properties of relatives and friends, which are not traceable to the convict/detenu, are not sought to be forfeited nor are they within the purview of SAFEMA**. The Court further held as follows:- In this view of the matter, there is no basis for the apprehension that the independently acquired properties of such relatives and associates will also be forfeited even if they are in no way connected with the convict/....
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.... in provisional attachment order as follows: And whereas from the investigations conducted so far under PMLA, 2002, it is revealed that the afore-mentioned 3,91,020 [3,35,160 + 55,860] shares of IDFC, which prima-facie, are proceeds of crime, are likely to be concealed, transferred or dealt with in such a manner, which may result in frustrating further proceedings viz. confiscation as provided under Chapter III of the PMLA, in case no provisional attachment order is passed in respect thereof, at this crucial stage. Thus, in view of the above and following the reasoning given in the case of Radha Mohan Lakhotia & Others Vs. The Deputy Director (supra), we are of the view that Respondents are covered under the provisions of section 5 of the Act and the attachment proceedings commenced by the authorities under the Act were valid proceedings. 77. Further, as regards another argument of the Respondents that source of investment was fully explained and the same was shown in books of account & income tax return etc., in our opinion, the same is of no help and without merits. Section 2(u) of the Act reads thus: 2(u) "proceeds of crime" means any property derived or obtained....