TaxTMI 
TaxTMI 
2017 (6) TMI 1401
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.... of the Property and date of Acquisition Name of the Current Holder of the Property Value (Accepted Bid Amount) 1. "Vishal House" Opposite Sales India, Ashram Road, Ahmedabad- Land bearing Plot NO. 169/14 of Mouja Shaikhpur- Khanpur of City Taluka : Ahmedabad M/s J.M.D. Media Pvt. Ltd. Ahmedabad Rs. 1,89,00,000/- 2. Jay Bungalow, Ishavashyam Society, [Near Rupmadhuri Society, Nr. Lav Kush Society] Vastrapur, Ahmedabad situated at Survey NO. 398 (Paiki) of T.P. Sheme No. 5, Final Plot No. 213 (Paiki), Sub-Plot NO. 4/A(Paiki), 4/B (Paiki) and 4/C of Mouje Vejalpur of City Taluka. M/s Alive Hospitality and Foods Pvt. Ltd. Ahmedabad Rs. 2,15,00,000/- In the present case, we are only concerned with property no.-1 i.e. Vishal House. 2. The facts of the case - as submitted by the appellants are that the appellants are based in Admedabad who came to know that a property viz. Vishal House described hereinabove, was for sale through a broker. Being interested in buying the said property situated in the limits of Mouje: Shaikhpur-Khanpur, Sub -Plot, No. 14 of Final Plot No. 169 of town planning scheme no. 3 which was included in Ward no. TP 3/3-4, Shaikhpur-Khanpur, city Survey no....
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....me time, the vacant and peaceful possession thereof was also given to M/s JMD Media Pvt. Ltd. 2.5 Thereafter, on 28.3.2011, the sale deed pertaining to the aforesaid units at Sr. Nos. 1 to 16 was done and on the very date was registered in the office of concerned Registrar at Ahmedabad (Respondent no. 3). Accordingly, the said property was owned and was in possession of M/s JMD Media Pvt. Ltd. 2.6 In the meantime, the appellants came to know from a broker that the owners of the aforesaid property called Vishal House were inclined to sell the said property, in the month of October, 2010 and accordingly, the appellant approached the concerned persons. The sale price of the said property was fixed at Rs. 2,25,00,000/- and in this regard, an amount of Rs. 6,00,000/- was initially paid to M/s JMD Media Pvt. Ltd. vide a cheque dated 13.12.2010. Subsequently thereto, cheques of different amounts were given on different dates to M/s JMD Media Pvt. Ltd. 2.7 The appellants, in the month of April, 2011, had advertised in the newspaper calling for objections from any person regarding the sale of the said property. Coupled with that the appellants also got a search pertaining to the title of....
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.... Patel, Karta of Shri Jagdisbhai Ishwarbhai Patel HUF, under provisions of section 50(2) of the said Act for remaining present on 19.01.2012. However, since Shri Jadishbhai Ishwarbhai Patel was unwell on the said date, he could not remain present and sough for an extension. 4. The appellants thereafter on 20.01.2012 received a copy of the letter dated 10.1.2012 addressed to the Assistant Directorate, Enforecement Directorate by the Joint Sub-Registrar requesting him for making appropriate orders regarding registration of the sale deed pertaining to the said property. 5. In the letter dated 21.7.2011, a Circular no. IGR/ADM/113/2010/9658 to 9724 dated 30.6.2010 issued by the Inspector General of Registrar, Government of Gujarat giving directions to all Sub Registrars was referred. The said circular informed the Sub Registrar that in cases where attachment orders under Section 5(1) of the said Act were issued attaching properties, deeds pertaining to transfer of such properties should not be registered without prior approval of the office of the Inspector General of Registration. 6. As the request of the appellants as regards registration of the aforesaid sale deed was not accepte....
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....measuring 339 sq. mts in an auction sale from Income Tax Department. Conveyance deed is executed in favour of Anand Owners Association. A building having 19 units is constructed on that plot. 2. 5.10.1991 Share certificates pertaining to 16 units of the said property were issued to concerned owners of the property. 3. December 1999 Share certificates pertaining to other 3 units of the said property were allotted to Shri Darshit Mehta, Shri Vishal Mehta and Shri Jay Mehta. 4. M/s. Vishal Exports Overseas Ltd., a company incorporated with which the appellants have no connection whatsoever had obtained financial assistance from consortium of State Bank of India for which 16 units of the said property were mortgaged to State Bank of India by depositing title deeds. Punjab National Bank which was a part of consortium of Banks, also sanctioned funds to M/s Vishal Exports Overseas Limited. 5. --- Due to default in repayment of finance obtained, the borrower was classified as Non Performing Assets 6. 18.9.2008 State Bank of India took over possession of the aforesaid mortgaged property i.e., 16 units in Vishal House under SARFAESI Act 7. 27.8.2009 The said propert....
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....lakh each was paid to JMD Media Pvt. Ltd. 17. 1.12.2011 6 cheques totaling to Rs. 25 lakh were issued, out of which 3 cheques of Rs. 2 lakh each were given to Shri Jay D. Mehta, Shri Darshit D. Mehta and Shri Vishal P. Mehta, whereas 2 different cheques of Rs. 6 lakh and 1 cheque Rs. 7 lakh were given to M/s. JMD Media Pvt. Ltd. 18. 10.12.2011 Sale Deed was drawn on the requisite stamp papers and was signed by the appellant along with 2 other purchasers and M/s. JMD Media Pvt. Ltd., Shri Jay Dipak Mehta, Shri Darshit Dipak Mehta and Shri Vishal Pradip Mehta. 19. 12.12.2011 Requisite registration charges were paid and the parties presented the duly executed sale deed to the Sub Registrar for registration. The duly executed sale deed was accepted by the Sub Registrar and receipt acknowledging receipt of the sale deed was given. An entry was also made in Book No.1 maintained by the Sub Registrar for the purpose. However, the Sub registrar refused to register the sale deed contending that vide notice dated 21.7.2011, the Assistant Director, ED had restrained it from doing so as certain investigations were under Prevention of Money Laundering Act against M/s. Vishal Exports Ove....
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....idavit and sought amendment in its writ petition being SCA No.1059 of 2012 for placing subsequent facts on record. 29. 31.7.2013 Hon'ble Gujarat High Court disposed of appellant's writ petition being SCA No.1059 of 2012 relegating the appellant and the co- owners to alternate remedy. However, status quo regarding possession of property was directed to be maintained till final disposal of appeals by the Tribunal. 30. Appellant's challenged the said judgment to the extent it was against the appellant before the Division Bench of Gujarat High Court by way of an LPA being No.1038 of 2013. 31. 21.2.2014 The said appeal was dismissed by the Division Bench and the order of the Single Bench was upheld. 32. 2.9.2014 Appellant challenged the said judgment of 21.2.2014 in the Supreme Court vide petition being SLP (C) No.10714/2014. The said petition was dismissed on the ground that petitioners had already adopted alternative remedy. It was, however, clarified as follows in the said order: ".... All the issues raised in these Special Leave Petitions are kept on and Tribunal may decide them independently and in accordance with law." The issues raised by the ap....
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.... the Sub- Registrar and the requisite registration fee was also paid. An entry was made in Additional Book 1 by the Sub- Registrar in terms of the requirement of the Registration Act, 1908. All the procedures required to be followed and the steps to be taken as stipulated in the Registration Act for registration of the sale deed were duly followed and taken by the parties. Nothing more was required to be done by the parties and only a ministerial job was required to be done by the Sub- Registrar of putting it's stamp and appending signatures thereon. As per the Gujarat Registration Rules, 1970, the Sub- Registrar was merely required to ensure:- i. That appropriate stamp has been affixed on the instrument; ii. that the instrument has been presented within the given time and at the proper office; iii. that the instrument has been presented by the proper person; iv. in case the instrument is with respect to an immovable property, the registration is not objectionable under sections 21 or 22 there; v. section 19 of the Act has been complied with; vi. in case of overwriting etcetera signatures of the persons are done as per section 20 of the Act; vii. there is no viola....
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....tered the document nor rejected the document submitted for registration but merely kept the same with himself. This act of registering officer in doing so was beyond the purview of the Registration Act. The act of not registering the sale deed is illegal. Once the sale deed is registered, the same would relate back to the date of execution which is 10.12.2011 in this case and is much prior to the date of POA. Hamada Ammal v. Aviappa Pathar [1991] 1 SCC 715 is on this point. 17. As far as transfer of property in question is concerned, the ownership thereof stands transferred in favour of the appellant as is apparent from communication dated 18.12.2015 received from Income Tax Office whereby certain details have been called for by the Income Tax Department from the appellant. A Misc. Application bringing the same on record has been preferred by the appellant. Without prejudice to the aforesaid, appellant submits that section 53A of the Transfer of Property Act pertains to part performance of contract and the rights of the transferee qua the property. The said section provides that where any person contracts to transfer an immoveable property for a consideration in writing signed b....
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....hat even if the sale deed had not been registered, the mere execution of the sale deed was sufficient to establish the ownership of the property, in view of the decision of the Apex Court in the case of the Suraj Lamp Case. The above contentions of the appellants were strongly refuted by the respondent. As regards the appellants' contention that for issuing the show cause notice, there must be "reasons to believe" which were absent in the instant case, the respondent stated that the show cause notice itself contains the reasons of forming such a believe as sufficient material do exist in form of the CBI charge sheets along with accompanying documents as well as the materials gathered by the Joint Director through his own investigation including the statement of Directors of various companies involved in alleged transfer of money, which formed the basis of "reason to believe" as in section 5(1) of the Act. It was reiterated by the counsel for the respondent that the fact that the designated court had taken cognizance of the charge sheets filed lends further credence to the said belief. As per the objection of the respondent for non registering the agreement of sell in the mont....
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....tion 8 of the PML Act contains provisions pertaining to adjudication of a complaint or applications mentioned therein. The scheme of the Act therefore envisages attachment of property and confirmation thereof or otherwise after adjudication. The scheme of the Act does not empower the authority to issue instructions to an other authority to refuse registration of a document inasmuch as the authority which is a creature of statute has no legal competence to issue directions for the purpose of bye-passing relevant provisions contained in the Registration Act as well as Rules framed thereunder. Any direction of such a nature is, therefore, is illegal. 19. A similar situation arose in a dispute before the Madras High Court in the case of Padmakan Singh v. Third Joint Sub-Registrar [1967] 63 ITR 679 wherein registering officer refused to register a document because of letters of Income Tax Officer warning him from registering the same. Considering the provisions of Registration Act as well as Payment of Taxes (Transfer of property) Act, 1949, the Hon'ble Madras High Court in its judgment reported in Padmakan Singh (supra) held such an action to be illegal and allowed the writ petiti....
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....Act and conveying that in case the sale or transfer was allowed despite instructions and order of statutory authority, it would compel the Enforcement Directorate to conclude that by allowing registration of property by way of sale/transfer/ alienation/ modification assistance has been given to activities connected with offence of money laundering rendering the Sub-Registrar liable to penal action under PML Act. This notice was issued without any powers in that regard. The Enforcement Directorate is taking an advantage of the said situation by contending that the aforesaid sale deed has not been registered. In fact such a direction vide aforesaid letter dated 21.7.2011 are not only wrongful and bad in law but void ab initio. It is settled legal position that any person cannot be permitted to advantage of his own wrong. In this regard reliance is placed on a judgments of Hon'ble Supreme Court in the cases of Oil & Natural Gas Corpn. Ltd. v. Modern Construction & Co. [2014] 1 SCC 648 and Bhartiya Seva Samaj Trust v. Yogeshbhai Ambalal Patel [2012] 9 SCC 310. Reliance is also placed on a judgment of Hon'ble Supreme Court in the case of Priyanka Overseas (P.) Ltd. v. Union of I....
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....R.N. Savarkar, the then Chief Manager and L V Raghvan, the then Senior Manager. It has been alleged that the facts disclose commission of offences under sections 120B, 420, 468, 471 and 477A of Indian Penal Code and section 13 of Prevention of Corruption Act. The appellant is no where connected with the commission of the alleged offences. Be that as it may, sections 120B, 420, 468, 471 and 477A of Indian Penal Code and section 13 of Prevention of Corruption Act were not scheduled offences prior to 1.6.2009. It is only with effect from 1.6.2009 that sections 120B, 420 and 471 of the IPC were incorporated in the schedule of the Act. The provisions of the PML Act cannot be made applicable to the offences allegedly committed prior to the incorporation of those offence in the Schedule. Otherwise also the provisions have not been given any retrospective effect by the legislature and could not have been made applicable with retrospective effect. A Division Bench of Karnataka High Court in the matter of Obulapuram Mining Co. (P.) Ltd. v. Jt. Director [WP No. 5962 of 2016, dated 12-3-2017] has authoritatively held that the petitioner can not be tried and punished for offences under PML Act ....
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.... In Clause (b). That is not superfluous, but to ascribable to the person referred to in Clause (a). Which means that even Clause (a) deals with person who has been charged of having committed a scheduled offence. It is not possible to countenance this submission. We are conscious of the fact that penal provisions should be strictly constituted. At the same time, we cannot overlook the language of section 5 as applicable at the relevant time. In our Opinion, clause (a) refers to "any person"- whether he has been charged of having committed a scheduled offence "or otherwise." The only requirement is that that person should be in possession of any proceeds of crime. The governing factor is possession of ay proceeds of crime by a person. Taking any other view may defeat the legislative intent. In as much as, a person who has been charged of having committed a Scheduled Offence can successfully defeat the object of the enactment of attachment and confiscation of proceeds of crime by transferring it to some other person who is not so involved with him in commission of stated scheduled offence. In our opinion, on fair reading of section 5(1) read with section 8 of the Act, it postulates t....
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....o. Various safeguards impose fetters upon the attaching officer obliging him to immediately send the order made by him and the factum of attachment of the property made by him within the prescribed period to the Adjudicating Authority to enable it to adjudicate upon such attachment. It is pertinent to note that the legislative intent in so far as powers of the Adjudicating Authority are concerned, is made clear under Section 6(15) by clarifying that it is not bound by the procedure laid down by the Code of Civil Procedure. Thus, if the Adjudicating Authority was intended to be an authority dealing with the criminal acts, the proviso dispensing with Code of Civil Procedure would not have been made. Instead proviso dispensing with Cr. P.C. would have been made. These facts thus sindicate that the Adjudicating Authority under Section 8 is authorized to undertake civil proceedings and adjudicate thereupon as rightly argued by the learned counsel for the respondents. 32. True that the first proviso to Section 5(1) and Section 17(1) requiring the compliance of the aforementioned provisions before embarking upon the exercise under Section 5 of P.M.L. Act but that would be the basis for ....
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....t caution. It is therefore necessary that the requisite information/details are ascertained from the repositories of such information. Such repositories may be required during preliminary enquiry/investigation under the Act to be restrained from allowing normal operations in respect of a property suspected to be involved in the offence of money laundering. It is therefore, crucial to achieve the objectives of the Act that the authorities under PML Act are empowered to collect and if need be, compel disclosure of relevant facts including specific details of the suspected properties, movable or immovable, liable to be attached in the course of investigation. The challenge mounted by the petitioners on such powers of the authorities is therefore, erroneous. The term investigation as defined in section 2 (na) of PML Act has to be read in consonance with the provisions of section 65 which empowers the authorities under PML Act to issue such directions/prohibitory orders. Therefore, any such direction issued in the course of investigation is within the four walls of law and in consonance with the object and reasons of the Act to ensure that the proceed of crime do not change hands making....
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....act as a court of appeal against the decision of a court or tribunal, to correct errors of fact, and does not by assuming jurisdiction under Article 226 trench upon an alternative remedy provided by statute for obtaining relief. Where it is open to the aggrieved petitioner to move another tribunal, or even itself in another jurisdiction for obtaining redress in the manner provided by a statute, the High Court normally will not permit by entertaining a petition under Article 226 of the Constitution the machinery created under the statute to be bypassed, and will leave the party applying to it to seek resort to the machinery so set up. 35. True that the said FFR Software Private Limited (supra) deals with the case pursuant to registration of the FIR. In the instant case also, two FIRs though not naming the petitioners but on the same subject have been lodged and thus legal proposition as discussed in the aforementioned authority can as well be applied to the facts of the present case. The contention of the learned counsel for the petitioners to the contrary thus cannot be accepted. 36. As noticed above, inquiry, investigation, etc., are permissible under Cr. P.C. by the authoriti....
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....of time. Section 5(4) of the PMLA provides for the enjoyment of the immovable property. Section 5(4) reads as under : "5. Attachment of property involved in money laundering.- (1) to (3)xxx xxx xxx (4) Nothing in this section shall prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment. Explanation.- For the purposes of this sub-section, 'person interested' in relation to any immovable property, includes all persons claiming or entitled to claim any interest in the property." Sub-section (4) of Section 5 provides that passing of the order of the provisional attachment under the Section shall not prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment. The term 'person interested' in relation to any immovable property is explained to include all persons claiming or entitled to claim any interest in the property. The Section intends that merely because the immovable property is provisionally attached, the person interested in the enjoyment of the immovable property should not be prevented from such enjoyment. By virtue of this ....
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....sed by the adjudicating authority, whereas if an order of attachment is passed under Section 102 of the Code read with Section 65 of the PMLA, then there is no time period prescribed so far as its Page 42 of 43 HC- NIC Page 42 of 43 Created On Tue Jun 13 15:50:56 IST 2017 R/SCR.A/150/2015 CAV JUDGMENT operation is concerned. Such a situation should not crop up. In light of the statement made by the learned Assistant Solicitor General of India, I do not want to go further into the matter. However, I make it clear that if the provisional order of attachment under Section 5 of the PMLA is not passed within a period of one week from today, then the instructions given by the Department to the bank for freezing of the account shall automatically come to an end and the bank shall permit the petitioner thereafter to operate her account. The final conclusions in the matter are as under : (i) The question no.1 is answered in the affirmative. (ii) The question no.2 is answered in the affirmative. (iii) The question no.3 is answered in the negative. (iv) The question no.4 is answered in the affirmative. (v) The order of attachment of a bank account in exercise of the powers under S....
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....the basic requirements for invoking the said section 5(1) have not been fulfilled. In such a situation, the provisional attachment order was bad in law and unsustainable. 27.2 It is also submitted that similarly, the Adjudicating Authority grossly erred in not appreciating that the term "proceeds of crime" covers not only the property derived. Under the circumstances, when the definition of the term "proceeds of crime" covers the value of such property and other attaching such proceeds which are lying with the bank could have been attached whereby the interests of bonafide purchaser like the appellant could not have been prejudiced or put to stage. The appellant in such a situation is nothing but a victim or crime, if at all committed by some other person. Under such situation, the attachment of property itself ought not to have been ordered by the Adjudicating Authority. In this regard, reliance is placed on a recent judgment of the Hon'ble Madras High Court in the case of M/s Indian Bank (WP No. 4696/2012) wherein, the Hon'ble Madras High Court, after considering the entire scheme of the said Act, in a similar situation, has set aside the provisional attachment order in ....
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....t defines 'proceeds of crime' to mean property derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence or the value of any such property. Thus, in terms of the said section, either the property derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence 'or the value of any such property' would be considered as proceeds of crime. Therefore, if any such property is purchased and/or acquired out of lawful earnings or assets and with a bonafide intention as well as at the fair market value, then, in terms of the said provision the value paid for such acquisition or purchase of the property would constitute 'proceeds of crime' involved in money laundering and not the property purchased out of legitimate income. Otherwise the words 'or the value of any such property' used in the said section would become nugatory. 27.6 It is urged that, the appellants alongwith 2 other co-purchasers had purchased 'Vishal House' admittedly out of their legitimate and legal income and with a bonafide intention. The said fact gets substantiated from the record pro....
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....gs against some third party are concluded under section 8(4) and 8(5), which is contrary to provisions of Article 300A of the Constitution of India. 27.9 It is also submitted that the provisions of section 24 of the Act provide that when a person is accused of having committed the offence under section 3 of the Act, the burden of proving that the proceeds of crime are untainted property shall be on the accused. In the present case, despite the fact that the appellant has not been accused of committing any offence under section 3 of the Act, the appellant along with co-purchasers by placing relevant materials on record has proved beyond doubt that the appellant is in possession of an untainted property i.e. 'Vishal House' which is purchased out of its legitimate and legal income and accordingly burden in that regard has been discharged by the appellant which aspect has not been appreciated by the Adjudicating Authority. In fact, in the original complaint many tables for transfer of funds between various companies have been placed. In the said tables also, there is no whisper for sources of funds, flow chart or payment, bank details provided by the appellant, which clearly p....
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....aws. For this reason also the confirmation of the provisional attachment order - the impugned order is liable to be set aside. Reliance is placed on following judgments: (a) Writ Petition No. 5962/2016 decided on 13.03.2017 by Division Bench of Karnataka High Court (b) State of A.P. v. Gandhi [2013] 5 SCC 111 (c) Ganesh Gogoi v. State of Assam [2009] 7 SCC 404 (d) Ritesh Agarwal v. SEBI [2008] 84 SCL 373 (SC) (e) Shyam Sunder v. Ram kumar AIR 2001 SC 2472 (f) M. Ramachandran v. Govind Ballabh AIR 1999 SC 3601 (g) Mahadeolal Kanodia v. Administrator General of West Bengal AIR 1960 SC 936 (h) Janardan Reddy v. State AIR 1951 SC 124 28. It is the specific case of the respondent that the present case related to the forgery to the tune of Rs. 212 crores by the Shri Pradeep S. Mehta and Deepak Mehta of Vishal House by duping various banks. The CBI has registered the case and since there was a commission of scheduled offence and Enforcement Directorate was also registered an ECIR and after investigation identifying the proceeds of crime and attached the property of Shri Pradeep S. Mehta and Deepak Mehta that is the Vishal House the details of the CBI investigation and th....
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....his company of FFR Software, the Said Mr. Pradeep S. Mehta has filed the similar plea before the Hon'ble Gujarat High Court in FFR Software. The hon'ble High Court has held the such issuance of Prohibitory order are within for corner of the provisions of PMLA and dismissing the said Special Civil Application. This aspect further given is to be examined by Hon'ble Gujarat High Court in Special Criminal Application no. 150/2015 wherein the similar power to issuance of prohibitory order was challenged including the aspect whether the date of the provisional order would be considered from the date of Prohibitory Order and the present Judgment i.e. Paresha G. Shah vs State of Gujarat. The Hon'ble High Court given in detailed judgment and held taking the analogy of the section 102 of Cr PC that such order are within for the corner of the PMLA and also held that the prohibitory order cannot be treated as date of Provisional Attachment Order. In view of this Judgment and finding of the Hon'ble Gujarat High Court the issue is completely answered. 32. As far as the present case is concerned, the agreement of sale which was registered in the month of October 2011 is conce....
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.... buyers and; (b) Though the appellants received a communication from his Advocate that he had not received any claim or objection to the sale of the said property only on 22nd September, 2011, an amount of Rs. 5 lakhs had been further paid on 9th June, 2011 itself; (c) As per the statement of Shri Ankit Patel on 7.02.2012, 13.02.2012 & 15.02.2012 wherein Shri Ankit Patel had stated that he had received a call from Shri Pradeep Mehta in August, 2011, wherein Mr. Mehta had insisted for an early finalization of the deal whereby Shri Ankit Patel got to know that the said property indirectly belonged to Shri Pradeep Mehta and M/s VEOL and had liability of the CBI. In his statement, Shri Ankit J. Patel stated that he had met with Mr. Pradeep Mehta again and requested him to settle the matter and refund the payment of Rs. 2 crores on which he was advised by Shri Pradeep Mehta to file a petition before Hon'ble Gujarat High Court and that arrangement of advocate and payment of fees for handling the matter in the High Court was also to be arranged by Shri Pradeep Mehta. 36. As would be observed from the above, prima facie that the tainted nature of the property was well known to JMD....
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....hment order, without taking into account the material placed on record before him, is also bad in law. 40. We have considered the written submissions and the oral arguments made by the appellant as well as the respondent. As regards the appellant's contentions that "reasons to believe" were absent in the instant case, a perusal of the show cause notice confirmed the arguments of the respondent that the reasons to forming to such believe was on the basis of sufficient material existing in the form of CBI Chargsheet alongwith accompanying documents as well as material gathered by the Joint Director through the investigations in the case including the statement of Directors of various companies involved do find place in the said showcause notice. The other contention of the respondent that the fact that the designated court had taken cognizance of the charge sheets filed lends further credence to the said "reasons to believe" is also a matter of record. The attachment order cannot be lifted unconditionally in the peculiar facts of the matter. When the order of reasons to believe was passed, the concerned officer had all the facts and material before him. It is evident that speaki....