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2023 (4) TMI 1359
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....n other persons and amassed assets in excess of his income from legitimate sources. It is inter alia alleged that Shri Binod Sinha, with the help of a Chartered Accountant Shri SK Naredi and other close associates, floated/acquired various companies and attempted to change the colour of the tainted money by way of fictitious share application money, or through other accommodation entries. The appellant company is alleged to be one of the companies in which the proceeds of crime generated by Sh. Madhu Koda were invested. The specific allegations and findings of the Ld. Adjudicating Authority with regard to the present appellant are to be found on pages 77 to 82 of the impugned order, which are reproduced below for ready reference: "Def. No. 13 (M/s Smridhi Sponge Pvt. Ltd.) 150. The Deputy Director writes that in December 2007 Sh. Binod Sinha had purchased 50% of shares of this company from Sh. Om Garg by paying Rs. 11 Crores and the shares were parked in the name of M/s Lacky projects Pvt. Ltd. Remaining 50% of the shares of Sh. Om Garg was purchased by Manohar Paul. It is also further stated that M/s Creative Fiscal Services Ltd. paid Rs. 11 Crores to M/s Lacky P....
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.... of all these cheques for all these companies is mentioned to be 11-7-2009 photocopies of the cheques bear the date 9-7-2009). The cheques details are as under: Name of the Issuer Company A/C No. Cheque Nos. Keshav Tradecom 0515-AA0395-050 783783,783786 to 91 Dayalu Vincom 0515-AA0350-050 714805 to 714811 Pramatma Mercantile Pvt. Ltd. 0515-AA0347-050 714854 to 714860 Padmalaya Dealcom Pvt. Ltd. 0515-AA0348-050 714760 to 714765, 714768, 714769 154. We find several suspicious features with regard to these transactions as detailed hereunder: 1. All these four companies are operating from two rooms in the same address 23A, N.S. Road, Kolkata, as the copies of their letters dated 11-7-2009 addressed to Creative Fiscal indicate. Keshav Tradecom and Pramatama Mercantile are operating from Room No. 19 on the 6th Floor of the same building. (Incidentally Defendant No. 21, Majestic Vinicom is also operating from the same room). Other two companies are operating from Room No. 6A, 8th Floor at the same address. This is highly unusual raising serious doubts about genuine existence of these companies, for any genuine purpose. ....
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....s non est. 160. Secondly, the copies of documents produced before us merely speak of application to Creative Fiscal for transfer of shares. Whether really the shares have been transferred is not proven. Whether these companies are doing any business or are paper companies operating form single rooms is not clear. Did these companies have enough of balance for issue of these cheques? If they had, wherefrom these nondescript companies got so much money in their bank accounts? If presented, were these honoured? These very relevant questions remain unanswered raising a huge question mark on the genuineness of the claim of the alleged share transfers." 3. Based on their findings as above, the Ld. Adjudicating Authority concluded that proceeds of crime were still with the appellant company and the same were much more than the fixed assets amounting to Rs. 6,65,16,129/- attached by the respondent Directorate. Consequently, the Ld. Adjudicating Authority proceeded to confirm the order of the Deputy Director attaching the fixed assets of the appellant company. 4. Aggrieved by the said order of the Adjudicating Authority, the appellant company has preferred the present appeal ....
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....his statement dt 4-11-2009 which has been relied upon by Respondent. The Respondent Directorate, it is contended, did not trace the money in their hands though it was under a statutory duty to do so, but illegally attached legitimate property of the Appellant without jurisdiction. 8. Creative Fiscal, it is further submitted, is neither accused of any scheduled offence nor accused of money-laundering offence. No complaint under section 3 read with section 4 has been filed against it. Moreover, attachment against Creative Fiscal was set aside by the Ld. Authority vide the same impugned order. With regard to the sale of shares of the appellant company by Creative, it is submitted before us that the Ld. Adjudicating Authority disbelieved the purchase of shares of the Appellant company by four companies from Creative Fiscal in July 2009 as per the chart below and confirmed attachment on imaginary/ unsustainable new allegations. No. of equity Shares Amount Rs. Cheque clearing date Bank statement Page no. Keshav Tradecom Pvt. Ltd. Office No. 19. 6th Floor, 23A, Netaji Shubhash Road Kolkata 700001 2642835 26428350 16-7-2009 16-17 Daya....
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.... offence nor have any allegations/ proceedings under PMLA been initiated against them. They are not paper companies. Thus, no adverse inference could have been drawn by Ld. Authority. The four companies had sufficient funds available with them on 9-7-2009 for payment of sale consideration of shares purchased. M/s Milestone Viniyog Pvt. Ltd. ('Milestone') which is a group company provided funds/ loans to these four companies for payment of sale consideration. These facts can be verified from the bank statements placed on record. As regards source of the source, Milestone had sufficient funds/sources to advance unsecured loan to these four companies. Milestone had raised share capital and premium thereon, of Rs. 15.59 crores during FY 2008-09 which is duly assessed/ admitted by the Income-tax Department in scrutiny assessment u/s 143(3)/148 of I-T Act for AY 2009-10. As regards presenting and payment of cheques given by four companies towards sale consideration to Creative Fiscal on 11-7-2009, it is submitted that all the cheques were presented by Creative Fiscal immediately to its bank and they were debited in the bank accounts of four companies on 16-7-2009 and the amounts ....
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....Authority was to adjudicate whether the Respondent, on the day of attachment had material in its possession on the basis of which it could have had reasons to believe that the Appellant was in possession of proceeds of crime. Thus, the impugned order qua attachment of properties of the Appellant is wrong, illegal, without jurisdiction and liable to be set aside. 15. Based on the above submissions, the appellant contends, it is clear that since Appellant was not in possession of any amount out of alleged proceeds of crime and its asset could not have been attached. The respondent was not in possession of material on the basis of which could have held the requisite belief in terms of the provisions of section 5(1) of the Act. Thus, the attachment of assets of the Appellant is wrong, illegal, against the provisions of law, and void ab initio. 16. Without prejudice to the above submissions and as an alternative plea, it is contended by the appellant that in the present case, admittedly, the total amount of alleged proceeds of crime, i.e., disproportionate assets in the hands of accused Mr. Madhu Koda as quantified in the charge sheet is Rs. 1,40,10,333/- and properties attached i....
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....f the 2002 Act. Similarly, possession of unaccounted property acquired by legal means may be actionable for tax violation and yet, will not be regarded as proceeds of crime unless the concerned tax legislation prescribes such violation as an offence and such offence is included in the Schedule of the 2002 Act. For being regarded as proceeds of crime, the property associated with the scheduled offence must have been derived or obtained by a person "as a result of" criminal activity relating to the concerned scheduled offence. This distinction must be borne in mind while reckoning any property referred to in the scheduled offence as proceeds of crime for the purpose of the 2002 Act. Dealing with proceeds of crime by way of any process or activity constitutes offence of money-laundering under section 3 of the Act." 18. Based on its submissions as above, the appellant prays that attachment of its properties may be quashed/set aside and the appeal be allowed. 19. The Respondent Department, on the other hand, strongly contested the averments and submissions made on behalf of the appellant on factual as well as legal grounds. To begin with, the Respondent has reiterated the broader ....
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....year 2007-2008 and substantial investment was made by Mr Binod Sinha precisely during this period. Furthermore, the impugned order, specifically para 152 and para 153, reflect that share purchase of the appellant company by four companies is highly suspicious and perusal of records indicates that these transactions were sham. 23. It is contended that the material on record satisfies the condition laid down in section 5(1). In view thereof, it is contended by the Respondent that it was incumbent upon the Appellant to indicate the sources of income, earning or assets out of which or by means of which the property attached has been acquired, the evidence on which he/it relies and other relevant information and particulars, to show cause why all or any of such properties should not be declared to be the properties involved in money-laundering and confiscated by the Central Government. The above information would have enabled the Adjudicating Authority to make a determination on which of the properties in question are properties "involved in money-laundering". and which are not. The Appellant failed to bring adequate material on record to discharge the burden cast upon them under the....
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....the material before us, and the rival contentions of the parties. Our findings and observations with regard to the various contentions raised on behalf of the parties are as set out in the succeeding paragraphs. 28. Firstly, with regard to the contentions that none of the members of the Paul family, including Mr. Mrinal Kanti Paul, Mr. Tarun Kanti Paul, Mr. Tushar Kanti Paul who were managing the affairs of the appellant company had any association or link with Mr. Binod Sinha, Mr. Vijay Joshi, Mr. Madhu Koda or any of the accused persons, that after July 2009, Creative Fiscal, Lacky Project Pvt. Ltd., Binod Sinha, Vijay Joshi or any other accused had no investment in Appellant company, that the entire money used for investment in shares of the appellant company was received back by Creative Fiscal/Lacky Projects, and also that Creative Fiscal is neither accused of any scheduled offence nor accused of money-laundering offence and no complaint has been filed against it, we do not find any merit in these contentions. As has been categorically held by the Apex Court in Vijay Madanlal Choudhary (supra), the precondition for being proceeds of crime is that the property has been deriv....
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....investment companies through banking channels. As a result the beneficiary is able to induct his undisclosed income in his regular books of account as share capita/unsecured loan in the name of these paper/investment companies. The CA/Entry operators receives commission/service charges in return which generally varies between 2 to 10 4% of the cheque amount." 30. Accordingly, the above contentions of the appellant are hereby rejected. 31. The next contention of the appellant is that the share sale transactions were between the seller, Creative Fiscal and four buyer companies. Creative Fiscal received the entire consideration from the four companies and the Appellant did not receive any money out of the said consideration. We are not persuaded by this argument either. It is pointed out by the respondent that proceeds of crime were infused into the appellant company through a circuitous route for the purpose of layering the tainted money. It is the contention of the respondent that in the financial year 2007-08 capital base of the company was increased from Rs. 10 cr. to Rs. 25 cr. and the investment in shares by Mr. Binod Sinha was made at this time. The appellant com....
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....usions drawn by the Ld. Authority as to whether the shares of the appellant were really transferred by Creative Fiscal to the four companies, whether the four companies were doing any business or were only paper companies, whether they had sufficient balance to issue the cheques, whether the cheques were ever presented, and if so, whether they were honoured, etc. (see para __ above), have been assailed and called into question. Having perused the contents of the impugned order thoroughly, we do not find any case of the Ld. Adjudicating Authority exceeding its brief. Under section 8 of the Act, the Ld. Adjudicating Authority is mandated, after considering the reply to the notice issued by it, after hearing the aggrieved person and the Directorate, and after taking into account all relevant materials placed before it, to record a finding whether all or any of the properties in the notice issued under the section are involved in money laundering. In passing the impugned order, the Ld. Authority has only fulfilled its mandate through a detailed, speaking order. Raising of certain questions by the Ld. Adjudicating Authority in their order and proceeding to answer them based on the evalu....
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....four companies were genuine and bona fide since they were through bank transactions and the necessary procedural requirements were followed. This proposition has already been discussed and rejected in para-___ of this order. Accordingly, this contention of the appellant also does not hold any merit. 35. The final contention of the appellant which is without prejudice to the main submissions already discussed at length in the foregoing paragraphs, and which has been presented as an alternative plea is that, in the present case, admittedly, the total amount of alleged proceeds of crime (disproportionate assets) in the hand of the accused Mr. Madhu Koda as quantified in the charge sheet is Rs. 1,40,10,333/- only, and properties attached in the hands of the accused are more than the total amount of such proceeds of crime of Rs. 1.4 crore as is evident from Annexure A of the Provisional Attachment Order. When the entire proceeds of crime are already attached in the hands of accused Mr. Madhu Koda, Mr. Binod/Sunil/Vikas Sinha etc., the Respondent Department, it is contended, could not have attached properties of Rs. 6.65 crore owned by the Appellant. The Respondent has no power to att....
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.... into the money generation aspect may not be exhaustive but may be only incidental. But if the Director of Enforcement on his own investigation finds more money to have been earned out of such scheduled offences than shown in the charge sheet he is entitled to attach the whole of such proceeds of crime. There is no bar in PMLA for doing so. The Director's jurisdiction is not confined to tip of the ice-berg but the whole of the ice berg, above and under water. 102. Para (b) of section 5(1) has a limited relevance in so far as it puts a condition for provisionally attaching the property. Once that condition is satisfied its relevance, including the quantum of proceeds from the scheduled offence, if any, comes to an end. 103. Further, as held by the Hon'ble Bombay and Andhra Pradesh High courts it is permissible to attach a property if it represents proceeds of crime even if the person in possession of the property was not charged for any scheduled offence. In such a case there is no charge sheet against him to serve as a point of reference. 104. In view of the above discussion we hold that attachment order cannot be faulted on the ground that the to....