TaxTMI 
TaxTMI 
2025 (1) TMI 1096
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...., Advs; For the Respondent : Mr. Munindra Dvivedi, Advocate, Mr. Kshitiz Aggarwal, Advocate. FINAL ORDER RAJESH MALHOTRA Present appeals under Section 26 of Prevention of Money Laundering Act, 2002 are filed by appellants against the impugned order dated 09.04.2015 passed by the Adjudicating Authority, in Original Complaint No. 386/2014 vide which the following properties of the appellants attached in PAO No. 03/2014 dated 21.11.2014 were confirmed for attachment:- S. No Description of the property Property held by Value in Rs. 1. Fixed deposits of worth Rs. 20 Crores vide FD A/c No. 027320100079584,027320100079690, 27320100079788, 027320100080058, 27320100080535, 027320100080508,27320100080517, 027320100080526 held in the name of M/s Southend Projects & Foundations Pvt. Ltd. with Andhra Bank, Jayanagar Branch, Bangalore. M/s Southend Projects & Foundations Pvt. Ltd. 20,00,00,000 2. Shares of 2,52,10,000 No's of Sri Indukuri Syam Prasad Reddy in M/s Indu Projects Limited of face value Rs. 10/- each vide share Certificate No. IME367101018 (Total shares 3,62,06,155 No's) Sri Indukuri Syam Prasad Reddy 25,21,00,000 3. Land ....
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.... In the meantime, after completion of investigation CBI filed charge sheet before Ld. Special Judge, CBI Court, at Hyderabad, on 01.02.2012, which reflects following material facts:- The Government of Andhra Pradesh (AP), issued Govt. Order (G.O) Ms. No. 359 dated 04.09.2002 for the development of an integrated project including multi-use development (Residential and Commercial Development) at Manikonda Village, R.R District on 535 acres of land as detailed below: The land use proposed at Manikonda S. N. Title Area Land Transaction 1. Golf Course 235 Acres Land to be provided on lease basis with upfront cost of Rs. 1.45 lakhs per acre deposit capitalized as equity in the SPVs and an annuity as 2% of annual gross turnover on all Golf Course components for a period of 66 years. 2. Multi-use 285 Acres Land to be conveyed on sale basis @ Rs. 29 lakhs per Acre. 3 Un-usable land 15 Acres. Water bodies Total Land 535 Acres The Government of AP issued GOMS No. 14 on 11.01.2005, amended by GOMS 22 dated 27.01.2005 for Development of Township Project at Manikonda by M/s Emaar Hills Township Pvt. Ltd. (EHTPL in short) as....
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....ure. The funds required were transferred from the account of M/s Discovery Estates Pvt. Ltd., in which Sri Shravan Gupta and his wife are having 99% shares. 18 Villa Plots were blocked in the name of these 10 companies @ Rs. 5000/- per Sq. yd. during the year 2010, when the prevailing market rate was Rs. 50,000/- per Sq. yd. and Villa Plots were being sold to other buyers in this project @ Rs. 50,000/- per Sq. yd. The 16 Villa Plots were also sold by EMGF at much higher rates during the period 2009-10 (which is evident from the information retrieved from the laptop of Sri Vijay Raghav through CFSL and from the statements of some Villa plot buyers), however only the amount @ Rs. 5000/- was accounted for in the books of accounts of M/s EMGF. As per the revenue sharing agreement and as per the books of accounts, EMGF was required to pass on 25% of the Gross Annual Revenue to EHTPL amounting to Rs. 48 Crores for further revenue sharing between EHTPL and APIIC. However, it was never transferred to the books of accounts of EHTPL and further to APIIC, thus APIIC was deprived from its due revenue share. EHTPL was being managed by the staff of EMGF, and thus, EHTPL was reduced to a sh....
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..../79 respectively during the same period have confirmed to have paid excess money @ Rs. 20,000/- per Sq. Yd., in cash over and above the documented price @ Rs. 5000/- per Sq. Yd. Further the following 18 Villa plots were booked by EMGF through their 10 shadow companies, in the name of the following companies @ Rs. 5000/- per Sq. Yd. and an amount equivalent to 10% of the sale consideration was paid from the accounts of the above said 10 companies in favour of EMGF, as per the details as under: S. No. Plot No. Name of the buyer Extent in Sq. Yds. Amount Paid (Rs.) 1. A-47 M/s Unicorn Infocom Pvt. Ltd. 1060 5,30,000/- 2. A-48 M/s Shalin Marketing Services (Kerala) Pvt. Ltd. 1303 6,51,000/- 3. B-51 M/s Eco Agrotech Pvt. Ltd. 1271 6,35,500/- 4. B-60 M/s Navagrah Realcon Pvt. Ltd. 1298 6,49,000/- 5. B-61 M/s Kingstar Realcon Pvt. Ltd. 1447 7,23,500/- 6. B-62 M/s Crave Infratech Pvt. Ltd. 1033 5,16,500/- 7. B-63 M/s Frolic Constructions Pvt. Ltd. 1005 5,02,500/- 8. B-64 M/s Unicorn Infocom Pvt. Ltd. 1200 6,00,000/- 9. B-65 M/s Proma Professiona....
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....er Sq. Yd., out of which, he paid Rs. 5,000/- per Sq. Yd. through cheque and the balance amount of Rs. 45,000/- per sq. yd. amounting to Rs.5,13,00,000/-, he paid Rs. 4,08,00,000/- to Sri Tummala Ranga Rao in the residence of Sri Koneru Rajendra Prasad and balance of Rs.1,05,00,000/- equivalent to USD 2,50,000 to Madhu Koneru. On the advice of Sri Koneru Rajendra Prasad, Sri Madhu Koneru refunded the said amount stating that the said amount as loan given by Sri Parthasarathy. However, Sri Parthasarathy denied the said transaction as loan. Similarly, Sri Madhu Koneru had received USD 1,40,000 equivalents to Rs. 65 Lakhs in his savings A/c No. 2750064022 from Sri Challa Suresh who purchased Villa plot A-28 in M/s EHTPL and this fact has been confirmed by Sri Suresh and Sri Tummala Ranga Rao. Investigation also revealed that Sri GV Vijay Raghav, Finance Head-South, EMGF, has collected an amount of Rs. 6,85,60,000/- from sale of three villa plots over and above the documented price @ Rs. 5,000/- per Sq. Yd., during the period 2008-2010. Sri Tummala Ranga Rao has collected excess amount of Rs. 96.01 Crores from villa plot buyers, thus an amount of Rs. 102,87,35,000/- collected from v....
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....tylish Holmes to collect the excess sale consideration from villa plot buyers in cash. As per his instructions, Sri Tummala Ranga Rao has collected the excess amount of Rs. 96.01 Crores from 82 Villa plot buyers in cash over and above the documented price of Rs. 5000/- per Sq. Yd., during 2005-10, which was confirmed by Sri Tummala Ranga Rao and his Accountant/Manager, who gave statements recorded under Section 164 of Cr.PC, 1973 before the Hon'ble Metropolitan Magistrate, Secunderabad. Sri Tummala Ranga Rao had handed over the excess amounts so collected (aggregating to Rs. 96.01 Crores) to Sri Koneru Rajendra Prasad and to Sri N. Sunil Reddy, as per the instructions of Sri Koneru Rajendra Prasad. Both Sri Tummala Ranga Rao and his Manager/Accountant Sri K. Srinivas have confirmed the same in their statements under Section 164 Cr. PC, 1973 and that on most of the cases Sri N. Sunil Reddy used to come to their office to collect the excess amount collected from Villa Plot Buyers and as per the instructions of Sri Koneru Rajendra Prasad, they used to hand over the cash amount to Sri N. Sunil Reddy. Sri N. Sunil Reddy along with his father Sri N. Sangi Reddy, floated a compa....
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....tylish Holmes, CBI filed supplementary charge sheet no. 05/2012 dated 23.04.2012. While initiating further investigation under the Act, it was noticed that Shri Tummala Ranga Rao has given a statement before Hon'ble Metropolitan Magistrate, under Section 164 Cr.PC on 09.01.2012 in which he stated as under:- He established M/s Stylish Holmes Real Estates Pvt. Ltd. on 16.09.2004 as per the instructions of Sri Koneru Rajendra Prasad, at Plot No. 15, Site II of Film Nagar, Jubliee Hills, Hyderabad, which is a residence of Sir Koneru Rajendra Prasad and family.He was taken to the office of M/s Emaar Properties PJSC in Dubai by Sri Koneru Rajendra Prasad in January, 2005 and entered into an agreement with M/s EHTPL on 29.01.2005 specifying that- 30 plots to be sold within 6 months from the date of the first sale of the plot; 100 villa plots to be sold at agreed price of Rs.5000/- per Sq. Yd.; Agent may collect 4% on the sale value as commission from the buyer; remaining plots should be sold as per the price fixed by M/s EHTPL, as per the market conditions prevailing. In March 2005, Sri Koneru Rajendra Prasad told him to collect excess amounts in cash from the buyers of the p....
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.... persons and also obtained financial accounts and bank statements of M/s Stylish Holmes, Shri Tummala Ranga Rao of M/s Southend Projects and Foundations Pvt. Ltd., Sri N. Sunil Reddy, Sri K. Rajendra Prasad and the other persons associated with the transactions. Investigation revealed that Sri N. Sunil Reddy received Rs.45.21 crores in cash from Sri Tummala Ranga Rao and invested the same in M/s Southend Projects through eleven Bogus Companies for the purpose of transfer of funds to M/s Southend Projects and were converted in to share capital amount with high premium, as against the paid-up capital of Rs.10.73 crores made by the promoters. Hence, the amount of Rs.45.21 crores dissolved in M/s Southend Projects was considered as proceeds of crime. The remaining amount of Rs.50,80,75,000/- out of cash of Rs.96,01,75,000/-, collected by Shri Tummala Ranga Rao was handed over to Shri Koneru Rajendra Prasad. Accordingly, ED vide PAO No. 03/2014 dated 21.11.2014, attached the assets of appellants (as detailed in para no. 1 above), and thereafter filed Original Complaint No.386/2014 before Ld. Adjudicating Authority for confirmation of the said properties. Ld. Adjudicating Author....
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....rties of appellant were already attached by the Income Tax Authorities vide letter dated 26.09.2013 and hence, there was no occasion on the part of appellant company to dispose of or transfer the said properties. He submitted that even prior to the said attachment the appellant was unable to transfer or deal with the properties in terms of the order dated 21.12.2010 passed by Hon'ble Company Law Board, Chennai bench, in CP No. 608/2010 without the consent of Conciliation Board. He argued that Ld. Adjudicating Authority without appreciating the fact that there is no material in OC 386/2014 to issue show cause notice, issued the same without any application of mind and thereafter confirmed the same vide order dated 09.04.2015, by ignoring the defence of the appellant as mentioned in his reply. He argued that PAO by ED and its confirmation by Adjudicating Authority without reasons is a nullity and needs to be set aside. He contended that in absence of any proceedings qua the offence of money laundering, in absence of any prosecution complaint under PMLA against him, the question of attaching and confirming his/its properties does not arise.Ld. Counsel for appellant company submitt....
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....tment ought not to have linked a routine/normal business transaction done by M/s ATPPL with completely different transactions between Mr. N. Manohar Reddy and Mr. Sunil Reddy. He pointed out that ED attached the properties of appellant without enquiring into the other possible assets of the alleged perpetrators. The property of appellant is attached without appreciating the fact that he has no connection with the alleged criminal activity and without verifying the fact that Mr. Sunil Reddy was in possession of other properties. He stressed that attachment of shares of the appellant owned by him in his personal capacity in M/s Indu Projects Ltd. is quite erroneous, as the company M/s ATPPL and its directors and shareholders are different legal entities. He contended that ED has attached the said shares on its face value of Rs. 10each totalling to Rs. 2,52,10,000/-, without appreciating the actual/fair market value of the said shares on the date of attachment. He pointed out that the said shares were acquired by the appellant ranging from Rs. 130 to Rs. 183. He argued that appellant is bona-fide third party and is not involved in any conspiracy with the accused persons/suspects. Pray....
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.... of direct proceeds of crime. He argued that his attached land is not part of the properties from proceeds of crime and no part of the same is involved in the case registered by CBI or ED. He further submitted that the appellant is not an accused in CBI case or prosecution complaint filed by ED. He pointed out that Tummala Ranga Rao Director of appellant company is already discharged from the CBI case by Ld. Special Judge Hyderabad, by granting him pardon and making him as a witness in the said case. Accordingly, he pointed out that as per section 8(5) of PMLA the attachment of his land ceases to have any effect, once he is acquitted in the predicate offence by way of pardon and hence, his property needs to be released, by allowing the present appeal. Ld. Counsel for appellant Southend Projects & Foundations Pvt. Ltd. submitted that its FDRs to the extent of Rs. 20 crores were wrongly confirmed for attachment without appreciating the reply and contention of the appellant. He pointed out that appellant company is not arrayed as accused in predicate offence investigated by CBI. Appellant company has not received any share from the alleged proceeds of crime. No enquiry was conducte....
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....re purchased by the appellant Pradeep Koneru. On the other hand, appellant explained all the sources of fund for purchasing the said attached property. Prayer is accordingly made to allow the present appeal. Ld. Counsel for the appellant K. Ravindranath submitted that as per the chargesheet filed by the CBI, the Provisional Attachment Order issued by the ED and all other documents clearly mention that the said plot was purchased by the appellant. He further submitted that none of the 102 plots were sold by EHTPL/Emaar MGF Land Ltd. to any person by way of registered sale deed and hence, only 14 plots, including the one B-33a held and purchased by appellant was wrongly included for attachment. He argued that appellant is a bonafide purchaser for value. He was not having any knowledge regarding the commission of any fraud and hence his plot is wrongly attached by ED. Prayer is accordingly made to release his plot from any attachment. 4. On the other hand, Ld. Counsel for the respondent ED strongly opposed the grounds of appeal and the same will be taken into account in our discussion in the subsequent paras. 5. As per the first contention of appellants Section 5 (1) of the P....
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....tment and the consequence of it would be serious. It would result to a situation where the accused would immediately try to vanish or siphon off the proceeds, so that the properties may not be attached. In light of the same, the definition has been framed after taking care of all the circumstances, and therefore, it is not that only the property derived or obtained directly or indirectly from the crime would come within the sweep of Proceeds of Crime, but it would also be the property of equivalent value as well which may not have nexus with the proceeds of crime. It would also be when the property is taken or held outside the country then the property of equivalent value held within the country. The argument that attachment can be only of the property derived or obtained directly or indirectly out of the criminal activity was an issue before the Delhi High Court in the case of Enforcement Directorate v. Axis Bank, reported in 2019 SCC OnLine Del 7854 and Prakash Industries Ltd. v. Directorate of Enforcement, reported in 2022 SCC OnLine Del 2087. The Ld. Counsel for the Appellants also referred a judgment of Kerala High Court in W.P.(Crl) No. 406/2024 Satish Motilal Bidri vs. Union....
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....he said attachment. Since ex facie illegal acts can be interfered with under Article 226 of the Constitution of India, notwithstanding the existence of an alternative remedy, this Court is of the view that the provisional attachment of the immovable property as seen from schedule A to Exhibit P11 order dated 22.05.2024 is liable to be set aside. However, as relating to the provisional attachment mentioned in schedule B to Exhibit P11, i.e. those relating to the amount in the bank accounts the petitioner has an effective alternative remedy provided by the statute." The perusal of the judgment in the case of Satish Motilal Bidri (supra) would show reference of the earlier judgment of different High Courts, which includes the judgment in the case of Seemav Garg Vs. Deputy Director, Directorate of Enforcement 2020 SCC online Punjab & Haryana 738 and also the judgment in the case of Axis Bank (supra). We, however, do not find reference of relevant para of the judgment of the Apex Court in the case of Vijay Madanlal Chaudhary &Ors. Vs. Union of India 2022 SCC online Supreme Court 929rather makes reference of other paras.Para 68 of the said judgment is relevant and quoted thus: ....
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....oceeds of crime", it having been obtained "indirectly" from a prohibited criminal activity within the meaning of first limb of the definition. 107. In contrast, the second and third kinds of properties mentioned above would ordinarily be "untainted property" that may have been acquired by the suspect legitimately without any connection with criminal activity or its result. The same, however, are intended to fall in the net because their owner is involved in the proscribed criminality and the tainted assets held by him are not traceable, or cannot be reached, or those found are not sufficient to fully account for the pecuniary advantage thereby gained. This is why for such untainted properties (held in India or abroad) to be taken away, the rider put by law insists on equivalence in value. From this perspective, it is essential that, before the order of attachment is confirmed, there must be some assessment (even if tentative one) as to the value of wrongful gain made by the specified criminal activity unless it be not possible to do so by such stage, given the peculiar features or complexities of the case. The confiscation to be eventually ordered, however, must be restric....
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....ce: "15. It is also necessary to clarify that if the accused derived or obtained the property out of the crime has parked it with other person, then the person holding such property can be subjected to attachment or seizure though he may not be accused in the FIR. It is for the reason that if the interpretation otherwise is taken, it would frustrate the object of the Act of 2002. It can be in a manner that the person who derived or obtained the property out of the crime may immediately park it with a third person and the property in that case would not be liable for attachment or seizure for the reason that the person holding the property has not been named as an accused, in that case, the very purpose and object of the Act would be frustrated. In view of the above, even if the appellant is not named as an accused but he is holding the "proceeds of crime" and even if the property if not directly or indirectly obtained out of the crime but is of the value thereof, it would fall in the definition of "proceeds of crime" and such property or document can be subjected to seizure. 16. In the instant case, serious allegations of fraudulent transactions to the tune of Rs.....
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....any property acquired subsequent to the commission of crime would be directly or indirectly proceeds of crime and then, it would fall in the first limb of the definition of proceeds of crime. In the second limb, which refers to "the value of any such property" would indicate any other property which was acquired prior to the commission of crime and it would be attached only when the proceeds directly or indirectly obtained or derived out of the criminal activity is not available. It may be on account of siphoning off or vanished by the accused. In those circumstances the property of equivalent value can be attached. The word "the value of any such property" signifies without any embargo that it should be the property purchased after the commission of crime or prior to it rather it would apply in both the eventuality in the given circumstance. Thus, we are not in agreement with the counsel for the appellant who has questioned the attachment in reference to the property acquired prior to commission of crime. We are not going even further that the properties have nexus with the proceeds out of the crime but even in given circumstances and scenario that the property was acquired prior ....
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....e floating of the said township project was widely published in the newspapers to sell the plots on first come first serve basis. Even, brochure of the said housing project reflecting terms & conditions along with the rate price and number of plots is not produced by the appellants. The charge sheet filed by the CBI revealed that M/s EMGF & M/s Emaar Properties PJSC obtained undue pecuniary advantage of Rs.167.29 Crores. Thereafter, CBI also filed Supplementary charge sheet against the accused persons. The detailed allegations against all the appellants are mentioned in para no.2 above. The said allegations are also supported with the statement of Tummala Ranga Rao & Parthasarathy U/s 164 Cr.P.C., the statement of the buyers namely, Rahul Raju, Sri Challa Suresh and the other buyers of villas & plots etc. clearly reflects the generation of proceeds of crime by the present appellants by selling the plots on high rates on premium, but on record reflecting the sale price as only Rs.5,000/- per Sq.yd. and thereby, generating the excess amount/proceeds of crime of Rs.102,87,35,000 (Rs.96,01,75,000+Rs.6,85,60,000). 8. The next contention of the appellants that the SCN was issued by....