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2025 (6) TMI 1273

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....ice No. CE 5053 & 5054, Bharat Diamond Bourse, Bandra Kurla Complex, Mumbai, registered in the name of M/s SJR Commodities & Consultancies Pvt. Ltd. 11,02,83,000/-   Total 24,08,82,000/- 2. As per the facts of the case, Central Bureau of Investigation, Bank Securities & Frauds Cell, Mumbai registered a case vide RC-BSM2014 E0004 dated 26.03.2014 on the basis of written complaint filed by Ashok Bansal, AGM, PNB against Jatin Rajnikant Mehta, Shri Ramesh Indulal Parikh, Shri Ravichandran Ramsami, Shri Harish Ratilal Mehta, Shri Pranav Ramesh Dalal, Vinod Kumar Rajendra Jain, Shri Bahilalbhai Kantilal Patel, Shri Hari Mohan Namdev, Shri Haytham Salman Ali Abu Obaidah, M/s Winsome Diamonds and Jewellery Ltd. (WDJL) and M/s Forever Precious Jewellery Diamond Ltd. (FPJDL) for commission of offence under Section 120B IPC read with 420 IPC and substantive offence thereunder: CBI BS &FC, Mumbai also registered several other FIR's for acts of criminal conspiracy for committing fraud with various banks on the basis of complaint filed by respective banks namely Oriental Bank of Commerce, State Bank of Hyderabad, Syndicate Bank, Canara Bank, Central Bank of India, IDBI Bank and Vijay....

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.... into coins and pendants and sold them in open market in order to siphon off gold in the garb of export to UAE based buyers. The complete cycle of import of gold and realization of sale proceeds was taking hardly 5-6 days, whereas they availed credit facilities upto 270 days in order to round trip the funds and show high turnover. On the basis of high turnover, they managed to avail enhanced working capital, induced the bank to part with the fund and siphoned off the money in the guise of loss in derivative trading by the buyers abroad and the proceeds were routed through bank accounts of various foreign companies and were ultimately routed into the accounts of various companies owned and controlled by Mrs. Sonia Mehta and Shri Suraj Mehta. As a result of criminal conspiracy and cheating by M/s WDJL, M/s. FPJDL and their Directors, Promoter Sh. Jatin, Mehta, Smt. Sonia Mehta, Shri Suraj J. Mehta, Mr. Haytham Salman Ali Abu Obaidah of UAE and unknown Public servants, have committed the offence of Money Laundering, as defined u/s 3 of PMLA, 2002, there has been wrongful loss to the banks, by the two companies' M/s WDJL and M/s FPJDL as mentioned in Table at Para 4. Further the two co....

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.... Diamonds, Hongkong and others entities owned by Mrs. Sonia Mehta, wife of Shri Jatin R. Mehta and Shri Suraj Mehta, son of Shri Jatin R. Mehta. Therefore, on the basis of the material collected during the course of investigation and placed on record, it was imperative that the immovable properties as mentioned in the schedule, provisionally attached, considering the same in terms of 'value thereof', under Section 2(1)(u) read with Section 5(1) of the PMLA, 2002. (B) Brief facts regarding attachment of properties at Bharat Diamond Bourse, Bandra Kurla complex, a Mumbai registered in the name of M/s SRV Polished Diamonds Pvt. Ltd and M/s SJR Commodities and Consultancies Pvt. Ltd. Investigation has revealed that Shri Jatin R. Mehta was also having several group companies and the share holding pattern was as such that Jatin Mehta, his family members and other group companies are the shareholders in every Group Company. One of the Group Companies was M/s SRV Polished Diamond Companies Pvt. Ltd., which got its name through several successive changes from M/s Suraj UK Industries Ltd., M/s SJR Developers Ltd., M/s SJR Diamond and Jewellery Ltd. and to its present name M/s SRV P....

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.... Diamonds Company Pvt. Ltd. 100 6. Kohinoor Diamonds Pvt. Ltd. 24050 7. Firstrate Diamonds Pvt. Ltd. 6900   Total 50000 Subsequently, 01.04.2013 share holding pattern was changed as under investigation has revealed that in the during 2012-13, Mrs. Sonia Mehta, Shri Suraj Mehta and Shri Vishal Mehta were the shareholders in M/s SRV Polished Diamond Company Pvt. Ltd., but subsequently they transferred their shares in the name of their group companies. Share holdings of M/s SRV Polished Diamonds Pvt. Ltd. from 01.04.2013 to 31.03.2015 was as under: - Sr. No. Name of Shareholders No. of Shares 1. Jatin R. Mehta (HUF) 14600 2. L.S. Bhansali 50 3. Suraj Jewellery India Pvt. Ltd. 50 4. Professional Diamonds Pvt. Ltd. 24050 5. Suraj Diamond Industries Pvt. Ltd. 2050 6. Euro Auto Pvt. Ltd. (99% share held by Shri Jatin R. Mehta) 4600 7. Suraj Diamond Pvt. Ltd. 4600   Total 50000 On 01.04.2016, shareholding pattern of the said company was again changed and this time 48.1 % of shares of M/s SRVPDPL (24060 shares) which were held by M/s Professional Diamonds Pvt. Ltd. were sold to one Ronak Maheshwari against total consideration of Rs. 24060 @ f....

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..../2015 SRV POLISHED COMPANY PVT LT 79934.86 PDC INTERNATIONAL FZE     TOTAL 762041.45   During the course of investigation, it was revealed that following immovable properties situated at Bharat Diamond Bourse, BandraKurla Complex, Mumbai, are presently owned by M/s SRV Polished Jewellers Pvt. Ltd. (a) Office No. CE 5051, bearing 2458 shares under C/0577 share certificate and C- 324, C-325, C-326, C-417 to C-422, car parking space bearing shares 900 under share certificate No. P/0431 to P/0439, which was transferred vide Deed of Transfer No. 4/4010/2014 dated 11.06.2014 by M/s Su-Raj Diamond Industries Ltd. to M/s SRV Polished Diamonds Co. Pvt. Ltd. (b) Office No. CE 5052, bearing 2379 shares under Share Certificate C/0578, which was transferred vide Deed of Transfer No. 4/4011/2014 dated 11.06.2014 by M/s Su-Raj Diamond Industries Ltd. to M/s SRV Polished Diamonds Co. Pvt. Ltd. Vide letter dated 08.03.2018, Bharat Diamond Bourse, Mumbai has submitted copies of documents relating to the aforesaid properties. From the same it appears that Office No. 5051 and 5052 were allotted to M/s Kohinoor Diamonds Pvt. Ltd. by Bharat Diamond Bourse, Mumbai vide letter....

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....amonds Co. Pvt. Ltd. 06 5. Forever Diamonds Pvt. Ltd. 1000 6. Firstrate Diamonds Pvt. Ltd. 1050   TOTAL 24500 Subsequently, 01.04.2013 share holding pattern was changed as under and further continued: Sr. No. Name of Shareholder No. of Shares 1. Jatin R. Mehta (HUF) 11444 2. Suraj Diamond Dealers Pvt. Ltd. 1000 3. Suraj Jewellery India Pvt. Ltd. 11000 4. Euro Auto Pvt. Ltd. (99% share held by Sh. Jatin R. Mehta) 06 5. SRV Polished Diamond Companies Pvt. Ltd. 1050   TOTAL 24500 Again, as on 01.04.2017, shareholding pattern was changed and other shareholders were introduced namely Harsha Jhaveri, Pratima Jhaveri and Ankit Jhaveri as under: Sr. No. Name of Shareholder No. of Shares 1. Jatin R. Mehta 11444 2. Cochin Art Jewellery Pvt. Ltd. 4000 3. Suraj Diamond Dealers Pvt. Ltd. 1000 4. Euro Auto Pvt. Ltd. (99% shares held by Sh. Jatin R. Mehta) 06 5. SRV Polished Diamond Companies Pvt. Ltd. 1050 6. HarshaJhaveri 3500 7. PratimaJhaveri 3500   TOTAL 24500 During the course of statement u/s 50(2) & (3) of PMLA, on 05.09.2018, Shri Kelkar was asked regarding the whereabouts of the aforesaid new shareholders namely....

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....red through various overseas companies and ultimately converged in Bank Accounts of M/s Al Noora Jewellery FZE, UAE, Alma Diamonds, Hong kong and others entities owned by Mrs. Sonia Mehta, wife of Shri Jatin R. Mehta and Shri Suraj Mehta, son of Shri Jatin R. Mehta. Analysis of share holding pattern of the above discussed companies as well as the property transactions/ transfer of flats by Mrs. Sonia Mehta shows that the change in shareholding pattern/ownership was affected only to camouflage the real ownership of the properties mentioned in 'Schedule of properties above', owned by the said companies. Therefore, on the basis of the material collected during the course of investigation and placed on record, it was imperative that the immovable properties as mentioned in the schedule, provisionally attached, considering the same in terms of 'value thereof, under Section 2(1)(u) read with Section 5(1) of the PMLA, 2002. Accordingly, the properties of the appellants were attached vide PAO No.21/2018 dated 02.11.2018, as mentioned in para no.1 above. Thereafter, ED filed Original Complaint No.1062/2018 before the Adjudicating Authority. The Adjudicating Authority being sat....

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....t that on 26.06.2016, CBI registered another FIR against M/s Forever Precious Jewellery & Diamonds Ltd, Shri Jatin R Mehta and other directors, but even in the said subsequent FIR the present two appellant companies are not named therein. He further pointed out that the said two appellant companies are also not named in the charge sheet filed by the CBI on 07.06.2008. He further contended that in-spite of no allegation against the present appellants, ED wrongly attached the properties of the present appellant companies on 02.11.2018, and thereafter, the said PAO was also wrongly confirmed by the Adjudicating Authority on 04.12.2018 without any basis, by ignoring the reply filed by the defendants (herein appellants). He stressed that the Adjudicating Authority confirmed the PAO without appreciating the fact that the said two properties were acquired by the appellant company out of its own source of income/cash generated out of the business of the appellant. He further stressed that as the provision of value thereof for attaching the properties equivalent the value held within the country was inserted in the year 2015 and hence the said provision cannot be applied with the retrospect....

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....ITO Vs. Lakhmani Mewal Das 103 ITR 437 (SC) (a) Submission with regard to proceeds of crime (b) Reliance placed on (i) Vivek Mathias 96 taxmann.com 388 (ii) Jagati Publications Ltd. 92 taxmann.com 51 (iii) Himachal EMTA Power Ltd. in W.P. (C) 5537/2018 a) Submission that the Sale Deed would prevail over the order of provisional attachment b) Reliance placed on (i) Hamda Ammal v. Avadippa Pathar (1991) 1 SCC 715 (ii) Vannarakkal Kallalathil Sreedharan Chandramaath Balakrishnan (1990) 3 SCC 291. Prayer is accordingly made to allow the present appeal. 4. Ld. Counsel for the respondent ED controverted the submissions made on behalf of the Ld. Counsel for the appellants as mentioned in para no.3 above. He also pointed out the incriminating material against accused persons and layering of the proceeds of crime in the name of present appellants. The arguments of respondent ED will also be considered in our discussion in the following paras. 5. On the basis of the rival submissions, the following legal issues needs to be decided by this Appellate Tribunal: i) Whether the property of the appellant can be attached despite the fact that the said FIR is silent regarding the name of M/s SRV....

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....process or activity connected with the proceeds of crime. Such a person besides facing the consequence of provisional attachment order, may end up in being named as Accused in the complaint to be filed by the authorised officer concerning offence Under Section 3 of the 2002 Act. 69. We find force in the stand taken by the Union of India that the objectives of enacting the 2002 Act was the attachment and confiscation of proceeds of crime which is the quintessence so as to combat the evil of money-laundering. The second proviso, therefore, addresses the broad objectives of the 2002 Act to reach the proceeds of crime in whosoever's name they are kept or by whosoever they are held." [Emphasis supplied] Therefore, the property in the hands of any person in possession of proceeds of crime can be attached even if he is not accused of the predicate offence investigated by the police/CBI. Accordingly, this issue is decided against the appellants and in favour of respondent ED. 7. Now, coming to the issue no. ii) Whether the properties of the appellant companies can be attached, for any offence allegedly committed by its shareholders/directors, as the appellant companies are non-corp....

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....despite the fact that appellant is not an accused and in the light of retrospective application of the third limb, as it was inserted in 2015? To analyze these issues, it would be gainful to refer to the definition of "proceeds of crime" given under Section 2(1)(u) of the Act of 2002 and is quoted as under- "2. Definitions -(1) In this Act, unless the context otherwise requires, -xx xx xx xx xx xx xx xx xx xx xx (u) "proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence, or the value of any such property', [or, where such property is taken or held outside the country, then the property equivalent in value held within the country] [or abroad]; [Explanation.- For the removal of doubts, it is hereby clarified that "proceeds of crime" include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence]. xx xx xx xx xx xx xx xx xx xx xx" The perusal of the definition reveals three limbs of the definition out of w....

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....rned Judge observing that in such a situation it would have to be established that the person accused of money laundering had an interest in such property at least till the time that he indulged in the proscribed criminal activity. The learned Judge further observed that bona fide rights acquired by third parties prior to the commission of the predicate offense would stand saved." Further, this Tribunal has also given an elaborate judgment on the issue in the case of Sadananda Nayak v. The Deputy Director, Directorate of Enforcement, Bhubaneswar in FPA-PMLA-5612/BBS/ 2023 delivered on 14.10.2024, where all the judgments on the issue have been considered and thereby this issue was decided in favour of Respondent ED. Further, in view of the para 68 of the judgment of Hon'ble Supreme Court of India in the case of Vijay Madanlal Chaudhary Vs. Union of India, 2022 SCC OnLine SC 929 wherein, it is held that- "68. It was also urged before us that the attachment of property must be equivalent in value of the proceeds of crime only if the proceeds of crime are situated outside India. This argument, in our opinion, is tenuous. For, the definition of "proceeds of crime" is wide enough to ....