TaxTMI 
TaxTMI 
2025 (9) TMI 405
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....rder (PAO) No. 10/2016 dated 31.03.2016 attaching the three immovable properties in the name of Sh. K. Prakash totally valued at Rs. 8,87,75,280/- was confirmed vide the Impugned Order. 2. The records have revealed that a complaint dated 24.07.2007 was filed by Shri. D. R. Sridhara, Chief Vigilance Officer, Vijaya Bank, Head Office, No 41/2, M. G. Road, Bangalore with the Superintendent of Police, CBI (BS & FC), Bangalore. S/Shri S. Gowthaman and S. Mahendran started a limited company in the name and style of M/s Sangam Organics & Chemicals Limited having its registered office at No. 8 & 9, "Aradhana" 1st Main Road, Ramalinga Nagar, Trichy and Factory at 728/1B, Pudukkottai Road, Mandaiyur Salai, Suriyur village, Mathur Post, Trichy. 3. The records also show that M/s Sangam Organics and Chemicals Ltd., Trichy was being financed by Union Bank of India, Trichy Branch since 1995 for their Working Capital requirements up to March 2003. In April, 2003, M/s Sangam Organics & Chemicals Ltd filed an application with Vijaya Bank Trichy Branch, Trichy signed by its Managing Director, Shri S. Gowthaman and Director, Shri S. Mahendran for sanction of credit facilities for the purpose of ....
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..... Srinivasan, (Late) H. Surendra Shetty, Shantharam Shetty, K. Baburaya Shenoy, K. S. Suresh, K. R. R. Pai and Ratnakar Hedge by the Directorate of Enforcement, Madurai and investigations under PMLA were initiated. 5. Ld. Counsel for the Appellants contended that the impugned properties which have been attached were in fact, purchased in the year 2007. However, the loan which was taken from the Vijaya Bank was in the year 2003. Therefore, the impugned properties could not have been purchased from the loan which was taken from the Vijaya Bank as the account of the Appellants had been declared as Non-performing Asset (NPA) and had been frozen on 31.03.2005. 6. Ld. Counsel for the Appellants further submitted that Smt. G. Renuka, one of the Appellants, had bought 6 acres of land from Smt. Rukmani. She had registered the same on 15.11.2007 for a sum of Rs. 5,59,130/-. The said piece of land was originally owned by Smt. Rukmani, wife of Late Sh. D.N. Patel, who was very close family friend of the Appellant Sh. Gowthaman. Late Sh. D.N. Patel and Sh. Gowthaman had entered into an oral agreement to sell and purchase the said property in the year 1997. Part payments were made periodic....
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....t. The source of income for purchase of the land in question were not proceeds of crime which were obtained by alleged cheating of the Vijaya Bank, in any manner whatsoever. 10. Ld. Counsel for the Appellants further contended that the Adjudicating Authority failed to appreciate that the PMLA itself came in force on 01-07-2005 and the account of the Appellant Company was declared NPA on 31.03 2005 before the PMLA came into force. Therefore, there could have been no withdrawal of any amount after 31.03.2005, when the account was frozen. It was, hence, submitted that the PMLA cannot have any application retrospectively in relation to an account or its transactions which had already been declared an NPA. Ld. Counsel contended that any syphoning of funds alleged to have taken place before the Act came into force cannot be enquired into or investigated subsequently. In this respect, the ECIR dated 18.07.2011, the PAO dated 31.3.2016 and the present complaint are all beyond the powers conferred on the Respondent under the PMLA. Ld. Counsel alleged that inquiries by the Respondent Directorate amount to an abuse of process and a colourable exercise of power. This was not taken into acco....
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....e said SSI, they had converted the firm into a limited company in the name and style of M/s Sangam Organics & Chemicals Ltd. It had business terms with the Union Bank of India till September 2003. Due to competitive pricing they shifted their account to Vijaya Bank, Trichy in September, 2003. The total working capital with the Union Bank of India was around Rs. 695 lakhs. Their proposal for loan which was sanctioned by the Vijaya Bank was around Rs. 940 lakhs. Out of Rs. 940 lakhs Rs. 640 lakhs were paid directly by the Vijaya Bank to the Union Bank of India. From the remaining balance of Rs. 300 Lakhs Rs. 127 Lakhs was paid directly by the Vijaya Bank to their lenders and the balance was credited into the working capital account. Due to drop in their business they requested Vijaya Bank to reschedule the loan which was declined by the bank. During the month of March 2005, their bank account was classified as "Non- Performing Assets" and the Vijaya Bank proceeded against them under SARFEASI, whereby all the assets including residential properties, factories, land, building, machinery and vacant plots were taken possession by the bank. 14. Ld. Counsel for the Respondent submitted ....
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....ations conducted have established that a part of the proceeds of crime has been utilized for the investment on the said properties, which were registered in the name of Sh. K. Prakash and the Appellants projected the same as untainted properties. Ld. Counsel for the Respondent contended that it is clear from the records that the Complainant had reasons to believe that M/s Sangam Organics and Chemicals Ltd., Sh. S. Gowthaman and Sh. S Mahendran had cheated Vijaya Bank to the tune of Rs. 10.55 Crores by committing the offence under Section 120 (b) read with Section 420, 467, 471 of Indian Penal Code (IPC),1860 which are scheduled offences under PMLA. The amount acquired by M/s Sangam Organics and Chemicals Ltd. and its directors is nothing but proceeds of crime as defined under Section 2(1) (u) of PMLA. He contended that a part of these proceeds of crime was invested by the Appellants in the impugned properties for which the Appellant Sh. K. Prakash joined hands with them. Ld. Counsel for the Respondent submitted that the Appellants have not placed on record any documentary proof to show lawful sources of funds for purchasing the attached properties from Patels. Ld. Counsel stated th....
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....payments were made from 1997 to 1999 and demand draft payment was made in 2007 by the Appellant Smt. Renuka to Smt. Rukmani widow of late Sh. D.N. Patel. It is observed that no further details about these cheque payments have been disclosed. It is further claimed that the Appellant Smt. Hema had paid an advance of Rs. 50,000/- on 29.04.1997 and the balance Rs. 4,79,770/- was paid on 06.11.2007 and 10.11.2007 after availing a gold loan from M/s Muthoot Finance. The Appellant has filed a copy of letter from M/s Muthoot Finance in vernacular language. There is no explanation to the effect that why the purchase deal which was entered into 1997 could be finalized as late as 10 years later in 2008. No agreement to sell or any other corroborative documents has been placed by the Appellants which bear the concurrence of the Patels or for that matter of his widow as to corroborate that the purchase was in fact genuine and reflected the market value of the said properties. 20. I also find from the records that the claim made by the Appellants that Sh. Prakash had extended loan of Rs. 10 Lakhs to the firm and the family so as to meet their liability of over Rs. 10 Crores to M/s Vijaya Bank....
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....in the Schedule to PMLA much before the date of PAO. The submission made by the Appellants that the attachment of the impugned properties is bad in law as the invocation of the retrospective application of PMLA shall not apply to the Appellants. The records reveal that all the Appellants indulged in or were party or assisted in the impugned transactions. In any case the charges invoked against the Appellants were Scheduled Offences under the PMLA at the relevant time. In this regard following paragraphs of the Judgment of the Hon'ble Andhra Pradesh High Court in W.P. No. 2789/2010 - V. Suryanarayana Prabhakar Gupta and Another Vs Union of India are being referred: "The above contention does not merit acceptance even otherwise. Article 20 of the Constitution enacts an injunction only in respect of ex-post facto laws resulting in conviction for offences or imposition of penalties greater than which might have been inflicted under the law enforceable at the time of commission of the offence. No provision of the Constitution has been brought to our notice which prohibits a legislative measure which targets for attachment and confiscation of proceeds of crime. On the text a....