TaxTMI 
TaxTMI 
2026 (2) TMI 735
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....ISHWAR NATH BHANDARI (CHAIRMAN) AND SHRI V. ANANDARAJAN (MEMBER) For the Appellants : Shri Balbir Singh, Sr. Advocate Shri Ashwani Taneja, Shri Purushartha Satish, Shri Akhilesh Dubey, Shri Uttam Dubey, Shri Varad Dubey, Advocates For the Respondents : Shri N.K. Matta, SPP FINAL ORDER The batch of appeals have been filed to challenge different Provisional Attachment Orders so as its confirmation by the Adjudicating Authority. However, we are passing a common order as the facts involved in the cases are intermixed and, therefore, it was found appropriate to take up all the matters together with the agreement of counsel for the parties. 2. The Provisional Attachment Orders in batch of appeals were caused after recording the ECIR by the respondents followed by the investigation. The FIR for the predicate offence was registered earlier against M/s Unitech Ltd. and many others. In fact, 74 FIRs were registered against M/s Unitech Ltd. for causing offence of cheating and other offences against the investors. So far as the appellants are concerned, they are said to be the recipient of the proceeds of crime thus an order for provisional attachment of the properties was cause....
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....Kirti Devi, Praveen Gupta, Chandraprakash Srivastava and many others were recorded under Section 50(2) and 50(3) of the Prevention of Money Laundering Act, 2002 (in short `the Act of 2002'). 8. It was found that the promoters of Unitech Group diverted the home buyer's funds on non-mandated heads causing wrongful loss to the investors. They failed to deliver the houses/flats to the home buyers and thus the complaint of cheating was made by the home buyers. After registration of the first FIR, 73 FIRs were registered for the commission of offence under Section 120-B, 406, 420 IPC and Section 7, 7(A), 8, 9,10, 12 & 13 of the Prevention of Corruption Act, 1988. It was even for the offence under Section 3 of the Act of 2002 for which ECIR was recorded. 9. So far as the appellant M/s Authentic Finance Pvt. Ltd. (hereinafter referred to as "M/s AFPL") is concerned, it was incorporated on 01.09.1997. There were many associate entities of M/s AFPL which includes M/s KJV Estates Pvt. Ltd. and M/s Betul Hospitality Parks Pvt. Ltd. M/s AFPL was holding 100% shares of M/s KJV Estates Pvt. Ltd. and subsequently M/s KJV Estates Pvt. Ltd. had taken 65% shares of M/s Betul Hospitality Parks P....
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.... taken together for its disposal. Arguments of counsel for the appellant: 13. The learned counsel for the appellants submitted that the respondents have failed to show appellant companies to be the recipient of the proceeds of crime so as to provisionally attach their properties. The issue was analyzed by M/s Grant Thorton LLP in forensic audit. M/s Grant Thorton has not reported any diversion of funds to the appellant companies. It was after analyzing the money trail to find out whether investors' money was diverted by M/s Unitech Ltd. to the appellant companies. The respondent has gone beyond the GT report and established money trail based on its own independent investigations which could not have been done. In fact, M/s Betul Hospitality Parks Pvt. Ltd. was incorporated on 09.12.2005 with the object of conducting the business in hospitality and real estate. On 20.06.2006, M/s Betul Hospitality Parks Pvt. Ltd. entered into Long Term Lease Agreement with Goa Industrial Development Corporation ('GIDC') to acquire 4,18,714 square meters of the land. On 16.03.2007, M/s KJV Estates Pvt. Ltd. acquired 65% stake in M/s Betul Hospitality Parks Pvt. Ltd. and M/s CMPL acquired the re....
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.... diversion of investors' funds by M/s Unitech Ltd. 18. The learned counsel further submitted that the ECIR was recorded in reference to the predicate offence under Section 420 and 120-B IPC while those provisions were incorporated in the Schedule by way of amendment w.e.f. 01.06.2009 thus could not have been applied for a transaction prior to it because it has no retrospective application. On the aforesaid ground also, the impugned order deserves to be set aside. 19. MOU was entered between M/s Unitech Ltd., M/s CMPL, M/s KJV Estates Pvt. Ltd. and M/s Betul Hospitality Parks Pvt. Ltd. and M/s CMPL on 15.06.2007 for purchasing 65% stakes of M/s Betul Hospitality Parks Pvt. Ltd for a sum of Rs. 50 crores. It was agreed that Rs. 28.40 Crores would be transferred to M/s KJV Estates Pvt. Ltd. and Rs. 11.65 Crores to M/s CMPL. It is reiterated that no funds were ever received by M/s Betul Hospitality Parks Pvt. Ltd. 20. In supersession of the Agreement dated 15.06.2007, another MOU was entered on 15.11.2007 between M/s AFPL and M/s Unitech Ltd. wherein it was agreed to sell 100% shares of M/s KJV Estates to M/s Unitech Ltd. for Rs. 117 Crores. Under the MOU dated 15.06.2007, a s....
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....e as to how Limited Liability Partnership properties were acquired from the proceeds of crime. 23. The respondent should have traced the assets acquired through use of the proceeds of crime. It has wrongly proceeded to attach the properties unconnected with the proceeds of crime under the garb of "value equivalent." It was further submitted that traditional partnership firm is distinct from the LLP because it has the separate legal entity and the respondents without any evidence could not have attached the assets of the LLPs. The attachment could be limited to M/s AFPL shares in the LLP and not the properties of the LLP. The Adjudicating Authority has confirmed the order in a mechanical manner without reasons to believe for attaching the LLPs properties. 24. The counsel for the appellant LLPs, however, stated that it adopts the arguments of the counsel for M/s KJV Estates Pvt. Ltd. and in case appeal filed by M/s KJV Estates Pvt. Ltd. is allowed, the appeal filed by the LLPs may also be allowed. Thus, the counsel prayed that the impugned order deserves to be set aside on the aforesaid ground itself. 25. Appeal No. 4502/2022 and Appeal No. 5091/2022 has also been filed by M....
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....nal attachment and its confirmation by the Adjudicating Authority: Appeal No. Concerned Party PAO No. O.C. No. Property Attached 4502/2022 Betul Hospitality 04/2021 dt. 31.03.2021 1476/2021 26.04.2021 Land parcel in South Goa measuring 4.18L Sq. meters [35% of the Land value (Rs.2.63 crores)-CMPL's 35% stake in Betul] 5091/2022 Betul Hospitality 07/2022 dt. 21.03.2022 1687/2022 19.04.2022 Bank balances in SBI-Goa, Maharashtra & Delhi (35% of the bank balances held (Rs. 1.33 Lakhs)- CMPL's 35% Stake in Betul] 5454/2023 5451/2023 5456/2023 Betul Hospitality KJV Estates Authentic Finance 17.02.2022 dt. 17.06.2022 1771/2022 dt.14.07.2022 Land parcel in South Goa measuring 4.18L Sq. meters [65% of the Land value (Rs.4.89 crores)-KJV's 65% stake in Betul] Various securities and bank Balances to the tune of Rs. 31.18 Crores. 5469/2023 5470/2023 5471/2023 5472/2023 5473/2023 M/s Adesh Ventures LLP M/s ARC Agrochemicals LLP M/s Adesh Agrifarm LLP M/s ARC Agrobaskets LLP M/s Adesh Enterprises LLP 17.02.2022 dt. 17.06.2022 1771/2022 dt.14.07.2022 Various immovable prop....
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....reunder for ready reference: "VIII. Limitations During our review, we have come across certain limitations in carrying out the procedures due to the unavailability of the requested information. Further, we were informed by the management that the following requested information is unavailable: 1. Financial statements: a) Audited financial statements of Unitech Group: We were not provided with the 21 audited financial statements pertaining to eight entities of Unitech Group pertaining to the 74 Projects for our review period up to FY 2018. (Refer Annexure 10) b) Audited financial statements for Related Parties of Unitech: We were not provided with 711 audited financial statements for 204 Related Parties of Unitech for our review period upto FY 2018. (Refer Annexure 11) 2. Access to the books of accounts of the Related Parties of Unitech: We were not provided access to the books of accounts for 100 Related Parties of Unitech during the Review Period. (Refer Annexure 12) 3. Bank account statements of Unitech Group and its' Related Parties We were not provided with 183 bank account statements for Unite....
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....ation for recovery of advances etc.) pertaining to the advances aggregating to INR 1,036.35 crore to 30 Related Parties, four undisclosed Related Parties of Unitech and 49 third parties. (Refer Annexure 17) 9. Bank account statements and details pertaining to personal bank accounts of Promoters and their family members a) Bank account statements: We were not provided with the seven personal bank account statements of Promoters and their family members during the Review Period. (Refer Annexure 18) b) Clarification/details of transactions: We were not provided with the clarification/details of transactions aggregating to INR 2.58 crores from the personal bank account of Promoters and their family members. (Refer Annexure 19) 10. Details / documentation pertaining to sale and repurchase of equity shares of Related Parties We were not provided with the details and supporting documentation such as due diligence report, valuation reports etc. pertaining to sale and repurchase of equity shares in 22 Related Parties aggregating to INR 1,463.08 crore. (Refer Annexure 20) 11. Data/documentation pertaining to deposits received from public ....
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....disclosed Related Parties We were not provided with the supporting documentation such as valuation reports for the subsidiaries sold, due diligence reports, communications for recovery made pertaining to high value receivables aggregating to INR 285.44 crores from Royal Inframart Private Limited, Sky Event Management Private Limited and Temple Infratech Private Limited. 17. Data / Documentation pertaining to sale of land to undisclosed Related Parties We were not provided with the supporting documentation pertaining to the sale of land to three undisclosed Related Parties. Refer table below for details: S. No. Name of the entity Supporting documentation not provided 1. Red Parks Private Limited ("RPPL") Valuation report of land, due diligence reports, details of payment etc. pertaining to sale of 15 acres of land parcel for INR 165 crores. 2. Kore Communities India Private Limited ("Kore") Valuation reports of land, due diligence reports, details of payment etc. pertaining to sale of 56.52 acres of land parcel for INR 226.86 crores. 3. Joshu Gurgaon SEZ Private Limited ("Joshu") Valuation reports of land, due diligence ....
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....2 Related Parties of Unitech. (Refer Annexure 25) 24. Data pertaining to IT assets i. IT assets used by Promoters During our review, we noted that the below mentioned IT devices were issued to the Promoters. We were informed by the management that these devices are old/e-scrap and not available with the Company. Refer table below for the details: S. No. User Make Asset Type Model Serial Number 1. Sanjay Chandra Sony Laptop TX27GP Not available 2. Sanjay Chandra IBM Laptop Not available LV- A7674- 05/8 3. Sanjay Chandra Fujitsu Laptop Fujitsu Lifebook T4220 C070606941 4. Ajay Chandra HP Laptop 6720S CNU8062446 5. Ajay Chandra Sony Laptop VAIO S017008733E 6. Ajay Chandra Toshiba Laptop SATELLITE M30 74108269H 7. Ajay Chandra Lenovo Workstation 2552 PBNMBND 8. Ramesh Chandra IBM Not available Not available Not available ii. IT assets used by ex-Chief Financial Officers ("CFO"): a) Mr. A.S. Johar: We were informed by the representatives from Unitech's IT department that Mr. A S.....
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....y the appellants. The bare perusal of the disclaimer of M/s Grant Thornton makes it further clear that their results of work with respect to review of application of Homebuyer funds and misappropriation of collected amount should be considered as a guide. The report and comments should not be considered to be a definite pronouncement on the individual or the Company. There may be additional irregularities and/or improprieties which could exist at M/s Unitech Ltd. and forensic audit may not identify all the underlying issues due to the applicable restrictions and limitations of the engagement. The disclaimer made in the report is also quoted hereunder for ready reference: "Disclaimers: 1. This report has been prepared based on the approach note submitted to the Honourable Supreme Court of India (the "Court") on 18 January 2019 to comply with the Court order dated 07 December, 2018. 2. The report has been prepared for the objectives and procedures mentioned in our approach note and the directions received from the Court during the review procedures. Accordingly, Grant Thomton India LLP accepts no responsibility and disclaims liability in any manner whatsoev....
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....agement. 9. The scope of work performed by us under this engagement was as considered necessary at the given point in time. This report is based on information and evidence obtained as a result of our field work carried out up to 10 July 2020. We reserve the right to amend any findings, if deemed necessary by us, should any further information become available to us post submission of this report. Additional information provided to us post submission of this report may also have a bearing on the report. 10. During the course of this engagement we have received inputs from the representatives of M/s Unitech limited on various observations and these inputs have been appropriately incorporated in this report. 11. Our work does not make any representation regarding questions of legal interpretation and cannot render legal advice. 12. While we have taken reasonable steps to corroborate the information obtained, we cannot guarantee its reliability or completeness. For these reasons, this report should be used for guidance purposes only. It should not form the sole basis for any decision as to a potential course of action without independent confirmatio....
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....e 01.06.2009. However, it is without challenge to the ECIR recorded by the respondents. The ECIR was recorded finding a case for an offence under Section 3 of the Act of 2002. The relevant time to find out the offence is the date when ECIR was recorded finding an offence under Section 3 of the Act and it can be taken up when there exists a scheduled offence which admittedly was existing at the time of recording the ECIR. The relevant date would not be the date of offence but when the appellants tried to project tainted money to be untainted and even concealed it coupled with the other acts to make out an offence under Section 3 of the Act of 2002. We may refer the judgment of the Karnataka High Court in the case of Dyani Antony Paul and Ors. vs. Union of India and Ors. reported in MANU/KA/4442/2020on the issue. The relevant para of the judgment is quoted hereunder for ready reference: "105. Thus, in case of the proceeds of crime are being projected as being untainted and thereby ploughing such tainted money to the economy of the country, it would definitely have delirious effect and impact on the economy and as such the offence which has been committed and continuing would....
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..... It was agreed that M/s Unitech Ltd. shall pay Rs. 28.40 Crores to M/s KJV Estates Pvt. Ltd. and Rs. 11.56 Crores to M/s CMPL. In supersession of the MOU dated 15.06.2007, another MOU dated 15.11.2007 was entered wherein M/s AFPL agreed to sell 100% stake in M/s KJV Estates Pvt. Ltd. to M/s Unitech Ltd. for Rs. 117 Crores. The amount of Rs. 28.40 Crores paid earlier was to be treated as a part of the MOU dated 15.11.2007. Further, the amount of Rs. 11.65 Crores transferred to M/s CMPL vide MOU dated 15.06.2007 was to be transferred to M/s KJV Estates Pvt. Ltd. who would further transfer it to M/s AFPL. The balance of Rs. 56 Crores was to be paid once the approval for construction of 500 rooms at the land parcel in South Goa held by M/s Betul Hospitality Parks Pvt. Ltd. is taken by M/s AFPL. It is alleged that neither the shares were transferred by M/s AFPL nor any amount was refunded to M/s Unitech Ltd. on non- compliance of the terms of MOU. Further, M/s Unitech Ltd. had also incurred funds to the tune of Rs. 20 lakhs as aircraft charges for the benefit of M/s AFPL and are still recoverable from M/s AFPL. It was urged by the counsel for the appellants that the diversion of funds ....
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....land has been disclosed by M/s Betul Hospitality Parks Pvt. Ltd. The lease premium of Rs. 7.53 Crores was paid by M/s Betul Hospitality Parks Pvt. Ltd. out of the funds mobilized by M/s AFPL from M/s Pioneer Vyapar Ltd. The documents have been annexed as a part of record and thus we find the attachment of the land parcel in South Goa i.e. 65% in Appeal No. 5454/2021 as bad in law. At most, the shares held by M/s KJV Estates Pvt. Ltd. in M/s Betul Hospitality Parks Pvt. Ltd. could have been attached but not the land parcel as M/s Betul Hospitality Parks Pvt. Ltd. did not receive funds from M/s Unitech Ltd. for land parcel at Goa. 38. We find that the home buyers funds were not diverted to M/s Betul Hospitality Parks Pvt. Ltd under the MOU thus, provisional attachment of the 65% of the land parcel in South Goa acquired by M/s Betul Hospitality Parks Pvt. Ltd. cannot be said to be proper. It is pertinent to state that the money traveled from M/s Unitech Ltd. to M/s AFPL, M/s CMPL and M/s KJV Estates Pvt. Ltd. but not to M/s Betul Hospitality Parks Pvt. Ltd under the agreement. It was further alleged by the counsel for the respondents that no shares were transferred by M/s AFPL to M....
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.... Rs. 1 lakh rupees contributed by two promoters. It was much prior to the diversion of fund by M/s Unitech Ltd. because as per the allegation made by the ED on their investigation, the transfer of fund started w.e.f. 30.05.2007 i.e. much subsequent to the amount received by M/s Betul Hospitality Parks Pvt. Ltd. and accordingly the subscription of the shares by M/s CMPL was not out of proceeds of crime and, therefore, there was no justification to attach land parcel to the extent of 35% in the account of M/s CMPL. We have already dealt with the issue in regard to the acquisition of remaining 65% shares of M/s Betul Hospitality Parks Pvt. Ltd. by the appellant companies which was again on 16.03.2007 i.e. prior to the diversion of fund thus how it has been co-related for attachment of 65% of the land parcel of M/s Betul Hospitality Parks Pvt. Ltd. could not be clarified. If at all, the appellant M/s KJV Estates Pvt. Ltd. and M/s Authentic Finance Pvt. Ltd. remained receipt of the alleged proceeds of crime subsequently with transfer of money by M/s Unitech Ltd. or by M/s CMPL, the corresponding attachment could have been of the shares purchased after involving the proceeds of crime in ....