TaxTMI 
TaxTMI 
2026 (3) TMI 660
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....I-HYD dated 17.08.2011) was registered by the CBI, ACB, Hyderabad against Sh. Y.S. Jagan Mohan Reddy (hereafter referred to as Jagan Mohan), M/s Dalmia Cement (Bharat) Ltd. (the appellant herein) and others under Sections 420, 409 and 477-A of the erstwhile Indian Penal Code, 1960 and Section 13(2) read with 13(1)(c) & (d) of the Prevention of Corruption Act, 1988, for entering into criminal conspiracy to cheat the Government of Andhra Pradesh. It was alleged that Sh. Jagan Mohan exercised his influence on his father, Late Dr. Y.S. Rajasekhara Reddy, the then Chief Minister of Andhra Pradesh, and also on unknown public servants of Govt. of Andhra Pradesh, who in turn, abused their official positions by corrupt or illegal means and issued orders favourable to the appellant company, M/s Dalmia Cements, other companies and persons, and thereby, dishonestly caused wrongful loss to the Govt. of Andhra Pradesh and corresponding wrongful gain to themselves. As quid-pro- quo, M/s Dalmia Cements, other companies and persons invested several crores of Rupees in companies promoted by Jagan Mohan at a huge premium in lieu of illegal favours. The said FIR was registered pursuant to a common ord....
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....ubscription in Bharathi Cements Corporation Pvt. Ltd., a company controlled by Jagan Mohan. The said shares were subsequently sold to M/s PARFICIM, (France) for Rs. 139 crore. Out of this amount, an amount of Rs. 55 crore was paid to Jagan Mohan through cash and hawala channels, and the remaining Rs. 84 crore were retained by the appellant company. Secondly, the appellant company illegally extracted 1.06 crore MT of limestone from Kadapa Mines valued at Rs. 709.34 crore under unlawfully acquired mining lease. Thirdly, the appellant company overpaid Rs. 2.14 crore for acquisition of M/s Eswar Cements Pvt. Ltd., a company whose promoter-directors were Sajjala Diwakar Reddy, Sajjala Ramakrishna Reddy and Sajjala Bhageerathi. The said amount was later diverted to M/s R. R. Stones Pvt. Ltd. owned by Sajjala Diwakar Reddy. Thus, it was alleged that these amounts, namely, quid pro quo investment in shares of M/s Bharathi Cements Corporation Ltd., illegal mining proceeds, cash and hawala transfers, speculative overpayments amounting to Rs. 95 crore Rs. 55 crore Rs. 709.34 crore and Rs. 2.14 crores respectively, constituted proceeds of crime. Investigation further revealed that the said pro....
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....e that the computation of profits derived from limestone extraction has since been reduced by the ED to Rs. 92.52 crore only after deducting the cost of extraction. Thus, the revised proceeds of crime now stand at a total of Rs. 176.52 crore. 11. Coming to the first main allegation against the appellant company, namely, quid pro quo investment in shares of M/s Bharathi Cements Corporation Ltd., a company controlled by Jagan Mohan at the relevant time, the allegation is that investment by the appellant in the said company was not a bona fide commercial decision but was made at a highly inflated share premium without corresponding economic rationale. With regard to this allegation, the ld. counsel for the appellant referred to the detailed consolidated judgment dated 26.07.2019 passed by this Appellate Tribunal in the case of M/s Alpha Avenue Pvt. Ltd. (FPA-PMLA- 751/DLI/2014) and 11 other connected matters involving identical allegations against the appellants therein. The Appellate Tribunal in that case, had held as below: "49. ........... The main concern it appears from the case of the ED is that the investment was bribe money in order to get the project and the purch....
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....ed of crime when it has come on record that original purchase of shares was a genuine transaction, otherwise why the French Company, who is a third party, would purchase the same very shares at the higher price who is admittedly not charged either by the CBI or ED. 100. The main allegations made by the CBI against Mr. Nimmagadda Prasad, have been confirmed by the Respondent No.1 stating that Mr Nimmagadda Prasad, through his group companies, paid illegal gratification to the tune of Rs. 854.50 Crores to the companies controlled by YS Jagan Mohan Reddy, which is a bribe paid for grant of several undue favours to Mr. Nimmagadda Prasad by the Government of Andhra Pradesh led by late. Dr. Y. S. Rajasekhara Reddy, the then Chief Minister Mr. Nimmagadda Prasad was allotted the VANPIC Project worth Rs. 17,000 Crores under the guise of Government-to-Government Project by introducing Government of Ras al-Khaimah into picture a front. The Concession Agreement dated 11.07.2008 is in violation of the Memorandum of Understanding dated 11.03.2008 inter alia since the Government of Ras al Khaimah is not obligated to hold 51% equity in the SPVs of the VANPIC Project under the Concession A....
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.... I have conceived an investment plan named as "Project Pancharatna" where I have identified 5 sectors in emerging Indian Economy. The sectors are Health Care, Media and Entertainment, Hospitality, Core infrastructure & Core Industries (cement, power, steel) Beginning 2005, I invested in these sectors based on my assessment, market reports of the investee companies/sectors and instincts. Therefore, as asked by you the investments made by the Companies was after consideration of the benefit factors." [Emphasis supplied] 104. From the proceeds of his disinvestment in Matrix Labs. Mr. Nimmagadda Prasad invested in several companies, including the companies owned and controlled by Mr. Y. S. Jagan Mohan Reddy, while keeping in the mind the above investment strategy. His investments so far are as under:- Sl. No. Investment(Company or business entity) Sector 1. Care Hospitals Healthcare 2. Asian Institute of Gastroenterology Healthcare 3. Mylan Inc., Healthcare 4. Relysis Medical Devices Healthcare 5. Metronomix Healthcare 6. Indigen Healthcare 7. Pacific Healthcare Healthcare 8. MAA Television ....
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....ibunal that Mr. Nimmagadda Prasad's investments in these companies are illegal gratification for purported undue favors by the Government of Andhra Pradesh. Final sanction of the project has not been granted. Against the said project, the advance amount spent for purchasing the land from farmers and other charges or paid by Mr. N. Prasad is very less amount than the amount of Rs. 863.33 сrоres. The project was not in his hand. He is not in possession of the land. How it is practicable possible. The project has not been started, no benefit of any nature has been derived by Mr. N. Prasad and merely on the basis of allegation and presumption, the inference cannot be drawn. The charges are framed in the schedule offence. * * * It is admitted position that Respondent No.1 never questioned the investment by M/s Paraticim, the French company and in fact, treated it as genuine investments. The aforementioned findings by the Adjudicating Authority are therefore completely out of record/pleadings before it and finds place for the first time in the Impugned Order. M/s. Paraficim which is French company is not accused either in the schedule offence nor in the ....
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....e on commercial basis after due diligence" * * * 163. As far as other heads i) to vi) are concerned, the total attachment of these heads is Rs. 274 38 crores ie net profit on an investment of Rs. 342 crores in Silicon Builders Pvt. Ltd and Bharati Cement Corporation Ltd. It appears that no cogent evidence is available on record to show that the said investment at the first instance was the bribe or not On the one hand, the stand of the respondent is that the shares against investment in the said companies were just eye-wash and waste of papers, but on the other hand, it has been established on record that said shares got 96% profits. The said appellants prima facie placed the material on record that there are sources of funds available for the purpose of investment. 164. The allegation of the respondent no. 1 as well as in the impugned order that Mr. Y.S. Jagan Mohan Reddy has received Rs. 35 crores as quid pro quo for VANPIC Projects, prima facie, there is a material on record that Y.S. Jagan Mohan Reddy received Rs. 30 crores on 22.1.2007 by way of cheque no. 686670 from Mr. Nimmagada Prasad as sale consideration for 21,42,869 shares of Sandur Power held by h....
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....ssic Realty Pvt. Ltd. who is also described as "not found in any criminal activity" and as not having proceeds of crime in its possession, for a consideration of Rs. 57 Crores, as mentioned in Paragraph 25(1) of the Complaint. The CBI has filed a Memo on 23.09.2013 in RC 19(A)/2011-CBI-HYD wherein they have specifically stated that no quid pro quo could be established in relation to the said Company viz Classic Realty Pvt. Ltd. As such, there is no question of any amounts earned from transactions with M/s Classic Realty Pvt. Ltd being proceeds of crime The Respondent No. 1, despite observation by the CBI in its charge sheet has taken the different view. 165.2 The total amount arising from the sale of shares referred to herein above is Rs. 617.45 Cr The said amount received from Parficim is not the proceeds of crime, nor it was/ is tainted amount as admitted by the respondent. The said amount is clean money and it has no nexus whatsoever with any alleged quid pro quo transaction mentioned in paragraph 24 the Complaint The only stand of the respondent that shares were purchased earlier was proceed of crime and these shares were sold on higher price to French Company (who is ....
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.... Revenue generated by the Appellants from a separate, untainted, secondary purchase by third parties who are admittedly innocent, paid for by them from untainted monies cannot be characterized as "proceeds of crime". 12. Thus, it is pointed out by the ld. counsel for the appellant that the underlying issue involved in the present appeal has already been decided by the Appellate Tribunal. In its 119-page order in the above case of Alpha Avenue, the Tribunal had decided the matter in appellants' favour and held that the amount invested by Shri Nimmagadda Prasad (appellant in that appeal) in the shares of two companies controlled by Jagan Mohan, which were subsequently sold for handsome profits, could not be held to be a bribe. It is contended that the appellant in the present appeal is identically placed. 13. As regards the further allegation of payment of bribe of Rs. 55 crore to Jagan Mohan out of the sale proceeds of the shares, ld. Counsel for the appellant submitted, firstly, that no evidence of any cash or hawala payment to Jagan Mohan was found during investigations by the respondent directorate. It was simply alleged by them that the company wanted to pay a bribe of Rs.....
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....ant valued at approximately 377.26 crore at the time of passing the PAO, the ED failed to deduct an amount of Rs. 616.82 crore being the cost of extraction of the mineral. Subsequently, the ED has revised its computation of proceeds of crime in the hands of the appellant to Rs. 176.52 crore only, which comprised Rs. 92.52 crore from mined limestone and Rs. 84 crore from share sale. The prayer of the appellant in the interlocutory application, therefore, was that the attachment should be limited to Rs. 176.52 crore, and attachment of property to the extent of Rs. 616.82 be ordered. 17. Lastly, It was also prayed that since the attached properties are productive assets of the appellant company, which is causing irreparable prejudice to the business of the appellant and hampering day-to-day business, the objective of securing the alleged proceeds of crime may be met through alternate security offered by the appellant without causing any prejudice to the complainant (ED). It is pointed out by the ld. counsel that even before the Ld. AA, the appellant had made a Misc. Application dated 31.03.2025 seeking the same relief, namely, release of attached properties subject to furnishing of....
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....forcement V. Axis Bank, (2019 SCC OnLine Del 7854) held that the Act empowers the respondents not only to proceed against properties which may be directly linked to proceeds of crime but also against properties which would be equivalent in value thereof. If the "tainted property" respecting which there is evidence available to show the same to have been derived or obtained as a result of criminal activity relating to a scheduled offence is not traceable, or the same for some reason cannot be reached, or to the extent found is deficient, the empowered enforcement officer may attach any other asset ("the alternative attachable property" or "deemed tainted property") of the person accused of (or charged with) offence of money-laundering provided it is near or equivalent in value to the former, the order of confiscation being restricted to take over by the government of illicit gains of crime. 19. It is further submitted that the seizure of the pen drive from the residence of Shri Joydeep Basu and the corresponding hawala entries are corroborated by independent evidence, including banking trails and witness statements. The material was duly examined and cross-verified during i....
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....crore represents the laundered value of property derived from the criminal activity. 23. The contention that the revised computation "exposes the weakness" of the Respondent's case is baseless. The refinement of the figure does not undermine the core findings of money-laundering; it only reflects a more accurate valuation based on updated evidence submitted by the Appellant before the Respondent after issuance of PAO. The Adjudicating Authority rightly confirmed attachment based on the material then available, and the Respondent's subsequent computation cannot retroactively invalidate that order. 24. In view of the foregoing, the Respondent submits that the Appellant's defense of lawful acquisition, legitimate investment, and lack of predicate offence is without merit and contrary to the evidence on record. The mining leases, investments, and profits in question are clearly connected to the quid pro quo arrangement forming part of a continuing offence of money- laundering under Section 3 of the PMLA. The quantification of Rs. 176.52 crore represents the traceable proceeds of crime, and the attachment to that extent is fully justified. 25. In r....
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....laint itself PARAFICIM is an innocent investor who is not found to be involved in any criminal activity or in possession of proceeds of crime. On the one hand, the stand of the respondent is that the purchase of the shares by the appellant in the companies was just an eye-wash, but on the other hand, it has been established that the very same shares fetched a profit of 96% upon sale. 23. The above findings of the Appellate Tribunal in the case of Alpha Avenue (supra) are equally relevant to the present case where the appellant company, as per the respondent itself,derived a profit of Rs. 139 crore upon sale of the shares which are alleged to have been acquired for a premium without any economic rationale. It is also noteworthy that the purchase of shares by the appellant company was an outgo in so far as the appellant company is concerned and was not an amount "derived or obtained" by the appellant. Therefore, even otherwise, it could not constitute 'proceeds of crime' in the hands of the appellant company as per the definition of the term provided u/s 2(1)(u). There is also no allegation that the consideration paid by the appellant company for the shares was paid out of tainted....
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....d to the firm. In October, 2004, Sajjala Diwakar Reddy of Eswar Cements Pvt. Ltd. requested the Director, Mines & Geology for grant of PL in its favour instead of Jaya Minerals, claiming a takeover. However, the PL was still not granted despite being recommended for the same three more times between 2004 and 2006. Thereafter, there was an MOU between Eswar Cements Pvt. Ltd. and the appellant company on 12.04.2006. As per the MOU, the appellant company was to acquire the said Eswar Cements Pvt. Ltd., subject to the condition, however, that the said company would first acquire a PL and subsequently, a Mining License (ML) which would then be transferred to the appellant company. Things seem to have moved very quickly thereafter. On 14.07.2006, PL was granted to Jaya Minerals (the original applicant since the year 1997) with the condition that it would be transferred to M/s Eswar Cements Pvt. Ltd. within three months. As already mentioned, M/s Eswar Cements Pvt. Ltd. already had an MOU for with the appellant company whereby the said company would be acquired by the appellant company. The very next month, M/s Jaya Minerals applied for the transfer of the PL to M/s Eswar Cements. Two mon....
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....stigation has quantified the resultant proceeds of crime to Rs. 176.52 crore after accounting for extraction costs and other adjustments. Needless to say, this revised total of Rs. 176.52 is inclusive of Rs. 84 crore being the sale proceeds from share of M/s Bharathi Cements Corporation Pvt. Ltd. to M/s Parificim which I have already held not to constitute proceeds of crime in the hands of the appellant. As a result, the total proceeds of crime would stand reduced to Rs. 92.52 crore only as against Rs. 793.34 crore as quantified in the PAO. 30. An issue has also been raised by the appellant regarding the absence of 'reason to believe' which is a precondition for invoking the provisions of Section 5 of the Act. It is inter alia contended that that there could have been no possible urgency to attach the properties after 14 years of the investment being made. 31. In this context, I have perused the 'reason to believe' recorded by the Dy. Director, Directorate of Enforcement, Hyderabad Zonal Office which is available on record. The text of the 'reason to believe' recorded by the officer is as follows: "REASONS TO BELIEVE FOR ATTACHMENT OF PROPERTIES: 12.1. From ....
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....going proceedings concerning the confiscation of proceeds of crime. Therefore, based on the material in my possession, I have reasonable grounds to believe that if the properties, as listed in the Schedule of Properties above, which are involved in the offence of money laundering are not attached immediately, their non-attachment may result in frustrating further legal proceedings aimed at the confiscation of these proceeds of crime. 12.5. In light of the material and evidence presented in the ongoing investigation, and having reasonable belief as outlined in the preceding paragraphs, I, in exercise of the powers conferred upon me under Sub-section (1) of Section 5 of the Prevention of Money Laundering Act, 2002 (15 of 2003), hereby order the provisional attachment of the properties identified as proceeds of crime under Section 2(1)(u) of the PMLA, 2002, as the 'value of any such property' / 'value thereof, as detailed in the "Schedule of Properties' mentioned at Para 10 above. 13. Thus, above mentioned properties attached shall remain under attachment for a period of 180 days from the date of attachment or order is passed by the Adjudicating autho....
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....nt of properties suspected to be proceeds of crime, the law also recognizes the need to balance enforcement objectives with protection of legitimate business interests. In the interest of justice and economic prudence, it is submitted that if the value of the alleged proceeds of crime can be secured by way of alternate security, such as à substitution with other non-operational assets, the same may be considered by this Hon'ble Authority so as to prevent irreparable harm to a functioning enterprise and the economy at large Such an approach would serve the dual objectives of the PMLA preventing dissipation of alleged tainted assets while avoiding disproportionate hardship to bona fide business operations. 8. In reply to para 5 it is submitted that the complainant does not dispute the defendant's fundamental right to carry on business and acknowledges that the proposed expansion projects at Kadapa, Chennai, Belgaum, and Pune, involving a reported investment of approximately Rs. 6,800 crores, may have significant economic and developmental implications While the Directorate of Enforcement stands by the legality and necessity of the provisional attachment under ....
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....PMLA, and prevent disproportionate prejudice to the defendant's legitimate business activities, particularly when no corresponding prejudice would be caused to the Complainant if appropriate safeguards are in place. 11. In reply to para 8 it is submitted that the Complainant does not dispute that the underlying legislative intent is to secure the value of alleged proceeds of crime without unnecessarily hampering bona fide business activities or causing disproportionate hardship. The Complainant submits that subject to the satisfaction of this Hon'ble Authority and appropriate, safeguards being put in place, the satisfaction substitution of provisionally attached immovable assets with adequate security such as Bank Guarantee or other acceptable financial instrument could serve the dual purpose of securing the alleged value involved in money-laundering, and enabling the defendant to continue its legitimate business operations without interruption. 12. In reply to para 9 it is submitted that the complainant respectfully acknowledges the defendant's application of just and equitable principles in the present matter, especially considering the critical natu....
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....ing issue has been discussed at great length in the order dated 12.11.2025 passed by this Appellate Tribunal in the case of Sanjeev Tyagi FPA-PMLA-1287/DLI/2016 wherein it was held as follows" "17. As regards the question whether this Appellate Tribunal can allow substitution of the property, I find that in none of the cases cited by the appellants, it has been categorically held that the Appellate Tribunal has the requisite power to do so. On the contrary, it is pointed out by the Ld. counsel for the respondent, the Hon'ble Madras High Court had stayed the order of this Appellate Tribunal in VGN Property Developers Pvt. Ltd. (supra) on a challenge by the ED against its order allowing the substitution. Furthermore, the Hon'ble Delhi High Court in the case of Revati Cements Pvt. Ltd. (supra) has, in para 10 of its order, noted the absence of any specific power vested either with the Adjudicating Authority or with the Appellate Tribunal under PMLA, and, on the said basis, concluded that there is no force in the argument advanced by ED that writ petition is not maintainable as alternate remedy is available under the Act. 18. It may be mentioned at this stage that the....