TaxTMI 
TaxTMI 
2026 (3) TMI 1073
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....2010 1. Plot No. 476-479, Makarpura, Varoda having area 11844 sq. mtr. in the name of Jayant Veg Oils and Chemicals. 9,47,52,000/- 2. Plot No. 480-482, Makarpura, Varoda having area 23156 sq. mtr. in the name of Jayant Oil Mills. 18,52,48,000/- 3. Plot No. 483, Village-Vadsar, Makarpura, Industrial Estate, GIDC, Vadodra having area 6291.97 sq. mtr. in the name of Jayant Veg Oils & Chemicals. 5,66,19,000/- 4. Plot No. 484A, Makarpura, Varodara having 4403 sq. mtr. in the name of Jayant Veg Oils & Chemicals. 3,52,24,000/- 5. Plot No. 601-610, 6th Floor, GIDC, Makarpura, Vadodra having area 6600.53 sq. mtr. in the name of Jayant Veg & Derivatives Ltd. 1,51,80,000/- 6. Block No. A1, Gayatri Krupa Housing Society, Vadsar Road, GIDC, Makarpura, Varodara having land area 131.15 sq. mtr. and built up area 130.95 sq. mtr. in the name of Shri Bharatbhai Mangaldas Kapadia. 26,21,200/- 7. Block No. A2, Gayatri Krupa Housing Society, Vadsar Road, GIDC, Makarpura, Varodara having land area 131.15 sq. mtr. and built up area 130.95 sq. mtr. in the name of Shri Rajesh Mangaldas Kapadia. 23,88,550/- 8. Land & Building on C.S. No. 5....
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....t the goods on the basis of the said false bills/ invoices and by showing quantity of seeds receipts in the godown, though such quantity was not available, and thereby, preparing the false documents showing that such quantity is in stock by inflating the same; and leasing the raw material and furnished goods to different banks against the said raw material/furnished goods, and thereby, obtained finances in various manner. Thereby, the accused persons misappropriated more than sum of Rs. 221,47,00,000/- and thereby committed the scheduled offences. Some of the accused persons working in the accounts department of M/s Biotor Industries Limited were authorized to sign cheques up to Rs. 1 crore as authorized signatory by the company and by misusing the authority, on the basis of bogus bills of the goods, which were never received in the company, made payments through cheques to different merchants which enabled M/s Biotor Industries Ltd. (M/s BIL) to get farmer funding from the banks. M/s BIL had obtained short term loan (Farmers Funding) in the name of Bogus/Non-existent farmers from various banks viz. Rs. 100 crores from Oriental Bank of Commerce (OBC Bank), Ashram Road Branch,....
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.... the tune of Rs. 338.35 crores. During the course of investigation, statements of following persons were recorded under Section 50 of PMLA, 2002. i. Shri Rajesh Mangaldas Kapadia ii. Shri Bharat M Kapadia iii. Shri Jignesh Kaniyalal Thakkar iv. Shri Amar Jaysinh Thacker v. Shri Anupam Manmohan Shukla vi. Shri Zubeen F. Battiwala vii. Shri Amit Bhaskarbhai Gohil viii. Shri Subhash Tarmakdas Shah ix. Shri Patel Thakorbhai Nanabhai x. Shri Vasva Maheshbhai Jasubhai xi. Shri Rajubhai Babulal Solanki xii. Shri Jigar Amrutal Thakkar The relevant and important excerpts of main persons are as under: i. Shri Rajesh Mangaldas Kapadia stated that he is the Managing Director of M/s BIL, which is engaged in the business of manufacturing and export of castor oils and its derivatives. He is also Director on Board in M/s Biotor Contract Farming Limited, Mumbai, M/s Jayant Oil Mills Pvt. Ltd., which is also engaged in the business of Castor oil and derivatives. They had availed working capital loan of about Rs. 75 Crores under consortium of SBI, which was eventually increased t....
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....iii. Plot No. 483, Village-Vadsar, Makarpura, Industrial Estate, GIDC, Vadodara having area 6291.97 sq. mtr in the name of M/s Jayant Oil Mills, Prop. M/s Jayant Vegoils & Chemicals Pvt. Ltd. Factor of M/s Biotor Industries is built on this property. This property is a leased property taken from Gujarat Industrial Development Corporation. Lease Agreement was executed on 03.07.1981. Valuation of this property was done by registered Govt. Valuer as on year 2010 which comes to Rs. 5,66,19,000/. iv. Plot No. 484A, Makarpura, Varodara, Gujarat having area 4403 sq. mtr in the name of M/s Jayant Oil Mills, Prop. M/s Jayant Vegoils & Chemicals Pvt. Ltd. Factor of M/s Biotor Industries Ltd. is built on this property. This property is a leased property taken from Gujarat Industrial Development Corporation. Lease agreement was executed on 12.05.1994. Valuation of this property was done by registered Govt. valuer as on year 2010 which comes to Rs. 3,52,24,000/-. v. Plot No. 601-610, 6th Floor, GIDC, Makarpura, Vadodara having area 6600.53 sq. mtr in the name of M/s Jayant Oils & Derivatives Ltd. Office of M/s Biotor Industries Ltd. is built on this property. This property was....
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....stered Govt. valuer as on year 2010 which comes to Rs. 64,24,43,760/-. x. Agricultural land at Block No. 554, 556 & 560, Gokhale Road, Alibaug-Rewas Main Road, Village-Awas, Taluka-Alibaug, Distt. Raigad, Maharashtra in the name of Rajesh Mangaldas Kapadia, Director of M/s Biotor Industries Pvt. Ltd. having area 137 gunthas and right off way measuring 82.2 mtr X 3.65 mtr towards Southern side of the land property. This property was purchased from Pranesh Puranmal Kejriwal of Mumbai on 19.04.2007 for the amount of Rs. 55,00,000/- and right off the way was purchased from Keshri Erach Kapadia and others on 24.12.2007 for the amount of Rs. 5,00,000/-. Valuation of this property was done by registered Govt. valuer as on year 2010 which comes to Rs. 2,60,30,000/-. xi. Flat No. 201, 20th Floor, Kshitij Building, The Nepean Sea Road Prag Prem Premises Cooperative Society Limited, 47, L Jagmohandas Marg, Near Consulate General of Russia, Nepean Sea Road, Mumbai - 400036 in the name of M/s Jayant Oil Products Pvt. Ltd. having area 1413 sq. ft. This property was purchased from Prag Prem Builders Pvt. Ltd. on 22.12.1975. Valuation of this property was done by registered Govt.....
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....ectors. In 2008, they wanted to raise investment from Morgan Stanly, but they objected to the Directorship of Sh. Bharat M. Kapadia and Shri Rajesh M. Kapadia as they were in the appellant company M/s Jayant Oil Products Pvt. Ltd., having similar business. Accordingly, the aforesaid two directors resigned from M/s Jayant Oil Products Ltd. On 25.09.2008, shareholder's agreement was executed between Morgan Stanly and promoters of Biotor Industries Ltd. Articles 14.2 of the agreement provided a restriction that each promoter shall not be part of the other such company, which is engaged in any business which competes with or is same as of M/s Biotor Industries Ltd. Accordingly, Sh. Bharat M. Kapadia and Shri Rajesh M. Kapadia resigned from the Director's and their shareholding was transferred to the other family members. Till 2010, the appellant company continued its business of purchase and supply and remained a separate legal entity and thus M/s Jayant Oil Products Pvt. Ltd. has nothing to do with the business activities of M/s Biotor Industries Ltd. He pointed out that in the present case, FIR No. DCI- I-14/2010 dated 05.04.2010 was lodged by Biotor Industries Ltd. at P.S. D.C.B. Va....
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....8-1086 and 1162 Rs. 64,24,43,760 (Valuation at Pg. 1081) Purchased on 04.03.1972 02.06.1962: K. Mahadeo & Co. executed a Deed in favour of M.R. Kapadia and V.G. Udeshi, the then Directors of the appellant company. The property 1, which was leased to Mahadeo was subleased to Kapadia and Udeshi, for a period of 95 years. Deed of Lease dated 04.03.1972 was executed between M.R. Kapadia & GV Udeshi (Lessor) and Appellant (Lessee), property was sub-leased to Appellant for 90 years. Since 1972, Appellant has been paying the taxes, rents, expenses. Flat No. 201, 20th Floor, Kshitij Building, The Napean Sea Road, (Property 2) (At Sl. No. 11) Rs. 5,15,74,500 (Valuation at Pg. 1149) Purchased on 22.12.1973 Relevant Docs at Page. 1129- 1161 28.03.1972: Indenture of Conveyance made between Sir Hirji Cowasjee Jehangir & Ors. (Vendors), Pukhraj Lachmandas Jain (Confirming Party) and Prag Prem Builders (Purchasers). Vide this Purchaser was conveyed the entire free hold land and consequently BMC gave sanction to the Vendor for sub-division of property which was a separate sub-divided property belonging to Builders. The Builders then constructed multi storeyed building et....
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....ctors of M/s Jayant Oil Products Pvt. Ltd. having shares of 2.5%, 10% & 10% respectively, totalling to 22.5%. From 07.10.2008 to 01.10.2010, the directors of the appellant company were Dinesh Kapadia, Indra Dinesh Kapadia w/o Dinesh Kapadia and Tripti Kapadia sister of Rajesh Kapadia having shares of 2.5%, 0% and 0% respectively. Later-on after 01.10.2010, Indra Dinesh Kapadia and Tripti Kapadia were the directors of the appellant company having shares of 0% & 11.5% respectively. Ld. Counsel for Respondent ED pointed out that fraud has happened and proceeds of crime were generated during the year from 2007 onwards. It is apparent from the share pattern that Shri Dinesh Kapadia, Rajesh Kapadia and Bharat Kapadia remained de-facto directors of the appellant company and they intentionally resigned from the post of directors of the appellant company on 01.10.2010 and made their relatives as directors and subsequently allotted their shares to the new directors, to shelter the appellant company and the current directors from any liability, as a systematic strategy. Accordingly, he vehemently controverted the submissions of the Ld. Counsel for the appellant that the present appellant comp....
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....ter hearing the rival submissions, following issues emerge for decisions: (i) Whether the appellant company is an independent company and has no link/connection with the M/s Biotor Industries Ltd. and its Directors? (ii) Whether the properties mentioned at sr. no. 9 & 11 of the appellant company cannot be attached as value thereof being purchased much prior to the commission of alleged fraud? (iii) Whether there was no reason to believe for attachment and further conditions mentioned in 5(1)(a) & (b) for attachment of the properties of the appellant company are not fulfilled? Now, we will decide the above issues one by one in the following paras. Issue No. 1 6. Regarding this issue, we are not satisfied with the contention of Ld. Counsel for the appellant company, in view of the submissions made by Ld. Counsel for the Respondent ED as mentioned in para no. 4 above, wherein he pointed out that upto 07.10.2008, Shri Dinesh Kapadia, Rajesh Kapadia and Bharat Kapadia were the directors of M/s Jayant Oil Products Pvt. Ltd. having shares of 2.5%, 10% & 10% respectively, totalling to 22.5%. From 07.10.2008 to 01.10.2010, the directors of the appellant c....
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....ctly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence]. xx xx xx xx xx xx The perusal of the definition reveals three limbs of the definition out of which first part refers to the property acquired or derived directly or indirectly by a person relating to the criminal activity to a scheduled offence. The second part includes "the value of any such property". The second part is generally mixed with third party for giving interpretation. However, an elaborate judgment on the issue has been given by the Delhi High Court in the case of Prakash Industries Ltd. v. Directorate of Enforcement reported in 2022 SCC OnLine Del 2087 and in this regard, para 105 of the judgment in the case of Prakash Industries Ltd. (supra) are quoted hereunder: - "105. It would be pertinent to recall that properties which were acquired prior to the enforcement of the Act may not be completely immune from action under the Act in light of what this Court had held in Axis Bank. As was explained by the Court in Axis Bank, the expression proceeds of crime envisages both ―tainted property as well as "untainted property" with it be....
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....ceeded with. The definition of "property" as in Section 2(1)(v) is equally wide enough to encompass the value of the property of proceeds of crime. Such interpretation would further the legislative intent in recovery of the proceeds of crime and vesting it in the Central Government for effective prevention of money-laundering." The paras quoted above show a detailed discussion to the interpretation to the definition of "proceeds of crime". The judgment of the Apex Court in the case of Smt. Pavana Dibbur v. The Directorate of Enforcement reported in 2023 SCC OnLine SC 1586 has also been considered. However, findings given by three judges Bench of the Apex Court in the Vijay Madanlal Choudhary v. Union of India (supra) has been relied to give interpretation to the definition. In the light of the above, we are of the view that when the proceeds out of crime was not available with the appellant rather vanished and siphoned off, the property of equivalent value can be attached. In the present case, the proceeds of crime were siphoned off by the Directors of M/s Biotor Industries Ltd. by diverting it to various group companies and by layering the proceeds. In the light of the aforesai....
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.... evidence available from the investigation against the directors of the appellant company, who were also managing the affairs of M/s Biotor Industries Ltd. regarding the commission of offence of money laundering by committing fraud with number of banks to the extent of about Rs. 399 Crores, by siphoning of the loan funds for the other purposes, as detailed in para no.2 above. The explanation and defence taken by the appellant company are apparently without any basis and the same is apparently an afterthought strategy, as mentioned in para no. 6 above. Seeing the fact that number of FIRs were registered against M/s Biotor Industries Ltd. and its directors who also happen to be the directors of the present appellant company for commission of fraud by mis- appropriation of loan amounts and generation of proceeds of crime is a prima facie material for forming reason to believe by Respondent ED for passing the PAO. Moreover, there was apparent apprehension of alienation of these properties, seeing the fact that the appellant company tried to dispose of its property at survey no. 55 & 56 at Datta Mandir Road, Near Samarth Garden Building, Off. Bhandup village Road, Bhandup (West), Mumbai....