TaxTMI 
TaxTMI 
2026 (5) TMI 1028
X X X X Extracts X X X X
X X X X Extracts X X X X
.... MP-PMLA-3012/DLI/2025 Stay MP-PMLA-3013/DLI/2025 Exemp. FPA-PMLA-1383/DLI/2025, MP-PMLA-3015/DLI/2025 Stay MP-PMLA-3016/DLI/2025 Exemp. FPA-PMLA-1384/DLI/2025 and MP-PMLA-3018/DLI/2025 Stay MP-PMLA-3019/DLI/2025 Exemp. FPA-PMLA-1385/DLI/2025 SHRI V. ANANDARAJAN (MEMBER) For the Appellant : Mr. Gurpreet Singh, Adv., Mr. Harsh Yadav, Adv. Mr. Bakul Jain, Adv., Mr. Naveen Kohar, Adv. Mr. Madhav Khurana, Adv. Mr. Jagjit Nandal, Adv. For the Respondent : Mr. Kshitiz Aggarwal, Adv. FINAL ORDER The present appeals have been filed against the common order dated 19.05.2025 passed by the Ld. Adjudicating Authority (AA) in Original Application (O.A.) No. 08/2025, whereby the O.A was allowed and the retention/continued freezing of immovable and movable properties in the form of cash, vehicles, digital devices, bank lockers, bank accounts, Fixed Deposits (FDs), shares and demat accounts of the appellants herein as per the details given below was permitted by the AA: Siddhant Gupta S. No. PROPERTY FROZEN FROM PREMISES 1. IPhone 16 Pro F-9/9, Vasant Vihar, Delhi S. No. A/c No. or PAN No. DEMAT No. Account maintained with 1. Linked with....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hi 3. DD01A3157 Porsche, 2020 & Cayenne along with car key F-9/9, Vasant Vihar, Delhi S. No. A/c No. /PAN No. NAME OF THE BANK/ NAME OF SHARE 1. 092813011681 (FD) ICICI Bank 2. 092813011683 (FD) ICICI Bank 3. 092813011695 (FD) ICICI Bank 4. 092813011706 (FD) ICICI Bank 5. 092813011949 (FD) ICICI Bank 6. 092813012009 (FD) ICICI Bank 7. 092813009050 (FD) ICICI Bank 8. 092813011291 (FD) ICICI Bank 9. 092813011292 (FD) ICICI Bank 10. 092813011396 (FD) ICICI Bank 11. 092813010840 (FD) ICICI Bank 12. 092813010852 (FD) ICICI Bank 13. 092813010853 (FD) ICICI Bank 14. 092805001471 (FD) ICICI Bank 15. 092805001872 (FD) ICICI Bank 16. 092805001887 (FD) ICICI Bank 17. AADCL5104E Aditya Birla Sun Life Corporate Bond Fund 18. AADCL5104E Aditya Birla Sun Life Savings Fund 19. AADCL5104E HDFC Corporate Bond Fund 20. AADCL5104E HDFC Liquid Fund 21. AADCL5104E HDFC Top 100 Fund 22. AADCL5104E HDFC Ultra Short-Term Fund 23. AADCL5104E ICICI Prudential Blue-Chip Fund ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....CI Bank Bank account maintained with aforementioned banks of M/s Universal Infra. Co. Pvt. Ltd. linked with the PAN No. AACCJ4434E also frozen. Facts in Brief 2. The brief facts of the case are that a written complaint dated 11.08.2020 had been received by CBI from Sh. Manish Gupta, Assistant General Manager, Bank of India, New Delhi, Large Corporate Branch, 10th Floor, Chanderlok Building, 36, Janpath, New Delhi. 3. On the basis of the aforesaid complaint, an FIR (No. RC2232020A0005 dated 10.09.2020) had been registered by CBI, AC-V, New Delhi against the following entities/individuals, namely: (i) M/s Kwality Limited, KDIL House, F-82 Shivaji Place, Rajouri Garden, New Delhi, West Delhi. (ii) Sh. Sanjay Dhingra, Director, M/s Kwality Ltd., Resident of House No. 14, road no 8, East Punjabi Bagh, New Delhi. (iii) Sh. Sidhant Gupta, Director, M/s Kwality Ltd. Resident of X-12, Second Floor, Hauz Khas, New Delhi. (iv) Sh. Arun Shrivastava, Director, M/s Kwality Ltd. 314, 1 floor, Sri Nagar, Shakur Basti, New Delhi. (v) Other unknown persons and public servants. 4. As per the FIR, M/s Kwality Limited was engaged in processing....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Bank of India consortium was reconstituted on multiple occasions with enhancement of limits from time to time and lastly, on 25.07.2014, it was reconstituted consisting of 10 member banks, i.e., Bank of India, Bank of Baroda, Andhra Bank, Central Bank of India, Corporation Bank, IDBI Bank Ltd., Allahabad Bank, Canara Bank, Syndicate Bank and Dhanlaxmi Bank and have granted both fund-based and non-fund based facilities to the tune of Rs. 1125 crore to M/s Kwality Limited. The account came under default due to non-servicing of interest and instalments and slipped to NPA on 31.08.2018. 9. Investigations revealed cash flow mismatch, non-routing of proportionate sales, delay in debtor realization and repayment obligation of term lenders. The underlying object of the company was to indulge in sham transactions and rotate the funds disbursed by banks as loan, either by withdrawing in cash or transferring in the accounts of bogus companies/ firms, inflating the turnover of the company, inflating bogus debtor and enhancing further loans. It was also found that Sanjay Dhingra and Sidhant Gupta had created a number of dummy entities in the names of their employees and in the names of pe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the forensic audit report conducted by GSA and Associates, the balance confirmation in respect of receivables showed huge deviation. As against total outstanding of INR 1807.57 crore, parties confirmed receivables of INR 972.82 crore only, which indicated inflation of receivables by Rs. 834.75 crores. These receivables were either realized out of books or were bogus figures, which led to generation of proceeds of crime by Kwality Limited. Further, it was noticed that the entities with whom there was a difference in balance confirmation were mainly the bogus entities which were in the names of the then employees of M/s Kwality Limited or persons known to the directors of Kwality Limited. These bogus entities were not run by the dummy directors in whose names they were floated but were being managed by Sanjay Dhingra and Sidhant Gupta. Therefore, a difference in balance confirmation with respect to these entities indicated deliberate siphoning of funds by Sanjay Dhingra and Sidhant Gupta. 16. Investigations also revealed that Sidhant Gupta along with Sanjay Dhingra had siphoned off the proceeds of crime, i.e., the loan funds availed by M/s Kwality Limited from the consortium of ba....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 68. It must also be borne in mind that the freezing of a bank account in violation of statutory requirements has far-reaching consequences. Such action directly impinges upon the constitutional right to property guaranteed under Article 300A of the Constitution of India, which mandates that no person shall be deprived of property except in accordance with the authority of law. Any violation of this constitutional safeguard strikes at the very root of the legitimacy of the impugned action and cannot be countenanced." 22. Copies of the aforesaid judgment as well as the judgment passed by the Delhi High Court in ED v. Rajesh Kumar Aggarwal, Misc. Appeal (PMLA) 03/2023 have been have been submitted. It is contended that prior to passing the freezing order, ED has to specifically state the reasons why the property constitutes proceeds of crime rather than merely making a lame statement without any reasons quoted. It is contended that in the present case, ED has failed to comply with the provision of Section 17. It failed to record any reason that how the Appellant is in possession of proceeds of crime. 23. It is next contended that the Ld. AA decided the Application submitte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t be relied upon in terms of the order dated 02.06.2021 passed by the Hon'ble High Court of Delhi wherein the said GSA and Associates report is under challenge on the basis of bias and being contrary to the records, the Hon'ble High Court recorded as follows: "21. By virtue of this email, the observations which were pointed out by the auditor in regard to the affairs of the company were informed to the petitioners. By the same email the petitioners were directed to submit their reply to the observations as pointed out by forensic auditor to the consortium latest by 15.04.2019. The reading of this email shows that the forensic auditor M/s G.S.A. & Associates have submitted their final forensic audit report which has been shared with all the lenders. So, if this is the case, there was no scope for the petitioners to have sent any reply as asked by this email. But still as per the petitioners they had sent their reply along with annexures vide email dated 18.04.2019. 22. Even if we go by this assertion that it was a draft report, the reply though sent late by the petitioners could have been considered in response to the findings of the forensic audit report o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....port for the first time is mentioned in the reply filed by the Respondent no. 1. 30. With regard to the report of M/s PVRN & Co., it is further stated that respondent, in their reply to the appeal, at para no. 35, has relied upon a report of PVRN & Co., which was conducted in compliance of the order passed by the Hon'ble High Court. But the said report was never a part of the proceedings before the Ld. AA and is stated in the reply to be annexed as Annexure A, but the same was never supplied to the Appellant, thus the same cannot be relied upon. Further the allegations made that the said report also confirmed the misappropriation and mishandling are false and misleading. 31. It is next contended that the Ld. AA failed to take into consideration the grounds and facts stated in the reply and the arguments on presented on behalf of the appellant. While the submissions of the Appellant have been recorded, the same have been rejected without giving any reason. Instead, the Authority recorded as follows: "10. At this point, it is vital to emphasize the importance of the ongoing investigation, considering the existence of prima facie allegations related to the offense o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....MLA. The same has also been stated by Anand Goyal (an employee working under Sidhant Gupta) in his statements recorded u/s. 50 of PMLA as under: "The major share-holder of this company (99.99%) is Ved Prakash Gupta who is holding 9.99 Lakh shares of this company. The rest 1000 shares were hold by Samarth Gupta as on date. However, all the activity of this company is being managed by Sidhant Gupta Avinish Kumar Srivastava and Sonu are the directors of this company. Sonu is the driver of Golf Link working under Sidhant Gupta and Avinish Kumar Srivastava was ex-employee of Kwality Limited and was a known person of Sidhant Gupta." 36. Further, Avinish Kumar Srivastava, director in the company, whose statement was recorded under section 50 of PMLA, 2002, stated that he was just a namesake director and did not have any control over the company. The other director is also a driver under Sidhant Gupta. He also stated that the entire control of the company is with Sidhant Gupta and he manages all the affairs of the company and that he doesn't have knowledge of any of the transaction of the company. 37. Summons was issued to Sonu to provide the source of the funds which ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he property in possession was in fact proceeds of crime. All that the Authority is required to show is that there was "substantially probable cause" to form opinion that the property under attachment is proceeds of crime..." 41. The decision of the Division Bench the Hon'ble High Court at Bombay in the case of Brizo Reality Company Pvt. Ltd. Vs. Aditya Birla Finance Ltd. and Others is also cited wherein it was held: "6. Apparently, in view of various references to the Petitioner in the complaint, the impugned notice dated 29.04.2014 was issued. It is contended that the said notice does not furnish any reason to believe that the petitioner has committed an offence under section 3 or is in possession of proceeds of crime. In view of this contention, it is necessary to set out the entire notice. "You are called upon to indicate the source of your income, earning or assets out of which or by means of which you have acquired the property attached under subsection (1) of section 5 of the Prevention of Money Laundering Act, 2002 the evidence on which you rely and other relevant information and particulars and show cause why all or any such property should not be d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....krishan Vs. Deputy Director & Anr., in W.P. W.P.(MD) No.11454 of 2018 is also relied upon, wherein, it was observed: "The language used in Section 8(1) of PMLA is different from what it is used in Section 5(1) of PMLA. Both the expressions are different and distinct and the Adjudicating Authority is not required under Section 8(1) to record reasons as in the case of the Authority exercising under Section 5(1) of PMLA which means that the Adjudicating Authority, on the basis of the complaint filed by the initial authority under Sub Section 5 of Section 5 of PMLA, can proceed with the adjudication process on the basis of subjective satisfaction. In any event, the Adjudicating Authority has to follow procedure provided under Section 8 as well as the procedure contemplated under the Adjudicating Authority (Procedure) Regulations 2013. Therefore, the writ petitioners are provided with sufficient opportunities to put forth their plea before the Adjudicating Authority. Moreover, even in the show cause notice issued, it is mentioned that there is compliance of Section 8(1) of PMLA which compliance can be verified by obtaining a copy of the order by making necessary application to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....connected therewith and collect evidence to be presented before the Adjudicating Authority for consideration of application regarding confirmation of provisional attachment order as per Section 8 of the 2002 Act. This provision of reverse burden of proof must, however, apply to proceeding before the Adjudicating Authority regarding confirmation of provisional attachment order and eventually for ordering confiscation of the attached property for vesting in the Central Government under Section 9 of the 2002 Act. 46. It is thus, clear that this special provision regarding burden of proof in any proceeding relating to proceeds of crime under this Act would apply to stated proceeding before the Adjudicating Authority. The change effected in Section 24 of the 2002 Act is the outcome of the mandate of international Conventions and recommendations made in that regard. Further, keeping in mind the legislative scheme and the purposes and objects sought to be achieved by the 2002 Act coupled with the fact that the person charged or any other person involved in money-laundering, would get opportunity to disclose information and evidence to rebut the legal presumption in respect of facts wit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot involved in money laundering, by producing evidence which is within his personal knowledge. In other words, the expression "presume" is not conclusive. It also does not follow that the legal presumption that the POC are involved in money-laundering is to be invoked by the authority or the court, without providing an opportunity to the person to rebut the same by leading evidence within his personal knowledge. 49. Moreover, section 24(b) of the 2002 Act, that concerns person other than the person charged with the offence of money -laundering under section 3 of the 2002 Act. In his case, the expression used in clause (b) is "may presume". This is essentially a factual presumption or discretionary presumption. Notably, the legal presumption in the context of section 24(b) of the 2002 Act is attracted once the foundational facts of existence of proceeds of crime and the link of such person therewith in the process or activity is established by the prosecution. The stated legal presumption can be invoked in the proceeding before the AA or the court, as the case may be. The legal presumption is about the fact that the proceeds of crime are involved in money laundering which, howeve....
X X X X Extracts X X X X
X X X X Extracts X X X X
....isions of the PMLA. Next, he has referred to the facts of the case and the allegations against the respondents (appellants herein) as emerging from the O.A. and the alleged role of each person. Next, he has extracted the gist of the replies filed by the respondents and rejoinders thereto filed by the Directorate. Thereafter, he has reproduced the written submission filed by the Directorate in respect of respondent no. 9 and 11. Thereafter, in para 6, a direction has been issued to the applicant/ED to make available true copies of seized records within 30 days in accordance with provisions of section 21(2). Thereafter, in paragraph 7 titled as "Conclusions", Ld. AA has once again narrated the facts of the case and the allegations against the appellants as well as the findings of the investigation by the ED in detail. Next, the contents of the show-cause notice issued to the appellants on the basis of reasons to believe arrived at by the AA have been stated. In para-9, the Ld. AA has recorded the submissions made by each of the respondents and the ED's response thereto, without giving his own findings thereon. 54. Upon careful perusal of the impugned order, I find that the only fi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation process. It is important to highlight that the present application does not involve any actions that would significantly impact the Respondent's rights, such as the confiscation of their property. The sole objective of this application is to retain the immovable & movable properties in the form of cash, vehicles, digital devices & documents/ records seized and bank lockers, bank accounts, FDs, shores & DEMAT accounts frozen mentioned in the OA ensuring uninterrupted progress in the investigation of the PMI.A offense and subsequent adjudication process. 12. Considering the circumstances outlined above, it is crucial for the advancement of the ongoing investigation and the fair administration of justice that the Application filed by the Enforcement Directorate be granted As a result, the retention of immovable & movable properties in the form of cash, vehicles, digital devices & documents/ records seized and bank lockers, bank accounts, FDs, shares & DEMAT accounts frozen during searches conducted on 27.11.2024, 28.11 2024, 29.11.2024, 02.12.2024, 03.12.2024 & 17.12.2024 under section 17(1) of the Prevention of Money Laundering Act (PMLA), as mentioned in the Origi....