TaxTMI 
TaxTMI 
2026 (9) TMI 93
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....Central Bureau of Investigation, Hyderabad, against Sh. BP Acharya, IAS, Chairman & MD of Andhra Pradesh Industrial Infrastructure Corporation (herein after referred as APIIC); M/s Emaar Properties PJSC, Dubai; M/s Emaar Hills Township Pvt. Ltd., Hyderabad; unknown officials of Government of Andhra Pradesh & unknown others for the offences punishable under Section 120-B IPC read with 420, 409,420 & 477-A of Indian Penal Code, 1860 and Section 13(2) r/w Sec. 13(1) (c) & (d) of the Prevention of Corruption Act, 1988 and substantive offences thereunder. As the said offences are scheduled offences, ECIR/08/ HYZO/2011 dated 30.08.2011 was recorded under PMLA by the Directorate of Enforcement for investigation. In the meantime, after completion of investigation CBI filed charge sheet before Ld. Special Judge, CBI Court, at Hyderabad, on 01.02.2012. After completion of investigation, CBI filed Chargesheet No. 01/2012 dated 01.02.2012 before the Ld. Special Judge for CBI case, Hyderabad. As per the Chargesheet, the following facts emerged: The Government of Andhra Pradesh (AP), issued Govt. Order (G.O) Ms. No. 359 dated 04.09.2002 for the development of an integrated project includin....
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.... the sale and lease proceeds. Subsequently an Addendum to Development Agreement & GPA dated 23.07.2008 was executed reducing revenue sharing pattern from 75:25 to 95:5. An agency agreement dated 29.01.2005 was entered by M/s Emaar Properties PJSC, Dubai and M/s Stylish Holmes Real Estates Pvt. Ltd., 100 villa plots to be sold @ Rs. 5,000/- per Sq. Yd., and the remaining Villa Plots (beyond 100) were to be sold at the prevailing market rates and it was the responsibility of EMGF to fix the rates in tune with market rates. Instead of fixing the rates in line with the market rates, as per the instructions of Sri Shravan Gupta, Director of EMGF, floated 10 different companies (7 at New Delhi and 3 at Ernakulam) with its employees as Directors/Shareholders and booked Villa Plots @ Rs. 5,000/- per Sq. yd., so that the same could be sold at premium rates in future. The funds required were transferred from the account of M/s Discovery Estates Pvt. Ltd., in which Sri Shravan Gupta and his wife are having 99% shares. 18 Villa Plots were blocked in the name of these 10 companies @ Rs. 5000/- per Sq. yd. during the year 2010, when the prevailing market rate was Rs. 50,000/- per Sq. yd. a....
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....sq. yd., though the prevalent market rates were much higher. M/s Stylish Holmes Real Estates Pvt. Ltd. was not involved in the sale of these villas and villa plots. Investigation has revealed that 13 villa plots, including three model villas (constructed at Plot No's: A-70, A-71 and A-73) were sold by EHTPL and EMGF directly to the buyers. During investigation, one of the above said villas/plot buyers confirmed having paid excess amount of Rs. 2,80,40,000/- in cash over and above the documented price of Rs. 5000/- per sq. yd., and the said amount was sent by him to the office of EMGF, Hyderabad, as per the Instructions of Sri Vijay Raghav. Investigation revealed that ten villas/plots Nos. A-70, A-71, A-72, A-73, A-74, A-75, A-76, A-77 & A-78/79 were sold by EMGF, between May, 2009 and March, 2010. Two villa plot buyers, who purchased plot Nos. A-75 & A-78/79 respectively during the same period have confirmed to have paid excess money @ Rs. 20,000/- per Sq. Yd., in cash over and above the documented price @ Rs. 5000/-per Sq. Yd. Thus, investigation revealed the existence of a very well-knit criminal conspiracy on the part of EMGF, and others to deprive APIIC of its lawf....
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....s profit before tax to EHTPL, which is a pecuniary gain. CBI also filed supplementary charge sheet No. 05/2012 dated 23.04.2012 accusing Sri N. Sunil Reddy, Sri G.V. Vijay Raghav, Finance Head of EMGF and Sri Shravan Gupta, MD of EMGF u/s. 120-B IPC r.w.s. 420, 409, 109, 468, 471 & 477-A of IPC, 1860 r.w.s. 13 of Prevention of Corruption Act, 1988. The first 100 plots were to be sold at an agreed price of Rs. 5000/- per sq. yd., Sri Koneru Rajendra Prasad fixed higher rates ranging from Rs. 40000/- to Rs. 45000/- per Sq. Yds. over and above the documented price of Rs. 5000/- per Sq. Yds. and instructed Sri T. Ranga Rao of M/s Stylish Holmes to collect the excess sale consideration in cash from villa plot buyers. As per the instruction of Sri Koneru Rajendra Prasad, Sri Tummala Ranga Rao has collected the excess amount of Rs. 96.01 Crores from 82 Villa plot buyers in cash over and above the documented price of Rs. 5000/- per Sq. Yd., during 2005-10, which was confirmed by Sri Tummala Ranga Rao and his Accountant/Manager, who gave statements recorded under Section 164 of Cr.PC, 1973 before the Hon'ble Metropolitan Magistrate, Secunderabad. Sri Tummala Ranga Rao had handed....
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....vide order dated 15.02.2013 in previous Original Complaint no. 158/2012. With regard to the remaining amount of Rs. 96.01 crore received in cash by Shri Tummala Ranga Rao of M/s Stylish Holmes, CBI filed supplementary charge sheet no. 05/2012 dated 23.04.2012. While initiating further investigation under the Act, it was noticed that Shri Tummala Ranga Rao has given a statement before Hon'ble Metropolitan Magistrate, under Section 164 Cr.PC on 09.01.2012 in which he stated as under:- He established M/s Stylish Holmes Real Estates Pvt. Ltd. on 16.09.2004 as per the instructions of Sri Koneru Rajendra Prasad, at Plot No. 15, Site II of Film Nagar, Jubliee Hills, Hyderabad, which is a residence of Sir Koneru Rajendra Prasad and family. He was taken to the office of M/s Emaar Properties PJSC in Dubai by Sri Koneru Rajendra Prasad in January, 2005 and entered into an agreement with M/s EHTPL on 29.01.2005 specifying that- 30 plots to be sold within 6 months from the date of the first sale of the plot; 100 villa plots to be sold at agreed price of Rs. 5000/- per Sq. Yd.; Agent may collect 4% on the sale value as commission from the buyer; remaining plots should be sold as per ....
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....ash transactions to anybody as instructed by Sri Koneru Rajendra Prasad. Accordingly, ED issued the summons under Section 50 of PMLA, and thereafter, recorded the statements of several persons and also obtained financial accounts and bank statements of M/s Stylish Holmes, Shri Tummala Ranga Rao of M/s Southend Projects and Foundations Pvt. Ltd., Sri N. Sunil Reddy, Sri K. Rajendra Prasad and the other persons associated with the transactions. Investigation revealed that Sri N. Sunil Reddy received Rs. 45.21 crores in cash from Sri Tummala Ranga Rao and invested the same in M/s Southend Projects through eleven Bogus Companies for the purpose of transfer of funds to M/s Southend Projects and were converted in to share capital amount with high premium, as against the paid-up capital of Rs. 10.73 crores made by the promoters. Hence, the amount of Rs. 45.21 crores dissolved in M/s Southend Projects was considered as proceeds of crime. The remaining amount of Rs. 50,80,75,000/- out of cash of Rs. 96,01,75,000/-, collected by Shri Tummala Ranga Rao was handed over to Shri Koneru Rajendra Prasad. Furthermore, during the course of investigation by ED, it was revealed that Shri T....
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....e replies filed by the Appellant and hearing both the sides confirmed the attachment vide order dated 25.05.2022. Aggrieved by the said order, the appellant filed the present appeal. 3. During the arguments, Ld. Counsel for the Appellant submitted that the Respondent ED is trying to illegally attach the subject property in excess of the total value of 'Proceeds of Crime', which is not in conformity to the legislative intent of PMLA, 2002, as the Respondent ED has already passed two separate PAOs in the year 2012 & 2014 attaching full amount of Rs. 167.28 Crores and thereby there is nothing left to be attached in the light of the proceeds of crime identified. Vide PAO No. 01/2015, an amount of Rs. 71.27 Crores was attached and similarly, vide the second PAO No. 03/2014, an amount of Rs. 96.01 Crores, including one immovable property of the present appellant i.e. 36 Acres and 14 Guntas at Bailkal and Mallikarjunagiri Villages, Marpalle Mandal, Ranga Reddy District, Telangana valued at Rs. 12,83,000/- was attached and confirmed by the Ld. Adjudicating Authority. Thus, the total identified proceeds of crime totalling to Rs. 167.28 Crores was attached, thus, there is no plausible ....
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.... the legitimate funds of M/s Rescom Holdings since the year 1998. However, the offences of money laundering against Shri Madhu Koneru, which in any case have been quashed by the Hon'ble High Court of Telangana vide the orders dated 11.07.2022 in Writ Petition No. 32191 of 2021 and the prosecution complaint against him has also been quashed by the Hon'ble Court vide order dated 02.06.2021 in Criminal Petition No. 5130 of 2019, pertained only after the alleged scam period of 2005-2010. Furthermore, the said company M/s Rescom Holdings was never made an accused or party in any of the PMLA proceedings which substantiates the fact that the premium of the aforesaid insurance was paid from clean, genuine and purely business sources. Ld. Counsel for the Appellant pointed out that the impugned order is fundamentally flawed as the Ld. Adjudicating Authority while making compliance to Section 5 has relied upon an unrelated and incorrect company which has no nexus to the Appellant or the proceedings in any manner. Thus, the gross non-application of mind and gross non-compliance of Section 5(1) is evident and the impugned order deserves to be set aside. Prayer is accordingly made to allow th....
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....ant's brother has no bearing upon the present appeal. It is submitted that Shri Madhu Koneru was given relief by the Hon'ble Court on the ground that as he has already been discharged in the predicate offence proceedings in CC No. 06/2012 filed by CBI and SC No. 01/2019 filed by Respondent Department. However, the present Appellant has not succeeded in his discharge petition and is not successful in proving his innocence. Further, CBI & ED proceedings have not been quashed by the Hon'ble High Court against Koneru Rajendra Prasad who is the main master mind behind entire misappropriation of money. He argued that the main ground over which the said proceedings has been quashed is knowledge of Koneru Madhu with regard to the said money being proceeds of crime. The order nowhere touches upon the involvement of Koneru Rajendra Prasad in the said crime. Ld. Counsel further contended that it is trite law that not only any property of the accused booked for offence u/s. 5 of PMLA, 2002 can be attached whether acquired or obtained directly or indirectly from the proceeds of criminal activity constituting scheduled offence but also other asset or property of equivalent value. Ld. Couns....
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....collect the premium of the villas and villas plots at per prevailing market rate in cash from the vendees, but reflecting the sale price, as Rs. 5000/- psf. in the books of accounts, agreements and sale documents. Since the entire transactions for collecting premium were done via cash, the actual value of proceeds of crime cannot be accurately identified & verified. So, the contention made by the appellant that assets equivalent to proceeds of crime has already been attached is devoid of any merits. Also, the PAO is not confined to POC identified in the schedule offence only, but also to any excess POC traced later in furtherance of investigation. No section or rule of PMLA bars the Respondent to attach such POC to aver that the act of the Respondent is illegal. Moreover, the confirmed attached moveable property viz. insurance policy of the appellant with the proceeds of crime is clearly established from the fact that Shri Koneru Rajendra Prasad (father of the appellant) was admittedly involved in misappropriation of public money and the said tainted money was thereafter, infused in off-shore companies of Shri Koneru Rajendra Prasad and was ultimately transferred in the name of his....
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....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, wherein in para 105 it is held as under:- "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 being permissible to proceed against the latter provided it is being attached as equal to the "value of any such property" or "property equivalent in value held within" "the country or abroad". However, both the italicised categories would be liable to be invoked in cases where the actual tainted property cannot be traced or found out. It is only where the respondents are unable to ....
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.... 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. Similar view has been taken by Hon'ble Punjab & Haryana High Court in case Dilbag Singh & Ors. v. Union of India & Ors. MANU/PH/ 3575/2024. In the light of the aforesaid, second limb of the definition of "proceeds of crime" has been applied to attach the property, which is quite less than the proceeds of crime, as decided in para no.6 above. Hence, this issue is decided against the appellant and in favour of the appellant. 8. Coming to issue no. iii), it is established from the fact that Shri Koneru Rajendra Prasad (father of the Appellant) was admittedly involved in misappropriation of public money and the said tainted money was thereafter, infused into off-shore companies of the Shri Koneru Rajendra Prasad and ultimately transferred in the name of his son Shri Koneru Madhu (brother ....
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....d in the FIR. It is for the reason that if the interpretation otherwise is taken, it would frustrate the object of the Act of 2002. It can be in a manner that the person who derived or obtained the property out of the crime may immediately park it with a third person and the property in that case would not be liable for attachment or seizure for the reason that the person holding the property has not been named as an accused, in that case, the very purpose and object of the Act would be frustrated. In view of the above, even if the appellant is not named as an accused but he is holding the `proceeds of crime‟ and even if the property if not directly or indirectly obtained out of the crime but is of the value thereof, it would fall in the definition of "proceeds of crime" and such property or document can be subjected to seizure. 16. In the instant case, serious allegations of fraudulent transactions to the tune of Rs. 164.99 crores exists against many accused which includes appellant's grandfather. The appellant's grandfather purchased a property in the year 1988 but it was gifted to the appellant in the year 2020 after registration of the FIR in the year 2017 and ev....
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....roperty" would indicate any other property which was acquired prior to the commission of crime and it would be attached only when the proceeds directly or indirectly obtained or derived out of the criminal activity is not available. It may be on account of siphoning off or vanished by the accused. In those circumstances the property of equivalent value can be attached. The word "the value of any such property" signifies without any embargo that it should be the property purchased after the commission of crime or prior to it rather it would apply in both the eventuality in the given circumstance. Thus, we are not in agreement with the counsel for the appellant who has questioned the attachment in reference to the property acquired prior to commission of crime. We are not going even further that the properties have nexus with the proceeds out of the crime but even in given circumstances and scenario that the property was acquired prior to commission of crime then, also under certain circumstances, it can be attached for "the value of any such property." The issue otherwise has been dealt with by this Tribunal in the case of Ayush Kejriwal (Supra) and the present matter is squarely....
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....roceedings has been quashed is knowledge of Koneru Madhu with regard to the said money being proceeds of crime. The order nowhere touches upon the involvement of Koneru Rajendra Prasad in the said crime and on the role of present appellant in acquiring the moveable property from the proceeds of crime collected by Shri Koneru Rajendra Prasad. Further, in support of this discussion, we mention Section 43 of the Indian Evidence Act, 1872: 43. Judgments, etc., other than those mentioned in sections 40, 41 and 42, when relevant.- Judgments, orders or decrees, other than those mentioned in sections 40, 41 and 42, are irrelevant, unless the existence of such judgment, order or decree is a fact in issue, or is relevant under some other provision of this Act. Hence, this issue is decided against the appellant and in favour of the respondent ED. 11. Coming to issue no. vi), the law on this issue now stands settled by the landmark judgment of the Hon'ble Supreme Court in the case of Vijay Madanlal Choudhary and Ors. vs. Union of India (UOI) and Ors. (supra). The relevant text from the judgment is quoted hereunder: "65......... The sweep of Section 5(1) is not limited t....