TaxTMI 
TaxTMI 
2026 (9) TMI 199
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.... Khata No. Plot No. 1) 911 dated 19.03.2005 64 50, 53, 4 8 Rs. 16,80,057.50 Rs. 1,23,20,000 2) 1392 dated 17.05.2003 & 1152 (Rectification deed) dated 29.04.2004 64 4 4.90 Rs. 5,41,857.50 Rs. 75,46,000 3) 1272 dated 04.05.2003 64 4 6.63 Rs. 7,57,107.50 Rs. 1,02,10,200 4) 1522 dated 13.04.2009 4, 64 47, 48, 49, 50/1002, 50/1013, 46/1003, 46/1006, 4/1993 5.49 Rs. 47,57,057.00 Rs. 84,54,600 5) 3489/2004 64 50 0.52 Rs. 1,09,185.75 Rs. 8,00,800 Total 25.54 Rs. 78,45,265.25 Rs. 3,93,31,600 Facts in Brief: 2. The relevant facts briefly are that a FIR (FIR No. RC/219/2013/E0002) was registered by the Central Bureau of Investigation, EO-I, New Delhi (CBI) on 08.03.2013 against M/s Jharkhand Ispat Pvt. Ltd. (the appellant company herein), its Promoters/Directors and other unknown persons for offences under Sections 120-B and 420 of the Indian Penal Code, 1860 (IPC), for falsely submitting and misrepresenting on the counts of total land acquired and total existing production capacity, in order to embellish its claim for the purpose of securing a favorable recommendatio....
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....ts claim for the purpose of getting favorable recommendation for allocation of North Dhadu Coal Block. The appellant company was subsequently allotted 49 million tons of coal allocation vide Allocation Letter No. 13016/31/2005-CA-1 dated 13.01.2006 issued by the Ministry of Coal, instead of the actual coal requirement of 14.4 million tons for the project; d. The said Allocation Letter No. 13016/31/2005-CA-1 dated 13.01.2006 was cancelled subsequent to the registration of the FIR by the CBI and the North Dhadu Coal Block was formally de-allocated on 14.02.2014, w.e.f. 22.11.2012. The said coal block allocation was cancelled by the Hon'ble Supreme Court as well vide Order dated 25.08.2014 in Writ Petition (Crl.) No. 120/2012; e. As a result of the application for allocation of coal block, on the basis of misrepresentation, the appellant company received Share Application Money (SAM), from other companies from 2004 to 2009 as detailed hereinafter: Financial Year Share Application Money 2004-2005 Rs. 1,31,00,000/- 2005-2006 Rs. 39,00,000/- 2006-2007 Rs. 8,35,70,000/- 2007-2008 Rs. 5,03,50,000/- 2008-2009 Rs. 9,90,80,000/- Total A....
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....n frustrating further proceedings, viz., confiscation as provided under Chapter III of the PMLA, a Provisional Attachment Order (PAO) No. 01/2019 dated 31.01.2019 was passed by ED whereby a total of five properties relating to the appellant company were provisionally attached. 6. Consequent to the passing of the PAO, as per the requirement of Section 5(5) PMLA, an Original Complaint (OC) No. 1100/2019 was filed before the Ld. AA for confirmation of the PAO. The said PAO was confirmed by the Ld. AA vide Order dated 24.07.2019. 7. Aggrieved by the said order of the Ld. AA, the appellant company has filed the present Appeal before this Appellate Tribunal under Section 26 of the PMLA. Submissions for the Appellant 8. It is firstly submitted on behalf of the appellant company that the case of the respondent is self-contradictory as the respondent has continued to change its main case from the Show Cause Notice (SCN) to the OC and PAO. The respondent states in the SCN/OC/PAO that the appellant company allured the investors into making investments, however, during the hearing of OC, the respondent submitted that the investors were in fact a group of companies controlled by the....
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....l allocation. 12. It is further contended for the sake of argument, without admitting, that only the license/allocation of coal could have been the proceeds of crime and not the SAM amount or the attached properties as evidenced from the Chargesheet filed by the CBI in the scheduled offences which has formed the basis of the ECIR, PAO and OC as well as a relied upon document of the Prosecution Complaint filed by the respondent under Section 45 PMLA before the jurisdictional court. In fact, paragraph 39 of the Chargesheet of the CBI records that the excess amount of coal allotment was wrongful gain to the appellant company. Additionally, the respondent cannot go beyond the alleged scheduled offences and it cannot term anything but the excess of coal allotment as the alleged proceeds of crime. 13. It is also submitted that the coal allocation was de-allocated and cancelled on 14.02.2014 w.e.f. 22.11.2012, which is much prior in time to the registration of the ECIR. No coal was extracted from the coal block allocated to the appellant company and instead of any benefit, the appellant company had to incur heavy expenditure and loss in respect of the same. 14. It is pointed out ....
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....e out a prima-facie case against the appellant company. 19. It was contended on behalf of the appellant company that the respondent has incorrectly and without any application of mind invoked the legal fiction of 'value thereof' provided in Section 2(1)(u) PMLA as it is the own case of the respondent that the alleged proceeds of crime were available on the date of passing of PAO. 20. The appellant company has further argued that the OC and PAO seeks to do indirectly what the OC No. 644/2016 dated 13.10.2016 and PAO No. 01/2016 dated 15.09.2016 sought to do directly, which also arise from the same ECIR. The OC No. 644/2016 dated 13.10.2016 and PAO No. 01/2016 dated 15.09.2016 provisionally attached various instalments of the factory including machinery, kilns, etc. of the appellant company while the OC and PAO in the present appeal have attached the land on which these instalments exist. 21. The appellant company has also submitted that the attached properties were acquired from legitimate sources and prior to the receipt of the SAM. Also, the value of the attached properties as provided by the respondent is incorrect and the actual value is much higher than the value as me....
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....rovisions of Section 5 PMLA on the basis of reason to believe, which was duly recorded in writing and was also communicated to the Ld. AA as per the relevant provisions. It is submitted that there were reason to believe that the properties were involved in the offence of money-laundering and if they were not attached immediately, the non-attachment of the properties was likely to frustrate the proceedings under the PMLA, therefore the PAO was issued. 29. The respondent has submitted that the properties valuing at Rs. 19.73 crore out of the total proceed of crime of Rs. 25 crore were attached in PAO No. 01/2016 dated 15.09.2016 and the remaining amount of Rs. 3.93 crore was attached by the PAO No. 01/2019 as confirmed by the impugned order of the Ld. AA. 30. During the initial course of investigation, it was revealed that the Directors of the appellant company attracted investments on account of anticipation of getting the coal block allocation and further investigation revealed that certain Non-Banking Financial Companies, which were the investors in the appellant company, were largely front companies of the directors of the appellant company. The investing companies were act....
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.... as the offences under Sections 120-B and 420 IPC were not scheduled offences under PMLA at the time of commission of such offences is baseless, as the relevant date to determine commission of money laundering is the date of projection of proceeds of crime as untainted property and not the date of commission of scheduled offences. Moreover, projection of proceeds of crime is a continuous process and it is evident that the appellant company was in continuous possession of proceeds of crime. 36. It was further submitted by the respondent that even if the proceeds of crime are generated directly or indirectly and not found, property can be attached as 'value of such property'. The definition of 'proceeds of crime' under Section 2(1)(u) PMLA clearly mentions "value or such property". Section 5 of the Act enables the authority to provisionally attach the proceeds of crime, which includes the 'value' of the property derived or obtained directly or indirectly as a result of criminal activity. 37. The respondent further submitted that the possession of the attached properties was duly taken on 19.08.2019 at 10:30 AM after the confirmation of the PAO by the Ld. AA on 24.07.2019. Howev....
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.... Tribunal dated 06.09.2019 in FPA-PMLA-1718/RNC/2017 wherein M/s. Jharkhand Ispat Pvt. Ltd. (the appellant herein) was one of the appellants. I have perused the said judgment and find that the said appeal had arisen out of the previous attachment order arising out of the same ECIR, passed by the ED and confirmed by the Ld. AA, wherein properties amounting to Rs. 19.73 crore were attached against alleged proceeds of crime quantified at Rs. 25 crore. The subsequent attachment of properties, which is challenged in the present appeal, was made by the ED in pursuance of the same ECIR, but in a subsequent OC whereby properties equivalent to Rs. 3.93 crore were provisionally attached. 41. Upon perusal of the aforesaid judgment dated 06.09.2019, it seen that the appeals were allowed by this Appellate Tribunal based primarily on the following findings: • That it is a matter of record that the appellant company received SAM of Rs. 1.70 crore even prior to the date of allocation of coal block i.e., 13.01.2006; • That the allegation that the investor companies invested in the shares of appellant company due to coal block allocation is contradictory to the statement....
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....eme Court; • That the transactions pertaining to receipt of SAM from various companies were duly documented, above-board and legal transactions; • That at the stage of rebuttal arguments, for the first time, it was orally argued by the ED before the Ld. AA that the investor companies were actually group companies of the appellant company itself and the persons who had given statements under Section 50 PMLA on behalf of such investor companies were related/interested persons and, therefore, their statements recorded under Section 50 PMLA are not reliable and are liable to be disbelieved. Even if this new case of the respondent is accepted for the sake of arguments and the investor companies are presumed to be related or group companies, then the money invested by them also has to be relatable to the appellants, and as such, there can be no question of profiteering or benefitting from the coal allocation and thus, no question of any proceeds of crime arise. 42. The Appellate Tribunal, in the said judgment, also took note of the submission from the side of the appellant company based on their Balance Sheets for years 2003-04 to 2013-14 that despite the abs....
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.... Directorate could not have either assumed existence of such link or even undertake to investigate such link, being only empowered to conduct investigations of the offence of money laundering and not that of the scheduled offence. 17. We note that in the absence of any predicate offence having been registered and investigated with respect to the flow of investment from outsider investors into the Appellant Company, the attempt by the Respondent Directorate to make such flow of funds as proceeds of crime fails. The Hon'ble Supreme Court in the judgment dated 27.07.2022 in SPECIAL LEAVE PETITION (CRIMINAL) NO. 4634 OF 2014 in the matter of Vijay Madanlal Choudhary vs Union of India has observed that: "The authorities under the 2002 Act cannot resort to action against any person for money laundering on an assumption that the property recovered by them must be proceeds of crime and that a schedule offence has been committed, unless the same is registered with jurisdictional police or pending inquiry by way of complaint before the competent forum." 18. In view of the aforementioned analysis and discussions, the Appeal is therefore allowed and pending appli....