AI Structured Summary
Not yet generated for this judgment
Judgment
S. No.,"Name of the Company and
CIN Number","Amount of Share
Application Money
Received","Number of shares
allotted",Financial Year
1.,"Shalini Holdings Limited
(Presently Known as
Alstone Textiles (India)
Limited) [Listed on Bombay
Stock Exchange]
C I N -
L65929DL1985PLC021037","30,00,000","30,000",2008-09
2.,"Ad-Fin Capital Services
(India) Pvt. Ltd.
C I N -
U74899DL1995PTC069705","30,00,000","30,000",2008-09
3.,"Mani Mala Delhi Properties
Pvt. Ltd.
C I N â€
U45201DL2005PTC137783","30,00,000","30,000",2008-09
4.,"Desmond Vinimay Pvt. Ltd.
(Presently Known as Shree
Gajanand Fintrade Pvt. Ltd.)
C I N â€
U51109WB1995PTC074093
Note: Admittedly, the said
amount has not been utilized
in the Property in question.","30,00,000","30,000",2007-08
,Total,"1,20,00,000","1,20,000",
The Provisional Attachment Order dated 04th September, 2017 was confirmed on 19.02.2018 against which the present appeal has been filed.",,,,
Thereafter, the appeal was filed under Section 26 of Prevention of Money Laundering Act, 2002 alongwith the stay application. In the stay application,",,,,
the prayer is made by the appellants inter-alia issue the direction to the Respondent to hand over the peaceful physical possession of the Property on,,,,
various grounds as the Respondent has taken physical possession of the entire Property after passing of the Impugned Order even without giving prior,,,,
notice for possession to the Applicants and forcefully evicted staff of the Applicant No.1 and locked the entire Property, whereas as per the PAO",,,,
only 90% of the Property was attached as alleged proceeds of crime but the Respondent has served the notice for possession u/s 8(4) dated,,,,
23.02.2018 of the PML Act on 27.02.2018 to the Applicants after taking over the possession of the Property.,,,,
In the appeal, the appellant has challenged the Impugned Order on merits. There are two aspects of the matter involved in the present appeal. The",,,,
first one is about the taking of physical possession of the Property in question by the Respondent. It is to be examined as to whether the said physical,,,,
possession is taken by the Respondent by following the provisions of the Act and Rules or not and the second aspect of the matter is about the merit,,,,
of the case.,,,,
It is stated on behalf of appellant that the took physical possession of 100% of the Property in complete violation of the impugned order, that too",,,,
without giving mandatory notice under sub section (4) of section 8 of the PMLA read with Rule 5(1) of the PMLA (Taking Possession of Attached or,,,,
Frozen Properties Confirmed by the Adjudicating Authority) Rules, 2013. The Impugned Order was passed on 19.02.2018 and the Respondent took",,,,
physical possession on 22.02.2018. The Appellants were not even served the Impugned Order by then and the Respondent forcibly evicted the,,,,
resident caretaker staff namely Mr. Surendra Kumar and Mr. Bhimal Yadav from the property in question, which was also the registered office of the",,,,
Appellant No.1. The relevant documents in support viz. Panchnama, Electricity Bill, MCA Report, Aadhar Card of the staff have been submitted by",,,,
the ld. counsel of the Appellants on 04.04.2019 during final arguments.,,,,
The Respondent has issued notice of possession dated 23.02.2018, wherein they have admitted that “the undersigned has taken possession of",,,,
90.225% possession of the aforesaid propertyâ€. In fact, the Respondent took possession of 100% of the Property in haste, which shows their",,,,
malafide intention, high handedness and gross abuse of power. The impugned order was passed on 19.02.2018, which was received by the appellants",,,,
on 22.02.2018. On 23.02.2018, it was mentioned that the possession has been taken. No notice was received by the appellants by 23.02.2018.",,,,
At the first instance, this Tribunal wishes to examine the issue raised by the learned senior counsel for the appellants that the physical possession",,,,
of the property was taken by the Respondent totally contrary to the provisions of the Act and in an arbitrary manner. The submissions in this regard,,,,
are addressed by both the parties. Admittedly the Impugned Order in the above said matter was passed on 19.02.2018 and the physical possession of,,,,
the property of the Property was taken by the Respondent on 27.02.2018. In order to understand the issue involved in the present case, it is necessary",,,,
to refer sub-section (4) of Section 8 of the PML Act, 2002 which reads as under:",,,,
“(4) Where the provisional order of attachment made under sub-section (1) of section 5 has been confirmed under sub-section (3), the",,,,
Director or any other officer authorised by him in this behalf shall forthwith take the 1[possession of the property attached under section 5,,,,
or frozen under sub-section (1-A) of section 17, in such a manner as may be prescribed:",,,,
Provided that if it is not practicable to take possession of a property frozen under sub-section (1-A) of section 17, the order of confiscation",,,,
shall have the same effect as if the property had been taken possession of.]â€,,,,
If the Provisional Attachment Order is confirmed by the Adjudicating Authority, the Respondent, if so required is entitled to take the possession of",,,,
the Property after passing the said order. However, due process of law and as per law.",,,,
The Rule 5 of the Prevention of Money-Laundering (Taking Possession of Attached or Frozen Properties Confirmed by the Adjudicating Authority),,,,
Rules, 2013, the same read as under:",,,,
“5. Manner of taking possession of immovable property.â€"(1) Where the immovable property confirmed by the Adjudicating Authority is,,,,
in the form of a land, building, house, flat, etc., a notice shall be issued to the Registrar having jurisdiction of the area alongwith the",,,,
provisional attachment order and order of the Adjudicating Authority confirming such attachment requiring the Registrar not to transfer or,,,,
create any interest in such property until further orders and a copy of the order confirming the attachment shall be affixed at a conspicuous,,,,
part of the property.,,,,
(2) Where the immovable property confirmed by the Adjudicating Authority is in the form of a land, building, house, flat, etc., and is",,,,
occupied by the owner, the authorized officer shall issue a notice of eviction of ten days so as to prevent the person from enjoying such",,,,
property and after issuing of such notice if the premises is not vacated within the stipulated time, such occupant shall be evicted and the",,,,
possession shall be taken by seeking the assistance of the local Authorities in terms of section 54 of the Act.â€,,,,
The scheme of the Act has to be taken into consideration while interpreting the statute and different words should not be construed in isolation of,,,,
the other sections of the statute, as well as the scheme of the statute. The Appellant has relied upon the following cases in support of its submissions:",,,,
a. Darshan Singh vs. State of Punjab, (AIR 1953 SC 83) at Paragraph 10",,,,
“10. These arguments though somewhat plausible at first sight, do not appear to us to be sound or convincing. It is a cardinal rule of interpretation",,,,
that the language used by the Legislature is the true depository of the legislative intent, and that words and phrases occurring in a statute are to be",,,,
taken not in an isolated or detached manner disassociated from the context, but are to be read together and construed in the light of the purpose and",,,,
object of the Act itself.â€,,,,
b. Mangoo Singh vs. Election Tribunal (AIR 1957 SC 871) at Paragraph 9,,,,
“…9. When the context makes the meaning of a word quite clear, it becomes unnecessary to search for and select a particular meaning out of the",,,,
diverse meanings a word is capable of according to lexicographers.â€,,,,
c. P.K. Renguntawar vs. Deputy Director of Enforcement ([1981] 51 Comp Case 163 (Bom)) at Paragraph 14,,,,
“14. The provisions of s. 4 enact restrictions on the persons with regard to dealings in foreign exchange. The provisions themselves have to be,,,,
understood and interpreted so as to further the express object of the Act, one of it being to regulate certain payments and dealings in foreign",,,,
exchange. The provision is in two parts, being permissive as well as prohibitive. Unless the first exists or is shown to have existed the prohibition",,,,
operates. Unless as may be excepted by a general or special permission of the Reserve Bank, no foreign exchange can be acquired by any person",,,,
other than an authorised dealer in India and resident of India nor one can deal in such foreign exchange while such person is outside the country. The,,,,
restriction is against the persons who are in India as well as against the persons who are Indian residents while they are abroad. The section by itself,,,,
permits acquisition from various dealers in the country as well as outside the country. If the transaction is not between the person and an authorised,,,,
dealer, there is a total statutory embargo on buying or otherwise acquiring, borrowing or selling or otherwise transferring or lending of any foreign",,,,
exchange. Once it is shown that the person of the category mentioned in the section has acquired foreign exchange not from the authorised dealer,",,,,
then as the width and amplitude of the section stands, the only defence available is the previous general or special permission of the Reserve Bank.â€",,,,
d. State of Maharashtra vs. Mahesh Mehta (1983(1) Bom C R 600),",,,,
“12. …On proper analysis it would be clear that the absence of permission, either general or special, from the Reserve Bank is the foundation of",,,,
the contravention indicated therein. The further restrictions are put on any person resident of India except the authorised dealer while a more,,,,
generalised category is carved out which would include by any person, who may or may not be a resident of India, but who is not an authorised dealer.",,,,
This, therefore, relates to the capacity of the person concerned. The third clause relates to the various modes which are annexed to the foreign",,,,
exchange which can be tagged with the said person. The restriction suggests that any purchase or borrowing or selling or lending or otherwise,,,,
transferring are various modes of contravention, and a residuary clause in that category includes when a person is said to have otherwise acquired",,,,
foreign exchange. As to who is an authorised dealer and money-changer has been defined under the Act. The respondent 1 admittedly does not fall in,,,,
that category. Similarly, admittedly no permission was obtained from the Reverse Bank and lastly fact that the respondent is not a resident of India",,,,
would hardly make any difference since he can be covered by the other clause about his capacity as being a person not being an authorised dealer.â€,,,,
e. Marubeni India v.. Special Director of Enforcement (MANU/DE/0404/2014) at Para 10,",,,,
“10. The Court does not wish to repeat, what has already been held by it in Mitsubishi Corporation and Fuji Bank Ltd. However, the following",,,,
portion of the judgment in Mitsubishi Corporation in the context of exparte employees of foreign corporation being seconded to Indian liaison offices,,,,
(LOs) would equally apply to the present appeals as well:,,,,
…,,,,
Under Section 8(1)(b) FERA, there is a prohibition on a person “other than authorized dealer†purchasing, acquiring or borrowing or selling",,,,
otherwise transferring or lending or exchange with any person not being an authorized dealer, any foreign exchange either in India or outside India.",,,,
The question then arises is whether on the facts of the present case, the Appellant can be said to have “purchased or otherwise acquired or",,,,
borrowed†any foreign exchange in India.,,,,
…â€,,,,
In case the said Rule is read in a meaningful manner, it mandates that the Authorized Officer shall issue a notice of eviction for 10 days so as to",,,,
prevent the person from enjoying the property and after issuing such notices, if the premises is not vacated within the stipulated time, such occupant",,,,
shall be evicted and possession shall be taken by seeking the assistance of the local authorities in terms of Section 54 of the Act. It is denied on behalf,,,,
respondent that almost in all matters after confirmation order is passed, the 10 days notice is issued in order to take the possession after the expiry of",,,,
10 days from the date of service of said notice, further steps are to be taken. But in the present case it has not happened.",,,,
In the present case, admittedly certain small portion of the immovable property was able portion where the appellant was operating office/Gym in",,,,
the premises. However, the Respondent has taken the possession even before issuance of notice dated 23.02.2018 under sub-section (4) of Section 8",,,,
of the Prevention of Money Laundering Act, 2002 (Act No. 15 of 2003) r/w Rule 5(1) of the Prevention of Money-Laundering (Taking Possession of",,,,
Attached or Frozen Properties Confirmed by the Adjudicating Authority) Rules, 2013 as mentioned in the notice itself The said notice was served only",,,,
27.02.2018 after taking the possession. In nutshell, the following dates are relevant in the following case:",,,,
i). Date of Impugned Order is dated 19.02.2018.,,,,
ii) Notice issued under Section 8(4) of the PML Act, 2002 is dated 23.02.2018, served on 27.02.2018 and in the said notice in sub Para 3 it is admitted",,,,
that “the undersigned has taken possession of 90.225% portion of the aforesaid property, which shall be at disposal of the Directorate of",,,,
Enforcement until further order and such property and such property shall be kept intact by all concerned for further proceedings under this Act;â€.,,,,
It is also a matter of fact that the Respondent has taken the entire possession i.e. 100% of the aforesaid property. Later on, 90% was identified",,,,
and return to the appellant as per order passed by this tribunal at the initiate stage of the appeal.,,,,
From the said dates it is very clear that the possession has been taken by the Respondent contrary to the Rule 5 of the Prevention of Money-,,,,
Laundering (Taking Possession of Attached or Frozen Properties Confirmed by the Adjudicating Authority) Rules, 2013.",,,,
The Respondent was not entitled to take the possession unless 10 days clear notice is issued to the appellant. In the present case on the face of it,",,,,
no 10 days notice was given after taking the possession. The same Act of the I.O was wholly contrary to the mandatory rule, practice, procedure,",,,,
PMLA is a Special Act, all Section and Rules are strictly to be complied with.",,,,
Therefore, it is held that the possession taken by the Respondent is contrary mandatory provisions of the PML Act and the said possession stand",,,,
restored to the appellants forthwith.,,,,
Now this Tribunal shall deal with the case of both the parties on merit.,,,,
The main case-set up by the respondent in the present appeal (a) The Serious Fraud Investigation Office, [hereinafter referred to as “SFIOâ€]",,,,
has filed a Criminal Complaint No. 57463 of 2016 dated 29.11.2016 against various persons under Section 120-B r/w 420, 468 and 477A of Indian",,,,
Penal Code, 1860 and Section 628 r/w 211/233 & 240(3) of Companyâ€s Act, 1956 before the Court of Ld. Additional Chief Metropolitan Magistrate",,,,
(Central) Special Acts, Tis Hazari Courts, Delhi. This Criminal Complaint was filed on the basis of investigation conducted by SFIO which culminated",,,,
in its investigation report dated 31.03.2016 U/s 241 of the Companies Act, 1956.",,,,
(b) Based on the above, the matter was taken up by the Enforcement Directorate, Delhi Zonal Office-II (DLZO- II) and an ECIR no. 01/DLZO-",,,,
II/2017 dated 11.02.2017 was recorded for investigation under the Provisions of Prevention of Money Laundering Act, 2002 (PMLA) as Sections 420",,,,
and 120 B IPC are the Scheduled offences under Part A, Paragraph 1, of the PMLA, 2002.",,,,
(c ) After recording the subject ECIR no. 01/DLZO-II/2017 dated 11.02.2017, this Directorate has initiated further enquiries in terms of PMLA, 2002,",,,,
with a view to identify the properties/assets etc. [Proceeds of crime as defined under Section 2(1)(u) of PMLA, 2002]. During investigation, proceeds",,,,
of crime of Rs. 64.70 Crore and Rs. 1,11,96,000/- were identified pertaining to M/s Jagat Projects Ltd and Jain Brothers, respectively. An",,,,
unaccounted money of Rs. 64.70 Crore was laundered by M/s Jagat Projects Ltd. through the companies controlled by Jain Brothers with the help of,,,,
mediator, Shri Rajesh Agrawal, CA. Jain Brothers received a commission of Rs. 1,11,96,000/- from the beneficiary M/s Jagat Projects Ltd through",,,,
mediator, Shri Rajesh Agrawal, CA. Shri Rajesh Agrawal, as a mediator also received commission for this illegal activity. On the basis of material in",,,,
possession, there was reasons to believe that Shri Surendra Kumar Jain, Shri Virendra Jain and Shri Rajesh Agrawal were guilty of an offence",,,,
punishable under the PMLA, 2002, they were placed under arrest. The Prosecution Complaint against them has already been filed before the",,,,
Honâ€ble Patiala House Court, New Delhi. In the case of Jain Brothers, a property, Agricultural Land bearing Khasra No. 814 & others (13 Bighas",,,,
and 03 Biswas), Village Bhatti, New Delhi, involved in money laundering to the extent of Rs. 1,11,96,000/-, has been provisionally attached. In case of",,,,
M/s Jagat Projects Ltd, a property at Plot No. 4, Sector-13, Dwarka, New Delhi, to the extent of Rs. 64.70 Crore (Hotel managed by Radisson Blu),",,,,
was provisionally attached which has been subsequently confirmed by the Adjudicating Authority vide Order dated 10.08.2017 in OC No. 713/2017.,,,,
(d) In the same manner as that of M/s Jagat Projects Ltd., Jain Brothers have provided accommodation entries to M/s Mishail Packers and Printers",,,,
Pvt. Ltd. in the year 2008-2009. The company, M/s Mishail Packers and Printers Pvt. Ltd. was initially registered at the address 25, Tuglak Road,",,,,
New Delhi. During the year 2009-10, the address was changed to Farm No. 26, Palam Farms, VPO Bijwasan, New Delhi. Ms. Misha Bharti",,,,
remained one of the director of the company from the date of inception of the company in the year 2002 upto the month of Jan, 2017. Sh. Shailesh",,,,
Kumar has all along being another director of the company.,,,,
(e ) That on a reasonable belief that the proceeds of crime, records/ documents relating to money laundering or the documents of property related to",,,,
the crime could be recovered, searches were executed at premises of Shri Shailesh Kumar and Ms. Misha Bharti situated at (1)1, Shakuntala Farm",,,,
House, Sarla Villa, MG Road, Ghitorni, New Delhi-110030, (2) Farm No. 26, Palam Farms, VPO Bijwasan, Near Palam Vihar Road, New Delhi-",,,,
110061 and (3) W-8E/1 (H27/2), Western Avenue, Sainik Farms, New Delhi-110080 on 08.07.2017. During searches, some relevant documents",,,,
related to M/s Mishail Packers and Printers Pvt. Ltd. and property documents were seized under the Panchnama / Seizure Reports dated 08.07.2017,,,,
and statement of Shri Shailesh Kumar were recorded under Section 17 of PMLA, 2002.",,,,
(f) During the investigation conducted by the Directorate of Enforcement, it is revealed that during the financial year 2008-2009, M/s Mishail Packers",,,,
and Printers Pvt Ltd. allotted its shares to M/s Shalini Holdings Ltd., M/s Ad-Fin Capital Services (India) Pvt. Ltd and M/s Mani Mala Delhi",,,,
Properties Pvt. Ltd., at a share value of Rs. 100 per share (including premium of Rs. 90 per share) and mobilized funds to the tune of Rs. 90 Lakh. All",,,,
these companies were controlled by “Jain Brothersâ€. The shares subscribed by above mentioned 3 companies were purchased by Ms. Misha,,,,
Bharti, Director of M/s Mishail Packers and Printers Pvt Ltd., during the financial year 2009-10 at nominal price of Rs. 12 per share. Thus on paper",,,,
these three companies suffered a loss of 88% of their investment value. However, in actual, there was no loss as the funds for investment by these",,,,
companies were received by Jain Brothers in advance through the mediator Shri Rajesh Agrawal.,,,,
(g) That during the financial year 2007-2008, M/s Mishail Packers and Printers Pvt Ltd. allotted its shares to M/s Desmond Vinimay Pvt Ltd., at a",,,,
share value of Rs. 100 per share (including premium of Rs. 90 per share) and mobilized funds to the tune of Rs. 30 Lakh. The company, M/s",,,,
Desmond Vinimay Pvt Ltd., was controlled by Shri Santosh Kumar Shah. The shares subscribed by M/s Desmond Vinimay Pvt Ltd., were first",,,,
transferred to 4 companies, namely, Picadelly Trade & Holdings Pvt. Ltd., M/s. Vidhata Housing Pvt. Ltd., M/s. Diwakar Building Pvt. Ltd., M/s.",,,,
Starlite Traders Pvt. Ltd. at the share value of Rs. 100 per share for the purpose of layering and these shares were again purchased by Ms. Misha,,,,
Bharti, Director of M/s Mishail Packers and Printers Pvt Ltd., during the financial year 2009-10 at nominal price of Rs. 12 per share. Thus on paper",,,,
these companies suffered a loss of 88% of their investment value. However, in actual, there was no loss as the funds (cash) for investment were",,,,
already received by Shri Santosh Kumar Shah in advance.,,,,
(h) That M/s Mishail Packers and Printers Pvt. Ltd, have laundered unaccounted money of Rs. 1.20 Crore into apparently legitimate transactions by",,,,
way of share subscription by 3 companies, M/s Shalini Holdings Ltd., M/s Ad-Fin Capital Services (India) Pvt. Ltd and M/s Mani Mala Delhi",,,,
Properties Pvt. Ltd., which were controlled and managed by Jain Brothers and 1 company, M/s Desmond Vinimay Pvt Ltd., which was controlled by",,,,
Shri Santosh Kumar Shah.,,,,
(i) That the laundered money of Rs. 1.20 Crore was utilized by M/s Mishail Packers and Printers Pvt Ltd. for purchase of 12 Bigha land (Mustil No.,,,,
134, Khasra No. 13MIN (4-7), 14 MIN (1-7), 17/1(0-10), 17/2MIN (1-0), 18(4-16)) situated in the revenue estate of Village Bijwasan Tehsil Vasant",,,,
Vihar, Distt. South-West, New Delhi (Farm No. 26, Palam Farms, VPO Bijwasan, New Delhi). The total purchase value of this land was Rs. 1.33",,,,
Crore.,,,,
(j) In view of the above, the provisional attachment of the property, 12 Bigha land (Mustil No. 134, Khasra No. 13MIN (4-7), 14 MIN (1-7), 17/1(0-",,,,
10), 17/2MIN (1-0), 18(4-16)) situated in the revenue estate of Village Bijwasan, Tehsil Vasant Vihar, Distt. South-West, New Delhi (Farm No. 26,",,,,
Palam Farms, VPO Bijwasan, New Delhi), to the extent of Rs. 1.20 Crore out of the purchase value of Rs. 1.33 Crore, i.e. 90.225% of the property,",,,,
as belonging to M/s Mishail Packers and Printers Pvt Ltd., being the proceeds of crime as defined under Sec 2 (i)(u) of the PMLA, 2002, made vide",,,,
Provisional Attachment Order No. 10/2017 dated 04.09.2017.,,,,
In reply, the case of the appellant is that the only allegation against the Appellants is of using alleged accommodation entries for the purchase of",,,,
the Property. The allegations of accommodation entries for the purchase of the Property is unsustainable, as the income tax department after",,,,
conducting assessment proceedings under section 147/148 of IT Act has rejected the contention of using “accommodation entries†for the,,,,
purchase of the attached land vide its order dated 18.03.2014. On the point as to whether Income Tax violation is covered under PMLA or not, the",,,,
same has been answered in negative. In lok sabha speech on the point of Income Tax violations vis a vis PMLA, the then finance minister made a",,,,
statement which reads as follows;,,,,
“Mr. Deputy Chairman sir, I am grateful to the Hon. Members, especially then Hon’ble Members who have spoken on the bill and",,,,
supported the Bill. Naturally, some questions will arise; they have arisen. It is my duty to clarify those matters. Sir firstly, we must remember",,,,
that money laundering is very technically-defined offence. It is not the way we understand “Money Laundering†in a colloquial sense. It,,,,
is a technically defined offence. It postulates that there must be a predicate offence and it is dealing with the proceeds of a crime. That is the,,,,
offence of money laundering. It is more than simply converting black money into white or white money into black. That is an offence under,,,,
the income tax act. There must be a crime as defined in the schedule. As a result of that crime there must be certain proceeds- it could be,,,,
cash; it could be property. And anyone who directly or indirectly indulges or assist or is involve in any process or activity connected with,,,,
the proceeds of crime and projects it as untainted property is guilty of offence of money laundering.â€,,,,
25.1. There is no allegation against the Appellants in respect of that the use of any proceeds of crime for the purchase of the property in question. The,,,,
Respondent has only alleged use of unaccounted money and has failed to identify any related scheduled offence, let alone any proceeds emanating",,,,
there-from, in relation to Appellants or the Property.",,,,
S.No.,Name of the Company,Cheque No. and date,Amount,
1.,M/s. Shalini Holdings Ltd.,025303 dated 27.05.2008,"30,00,000",
2.,M/s Ad-fin Capital Service (India) Pvt. Ltd.,025304 dated 27.05.2008,"30,00,000",
3.,M/s. Mani Mala Delhi Properties Pvt. Ltd.,025468 dated 03.06.2008,"30,00,000",
4.,M/s. Desmond Vinimay Pvt. Ltd.,011912 dated 10.05.2007,"30,00,000",
In the impugned order, it was recorded and also admitted by I.O at the time of hearing when verified that attachment order was passed by invoking",,,,
the first proviso. Section 5 is reproduced herebelow:-,,,,
Attachment of property involved in money-laundering. â€"(1) Where the Director, or any other officer not below the rank of Deputy",,,,
Director authorised by the Director for the purposes of this section, has reason to believe (the reason for such belief to be recorded in",,,,
writing), on the basis of material in his possession, thatâ€"",,,,
(a) any person is in possession of any proceeds of crime; and,,,,
(b) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any",,,,
proceedings relating to confiscation of such proceeds of crime under this Chapter, he may, by order in writing, provisionally attach such",,,,
property for a period not exceeding one hundred and eighty days from the date of the order, in such manner as may be prescribed:",,,,
Provided that no such order of attachment shall be made unless, in relation to the scheduled offence, a report has been forwarded to a",,,,
Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person authorised to",,,,
investigate the offence mentioned in that Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case",,,,
may be, or a similar report or complaint has been made or filed under the corresponding law of any other country:",,,,
Provided further that, notwithstanding anything contained in 1[first proviso], any property of any person may be attached under this",,,,
section if the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section has,,,,
reason to believe (the reasons for such belief to be recorded in writing), on the basis of material in his possession, that if such property",,,,
involved in money-laundering is not attached immediately under this Chapter, the non-attachment of the property is likely to frustrate any",,,,
proceeding under this Act:],,,,
2[Provided also that for the purposes of computing the period of one hundred an eighty days, the period during which the proceedings",,,,
under this section is stayed by the High Court, shall be excluded and a further period not exceeding thirty days from the date of order of",,,,
vacation of such stay order shall be counted.],,,,
In the present case, no report under section 173 was filed against the appellant as they were not arrayed in FIR, no charge-sheeted and before",,,,
passing of PAO, no complaint was filed by the person authorized before Magistrate to investigate the matter. However, the property was still",,,,
attached.,,,,
The Respondent, while attaching the property in question under the first proviso of section 5(1) of the PMLA, has only alleged that “the amount",,,,
of Rs. 1,20,00,000/- received in M/s Mishail Packers and Printers Pvt. Ltd. apparently as share money from M/s Shalini Holding Ltd., M/s Ad-Fin",,,,
Capital Services (India) Private Limited, Mani Mala Delhi Properties Pvt. Ltd. in lieu of the unaccounted money of equivalent value paid in advance,",,,,
was utilized by M/s Mishail Packers and Printers Pvt. Ltd. for purchase of the property.â€,,,,
There is no investigation any evidence is available on record that the appellant is likely to conceal the property reason to believe are separately,,,,
recorded by the respondent. Nor any cognizance of schedule offence is taken against the appellant in the complaint filed against the party. The,,,,
appellant is not arrayed as party in the complaint.,,,,
The case of the respondent is that it was unaccounted money. The assessment order has already attained finality. How unaccounted can became,,,,
proceed of crime when there is no FIR or charge sheet under the schedule offence under Section 420 and 120B was registered against the appellant.,,,,
The Income Tax Department had conducted an enquiry into the investment made in the Appellant No.1 in the FY 2008-09 by M/s Shalini Holding,,,,
Ltd., M/s Ad-Fin Capital Services (India) Private Limited, and M/s Mani Mala Delhi Properties Private Limited. An order dated 18.03.2014 was",,,,
passed by the Ld. Assessing Officer of the Income Tax, after due investigation and verification, wherein it was held that the investments made by the",,,,
aforesaid companies are genuine, and not accommodation entries. The said order was never appealed, and has attained finality.",,,,
The Adjudicating Authority has failed to appreciate that the Income Tax Department is the competent and final authority in investigating,,,,
accommodation entries and unaccounted money.,,,,
The Appellants have not been charged for any scheduled offence, and the allegations against the Appellants is that they have laundered their",,,,
unaccounted money. It is not the case of the Respondent that the alleged unaccounted money was related to any schedule offence in relating to,,,,
criminal activities. The total purchase consideration for the purchase of the property in question was Rs. 1.33 Crore. The entire purchase,,,,
consideration was paid through legitimate banking channels, from the bank account of the Appellant No.1, and the source of the same has been",,,,
assessed by the Income Tax Department.,,,,
There is no valid notice issued under Section 8(1) of the Act as reason to believe are not recorded with regard to the appellant. The mandatory,,,,
requirement of sub-section (2) of Section 8 has been fulfilled. The issues raised by the appellant are not legal dealt-with or decided. Section 8 reads as,,,,
under:,,,,
Adjudication. â€"(1) On receipt of a complaint under sub-section (5) of section 5, or applications made under sub-section (4) of section",,,,
17 or under sub-section (10) of section 18, if the Adjudicating Authority has reason to believe that any person has committed an 1[offence",,,,
under section 3 or is in possession of proceeds of crime], it may serve a notice of not less than thirty days on such person calling upon him",,,,
to indicate the sources of his income, earning or assets, out of which or by means of which he has acquired the property attached under",,,,
sub-section (1) of section 5, or, seized 2[or frozen] under section 17 or section 18, the evidence on which he relies and other relevant",,,,
information and particulars, and to show cause why all or any of such properties should not be declared to be the properties involved in",,,,
money-laundering and confiscated by the Central Government:,,,,
Provided that where a notice under this sub-section specifies any property as being held by a person on behalf of any other person, a copy",,,,
of such notice shall also be served upon such other person:,,,,
Provided further that where such property is held jointly by more than one person, such notice shall be served to all persons holding such",,,,
property.,,,,
(2) The Adjudicating Authority shall, afterâ€"",,,,
(a) considering the reply, if any, to the notice issued under sub- section (1);",,,,
(b) hearing the aggrieved person and the Director or any other officer authorised by him in this behalf; and,,,,
(c) taking into account all relevant materials placed on record before him, by an order, record a finding whether all or any of the",,,,
properties referred to in the notice issued under sub-section (1) are involved in money-laundering:,,,,
Provided that if the property is claimed by a person, other than a person to whom the notice had been issued, such person shall also be",,,,
given an opportunity of being heard to prove that the property is not involved in money-laundering.,,,,
(3) Where the Adjudicating Authority decides under sub-section (2) that any property is involved in money-laundering, he shall, by an order",,,,
in writing, confirm the attachment of the property made under sub-section (1) of section 5 or retention of property or 3[record seized or",,,,
frozen under section 17 or section 18 and record a finding to that effect, whereupon such attachment or retention or freezing of the seized",,,,
or frozen property] or record shallâ€",,,,
(a) continue during 4[investigation for a period not exceeding 5[three hundred and sixty-five days] or] the pendency of the proceedings,,,,
relating to any 3[offence under this Act before a Court or under the corresponding law of any other country, before the competent Court of",,,,
criminal jurisdiction outside India, as the case may be; and]",,,,
6(b) become final after an order of confiscation is passed under sub-section (5) or sub-section (7) of section 8 or section 58-B or sub-,,,,
section (2-A) of section 60 by the 7[Special Court].],,,,
8[Explanation.- For the purposes of computing the period of three hundred and sixty-five days under clause (a), the period during which",,,,
the investigation is stayed by any Court under any law for the time being in force shall be excluded.],,,,
(4) Where the provisional order of attachment made under sub-section (1) of section 5 has been confirmed under sub-section (3), the",,,,
Director or any other officer authorised by him in this behalf shall forthwith take the 1[possession of the property attached under section 5,,,,
or frozen under sub-section (1-A) of section 17, in such a manner as may be prescribed:",,,,
Provided that if it is not practicable to take possession of a property frozen under sub-section (1-A) of section 17, the order of confiscation",,,,
shall have the same effect as if the property had been taken possession of.],,,,
The Honâ€ble High Court of Delhi at New Delhi in the case of S. Ramachandran & Ors. Vs. Union of India & Ors. decided on 11.01.2018 in,,,,
para no. 51 has given its findings about the interpretation of the (1) & (2) proviso of Section 5(1). The paras 51 is reproduced:-,,,,
The first proviso to Section 5(1), seeks to restrict the applicability of Section 5(1) only to such persons who are facing trial for a",,,,
scheduled offence. In case of such persons, until a challan/charge-sheet/final report is filed in the criminal court under Section 173 CrPC",,,,
or cognizance is taken of the scheduled offence by a Magistrate before whom a complaint was filed, no provisional order of attachment can",,,,
be made under Section 5(1) PMLA.,,,,
In case of para 51 of the said judgement is read wherein it has been clearly held that until a challan/charge-sheet/final report is filed in the criminal,,,,
court under Section 173 Cr.P.C. or cognizance is taken of the scheduled offence by a Magistrate before whom a complaint was filed, no provisional",,,,
order of attachment can be made under Section 5(1) PMLA.,,,,
Though the operation of the aforesaid judgment has been stayed by the Honâ€ble Supreme Court in the case of J. Sekar which was decided with,,,,
the case of (Ram Chandran Supra), the above dicta cannot cease to be law of precedential value and binding in other matters i.e. third parties, in view",,,,
of settled law. One of such decision reported as vide Shree Chamundi Mopeds Ltd. v. Church of South India Trust Assn., (1992) 3 SCC 1 (para 10).",,,,
A Division Bench of the Honâ€ble Calcutta High Court inN iranjan Chatterjee v. State of West Bengal & Ors., 2007 SCC OnLine Cal 28 3after",,,,
relying on the aforesaid decision has held that:,,,,
“17. After hearing the learned Counsel for the parties and after going through the aforesaid position of fact, we find that the Supreme",,,,
Court by those interim order has, no doubt, stayed the operation of the order of the Division Bench of this Court by directing the parties to",,,,
maintain status quo but at the same time, has even restrained the State from inducting the third parties on the lands which were the subject",,,,
matters before the Apex Court. Such interim order is binding upon the parties to the proceedings but the law is equally settled that by mere,,,,
passing of an interim order staying the operation of a judgment with certain further conditions, the existence of the said judgment is not",,,,
wiped out and at the same time, for such interim order inter parties, the authority of a decision as a precedent is never undermined.Unless a",,,,
decision is set aside by the Superior Court, the said decision remains effective as a precedent though may not be binding upon the parties to",,,,
the proceeding where the superior Court has granted interim order.,,,,
Therefore, the effect of the order of stay in a pending appeal before the Apex Court does not amount to “any declaration of lawâ€",,,,
but is only binding upon the parties to the said proceedings and at the same time, such interim order does not destroy the binding effect of",,,,
the judgment of the High Court as a precedent because while granting the interim order, the Apex Court had no occasion to lay down any",,,,
proposition of law inconsistent with the one declared by the High Court which is impugned.â€,,,,
[Emphasis Supplied],,,,
The two investor companies are also not accused of any scheduled offence for the relevant time period except one of the four companies, namely",,,,
M/s Shalini Holdings Ltd., is named an accused in criminal complaint filed by SFIO u/s 420 read with 120-B of the Indian Penal Code for showing",,,,
incorrect figures in the balance sheet for the FY 2009-10.,,,,
It has come on record that Shalini holdings Ltd. (a BSE listed public company) had invested in the Appellant No.1 in the FY 2008-09. The Balance,,,,
Sheet of Shalini Holdings Ltd. is prepared by independent professional auditors in compliance with SEBI guidelines, as it is a listed company on the",,,,
BSE. There is no adverse report even in the case of M/s Shalini Holdings Ltd. for the period when the said transactions in the attached property are,,,,
said to have taken place.,,,,
The Respondent in its reply has taken a plea for the first time that “Further where the investigation under PML Act found that there are,,,,
interconnected transactions in money laundering one or more such transactions is or are proved to be involved in money laundering the presumption,,,,
enumerated under Section 23 of the PML Act come into picture…â€.,,,,
Section 23 of the PMLA provides for a rebuttable presumption to be proved to the satisfaction of the Adjudicating Authority. But the Respondent,,,,
never took this plea before the Adjudicating Authority and the Impugned Order is also not based on such presumption u/s 23 of the PMLA.,,,,
In the case of interconnected transactions in money laundering, one or more transactions is/are to be proved to be involved in money laundering as",,,,
basis to presume money laundering in respect of other transactions. Section 3 of The Indian Evidence Act defines â€",,,,
“Proved†â€" A fact is said to be proved when, after considering the matters before it, the Court either believes it to exist, or considers",,,,
its existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists.",,,,
It is stated on behalf of appellant that the Respondent has failed to adduce any such evidence/documents proving a interconnected transactions to,,,,
be involved in money laundering. Prima facie, it appears that the Respondent has tried to interconnect the present matter with the case of Jagat",,,,
Projects Ltd., however it is an admitted position that the last investment in Appellant No.1 was received on 04.06.2008, whereas the company Jagat",,,,
Projects Ltd. did not even exist then and was not even incorporated.,,,,
In the light of above, the impugned order is passed without application of law and facts involved in the matter. The property was attached in haste,",,,,
possession is taken in haste (without compliance of mandatory provisions). The issue raised by the appellant has not been legally dealt with or decided.,,,,
Thus, as far as attachment of property is concerned, the attachment stands quashed. The appeal is allowed by set-asiding the impugned order in",,,,
respect of attached property in question. But the same is subject to the conditions that the appellant without prejudice shall deposit a sum of Rs. Ninety,,,,
Lakh (the alleged proceeds of crime, if any) with the respondent within two month in view of the allegation about accommodation entries as alleged",,,,
against the appellant.,,,,
The appellants may move the petition for modification of this condition if it is established that those for sum of Rs. 19,00,000/- (Rs. Ninety Lakhs)",,,,
were genuine transactions with the three investors. The appeal is partly allowed by modification of impugned order. Accordingly, provisional",,,,
attachment order is quashed.,,,,
No costs.,,,,