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Judgment
,,,
FPA-PMLA-1332-1333/DLI/2016, FPA-PMLA-1930-1931/DLI/2017, FPA-PMLA-1952/DLI/2017, FPA-PMLA-1957/DLI/2017, FPA-",,,
PMLA-2428/DLI/2018,,,
First two appeals being no. FPA-PMLA-1332/DLI/2016 & FPA-PMLA-1333/DLI/2016 have been filed against the order dated 10.05.2016 passed,,,
in O.A. No. 41/2015 whereby the application filed by the respondent u/s 17(4) of the Act was allowed. The prayer of retaining of documents and,,,
electronics equipment (which were seized from the premises of the appellants) were allowed to be retained till further investigation.,,,
The second set of appeals no. FPA-PMLA-1929-1930-1931/DLI/2017, FPA-PMLA-1952/DLI/2017, FPA-PMLA-1957/DLI/2017 & FPA-",,,
PMLA-2428/DLI/2018 have been filed against the common order dated 4.8.2017 by State Bank of Patiala which is now merged with the State Bank,,,
of India. Both banks were having the same stand.,,,
It is the admitted position that common order passed in O.A. No. 41/2015, on 10.05.2016, the prosecution complaint has only filed in July, 2018",,,
where even the Respondent was not able to remove the objection for one year the Special Court.,,,
Counsel for the appellants have argued their respective appeals as per their case set up in their appeals.,,,
The brief facts are that CBI, New Delhi registered FIR dt. 24th August, 2015 which inter alia revealed that ZHC incorporated and registered with",,,
ROC Mumbai, having registered office in Mumbai is involved at the offences under Section 120B, 420, 467, 468 & 471 of IPC and PC Act from 2010",,,
to 2013. This company in association with persons holding positions of public office in connivance with others committed certain criminal Acts. These,,,
persons included Shri Ashok Gehlot the then Chief Minister of Rajasthan, Shri Duru Miya, then Health Minister, Government of Rajasthan, the then",,,
Director NRHM, Rajasthan and others companies Directors are Sachin pilot, Shri Karti P. Chidambaram, Shri Ravi Krishna, Shri Shaffi Mather and",,,
Ms. Sweta Mangal.,,,
The respondent case is that after registering the FIR by CBI was it found that the said company was involved in generation of funds to the tune of,,,
Rs. 6.44 crores illegally while running “108 Ambulance Service†in Rajasthan and the offence are punishable under certain sections of IPC. The,,,
case relates to award and execution of contract for operation of Ambulance Service in different Districts of Rajasthan by ZHC between 2010-2013.,,,
Under section 17 of PMLA searches were carried out on registered and corporate offices of the company and residence of its MD Shri Naresh Jain,,,
in Mumbai resulting in seizure of material crucial for appropriate and logical investigation of the offence of money laundering. Searches continued on,,,
25.11.2015 and during the searches documents were also seized which are necessary for investigation.,,,
It is stated by the respondent that from the documents found during searches, it came to the notice that the company is operating in one other states of",,,
India viz. Punjab, Orissa, Bihar, Jharkhand and Kerala. It was also noticed that company has received foreign investments from many entities and",,,
total funds from overseas sources were of the order of Rs. 21.25 crores during 2004-2010. Shareholders thus are beneficiaries to the illegal gains,,,
along with the said company these issues are being investigated further along with other financial transactions. Seizure under section 17(1) of PMLA,,,
is relevant for further investigation under the said Act and therefore required to be retained in view of the fact that investigation is still going on.,,,
By order dated 10.05.2016, the respondent application was allowed for retention of documents and equipment.",,,
By invoking the second proviso of Section 5 (1) ECIR was registered against the appellant including appellant at Sr. No. 3 to 8 of the title of the,,,
order.,,,
After investigation CBI has filed charge sheet before the Ld. Special Judge, CBI at Jaipur in the said case against M/s Ziqitza Healthcare Ltd",,,
(hereinafter referred as ZHL), Sh. Ravi Krishna, Mrs. Sweta Mangal and Shri Amit Antony before Special Judge, CBI at Jaipur. Ld. Special Judge",,,
has taken cognizance on said charge sheet. As per CBI, further investigation is under progress in the said case and supplementary charge sheet will",,,
be filed by them. Copy of the charge sheet filed by CBI is already on record as filed by the Appellant. The main allegation were summarized as,,,
under:-,,,
(i) Investigation revealed that a criminal conspiracy was hatched, in pursuance of which M/s ZHL, dishonestly, fraudulently and deliberately, prepared",,,
forged documents and used these forged documents as genuine as M/s ZHL was not eligible as per the eligibility criteria of the RFP regarding annual,,,
turnover of Rs. 20 crore in any one of the last 3 years. But with the added revenues of International Centre for Emergency Techniques (ICET) (the,,,
Consortium Partner), M/s ZHL was technically qualified for opening of financial bids. It is also pertinent to mention here that only Dr. Subrato Das",,,
was authorized to sign on behalf of ICET and the Annual Returns of ICET for the year 2006/07/08 bears an endorsement “This statement is,,,
confidential and for the sole purpose of presenting the bid for tender no. RITES/Training/ICB-MoR/2009†meaning thereby that this report could not,,,
have been used in any other tender except for the specified tender. There is no mention of formation of a consortium with ICET for bidding for the,,,
operation of 108 Ambulance Service in the State of Rajasthan, in any of the Board Minutes, minutes of the Extraordinary General Meetings or Annual",,,
General meetings of M/s ZHL. The Joint Bidding Agreement dated 09.11.2009 and the letter dated 28.01.2010 for encashment of the bank guarantee,,,
created the right of accused company to participate in the bid and to be considered for award of contract and thus, the said documents fall in the",,,
category of “valuable securityâ€. Thus, by way of submission of forged documents, M/s ZHL through its CEO Smt. Sweta Mangal and the",,,
Director Sh. Ravi Krishna induced NRHM to believe the existence of the Consortium and in furtherance of the same, award the contract to the",,,
Consortium. It has also come out during investigation, that the name of ICET was dishonestly used by M/s ZHL with a sole motive of technically",,,
qualifying the tender.,,,
(ii) Investigation further revealed that as per Para 11 (10) of part A2 of RFP, any false representation or submission of incorrect information would",,,
have resulted into rejection of the bids. In this case, the bid of the consortium of M/s ZHL and ICET was also required to be rejected in view of the",,,
forgery in the documents submitted, false information and non-qualification of the eligibility criteria, if this fact would have come to the knowledge of",,,
NRHM officials.,,,
(iii) After the award of the contract, M/s ZHL took over the operations from M/s EMRI on 01.07.2010 and continued it till 07.05.2013. Before",,,
initiation of the operations, an amount of Rs. 2 Cr was paid to M/s ZHL as advance to start the operations, as provided in the RFP. It was also",,,
decided to recover the same in instalments during the operation of services by M/s ZHL.,,,
(iv) No supporting record was submitted with the bill and the bill was not verified by the Chief Medical & Health Officers (CM & HOs) of the,,,
concerned districts as decided in the meeting dated 26.07.2010. Further, photocopies of the bills in respect of the medical/non-medical consumables",,,
were enclosed with the bill for claiming payments. These facts were highlighted by the officials processing the payment. However, after processing of",,,
this bill, ""on account†payment to the tune of 50% of the bill was proposed to be made by Sh. Hanuman Prasad, the then FA, in order to ensure that",,,
the services are not disrupted.,,,
(v) It revealed that verification could not be done by the CM & HOs as the company did not submit the bills with supporting documents to the CM &,,,
HOs for verification. However, ""on account†payment continued to be made for the entire centralized period of payment till December, 2011 when",,,
the payment of the bills was decentralized to respective District Health Societies. During this period, the concerned Mission Directors of NRHM",,,
continued to make ""on account†payment to M/s ZHL in order to ensure that the emergency services are not disrupted. During July, 2010 to",,,
December, 2011 (centralized period), NRHM made payment of Rs. 32,60,99,926/- to M/s ZHL as against total claimed amount of Rs. 41,86,19,930/-.",,,
(vi) Investigation revealed that during processing of the bills by NRHM officials, several discrepancies were observed in the bills submitted by M/s",,,
ZHL viz. non-verification of the claims, non-submission of supporting records, submission of photocopy of the bills in respect of medical/non-medical",,,
consumables, non-submission of records to respective CM & HOs for verification and instances of multiple trips in the bills/supporting records",,,
submitted by the company. The instance of multiple trips came to the notice of officials of NRHM in the month of June, 2011 while examining the bill",,,
for the month of May, 2011 along with the supporting records. Earlier, such instances could not be identified as the requisite record was not available.",,,
It revealed that the company was treating each patient attended by the ambulance as individual trip by giving separate ID to every patient attended.,,,
Thereafter, while on account payment was continued to be made, an exercise was undertaken by Sh. Lalit Tripathi, the then Consultant, ISC to",,,
calculate the excess payment made to M/s ZHL on account of claim of multiple trips. The multiple trips used to enhance the trip achievement of M/s,,,
ZHL and reduced the proportionate deduction, if any, due to short fall in achievement in trip target as provided in the RFP. An amount of Rs.",,,
3,30,26,322/- was calculated as excess payment made to the company during the months of April to August, 2011 on account of multiple trips shown",,,
by the company in its supporting records. Later on, after further exercise, an amount of Rs. 4,15,88,560/- was calculated by the Comptroller & Auditor",,,
General (CAG) in its report as excess payment made to M/s ZHL due to exaggerated claims made by the company (containing multiple trips). The,,,
amount so calculated was calculated on the basis of available record and does not cover the entire period as the requisite data for the entire period,,,
was not available so as to enable NRHM to calculate exact magnitude of loss suffered on this account.,,,
(vii) After calculation of amount to be recovered on account of excess payment due to multiple trips and the salary of the staff deputed on ambulances,,,
during 01-15 July, 2010, a letter dated 25.01.2012 was sent to the CM & HOs of Alwar, Udaipur, Jodhpur, Bharatpur, Bhilwara, Nagaur, Sikar,",,,
Bikaner, Jhunjhunu and Banswara districts to recover the said amount in 10 installments. Accordingly, a recovery of Rs. 3,55,72,685/- was made on",,,
account of excess payment made to M/s ZHL due to multiple trips. However, an amount of Rs. 60,15,875/- is still remaining to be recovered as per",,,
the calculation made by department and the CAG on the basis of available record.,,,
(viii) Investigation has thus, revealed that M/s ZHL through its CEO Smt. Sweta Mangal and Director Sh. Ravi Krishna dishonestly, fraudulently and",,,
deliberately submitted inflated bills about multiple trips on the basis of wrong parameters and obtained excess payment from the Government of,,,
Rajasthan on the basis of the said bills and inducement, thereby causing a loss to the government exchequer.",,,
(ix) Later on, an audit was got conducted by NRHM in respect of the medical/nonmedical consumables used by M/s ZHL during operation of 108",,,
ambulance services in the state of Rajasthan. For this purpose, an agency namely Institute of Public Auditors of India (IPAI) was engaged. IPAI",,,
submitted its audit report and had highlighted several discrepancies including that M/s ZHL procured articles/materials amounting to Rs. 1.37 lakhs,,,
which were not covered by the terms of agreement, non-medical consumables (stationery) amounting to Rs. 1,86,727/- which were not covered under",,,
sub-head stationery but got reimbursed by ZHL, operational unit cost of Rs. 94,899/- per ambulance per month, inter alia included the cost of postages",,,
and courier services, thus, unauthorized reimbursement of Rs. 1,21,983/- on account of courier services was made to M/s ZHL etc.",,,
(x) Investigation also revealed that the company dishonestly and deliberately did not submit the requisite data in the initial period of its operation which,,,
was required for the verification of its claims, thereby rendering the Government unable to verify the claims made by the company. In furtherance of",,,
criminal conspiracy with the object to cheat the Government, the company and its CEO Smt. Sweta Mangal and Sh. Ravi Krishna, Director",,,
deliberately and dishonestly did not get the services verified from the respective CM&HOs during the entire centralized period i.e. from July, 2010 to",,,
November, 2011, as was required to be done for claiming payment from NRHM, Rajasthan, in line of the decision taken in the meeting dated",,,
26.07.2010.,,,
(xi) Investigation further revealed that the report of the CAG on the operation of 108 Ambulance Service in the State of Rajasthan was tabled before,,,
the Public Accounts Committee of Rajasthan Legislative Assembly. The PAC of Rajasthan Legislative Assembly vide its report dated 02.03.2017 has,,,
concluded that a wrongful gain has been caused to M/s ZHL by making payments on the basis of unverified claims of the company.,,,
(xii) Investigation revealed that Sh. Ravi Krishna was actively associated with the functions of the company since the beginning of the work in the,,,
State of Rajasthan. He was the Director of M/s ZHL at the relevant time. He was also responsible for the completing the documentation with ICET,,,
as revealed from the mail dated 04.11.2009 of Sh. Shaffi Mather, Founder Director of M/s ZHL. Sh. Ravi Krishna had also attended meetings with",,,
NRHM as a representative/director of M/s ZHL and knew about the forgery in the documents submitted by M/s ZHL as well as the cheating in the,,,
operation by treating each patient attended as an individual trip. He as Director, had also received remuneration of Rs. 50,61,520/from M/s ZHL",,,
during FY 2012-13.,,,
(xiii) Investigation revealed that Smt. Sweta Mangal was the co-executants of the forged documents viz. Joint Bidding Agreement dated 09.11.2009,,,
and Power of Attorney for the Lead Member of Consortium dated 14.11.2011 which were filed by M/s ZHL along with its bid and enabled M/s ZHL,,,
to be selected in the bid. She was also the executants of the contract with Govt. of Rajasthan and was the CEO of M/s ZHL at the relevant time. She,,,
was handling the operations of the company in the State of Rajasthan on regular basis and had attended numerous meetings with NRHM officials as,,,
the representative of the company both before and after execution of the contract. Treating each patient as an individual trip was also her brain child,,,
and she was aware of the malpractices done by the company in submission of the bids as well as in subsequent monetary claims. She, as CEO, had",,,
also obtained remuneration of Rs. 1,23,32,400/- during FY 2010-2013 (during the period of operation of M/s ZHL in the State of Rajasthan) from M/s",,,
ZHL.,,,
(xiv) M/s Ziqitza Healthcare Ltd. being a legal entity also gained out of the offences of cheating and the forgery in the document enabled the company,,,
to grab the contract for which it was not eligible.,,,
(xv) Since M/s ZHL did not submit the record for three months after starting operation of ambulances and complete record for entire centralized,,,
period was not available, the exact magnitude of loss suffered due to multiple trips could not be ascertained. It is pertinent to mention that after",,,
calculating the excess payment made to M/s ZHL on account of multiple trips during a part of the centralized period, a recovery of Rs. 3.55 crores",,,
was affected by NRHM. However, Rs. 60,15,875/- was remaining to be recovered as per CAG calculation on the basis of available material.",,,
Therefore, a loss of Rs. 60,15,875/- has been caused by M/s ZHL on account of multiple trips. A loss of Rs. 1,21,983/-on account of courier charges",,,
and Rs. 1,37,162/- on account of procurement of articles/materials not covered by the terms of agreement has also been caused by M/s ZHL to",,,
Rajasthan Government.,,,
Details of FD kept with State Bank of Patiala- Annexure A-1,,,
FD A/c No.,FD Date,Amount,"Date of
Maturity
65253807502
after maturity new
No. 65282448683",7.Apr.2017,"9,900,000",8.Apr.2018
65253807535
after maturity new
No. 65252448694",7.Apr.2017,"9,900,000",8.Apr.2018
65253807580
after maturity new
No. 65282448729",7.Apr.2017,"9,900,000",8.Apr.2018
65253807614
after maturity new
No. 65282455758",1.Apr.2016,"9,900,000",8.Apr.2018
65253807647,1.Apr.2016,"2,900,000",1.Apr.2017
65274073857,31.Oct.2016,"5,000,000",1.Nov.2017
65274073813,31.Oct.2016,"7,500,000",1.Nov.2017
65265904386,21.Sep.2016,"1,200,000",22.Sep.2017
65266188611,26.Sep.2016,"9,800,000",27.Sep.2017
65266220099,27.Sep.2016,"9,700,000",28.Sep.2017
65274070540,1.Nov.2016,"800,000",2.Nov.2017
65274440989,8.Nov.2016,"1,000,000",9.Nov.2017
Total â€" 12
FD’s",,"Rs. 7,75,00,000/- After
renewal present value
(Rs. 80591575.00/-)",
16943600005894,25.Mar.2016,"1,171,673",4.Apr.2017
16943600006167,12.Jul.2016,"5,000,000",12.Jul.2017
16943600006170,12.Jul.2016,"10,000,000",12.Jul.2017
16943600006205,4.Aug.2016,"205,000",4.Aug.2017
Total,,"2,13,76,673/-",
It is submitted on behalf of respondent that on the basis of FIR dated 10.6.2014 the department has made searches on the premises of the accused,,,
company/persons namely on Mr. Ravi Krishna, Ms. Sweta Mangal and M/s. Ziqitza Health Care through its Director wherein some documents &",,,
electronic record was seized. In respect of the said seizure OA was filed before Adjudicating Authority, and retention was allowed.",,,
Thereafter on reasonable belief that properties are involved in money laundering provisional attachment order was passed on 31.3.2017 wherein,,,
movable and immovable properties of the accused was attached.,,,
The attachment was confirmed by Adjudicating Authority vide Order dated 04.08.2017.,,,
It is stated on behalf of respondent since prior to 19.04.2018 when Section 8(3)(a) was amended, there was no time limit for filing prosecution",,,
complaint, hence after the amendment the prosecution case in respect of all the accused persons namely M/s. Ziqitza Healthcare, Sweta Mangal, Ravi",,,
Krishna, Naresh Jain & other persons was filed within the stipulated time of 90 days in the Special Court at Jaipur, Rajasthan on 18.07.2018 for the",,,
offence of money laundering and confiscation of the properties and the said persons are named as accused in the prosecution complaint.,,,
It is submitted that the said prosecution is in respect of both actions of the department i.e. seizure and attachment. That the documents seized at,,,
the time of search are relied upon documents for the purpose of trial and are evidence required in original before Special Court, PMLA wherein",,,
prayer is made for confiscation of properties involved in money laundering.,,,
It is not denied that the prosecution case was thereafter listed on different dates i.e. 18.7.2018, 23.8.2018, 26.9.2018, 29.10.2018, 7.1.2019,",,,
28.2.2019, 10.3.2019, 5.4.2019, 2.5.2019, 24.5.2019, 14.6.2019 and the matter was listed on 6.7.2019 and 2.8.2019 and it was requested only 2019",,,
which was almost after two years as complaint no. 2/2019.,,,
The case of Shri Naresh Jain, Ziqitza Health Care Ltd. in appeal no. FPA-PMLA-1332/DLI/2016 and other set of appeals are as under:-",,,
(a). The Appellant Shri Naresh Jain is the Managing Director of a company named Ziqitza Health Care Ltd. The appellant on 30th June, 2004 was in",,,
the Board of Director and thereafter continued to work as an Executive Director till 2007. In the month of October, 2007 the appellant shifted to",,,
Reliance Capital Ltd., and worked therein till 2012. Thereafter on 07.04.2015, the appellant was appointed as the MD and CEO of Ziqitza Health Care",,,
Ltd.,,,
(b). The company was incorporated in the year 2002 with the primary objective of rolling out a nationwide network of Life Support Ambulance,,,
Service that would provide basic life support, advance life support and patient transfer services. The first initiative of the Company was in the form of",,,
“Dial 1298 for Ambulanceâ€. Under the 1298 model, the Company provided ambulance services under the pay per use model to patients and a",,,
fixed price contracts to hospitals, government bodies and events.",,,
(c). In September, 2008, “108 Ambulance Services†was launched in Rajasthan by Hon. CM Vasundhra Raje Scindia operated by EMRI. Under",,,
the said scheme on January 2009, Government of Rajasthan issued invitations to tenders, mentioning the same technical specifications as mentioned in",,,
the MOU between EMRI and GOR.,,,
(d). On 07/04/2010, an agreement for operation of ambulances between Appellant No. 1 Company and Government of Rajasthan, after Appellant No.",,,
1 company was found lowest bidder amongst three technically qualified bidders. The Appellant No. 1 Company was awarded the contract for running,,,
“108 ambulance services†in Rajasthan from 6th Aprilâ€10 to 6th Aprilâ€13, at Rs. 94,899/- per ambulance per month which was lower than",,,
other two technically qualified bidders. That on 1/07/2010, Appellantâ€s Company successfully took over the operations of 164 ambulanced under",,,
“108 service†from GVK-EMRI. The aforesaid allotment was transparent and competitive, it was a multi-party bid, out of which three bidders",,,
were technically qualified and Appellantâ€s Company was the lowest bidder. Hence, the Company was qualified in the technical threshold and also",,,
was with the lowest bid. It is pertinent to state that GCK-EMRI MOU which existed prior to Company taking over the operation had GPS as a,,,
technical requirement which was carried on for the expression of interest in which Company finally succeeded. All subsequent tenders issued by,,,
NRHM. Rajasthan also has the requirement for installation of GPS/GIS/GPRS.,,,
(e). At the time of the takeover, majority of the 164 ambulances were not road worthy. They required significant maintenance work. The estimated",,,
cost of repair of the vehicles came to around Rs. 90 Lakhs, out of which NRHM passed an amount of Rs. 54.29 Lakhs. NRHM authorised ZHL to",,,
get the repair work as per approved estimate. Till date this amount has not been reimbursed by Government of Rajasthan.,,,
(f). After the Company took the responsibility of administration and functioning of Ambulance service in the State, NRHM was action in an",,,
irresponsible fashion. Since inception of the project, there were invariable delays every month in clearing invoices, without any valid reason. Only part",,,
payment was being made “on account†basis for invoices submitted without any explanation being given.,,,
(g). The company never complained about the delayed payment, but when one Mr. Lalit Tripathi demanded commission for release of payment from",,,
NRHM, the company was compelled to lodge an Complaint dated 19/09/2011 against Mr. Lalit Tripathi alleging demands for commissions for release",,,
of payments from NRHM. It is pertinent to mention that the IEC director in his report dated 21/11/2012 clearly stated that the complaint of Appellant,,,
No. 1 company against Mr. Lalit Tripathi is found to be correct. Further that despite being summoned, nine times to appear before the IEC director,",,,
and give his version, Mr. Lalit Tripathi did not appear at all.",,,
(h). Even after filing of the Complaint, when no payment was released by NRHM. The Appellant No. 1 company finding no other alternative",,,
mechanism of demanding their lawful right on their payment, made an application for referring the disputes to Dispute Resolution Committee on",,,
25/10/2011 for Settlement of Disputes as payments were held post submission of written complaint against Lalit Tripathi, Consultant to NRHM,",,,
Rajasthan. The non-payment of invoices was one of the points raised in the dispute resolution proceeding before the Dispute Resolution Committee.,,,
The Dispute Resolution Committee after detailed examination, on 16/11/2011 directed payment of 80% of the invoice was to be released within 15",,,
days of submission every month and 20% was to be released after deduction of penalties if any. However, despite this award by the Dispute",,,
Resolution Committee NRHM had not paid the 80% of the invoice.,,,
(i). As per the aforesaid payment was not made by NRHM under the aforesaid award, the Company was constrained to move for execution of the",,,
award before a Civil Court of competent jurisdiction in Jaipur. While the execution petitions was still pending before the Civil Court, NRHM moved a",,,
writ petition before the Honâ€ble High Court under Article 227 after the Civil Court dismissed their objections filed against the execution petition,,,
moved by the Company.,,,
(j). It was NRHM on 25.03.2013 which seeked the company consent for extension of the contract for 3 more months. On 4/04/2013, the company",,,
gave conditional acceptance to the request for extension of the contract period for three months. However, these conditions were never accepted by",,,
NRHM Rajasthan. Despite NRHM not accepting the conditions of the company, still in good faith the company continued to operate the 108 services",,,
till 5/04/2013. Despite this, the last date of operation of the ambulance as per the contracted term was extended by NRHM for a further period of 3",,,
months on 6/04/2013. The Company expressed its inability to operate further unless payment released as per the terms and conditions of the contract.,,,
(k). On 7/05/2013 NRHM suo motu decided to take charge of office premises, control room, all data and give possession of all ambulances to",,,
CMHOâ€s Company handed over all mentioned premises and ambulances on a “as is where is†basis along with all ambulance spares procured,,,
by ZHL at its own cost. On 20/06/2013 a demand note of Rs. 6.5 crore was raised by NRHM on the Company based on an inspection of ambulances,,,
done by GVK EMRI, who stands as a known business competitor in this field.",,,
(l). NRHM illegally on 30/08/2013 attempted to invoke the bank guarantee submitted by the Company as performance security after contract was,,,
over. That on 4/09/2013 the Company filed Writ Petition before Honâ€ble High Court of Rajasthan at Jaipur for stay on invocation of Bank,,,
Guarantee. The Honâ€ble High Court of Rajasthan on 10/09/2013 was pleased to stay the invocation of Bank Guarantee letter. On 19/02/2014,",,,
thereafter NRHM filed Counter Affidavit wherein it stated that NRHM owes Ziqitza Rs. 2,30,23,887/- and that as per the notice of invocation Ziqitza",,,
owes NRHM Rs. 6.5 crores. That on 10/12/2014, NRHM changed its stand and filed an additional affidavit stating that the actual expense of repair",,,
was only Rs. 2,68,07,240,80/- and not Rs. 6.5 crores as demanded earlier. This shows the change of stand and also proves that the demand made by",,,
NRHM was illusionary and improper.,,,
(m). In the meanwhile on 10.06.2014 an FIR was registered under Section 120-B, 420, 467 and 471 of IPC, registered at Police Station Ashok Nagar,",,,
District Jaipur (South). Pursuant to the request of the Government of Rajasthan, Home (Gr. V) Department vide Notification No. F.19 (99) Hoe",,,
5/2014 dated 21.04.2013, the Ministry of Personal Public Grievances and Pension (Department of Personnel and Training), the Government of India",,,
issued Notification F. No. 228/73/2014-AVD-II dated 30.07.2015, by which the aforesaid FIR was transferred to the central Bureau of Investigation",,,
(CBI). That on 24.08.2015, the CBI registered a false and baseless FIR NO. 217015A0011 dated 204.08.2015 alleging the commission of offences",,,
under Section 120-B, 420, 467, 468 and 471 of IPC during the period of 2010 to 2013. The allegations in the FIR are as follows:-",,,
a. That the company is association with persons holding positions of public office in the Rajasthan state government such as Shri Ashok Gehlot (The,,,
then Chief Minister of Rajasthan), Shri Duru Miya (the then Health Minister) Government of Rajasthan.",,,
b. The directors of the Company as per the FIR are Shri Sachin Pilot, Shri Karti P. Chidambaram, Shri Ravi Krishna and Ms. Sweta Mangal.",,,
c. The company is involved in generation of funds to the tune of Rs. 6.44 crores illegally while running “108 Ambulance Service†in Rajasthan.,,,
The case relates to award and execution of contract for operation of Ambulance services in different districts of Rajasthan by ZHC between 2010-,,,
2013.,,,
(n). Solely on the basis of the aforesaid FIR and without application of mind as to whether positive steps are taken by the company for claiming the,,,
proceeds from NRHM as untainted money, and Original Application was filed before the Adjudicating Authority under the Prevention of Money",,,
Laundering Act, 2002 as O.A. No. 41/2014.",,,
(o). On 28.08.2015, CBI conducted search raids in the office of the company and three of its directors. On 29.08.2015 to 3.09.2015, notices were",,,
issued to Mr. Naresh Jain (CEO) to appear before CBI and CEO appears before them and submitted all the required documents. It is submitted that,,,
Naresh Jain was also made a party with the proceeding despite the fact that Naresh Jain was appointed as the Director in 30 June 2004, however, he",,,
resigned from the company in October 2007 and thereafter he has not obtained any payment from the company till 2014 (which is alleged to be the,,,
period between which the alleged crime has taken place) as he was not a part of the company and only on 7.4.2015 he has become the MD and CEO,,,
of the company. Despite this fact, Naresh Jain is held vicariously responsible for the criminal liability, if any, committed by the company. In criminal",,,
cases the principle of vicarious liability has no application still its seems that the Enforcement Directorate without application of mind has applied the,,,
principle of vicarious liability to Mr. Naresh Jain who was not receiving any payment from the company at the alleged period when the offence was,,,
committed.,,,
(p). On 9.9.2015, summons was issued to the Managing Director of the Company, the appellant herein. Legal representative of the company presents",,,
before Enforcement Directorate and submits all the documents required which are the same documents. Thereafter a second summon to the appellant,,,
was issued on 14.10.2015. Thereafter summons were issued through its letter dated 24.09.2015 in reply to summon issued in ECIR/1/HIU/2015 dated,,,
9.9.2015, the answering respondents, Managing Director through his counsel had requested the Enforcement Directorate to inform in writing the",,,
following which have not been done till today.,,,
(i). As to what nature of crime is being investigated against the answering respondent.,,,
(ii). Under what authority/jurisdiction the same is being investigated.,,,
(iii). The material based on which the Enforcement Directorate (ED) has based its opinion to issue summons.,,,
(iv). The reasons based on which the ED have reasonable belief to investigate against the answering respondents herein.,,,
(q). All these documents were supplied by the answering respondent to the Directorate of Enforcement through its Managing Director in reply to the,,,
notice of summons which was replied through counsel. The same documents were again asked for and it was pointed out that the same documents,,,
have already been supplied. Subsequently after supply of these documents the same documents again have been seized by the Directorate of,,,
Enforcement form the office of the Appellant, and most importantly the same are public documents available on the web site of the Registrar of the",,,
Companies.,,,
(r). On 24.11.2015, the Directorate had taken actions under Section 17 of PMLA Act, 2002 against the Company and its Managing Director, Shri",,,
Naresh Jain in Mumbai and seized the files alleging it to be crucial for investigation of the offences of money laundering. The said documents seized,,,
are under investigation. The said documents were not at all required to be seized as the same were either supplied by the Company or were already in,,,
the public domain.,,,
The case of SBI in its appeal Nos. FPA-PMLA-1952/DLI/2017 and FPA-PMLA-2428/DLI/2018 in OC 769/2017 filed Bank of Patiala.,,,
The fixed deposits attached by the Enforcement Director (ED) have been taken as margin money for the Bank Guarantee (BG) issued by the,,,
appellant bank as performance security for the contract, on which the bank has exclusive charge and therefore does not fall within the purview of",,,
“proceeds of crime†as defined u/s 2(1)(u) of the Act.,,,
21.1 The appellant bank being the secured creditor has priority over the rights of any Central or State Government. In case of the release of the bank,,,
guarantee by this Tribunal, the appellant bank will continue to hold them as margin money for the BG issued by the bank till their maturity date or they",,,
will be used for recovering its dues of Rs. 37.97 crores as on 25.07.2018. The amount being released by this Tribunal will be utilised towards the dues,,,
of the bank and the amount will not be released to the company.,,,
21.2 This Tribunal has held in FPA-PMLA-2121/DLI/2017 in the case of SBI vs Joint Director dated 06.02.2018 that the bank cannot be asked to,,,
wait till the trial/proceedings are over.,,,
21.3 The money flow demonstrating the amount of money received into the companyâ€s account along with source of fund for the fixed deposit,,,
receipt from the account of the company which was maintained with Dhanlaxmi Bank, Mumbai, in addition to the funds directly received in cash",,,
credit account of the company with the Appellant bank. The bank has provided the fund flow towards the FDRs in question in Annexure A-1.,,,
21.4 There is no material placed on record that the appellant bank is involved in the offence of money laundering. Further, there is no “reason to",,,
believe†filed by the ED before this Tribunal in support of the contention raised by the ED in its reply are denied specifically. It is incorrect that the,,,
proceeds of crime has been parked with the appellant bank or is in direct possession or control of the bank.,,,
21.5 For making such claim or to project proceeds of crime as tainted, the “knowledge†of tainted nature i.e. the property being proceeds of crime",,,
derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence, would be necessary, which is lacking in the",,,
present case against the bank.,,,
21.6 The appellant bank has not received any cash deposit into the account of the company maintained with the appellant bank. The bank has granted,,,
Cash Credit limit of Rs .5 crores and Bank Guarantee of 28.63 crores and there is an outstanding of Rs. 4.79 crores in CC account and Rs. 31.18,,,
crores in BG from the company as on 25.07.2018. The bank being the secured creditor has priority over the rights of the Central or State Government,,,
or any other local authority.,,,
21.7 The second proviso of section 5 of the PMLA Act reveals it differently that the rest of the section and has additional checks and balance as the,,,
word “money laundering†is used and no “proceeds of crimeâ€. Therefore apart from merely suggesting that there exist proceeds of crime, the",,,
onus is on the Prosecution/Director of Enforcement to make a prima facie case of money laundering, placement and layering.",,,
21.8 As per the provision of section 8(1) and the proviso to section 8(2) of the PMLA Act, whereby the Adjudicating Authority has to rule whether all",,,
or any of their properties referred to in the notice are involved in money laundering or not and the Authority while arriving at any conclusion has to,,,
give valid reasons. Hence the ED has to take its decision on its “reason to believe†which is not produced/placed on record by ED.,,,
21.9 This Tribunal has repeatedly granted opportunities to the ED to place on record the “reason to believe†vide orders dated 12.01.2018,",,,
09.03.2018, 29.11.2018 & 09.01.2019 and has directed the IO to be present along with the documents. However, on the last date of hearing neither",,,
the Counsel for the Respondent was present nor the IO was present in compliance of the order dated 24.05.2019. This Tribunal observed that since,,,
the ED had sought various adjournments and a last opportunity was granted and the matter was being argued by the Appellant.,,,
21.10 As per the order dated 18.01.2019, since the ED has failed to produce the records particularly the “reason to believe†in order to invoke the",,,
second proviso of section 5(1) which was necessary to dispose the matters, the I.O. was directed to be present and to file an affidavit in this regard.",,,
The Assistant Director by its affidavit dated 20.02.2019 has filed the affidavit which is not in compliance of the order passed by this Honâ€ble,,,
Tribunal. Since the ED has failed to proceed “reason to believeâ€, hence it amounts that there is no “reason to believe†before taking the",,,
decision/passing the impugned order.,,,
21.11 The Honâ€ble Supreme Court has decided in multiple judgements that in cases under PMLA, prosecution has to substantiate its foundational",,,
fact and the burden of rebutting any allegation does not come on the accused. In the present case, the Respondent ED has failed to establish any",,,
foundational fact for passing the impugned order dated 04.08.2017 and has erroneously confirmed the provisional attachment order.,,,
Case of Dhanlaxmi Bank Ltd. in its appeal no. FPA-PMLA-1957/DLI/2017,,,
The Ziqitza Health Care Ltd. through direction had sanctioned the credit facilities namely Bank Guarantee facilities, Term Loans Cash Credit Limit for",,,
working capital limit (WC) to them in the order dated 4.8.2017. Currently, the Appellant Bank has only a Cash Credit (CC) Limit of Rs. 4 crores",,,
which is being operated regularly.,,,
22.1 The Appellant Bank has opened account to the sanctioned credit limits and permitted to avail it as per guidelines of Reserve Bank of India and,,,
obtained appropriate documents. It is further stated that at all the times, banking norms prescribed have been duly complied with without any exception",,,
and amounts came to the account have been allowed to be availed by the Respondent No. 2 company strictly as per their instructions received from,,,
time to time.,,,
22.2. It is further stated that at point of time or at any stage, the Appellant Bank has connived in any manner whatsoever with Respondent No. 2",,,
Company and therefore the provisions of Money Laundering Act, 2002 will neither be applicable nor attracted so far the banking activities and",,,
operation of account is concerned.,,,
22.3. It is further stated that Appellant Bank has acted always in a transparent manner under the guidelines of apex regulatory authority (Reserve,,,
Bank of India) and none of the officials of the branch has connived or acted in any manner to facilitate any unusual activities while conducting or,,,
operating the account by Respondent No. 2 Company.,,,
22.4. The impugned order dated 4.8.2017 has totally ignored the law laid down in the case of C. Chellamuthu Vs. Deputy Director, Prevention of",,,
Money Laundering Act, C.M.A. (MD) No. 104 to 110 of 2015 passed by the Madurai Bench of Madras High Court, which puts the onus on",,,
complainant that being the Directorate of Enforcement to verify Bank statements, and record as to how the private party did not have sufficient",,,
financial capacity to buy the property.,,,
22.5 The impugned order dated 4.8.2017 ought to have considered the law laid down in the case of Dr. V.M. Ganesan Vs. The Joint Director, the",,,
Honâ€ble High Court of Madras held that if money has been advanced, for the purchase of certain property and cannot be taken to be proceeds of",,,
crime then, after recording a finding to that effect the Adjudicating Authority is obliged to set aside the provisional attachment order.",,,
22.6. It is submitted that in the present case the Directorate of Enforcement has failed to make out a case, that the property sought to be attached is",,,
arising out of proceeds of crime, if at all any crime has been committed by the respondents.",,,
22.7. The Adjudicating Authority in the impugned order dated 4.8.2017 has failed to apply its mid to the fact that value thereof can be attached only,,,
and only after coming with final finding about the value of money laundering for which a prima facie figure can only be arrived after charge sheet is,,,
filed. In the present impugned order dated 4.8.2017, there has been no finding arrived with respect to any sum or amount of money by the",,,
Adjudicating Authority in the finding of the Adjudicating Authority.,,,
22.8. The Adjudicating Authority in the impugned order dated 4.8.2017 has failed to consider that the legislature has chosen to specifically avoid using,,,
the term “proceeds of crime†in the 2nd proviso to sub section 1 of section 5 of the Prevention of Money Laundering Act, 2002 and has used the",,,
term “and property†and “such propertyâ€. The 2nd proviso of sub section 1 of section 5 of the Prevention of Money Laundering Act is an,,,
exception to the general rule of any attachment to the only carried out in consequence of a report being forwarded to a magistrate under section 173,,,
of the code of criminal procedure, 1973 and not otherwise.",,,
22.9. It is clear that the subject matter of ED of the Respondent No. 2 Company, provisionally attached by the Enforcement Directorate and",,,
confirmed by the Adjudicating Authority vide the impugned order dated 4.8.2017. The appellants have no relation with the Rajasthan 108 Ambulance,,,
Service project as they are from the funds received by the Respondent No. 2 from the Punjab contract and therefore the Adjudicating Authority erred,,,
in not considering the said fact and mechanically, confirmed the provisional attachment order vide the impugned order dated 4.8.2017 and hence",,,
committed an error in law as well as in fact.,,,
22.10. The Adjudicating Authority has completely failed to appreciate the factum that Respondent No. 2 Company was permitted to open account,,,
with the Appellant Bank after observing and verifying all the usual banking norms such as KYC, as stipulated by Reserve Bank of India, the regulator",,,
and the highest body controlling the financial portfolio of the country as a whole.,,,
22.11. The Adjudicating Authority has not applied his mind judicially and failed to consider that charges had already been credited in favour of,,,
Appellant by making lien on the FDs more specifically mentioned hereinabove and hence, the Applicant Bank is a secured creditor. The Adjudicating",,,
Authority has simply vast its end by taking view that a charge created by a private agreement would be subject to a statutory charge as it has been,,,
held in Jitendranath Singh Vs. OL (2013) SCC 462.,,,
The matter came to be listed before the Tribunal on 13.09.2017 whereby the Tribunal issued notice and interalia passed the order granting Status,,,
Quo.,,,
(a). The matter came to be listed again on 22.09.2017 whereby time was granted to the respondents to file their replies. Interim orders were directed,,,
to continue.,,,
(b). No reply was filed by the Respondent ED. Therefore again 6 weeks time was granted for the same on 12.01.2018. It was further directed to the,,,
Respondent ED, by this Honâ€ble Tribunal to supple a copy of the “reason to believe†in a sealed cover. The said reason to believe was never",,,
provided to the Appellant.,,,
(c ). The reply by the Respondent ED was not filed and it was stated at bar, on 09.03.2018 that the same would be filed during the course of the day.",,,
Substantial arguments were advanced on behalf of the Appellant as no copy of reason to believe was ever produced nor copy given. It was also,,,
stated by the counsel for the Respondent ED that copy of the “reason to believe†was not available with her and therefore this Tribunal may,,,
summon the file from the Adjudicating Authority on the next date of hearing i.e. 27.07.2018.,,,
(d). Reply was filed by the Respondent ED on 27.07.2018 and time was granted to the Appellant to file rejoinder. Interim orders were directed to,,,
continue.,,,
(e ). The Appellant filed its rejoinder on 19.09.2018 as well as written submissions with an advance copy of the same to the counsel for the,,,
Respondents.,,,
(f). The matter came to be listed before the Tribunal on 29.11.2018 and final arguments started and inter alia the issue of the exercise of powers,,,
under the 2nd proviso to sub section (1) of Section 5 not fulfilling the ingredients as mandated by the said 2nd proviso was agitated when this Honâ€ble,,,
Tribunal was pleased to record “no envelope is available regarding the “reason to believeâ€. Registry will issue the reminder for the next date of,,,
hearing and also for the reasons to believe.â€,,,
(g). “Reason to believe†was not produced by the Respondent on 09.01.2019 before this Tribunal and it was stated that the counsel for the,,,
Respondent will take instructions from ED as well as the Adjudicating Authority regarding the same. After hearing the arguments on behalf of the,,,
Appellant for some time, the matter was posted for 18.01.2019 for final arguments.",,,
(h). Despite specific orders of this Tribunal, the Respondent ED failed to place on record the “Reason to believeâ€. Therefore this Tribunal passed",,,
inter alia the following order:-,,,
“...Despite orders dated 12.01.2018, 09.03.2018, 29.11.2018 and 09.01.2019, ED and Adjudicating Authority have failed to produce the records",,,
containing particularly the “reason to believe†in order to invoke the second proviso of Section 5(1). The same is necessary in order to dispose of,,,
the above mentioned matters. One final opportunity is granted to both the authorities to produce the original records on the next date of hearing. The,,,
Investigating Officer shall also remain present in person on the next date and explain about the non-compliance of the orders passed by this Tribunal.,,,
He should file an Affidavit in this regard by the next date......â€,,,
(i). On 26.02.2019 the Respondent for the first time produced the record as directed by this Tribunal, however the affidavit to be filed by the",,,
Respondent ED in terms of the order dated 18.01.2019, was not filed.",,,
(j). The appeal was argued on behalf of the Appellants. Counsel for the Respondent admitted on 02.04.2019 that no separate reason to believe were,,,
ever recorded hence not been presented.,,,
It is pained to notice, how the orders of this tribunal are not been complied despite of directions. The orders are breached left and right without",,,
giving any respect. There is no valid justification is given not to comply the orders during hearing of appeals.,,,
It is as essential ingredients to pass order under the 2nd Proviso to Section 5(1) of PML Act was not fulfilled, the attachment has to go. Even at",,,
the stage of search and seizure under Section 17 of the Act, the separate reason to believe were to be recorded which is mandatory. The same were",,,
neither produced nor filed.,,,
Therefore, the Adjudicating Authority by the Impugned Judgment has erred in failing to recognise the legitimate claim of the Appellant at the stage",,,
of confirmation of the PAO itself as the Appellant Bank is a victim.,,,
Ingredients of S. 8(1) of the Act are not satisfied.,,,
Under Section 8(1), upon receipt of a Complaint U/s 5(5) of the Act, if this Authority has reason to believe that any person has committed an",,,
offence under section 3 or is in possession of proceeds of crime, he 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 U/s 5(1) of the Act.",,,
The fact that the Appellant along with the other Consortium Lenders have a mortgage on the attached properties and have provided facilities against,,,
the security of such attached Properties cannot and does not fall within the purview of Section 8(1) of the Act. Consequently, the notice U/s 8(1) of",,,
the Act as was issued to the Appellant as Lead Bank of Consortium Lenders was bad in law and hence also liable to be set aside.,,,
The words “reason to believe†used in S. 8(1) of the Act cast an onerous duty on the Adjudicating Authority, while deciding to act under the",,,
said Section and before issuance of notice under Section 8(1) of the Act. The Honâ€ble Supreme Court and various Honâ€ble High Courts have held,,,
that “reason to believe†is not the same thing as suspicion or doubt and merely seeing cannot be equated to believing. “Reason to believe†is a,,,
higher level of state of mind. A person must have reason to believe if the circumstances are such that a reasonable man would, by probable reasoning,",,,
conclude or infer regarding the nature of the thing concerned. Further, at the initial stage for believing the existence of a thing, condition or a statement",,,
of fact, one would collect information and then examine the information and come to a final conclusion on the basis of that information, that such a",,,
thing, condition or statement of a fact exists. All these ingredients are pre-requisite for forming an opinion based on “reason to believeâ€.",,,
Reasons to believe,,,
Counsel appearing on behalf of ED submits that it is not necessary to record the reasons to believe prior to passing the provisional attachment,,,
order. It can only be recorded in respect of provisional attachment order itself. No separate reason to belief were recorded by invoking second proviso,,,
which can only be invoked in emergency situation.,,,
Copy of the same is not to be served to aggrieved party even at the stage of arguments in the main appeal or any subsequent proceedings.,,,
These cannot be shown to the appellant.,,,
The guidelines of recording the reason to believe have been laid down in various judgements of Apex Court and High Courts. It is held time and,,,
again by the said Honâ€ble Courts directing that the approach should be not the subjective satisfaction of the officer concerned. Such power given to,,,
the officer concerned is not an arbitrary power and has to be exercised in accordance with the restraints imposed by law. The belief must be that of,,,
an honest and reasonable person based upon reasonable grounds, the officer concerned may act on direct or circumstantial evidence but not on mere",,,
suspicion or the allegations mentioned in the FIR or charge-sheet so that the same can be scrutinized in order to verify whether they are relevant and,,,
germane or not.,,,
He cannot proceed further on the basis of opinion already formed by someone else. The officer who is supposed to write down his reasons to believe,,,
independently applying his mind in every case. It should not be merely a mechanical reproduction of the words mentioned in the statute in order to,,,
complete the formality as PMLA cases (being independent proceeding) as submitted on behalf of the respondent. If the person concerned are more,,,
than one, the officer authorized is to record the independent/separate, reasons to believe for each “person concernedâ€.",,,
If no valid reasons to believe are recorded, the issuance of notice to the “person concerned†or without going into the material and non-",,,
application of mind, the same would be considered as invalid notice. It is settled law that if the Show-Cause notice fails to fulfil the basic ingredients as",,,
laid down by a Constitutional Bench of the Honâ€ble Supreme Court inK hem Chand v. Union of India [AIR 1958 SC 300,] the Show-Cause Notice",,,
itself is bad in law. Thus, it is vitiating the proceedings. Also see another judgement in the case of Aslam Mohammad Merchant v. Competent",,,
Authority [2008 (14) SCC 186] in this regard.,,,
In the present case, copy of reason to believe has not been filed.",,,
Counsel for the respondent submits that reason to believe is not required prior to the order of passing the provisional attachment order. The attachment,,,
order shows that after recording the facts, the IO has just used the expression by repetition of language of section 5(1) in the provisional attachment",,,
order. The respondent must understand that unlike other statute. Under this Act, the burden of proof lies with person concerned under. It is virtually",,,
not possible for any party to discharge the burden of proof unless he knows the allegations and copy of reason to belief. From the submission,,,
addressed on behalf of respondent, it is clear that the respondent does not wish to show or communicate the extract of reasons to believe recorded at",,,
the stage of Section 5(1) of the Act to the aggrieved party/person concerned. The said stand of the respondent cannot be accepted as the same is,,,
against the law and against the principle of natural justice. The reason to believe must be recorded in terms of para 22 of my order.,,,
Prosecution Complaint,,,
It is stated that the respondent has filed a prosecution complaint a copy of which was not produced nor any case number was provided. This,,,
Tribunal directed the counsel for the Respondent ED to file fresh affidavit with an advanced copy to the counsel for the Appellant, disclosing the date",,,
of filing the prosecution complaint as well as the date of removal of objections before the special court. Counsel for the respondent stated that the,,,
prosecution complaint was only filed on 18.07.2018 and admitted that the same was only registered in 2019 i.e. after one year. It was stated that it,,,
took time to remove the objection. It appears that the objection were removed, after the start of arguments in the appeal. The first order for retention",,,
of documents and equipment was passed on 10.05.2016. The prosecution complaint was not filed for more than two years. The confirmation order of,,,
properties were passed on 4.8.2017. The prosecution complaint was allegedly filed on 18.07.2018 i.e. after about 11 months. The objections were not,,,
removed for one year raised by the Special Court. The same is not intent of the provision of u/s. 8(3)(a) of the Act.,,,
The conduct of I.O. was not proper and fair who does not wish to file the complaint in time, who does not wish to remove the objection for more",,,
than a year, who does not wish to comply any order passed by this Tribunal. The details of his conduct are given in the following paras:-",,,
(a) When appeal came to be listed before this Tribunal on 07.05.2019, passed inter alia the following order:-",,,
“…the IO shall remain present on the next date of hearing along with record. Copies of prosecution complaint have not been filed in view of the,,,
order passed dated 02.04.2019. let the same be filed by the next date of hearing.,,,
June 30, 2004",Naresh Jain was appointed as an Director on Board of Director.,,
Oct. 15, 2007",Worked as an Executive Director.,,
Oct. 16, 2007",Joined Reliance Capital Limited as part of Treasury Operations.,,
31.Aug.2012,"D2 quit Reliance Capital Ltd. Then joined
Transwarranty Finance Limited and worked as a consultant in Corporate
Finance.",,
7.Apr.2015,Appointed as MD &CEO of Ziqitza.,,
“Provided further that, notwithstanding anything contained in {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 authorized by him for the purposes of this section has reason to believe (the,,,
reasons for a such belief to be recorded in writing) , on the basis of material in his possession, that if such property involvedin money launderingis not",,,
attached immediately under this chapter, the non-attachment of the property is likely to frustrate any proceeding under this Act.â€",,,
An appreciation of Second proviso to Section 5 of PMLA act reveals it is differently worded than the rest of the section and has additional checks,,,
and balance as the word “money laundering†is used and not “proceeds of crime†. Therefore apart from merely suggesting that there exists,,,
proceeds of crime the onus is on the prosecution / Director of Enforcement to make a prima facie case of money laundering, prima facie case of",,,
placement and layering which in the respectful submission of the Appellant does not exist in the present matter before the burden of proof shifts to the,,,
accused/ citizens.,,,
That the second proviso to sub section (1) of Section 5 has certain ingredients and casts certain obligatory duties on the Deputy Director before,,,
invocation of the draconian provision which carves out an exception to the rule of attachment of property only after a report under section 173 of,,,
CrPC is filed. In the judgment of Shri K. Anwar Hussain Vs. Deputy decided on 27.04. 2017. The Appellate Tribunal in the judgment in paragraph 32,,,
on page 10 recorded in the following terms; The Second proviso entails the following mandatory considerations for any order under it to be valid.,,,
32“the proviso to section 5 (1) is an urgent provision to enable the deputy director to attach the properties immediately. In the present case, neither",,,
the respondent nor the adjudicating authority had justified the “immediate†provisional attachment made after almost 5 years from the initiation of,,,
proceedings by CBI in 2009 while passing the impugned confirmation order.â€,,,
“43.Thus the provisional attachment itself is bad in law and it is not a provisional attachment as envisaged in the act. The said presumptive,,,
attachment is ALSO in violation of express proviso 2 of section 5 (1) of PMLA, 2002. Here the respondent failed to record in writing his reasons for",,,
believing that the immediate non-attachment of properties will frustrate the proceedings of the crime.â€,,,
Principle of reverse burden of proof is allowed in cases like The Prevention Of Money Laundering Act, 2002, NDPS ACT, However the burden",,,
has to be specific, reasonable and dischargeable. The doctrine of Proportionality and reasonableness which are high Constitutional Mandates have to",,,
be followed. It has been held that the substance and effect of any presumption adverse to a defendant must be examined, and must be reasonable.",,,
Fairness and reasonableness of trial as also maintenance of the individual dignity of the accused must be uppermost in the court's mind. The discharge,,,
of this presumption is on a much easier scale of evidence that being the “balance of Proof â€. In the judgment in the case of Noor Aga v. State of,,,
Punjab, (2008) 16 SCC 417 : (2010) 3 SCC (Cri) 748 the Honâ€ble Supreme court has held in the following terms;",,,
“…. 60. Whether the burden on the accused is a legal burden or an evidentiary burden would depend on the statute in question. The purport and,,,
object thereof must also be taken into consideration in determining the said question. It must pass the test of the doctrine of proportionality. The,,,
difficulties faced by the prosecution in certain cases may be held to be sufficient to arrive at an opinion that the burden on the accused is an,,,
evidentiary burden and not merely a legal burden. The trial must be fair. The accused must be provided with opportunities to effectively defend,,,
himself. In Sheldrake v. Director of Public Prosecutions [(2005) 1 AC 264 : (2004) 3 WLR 976 : (2005) 1 All ER 237 : 2004 UKHL 43 (HL)] it was,,,
stated in the following terms: (WLR pp. 988-89, para 21)",,,
“21. From this body of authority certain principles may be derived. The overriding concern is that a trial should be fair, and the presumption of",,,
innocence is a fundamental right directed to that end. The Convention does not outlaw presumptions of fact or law but requires that these should be,,,
kept within reasonable limits and should not be arbitrary. It is open to States to define the constituent elements of a criminal offence, excluding the",,,
requirement of mens rea.,,,
But the substance and effect of any presumption adverse to a defendant must be examined, and must be reasonable. Relevant to any judgment on",,,
reasonableness or proportionality will be the opportunity given to the defendant to rebut the presumption, maintenance of the rights of the defence,",,,
flexibility in application of the presumption, retention by the court of a power to assess the evidence, the importance of what is at stake and the",,,
difficulty which a prosecutor may face in the absence of a presumption. Security concerns do not absolve member States from their duty to observe,,,
basic standards of fairness. The justifiability of any infringement of the presumption of innocence cannot be resolved by any rule of thumb, but on",,,
examination of all the facts and circumstances of the particular provision as applied in the particular case.â€,,,
(emphasis added),,,
It is submitted that the Respondent ED has to first establish a prima facie on the basis of materials and reason to belief that case of Money,,,
Laundering and then only any burden of proof can shift on the Appellants. In the present case not only a prima facie case has not been made out but,,,
also the following submissions of the Appellant have not been rebutted.,,,
(a) That every contract of the Appellant with every State Government under the Federal Polity of India, with health being a state subject. The",,,
contract with the government of Rajasthan entailed that money will go only in 1 account of Dhanlaxmi bank Jaipur. The money has come into,,,
Rajasthan Dhan Laxmi bank from other projects of the Appellant as the account would show than gone out.,,,
(b) The government of Rajasthan owes Rs. 18,18,19,529/-(Eighteen crores eighteen lacs nineteen thousand five twenty nine)as per the pending",,,
execution proceedings before the Additional District Judge, 10, Jaipur district.",,,
(c ) No dividend has ever been paid to the shareholders as evident from the audited balance sheet of the Appellant company. Hence all the Money,,,
which came from the Government remained in the system, hence no case even of prima facie layering, placement or projecting money in any other",,,
form which it was not of, does not arise at all and even prima facie case is not made out.",,,
(d) no intermingling of funds could be substantiated by the ED. No documents were filed or any serious arguments were advanced.,,,
(e ) the provisional attachment order or any order below record no ground for urgency provision to be invoked or makes any ground of layering or,,,
placement at all leave alone a prima facie case.,,,
(f) No case made out at all that any property is untraceable or can go untraceable.,,,
(g) Even after accepting in the provisional attachment order that ED have examined the Appellantâ€s Bank account, ED has not been able to even",,,
make out a Prima Facie case of changing the nature of money or any layering or placement.,,,
In the case of Babu v. State of Kerala, (2010) 9 SCC 189 : (2010) 3 SCC (Cri) 1179 at page 20,1 the Honâ€ble Supreme Court was pleased to",,,
record and hold in the following terms;,,,
“… (IV) Burden of proof and doctrine of innocence,,,
Every accused is presumed to be innocent unless the guilt is proved. The presumption of innocence is a human right. However, subject to the",,,
statutory exceptions, the said principle forms the basis of criminal jurisprudence. For this purpose, the nature of the offence, its seriousness and gravity",,,
thereof have to be taken into consideration. The courts must be on guard to see that merely on the application of the presumption, the same may not",,,
lead to any injustice or mistaken conviction. Statutes like the Negotiable Instruments Act, 1881; the Prevention of Corruption Act, 1988; and the",,,
Terrorist and Disruptive Activities (Prevention) Act, 1987, provide for presumption of guilt if the circumstances provided in those statutes are found to",,,
be fulfilled and shift the burden of proof of innocence on the accused.,,,
However, such a presumption can also be raised only when certain foundational facts are established by the prosecution. There may be difficulty in",,,
proving a negative fact.,,,
The case of C. Chellamuthu vs. Deputy Director, Prevention of Money Laundering Act, C.M.A (MD) No. 104 to 110 of 2015 passed by the",,,
Madurai Bench of Madras High Court, again puts the onus on complainant to verify bank statements, and record as to how the private party did not",,,
have sufficient financial capacity to buy the property Relevant pages 11( quoting Lakotia judgment 2010 (5) Bom CR 625 last 8 lines of para 11 ),18",,,
(para 23),19 (para 27),“…in the present case, the respondent failed to prove that the appellants did not have sufficient financial capacity to buy the",,,
property or that the money paid by them as sale consideration was not legitimate money derived by agricultural activities. The respondent has not,,,
made any such investigation and has not produced any such material.â€,,,
In the case of Dr. V. M. Ganesan vs The Joint Director, the Honâ€ble High Court of Madras held that if money has been advanced, for the",,,
purchase of the purchase of certain property and cannot be taken to be proceeds of crime then, after recording a finding to that effect the adjudicating",,,
authority is obliged to set aside the provisional attachment order. It is thus most respectfully submitted by the respondent No. 1, that the same",,,
reasoning would apply here as the provisional attachment order fails to give any reasoning and deserves to be set aside on this count itself. Further the,,,
money on loan from any financial institution cannot be said to be forming part of proceeds of crime from any angle.,,,
The ED has failed to give any findings as to whether the property in question is “ascribable†to money laundering or not. The Authority is,,,
required to show that was substantially probable cause to form opinion that the property under attachment is “proceeds of crimeâ€. The ED has,,,
failed to establish that the decision is well thought, well reasoned and has been issued on the basis of the material gathered during the course of",,,
investigation carried out under the provisions of PMLA. ECIR was registered on the basis of FIR filed by CBI. Second proviso was invoked but no,,,
reason to believe were recorded as prescribed in the second proviso. The impugned order was passed on the basis of charge-sheet filed later on.,,,
There is valid investigation and independent investigation by increasing the figures. Even otherwise, if figures are increased, it has to be tested at the",,,
time of trial.,,,
The Adjudicating Authority failed to appreciate that the fixed deposits have been taken as margin money for the bank guarantee issued by the,,,
Appellant Bank and as such bank has exclusive charge on them. The Authority has not recorded any reason as to why funds with the bank that are,,,
secured for the Bank Guarantee issued by the Appellant bank could be attached and there is no “reason to believe†placed on record by the ED.,,,
The bonus cannot be harassed without their fault.,,,
The Adjudicating Authority failed to appreciate that the Appellant Bank is not holding any funds of the Accused/Respondents, whereas on the",,,
other hand, the Appellant Bank itself has to recover more than Rs. 4.79 crores in Cash Credit Account and Rs. 31.18 Crores in Bank Guarantee as on",,,
25.07.2018 from the company i.e. Respondent no. 2. Hence, the bank being the secured creditor has priority over the rights of Central or State",,,
Government or any other Local Authority.,,,
In the case of Standard Chartered Bank Vs. The Deputy Director, Directorate of Enforcement, Mumbai in FPA-PMLA-1604/MUM/2017) the",,,
Appellate Tribunal has observed that when there is no direct nexus between the crime committed and the consortium of banks, the banks shall have",,,
the priority right over the property mortgaged with them. Also, the intention of the PMLA Act is not to block the loan against mortgaged property.",,,
Where such loan is given out by innocent parties, being banks in this case, then it would be absurd that the securities of the banks are not available to",,,
them to recover their losses. Any order which goes against the banks would create chaos in banking industries and would be against the interest of the,,,
nation as a whole and would also be against the public money.,,,
The Adjudicating Authority failed to appreciate that the Adjudicating Authority has to take into consideration the plea of innocence of the bank and,,,
whether the property which has been attached has any nexus whatsoever with that of money laundering or not. The bank had advised by the letter,,,
dated 19.11.2016 the list of FDs outstanding in the name of the company which are encumbered and issued against BG facility sanctioned to the,,,
company as Cash Margin against BGs issued by the bank. The bank has neither directly nor indirectly attempted to indulge in any activity in,,,
connection with proceeds of crime, hence the question of bankâ€s involvement does not arise as they are third party and the bank cannot be asked to",,,
wait till the trial/proceeding are over.,,,
The Adjudicating Authority failed to appreciate that the Scheme of Prevention of Money Laundering Act clearly provides the mechanism whereby,,,
the innocent parties can approach the Adjudicating Authority for the purposes of release of properties which have been attached in terms of the,,,
provisions of Section 5 of the Act. This can be seen by reading Section 8(1) and the proviso to Section 8(2) of the Act whereby Adjudicating,,,
Authority has to rule whether all or any of the properties referred to in the notice are involved in money laundering or not and the authority while,,,
arriving at any conclusion has to give valid reasons.,,,
The Adjudicating Authority has failed to establish a prima facie case against the appellant banks. There are no proofs on records that the bank is,,,
parking the proceeds of crime. It is incorrect to allege that the FDRs will be frustrated if they are not provisionally attached. The bank has exclusive,,,
charge over the margin money and the same is safely kept with the bank and cannot be used by the company. Further, the Adjudicating Authority has",,,
failed to appreciate that the property attached under the provisional order is not acceptable to money laundering or that the property has been obtained,,,
out of proceeds of crime. The bank money/bank guarantees cannot be allowed to be attached in this fashion unless the banks have link and nexus in,,,
the criminal actively, otherwise banking system would be collapsed.",,,
The most important point in the present case is that Magistrate (SPE) where CBI has held the total “loss to government†is Rs. 62,75,020/-",,,
which is nowhere close to the figure as alleged by ED in its reply to the present Appeal (i.e. in para 9.11 recovery of Rs. 23.92 crores), hence the",,,
total amount of Rs. 8,05,91,575/- kept in the form of FDs with the appellant Dhan Laxmi bank has been erroneously attached by the ED in its",,,
impugned order.,,,
Presumption of innocence in presumptive reverse burden of proof cases, proportionality and view of the Honâ€ble Supreme Court of India in",,,
decided cases. The law operates on the ground that even in such cases the prosecution has to substantiate its foundational fact that part of the,,,
prosecution case wherein the prosecution fails to give foundational facts the burden of rebutting any allegation does not come on the accused. In the,,,
present case, the Respondent Directorate of Enforcement has failed to establish any foundational fact. Charge sheet filed by CBI before Ld.",,,
Additional chief Judicial Magistrate (SPE ) Cases Jaipur, wherein CBI has stated that the total “loss to Government†is only Rs. 62,74 858 ( Rs",,,
Sixty Two Lakhs Seventy Four Thousand Eight Hundred and Fifty Eight Only/-) which is no where close to the imaginary and concocted figure of Rs,,,
23,92,34724 (Twenty Three Crores Ninety Two Lakhs Thirty Four Thousand Seven Hundred and Twenty Four Only/-) as alleged by the Respondent",,,
Directorate of Enforcement as recoverable from the Appellant. Hence presuming and not admitting, the liability as against the Appellant can be of",,,
only Rs. 62,74 858 ( rs sixty two lakhs seventy four thousand eight hundred and fifty eight only/-) and not of Rs. 23,92,34724 (twenty three crores",,,
ninety two lakhs thirty four thousand seven hundred and twenty four only/-). Therefore the whole case of the Respondent Directorate of Enforcement,,,
falls to the ground as the whole case of the Repondent till today proceeded on the figure of 23.9 Crore Approx, which in reality as on today is nothing",,,
but an imaginary figure, without any basis. The same figures are yet to be established at the time of trial and final arguments.",,,
It is a matter of record that on the basis of CBI allegation, the respondent has passed the PAO. CBI has discussed each and every document in",,,
relation to the case in hand and has come to conclusion that the total loss is Rs. 62,75,020/- and it is pertinent to mention on the basis of same material",,,
the respondent says that loss is about 23.92 crores. The findings of respondent have to be tested at the time of trial.,,,
How the contrary figures have been mentioned by the respondent as per its own investigation of the same allegation. Without expressing any,,,
opinion in this regard, we are of the view that all these contrary figures of two agencies are to be tested in evidence.The banks are innocent parties.",,,
One is failed to understand after filing the reply, the banks are un-necessary dragged in the litigation. Their duty amount has to be secured. They",,,
cannot be harassed in this fashion. No civil death should be given to banks without their involvement. The banks money is a public money.,,,
Thus, the appeals filed by the banks are allowed and impugned order is set-aside against them. The attachment is not sustainable, without",,,
application of mind and very harshful. There is no material of record that the banks have any nexus and link with the other appellants.,,,
As far as other appellants are concerned, CBI has given the following finds after investigation and on the basis of charge-sheet filed. The same",,,
documents were discussed by the CBI. Such details are given as under:-,,,
“(i) It revealed that verification could not be done by the CM & HOs as the company did not submit the bills with supporting documents to the CM,,,
& HOs for verification. However, ""on account†payment continued to be made for the entire centralized period of payment till December, 2011",,,
when the payment of the bills was decentralized to respective District Health Societies. During this period, the concerned Mission Directors of",,,
NRHM continued to make ""on account†payment to M/s ZHL in order to ensure that the emergency services are not disrupted. During July, 2010 to",,,
December, 2011 (centralized period), NRHM made payment of Rs. 32,60,99,926/- to M/s ZHL as against total claimed amount of Rs. 41,86,19,930/-.",,,
(ii) Investigation revealed that during processing of the bills by NRHM officials, several discrepancies were observed in the bills submitted by M/s",,,
ZHL viz. non-verification of the claims, non-submission of supporting records, submission of photocopy of the bills in respect of medical/non-medical",,,
consumables, non-submission of records to respective CM & HOs for verification and instances of multiple trips in the bills/supporting records",,,
submitted by the company. The instance of multiple trips came to the notice of officials of NRHM in the month of June, 2011 while examining the bill",,,
for the month of May, 2011 along with the supporting records. Earlier, such instances could not be identified as the requisite record was not available.",,,
It revealed that the company was treating each patient attended by the ambulance as individual trip by giving separate ID to every patient attended.,,,
Thereafter, while on account payment was continued to be made, an exercise was undertaken by Sh. Lalit Tripathi, the then Consultant, ISC to",,,
calculate the excess payment made to M/s ZHL on account of claim of multiple trips. The multiple trips used to enhance the trip achievement of M/s,,,
ZHL and reduced the proportionate deduction, if any, due to short fall in achievement in trip target as provided in the RFP. An amount of Rs.",,,
3,30,26,322/- was calculated as excess payment made to the company during the months of April to August, 2011 on account of multiple trips shown",,,
by the company in its supporting records. Later on, after further exercise, an amount of Rs. 4,15,88,560/- was calculated by the Comptroller & Auditor",,,
General (CAG) in its report as excess payment made to M/s ZHL due to exaggerated claims made by the company (containing multiple trips). The,,,
amount so calculated was calculated on the basis of available record and does not cover the entire period as the requisite data for the entire period,,,
was not available so as to enable NRHM to calculate exact magnitude of loss suffered on this account.,,,
(iii) After calculation of amount to be recovered on account of excess payment due to multiple trips and the salary of the staff deputed on ambulances,,,
during 01-15 July, 2010, a letter dated 25.01.2012 was sent to the CM & HOs of Alwar, Udaipur, Jodhpur, Bharatpur, Bhilwara, Nagaur, Sikar,",,,
Bikaner, Jhunjhunu and Banswara districts to recover the said amount in 10 installments. Accordingly, a recovery of Rs. 3,55,72,685/- was made on",,,
account of excess payment made to M/s ZHL due to multiple trips. However, an amount of Rs. 60,15,875/- is still remaining to be recovered as per",,,
the calculation made by department and the CAG on the basis of available record.,,,
(iv) Investigation has thus, revealed that M/s ZHL through its CEO Smt. Sweta Mangal and Director Sh. Ravi Krishna dishonestly, fraudulently and",,,
deliberately submitted inflated bills about multiple trips on the basis of wrong parameters and obtained excess payment from the Government of,,,
Rajasthan on the basis of the said bills and inducement, thereby causing a loss to the government exchequer.",,,
(v) Later on, an audit was got conducted by NRHM in respect of the medical/nonmedical consumables used by M/s ZHL during operation of 108",,,
ambulance services in the state of Rajasthan. For this purpose, an agency namely Institute of Public Auditors of India (IPAI) was engaged. IPAI",,,
submitted its audit report and had highlighted several discrepancies including that M/s ZHL procured articles/materials amounting to Rs. 1.37 lakhs,,,
which were not covered by the terms of agreement, non-medical consumables (stationery) amounting to Rs. 1,86,727/- which were not covered under",,,
sub-head stationery but got reimbursed by ZHL, operational unit cost of Rs. 94,899/- per ambulance per month, inter alia included the cost of postages",,,
and courier services, thus, unauthorized reimbursement of Rs. 1,21,983/- on account of courier services was made to M/s ZHL etc.â€",,,
The other issues raised by the respondent is a matter of trial. Thus, the appellants without prejudice are liable to secured a sum of Rs. 62,75,020/-",,,
with the respondent. The rest of the attachments stand released. However, it is clarified that the above said appeals are decided on the basis of",,,
charge-sheet filed by CBI and without going into merit of the case of criminal liabilities which would be considered as per its merit without the,,,
influence of this order.,,,
All appeals are disposed of. The appeals filed by the banks are allowed. The appeals filed by the other appellants are partly allowed. The,,,
impugned orders are modified.,,,
No costs,,,