AI Structured Summary
Not yet generated for this judgment
Judgment
FPA-PMLA-936/CHD/2015 & FPA-PMLA-1288/CHD/2016, FPA-PMLA-1289/CHD/2016 & FPA-PMLA-1290/CHD/2016
The aforesaid appeals have been preferred by the said appellant and others which involves the same facts and similar questions of law so it is
propose to decide the aforesaid four appeals by a common order.
FPA-PMLA-936/CHD/2016
a. This appeal has been preferred under Section 26 of the Prevention of Money Laundering Act, 2002 hereinafter referred as that the “said Actâ€
against the order dated 12.05.2015 passed by learned Adjudicating Authority in the matter of OC 405/2015.
The brief facts are that Smt. Pritam Kaur, appellant is exclusive owner in possession of the land measuring 26 Kanal 18 marla alongwith other land
in revenue State of Sultan Wind Sub Urban, Mahal-II, Tehsil and District Amritsar.
On 05.07.2006 One Mr. Hardip Singh Thapar S/o Lt. K.S. Thapar approached the appellant to purchase the land measuring 26 Kanal 18 Marla @
5000/- per sq yard and the registered agreement to sale dated 05.07.2006 has been executed and for which Mr. Hardip Singh Thapar has paid Rs.
1,34,50,000/- as earnest money and fixed the date 01.12.2006 for execution and registration of sale deed.
It is mentioned in agreement that the date for execution of sale deed will not be extended either orally or in writing and time was made essence of
contract.
On 15.11.2006 the appellant send legal notice dated 15.00.2006 and 20.11.2006 to the Mr. Hardip Singh Thapar in regard of execution of sale deed.
On 01.12.2006 Mr. Hardip Singh Thapar failed to execute the sale deed and even did not turn up before the Registrar. The appellant also send
telegram to the Mr. Hardip Singh Thapar and even marked the presence before the sub-registrar, Amritsar.
On 18.12.2006 the appellant gave another notice to Mr. Hardip Singh Thapar interalia again asking to execute agreement to sell dated 05.07.2006
but the buyer did not turn up.
As the time was essence of the contract and since Mr. Hardip Singh Thapar failed to execute the agreement to sell dated 05.07.2006, the earnest
money of Rs. 1,34,00,000/- was forfeited by the appellant as per the agreement.
From the earnest amount received, Smt. Pritam Kaur had invested part of amount in development of land and some amount has been given to
relatives as financial assistance and had made FDRs of that money. On 10.08.2007 the husband of Pritam Kaur entered into the settlement with his
brother Kulwant Singh and paid him Rs. 95,00,000/- to buy peace of mind and to settle all the litigation going on in between the parties. It is pertinent
to mention here that the answering defendant no. 4 did not get any property or shops in lieu of Rs. 95,00,000/- given to Mr. Kulwant Singh.
On 19.07.2008 Mr. Hardip Singh Thapar tried to take the forceful possession of the property of the appellant who filed the Civil Suit No.
803/19.07.2008 for permanent injunction restraining the Mr. Hardip Singh Thapar and his companion from interfering into the peaceful possession of
the land.
One Mr. Narendra Kumar Chandna (complainant) who earlier paid Rs. 3,61,00,000/- (Rs. Three Crore Sixty One Lacs) to Shri Hardeep Singh
Thapar through cheques for purchasing 22-25 acres of land in Amritsar for further developing it for AWHO.
He himself was dealing in Real Estate. Shri Hardeep Singh Thapar and his sons Manish and Vikas Thapar told him that they are having about 140
acres of land in village Sultan wind sub urban GT Road, Daburjee, Amritsar and they can provide him the required land. It was alleged by him that
they had shown forged and fabricated documents about the land. After receiving the amount of s. 3,61,00,000/- (Rs. Three Crore Sixty One Lacs)
Thaparâ€s kept on lingering the matter by making false promises. When Shri Hardeep Singh Thapar could not arrange for the land he was asked to
return the amount back. Thereafter Shri Hardeep Singh Thapar returned back two cheques for sum of Rs. 3,61,00,000/- but both the cheques were
dishonoured.
In view of aforesaid reason, Shri Narender Kumar Chandna filed the complaint and on the basis of thereof an FIR bearing No. 66 dated
28.02.2007 was registered in the police station DLF Phase-II, Gurgaon for the alleged commission of offence allegedly committed under Sections
420/467/468/471/ of IPC against Hardeep Singh Thapar and his sons namely, Manish Thapar and Vikas Thapar. The said accused persons dishonestly
induced Shri N.K. Chandna to advance a sum of Rs. 3,61,00,000/-( Rupees Three Crore Sixty One Lakh only) After investigation charge sheet and
supplementary charge sheet have been filed against the aforesaid FIR named persons on dt. 31.07.2009& 15.01.2010 respectively u/s
420/467/468/471/120B/201 of IPC.
On the basis of above, case under the “said Act†was registered by the Enforcement Directorate, Delhi Zone vide ECIR/63/DZ/2010 AD
(SC) dated 27.10.2010 was registered for investigation. Subsequently, due to territorial reorganization, the case was transferred to Chandigarh Zonal
office of the Enforcement Directorate for further investigation and renumbered as ECIR No. CDZO/10/2013.
The respondent No. 1, on the basis of material collected during the course of the investigation concluded that the respondent No.4, out of said Rs.
3, 61,00,000/-, paid a sum of Rs. 1,34,50,000/- to the appellant Ms. Pritam Kaur on dated 05.07.2006 as an earnest money towards the purchase of 26
Kanal 18 Marla of land @ 5,000 per sq. yd. and executed agreement to sell dated 05.07.2006 fixing the date 01.12.2006 for execution and registration
of sale deed.
The Appellant has submitted the English translated copy of the said agreement (Annexure A-1) wherein it has the reflection of the breakup of the
total amount paid to the appellant by R-4, the quantum of land and the rate of the land per square yard, etc. In the said agreement, it is clearly
mentioned, inter alia, that the date of registration of sale deed fixed as 01.12.2006 shall not be extended in any manner, oral or legal. It is further
mentioned that on the failure of registration on the part of vendee, the earnest money so paid shall stand forfeited.
During the course of investigation, the respondent No. 1 attached the properties in question vide provisional attachment order (PAO) No. 1/2014
dated 31.12.2014 (Annexure A-11) and filed the Original Complaint no. 405/2015 before the Adjudicating Authority under PMLA for confirmation of
the provisional attachment order. In the said complaint the present appellant Smt. Pritam Kaur is defendant no. 4 and herein we are dealing with
properties of Smt. Pritam Kuar attached under this PAO 1/2014 and confirmed in O.C. 405/2015.
In statement dated 25.04.2014 and 12.12.2014 recorded u/s 50 of PML Act, Shri Hardeep Singh Thapar admitted investment of Rs. 1,34,50,000/-
(Rs. One Crore Thirty Four Lacs and Fifty Thousand Only) with Smt. Pritam Kaur of village Daburjee, G.T. Road, Amritsar, as advance for
purchasing her land.
In her statement dated 06.05.2014, 26.06.2015 and 10.08.2014 recorded u/s 50 of PMLA. Smt. Pritam Kaur W/o Sukhpal Singh admitted being
owner of agricultural land measuring 26 Kanal 18 Marla in Khasra No. 1585/4-8, 1586/9-3, 1587/8-16, 1575/4-11 sub account No. 726/2367/2373, as
per the revenue record for the year 2011, situated in Sultanwind, Sub-urban, Tehsil & District Amritsar. She made an agreement with Hardeep Singh
Thapar on 05.07.2006 to sell her aforesaid 26 Kanal 18 Marla agricultural land and received Rs. 1,34,50,000/- (through Cheque No. 112852 for Rs.
1,29,50,000/-, Cheque No. 112818 for Rs. 3, 00,000/- both dated 07.07.2006 and Rs. 2,00,000/- cash). As this amount of Rs. 1,34,50,000/- was paid
from the proceeds of crime generated by Shri Hardeep Singh Thapar and his sons by cheating, Shri Narinder Chandana for which FIR No. 66/2007
dated 28.02.2007, PS DLF Phase-II, Gurgaon was registered against Shri Hardeep Singh Thapar and his sons i.e. Manish and Vikas Thapar.
The Adjudicating Authority passed the impugned order on 12.05.2015 in OC No. 405/2015 confirming the aforesaid PAO. The said order of
Adjudicating Authority is under challenge before us, inter alia, on following grounds:
a. No proceedings under the PMLA can be initiated against the appellant as she is neither a named person in the FIR nor has been charged under a
schedule offence.
b. The provisions of PMLA cannot be applied to her retrospectively as the provisions of amendment Act 2 of 2013 of Prevention of Money
Laundering Act is applicable w.e.f. 15.02.2013. He has relied on the judgment passed in Arun Kumar Mishra vs. Directorate of Enforcement, by
Honâ€ble High Court of Delhi.
c. The appellant has received money in the year 2006 i.e. 05.07.2006 and the amendments done in 2009 and 2013 in PMLA, 2002 have no effect on
the appellant and the present case ought to be adjudicated as per the pre-amendment act of 2002 and Prevention of Money Laundering (Amendment
Act 2012) is not applicable on the present case.
d. Money in the hands of appellant is not proceeds of crime as per the definition under Section 2(u) of said Act.
e. The earnest money so paid to her by Mr. Thapar has been forfeited as per the terms of the agreement dated 05.07.2006 and order of Civil Court in
civil suit no. 803/19.07.2008. Hence the money received by the appellant cannot be held as proceeds of crime.
f. The respondent No. 1 has not attached the properties of respondent No. 3 and 4.
The Adjudicating Authority affirmed the attachment order No. 01/2014 against Pritam Kaur but while dismissing the attachment order against the
persons who were not party before the Adjudicating Authority gave liberty to Deputy Director to issue fresh attachment order under section 5 (1) of
Prevention of Money Laundering Act, 2002.
The said order has been challenged before us which is subject matter of appeal no. FPA-PMLA-936-CHD/2015.
In response to the grounds taken in the memorandum of appeal, the respondent No. 1 filed his reply, inter alia, on the following grounds:
a. Section 467 of IPC was a schedule offence prior to the amendment dated 15.02.2013, hence, ECIR can be registered under the provisions of said
Act only on the basis of Section 467 of IPC.
b. Appellant was in possession of proceeds of crime generated by Hardeep Singh Thapar and his sons so the attachment.
c. Section 467 of IPC was a schedule offence in FIR No. 66 dated 28.02.2007 hence ECIR was registered as per the provisions of the said Act. The
said Act came into force w.e.f. 01.07.2005 and Section 467 of IPC was a scheduled offence under the schedule Annexed to the PMLA at that time.
d. The amount of Rs. 1,34,50,000/- paid to the appellant was obtained/generated by Hardeep Singh Thapar through criminal activity, hence it comes
under the definition of proceeds of crime.
e. The Civil Court has passed decree and only restrained Hardeep Singh Thapar from interfering into the peaceful possession and taking out the
forceful possession of the land even though the civil suit was also for the forfeiture of amount.
f. No other properties as alleged could be detected during the investigation of the ECIR.
It is a matter of fact that after passing the order dt. 12.05.2015 in O.C. No. 405/2015 on 28.09.2015 respondent no. 1 again issued provisional
attachment order against the Pritam Kaur by passing the provisional attachment order 1 of 2015 dated 28.09.2015 attaching the movable properties by
alleging that after the receipt of advance amount for the sum of Rs. 1,34,50,000/- by Pritam Kaur from Shri Hardeep Singh who was M.D. of Thapar
Infrastructure Ltd. had made F.D worth Rs. 16,00,660/- which were attached by PAO 1/2014 dated 31st December, 2014 which was confirmed by
order dated 12th May, 2015 and F.D. of Rs. 20,01,034/- which was name of the mother. The money which was received from Pritam Kaur as well as
8,00,403/- which was in the name of her husband Sukhpal Singh. The ED has also attached the agricultural land in the name of Pritam Kaur
measuring 26 Kanal 18 Marlas as per PAO 1/2015.
As far as remaining amount it has come on record that after receiving the advance amount, admittedly on 10.08.2007 the husband of appellant
entered into the settlement with his brother Kulwant Singh and paid him Rs. 95,00,000/- to buy peace of mind and to settle all the litigation going on in
between the parties. It is pertinent to mention here that the appellant did not get any property or shops in lieu of Rs. 95,00,000/- given to Mr. Kulwant
Singh. His widow wife has also challenged the order 18.03.2016 which is subject matter of appeal no. FPA-PMLA-1289/CHD/2016.
On 31.01.2015, the complaint under section 5(5) was filed about provisional attachment order before Adjudicating Authority. After hearing, the
said provisional order of attachment was confirmed by the Adjudicating Authority by passing the order dated 18.03.2016 against the appellant Pritam
Kaur her husband Sukhpal Singh, mother and another relative.
On 8.03.2016, the Adjudicating Authority by its order dated 08.03.2016 in complaint no. 644/2015 in provisional attachment order 1 of 2015 dated
28.09.2015 in ECIR No. CDZO/10/2013 confirmed the Provisional Attachment Order No. 1 of 2015 dated 28.09.2015.
The appellant and her husband, and other relative have challenged the order being appeal no. FPA-PMLA-1288/CHD/2016 also filed by Smt.
Pritam Kaur and appeal no. FPA-PMLA-1290/CHD/2016 under section 26 of Prevention of Money Laundering Act, 2002 against the order dated
08.03.2016 in O.C. No. 529 of 2015 passed by the Adjudicating Authority. For the reasons stated in the application, the delay in filing the appeals are
condoned as there was no oppositions at the time of hearing.
Separate appeals have also been filed by Mann Kaur whose FD for sum of Rs. 20,01,034/- has been attached and Sukhpal Singh husband of the
Pritam Kaur whose F.D. for Rs. 800403/- has been attached. The amount received from Pritam Kaur being appeal no. FPA-PMLA-1289/CHD/2016
and FPA-PMLA-1290/CHD/2016.
The respondent no. 1 at the same time has also again attached the immovable property i.e. agricultural land for Rs. 90,47,903/- in the value thereof
attachment vide PAO 1/2015 of the said amount.
As far as the facts stated by the appellants in the appellants in reply the respondent no. 1 has admitted the same in para 1 to 15 of the reply.
It is admitted position that the appellants were not named in the FIR and were not charged under any schedule offences. No complaint under
PMLA has been filed. Even no suit for recovery of advance amount has been filed by Shri Hardip Singh Thapar and his company Thapar
Infrastructure Ltd. or any by N.S. Chandana who lodged the FIR against Shri Hardeep Singh Thapar and Ors.
There is no evidence produced by the respondent No. 1 either before the Adjudicating Authority or before this Tribunal that the appellant has any
knowledge about the said tainted money and she had knowledge that the respondent No. 4 has obtained it by way of criminal activity and as a result
she had executed the agreement to sell on 05.07.2006. It is crystal clear from the facts and circumstances of the case that the appellant was not a
party to the criminal activity of respondent No. 4. Had there been any such evidence than she would have been made an accused in the charge sheets
filed against respondent No. 3 and others. She is not a party to the alleged crime.
It is one of the strong argument of the appellant that as per the terms and conditions of the contract time was the essence of contract and since
the R-4 did not perform his part of the contract by 01.12.2006 so she has forfeited the entire amount of Rs. 1,34,50,000/- without parting with a single
inch of land or incurring any loss due to such non-performance of contract. The contention of the appellant is that she had forfeited the amount
because time was the essence of the contract.
The appellant has received the advance money in the year 2006. She as per agreement has forfeited the advance amount in the FIR has been
registered in the year 28.02.2007 against Shri Hardeep Singh Thapar.
There is no material on record to show that the appellant has directly or indirectly link and nexus with Hardeep Singh Thapar or has any relation in
any manner with him.
The question before us as to whether any person or any property is involved in money laundering or not. If there is no direct / indirect involvement
of any person or property with the proceeds of the crime nor there is any aspect of knowledge in any person with respect to involvement or assistance
nor the said person is party to the said transaction, then it cannot be said that the said person is connected with any activity or process with the
proceeds of the crime. The same principle is to be applied while judging the involvement of any property of any person in money laundering. If the said
seller who is not having any knowledge about the involvement of the said property with the proceeds of the crime nor being the participant in the said
crime cannot be penalized for no fault of his/her. Therefore, it cannot be the Scheme of the Act whereby bona fide person without having any direct/
indirect involvement in the proceeds of the crime. He or she cannot be made to suffer by attachment of his/her property without any fault on the basis
of mere suspicion when the element of mens rea or knowledge is missing.
The issue pertaining to projection of the proceeds of crime has to be applied against the person who is directly or indirectly in any process or
activities connected with the proceed of crime and projecting, the same cannot be applied to innocent person who has no link, connection or nexus
with the person who is involved in the offences under section 3 read with section 2(u) of the Act particularly when the advance amount was received
by a party in bona fide manner prior to 1st June, 2009 when schedule offences were added. Such situation in the present case does not arise as she
was not involved in any criminal activities. She is the innocent seller.
As per the definition of proceed of crime u/s 2(u) of PML Act, 2001 the property should be as a result of criminal activity where as in the present
case, the property was admittedly not purchased with illegal or tainted money.
This Tribunal in the case of IPRS in appeal no. FPA-PMLA1302/MUM/2016 decided on 22.06.2017 had dealt with the similar issue as to whether
the innocent party whose immovable properties are attached by the ED can approach the Adjudicating Authority for release of the same in para no.
55 to 60 the same read as under:- ―
Whether innocent party whose properties i.e. movable or immovable are attached can approach the Adjudicating Authority for release
of attached property.
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.
“8. Adjudication.- (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 subsection (10) of section 18, if the Adjudicating 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 under sub-
section (1) of section 5, or, seized 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, after- (a) considering the reply, if any, to the notice issued under subsection (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, section 58 B or sub-section (2 A) of section 60 by the Adjudicating Authority (4) Where the provisional order of attach
There are judicial pronouncements whereby it has been laid down that the innocent parties can approach the Adjudicating Authority for
release of property by showing their bonafides in their dealings with the property. In the case of Sushil Kumar Katiyar (Appellants) Vs UOI
and Ors. (Respondents) decided on 10.05.2016 by Allahabad High Court, it has been observed by the Ld. Single Judge after noticing the
judgment of Karnataka High Court that the element of knowingly or mens rea have been provided under the Act so that the aspect of
implicating any innocent person can be ruled out. Relevant para 26 of judgment is reproduced below:-
“26. Thus, upon consideration of the law laid down by the Hon'ble Karnataka High Court, it is clear that the amendment incorporated in
the Money Laundering Act was not held unconstitutional and ultra virus, but it was observed by the Karnataka High Court that the property
of a person can be attached without there being any prosecution for the offence of Money Laundering, but so far as the prosecution of a
person for the offence of money laundering is concerned, the proceedings under section 3 of the PML Act can be initiated only in case the
person is held guilty of receiving proceeds of crime as a result of commission of scheduled offence. The Karnataka High Court has also held
that the complainant in such a case is not required to wait for the result of trial being held for the scheduled offence. A complaint can still be
filed against such person, but if ultimately the person is acquitted of the charge for the scheduled offence, his prosecution under section 3 of
the Act for the offence of Money-Laundering would also come to an end. It has also been kept open by the Karnataka High Court that a
person against whom complaint under section 3 of the PML Act has been filed and he is being prosecuted for the offence of money-
laundering, he can show before the court that he is innocent and has not received any proceeds of crime.â€
It is clear that innocent person can approach the Adjudicating Authority of any competent court to demonstrate his innocence that he has
not received any proceeds of crime. The consequence of this is that while considering whether all or any of the properties provided under
notice issued u/S 8(1) are involved in money laundering, the Adjudicating Authority can take into consideration the plea of innocence
raised by any person and also the fact as to whether the property which has been attached has any nexus whatsoever with that of money
laundering or not if the person before the Tribunal/ Adjudicating Authority is able to demonstrate that he neither directly nor indirectly has
attempted to indulge nor with knowledge or ever assisted any process or activity in connection with proceeds or crime and the question of
his involvement does not arise as he is third party, then the Tribunal/ Adjudicating Authority can consider the said plea depending upon
whether there exist bona fide in the said plea or not and proceed to adjudicate the plea of innocence of the said party.
This is due to the reason that Section 8 allows the Adjudicating Authority to only retain the properties which are involved in money
laundering which means as to whether properties attached are involved in money laundering or not is a pre-condition prior to confirming
or attachment by Adjudicating Authority. Therefore, at that time, if the plea is raised that the party whose property is attached is innocent or
is without knowledge of any such transaction with respect to money laundering, then the Tribunal can consider the said plea and proceed to
release the said property out of the properties by holding that the said property is not involved in money laundering.
For the purposes of determining whether the property is involved in money laundering, the Court may consider the ingredients of
Section 3 which define offence of money laundering. The aspect of knowledge or involvement has been discussed by Ld. Single Judge of
Gujarat High Court in the case of Jafar Mohammed Hasanfatta and Ors (Appellants) Vs Deputy Director and Ors. (Respondents) wherein
Ld Single Judge has observed as under:-
“37. A holistic reading of this definition of 'proceeds of crime' and the penal provision under Section 3 of PMLA, which uses conjunctive
'and', makes it luminous that any persons concerned in any process or activity connected with such ""proceeds of crime"" relating to a
scheduled offence"" including its concealment, possession, acquisition or use can be guilty of money laundering, only if both of the two
prerequisites are satisfied i.e.-
“(i) Firstly, if he-
(a) directly or indirectly 'attempts' to indulge,
(b) “knowingly†either assists or is a party, or
(c) is “actually involved†in such activity; and
(ii) Secondly, if he also projects or claims it as untainted property;
The first of the two pre-requisite to attract Section 3 of PMLA shall thus satisfy any of the following necessary ingredients-
“A. RE: DIRECT OR INDIRECT ATTEMPT:
In State of Maharashtra v. Mohd.Yakub, (1980) 3 SCC 57, the Hon'ble Supreme Court observed that-
“13. Well then, what is an “attempt� ...In sum, a person commits the offence of ""attempt to commit a particular offence"" when (i)
he intends to commit that particular offence and (ii) he, having made preparations and with the intention to commit the offence, does an act
towards its commission; such an act need not be the penultimate act towards the commission of that offence but must be an act during the
course of committing that offence.
Thus, an “attempt to indulge†would necessarily require not only a positive ""intention"" to commit the offence, but also preparation for
the same coupled with doing of an act towards commission of such offence with such intention to commit the offence. Respondent failed to
produce any material or circumstantial evidence whatsoever, oral or documentary, to show any such 'intention' and 'attempt' on the part of
any of the petitioners.
B. RE: KNOWINGLY ASSISTS OR KNOWINGLY IS A PARTY:
In JotiParshad v. State of Haryana, 1993 Supp (2) SCC 497 the Hon'ble Supreme Court has held as follows-
“5. Under the Indian penal law, guilt in respect of almost all the offences is fastened either on the ground of ""intention"" or ""knowledge
or ""reason to believe"". We are now concerned with the expressions “knowledge†and ""reason to believe"". “Knowledge†is an
awareness on the part of the person concerned indicating his state of mind. “Reason to believe†is another facet of the state of mind.
Reason to believe"" is not the same thing as “suspicion†or “doubt†and mere seeing also cannot be equated to believing.
“Reason to believe†is a higher level of state of mind. Likewise “knowledge†will be slightly on a higher plane than “reason to
believeâ€. A person can be supposed to know where there is a direct appeal to his senses and a person is presumed to have a reason to
believe if he has sufficient cause to believe the same.â€
The same test therefore applies in the instant case where there is absolutely no material or circumstantial evidence whatsoever, oral or
documentary, to show that any of the petitioners, 'Knowingly', assisted or was a party to, any offence.
C. Actually involved:
Actually involved would mean actually involved into any process or activity connected with the proceeds of crime and thus scheduled
offence, including its concealment, possession, acquisition or use. There is absolutely no material or circumstantial evidence whatsoever,
oral or documentary, to substantiate any such allegation qua the petitioners,
D. Neither any of the petitioners is arraigned as accused in the 'Scheduled Offences' punishable under Indian Penal Code for direct or
indirect involvement, abetment, conspiracy or common intention, nor is any such case made out even on prima facie basis against any of
them.
The second of the two pre-requisite to attract Section 3 of PMLA would be satisfied only if the person also projects or claims proceeds of
crime as untainted property. For making such claim or to project 'proceeds of crime' as untainted, 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 utmost necessary, which however is lacking in the instant case.
These are four ingredients which are determinative factors on the basis of which it can be said that whether any person or any property
is involved in money laundering or not. If there is no direct / indirect involvement of any person or property with the proceeds of the crime
nor there is any aspect of knowledge in any person with respect to involvement or assistance nor the said person is party to the said
transaction, then it cannot be said that the said person is connected with any activity or process with the proceeds of the crime. The same
principle should be applied while judging the involvement of any property of any person in money laundering. This is due to the reason that
if the property has no direct involvement in the proceeds of the crime and has passed on hands to the number of purchasers which includes
the bona fide purchaser without notice, the said purchaser who is not having any knowledge about the involvement of the said property
with the proceeds of the crime nor being the participant in the said transaction ever, cannot be penalized for no fault of his. Therefore, it
cannot be the Scheme of the Act whereby bona fide person without having any direct/ indirect involvement in the proceeds of the crime or its
dealings can be made to suffer by mere attachment of the property at the initial stage and later on its confirmation on the basis of mere
suspicion when the element of mens rea or knowledge is missing.
Similar principle has been laid down by Chennai High Court in the case of C. Chellamuthu (Appellants) Vs The Deputy Director,
Prevention of Money Laundering Act, Directorate of Enforcement (Respondent) decided on 14.10.2015, relevant portion of which are
reproduced below:-
“20. The said sections read as follows:--
“23. Presumption in inter-connected transactions Where money-laundering involves two or more inter-connected transactions and one or
more such transactions is or are proved to be involved in money-laundering, then for the purposes of adjudication or confiscation (under
section 8 or for the trial of the money-laundering offence, it shall unless otherwise proved to the satisfaction of the Adjudicating Authority or
the Special Court), be presumed that the remaining transactions form part of such inter-connected transaction.
Burden of proof
In any proceeding relating to proceeds of crime under this Act,
(a) in the case of a person charged with the offence of money-laundering under Section 3, the Authority or Court shall, unless the contrary is
proved, presume that such proceeds of crime are involved in money-laundering; and
(b) in the case of any other person the Authority or Court, may presume that such proceeds of crime are involved in money-laundering.
In the present case, one G. Srinivasan is accused of having played fraud and obtained a loan of Rs. 15,00,00,000/- by producing bogus
and fabricated documents. From and out of the said amount, the property in question was purchased by him in the names of his Benamies.
One Ayyappan was appointed as their Power Agent. One Gunaseelan purchased the property through the Power Agent Ayyappan. The said
Gunaseelan was examined and his statement was recorded Under Section 50 of the Act. He had stated that he purchased the property for
cultivation. He developed the property but geologist gave opinion that property will not yield proper income. In the circumstances, he sold
the property to appellants. The respondent has not produced any document or material to disprove the statement of Gunaseelan. There is
nothing on record to show that the transaction in favour of the said Gunaseelan, is not genuine. It is not the case of respondent that the said
Gunaseelan is a Benami or employee of G. Srinivasan and that Gunaseelan did not pay any amount as sale consideration or the sale
consideration paid by Gunaseelan was not legitimate money. There is no material to show nexus and link of Gunaseelan with G. Srinivasan
and his Benamies. In the absence of any verification or investigation by respondent with regard to genuineness or otherwise of the purchase
by Gunaseelan; whether he was connected with G. Srinivasan or the sale consideration is legitimate or not the property in the hands of
Gunaseelan cannot be termed as proceeds of crime.
Further, the appellants have given statements under Section 50 of the Act. They have categorically stated that they possess agricultural
lands, cultivate GloriosaSuperba seeds and sell the same and derive considerable income. They have named the persons to whom they have
sold the GloriosaSuperba seeds and produced Bank statements. Some of the Appellants have stated that they sold their lands and borrowed
monies to purchase the property in question. There is nothing on record to show that the respondent had verified these statements.
Especially, the respondent has not verified the Bank statement produced by the Appellants to ascertain the genuineness of the same and
whether the money deposited came from genuine purchasers or from the persons involved in fraud and Money Laundering. The respondent
does not allege that Appellants are Benamies of G. Srinivasan or no sale consideration passed to the vendor.
Considering the materials on record and judgments reported in 2010 (5)Bom CR 625 [supra] and : [2011] 164 Comp Cas 146(AP)
[supra], I hold that appellants have rebutted the presumption that the property in question is proceeds of crime. The respondent failed to
prove any nexus or link of Appellants with G. Srinivasanand his benamies. Once a person proves that his purchase is genuine and the
property in his hand is untainted property, the only course open to the respondent is to attach sale proceeds in the hands of vendor of the
appellants and not the property in the hands of genuine legitimate bona fide purchaser without knowledge.
Before the Adjudicating Authority it was admitted by complainant that appellants had no knowledge that properties in the hands of their
vendor was proceeds of crime. It was also not disputed by complainant that the appellants did not have financial capacity to buy properties.
Paragraphs 21, 22, 23 and 24 of order of Adjudicating Authority is extracted herein for better appreciation.
“21. The CBIBS & FC (BLR) has filed a charge sheet in the court of Spl. Judge for CBI cases Coimbatore, against Sh. Arivarasu, Sh. R.
Manoharan, Sh. R. Selvakumar, Sh. G. Srinivasan, Sh. K. Martha Muthu, Sh. V. InduNesan, Sh. K. Vignesh, Sh. A. Sainthil Kumar, Sh. M.
Ram Krishnan, for the offences punishable under Section 120-B read with 420, 467, 471 IPC and section 13(2) read with 13(1)(d) of PC
Act 1988. The offences punishable under section 120-B, 420, 471 are schedule offence under Section 2(1)(y) of the PMLA and therefore on
of the condition for issuing provisional attachment order is satisfied. The other important point to be determined is whether the properties
attached vide Provisional attachment order are involved in money-laundering. The only defense or explanation raised by Defendants,
particularly Def No. 2 to 8 is that the landed properties attached by the complainant are not proceeds of crime. These properties were
purchased by these defendants without having any knowledge, whatsoever, that these properties were derived or obtained through criminal
activities relating to schedule offence. It has been demonstrated by them that they verified the title deeds relating to the properties and after
due verification of every details entered into the sale transactions as such these are bona fide deals entered by them against proper sale
consideration and the money paid to the seller is also well explained.
Against the above arguments vehemently raised by the defendants, the complainant without disputing that the deals are bona fide
heavily relied on the judgment of the Bombay High Court, dated 05.08.2010 in Mr. Radha Mohan Lakhotia Vs. Deputy Director, PMLA,
Directorate of Enforcement, Mumbai in first appeal No. 527/2010. In this case it held by the Bombay High Court that the property bought
without the knowledge that the same is tainted could be subjected to Provisional Attachment Order.
In the instant case the only point to be decided is whether the properties bought by any person against clean money and without any
knowledge that properties have been acquired directly or indirectly through scheduled offence could be subject matter of provisional
attachment order.
It is an admitted position that the Defendants (D-2 to D-8) had no knowledge that the properties in the hands of the vendor was proceeds
of crime. They have also verified the papers relating to these properties before the deal. No point has been raised with regard to the
financial capability of these Defendants to buy these properties. However, the Bombay High Court decision in Radha Mohan Lakhotia has
been pressed into service to make out a plea that the properties could be attached in such circumstances under the PMLA.
Provisional attachment was sought to be continued only based on the judgment of Bombay High Court in Radha Mohan Lakhotia's case.
A reading of paragraphs 21 to 24 clearly reveals that both the Adjudicating Authority as well as Appellate Authority failed to properly
appreciate the facts and findings in Radha Mohan lakhotia's case. In that case, the Department had placed substantial and acceptable facts
to prove that the property in the hands of third party was proceeds of crime. It is pertinent to note that in Mr. Radha Mohan Lokatia's case,
Department had proved the nexus and link between the person possessing the property and person accused of having committed an offence.
All the persons involved in that case were close relatives.
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.
No material was produced to show that the appellants are close relatives of person, who involved in criminal activities and the person, who
sent monies to purchase the property did not possess financial capacity to provide such huge amounts and that they are not genuine
purchasers of agricultural products of appellants. The respondent has not made any such investigation and has not produced any such
material. Further, the Appellate Authority in fact considered the additional documents produced before it, but rejected the same on the
ground that Appellants have not given any valid reasons for not filing the same before the Adjudicating Authority. Having considered the
Additional documents, the appellate authority failed to give any finding on merits after verifying with the concerned Bank.â€
The earnest money received by the Pritam Kaur cannot be treated as proceed of crime and tainted amount as Pritam Kaur at the time to receiving
earnest amount was not aware that Shri Hardeep Singh Thapar had received the amount as alleged from the complainant. The FIR was registered
against Mr. Thapar subsequently. Between Pritam Kaur and Shri Hardeep Singh Thapar was a genuine and bona fide transaction. It is also the
admitted fact that property involved was not involved in the proceed of crime. ED has not produce any material after investigation against Pritam
Kaur by alleging that she was aware about the amount received by the Hardeep Singh Thapar from the complainant.
In the present case, as Pritam Kaur was never involved in the criminal activities. She has no link and nexus with the allege accuse. She is the
innocent party. Furthermore, it is the admitted position that the subject of the property was not purchased by proceed of crime as admitted by the
respondent No.1. The dispute in the present case is of a civil nature - where the advance amount was paid as per agreement. Time was the essence
of the contract, since no remaining amount was paid, thus the earnest money was forfeited. The suit for recovery of earnest money has already
become time barred in December, 2009. Therefore, the facts in the present are different. Even otherwise the provisions as referred under NDPS are
not codified under the PML Act, 2002. Therefore, the said decision is not applicable to the facts of the present case.
There has no link or nexus with the Hardeep Singh Thapar or the complainant or having relation with them. In nut-shell she was innocent seller
when the deal was struck. When the remaining amount was not paid, the advance amount was forfeited as per law and agreement.
Under Section 2(u) of Prevention of Money Laundering Act, 2002, “Proceeds of Crime†means any property derived or obtained, directly or
indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property.
In view of the above definition it is clear that proceeds of crime means the property which is derived by any person as a result of criminal activity
relating to scheduled offence and in the present case the appellant had done any wrong, but, only done genuine agreement to sale in regard of her land
and taken earnest money and further, when the person due to the slump in property market could not purchase her land, then she confiscate the
earnest money as per the agreement to sale dated 05.07.2006 as per law. The said earnest money was forfeited in December, 2006 as per agreement.
The limitation to recover the said amount after forfeiture is three years from the date of forfeiture. No Civil or criminal action was filed against her by
buyer. As a matter of fact, the dispute on behalf of Pritam Kaur was over in December, 2006 itself once she forfeited the advance amount at that
even no FIR was registered against Shri Hardeep Singh Thapar subsequently.
In Shree Hanuman Cotton Mills v. Tata Air Craft Ltd. (1969) 3 SCC 522 the Supreme court elaborately discussed the principles which emerged
from the expression “earnest moneyâ€. That was a case where the appellant therein entered into a contract with the respondent for purchase of
aero scrap. According to the contract, the buyer had to deposit with the company 25% of the total amount and that deposit was to remain with the
company as the earnest money to be adjusted in the final bills. The buyer was bound to pay the full value less the deposit before taking delivery of the
stores. In case of default by the buyer, the company was entitled to forfeit unconditionally the earnest money paid by the buyer and cancel the
contract. The appellant advanced a sum of Rs. 25,000/- (being 25% of the total amount) agreeing to pay the balance in two instalments. On the
appellantâ€s failure to pay any further amount, the respondent forfeited the sum of Rs. 25,000/- which according to it, was earnest money and
cancelled the contract. The appellant filed a suit for recovery of the said amount.
“The trial court held that the sum was paid by way of deposit or earnest money which was primarily a security for the performance of the contract
and that the respondent was entitled to forfeit the deposit amount when the appellant committed a breach of the contract and dismissed the suit.â€
(Shree Hanuman Cotton Mills (1969) 3 SCC 522). The High Court confirmed the decision taken by the trial court. This court, considering the scope of
the term “earnestâ€, laid down certain principles, which are as follows: (Shree Hanuman Cotton Mills (1969) 3 SCC 522).
From a review to the decisions cited above, the following principles emerge regarding “earnest†:
“(1) It must be given at the moment at which the contract is concluded.
(2) It represents a guarantee that the contract will be fulfilled or, in other words, “earnest†is given to bind the contract.
(3) It is part of the purchase price when that transaction is carried out.
(4) It is forfeited when the transaction falls through by reason of the default or failure of the purchaser.
(5) Unless there is anything to the contrary in the terms of the contract, on default committed by the buyer, the seller is entitled to forfeit the
earnestâ€
In DDA v. Grihsthapana Coop. Group Housing Society Ltd. (1995) Supp (1) SCC 75 1this court following the judgment of the Privy Council in
Har Swarup (Chiranjit Singh V. Har Swarup, (1926) 23 LW 172 : AIR 1926 PC 1 )and Shree Hanuman Cotton Mills (1969) 3 SCC 522, held that the
forfeiture of the earnest money was legal. In V. Lakshmanan v. B.R. Mangalagiri (1999) Supp (2) SCC 33 this court held as followsL (SCC p. 36,
para 5)
“5. The question then is whether the respondents are entitled to forfeit the entire amount. It is seen that a specific covenant under the
contract was that the respondents are entitled to forfeit the money paid under the contract. So when the contract fell through by the default
committed by the appellant, as part of the contract, they are entitled to forfeit the entire amount.â€
Infact it is a civil dispute. She within her legal rights has received the advance amount and forfeited the same and prior to date of registration of
FIR against Shri Hardip Singh Thapar. The date of registration of ECIR is 27th October, 2010. The date of provision attachment order is December,
2014 much after the expiry of three years. The claim of buyer was taken against her by buyer or the complainant. It was a commercial deal. She
was/is innocent party. She is not involved in any criminal matter in this case. The respondent no. 1 has not produced any material evidence regarding
her involvement in any criminal activity. No link and nexus has been established even prima facie and in view of the above facts the money in the
hands of the appellant has been rightly forfeited by her as per agreement and as per law. The suit for recovery of amount had already become time-
barred after December, 2009. The PMLA proceedings first time started in October, 2010. The provisional attachment order was passed in December,
2014 was bad and the findings of the Adjudicating Authority are not sustainable in the present case. No factual position has been discussed ineither of
the orders.
The main distinguishable features and major factor in the present case are that when the earnest money was received by Pritam Kaur there was
no FIR against Shri Hardeep Singh Thapar registered neither any case under Money Laundering Act. The FIR was registered at the later stage after
forfeiture of the earnest amount.
It is also pertinent to mention under section 68(A)(1)(d)&(e) even the person who are relative of the accused or associates, the ED has a right to
forfeiture and acquired the illegal property of the relative associates. However, in the present case under the PMLA Pritam Kaur is neither the
relative or the associates of Shri Hardeep Singh Thapar. At the time of making the payment by Shri Hardeep Singh Thapar no criminal case under the
schedule offence or PMLA was pending. At that time the amount received by Pritam Kaur was earnest money cannot be considered as tainted under
the PML Act and even she was not aware about any activities about Shri Hardeep Singh Thapar on the date of execution of the agreement. It was a
bonafide transaction.
The Adjudicating Authority has not discussed any relevant issue involved in the impugned order which was passed in mechanical manner and
without application of mind without considering and consulting law.. The appellant is an innocent person. No criminal complaint is pending against her.
It is purely a civil dispute. She has no link or nexus with Hardeep Singh Thapar directly or indirectly.
Both orders are accordingly set-aside. All the four appeals are allowed. The attachment of only immovable properties stands released. The appellant
may take the necessary steps as per law.
We may clarify here that as for the Criminal cases against Shri Hardeep Singh Thapar and other family member will continue as per law and the
same have to be decided as per its own merit without any influence of our Judgement.
ED and Adjudicating Authority has totally ignored the said vital facts involved in the present matter. Both orders are passed in mechanical manner.
Infact, had ED applied its mind of the peculiar facts of the matter, the provisional attachment order would not have been passed. Both provisional
attachment orders and confirmation orders are perversed and against the law.
All appeals and pending applications in four appeals are disposed of accordingly.
No costs.