Rajeev Jain & Ors vs Deputy Director Directorate Of Enforcement, Jalandhar

FPA-PMLA-1605,1606 & 1607/DLI/2017

The present appeals have been preferred by the appellants against the notice dated 09.11.2016 issued u/s 8(4)) of the Prevention of Money

Laundering Act (PMLA), 2002 issued in the name of Smt. Seema Garg w/o Sh. Vinod Kumar by the Enforcement Directorate in Provisional

Attachment Order (PAO) dt. 04/2016 dated 09.05.2016 arising out of ECIR no. ECIR/06/JLZO/2013 wherein it was ordered to vacate the following

property after order of confirmation dated 20.10.2016 passed by the ld. adjudicating authority in O.C. no. 605/2016

“Housing no. B-19-306 measuring 405 sq yards at Gehlewal, Major Sham Lal Road, Ludhiana.â€​

Brief facts of the case:-

(a) That the Assistant Excise and Taxation Commissioner, Ludhiana-I, lodged a complaint bearing no. 664 dated 18.07.2013 before the P.S. Division

NO. 5, Ludhiana, alleging that, M/s Jaldhara Exports, Ludhiana having VAT no. 03472071375 has shown export of readymade garments to the tune of

Rs. 33.36 crores to Bangladesh during the Financial year 2012-13. On this basis the firm claimed VAT refund of Rs. 1.56 crores from the

Government. However, on enquiry with the Custom Authorities, Petrapole Land, West Bengal had confirmed that all the shipping bills produced by the

firm were found to be forged and fabricated.

(b) That on the basis of above complaint, P.S. Division No. 5, Civil Lines, Ludhiana City registered an FIR bearing No. 126 dated 26.07.2013 u/s 177,

420,465,467,468, and 471 of Indian Penal Code, 1860 against Shri Raman Kumar Garg proprietor of M/s Jaldhara Exports, Ludhiana.

(c) That after investigating the matter the police authorities filed a Challan under section 173 of Cr. P.C. 1973 for the offences u/s

177,420,465,467,468 and 471 of Indian Penal Code, 1860 against Shri Raman Kumar Garg s/o Shri Vinod Kumar Garg r/o 66-A, Aggar Nagar,

Ludhiana, the proprietor of M/s Jaldhara Exports, Ludhiana. As per the said Challan, Shri Raman Kumar Garg, s/o Shri Vinod Kumar Garg had

obtained VAT refund of Rs. 1,56,76,190/- on the basis of forged and fabricated documents from Excise and Taxation Department Ludhiana. After

depositing the said amount in the account of M/s Jaldhara Exports maintained with State Bank of India, Mundian Kalan Branch, Ludhiana, it was then

transferred through RTGS in the Accounts of his Aunt, Smt. Sangeeta Garg w/o Jagmohan Garg, Umesh Kumar s/o Jagmohan Garg, Mother, Smt.

Seema Garg w/o Vinod Garg and Saiyarh Garg w/o Raman Kumar Garg in their different accounts maintained with DBC Bank, Feroze Gandhi

Market Branch, Ludhiana.

(d) That the offences punishable under Section 420,467 and 471 of I.P.C. ,1860 registered under FIR No. 126 dated 26.07.2013, as committed by

above mentioned accused persons are predicate offence under PMLA, 2002, accordingly an Enforcement Case Information Report (ECIR) bearing

no. ECIR/JLZO/06/2013 dated 14.08.2013 was registered by Jalandhar Zonal Office of Directorate of Enforcement, for investigation of the matter

under the provisions of Prevention of Money Laundering act, 2002. During the investigation conducted under the Provisions of PMLA, 2002, it

emerged that M/s Jaldhara Exports, Ludhiana having VAT no. 03472071375 had obtained VAT refund of Rs. 1,56,76,190/- from Excise and Taxation

Department Ludhiana. It was seen that VAT refund amount totaling Rs. 1,56,76,160/- was transferred on 26.03.2013 in the SBI account no.

30353206938 of M/s Jaldhara Exports, thereafter the same was transferred to SBI account no. 32857020457 of M/s Jaldhara Exports. Afterwards the

same was disbursed in the different accounts of Smt. Sangeeta Garg w/o Jagmohan Garg Proprietor of M/s Chetan Exports, Umesh Kuamr S/o

Jagmohan Garg Proprietor of M/s Kohinoor Traders, Smt. Seema Garg w/o Vinod Garg Proprietor of M/s VAN Impex, Saiyarh Garg w/o Raman

Kuamr Garg Proprietor of M/s M.A. Exports and Shri Vinod Garg s/o Sh. Brij Lal Garg.

(e) After investigation the Enforcement Directorate issued said PAO attaching the properties including property in question. The Enforcement

Directorate submitted O.C. bearing no. 605/2016 before the ld. Adjudicating Authority for confirmation. The ld. Adjudicating Authority has confirmed

the PAO on 20.10.2016.

The case of the appellant:-

(a) The present appeals have been preferred by Sh. Rajeev Jain, Smt. Kanchan Bala & Monika Jain, Appellants against the impugned notice dated

9.11.2016 wherein it was asked to vacate the property in question. The notice was issued stating therein that the property in question is owned by Smt.

Seema Garg w/o Sh. Vinod Kumar Garg.

(b) It is the contention of the appellants are that they were not a party before the adjudicating authority though they are the owner of portion of the

property in question.

(c) It is the case of the appellants are that the property in question measuring 405 sq. yds. Was owned by one Mrs. Seema Garg W/o Vinod Garg

which was sold in 5 portions. 96.5 sq yds., each was purchased by these appellants namely Sh. Rajeev Jain and his wife Monika Jain, 90 sq. yds was

purchased by one Kanchan Bala and 102 sq. yds was purchased by one Sanjeev Kumar who subsequently sold his portion to Monika jain by

registered sale deed 09.03.2016 from Smt. Seema Garg through the power of attorney holder Sh. Vikas Jain and taken the actual physical possession

after paying the full consideration and since then he is in the actual physical possession of the same.

(d) It is stated by the appellants that the property in question i.e. House no. B-19-306 measuring 405 sq. yards situated at said address was pledged

with Bank of India by Smt. Seema Garg. The appellants and other purchaser had paid the sale consideration in advance to enable Smt. Seema Garg to

deposit the amount with the Bank to clear her liability against the said property. The bank had issued NOC dated 26.04.2013 and after the said NOC

the appellants and others had purchased the same and got it registered on 03.05.2013.

(e) That the said property on the day of confirmation of the O.C. did not stand in the name of Smt. Seema Garg and this fact was well within the

knowledge of Smt. Seema Garg who had intentionally and deliberately suppressed this material fact before the authority and the authority and the

department did not follow due diligence and in fact were negligent as they did not even care to investigate to ascertain the true and correct facts.

(f) That is settled law, that it is not the property, but the sale consideration which is liable to the attached thus as held by the Hon’ble High Court

of Madras in C. Chellamuthu Case, it was the sale consideration which had passed on to Smt. Seema Garg which ought to have been attached by the

Department.

(g) That the appellants had purchased the said property in question much before any action was initiated by the Enforcement Directorate, and as such

when the appellants purchased the property in question there was  no prohibitory or any prohibition order issued by the Enforcement Directorate,

thus only for this reason his sale deed was registered.

(h) That after the present appeals were filed before this Tribunal, the appellants and all other persons whether directly or remotely involved with the

said transaction were summoned by the Enforcement Directorate’s Zonal Office at Jalandhar, they all fully co-operated in the ongoing

investigations and were questioned at length with regard to the source of money through which the property was purchased, during investigations

nothing incriminating came forward, and to the best of the knowledge of the appellants the department was convinced that the said sale transactions

were genuine and bonafide. That the suspicion raised with regard to the execution of the GPA by Smt. Seema Garg in favour of Mr. Vikas Jain

(relative of appellant) is concerned, the same was executed with the sole aim as the appellants were apprehending that she may not come forward to

execute the sale deed, as the appellants had paid her the entire amount in cash as demanded by her as she had to first procure an NOC from the Bank

of India where the plot of the appellants and other plots were pledged, after the NOC dt. 26.04.2013 was issued by the Bank of India, the appellant

got the sale deed registered in his name on 03.05.2013.

(i) That the respondent has only raised this objection that the sale deeds are executed through a power of attorney and thus it is not a valid sale

transaction and have placed reliance on the judgment of the Hon’ble Supreme Court delivered in the matter of Suraj Lamp and Industries (P) Ltd.

V/s State of Haryana. That the observations made by the Hon’ble Supreme Court in the above cited matter are not applicable in the facts and

circumstances of the present case as the Hon’ble Supreme Court never intended its observations to apply to genuine/bonafide transactions

through SA/GPA/WILL, where there is no impediment for transfer and the concerned persons have paid the requisite stamp duty. This issue has been

elaborately dealt with by the Hon’ble High Court of Delhi in Pace Developers and Promoters Pvt. Ltd. vs. Govt. of NCT, wherein the

Hon’ble High Court has held that the observations as made by the Hon’ble Supreme Court in Suraj Lamp’s case have been interpreted

wrongly, as a conveyance can be registered by taking recourse to a GPA, as long as the transaction is genuine and the same shall be registered by the

Registrar/Sub Registrar.

(j) That the appellants are a bonafide purchasers and the sale consideration paid is earned thorough legal means as the same is paid through the bank.

That the appellants are not accused of being involved in any criminal activities neither they are the benamidar of Smt. Seema Garg. That the

respondent have never stated that the appellants were or are in connivance with Mrs Seema Garg, the respondent has further failed to establish any

live link or nexus between the appellants and Smt. Seema Garg, there have been no inter connected transactions of any kind between the appellants

and Smt. Seems Garg other than the sale deed in question. The respondent has failed to prove that sale consideration paid by the appellants were

obtained through illegitimate means, the appellants have proved beyond doubt that their purchase are genuine and the property in their hands is

untainted, as the respondent has been negligent in investigating the matter now the only course available to the respondent is to attach sale proceeds in

the hands of Smt. Seema Garg and not the property of the appellants as they are genuine legitimate bonafide purchaser without knowledge.

(k) That, the said property measuring 405 sq yards was purchased by Smt. Seema Garg in the year 2011 and has been charged by the respondents for

the scheduled offences which she has alleged to have been committed in the year 2012-2013, that even otherwise the appellants had purchase the

property i.e. on 3/05/2013 much before the respondent initiated the proceedings against Smt. Seema Garg i.e. 14.08.2013. That the bonafide of the

appellants further stand established from the fact that the said property was pledged with a bank and a legitimate NOC procured from the Bank.

(l) That the appellants have cited the judgment 13.08.2018 of this Tribunal passed in the matter titled Sh. Vivek Mathias vs. The Deputy Director,

Directorate of Enforcement, Mumbai and Sanjeev Kumar Vs. The Deputy Director, Directorate of Enforcement, Chandigarh has protected the rights

of a bonafide purchaser who has no knowledge of any criminal activity attached with the said sale transaction.

Case of the Respondent is that;-

(a) In their replies to the appeals, the case of the respondent is as mentioned at para no. 2 above. Besides the same it is stated by the Respondent that

the property in question is owned by Smt. Seema Garg and documents submitted in the appeal shows that the plot was divided in five separate portions

and each portion sold through power of attorney holders on 03.05.2013. The total amount of sale consideration was Rs. 81,50,000/- (Rupees Eighty

One Lakhs Fifty Thousand only)

(b) The respondent has relied on judgment passed by Hon’ble Supreme Court in the matter of Suraj Lamp and Industries Pvt. Ltd. in SLP (C) no.

13917 of 2009 held on 11.10.2011 and on the basis of the said judgment it is submitted by the respondent that in view of the hon’ble Supreme

Court observation the aforesaid property transaction cannot be treated as a valid transaction and the property as on 09.05.2016 was legally owned by

Smt. Seema Garg, hence same was attached vide PAO 04/2016 dated 09.05.2016.

Analysis and discussion

(a) We have gone through the relevant papers including the translated copies of the registered power of attorney, sale deeds, copies of the bank

statements, no objection certificate dated 26.04.2013 issued by Bank of India, Bharat Nagar Chowk, Ludhiana, translated copies of revenue records

and reply filed by the respondent.

(b) It is not disputed that the appellants were not made a party before the adjudicating authority even though the appellants have interest over the

property in question.

(c) It is also not disputed that Smt. Seema Garg purchased the property in the year 2011 and the same was mortgaged with the Bank of India.

(d) The respondent does not dispute the fact that the Smt. Seema Garg executed power of attorney in favour of Mr. Vikas Jain who executed the sale

deeds in favour of the appellants and another on 03.05.2013. It is reveled from the copies of documents that the Vendees of the entire property in

question repaid the loan amount borrowed by Smt. Seema Garg from Bank of India and got the property in question released from the bank’s

mortgage before the execution of the sale deeds.

(e) The most important facts in this case is that the allegation against Sh. Vinod Kumar husband of Smt. Seema Garg was that he made fraudulent

claims of VAT refund of Rs. 1.56 crore from the Government during the financial year 2012-13. It means the offences of the year 2012-13. Whereas

the property in question was acquired in the year 2011 by Smt. Seema Garg.

(f) It is the contention of the respondent that the property in question has been attached as value thereof. There is no allegation that the property in

question has been acquired out of proceeds of crime. When the case was registered the appellants and others have already purchased the property in

question and in actual physical possession of the same. There is no rebuttal from the side of the respondent in this regard.

(g) It is an admitted fact that the ECIR was registered on 14.08.2013 and by that time the appellants were in physical possession of the same. This

means that no investigation was made not only to know the aforesaid fact on ground and from the local Registry office.

(h) The property in question was attached without affording opportunities of the appellants. The appellants are bona fide purchasers.

(i) The judgment of Hon’ble Supreme Court cited by the respondent is not applicable to the present fact and circumstances of the present case as

there is no allegation that the power of attorney executed in favour of Shri Vikas Jain was with malafide intention or to commit any fraud or that the

sale consideration amount has been obtained directly or indirectly from illegal sources. On the other hand the appellants have satisfactorily explained

the reasons as to why they got the general power attorney executed in favour Sh. Vikas Jain by Smt. Seema Garg. Hon’ble High Court of Delhi

in the matter of Pace Developers and Promoters Pvt. Ltd. Vs. Govt. of NCT has held that the observations as made by the Hon’ble Supreme

Court in Suraj Lamp’s case have been interpreted wrongly, as a conveyance can be registered by taking recourse to a GPA, as long as the

transaction is genuine and the same shall be registered by the Registrar/Sub Registrar.

(j) The issue of bonafide purchaser has been dealt with by this Tribunal in the matter of Vivek Mathias vs. Deputy Director, ED, Mumbai and in the

matter of Sanjeev Kumar vs. Deputy Director, ED, Chandigarh.

(k) In the present case, the case of the appellants are in a better footing as the property in question has been acquired prior to the alleged commission

of offences by the husband of Smt. Seema Garg and there is no allegation that the proceeds of crime has been used in any manner to acquire the

property in question.

(l) There is nothing on record to show that any prosecution complaint with respect to property in question has been filed.

Conclusion

We are considering the fact concerning the property purchased by the appellants. There is no point in remanding the matter in view of the reasons

stated above and in the light of documents placed before us. We have considered the materials on records as stated above and of the considered view

that the property in question purchased by the appellants are not in any way connected with proceeds of crime in the hands of the appellants nor the

said property was acquired out of proceeds of crime by Smt. Seema Garg in the year 2011, hence not liable to be attached. In view of the above the

provisional attachment order coupled with order dated 20.10.2016 of the adjudicating authority to the extent of property in question purchased by the

appellants is set aside. The appeals are accordingly allowed.

In view of the above all the pending applications are accordingly disposed of.

No Cost.