Shobha Karandlaje vs Joint Director Directorate Of Enforcement, Bangalore

FPA-PMLA-636/BNG/2014 & FPA-PMLA-588/BNG/2014

The present appeal has been preferred by the appellant against the impugned order dated 31.07.2014 passed in original complaint number (O.C.)

No. 263/2014 by the Adjudicating Authority, Prevention of Money Laundering Act, 2002 confirming the provisional attachment order (PAO) No.

1/2014 arising out of ECIR/07/B2/2011.

The appellant has prayed for the following reliefs in his appeal memo:-

(a) Quash the order passed by the Adjudicating Authority on 24/02/2014 in Original Complaint No. 263/2014, ordering issuance of notice to the

Appellant without assigning any reason; AND

(b) Set aside the show cause notice dt: 24/02/2014 issued by the Adjudicating Authority; AND

(c ) Set aside the order passed in original Complaint No. 263/2014, dated 31/07/2014 confirming the Provisional Order of attachment bearing No.

1/2014 in ECIR/07/BZ/2011 passed by the Joint Director of Directorate of Enforcement, the Respondent; AND

(d) Order for refund of Rs. 70 lakh taken by the Respondent from the account of the Appellant in Federal Bank, RT Nagar Branch, Bangalore

bearing No. 14720100008074.

(e) Pass such other orders that this Hon’ble Tribunal may deem fit in the facts and circumstances of the present case.

The aforesaid reliefs have been sought by the appellant, inter-alia, on following facts and grounds:-

A. FACTS

(i) That, the Appellant herein was the erstwhile Director of one company called M/s Kapila Manjushri Apparels Pvt. Ltd, which is dealing in trading of

readymade garments of Lee and Wrangler brands of M/s Arvind Fashions Pvt. Ltd;

(ii) That, the appellant’s company was short of Rs. 70 lakhs to acquire Franchise outlet from Ms. Arvind Mills at Indiranagar, so she was making

the enquiry with her colleagues and friends to arrange the aforesaid amount and at that point of time Sri Katta Subramanya Naidu (K.S. Naidu)

offered and handed over her a cheque of Rs. 70 lakh drawn from the account of M/s Indu Builders in Karnataka Bank, Indira Nagar Branch,

Bangalore stating that the same was issued from his son Katta Jagdish company’s account;

(iii) That the said cheque was enchased on 01.06.2007. Out of the aforesaid amount of Rs. 70 lakh, a sum of Rs. 64,56,000/- was paid to Ms. Arvind

Fashions on behalf of her company on 04.06.2007 and a sum of Rs. 5 lakh was advanced to her company on 07.06.2007. In the meantime, the

company of the appellant had applied to the State Bank of India, Indiranagar branch, Bangalore for working capital loan of Rs. 80 lakh which was

sanctioned on 16.07.2007 through an over draft account. The said company of appellant repaid a sum of Rs. 70 lakh to the appellant on 01.08.2007

which was transferred to her Federal Bank account on 02.08.2007

(iv) That, at a later date the appellant returned the amount of Rs. 70 lakh, borrowed from Sri K.S. Naidu, by depositing the said amount in favour of

M/s G.V. Infrastructure as per the instruction of Sri K.S. Naidu.

(v) That, the Appellant was summoned by the Deputy Director of Enforcement Directorate and her statement was recorded under section 50 of the

PMLA Act, 2002. Thereafter, provisional attachment order was passed on 24.01.2014 under section 5(1) of PMLA.

(vi) That, in the appeal memo, the appellant has described the facts stated by the complainant in the provisional attachment order and original

complaint regarding the report under section 173 of CrPC filed by the Police Wing of the Karnataka Lokayuktha, Bangalore.

(vii) That, the appellant had challenged the order dt. 24.02.2014 passed by the Adjudicating Authority before the Hon’ble High Court of Karnataka

bearing Writ Petition no. 19369/2014. That the Hon’ble High Court vide its order dated 04.06.2014 directed this Tribunal for expeditious disposal

of appeal if the appellant prefers an appeal challenging the show cause notice and order dated 24.02.2014.

(viii) That, the appellant had filed her reply before the Adjudicating Authority and argued the matter both on merit of the case as well as on the show

cause notice issued by the Adjudicating Authority.

(ix) That, the appellant has also preferred an appeal bearing no. 588/2014 before this Tribunal challenging the order dated 24.02.2014 as well as the

show cause notice issued to her and the same is pending.

(x) That, in the mean time Adjudicating Authority pronounced the order in OC No. 263 Of 2014 on 31.07.2014 confirming the PAO bearing no. 1 of

2014 attaching Rs. 70 lakh in the account of appellant in Federal Bank, RT Nagar Branch, Bangalore, which is impugned, in the present appeal.

B. GROUNDS

(i) that the Adjudicating Authority has not complied with the requirement of section 8(1) of the PMLA and there is gross violation of Article 14 of the

constitution and the principal of natural justice.

(ii) That, this case does not come within the schedule offence in regard to section 2(y)(ii) of the said Act.

(iii) That, PAO does not satisfy the requirements of section 5(1) of the said Act.

(iv) That, Rs. 70 lakh has been received from clear and legitimate source and not from Rs. 85,28,63,700 crore allegedly classified as proceeds of

crime and as defined under section 2(Y) of the said Act.

(v) That, the appellant is not an accused in special case no. 135/2011 filed before the special judge by the police wing of Karnataka Lokayuktha.

(vi) That, the Adjudicating Authority has not given any reasons as to how it arrived at the conclusion that Rs. 70 lakhs has not come from clean and

legitimate source and has come from proceeds of crime of Rs. 85,28,63,700/- crore.

(vii) That, the Adjudicating Authority has failed to appreciate the fact that Sh. B.L. Venkataiah @ Venkaiah in his statement dated 09.06.2012 has

stated that Rs. 70 lakh went to the appellant from Rs. 104,18,55,950 crore in the account of M/s Indu Builders. As per the complainant’s own

averments approximately 19 crore in the account of M/s Indu Builders is clean and legitimate.

(viii) That the Adjudicating Authority has not furnished any reasons as to why it came to conclusion that R. 70 lakh received by the appellant from the

account of M/s Indu Builders is proceeds of crime.

It is seen from the records that the respondent has not filed any reply to the contentions raised by the appellant. However the learned counsel for

the respondent submitted his oral arguments in the appeal.

We have heard the arguments from both the sides and have gone through the materials including the ECIR, PAO, OC, reply filed by the defendant,

the impugned orders and other relevant papers.

It appears to us from the record that the appellant had raised several contentions before the learned Adjudicating Authority, PMLA which were

neither discussed nor decided in the impugned order. One of the main contention raised by the appellant before this Tribunal is that the Adjudicating

Authority has not given any reasons as to why he arrived at the conclusion that Rs. 70 lakhs has not come from clean and legitimate source and has

come from the alleged proceed of Rs. 85,28,63,700 crores and has failed to appreciate the fact that Sh. B.L. Venkataiah @ Venkaiah in his statement

dated 09.06.2014 has stated that Rs. 70 lakhs went to the appellant from Rs. 104,18,55,950 crores in the account of M/s Indu Builders.

We have gone through the findings and conclusion of the Adjudicating Authority available at internal page 14 to 17 of the impugned order. It is not

discussed as to which of the documents supports the finding of the Adjudicating Authority that Rs. 70 lakhs was out of Rs. 85,28,68,700/- crores and

not out of the 19 crores which is claimed as the legitimate money in the account of M/s Indu Builders.

Since the defendant /appellant has been consistently raising the aforesaid issue that Rs. 70 crores is not from the proceeds of crime i.e. 85,28,68,700

crores but from other 19 crores, out of the total 104,18,55,950 crores in the account of M/s Indu Builders, it was necessary on the part of Adjudicating

Authority to pass a speaking order on merit on this issue.

Since the aforesaid issue was a contentious issue of fact before the Adjudicating Authority, it should have been decided primarily alongwith all

other pleas raised by the appellant in her pleadings by the Adjudicating Authority for the better appreciation of the case in its entirety.

Therefore, it is felt by this Tribunal that this case is a fit case to be remanded back to the Adjudicating Authority with direction to specifically give

a clear finding as to “whether Rs. 70 lakhs is the money out of the 19 crores, claimed to be the legitimate money in the account of M/s Indu

Builders or from Rs. 85,28,68,700 crore alleged to be proceeds of crime in the account of M/s Indu Builders out of the total amount of Rs.

104,18,55,950 crore. The Adjudicating Authority shall also decide all other pleas raised by the appellant in her pleadings.

In the light of the above, the impugned order is set aside and the matter is remanded back to the Adjudicating Authority for deciding the matter

afresh by way of a speaking order which shall disclose findings on all the issues raised by the appellant including the one mentioned in para above.

Parties to appear before the Adjudicating Authority on 28.07.2017 who shall deliver the order within 3-4 months from the date of our order after

hearing the parties. In view of serious issues involved, we direct that the bench of Adjudicating Authority shall consist of Chairman and two Members

including Member (Legal).

As far as appeal no FPA-PMLA-588/BNG/2014, wherein it was challenged the issue of notice without assigning any reason, the appellant is

allowed to raise the said issue also before the Adjudicating Authority which shall be considered on merit.

Both Appeals and pending applications are disposed of accordingly.

Copy of the order be communicated to the Adjudicating Authority also by the Registry forthwith.