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Judgment
SI.
No",Details of accused,Sections invoked,,,
1,Mr Katta Subramanya Naidu,"7, 13(1)(d) r/w 13(2) Prevention of Corruption Act,
1988 (PC Act) and 465, 471 r/w 120(B) of Indian
Penal Code(IPC) ;",,,
2,Mr K.S.Jagadish @ Katta Jagadish Naidu,"8, PC Act, 1988 and 420, 465,468,120(B) of IPC |",,,
3,Mr S.V.Srinivas,"12 PC Act, 1988, 420, 465, 468,506 r/w 120(B) of
IPC,",,,
4,"Mr Jagaiah ( absconding at the time of
filing chargesheet)","420, 465, 468 r/w 120(B) IPC",,,
5,"Mr Venkaiah (absconding at the time of
filing chargesheet)","420, 465,468 r/w 120(B) of IPC",,,
6,Mr Basavapoornaiah,"12 PC Act, 1988& 120(B) of IPC",,,
7,Mr T.P.Muninarayanappa,"13(1)(d) r/w 13(2) P.C. Act, 1988 &
120(B) of IPC",,,
8,Mr B.K.Manju.,"420 ,506 r/w 120(B) of IPC",,,
9,Mr M.Gopi,"420, 506 r/w 120(B) of IPC",,,
ANS: I have utilized the money derived from M/s Itasca towards the following (i) Rs.10 lakhs towards renovation of my house situated at No.,,,,,
20, 18th Cross, Malleswaram, Bangalore(ii) Rs. 5 lakhs towards day-to-day expenses for a period of one year (iii) Rs. 8 lakhs towards",,,,,
hospitalization expenses to my wife……â€,,,,,
On the basis of said questions and answers in the said statement relying the same as his admission, the property of the appellant was attached on",,,,,
the basis of Complaint and the reason is mentioned reproduced hereunder:,,,,,
“19.1 (j) that he has utilized the money derived from M/s ITASA towards the following (i) 10 lakhs towards renovation of his house,,,,,
situated at No. 20, 18th Cross, Malleswaram, Bangalore. (Property mentioned at Sl. No. 29 of Para 2 above)",,,,,
(ii) Rs. 5 lakhs towards day to day expenses for a period of one year (iii) Rs. 8 lakhs towards hospitalization of his wife.â€,,,,,
Smt V. Sarawathi who is the wife of appellant is also not accused either in the schedule offence or in the section 45 compliant filed by the,,,,,
Respondent herein numbered as SPL CC 124/2014. Her immovable properties are also attached. The appeals filed by her are also being decided by,,,,,
separate order.,,,,,
It is evident that the allegation against the appellant (as per complainant) in the provisional attachment order passed by the respondent was that a,,,,,
sum of Rs.10 lakhs from out of the amounts said to have been received by S.V. Srinivas from M/s ITASCA had been spent for renovation of property,,,,,
owned by his father. The property was attached merely on the basis of said reason. The statement made by S.V Srinivas was treated as an admission,,,,,
about proceeds of crime which were allegedly utilized in renovating the house at Malleswaram owned by the appellant. The appellant and his son S.V.,,,,,
Srinivas have specifically denied that it was the proceed of crime.,,,,,
Before the Adjudicating Authority, the Appellant had produced the documentary evidence in order to show that he purchased House No. 20, 18th",,,,,
cross Malleshwaram vide Registered sale deed dt: 22/12/1973 and adjacent House No. 20A, 18th cross Malleshwaram vide registered sale deed dt:",,,,,
28/01/1974, which is more than 20 years before the scheduled offences were allegedly committed by the accused parties. The copy of the said sale",,,,,
deeds are filed as ANNEXURE ‘A-5’ & ‘A-6’ at 176 and 189 respectively. It was alleged by the appellant that during the year 1975-76,",,,,,
constructed a composite building on the said properties after obtaining a sanctioned plan. The said building was given katha No. 20 and 20/3. The copy,,,,,
of the tax paid receipt dated 27/06/1977 showing the building on the above mentioned property being assessed to taxes is filed as ANNEXURE ‘A-,,,,,
7’.,,,,,
It has come on record that when the Appellant purchased the above said properties and constructed a building on the same by his own investment,",,,,,
his son S.V.Srinivas was not even born. The Appellant is an Income Tax assesse for the last 44 years and if the total income tax paid by the Appellant,,,,,
and his law firm is taken into consideration, at any particular point of time he was paying the taxes before the Income tax department. The copies of",,,,,
income tax returns of this Appellant are fixed as ANNEXURE ‘A-8’ at page 202.,,,,,
The Appellant had also stated that during the year 1992, he had applied to Bruhat Bangalore Maha Nagar Palike (BBMP) for merger of two",,,,,
kathas i.e., for property No. 20 and 20/3 into a single Katha number. The BBMP by its endorsement dated 10/01/1992, merged Katha of the two",,,,,
properties and gave single Katha No.20 and assessed the building for an annual value of Rs.10,000/- and revised the tax for properties by additional",,,,,
tax of Rs.620/-. The BBMP thereafter called upon this Appellant to pay a tax of Rs.2,620/- per year. The Copy of the said endorsement which is in",,,,,
Kannada are filed with English translation as ANNEXURE ‘A-9’ & ‘A-10’ at page 379 and 380 respectively and the copy of the,,,,,
assessment extract maintained by BBMP is also filed as ANNEXURE ‘A-11’ at page 381.,,,,,
It is evident that the Appellant had established that a building was in existence and it was taxed during the year 1975 itself and Katha of the two,,,,,
properties were merged in the year 1992. Thus, it is clear that the said house was not purchased from any proceed of crime.",,,,,
In order to explain the allegation about the renovation in his house, it is stated by him that during the year 2007-08, the Appellant and his wife went",,,,,
abroad to visit their daughter. When they returned, they found that the flooring of the house had been changed. The Appellant’s son S.V Srinivas",,,,,
intimated him that he had carried out this work, from out of his own funds. Parents were not aware as to whether it was or was not tainted money, the",,,,,
respondent even prima facie is not able to establish nor any allegation is made that the appellant has any connection with the crime or having any link,,,,,
and nexus as stipulated under section 3 of the Act.,,,,,
The properties of the appellate was attached under the provisional attachment order merely on the basis of the statement of his son who was not,,,,,
allegedly accused in the matter. Before attachment, the appellant was not given any notice nor any opportunity was given to explain his stand, nor",,,,,
even copy of reason to believe was served. The appellant is not an accused in any matter. His son statement was taken as his admission. There is no,,,,,
procedure for cross of investigated officer.,,,,,
The respondent has not recorded his statement before attaching the property owned by the Appellant herein described at Sl. No. 29 in Para-2 of,,,,,
the Complaint and for the same the provisional order passed by the Complainant is violative of principles of natural justice and violates the rights of this,,,,,
Appellant enshrined in Art. 14 and 21 of the Constitution of India. Both, the appellant was never called for or given any chance to explain their stand",,,,,
before passing the provisional attachment order.,,,,,
In Directorate of Enforcement v. SSR Infra and Anr. [LPA No. 453 of 2012 decided vide Judgment dated 1.6.2012], the Learned Delhi High",,,,,
Court has held that if part of the consideration for a property is sourced from a person accused under the PMLA Act, the same cannot justify",,,,,
attachment of the entire property.,,,,,
In the facts of present case, even the question of part consideration at the time of purchasing the property does not arise as the same was",,,,,
purchased by the appellant many decades earlier even his son was not born at that time.,,,,,
It is argued by the learned Counsel for the appellant that since S.V Srinivas during questioning stated that he received Rs. 25 lacs from M/s Itasca,",,,,,
it does not imply that he admitted receipt of proceeds of any crime. It is stated by the counsel for the appellant that S.V Srinivas received only a sum,,,,,
of Rs. 20 lakhs from M/s ITASCA which was by way of A/c payee cheques, in consideration for his services rendered to M/s ITASCA as an",,,,,
employee in the capacity of a Director. It is submitted by him that there is no allegation in the Charge Sheet submitted before the Prevention of,,,,,
Corruption Act Special Court by the Lokayuktha Police Wing that S.V Srinivas received amount from ITASCA by way of A/c payee cheques as a,,,,,
part of the alleged scheduled offences under PMLA.,,,,,
It is submitted on behalf of appellant that once the payment made by ITASCA through A/c payee cheques is not alleged in the Charge Sheet to be,,,,,
related to the alleged offences, the Complainant could not have improved upon the Charge-Sheet and treated the said payments as proceeds of crime.",,,,,
S. No.,Description,Direct (Rs),"Amounts
withdrawn
through bearer
cheques
(In the name of
Land lords) (Rs.)","Amount
withdrawn
through bearer
cheques ( in the
name of non
existing land lords
and their legal
heirs (Rs.)",Amount (Rs)
1,"A/c INDU
BUILDERS","16,03,07,700/-","37,23,29,000/-","32,02,27000/-","85,2863,700/-
2,"A/c ITASCA
MALLESHWARAM","5,77,00,000/-","33,87,18,000/-","30,90,33,178/-","70,54,51,178/-
3,"A/c ITASCA
BASAVESHWAR
NAGAR","5,25,00,000/-","13,20,50,000/-","20,58,00,000/-","39,03,50,000/-
Total,,"27,05,07,700/-","84,30,97,000/-","83,60,60,178/-","194,86,64,878/-
Adjudicating Authority who after receipt of complaint issued the direction to the respondent to issue the notice to all the defendants including the,,,,,
appellant bypassing two lines order that they have reason to believe than an offence has been committed under section 3 of the Act by all the,,,,,
defendants by forgetting that the appellant was not accused in the schedule offence nor any complaint u/s 45 has been filed.,,,,,
The Adjudicating Authority upon receipt of a complaint under section 5(5) of Act; under section 8 (1) of the Act is bound to peruse the same and,,,,,
upon perusal of such a complaint if it has reason to believe that any person has committed an offence under section 3 of the Act or is in possession of,,,,,
proceeds of crime may serve a notice on such person calling upon them to indicate the means by which he has acquired the property attached under,,,,,
section 5(1) of the Act. The notice issued by the Adjudicating Authority under Section 8 of the Act, is issued contrary to the said provision and is",,,,,
against principles of natural justice.,,,,,
Section 5(1) is a mandatory provision, before passing of provisional attachment order, the respondent has to satisfy itself by recording the reason to",,,,,
believe in writing that how the party or parties are involved in money-laundering.,,,,,
Section 5.1 of the PMLA Act is reproduced below :-,,,,,
“5. Attachment of property involved in money-laundering â€",,,,,
(1 ) Where the Director, or any other officer not below the rank of Deputy Director authorised by the Director for the purposes of this section,",,,,,
has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that â€"",,,,,
(a) any person is in possession of any proceeds of crime; and,,,,,
(b) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any",,,,,
proceedings relating to confiscation of such proceeds of crime under this Chapter,",,,,,
he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and eighty days from the date of the",,,,,
order, in such manner as may be prescribed:",,,,,
[Provided that no such order of attachment shall be made unless, in relation to the scheduled offence, a report has been forwarded to a",,,,,
Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974) , or a complaint has been filed by a person authorised to",,,,,
investigate the offence mentioned in that Schedule, before a Magistrate or court for taking cognizance of the schedule offence, as the case",,,,,
may be, or a similar report or complaint has been made or filed under the corresponding law of any other country:",,,,,
Provided further that, notwithstanding anything contained in [first proviso], any property of any person may be attached under this section if",,,,,
the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section has reason to,,,,,
believe (the reasons for such belief to be recorded in writing), on the basis of material in his possession, that if such property involved in",,,,,
money-laundering is not attached immediately under this Chapter, the non-attachment of the property is likely to frustrate any proceeding",,,,,
under this Act.]â€,,,,,
The first proviso of section 5(1) stipulates that no such order of attachments shall be made unless in relation to the schedule offence, a report has",,,,,
been forwarded to a magistrate under section 173 of the Code of Criminal Procedure, 1973.",,,,,
However, as per second proviso, the respondent without filing the charge-sheet is empowered to attach the properties without filing the report",,,,,
under section 173 of Cr.R.C. on the basis of material in the possession of the respondent if it is apprehended that non-attachment is likely to frustrate,,,,,
the proceedings. It is also mandated in second proviso that the reasons for such belief to be recorded in writing.,,,,,
The reasons of believe have to be recorded all the more reasons after incorporation of second proviso of section 5(1) where the ample powers are,,,,,
given to the respondent to attach the properties without even filing of charge-sheet before the Special Court as per second proviso. If a party after the,,,,,
receipt of notice under section 8(1) of the Act insists for a copy of reasons to believe before passing the provisional attachment order, in order to file",,,,,
the proper reply, it must be served. As justice must not only be done but it must also appear to be done as per settled principle of justice and sustaining",,,,,
the litigants faith in the justice delivery system. The question of secrecy or claiming any confidentiality does not arise after the issue of notice under,,,,,
section8(1) of the Act.,,,,,
In the present case, no notice was given to the appellant. No opportunity was granted to him to explain his stand. His statement was not recorded,",,,,,
still his property was attached by passing the provisional attachment order. As per settled law that every citizen has a vested right in its property.,,,,,
The property of third party cannot be attached by passing the order of provisional attachment who is not involved in schedule offence without,,,,,
issuing the notice to him and recording his statement as valuable rights in the properties are involved. In the present case, on the basis of the statement",,,,,
of his son, his property was attached. His son never admitted that the amount spent by him for renovation of father property was proceed of crime,",,,,,
the law and procedure and natural justice cannot be ignored in this fashion.,,,,,
The language of the notice issued by the Adjudicating Authority is not in conformity with the requirement stipulated under Section 8(1) of the Act,,,,,
and pre-suppose the guilt of the Appellant and for the same is against principles of natural justice. The notice has been issued in a mechanical and,,,,,
stereotypes on the face of record.,,,,,
The notice issued by the Adjudicating Authority to the Appellant does not disclose any reasons nor does it call upon the Appellant to disclose the,,,,,
source of income from out of which the appellant has acquired the property attached under section 5(1) of the Act and for the same the impugned,,,,,
notice is bad in law and violative of Art 14 of the Constitution.,,,,,
Adjudicating Authority while adjudicating the validity of the provisional attachment was bound to examine as to whether the value of such property,,,,,
has a direct relation to proceeds of crime, which is a condition prerequisite to constitute proceeds of crime in terms of section 2(u) under the PMLA.",,,,,
No case was brought out against the appellant either in the charge-sheet filed by the Lokayuktha Police Wing or the complaint filed by the,,,,,
Complainant and as such Section 2(u) of PMLA does not come into operation and as a consequence of the same Section 5 of PMLA. It has not,,,,,
established even prima facie that the appellant was aware that any alleged proceed of crime is spent on renovation. There is no evidence available on,,,,,
record. In the absence of that, the property of innocent party cannot be attached when admittedly when he party is not charged with schedule offence",,,,,
and in the prosecution complaint.,,,,,
The Adjudicating Authority is bound to go through reason to believe recorded before passing the provisional attachment order while coming to the,,,,,
conclusion to issue a notice under section 8(1) of the Act particularly to a person who is not an accused in the schedule offence and not a party to the,,,,,
prosecution complaint. Stereotypes notice under section 8(1) cannot be issued in such types matters in these types of cases. The case of appellant has,,,,,
not been dealt by the Adjudicating Authority in the impugned order. His property was provisionally attached without any notice and without recording,,,,,
his statement. He is senior citizen/ practicing Advocate. He was not aware that the amount spent on renovation was alleged tainted money. Even,,,,,
otherwise, any offence if committed by his son cannot be attributed to the father unless the father has link and nexus in the crime and involves in the",,,,,
criminal activities. In the present, such allegations against the appellant are not raised by the respondent.",,,,,
For the aforesaid reasons, the impugned order dt. 17/10/2012 passed by the Adjudicating Authority against the appellant is not sustainable in law",,,,,
and wholly contrary to section 5 and 8 of the Act. The appeal is accordingly allowed. The impugned order is set-aside against the appellant,",,,,,
consequently the provisional attachment order with regard to present appellant is also quashed. The property is released forthwith.,,,,,
It is directed that in case, his son who is one of the accused in prosecution complaint which is still pending ( The proceedings have been stayed by",,,,,
the Hon’ble High Court at Karnataka ) and if he is hold guilty after trial if to be conducted after disposal of writ petition. The respondent would be,,,,,
entitled to attach a sum of Rs.10 lacs if it established that it was a proceed of crime. The appeal and pending applications are disposed of.,,,,,
No costs.,,,,,