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Judgment
FPA-PMLA-1928/HYD/2017
The Appellant has filed the present appeal under Section 26 of Prevention of Money Laundering Act, 2002 against the order of the Adjudicating
Authority dated 01.08.2017 in O.C. No.762 of 2017.
The Respondent had passed the Provisional Attachment Order No. 4 of 2017 dated 31.03.2017 (hereinafter referred to as “Orderâ€) in respect
of various properties including the following properties belonging to the Appellant:
Land Admeasuring 420 yards at Plot No. 37 in Sy.No.1/4 at Hasmathpet Village, Kukatpally Municipality, Balanagrmandal, Ranga
Reddy District valued by Complainant at Rs.4,20,000/-.
The said attachments have been effected for value equivalent of the proceeds of crime.
It is undisputed fact that the attached property admeasuring 420 Sq. Yards was purchased on 01.05.2005. However, 210 Sq. Yards of the said
property was sold by the Appellant on 14.09.2005 by registered sale deed to Mr. Miryala Srinivas and Miryala Madhavi.
The alleged commission of scheduled offence qua the Appellant is that the Appellant, in conspiracy with one Mr. Anand Kiran defrauded one Mr.
D.R Prasad to wrongfully obtain steel worth Rs.18,97,090 which was in turn sold in open market. Therefore, the said amount was declared as
proceeds of crime by the respondent.
It is not denied that the Appellant is a trader in Iron and Steel since 1996 under the name “M/s JK Steel Corporation†who had been purchasing
steel from many persons/firms and sells the same to other traders. There is not denial that the Appellant had been dealing with Mr. Pankaj Goel of
M/s Jai Bhavani Steel Syndicate from whom in the month of March/April, 2011 had purchased steel from said Mr. Pankaj Goel. As per appellant, it
was purchased in the normal course of business and the same was later on sold in routine course of business.
After the gap of three years and ten months, in the month of January, 2015, the police of Punjagutta Police Station came to the residence of the
Appellant and informed him that a warrant of arrest has been issued against his name in view of a case pending against him before the XIV Additional
Chief Metropolitan Magistrate, Hyderabad.
Later on, as the Appellant, he came to know that certain material was delivered by Mr. Pankaj Goel to the Appellant. The Appellant has denied all
the allegations of ED.
After receiving the notices from the Complainant, the Appellant produced all relevant material before the Complainant, but the Complainant despite
said material, issued the subject provisional attachment order against the said property which was purchased in 2005, six years prior to the disputed
transaction.
The alleged value of the material as per respondent while effecting the attachment was for an amount of Rs.21,20,000/- as valued by the
Complainant. Although the same was of Rs.18,97,090/-.
As per Complainant own showing, the market value of the attached property of the appellant is about rupees 60 lakhs (ED has concluded that the
total proceeds of crime estimated at Rs.19 Lakhs), but Complainant has attached properties higher than the alleged proceeds of crime. As per the
case of the respondent, the property at the hands of the Answering Defendant is attached as the equivalent value of the alleged proceeds of crime.
But it is not understood, how the property of much greater value was attached as per admitted fact. Thus, it was without any application of mind and
without reading the provisions of the Act.
It is not denied by the respondent that the attached property was purchased in 2005, it is not acquired from proceeds of crime but has been
attached on “equivalent value†thereof. By attaching such value equivalent of alleged proceeds of crime, ED was aware that the value of
attached property was more than three times higher than the transaction amount. It is done without considering the reasonable market value as on the
day of attachment.
Value†as defined in Sec. 2 (zb) of the PMLA has to be harmoniously read with Sec. 2 (u) of the Act which mandates to acquisition value only
to situations where the proceeds of crime being attached. Such application cannot be pedantically extended to situations where the property equivalent
of alleged proceeds of crime are being attached, which do not have any nexus or continuum with the alleged direct proceeds of crime. The said
exercise can only be done if ED is not in a position to recover the actual amount of proceeds of crime from the accused who by manipulation spent
the proceeds of crime and the ED is not able to recover the same and attached that only under those circumstances, the property can be attached
equivalent to value thereof if the party has some link and nexus in the crime or the attached property was purchased from proceed of crime and is in
possession of third party.
The allegation against the appellant was that in April 2011, one Mr. S.V. Anand Kiran allegedly defrauded one Mr. D.R Prasad to wrongfully
obtain steel worth Rs.18,97,090. The Appellant is alleged to have purchased the Steel from said Mr. Anand Kiran at Rs.15,00,000/- through one Mr.
Pankaj Goyal knowing fully well that the steel for sum of Rs.18,97,090/- was obtained by fraudulent means. Thus, at the best, the Appellant is alleged
to be liable to an extent of Rs.3.97 lakhs as proceeds of crime.
The PAO prima facie was bad and illegal against the appellant because the Respondent, apart from merely reproducing the language of the Act,
did not give any reasons or cogent reasons, to satisfy the preconditions of Section 5. Similarly, the Adjudicating Authority confirmation under Section 8,
vide the Impugned Order did not apply its mind and mechanically passed the order against the appellant even without reading Section 2(u) of the Act
and requirement of Section 5 and 8 of the Act.
Under Section 5, the Respondent should mandatorily state his “reason to believeâ€, which is to be mandatorily recorded in writing, that such
proceeds of a 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†- or under the 2nd proviso â€" “the non-attachment of the property is likely to frustrate any proceeding
under this Actâ€. A bare perusal of the PAO, as also the Complaint, makes it evident that the Respondent, instead of an unsupported dogmatic
assertion, did not even record one single cogent reason based on which the Complainant had the ostensible “reason to believeâ€.
The predicate FIR and Charge Sheet, from which the subject PAO arises, were filed in May 2011 and August 2012, respectively. The ECIR was
registered in May 2012. The investigation carried by the Respondent was also way back in the year 2015. The respondent has passed the PAO in the
year 2017. There is no justification whatsoever on behalf of ED for such a long delay once even the alleged POC at the part the total proceed of
crime can be attributable to the Appellant is Rs.3.97 Lakhs. The Appellant is a steel trader with good financial standing in the market and society. The
Appellant is ready to secure an amount of Rs.3.97 Lakhs, but the respondent is not agreeable.
The entire computation is illegal manner because as per the Respondentâ€s own case, the alleged value of the material purportedly obtained by
fraudulent means is Rs.18,97,090/- which has been rounded to Rs19 lakhs by the Respondent. However, while effecting the attachment, the
attachment was made for an amount of Rs.21,20,000/- as per the value ascribed by the Complainant himself.
The Respondent at the best could have directed the Appellant to secure Rs.3.97 lakhs for the purpose of trial. However, the Respondentâ€s
pursuit to only attach immovable property, admittedly unconnected to the alleged offence, demonstrates the mala fide intention behind the attachment,
which is to harass the Appellant. The Complainant in its own showing has denoted the market value of the property as more than 60 lakhs.
In the light of above, the appeal is allowed, the impugned order against the appellant is set-aside so as the PAO. However, without prejudice, the
appellant is directed to secure the alleged amount being attributed as POC in the hands of Appellant to the tune of Rs.3.97 lakhs to be deposited in the
form of FDR in favour of the respondent for the period of five years so that trial is over by that time, otherwise the appellant shall renew the FDR for
further period of five years. Once the said amount is deposited, the attachment shall be lifted forthwith.
No costs.