Dismissed

FPA-PMLA-387/AHD/2012 of Jmd Media Pvt. Ltd. v/s The Deputy Director Directorate of Enforcement, Ahmedabad

ATFP20 Jun 2017FPA-PMLA-387/AHD/2012

Case brief

AI extract

What is this about?

The Appellate Tribunal dismissed an appeal against the confirmation of provisional attachment under the PMLA. The court found a nexus between the appellant's funds and the proceeds of crime originating from a mortgage fraud case, upholding the attachment order.

What did the court decide?

The appeal was dismissed and possession was retained subject to a monthly deposit condition.

FPA-PMLA-387/AHD/2012 of Jmd Media Pvt. Ltd. v/s The Deputy… — Money Laundering | ATFP (2017)

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APPELLATE TRIBUNAL, PREVENTION OF MONEY LAUNDERING ACT AT NEW DELHI

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Date of decision: 20.06.2017

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MP-PMLA-2023/AHD/2015 (U/s 35) MP-PMLA-244/AHD/2012 (Stay)

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FPA-PMLA-387/AHD/2012

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JMD Media Pvt. Ltd. … Appellant/Applicant

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Versus

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The Deputy Director Directorate of Enforcement, Ahmedabad

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… Respondent

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Advocates/Authorized Representatives who appeared

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For the Appellant	:	Shri Suryakant Singla, Advocate
For the Respondent	:	Shri Rajeev Awasthi, Advocate
CORAM
JUSTICE MANMOHAN SINGH	:	CHAIRMAN
SHRI KAUSHAL SRIVASTAVA	:	MEMBER
SHRI ANAND KISHORE	:	MEMBER

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JUDGMENT

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FPA-PMLA-387/AHD/2012

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The appellant has filed the appeal under Section 26 of the Prevention of Money Laundering Act, 2002 against the order dated 10^th July, 2012 passed by the Adjudicating Authority in Original Complaint No. 133 of 2012.

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In the order dated 10^th July, 2012, the Adjudicating Authority had confirmed the provisional attachment order dated 15.03.2012 in respect of the following immovable properties:-

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Page 1 of 29

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FPA-PMLA-387/AHD/2012

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Sr. NO.	Particulars of the Property and date of Acquisition	Name of the Current Holder of the Property	Value (Accepted Bid Amount)
1.	“Vishal House” Opposite Sales India, Ashram Road, Ahmedabad- Land bearing Plot NO. 169/14 of Mouja Shaikhpur-Khanpur of City Taluka : Ahmedabad	M/s J.M.D. Media Pvt. Ltd. Ahmedabad	Rs. 1,89,00,000/-
2.	Jay Bungalow, Ishavashyam Society, [Near Rupmadhuri Society, Nr. Lav Kush Society] Vastrapur, Ahmedabad situated at Survey NO. 398 (Paiki) of T.P. Sheme No. 5, Final Plot No. 213 (Paiki), Sub-Plot NO. 4/A (Paiki), 4/B (Paiki) and 4/C of Mouje Vejalpur of City Taluka.	M/s Alive Hospitality and Foods Pvt. Ltd. Ahmedabad	Rs. 2,15,00,000/-

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In the present case, we are concerned with property of serial no. 1

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i.e. Vishal House.

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The facts of the case - as submitted by the appellant - are as under:

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In 1991-92 Anand owner association (NTC) purchased a plot of land in an auction carried out by Income Tax Department and constructed a building thereon having 19 units. In 1992, the said 19 units were purchased by way of allotment and issuance of share certificates of Anand Owners Association by different persons Kantaben, Dipak S Mehta, Subhaschandra, Subhaschandra C Mehta HUF, Pradeep S. Mehta, Vishal Plastomer Pvt. Ltd., Drishtkumar D. Mehta, Jaikumar D Mehta, Vishal Kumar P. Mehta which included purchase of share certificate of 3 units of the said property by Shri Jagdish Ishwarbhai Patel, HUF (through its Karta, Jagdish Ishwar Bhai Patel), Shri Krushbhai Jagdishbhai Patel HUF (through its Karta, Krushbhai Jagdishbahi Patel) and Shri Ankit Jaddishbhai Patel HUF (through its Karta, Krushbhai Jagdishbhai Patel) also referred to as respondents 4, 5 and 6. Hence forth the said property it came to be known as Vishal House.

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FPA-PMLA-387/AHD/2012

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2.1 In 1997, Vishal Exports Overseas Ltd. (VEOL) took financial assistance from a consortium of Banks led by State Bank of India. In order to secure the loan, 16 units in Vishal House (out of total 19 units) were mortgaged to SBI and other constituents of the consortium.

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2.2 In 1998, Punjab National Bank joined the consortium by sanctioning working capital facilities to VEOL. In 2005-06, Punjab National Bank sanctioned additional funds to VEOL. As VEOL defaulted in payments of its dues, SBI and other consortium banks filed recovery proceedings against VEOL and the guarantors before the Debt Recovery Tribunal, Ahmedabad.

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2.3 On 31.01.2008, CBI registered a criminal case under various provisions of IPC and PC Act against the Directors of VEOL, the then manager PNB, then ZONAL Manager and other unknown persons. It was alleged that they had entered into a criminal conspiracy to cheat PNB in the matter of obtaining short-term loan of Rs. 50 crore on the basis of misrepresentation, during the period 2005 to 2006 by abuse of the official position. The respondent however omitted to consider that against the sanctioned sum of Rs. 150 crore, a sum of Rs. 120 crore were kept with the Punjab National Bank in Fixed Deposit. Similarly short term loan of Rs. 50 Crore was secured by BSE/NSE listed shares of the matching market value. A case was registered against Mr. Pradeep S Mehta, Mr Deepak Mehta, Mr. Subhashchandra Mehta and Mr RK Gupta Zonal Manager, Mr RN Savarkar, Chief Manager, Mr. LV Raghvan , the then Senior Manager. Consequently to the registration of case the matter was investigated.

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FPA-PMLA-387/AHD/2012

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On 19.06.2008, the appellant company was incorporated under the Companies Act, 1956. The subscribers to the company were Mrs. Falguni R Bhatt and Mr. Rambhai Kanji Rathore.

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2.4 On 18.09.2008, SBI took over the possession of 16 mortgaged units in Vishal House along with other mortgaged properties under the provisions of Securitisation Act.

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2.5 On 27.08.2009, SBI put up 16 units of Vishal House for sale through bidding in order to rule out the possibility of cartelisation and to secure the competitive market value. Similarly other mortgaged properties were also put up for auction sale.

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2.6 The appellant company gave bid for 16 units in Vishal House. Other investors gave their separate bids. The appellant's bid for Rs. 1,89,00,000/- was accepted.

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2.7 On 04.09.2009, the SBI issued the sale certificate dated 04.09.2009 favouring the appellant company. Original title deeds were handed over by the SBI to the appellant and appellant was put in possession of the stated 16 units. Subsequently conveyance deed was executed between the SBI and the appellant company in respect of those 16 units that had been mortgaged. Conveyance deed as was executed was registered.

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2.8 In October 2010, the appellant desired to sell those 16 units in Vishal House. Negotiations were held with Shri Jadish Ishwarbhai Patel, HUF, Shri Krushabh Jadishbhai Patel HUF and Shri

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FPA-PMLA-387/AHD/2012

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Ankit Jadishbhai Patel HUF (respondents 4, 5 and 6.) who agreed to purchase it for a sum of Rs. 2,09,00,000/-

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2.9 In August 2011, Public notice in respect of 16 units was issued in the newspaper inviting objections to the sale of mortgage units. Respondents No.4, 5 and 6 also got search conducted through their solicitor with respect to the title of those 16 units in Vishal House. No objections were received and the solicitors also gave a due diligence report.

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2.10 On 24.10.2011, an agreement to sell was entered into between the appellant and respondents 4, 5 and 6 in respect of 16 units of the appellant and 3 units of others in Vishal House and the same was registered at S.No. 12069/2011 with the SubRegistrar, Ahmedabad. Possession of all the 19 units was then handed over to respondents 4, 5 and 6 and a letter to this effect was executed and notarized.

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2.11 On 10.12.2011, Sale deed was drawn on requisite stamp papers and signed by the appellant, other co owners and respondents 4, 5 and 6. Anand Owners Association also signed the sale deed as confirming party. Then registration charges were deposited and the sale deed was presented to the Sub-Registrar on 12.12.2011 for registration. The instrument so presented was accepted by the Sub Registrar and acknowledgment confirming refused to register the sale deed contending that he had been restrained from registering any sale deed in respect of the stated

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FPA-PMLA-387/AHD/2012

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property by letter dated 21.07.2011 by the office of the Directorate of Enforcement. No other objection was raised by the Sub Registrar except the letter dated 21.07.2011 of the ED. In the letter dated 21.07.2011, the Enforcement Directorate had on the basis a circular of 30.06.2010 of Inspector General of Registration, asked the Sub-Registrar not to register any sale deed. Enforcement Directorate who had also intimated the Sub- Registrar that in case the sale deed is registered, he would also be liable for penal action under the Prevention of Money Laundering Act.

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Prior to the said transaction, it is matter of fact that on 30.11.2009, after completion of investigation, a charge Sheet dated 25.11.2009 was filed before the special CBI Judge under section 120B, 420,468,471 and 477A of the Indian Penal code and sections 13(2) read with 13(1)(d) of the prevention of Corruption Act. In the report under sections Penal Code and sections 13 (2) read with 13(l)(d) of the Prevention of 173 of the Cr.P.C it has been stated that the Directors of VEOL and the bank officers entered into a criminal conspiracy to cheat PNB in the matter of obtaining shortterm loan of Rs. 50 crores and foreign usance bill discounting of Rs.150 crores on the basis of misrepresentation during the period 2005 to 2006 by abuse of their official position.

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On 15.03.2012, Directorate of Enforcement on the basis of the report under section 173 Cr.P.C filed by the CBI allegedly

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FPA-PMLA-387/AHD/2012

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initiated its own enquiry. It recorded statement of various persons under section 50 of the PML Act and collected various documents during the course of investigation. On the basis of the investigation carried out, the ED concluded that Vishal House and Jay Bungalow have been acquired out of the proceeds of crime and have been projected as untainted money. The ED also concluded that these proceeds of crime were likely to be concealed, transferred or dealt with in such a manner which may result in frustrating further proceedings i.e., confiscation etc. and therefore passed the provisional attachment order.

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The Deputy Director then filed a complaint under section 5(5) of the Prevention of Money Laundering Act, 2003 seeking confirmation of the provisional attachment order. The complaint was registered as OC No. 133 of 2012. Notice of the complaint was issued and JMD Media Ltd. amongst others appeared before the Adjudicating Authority. After hearing, vide order dated 10^th July, 2012; the Adjudicating Authority held that the properties provisionally attached were involved in money laundering and confirmed the provisional attachment order dated 15.03.2012.

¶51

It is against the said order of the Adjudicating Authority dated 10^th July, 2012 that the present appeal has been filed i nter alia mainly with the following grounds:

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(i). The Adjudicating Authority had committed a patent error by holding that there was a reason to believe on the part of the FPA-PMLA-387/AHD/2012 Page 7 of 29

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respondent no. 1 that the Vishal House property were proceeds of crime and by holding that sufficient material existed in the form of the charge sheet and accompanying documents and materials gathered by the Joint Director through his investigation including statements of Directors on the basis of which reason to believe as envisaged under section 5(1) of the Act could be formed and has completely ignored the following which would establish that the respondent no. 1 could not, on the basis of the material available before him, have had any reason to believe that the Vishal House property was purchased from out of proceeds of crime as there was absolutely no evidence or material to show that the Vishal House property was purchased out of proceeds of crime. The charge sheet and documents accompanying it did not allege or even provide a shred of evidence indicating that the Vishal House property was purchased out of proceeds of crime. There is not even a remote link which could show that the Vishal House property was purchased from out of proceeds of crime.

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(ii). The Adjudicating Authority has failed to appreciate that none of the essential conditions of section 5(1) of the Act were fulfilled in the present case in view of the following (a) the Vishal House Property cannot be said to be proceeds of crime since there is no allegation of commission of any scheduled offence which has resulted in the Vishal House property being derived or obtained, (b) since there is no allegation against the appellant in respect of

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FPA-PMLA-387/AHD/2012

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having committed any scheduled offence, the appellant in respect of having committed any scheduled offence, the appellant cannot be said to be in possession of any proceeds of crime, (c) the appellant is admittedly not charged of having committed a scheduled offence, (d) since the Vishal House property is not proceeds of crime.

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(iii). The Adjudicating Authority has committed an error of law in rejecting the appellant’s contention that, when it was not charged for any scheduled offence and did not even have any knowledge of the activities of the persons who were charged under the charge sheet, there could be no action against any property of the appellant under the provisions of Section 5 the act and has failed to appreciate that the fining of the Adjudicating Authority in this regard is clearly contrary to the clear provisions of Section 5 of the Act.

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(iv). The Adjudicating Authority has erred in holding that the statements of the Directors of the appellant and that of the respondent no. 7 showed that all of them were consciously into activities of layering and integration of proceeds of crime and were involved in money laundering and were under the wings of the respondent no. 7.

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(v). The Adjudicating Authority has failed to appreciate that there is absolutely no connection or nexus, between the allegations made in the charge sheet dated- 26.11.2009 and the purchase of the Vishal House property by several persons in the year 1991 or the subsequent purchase

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FPA-PMLA-387/AHD/2012

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of the subject property by the appellant in the year 2009 in the auction sale conducted by SBI and hence the subject property could not, by any stretch of-imagination be said to be proceeds of crime. As far as appellant was concerned, it had not directly taken any monies from the respondent no.s 2 or 7 for making payments in respect of the sale consideration towards the Vishal House Property. It is clear that there is no nexus between the loans valid of by the respondent no. 2 from PNB or any other bank and the source of the funds paid by the appellant to SBI towards the sale consideration for the Vishal House property. (vi). The respondent no. 1 has no jurisdiction to attach any property unless the charge sheet specifically alleged commission of a scheduled offence which has resulted in deriving or obtaining that property. The Provisional Attachment Order and the complaint are based on conjectures and surmises with regard to the source of funds from which the respondent no. 1 purchased the subject property and proceed on the assumption that certain funds which could have been utilised by the respondent no. 2 to repay the banks were given to other companies. When there was no nexus whatsoever between funds sanctioned by PNB to the respondent no. 2 and the funds utilised by the appellant for making payment to SBI towards purchase consideration for the Vishal House property and the sources of funds utilised for purchased the said property were independent of the loans given by PNB to the respondent no. 2 and there was no allegation made at any time that the appellant has used any monies of PNB to acquire the subject property, the subject property cannot be termed as proceeds of crime in relation to the offences alleged to have been committed in the charge sheet dated 26.11.2009.

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(vii). The Adjudicating Authority failed to appreciate that the Vishal House property was purchased by several persons in the year 1990, FPA-PMLA-387/AHD/2012 Page 10 of 29

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much prior to the availing of loan by the respondent no. 2 from the consortium in the year 1997. Thereafter, the appellant purchased the subject property in a legal and valid auction sale conducted by SBI and became the absolute owner of the subject property. Hence the subject property cannot be said to be proceeds of crime.

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(viii). The offences alleged to have been committed as per the charge sheet were admittedly prior to 01.06.2009, the date on which the Schedule to the Act was amended vide Prevention of Money Laundering (Amendment) Act, 2009. Even the FIR was lodged on 31.01.2008, that is, much prior to the aforesaid amendment to the Schedule to the Act. Prior to its amendment, the Schedule to the Act did not contain the provisions pertaining to the offences alleged to have been committed as per the charge sheet (being offences under Sections 120B, 420, 468, 471 and 477A of the Indian Penal Code and Section 13 of the Prevention of Corruption Act) and hence the said offences were not "scheduled offences". In view of this also, the respondent no. 2 had no jurisdiction to provisionally attach the subject property.

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(ix). The Adjudicating Authority has committed an erred in relying upon Section 23 of the Act and holding that in the instant case, the presumption under Section 23 had not been discharged by the appellant. The Adjudicating Authority has failed to appreciate that, in the present case, the respondent no. 1 had not established any money laundering or any inter connected transaction of which any transaction was involved in money laundering and hence the said provision could not be applied to the present case.

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(x). The Adjudicating Authority has also wrongly in relying upon Section 24 of the Act and in holding that the burden in this regard had FPA-PMLA-387/AHD/2012 Page 11 of 29

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not been discharged by the accused and has failed to appreciate that Section 24 could not have been applied to the instant case which was one of attachment of a property in the hands of the appellant who is not charged of having committed any scheduled offence and the fact that, even assuming Section 24 is applicable, the appellant has sufficiently discharged the burden by showing the source of money from which the property was purchased.

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(xi). The action of issuing the letter dated 21.07.2011 was illegal and no such instructions/directions as were sought to be issued by the said letter could have been issued and hence, in order to get out of this situation and to frustrate the proceedings already pending in the Hon'ble High Court of Gujarat in respect of the said letter dated 21.07.2011, the Provisional Attachment Order was passed as an afterthought and the allegations made in the same and in the complaint are an afterthought and are clearly made in order to create a story to justify the action of passing the Provisional Attachment Order.

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(xii). The Vishal House property was sold by SBI in a public auction under the Securitisation Act for recovery of the dues of the consortium, the property exhausted itself for this purpose and could not have been attached under the Act and it was only the monies, which were allegedly obtained by commission of a scheduled offence, which could have been attached.

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During the course of hearing, the appellant has submitted a chronology of dates and events which reads as under:-

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FPA-PMLA-387/AHD/2012

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S.NO	DATE	PARTICUALRS
1.	11.03.1991	Anand Owners association purchased a plot admeasuring 339 sq. mts under an auction sale from income tax Department by way of conveyance deed of even date and consequently constructed the building.
2.	05.10.1991	Share certificates were issued to several people pertaining to 16 units of the said property.
3.	December 1999	Share certificates pertaining to 3 units of the said properties were allotted to Shri Darshit Mehta, Shri Vishal Mehta and Shri JayMehta.
4.	17.03.2003	One M/s Vishal Exports Overseas Ltd. obtained financial assistance from consortium of State Bank of India for which 16 units of the said property were mortgaged to State Bank of India by way of depositingtitle deeds of even date.
5.		Due to default in repayment of finance obtained, the borrower was classified as non-performing assets in terms of guidance and directives issued byRBI.
6.	19.09.2008	Under SARFESI Act, bank had taken over the possessionofthe aforesaid property.
7.	27.08.2009	The said property was put to auction/sale under SARFAESI Act, which was purchased by one Ms. JMD Media Pvt. Ltd.
8.	04.09.2009	After receipt the entire auction amount, SBI confirmed the sale in favour of the purchaser and issued sale certificate of even date
9.	05.09.2009	Sale certificate and original title deeds as well as peaceful possession were handed over to JMD Media Pvt. Ltd.
10.		Appellants came to know of inclination of M/s. JMD Media Pvt. Ltd. and owners of other three units of the said properties to sell the same.
11.	30.06.2010	Chief Inspector of Registration, Gujarat State, Gandhinagar issued a Circular conveying that where properties have been attached under section 5(1) of the Prevention of money Laundering Act, 2002, the properties mentioned in the Attachment order should not be registered without prior approval of the concerned Department.
12.	13.12.2010	A Sum of Rs. 6,00,000/- was initially paid

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FPA-PMLA-387/AHD/2012

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		to M/s. JMD Media Pvt. Ltd.
13.	08.04.2011	Appellants’ through their advocates gave a notice in the newspapers as regards any person having objection to the sale of the said property.
14.	21.07.2011	Assistant Director, Enforcement issued a letter to the Joint Sub-Registrar, Ahmedabad, conveying that the authority should not allow transfer/sale of the property to any person/party without prior approval of the Enforcement Directorate and that in case any sale /transfer is allowed it would compel the authority to conclude that by allowing registration of property by way of sale /transfer /alienation/modification the Registering Authority would be liable for penal action under the Prevention of Money Laundering Act, 2002 for assistance in the activities connected with the offence.
15.	22.09.2011	Having received no objection from any one, the advocate thereafter, certified vide certificate dated 22.09.2011 that he had not received any claim or objection regarding the said public notice till the issuance of certificate.
16.	24.10.2011	Subsequent to the said certificate dated 22.09.2011, appellants proceeded to make payment and entered into agreement to sale which was registered by the Sub- Registrar.
		No objection whatsoever were raised by the said authority at the time of registering the aforesaid agreement.
		Possession note pertaining to entire property was given along with physical possession of the property.
17.	10.12.2011	Sale deed pertaining to the said property was executed between appellant and Ms. JMD Media Pvt. Ltd., Shri Darshit Mehta, Shri Vishal Mehta & Shri JayMehta.
18.	12.12.2011	The appellants approached sub-Registrar for registration of aforesaid sale deed but the Sub-Registrar informed that the sale deed cannot be registered as vide notice dated 21.7.2011 Assistant Director an Authority for Prevention of Money Laundering act had restrained him from doingso as certain investigation were

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FPA-PMLA-387/AHD/2012

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		carried out against M/s. Vishal Exports, etc. with which the appellants are in no wayconcerned.
19.	16.12.2011	Sub-Registrar, Ahmedabad-III addressed a letter to the Enforcement Directorate asking for clarification/necessary permission regarding registration of sale- deed.
20.	21.12.2011	Enforcement Directorate addressed a letter to the Sub-Registrar conveying that the registration of the sale deed may not be allowed and reiterated contents of letter dated 21.7.2011.
21.	04.01.2012	Appellants addressed a letter to the Joint Registrar, Ahmedabad-III explaining the position and requesting for registration of the Sale Deed.
22.	10.01.2012	Sub-Registrar, Ahmedabad-III addressed a letter to Enforcement Directorate seeking clarification.
23.	30.01.2012	As The Sale Deed Was Not Being Registered By The Sub-Registrar, Appelalnts Filed A Writ Petition Bearing SCA No. 1059 Of 2012 In The Hon’ble Gujarat High Court praying for various reliefs on which the Hon’ble Court was pleased to issue notice.
24.	15.03.2012	Joint Director, Enforcement was pleased to issue provisional attachment order no. 2 of 2012 attachingtheproperty.
25.	11.04.2012	Joint Director, Enforcement filed a complaint bearing Original Complaint No. 133/2012 in provisional attachment order No.02/2012 under section 5(5) of prevention of Money Laundering Act, 2002.
26.	10.07.2012	Adjudicating authority was pleased to pass an order confirming the provisional attachment ofproperty.
27.		Appellants filed appeals challenging the said order in the Tribunal.
28.	09.10.2012	Appellants received a notice from the Directorate of Enforcement to vacate and hand over the possession of the said premises to the Deputy Director within ten days from the date of the receipt of this notice.
29.	31.07.2013	Hon’ble Gujarat High Court disposedoff the Writ Petition being Special Civil Application NO. 1059 of 2012 filed by the appellants relegating the appellants to alternate remedy. However, status quo as regards possession of property was

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		directed to be maintained till final disposalofappeals by theTribunal.
30.		Being aggrieved and dissatisfied, applicant filed Letters Patent Appeal being LPA no. 1038 of 2013 to only an extent to which the judgment dated 31.7.2013 was against the appellant.
31.	21.02.2014	Appeal challenging the said Judgment dated 31.7.2013 being Letters Patent Appeal NO. 1038 of 2013 (to an extent to which the judgment was against the appellants) was dismissed on the ground of alternate remedy.
32.	02.09.2014	Petition being SLA (C) No. 10714/2014 filed by the appellants in the Hon’ble Supreme Court of India Challenging the Judgment of Hon’ble Gujarat High Court in Letters Patent Appeal NO. 1038 of 2013 came to be dismissed on the ground that the appellants had already adopted alternative remedy. It was however, clarified that all the issues raised in the Special Leave Petition were kept open and the Hon’ble Tribunal may decide the same independently and in accordance with law.

¶88

The appellant has filed the written submissions. Oral arguments were also addressed for some time. We may clarify here that the main arguments were addressed in connected appeal nos. FPA-PMLA376/AHD/2012, FPA-PMLA-377/AHD/2012 and FPA-PMLA378/AHD/2012 filed by Krushab Jagdishbhai Patel, Ankit Jagdishbhai Patel and Jagdishbhai Ishwarbhai Patel HUF respectively.

¶89

We are delivering the separates judgment in the connected appeal. Most of the facts are common and connected in both matters. The said judgment may also be read as part of judgment is being given by us in above appeal.

¶90

Admittedly, 19 units in Vishal House that were purchased by Kantaben, Dipak S Mehta, Subhashchandra, Subhashchandra C Mehta

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FPA-PMLA-387/AHD/2012

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HUF, Pradeep S Metha, Vishal Plastomer Pvt. Ltd., Drishtkumar D Mehta, Jaikumar D Mehta, Vishal kumar P. Mehta in the year 1991 cannot be costrued to be proceeds of crime at the time of purchase. These were purchased by monies raised form legitimate sources. Similarly, these units were not proceeds of crime when these were mortgaged with the Bank to secure the loan taken by VEOL. These units were also not proceeds of crime at the time of taking over by the State Bank of India under Securitisation Act in September, 2008. The units can also not be construed to be proceeds of crime when bids were invited for sale. These units were purchased by the appellant for a consideration of Rs. 1,89,00,000/-. The source of this amount is traceable to loans received from different companies in 6 different trenches whose details are as below:-

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Rs. 10,00,000/Rs. 17,00,000/Rs. 48,00,000/Rs. 18,10,000/Rs. 2,15,000/Rs. 67,80,000/-

¶95

Rs. 26,00,000/-

¶96

It is alleged by the appellant in the present appeal that all these payments were obtained from different and independent parties and cannot be construed to be the proceeds of crime. The details of the amounts so received have been given in the reply filed before the Adjudicating Authority and are at pages 51 to 59 of the paper book before the Hon’ble Tribunal. The statements of the ex-directors of the appellant were recorded under threat and duress and are of no consequence.

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FPA-PMLA-387/AHD/2012

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It is submitted that the appellant was not involved in any Scheduled offence on 15.03.2012 which is a preconditions for provisional attachment order in terms of Section (5)(1)(b) of the Act. The appellant has not been charged of having committed any scheduled offence. Having been charged of committing a scheduled offence is a condition precedent to the passing of the provisional attachment order. It is stated that in Provisional Attachment Order dated 15.03.2012, it has been alleged that JMD Media and Allied Hospitality were formed in June 2008 on the direction of Pradip Mehta Managing Director of VEOL with the intention to purchase the properties which were mortgaged with the Bank for availing the loan/advance credit facilities. The appellant JMD was incorporated in June 2008 where as the properties were taken over by SBI in September, 2008. How could it be contemplated in June, 2008 that the SBI would be taking over the properties in September, 2008? Then the properties were put up for sale in August, 2009. How could it be contemplated at the time of incorporation of JMD in June, 2008 that the properties would be put up for sale almost 14 months of the incorporation and that then they would purchase it? The finding of the ED does not stand to reason.

¶100

The mandates of Section 5 of the PML Act is that DD has to formulate the reason to believe on the basis of material in his possession. The reason to believe has to be on the basis of objective satisfaction of the ED that is based on material in his possession. What material it had before passing the provisional attachment order? With respect, none. No material was in possession of the ED that the appellant was incorporated for purchasing the mortgaged properties. There was no material with the ED that could link the monies of Global Nutrition and Vikalp Rasayan to that of the monies obtained from the Banks. What has been recorded in the PAO is only the subjective satisfaction.

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¶103

Besides, there is no nexus between the funds sanctioned by PNB to VEOL and the funds utilized by the appellant in making the payment to SBI towards the purchase consideration.

¶104

Similarly, there was no material before the Adjudicating Authority for formulating the reason and then issuance of the notice. In fact, the attaching authority by itself did not have any material on the basis of which it could formulate the reason to believe and hence no material could have been placed before the Adjudicating Authority. The issuance of notice under Section 8 of the Prevention of Money Laundering Act, by itself was bad in law.

¶105

It is submitted by the appellant that offences under Sections 120B, 420, 471 and 477A of the Indian Penal Code and Sections 13 (2) of the Prevention of Corruption Act were not scheduled offences on the day they are alleged to have been committed. FIR was lodged 31.01.2008 and the offence if any ought to have been committed prior thereto. In fact, the allegation is that the loans were taken by adopting dubious means in 2005-06. The alleged offences came to be incorporated in the schedule by the amendment effective from 01.06.2009. Offence, if any, had been committed in 2005-06 and at that time these were no scheduled offences. The amendment of 2009 is not retrospective.

¶106

Even before the passing of the provisional attachment order on 15.03.2012, the property had been passed on to 3 HUFs as detailed in the memo appeal. The appellant being desirous to sell 16 units in Vishal House, negotiated with the 3 HUFs through their Kartas and the deal was struck at Rs. 2,09,00,000/-. A Public notice was got issued in newspaper inviting objections to the sale of said 16+3 units in Vishal House. Thereafter an agreement for sale was executed between the appellant, other vendors and the intending purchasers on 24.10.2011 FPA-PMLA-387/AHD/2012 Page 19 of 29

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which was registered with the Sub- Registrar. NO objection in response to the public notice was received from any quarter. On 24.10.2011 possession was handed over to the HUFs and a possession note was executed. Thereafter, requisite stamp papers were purchased and the sale deed was drawn on the requisite stamp papers. The sale deed was then signed by both the purchaser and the seller and was presented for registration to the office of the Sub- Registrar on 12.12.2011 after paying the requisite charges. It was at that stage that the Sub- Registrar refused to register the sale deed on the basis of a letter dated 21.07.2011 addressed by the Director of Enforcement to the Joint Sub-Registrar Stating that investigations were being carried out and that was suspected that properties listed therein were subject matter of further investigation and directed the joint Sub-Registrar not to allow transfer/sale of any of the property listed in the letter. In the letter dated 21.07.2011, the Enforcement Directorate had misquoted a circular of 30.06.2010 of inspector General of Registration, restrained the SubRegistrar from registering any sale deed. Enforcement Directorate also intimated the Sub-Registrar that in case the sale deed was registered, he would also be liable for penal action under the prevention of Money Laundering Act. Reference to the said the letter of Inspector General of Registration clearly show that it was in respect of the properties that had been provisionally attached under Section 5 of the Prevention of Money Laundering act. Under Prevention of Money Laundering Act, there is no provision empowering the Enforcement Directorate to issue restraint order before passing of the provisional attachment order. It shall not be out of place to state here that the Sub-Registrar not only refused to register the sale deed but illegally retained that instrument it is respectfully submitted that provisional attachment order was passed much thereafter. The direction to the Sub-Registrar was absolutely illegal and void ab initio and could not be acted upon. It is settled law that in FPA-PMLA-387/AHD/2012 Page 20 of 29

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order passed by any authority or Court without jurisdiction is coram non-judice. It is non nest-void ab inito . It’s invalidity can be set up whenever it is sought to be enforced or acted upon. The defect of jurisdiction sticks at the very authority.

¶111

The submission of the appellant is that whatever was necessary for execution of the sale deed had already been done by it and nothing further remained to be done by the appellant. Only a ministerial work had to be carried out by the Sub-Registrar for registering the property. In addition to what has been submitted, the appellant also adopts the submissions made on behalf of the purchasers – Respondents 4, 5 and 6.

¶112

During the course of hearing, the appellant placing reliance on the said sequence of events /facts – vehemently pleaded that no allegation had been made against the appellant/defendant no. 4 i.e. JMD Media Pvt. Ltd on 10.12.2011. Mentioning further that the sub-registrar informed the appellant that the sale deed cannot be registered in view of notice dated 21.07.2011 raised by the Enforcement Directorate, attention was drawn to the fact that he was not way connected with M/s Vishal Exports Ltd and further argued that even if the sale deed had not been registered, the mere execution of the sale deed was sufficient to establish the ownership of the property, in view of the decision of the Apex Court in the case of the Suraj Lamp Case.

¶113

All above contentions of the appellant were strongly refuted by the respondent. As regards the appellants’ contention that for issuing the FPA-PMLA-387/AHD/2012 Page 21 of 29

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show cause notice, there must be “reasons to believe” which were absent in the instant case, the respondent stated that the show cause notice itself contains the reasons of forming such a believe as sufficient material do exist in form of the CBI charge sheets along with accompanying documents as well as the materials gathered by the Joint Director through his own investigation including the statement of Directors of various companies involved in alleged transfer of money which formed the basis of “reason to believe” as in section 5(1) of the Act. It was reiterated by the counsel for the respondent that the fact that the designated court had taken cognizance of the charge sheets filed lends further credence to the said believe.

¶116

The nexus between Vishal Exports Overseas Ltd. and M/s JMD Media Pvt. Ltd. and the details of funds flow for purchase of Vishal House - which is under attachment, have been explained by the Respondent as under:-

¶117

M/s. JMD Media Pvt. Ltd., is having its registered office Near Jagdish Ashram, at P.O. Lukhtar, Dist.: Surendranagar which is the residence address of its Director Shri PravinHalvadiya, who is a childhood friend of Shri Pradeep Mehta and Shri Deepak Mehta, the masterminds of the subject scam and the de-facto owners of the firm. The other director of the firm is Smt. Falguni Bhatt who is the cousin sister of the same Shri Pradeep Mehta and Shri Deepak Mehta. Both these persons were made directors of the company by the said de-facto owners, and they have categorically stated that they were not aware of the day to day activities of the company and that all such things are handled by the said Shri Pradeep Mehta and Shri Deepak Mehta.

¶118

The said M/s. JMD Media never carried out any objects for which it was set up as per Memorandum and Articles of Association. POCs were diverted and rotated among a number of group firms floated in this manner by Shri Deepak Mehta and Shri Pradeep Mehta.

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Shri PravinHalwadiya was also director of various other group companies of Vishal Exports, i.e. Navkar Green Power, Alive Hospitalities, FFR Software, etc.

¶122

Smt. Falguni Bhatt was also director of other Vishal Group firms, i.e. Alive Hospitalities, VikalpRasayan, Mandakini Hydro Power, DF Hydro Power, etc. Her husband Rakesh Bhatt was also director of M/s. FFR Software, etc. along with Shri PravinHalwadiya.

¶123

It revealed that the property i.e. Vishal House, Ahmedabad was owned by M/s VEOL & its Directors and relatives thereof. The subject property was auctioned by the State Bank of India and the same was purchased by M/s JMD Media Private Limited whose one of the director was Shri Pravin T. Halvadiya (childhood friend of Shri PradeepS.Mehta). During investigation it revealed that JMD Media Private Limited had received the funds from M/s VikalpRasayan Private Limited (Group company of VEOL). M/s VikalpRasayan Private Limited had received funds from M/s VEOL, Vishal Builders and VIOL. It is evident that to save from the clutches of PMLA, the property was purchased by so called JMD. It appears prima-facie that the same was purchased from the funds of M/s VEOL after doing interlink transactions. The fund flow chart in regard of the same is as below

¶124

The fund flow from the de-facto owners and their other group firms to M/s. JMD Media is well explained in the complaint.:

¶125

The above flow of funds has been explained by Shri Rakesh Bhatt (husband of Smt. Falguni Bhatt and cousin sister of Shri Pradeep Mehta and Shri Deepak Mehta) in his statement recorded on 19.03.2012.

¶126

The above chart reveals that Shri Pradeep Mehta and Shri Deepak Mehta have transferred total amount of Rs. 2.69 Crores to M/s. VikalpRasayan (their own group firm in which their cousin sister Smt. Falguni Bhatt and her husband are the directors). Such transfers have done either from their own account or from the accounts of their group firms such as Vishal Builders, Vishal Imports Overseas Ltd. besides sourced out of the sale of a property

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at BKC, Mumbai. Out of the total Rs. 2.69 Crores, M/s. VikalpRasayan transferred Rs. 1.89 Crores to M/s. JMD Media Ltd.

¶130

The said amount of Rs. 1.89 Crores was paid by M/s. JMD Media to SBI for purchase of Vishal House in auction proceedings.

¶131

Para 5(a) to (f) of the prosecution complaint clearly illustrates the flow of funds among the group firms of Vishal Group.

¶132

Statements of Shri Falguni Bhatt, Shri Rakesh Bhatt, Shri PravinHalwadiya referred under Para 7 of the prosecution complaint clearly reveal that none of these persons, who were on the board of directors of various group firms, were actually handling the daily affairs of their business; and all such works were exclusively carried out by the de-facto owners Shri Pradeep Mehta and Shri Deepak Mehta.

¶133

In his statement dated 22.12.2011, Shri PravinHalwadiya, Director of M/s. JMD Media has categorically admitted that he was not even aware as to who had attended the auction proceedings in which his company had purchased Vishal House from SBI.

¶134

In her statement dated 09.03.2012, Shri Falguni Bhatt, other director of M/s. JMD Media stated that she was not aware of the unsecured loans taken by the said company from different sources, and that Shri Deepak Mehta and Shri Pradeep Mehta could only answer the same.

¶135

In his statement dated 27.12.2011, Shri Pradeep Mehta admitted to have provided funds to M/s. JMD Media and other group firms for purchase of subject properties.

¶136

In view of the above, it was contended that the nexus between the appellants and VEOL is proved beyond reasonable doubt and therefore, the present appeal should be dismissed.

¶137

We have considered the written submissions and the oral arguments made by the appellant as well as the respondent. As regards the appellant’s contentions that “reasons to believe” were absent in the FPA-PMLA-387/AHD/2012 Page 24 of 29

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instant case, a perusal of the show cause notice confirmed the arguments of the respondent that the reasons to forming to such believe was on the basis of sufficient material existing in the form of CBI Chargsheet alongwith accompanying documents as well as material gathered by the Joint Director through his own information including the statement of Directors of various companies do find place in the said showcause notice. The other contention of the respondent that the fact that the designated court had taken cognizance of the charge sheets filed lends further credence to the said “reasons to believe” as also a matter of word.

¶140

As regards the other contentions of the appellant that there was no evidence or material to show that the said property i.e. Vishal House had been purchased out of proceeds of crime, as it is a matter of record that the investigation revealed that Vishal Exports Overseas Limited (VEOL) had misused the credit facility given to it by Punjab National Bank and it was only on failure on the part of VEOL to the payment of the loan amount that certain immovable properties including Vishal House had been put up for auction by the consortium of banks led by State Bank of India and the property in question i.e. Vishal House had been purchased by JMD Media Pvt. Ltd. ( the appellant for an amount of Rs. 1.89 crores).

¶141

A perusal of the statements of Shri Pradeep Mehta, Managing Director of VEOL, Praveen T. Halvadia, Director, JMD and others indicate creation of various groups under the supervision of Shri Pradeep Mehta, and on analysis of details available on record indicate that Shri Pradeep Mehta and Deepak Mehta had transferred the amount of Rs. 2.69 crores to M/s VikalpRasayam (their own group firm in which their cousin sister Smt. Falguni Bhatt and her husband are the Directors), and such transfers have been done either from their own account or from the accounts of their group firms such as Vishal Builders, Vishal Imports FPA-PMLA-387/AHD/2012 Page 25 of 29

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Overseas Ltd. besides sources out of the sale of a property at BKC, Mumbai and it was out of the said amount of Rs. 2.69 crores that M/s VikalpRasayan had transferred Rs. 1.89 crores to JMD Media Pvt. Ltd. which was utilised for paying to State Bank of India for purchase of Vishal House in auction proceedings.

¶143

As stated earlier, out of 19 units in Vishal House, the share certificate of 3 units of the said property were purchased by Shri Jagdish Ishwarbhai Patel, HUF (through ifs Karta, Jagdish Ishwar Bhai Patel), Shri Krushbhai Jagdishbhai Patel HUF (through its Karta, Krushbhai Jagdishbahi Patel) and Shri Ankit Jaddishbhai Patel HUF (Through its Karta, Krushbhai Jagdishbhai Patel) also referred to as respondents 4, 5 and 6 and the sale deed – though executed on 10.12.2011 - had not been registered by the SubRegistrar in view of the communication received from the Enforcement Directorate conveying that the registration of sale deed need not be allowed as the property in question had been attached u/s 5(1) of the Prevention of Money Laundering Act, 2002.

¶144

As regards the appellant’s other contention that the execution of the sale deed dated 24.10.2011 had resulted in the sale/transfer of the said property, it was argued by the respondent that the said agreement dated 24.10.2011 was a sham document prepared subsequent to a letter dated 21.07.2011 of the Enforcement Directorate issued to the Joint Sub-Registrar not to allow transfer/sale of any property to any person/party without prior approval of the Enforcement Directorate. In support of his contention that the said agreement dated 24.10.2011 was a sham document, the learned counsel for the respondent place reliance on the following facts:-

¶145

(1) After having paid a sum of Rs. 6 lakhs to M/s JMD Media Pvt. Ltd. on 13.12.2010, it was only in April, 2011 that the Respondent 4,5 & 6 through their Advocates had given a notice

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in the newspaper as regards any person having objection to the sale of the said property and implying hereby that the fact that there was some issue relating to the property in question was in the knowledge of the seller as well as the buyers and;-

¶149

(2) Though the appellant received a communication from his Advocate that he had not received any claim or objection to the sale of the said property only on 22^nd September, 2011, an amount of Rs. 5 lakhs had been further received by the appellant on 9^th June, 2011 itself;

¶150

(3) As per the statement of Shri Ankit Patel on 07.02.2012, 13.02.2012 & 15.02.2012 wherein Shri Ankit Patel had stated that he had received a call from Shri Pradeep Mehta in August, 2011, wherein Mr. Mehta had insisted for an early finalization of the deal whereby Shri Ankit Patel got to know that the said property indirectly belonged to Shri Pradeep Mehta and M/s VEOL and had liability of the CBI. In his statement, Shri Ankit J. Patel stated that he had met with Mr. Pradeep Mehta again and requested him to settle the matter and refund the payment of Rs. 2 crores on which he was advised by Shri Pradeep Mehta to file a petition before Hon’ble Gujarat High Court and that arrangement of Advocate and payment of fees for handling the matter in the High Court was also to be arranged by Shri Pradeep Mehta.

¶151

As would be observed from the above, it is evident that the tainted nature of the property was well known to JMD Media Pvt. Ltd. as well as the buyers. As stated earlier, the Chief Inspector of Registration, Gujarat State, Gandhinagar had issued a circular conveying that where properties have been attached under Section 5(1) of the Prevention of FPA-PMLA-387/AHD/2012 Page 27 of 29

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Money Laundering Act, 2002, the properties mentioned in the attachment order should not be registered without prior approval of the concerned Department. Having received the initial payment of Rs. 6 Lakhs on 13.12.2010 M/s JMD Media Pvt. Ltd. thought it prudent to give a notice in the newspaper through their Advocates only on 08.04.2011 as regards any person having objection to the sale of the said property, Still further, an amount of Rs. 5 lakhs was paid by the appellant to M/s JMD Media Pvt. Ltd. on 9^th June, 2011 itself, whereas a communication from the Advocate stating that no objection had been received from anyone to the proposed sale of the said property has been received vide certificate dated 22.09.2011 only.

¶154

As far as registration of sale deed is concerned, the same has not been registered. We agree with regard to the argument that the FIR in the matter was registered on 31.01.2008 and the schedule offence were added on 01.06.2009, the same have no force as the units in questions were sold only in the year-2011. As regards the other arguments of the appellant, the same have no force as each and every plea raised by the appellant before us has been dealt in the impugned order. There is no infirmity in the impugned order.

¶155

In view of the facts and circumstance of the case, we find no force in the arguments of the appellants that the impugned order dated 10^th July, 2012 is arbitrary, unreasonable, high handed, only without jurisdiction and illegal and void. There is no infirmity in the order, we have passed a detailed order in the connected appeal. The operative part of order pertaining to the same property “Vishal House” is read as under;

¶156

“43. In view of the facts and circumstance of the case and the discussion hereinabove, we find no force in the arguments of the appellants that the impugned order dated 10^th July,

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2012 is arbitrary, unreasonable, high handed without jurisdiction and illegal and void. We therefore uphold the impugned order.

¶160

43.1 At the same time, it is observed that the appellants have already paid an amount of Rs. 1.89 crores to the seller, i.e. JMD Media Pvt. Ltd. – for purchase of the attached property and the property is in the possession with the appellant. During the hearing, the learned counsel of the appellant had made a prayer as an alternative submission that possession may be allowed to be continued with them. In the facts and circumstances of the case, we are of the opinion that it would be in all fairness if such permission is allowed subject to the condition that the appellant deposits the sum of Rs. 25 thousand per month for the attached properties to the respondent from the date of this order till the final disposal of the proceedings under the PML Act-2002, before the Learned Special Court. The said deposit shall be treated as without prejudice and in case it was found after trial and final order that the appellants were innocent party in purchasing the property, the said amount would be refunded to the appellant by the Respondent without any delay. In case the result is otherwise, the amount shall be to the account of the respondent. It is further directed that subject to the appellant complying with the above condition, possession shall not be taken over by the respondent in pursuance of the impugned order. The appeal is allowed in above terms .”

¶161