Allowed

FPA-PMLA-449/BNG/2013 of S.K.V. Chalapathy v/s The Joint Director Directorate of Enforcement, Bangalore

ATFP11 May 2018FPA-PMLA-449/BNG/2013

Case brief

AI extract

What is this about?

The Tribunal allowed the appeal and quashed the provisional attachment order under PMLA against a third-party appellant. It held that attaching property without issuing a proper notice, recording the reason to believe, or giving an opportunity to explain violated Sections 5(1) and 8 of the Act and principles of natural justice.

What did the court decide?

Impugned order dated 17/10/2012 set aside; provisional attachment order quashed; property of appellant released forthwith.

FPA-PMLA-449/BNG/2013 of S.K.V. Chalapathy v/s The Joint Director… — Money Laundering | ATFP (2018)

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APPELLATE TRIBUNAL, PREVENTION OF MONEY LAUNDERING ACT AT NEW DELHI

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Date of Decision: 11^th , May, 2018.

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FPA-PMLA-449/BNG/2013

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S.K.V. Chalapathy … Appellant/Applicant Versus The Joint Director Directorate of Enforcement, Bangalore … Respondent

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Advocates/Authorized Representatives who appeared

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For the appellant : Shri R. Swaroop Anand, Advocate For the respondent : Shri Vikas Garg, Advocate

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CORAM JUSTICE MANMOHAN SINGH : CHAIRMAN

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JUDGMENT

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FPA-PMLA-449/BNG/2013

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The Karnataka Lokayukta Police Wing in Spl CC 135/20111 filed a charge-sheet on 7.7.2011 before the Prevention of Corruption Act Special Court. The Appellant is not an accused in the schedule offence or in the prosecution complaint filed under Section 45 PML Act, 2002 being numbered SPL-CC 124/14. He is practicing advocate. He is father of Mr. S.V. Srinivas (who was charged with certain offence and later on acquitted from the schedule-offence as the charge-sheet was quashed by the Hon’ble High Court of Karnataka). The State has filed the appeal against the quashing order which is pending before Hon’ble Supreme Court. The appellant is neither the party in any criminal proceedings of any offence nor in the prosecution complaint.

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FPA-PMLA-449/BNG/2013

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Page 1 of 18

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The case against the accused parties as per the Charge-sheet No. 04/2011, is that dated 07.07.2011 filed by Karnataka Lokayuktha Authorities under Section 173 of Code of Criminal Procedure (Cr. PC) in the Court of Learned XXII Additional City Civil & Sessions Judge & Special Judge for Lokayukta Cases at Bangalore. Various allegations against the alleged accused parties were made. The details of the same are mentioned in the order is being passed in the appeal filed by Mr. S.V. Srinivas (son of the appellant).

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In the charge-sheet, it was alleged that the following accused

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persons have committed offences as mentioned below:

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SI. No	Details of accused	Sections invoked
1	Mr Katta Subramanya Naidu	7, 13(1)(d)r/w13(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	12PCAct,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 ,506r/w 120(B) of IPC
9	Mr M.Gopi	420, 506 r/w 120(B)of IPC

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The Joint Director of Enforcement Directorate based on the chargesheet dated 25.09.2012 filed by the Karnataka Lokayuktha Police Wing in Spl CC 135/20111 passed a provisional order of attachment bearing No. ECIR/07/BZO/2011 – AD – MNT/1477 attaching the properties of the Appellant herein amongst others.

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FPA-PMLA-449/BNG/2013

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Page 2 of 18

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Thereafter, in view of provisional order of attachment, the Joint Director of Enforcement Directorate, being the Complainant filed a complaint bearing No. 158/2012 under Section 5(5) of the Prevention of Money Laundering Act (‘Act’), before the Adjudicating Authority under the Act.

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Under the said provisional order of attachment, the respondent had attached House No. 20, 18^th Cross, Malleswaram Bangalore-55 of the appellant.

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In the complaint filed by the Joint Director of Enforcement Directorate under Section 5(5) of the Act, after hearing of parties, the Adjudicating Authority on 21.02.2013 confirmed the provisional order of attachment of all the attached properties, including the property of the Appellant.

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Against the order of the said Adjudicating Authority, the present appellant herein on 25.03.2013 has preferred the above appeal before the Appellant Tribunal, PMLA.

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After about one year, on 24.03.2014, the respondent filed a complaint under Section 45(1) of the Act before the Principal City Civil and Sessions Judge and Special Court for Prevention of Money Laundering Act, Bangalore against various parties however, the appellant is not arrayed as an accused, however, the property of the appellant was included in the said prosecution complaint.

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In the said complaint, the Respondent has made the prayer confiscations of all the attached properties vide provisional attachment FPA-PMLA-449/BNG/2013 Page 3 of 18

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Page 3 of 18

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order No. 7/2012 dt: 25.09.2012 in terms of Section 8(5) of the Act among other things including the attached property of the appellant. The principal City Civil and Session Judge and Special Court for Prevention of Money Laundering Act, Bangalore by its order dt. 24.03.2014 registered the complaint filed by the Respondent as Spl CC 124/2014. I have been informed that upon challenged by one of the parties, the said proceedings are stayed by the Hon’ble High Court at Karnataka.

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The reason for passing the order of provisional attachment attaching property mentioned in Sl. No. 29 in para 2 of the complaint was on the basis the statement given by this Appellant’s son S.V Srinivas on 12.6.2012 who was interrogated by the respondent (who was arrayed as the 9^th Defendant) in complaint No. 158/2012 dt: 05/10/2012.

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On the basis of which the above said property was attached. The relevant extract of his son statement is given below:

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“Question No.9: How much money you have derived from out of Rs.317 crores received from UTL from the account of ITASCA? ANS: I have derived an amount of Rs.25 lakhs (approx) from ITASCA account till date.”

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“Question No.11: Where all you have invested the amount so derived from the account of M/s Itasca?

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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, 18^th 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……”

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FPA-PMLA-449/BNG/2013

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Page 4 of 18

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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:

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“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, 18^th 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.”

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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.

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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.

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Before the Adjudicating Authority, the Appellant had produced the documentary evidence in order to show that he purchased House No. 20,

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FPA-PMLA-449/BNG/2013

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Page 5 of 18

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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 197576, 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’ .

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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

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as ANNEXURE ‘A-8’ at page 202 .

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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 FPA-PMLA-449/BNG/2013 Page 6 of 18

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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 .

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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.

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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.

¶49

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.

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The respondent has not recorded his statement before attaching the property owned by the Appellant herein described at Sl. No. 29 in FPA-PMLA-449/BNG/2013 Page 7 of 18

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Page 7 of 18

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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.

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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.

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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.

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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. FPA-PMLA-449/BNG/2013 Page 8 of 18

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Page 8 of 18

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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.

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It is admitted by the adjudicating authority in impuged order that at the best a sum of Rs. 10 lac was spent for renovation and it was tainted money but despite such findings, the entire immovable property was attached which was wholly unconnected with the proceed of crime as the same was purchased many decades earlier before registering the FIR. Thus, the impugned order was passed without application of mind.

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It was the case of S.V. Srinivas is that he received only a sum of Rs. 20 Lac from by 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. 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 any amount from ITASCA by way of A/c payee cheques as part of the alleged scheduled offences under PMLA. No questions were put to this appellant’s son S.V. Srinivas by the Complainant as to why the said sum of Rs. 20 Lac was paid to him by M/s Itasca. In the reasons of believe which are given in this regard, there is no discussion at all about the version and explanation given by S.V. Srinivas. The impugned property was attached merely on the basis that the proceed of crime has been used in the renovation of the property, therefore, it has to be attached. On the other hand, Mr. S.V. Srinivas has been able to establish that the said amount of Rs. Ten Lakh was the part of consideration of his rendered by him to

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M/s. IASCA as a Director.

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FPA-PMLA-449/BNG/2013

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Page 9 of 18

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The appeal No. 446/2013 which is filed by Mr. S.V Srinivas, the son of Mr. SKV Chalapathy. Mr. SV Srinivas who was arrayed as accused No. 3 in the schedule offence which was numbered as SPL CC 135/2011 and the same is quashed against Mr. SV Srinivas by the Hon’ble High Court of Karnataka in CrlP 5102/2015. He is also an accused in in the section 45 complaint filed by the Respondent herein numbered as SPL CC 124/2014 and is arrayed as accused No.3. The said SPL CC124/2014 was instituted on 24/03/2014 after the impugned order dt: 21/02/2013 passed by the Adjudicating authority in OC 158/2012. The same is pending. However, proceedings have been stayed by the Hon’ble High Court of Karnataka.

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Accused No.1 and Accused No. 8 in FIR 57/2010 resulting in charge sheet numbered as SPL CC 135/2011, i.e. Mr. Katta Subramnaya Naidu and M. Gopi respectively challenged FIR 57/2010 resulting in charge sheet numbered as SPL CC 135/2011 before the Hon’ble High Court of Karnataka in Criminal RP 432/2013 and CrlP 2313/2016 respectively.

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Counsel for the appellant has referred the charge-sheet where it was admitted by the respondent that the following amounts are proceeds of crime in terms of Section 2(u) of PMLA. The details of the same which are mentioned in Para-8 of the complaint dated 5^th October, 2012

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reproduce as under:-

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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)

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FPA-PMLA-449/BNG/2013

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Page 10 of 18

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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/-

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It is argued by the counsel for the appellant that the charge-sheet forms the basis of the complaint, no money received otherwise than in the manner alleged in the charge-sheet can be treated as proceeds of crime. Then what remains against SV Srinivas in the charge-sheet filed by Lokayuktha Police Wing in Spl CC 135/2011 is only Section120(b) of the IPC read with various other sections of IPC. Even regarding the said offences there is no allegation in the charge sheet filled by the Lokayuktha Police Wing that SV Srinivas has received any payments.

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Counsel for the appellant submits that even as per admission made in the complaint the entire proceed of crime amount if any was only which was paid to formers by the accused persons as compensation against the purchase of land. The said amount was never attached nor the land in question, possession of which is still lying with the Government (Karnataka).

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It is submitted on behalf of the appellant that allegations against the Appellant of receiving proceeds of crime is not made out and requirement of Section 5(1) of PMLA was not satisfied. The first requirement of the section 5(1) is regarding being in possession of proceeds of crime on the date of the provisional attachment, i.e.25/09/2012. As per charge-sheet a sum of Rs. 10 lac use for renovation cannot be treated as part of alleged proceed of crime as the FPA-PMLA-449/BNG/2013 Page 11 of 18

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charge-sheet speaks for itself and admission made in para-8 of the complaint.

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It is stated that in the present case it has not brought out 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. Even as admitted by the respondent, no complaint was either filed for schedule offence or under this Act is pending against him. Adjudicating Authority while adjudicating the validity of the provisional attachment who bound to examined 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.

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The Hon’ble High Court of Karnataka by a common order dt: 03/11/2016 allowed Criminal RP 432/2013 and CrlP 2313/2016 and quashed FIR 57/2010 resulting in charge sheet numbered as SPL CC 135/2011, as against Mr. Katta Subramnaya Naidu and M. Gopi. The prosecution has challenged the order of the Hon’ble High Court of Karnataka in Criminal RP 432/2013 and CrlP 2313/2016 before the Hon’ble Supreme Court in SLP (Crl) 1192-1193/2017. Notice is ordered in the said matters.

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The appellant in appeal No. 447/2013 is Smt Reshma Srinivas. She is the wife of SV Srinivas. She is not accused in the schedule offence. She is an accused in the section 45 compliant filed by the Respondent herein numbered as SPL CC 124/2014 and is arrayed as accused No.22. The said SPL CC124/2014 was instituted on 24/03/2014 after the

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FPA-PMLA-449/BNG/2013

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Page 12 of 18

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impugned order dt: 21/02/2013 passed by the Adjudicating authority in OC 158/2012.

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The appellant was arrayed as part no. 36 in the provisional attachment order. When the complaint under section 5(5) was filed before the 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.

¶82

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.

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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.

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FPA-PMLA-449/BNG/2013

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Page 13 of 18

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Section 5.1 of the PMLA Act is reproduced below :-

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“5. Attachment of property involved in money-laundering – (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 –

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(a) any person is in possession of any proceeds of crime; and

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(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,

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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:

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[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:

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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 nonattachment of the property is likely to frustrate any proceeding under this Act.]”

¶93

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.

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FPA-PMLA-449/BNG/2013

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Page 14 of 18

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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.

¶97

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.

¶98

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.

¶99

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

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FPA-PMLA-449/BNG/2013

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Page 15 of 18

¶102

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.

¶103

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.

¶104

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.

¶105

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.

¶106

FPA-PMLA-449/BNG/2013

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Page 16 of 18

¶108

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.

¶109

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.

¶110

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.

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FPA-PMLA-449/BNG/2013

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Page 17 of 18

¶113

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.

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No costs.

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(Justice Manmohan Singh) Chairman

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New Delhi, 11^th , May, 2018.

¶117

‘skb’

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FPA-PMLA-449/BNG/2013

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Page 18 of 18

FPA-PMLA-449/BNG/2013 of S.K.V. Chalapathy v/s The Joint Director Directorate of Enforcement, Bangalore

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