Disposed

FPA-PMLA-1065/HYD/2015 of M/s. The India Cements Ltd. v/s The Deputy Director, Directorate of Enforcement, Hyderabad

ATFP26 Jul 2019FPA-PMLA-1065/HYD/2015

Case brief

AI extract

What is this about?

The Tribunal dismissed five appeals filed by companies challenging PMLA attachment orders. The court held that the merits of the stay petitions depend on a related quashing petition before the Supreme Court regarding the personal liability of a director. Consequently, the tribunal adjourned the appeals to await the Supreme Court's decision while continuing the modified interim order.

What did the court decide?

Modified interim order continued; final merits of appeals adjourned to await Supreme Court decision.

FPA-PMLA-1065/HYD/2015 of M/s. The India Cements Ltd. v/s The… — Money Laundering | ATFP (2019)

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APPELLATE TRIBUNAL FOR SAFEMA, FEMA, PMLA, NDPS & PBPT ACT AT NEW DELHI

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DATE OF DECISION: 26.07.2019

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1) MP-PMLA-2015/HYD/2015 (Stay) FPA-PMLA-1053/HYD/2015
M/s. Jagati Publications Limited	…	Appellant
Versus
The Deputy Director, Directorate of Enforcement, Hyderabad	…	Respondent
2) MP-PMLA-2016/HYD/2015 (Stay) FPA-PMLA-1054/HYD/2015
M/s Janani Infrastructure Pvt. Ltd.	…	Appellant
Versus
The Deputy Director, Directorate of Enforcement, Hyderabad	…	Respondent
3) MP-PMLA-2086/HYD/2015 (Stay) FPA-PMLA-1055/HYD/2015
M/s Carmel Asia Holding Pvt. Ltd.	…	Appellant
Versus
The Deputy Director, Directorate of Enforcement, Hyderabad	…	Respondent
4) MP-PMLA-1945/HYD/2015 (Stay) FPA-PMLA-1035/HYD/2015
Bharathi Cement Corporation Pvt. Ltd.	…	Appellant
Versus
The Deputy Director Directorate of Enforcement, Hyderabad	…	Respondent
5) FPA-PMLA-1065/HYD/2015
M/s. The India Cements Ltd.	…	Appellant
Versus
The Deputy Director, Directorate of Enforcement, Hyderabad	…	Respondent
FPA-PMLA-1053-1055, 1035 & 1065/HYD/2015		Page 1 of 9

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Advocates/Authorized Representatives who appeared

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For the Appellants	: Shri Raghenth Basant, Advocate Shri Siddharth Rao, Advocate
For the Respondent	: Shri Mohd. Faraz, Advocate
CORAM JUSTICE MANMOHAN SINGH	: CHAIRMAN

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FPA-PMLA-1053-1055, 1035 & 1065/HYD/2015

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The five appeals have been filed by the above mentioned appellants challenging the common order passed by the Adjudicating Authority on 04^th August, 2015.

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In FPA-PMLA-1035/HYD/2015, after hearing on 03^rd September, 2015, notice was issued and status quo order was passed in the interim application. The said order was continued.

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On 17^th August, 2016, the said status quo order was modified to the following effect:

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“Considering the facts and circumstances of the case and in view of the statement made by the learned counsel for the appellant at the Bar that the interest amount, if permitted to be rolled over, be also treated at par with the Fixed Deposits under attachment, the interim orders vide the order dated 3^rd September, 2015 are extended to cover the rolling over of the interest amount accrued also. It is made clear to both sides that the F.D.s renewed in terms of the Tribunal‟s order dated 3^rd September, 2015 and the F.D. that may be opened in pursuance of today‟s orders shall be subject to the outcome of the appeal. If the appellant succeeds in the appeal, the principal amount(s) of the F.D.s as referred above alongwith the interest accrued would be appropriated to the appellant. If the respondent succeeds in the appeal, the principal amounts alongwith the interest accrued shall be appropriated to the respondent.

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Interim order vide order dated 3^rd September, 2015 is modified to the above extent. With the consent of both the sides, the matter is listed for final arguments on 16^th November, 2016.”

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FPA-PMLA-1053-1055, 1035 & 1065/HYD/2015

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Page 2 of 9

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Thereafter, the pleadings were completed. Parties have addressed their arguments before the Chairman as well as the learned Member, Shri Anand Kishore. On 13.03.2018, the detailed order was passed and the matter was adjourned awaiting the decision of the Supreme Court in which appeal filed by India Cement Ltd. The operative part of para 21 to 25 are read as under:

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“21. While going through the record, it has come to our notice that CBI in the OC 424/2015 has challenged the final judgement and order dated 18.03.2016 in CRLP No. 7584/2015 passed by High Court of Judicature at Hyderabad by filing of Special Leave to appeal (Crl.) no. 7621/2016 in the Supreme Court of India and the same appeal is still pending. The said proceedings were arisen from the O.C. which is also the subject matter of present appeals.

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The Hon‟ble High Court of Hyderabad has passed the judgment on 18^th March, 2016 on the following points:

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Now the points for consideration are:

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I. Whether the petitioner/A-3-Srinivasan, being the Vice Chairman and Managing Director of M/s India Cements Limited (A-7), be made personally liable for any acts of India Cements Ltd. with vicarious liability for the offences punishable under Sections 120-B read with 420 I.P.C. and Section 12 of the Prevention of Corruption Act, by virtue of any statutory liability or legal fiction?

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II. If not, whether petitioner/A-3-Srinivasan, other than of his status or position as Vice Chairman and Managing Director of India Cements Limited, be made personally liable for any acts and if so on what basis for the final report to accuse and for the learned special judge to take cognizance without specifying as to on vicarious liability or personnel liability?

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III. Whether the cognizance taken by the learned special judge without specifying as to on vicarious liability or personnel liability, is outcome of nonapplication of judicial mind and same is otherwise unsustainable for not reflecting any reasons or otherwise and is liable to be quashed?

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IV. To what result?

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All the above said points were decided in favour of the petitioner who filed the Criminal Petition No. 7584 of 2015.

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FPA-PMLA-1053-1055, 1035 & 1065/HYD/2015

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Page 3 of 9

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The operative part of the Judgement passed by the Hon‟ble High in said para 53 of the judgement read as under:

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53. Point No. IV: In the result the petition is allowed and the proceedings in CC No. 24 of 2013 from the cognizance of the offences under Sections 420 & 120B IPC & Section 12 of PC Act, taken by the Principal Special Judge for C.B.I Cases, Red Hills, Nampally, Hyderabad so far as the petitioner/A3-Sri N. Srinivasan concerned are quashed for no basis to sustain. The bail bonds of the petitioner/A3-Sri N. Srinivasan if any shall stand cancelled. The miscellaneous petitions pending if any stand closed.

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The India Cements Ltd and their directors were the petitioners in the said matters. The instances of illegal gratification in the guise of investment as quid-pro-quo by India Cements Ltd. (A-7) into the companies of Sri Y.S. Jagan Mohan Reddy are detailed in para 2(ii) of the said Judgement. The allegations inter-alia against India Cements Ltd are referred in para of 2(ii) (j) of the Judgement which are reproduced here below:

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“(j) India Cements Limited (A-7) had invested 12,50,000 of preference shares at a premium of Rs. 110/- for a sum of Rs. 15,00,00,000/-. Thereafter India Cements Limited (A-7) had invested a sum of Rs. 80.31 crores at a premium of Rs. 1440/-. There was no explanation available in the minutes of the meeting or the statements recorded from the top management of the company with regard to the necessity to increase the premium from Rs. 110/- to Rs. 1440/- (sudden raise of almost 12 times within a small time span of 9 to 10 months), except a simple statement that it is a “bouquet of investments”. The company which is having public funds with it, never bothered to get the “due diligence on the required premium” neither from their own technical team nor from an outside agency. Thus, it is clearly construed as a quid pro quo transaction between the India Cements Limited (A-7) and Sri Y.S. Jagan Mohan Reddy (A-1). India Cements Limited (A-7) sold the shares at Rs. 671/- to M/s PARFICIM, SAS, FRANCE on 14.04.2010 on the directions of Sri Y.S. Jagan Mohan Reddy undergoing a loss of Rs. 26,85,50,489/-. This clearly shows that the investment into M/s Raghuram Cements Limited, M/s Bharathi Cement Corporation Limited by M/s India Cements Limited (A-7) was nothing but a quid-pro-quo investment. In April, 2010 M/s. Pani & Associates, Bangalore evaluated the share price of M/s Raghuram Cement Corporation Private Limited and arrived at the value of share at Rs. 221.17 Ps. That the Board Resolution of India Cements Limited (A-7) dated 14.04.2010 resolved to invest up to Rs. 125 crores by way of Inter Corporate

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FPA-PMLA-1053-1055, 1035 & 1065/HYD/2015

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Page 4 of 9

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Loans/Advance/Investment in M/s. Bharathi Cement Group whereas on the same day India Cements Limited (A-7) had sold their stake 1803973 shares of Rs. 10/- each in M/s Bharathi Cements Corporation Limited at a total price of Rs. 121.00 crores to M/s PARFICIM, SAS, FRANCE.

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In case we go through the Judgement of Hyderabad High Court which is sub-judice before the Hon‟ble Supreme Court, it would not be appropriate for us to give the final findings about the merits of the case as well as the clarification of the movable and immovable properties.

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Under these circumstances, we are of the view that without going into the merit of the appeals and without expressing opinion about the rival submissions of the parties on merit, it would be appropriate to await the decision of the Supreme Court. After the said decision, an appropriate order would be passed in the light of the said judgment.

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The appeal filed by the India Cement Ltd. is already adjourned to 09.07.2018 for awaiting the decision of the Apex Court. List these matters also on 9^th July, 2018 for awaiting the orders of the Hon‟ble Supreme Court.”

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The appeal filed by the CBI against India Cement Ltd. is still pending in the Supreme Court. In the meanwhile, the learned Member Shri Anand Kishore has retired. The appeals were listed for re-hearing, except filed by India Cement Ltd.

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At the time of re-hearing on 03^rd October, 2015, it was submitted on 03.10.2018, by the Senior Counsel, Mr. Sidharth Luthra, appearing on behalf of Bharathi Cement Corporation Pvt. Ltd (“ Bharathi Cement ”) who had clarified that the appeal preferred by the CBI before the Hon‟ble Supreme Court in the matter of quashing of offences against Mr. N. Srinivas shall have no bearing on the facts of the matter, in view of the following:

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(i) The Quashing Petition filed by Mr. N. Srinivas before the High Court of Andhra Pradesh was filed under Section 482 of the

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Cr. P.C. praying for „quash the proceedings in C.C. No. 24 of

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FPA-PMLA-1053-1055, 1035 & 1065/HYD/2015

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Page 5 of 9

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2013 on the file of the learned Principle Special Judge for C.B.I. Cases, Hyderabad at Nampally, which is the outcome of FIR in R.C. No. 19/A/2011, registered on 17.08.2011‟.

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(ii) That the High Court of Andhra Pradesh in paragraph 9 of the Order, identifies the points which were in consideration. For ease of reference, the same are being reproduced herein under:

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“I. Whether the petitioner/A-3-Srinivasan, being the Vice Chairman and Managing Director of M/s. India Cements Limited (A-7), be made personally liable for any acts of India Cements Ltd. with vicarious liability for any the offences punishable under Section 12 of the Prevention of Corruption Act, by virtue of any statutory liability or legal fiction?

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II. If not, whether petitioner/A-3-Srinivasan, other than of his status or position as Vice-Chairman and Managing Director of India Cement Limited, be made personally liable for any acts and if so on what basis for the final report to accuse and for the learned special judge to take cognizance without specifying as to on vicarious liability or personnel liability?

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III. Whether the cognizance taken by the learned special judge without specifying as to on vicarious liability or personnel liability, is outcome of non-application of judicial mind and same is otherwise unsustainable for not reflecting any reasons or otherwise and is liable to be quashed?

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IV. To what result?”

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FPA-PMLA-1053-1055, 1035 & 1065/HYD/2015

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Page 6 of 9

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iii. That the High Court of Andhra Pradesh decided the above mentioned points in favour of Mr. N. Srinivasan and allowed the Quashing Petition filed by Mr. N. Srinivasan and held that Mr. N. Srinivasan was not personally liable for any acts of India Cements and quashed the proceedings against Mr. N. Srinivasan. For ease of reference, the operative part of the Order is reproduced herein below:

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“19. From the above, there is nothing against A-3 of he played personal and specific role to make him liable and in the absence of which form his mere status as Managing Director of A-7 cannot be made liable for any offence taken cognizance by the learned Special Judge from the transaction supra.

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53. Point No. IV: In the result the petition is allowed and the proceedings in CC No. 24 of 2013 from the cognizance of the offences under Sections 420 & Section 120B IPC & Section 12 of the PC Act, taken by the Principle Special Judge for C.B.I. Cases, Red Hills, Nampally, Hyderabad so far as the petitioner/A-3-Sri n. Srinivasa concerned are quashed for no basis to sustain. The bail bonds of the petitioner/A-3-Sri N. Srinivasan, if any, shall stand cancelled. The miscellaneous petitions pending, if any stands closed.”

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iv. That in view of the above, the only issue of consideration before the High Court of Andhra Pradesh was whether the offences against Mr. N. Srinivasan were liable to be quashed, based on

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FPA-PMLA-1053-1055, 1035 & 1065/HYD/2015

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Page 7 of 9

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the question whether he could be held personally liable for the acts of the Company by reason of being vicariously liable. It is submitted that the questions being addressed did not involve determination of whether the company (India Cements) had committed any of the alleged offences.

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v. That the issues which are in consideration in the present proceedings relate to the commission of the alleged offence of money laundering by India Cements in the guise of investment as quid pro quo into Bharathi Cement and the question whether, there are grounds for attachment of the investments made by India Cements into Bharathi Cement.

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vi. The present proceedings therefore, do not involve determination of the personal liability of Mr. N. Srinivasan. Further, there would be no consequence on the present proceedings irrespective of the conclusion that the Hon‟ble Supreme Court reaches on the personal liability/culpability of Mr. N. Srinivasan.

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The order was reserved in the four appeals, except the appeal filed by India Cement Ltd.

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There is some force in the submission of Mr. Siddharth Luthra, learned Senior Counsel appearing on behalf of Bharathi Cement but after having gone through the record of all appeals, this Tribunal felt that the earlier order passed on 13.03.2018 should not be ignored. The same was not challenged by any party. It was passed by the Chairman and the learned Member who has now retired. The impugned common order was passed in all the five appeals.

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FPA-PMLA-1053-1055, 1035 & 1065/HYD/2015

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Page 8 of 9

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This Tribunal is of the view that let the final outcome of Supreme Court is come, thereafter these appeals be heard and are decided, because one of the parties, who is party to common order, is contesting the appeals filed by CBI, let the further proceedings be adjourned till the said order is passed. This Tribunal is of the opinion that once the view has already been taken, it is appropriate not to disturb the same.

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As far as interim order is concerned, the appellants have made a strong case in their favour. Therefore, the modified interim order already passed on 17.08.2016 shall continue till the final order is passed in the above-mentioned five appeals.

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(Justice Manmohan Singh) Chairman

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New Delhi, 26^th July, 2019

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„skb‟

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FPA-PMLA-1053-1055, 1035 & 1065/HYD/2015

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Page 9 of 9

FPA-PMLA-1065/HYD/2015 of M/s. The India Cements Ltd. v/s The Deputy Director, Directorate of Enforcement, Hyderabad

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FPA-PMLA-1065/HYD/2015 of M/s. The India Cements Ltd. v/s The Deputy Director, Directorate of Enforcement, Hyderabad

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