Allowed

FPA-PMLA-1221/MUM/2016 of Kalyani Charitable Trust v/s Deputy Director, Directorate of Enforcement. Mumbai

ATFP17 Jan 2019FPA-PMLA-1221/MUM/2016

Case brief

AI extract

What is this about?

The Appellate Tribunal allowed appeals, holding that properties funded by clean money from Shapoorji Pallonji could not be labelled 'proceeds of crime'. The Tribunal quashed the attachment order, noting the absence of established proceeds of crime and procedural lapses in the ED's investigation.

What did the court decide?

Impugned order and provisional attachment orders set-aside and properties released forthwith.

FPA-PMLA-1221/MUM/2016 of Kalyani Charitable Trust v/s Deputy… — Money Laundering | ATFP (2019)

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APPELLATE TRIBUNAL, PREVENTION OF MONEY LAUNDERING ACT AT NEW DELHI

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Date of decision: 17^th January, 2019

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1. MP-PMLA-2386/MUM/2016(Stay) FPA-PMLA-1220/MUM/2016
Kalyani Education Pvt. Ltd. …	Appellant
Versus
Deputy Director, Directorate of Enforcement. … Mumbai	Respondent
2. MP-PMLA-2389/MUM/2016(Stay) FPA-PMLA-1213/MUM/2016
Ravindra G Sapkal …	Appellant
Versus
Deputy Director, Directorate of Enforcement. … Mumbai	Respondent
3. MP-PMLA-2390/MUM/2016(Stay) FPA-PMLA-1221/MUM/2016
Kalyani Charitable Trust …	Appellant
Versus
Deputy Director, Directorate of Enforcement. … Mumbai	Respondent
Advocates/Authorized Representatives who appeared
For the appellants : Shri R.K. Handoo,	Advocate
For the respondent : Shri Neeraj Atri, A	dvocate
CORAM
JUSTICE MANMOHAN SINGH : CHAIRMAN
JUDGEMENT FPA-PMLA-1220/MUM/2016, FPA-PMLA-1213/MUM/201	6 &FPA-
PMLA-1221/MUM/2016

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FPA-PMLA-1220, 1213 & 1221/MUM/2016 Page 1 of 13

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The above-mentioned appellants have challenged the Impugned Order dated 30.12.2015 in OC no. 512/2015passed by the Adjudicating Authority confirming the Provisional Attachment Order no. 18/2015 dated 21.07.2015 in ECIR No. 6/MZO/2012 dated 18.06.2012.

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The detailed separate judgement has been delivered in the ten appeals being no. 1104/2015 and others. Most of the facts and legal issues are common. Thus the said judgement may also be read with the present judgement being passed in the above appeals.

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The adjudicating order is common and hence by this order, I propose to decide all the three appeals by single order.

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It is admitted position that the appellants are neither arraigned in any schedule offence nor in any charge-sheet.

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The Appellants rely on the grounds of appeal filed by M/s. Kalyani Charitable Trust showing so called money trail at page 57 of the said appeal. Sh. Nilesh Thakur as proprietor of M/s. PRS Enterprises; M/s. P.R. Developers and Director of M/s. Accord Infrastructure Pvt. Ltd. Sh.Nitish Thakur/Sh.Nilesh Thakur is a prank contrived to justify invoking Section 13(1)(e) of P.C Act against the public servant Sh. Nitesh J. Thakur. This aspect has been addressed by Appellants in the said appeal. The grounds are inter-alia reproduced below:-

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B. For that the respondent could not proceeded for attachment against the appeal when admittedly the appellant was not held to be possessing any property on behalf of the public servant and was not arraigned as an accused in the charge-sheet filed by ACB against the public servant which in turn means that the monies received by the appellant were not part of the disproportionate assets of the public servant and the donations received by the Appellant Company could not be branded as a property derived or obtained as a result of criminal activity relating to the scheduled offence, hence was not a “proceed of crime” and therefore, the respondents could not have

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FPA-PMLA-1220, 1213 & 1221/MUM/2016 Page 2 of 13

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assumed jurisdiction to attach the impugned properties of the appellant under PMLA. The impugned order of confirmation and attachment is, hence, beyond the PMLA and thus is beyond jurisdiction.

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C. For that the attachment order and confirmation order by the Ld. Adjudicating Authority is proceeding on erroneous understanding of the provisions of section 13(1) (e ) of PC Act and section 109 of IPC. The impugned order being contrary to the criminal jurisprudence is void ab initio.

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D. For that the whole proceedings against the appellant and others are bad from root to fruit, inasmuch as, the Ld. Attaching Officer in the complaint and the Ld. Adjudicating Authority has failed to focus their attention to the first requirement of determination as to whether there is any “proceed of crime” as envisaged under section 2(u) of PMLA. The appellant submits that there is no material adduced by the respondent to show that the money sourced to or received from M/s. S.D. Corporation to M/s. PRS Enterprises and others, is result of any criminal activity relating to any scheduled offence. The appellant humbly submits that in the absence of the basic ingredient as to the “proceeds of crime” being available, the attachment and confirmation of complaint is void abinitio.

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E. For that the authorities below have miscarried themselves to conclude that “all” or “any transaction” conducted with the person arraigned in a “scheduled offence” is a “proceed of crime”. The focus ought to be on property derived or obtained as a result of criminal activity relatingto the scheduled offence as against the “person” who may be arraigned in a scheduled offence. The order is liable to the quashed on this count.

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F. For that the respondent and the Ld. Adjudicating Authority has proceeded to pass the impugned orders erroneously on the reasoning that “any person” and “any money” can be proceeded against under PMLA ignoring, that such person proceeded against has to be in “possession” of “proceed of crime” and it can’t be “any money” but only such money which is derived or obtained as a “result of criminal activity relating to the scheduled offence” which is a “proceed of crime”. In the absence of any such material the order is liable to be set aside on this short ground.

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G. For that the source of the funds is admittedly emanating from M/s. S.D. Corporation, M/s. Shapoorji Pallonji, who are not proceeded against in the attachment order or in the OC, hence it could not be averred that monies given by such entities to any person including M/s. PRS Enterprises or M/s. PRS Developers etc. are emanating from any activity relating to any “scheduled offence” hence such monies could not be “proceed of crime” and therefore the instant proceedings under PMLA are void

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FPA-PMLA-1220, 1213 & 1221/MUM/2016 Page

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3 of 13

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abinitio. The impugned orders are liable to be set-aside on this short ground.

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H. For that admittedly M/s. S.D. Corporation, M/s. Shapoorji Pallonji and or M/s. Strategic Infrasol LLC were neither involved in any scheduled offence nor party to the instant proceedings under PMLA, hence money flown from such legal entities were not result of any activity relating to any scheduled offence, hence could not be “proceed of crime” simply because it has come in the account of M/s. PRS Enterprises or M/s. PRS Developers, Proprietary concerns of Sh. Nilesh Thakur, arraigned as accused in terms of Section 109 IPC read with Section 13 (1) (e ) of PC Act. Merely because Sh. Nilesh Thakur is arraigned with his brother does not render all transactions conducted by him and/or by his business concern as “proceed of crime” much less the donation received by the Appellant Company. Thus, in the absence of “proceed of crime”, the instant proceedings under PMLA are beyond jurisdiction.

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I. For that the mere existence of the “scheduled offence” in the charge-sheet is not a pretence or occasion for exercise of powers of attachment of property of any person under PMLAS who is not even arraigned as an accused in the charge-sheet of scheduled offence and that too on the basis of the statement/transcript of the bank account showing movement of funds from one account to another in legal manner by way of cheques on account of normal legal transactions duly recognized by law. The whole approach of the authorities below is erroneous and contrary to law rendering the impugned orders null and void.”

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It is not disputed by any party including ED that the money received by the Appellants is traceable to source of Shapoorji Pallonji, which is admittedly “clean money”. This clean money of Shapoorji Pallonji given to M/s. S.D Corporation and further to M/s. PRS Enterprises and thereafter to Appellants for business purposes does not become “proceeds of crime”, merely because the ACB has registered offence u/s 13(1)(e) of P.C Act against Shri. Nitesh, brother of Shri. Nilesh.

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The use of money does not make such money “proceeds of crime”. As per definition of Section 2(u) of PMLA, the proceeds of crime is the property, movable or immovable, derived or obtained as a result of criminal activity

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FPA-PMLA-1220, 1213 & 1221/MUM/2016 Page 4 of 13

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relating to scheduled offence.

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Therefore, the property must be the consequence of criminal activity. In this regard, the Appellants have referred the latest judgment of Hon‟ble High Court of Delhi delivered in the case of Himachal Emta Power Ltd vs. UOI , Manu/DH/3183/2008 paras 15 to 20.

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15. At this stage, it would be relevant to refer to Section 5(1) of the PML Act, the relevant extract of which is set out below:

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“Section 5 (1) Where the Director or any other officer not below the rank of Deputy Director authorized 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, W.P.(C) 5537/2018 Page 8 of 11 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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16. A plain reading of Section 5(1) of the PML Act indicates that an order of provisional attachment can be passed only where the concerned officer has reasons to believe on the basis of material in his possession that: (a) any person is in possession of proceeds of crime; and (b) such proceeds are likely to be concealed, transferred, or dealt with any manner which would result in frustrating any proceedings relating to confiscation of such proceeds of crime. The expression “proceeds of crime” is defined under clause (u) of Section 2 (1) of the PML Act as under:

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Section 2 (u) proceeds of crime means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property (or where such property is taken or held outside the country, then the property equivalent in value held within the country).

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17. It is clear from the language of Section 2(u) of the PML Act that the expression proceeds of crime refers to a property, which is derived or obtained by any person as a result of criminal activity. Therefore, in order to pass an order of provisional attachment, it was necessary for the ED to have reasons to believe that the property sought to be attached was derived or obtained from any scheduled crime.

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18. A plain reading of the impugned order indicates that there is no material whatsoever on the basis of which the ED could have possibly W.P.(C) 5537/2018 Page 9 of 11 concluded that the investments made by HEPL were derived or obtained as a result of any criminal activity relating to a scheduled offence. In the impugned order, the ED has elaborately discussed the allegation made against HEPL. It is also recorded that at the time of filing of the application for allocation of coal block, the capital of HEPL was 5 lakhs which had swelled upto 7.91 crores after filing application for a coal block. The

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FPA-PMLA-1220, 1213 & 1221/MUM/2016 Page 5 of 13

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investment made by joint venture constituents of HEPL, namely, Himachal Pradesh Power Corporation Ltd. and EMTA, were further invested by HEPL; including in subscribing to the shares of CGL. The same cannot by any stretch be held to be proceeds of crime. The ED has, essentially sought to attach the investments made in HEPL on the allegation that the same have been used in commission of a scheduled offence. This is apparent from paragraphs 7 and 16 of the impugned order which are set out below:

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“7. AND WHEREAS, the investment of Rs. 7.91,00,000/- was made after filing for allocation of Coal Block, and the same has been used in commission of scheduled offence. i.e. the allocation of coal block by fraudulent means and to further obtain mining lease on the basis of said allocation. Further, there is a balance of Rs. 1,33,700/- lying in the bank accounts as mentioned at Para 5(xiv) and the fixed deposit No. 015340100288/8 dated 4.7.2017 amounting to Rs. 11,86,710/-.

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* * * * *

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16. AND WHEREAS, the following amounts have been used in the commission of scheduled offence and are proceeds crime in terms of Section 2 (u) and 2 (v) of PMLA, 2002:-

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S.No.	Amount in Rs.	Remarks
1.	2,45,00,000	Investment in M/s GCL By M/s HEPL and lying in Corporation Bank, Bhowanipur Branch, Kolkata A/c No.510101003473693 of M/s GCL.
2.	11,86,710	Lying as fixed deposits No.015340100288/8 dated 04.07.2017
3.	1,26,540	Lying in A/c No.0153201100424
4.	7,160	Lying in A/cNo.0153201002578
Total	2,58,20,410

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19 . The said assumption that any amount used in commission of a scheduled offence would fall within the expression proceeds of crime as defined under Section 2(1) (u) of the PML Act is fundamentally flawed. In the present case, the allegation against HEPL is that it had obtained allocation of coal block on the basis of misrepresentation. However, it is not disputed that mining of the coal from the block had not commenced, therefore, HEPL did not derive or obtain any benefit from the coal block. The ED has also not indicated any reason, which could lead one to believe W.P.(C) 5537/2018 Page 11 of 11 that HEPL had derived any other benefit from the allocation of the coal block in question.

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20. In view of the above, the petition is allowed and the impugned order is set aside. Consequently, the complaint dated 19.01.2018 made under Section 8 of the PML Act is also set aside. The Parties are left to bear their own costs. All the pending applications are also disposed of.”

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FPA-PMLA-1220, 1213 & 1221/MUM/2016 Page 6 of 13

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Admittedly, in the present case, investigations were already conducted against the Appellants under ECIR No.3/MZO/2011 which as per written submission of Respondent No.1 was registered on 10.05.2011. In this ECIR the whole information was available with the Respondent, Enforcement Directorate as would be clear from Page 152 Vol. II in the statement where the department is asking the particulars of the Appellants and in the statement dated 4.12.2013 when the statement of Shri. Ravindra G Sapkal was recorded in ECIR No.3/MZO/ 2011 as is revealed on first Para of statement. All the investigations in this regard had already been done.

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It has come on record that when the PAO was passed under the ECIR No.3/MZO/2011, the whole material was available with Enforcement Directorate but they did not issue any attachment order against Appellants.

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The legal presumption is that then it was concluded by Competent Authority that there is no proceeds of crime with Appellants. Subsequently, to pass the attachment against the present Appellants, on 21.07.2015 in another ECIR No.06/MZO/2011 dated 18.06.2012 is illegal and arbitrary. Such exercise of powers by the authority is per se illegal, arbitrary in violation of Article 14 of the Constitution, apart from being unfair.

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While passing the order of attachment in respect of the Appellants, the whole material in respect of the first adjudication order against Shapoorji Pallonji from whom the money had flown which is source of money has been screened/ suppressed rendering the PAO and confirmation thereof outcome of suppressed material and rendering the order null and void. The order of provisional attachment is bad and after thought. It is not disputed during the course of hearing that all the materials were already available with ED

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FPA-PMLA-1220, 1213 & 1221/MUM/2016 Page 7 of 13

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who had earlier decided not to attach properties of the appellants. The attachingof property on the basis of some material subsequently is not only misconceived and virtually illegal. It appears that ED does not care about the settled law. No doubt, if additional material is recovered by the ED against the party, only then the said exercise can be done subject to the condition that ED must pass the specific order of reasons to believe and copy thereof must be served to the party giving such information, otherwise it amounts illegal act. In the present case, no order of reasons to believe is produced before this Tribunal nor any copy was served to the appellants.

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As is revealed from the appeal of M/s. Kalyani Charitable Trust, it was not permissible in law for Competent Authority to disjoint and issue attachment order separately against M/s. Shapoorji Pallonji and later disjoint and separate attachment order for Kalyanis in the chart. Such attachment order is a dictate of malafide , non-application of mind and unsustainable.

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Appeal no.1211 of 2016 arising out of Original Complaint no. 512 of 2015.

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Shapoorji Pallonji & Co. Pvt. Ltd., ….Appellant/Org. Defendant No. 12

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V/s.

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Dy Director, Directorate of Enforcemen…Respondent No.1/ Org. Complainant

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Ravindra G. Sapkal, 3. Kalyani Charitable Trust, 4. Kalyani Education Pvt. Ltd, 5. Nitish J. Thakur, 6. Nilesh J. Thakur, 7. M/s. Ace Card Infrasol Pvt Ltd, 8. PRS Enterprises,

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Bank of Maharashtra, 10. State Bank of India, 11. Bank of Maharashtra, 12. State Bank of India .… Respondent Nos. 2 to 12/

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Org. Defendant Nos.1 to 11

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FPA-PMLA-1220, 1213 & 1221/MUM/2016 Page 8 of 13

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14.1 Properties attached in OC No.512/15: -

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(The SPCL has challenged the aforesaid attachment in PMLA Appeal No.1211/2016)

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A sum of Rs.61,42,00,000/- was given on loan by Nilesh Thakur Group to Kalyani Education Group and other connected persons. The ED has sought to attach properties worth Rs.56,02,05,718/- standing in the name of Kalyani Charitable Trust, Kalyani Education Pvt. Ltd. and one RavindraSapkal. The properties which are subject matter of attachment are as follows:-

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S.	Date of	Consideration	Location
no.	execution of document	mentioned in the deed
1	04.11.2011	65,00,000	Office premises at FO-22 [area 374.40 sq. ft.] alongwith open parking FD-10 at Shubhada CHS Pochkanwala Road Worli, Mumbai in the name of Ravindra Sapkal purchased from the account of Kalyani Charitable Trust‟s Axis Bank account
2		65,00,000	Fixed Deposit Syndicate Bank Byuculla
		40,50,00,000	Building alongwith ancillary structures and the land upon which said immoveable property stands today in the Campus of Kalyani Charitable Trust at plot Gut No.335, 340, 341, 342, 345, 367 of Village Anjaneri, Tal. Trimbakeshwar, Distt. Nashik.
4		5,32,469	Bank Balance account in RavindraSapkal‟s bank account in Axis Bank, PrabhadeviWorli Branch
		14,16,73,249	Buildings alongwith ancillary structure and the land upon immovable property stand today situated in the Campus of Kalyani Education Pvt. Ltd. at Plot Bearing Gut No.370, 336, 453 of village Anjaneri& Gut No.45/3, 47/2 & 589 of village Vadholi, Tal. Trimbakeshwar, Distt. Nashik
	Total	56,02,05,718

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FPA-PMLA-1220, 1213 & 1221/MUM/2016 Page 9 of 13

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14.2 The Nilesh Thakur Group during the period 2007 – 2009 and 2011 to 2012

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invested part of the monies advanced by SPCL under the land aggregation agreement (i.e. Rs. 141.50 Crores) in the Kalyani Group (Respondent Nos. 2, 3 and 4 herein) promoted by Ravindra G. Sapkal (being Respondent No. 2). The Nilesh Thakur Group advanced an aggregate sum of Rs. 61,42,00,000/- (Rs. 61.42 Crores) to Kalyani Group as loans and advances as per the case of appellant. The advances made by the Nilesh Thakur Group in Respondent No. 3 [i.e. Kalyani Charitable Trust] was to the tune of Rs. 41.80 Crores. Similarly the advances made by the Nilesh Thakur Group in the Respondent No. 4 (i.e Kalyani Education Pvt. Ltd.) was to the tune of Rs. 18.57 Crores. The remaining amount was advanced to Respondent No. 2 ( i.e Ravindra Sapkal, Proprietor of Ravindra Constructions).

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14.3 Out of the aforesaid amount of Rs. 61.42 Crores advanced to Kalyani Group, the Kalyani Group purchased various properties and invested the amount in fixed deposits and made some construction. The amounts advanced by the Nilesh Thakur Group to the entities of the Kalyani Group are shown as loans and advances in the Books of Accounts of the Nilesh Thakur Group. This is also acknowledged by Respondent No. 1 in clause 7.1 of the Original Complaint No. 512 of 2015 (“O.C. 512/15”).

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14.4 Respondent No. 1 (Director of Enforcement) issued a Provisional Attachment Order No. 18 of 2015 (PAO No. 18/15) on the basis of the second FIR (ECIR No. 6/M20/2012 dated 18.5.2012) being PAO No. 18 of 2015 dated 21.07.2015 attaching the properties worth Rs. 56,02,05,718/- (i.e. 56.02 Crores) standing in the name of the Respondents (i.e. the Kalyani Group) on the alleged basis that the said properties had been acquired out of proceeds of crime involved in money laundering.

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14.5 Based on the aforesaid PAO No. 18/15, Respondent No. 1 filed O.C.

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FPA-PMLA-1220, 1213 & 1221/MUM/2016 Page 10 of 13

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512/15 before the Adjudicating Authority.

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14.6 Being aggrieved by the attachment of properties in question, SPCL filed a Misc. Application on 28.10.2015 under proviso to section 8 (2) of the PML Act for being impleaded as a party Defendant to the said Original Complaint as it is the case of SPCL that it is the beneficial and the legal Owner of the aforesaid immovable properties, bank balances and fixed deposits, provisionally attached by the Enforcement Department as the said properties have been purchased/ created from the funds made available by Nilesh Thakur Group to the Kalyani Group, which in turn were advanced by SPCL to the Nilesh Thakur Group under the subject Agreement for land aggregation [which is referred to in the Common List of Dates].

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14.7 In view of the said Misc. Application, the Adjudicating Authority directed that SPCL be made a party Defendant to the Original Complaint and accordingly SPCL was arrayed as Defendant No. 12 in the proceedings of the O.C. 512/15.

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14.8 At the hearing before the Adjudicating Authority on 18.11.2015, Respondent No. 1 submitted a statement giving his comments to the Misc. Application praying therein that the Misc. Application filed by SPCL [Reply to SCN] be dismissed as it was devoid of merits and the attachment be confirmed.

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14.9 SPCL filed a Response Statement to the statement filed by Respondent No.1 in November, 2015. By its Response Statement SPCL brought on record the correct facts of the matter and also thereby dealt with Respondent No. 1‟s comments and contentions set out in Respondent No. 1‟s Statement.

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14.10 The Adjudicating Authority vide its Order dated 30.12.2015 confirmed the said PAO No. 18/15.

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Being aggrieved by the Order dated 30.12.2015, SPCL filed the above

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FPA-PMLA-1220, 1213 & 1221/MUM/2016 Page 11 of 13

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Appeal before this Tribunal on 15.02.2016.

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Nilesh J. Thakur has confirmed the payments given to the appellants for investment purpose. The difference only is that Kalyani Group says that it was donation and Nilesh J. Thakur has stated that it was investment

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These are two versions between the parties otherwise all group parties to the appeals admit that the money was owned by SPCL and was clean and untainted. It appears that there is an inter-se disputes between appellants and Nilesh J. Thakur. The stand of SPCL is that it was merely an investment and SPCL has to recover the said amount from Nilesh J. Thakur. Nilesh J. Thakur stand is that it was an investment and he is entitled to recover the entire amount with interest in order to reduce his liabilities towards decretal amount. Thus, all these are relevant to determine the civil disputes between the parties.

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The appellants are running educational institutions and the Respondent has issued the impugned attachment order and complaint on the erroneous premise of “any property” of“any person” without focusing its attention as to first pre-requisites in law of existence of any “proceeds of crime” and availability of “material” to lead to “reasons to believe” as required under Section 5 of PMLA.

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In the present case, one fact is very clear that Adjudicating Authority has not at all considered the written submission submitted by the Appellants before him, which are appended at page 95 onwards in the Paper Book of Kalyani Charitable Trust. The respondents and the Adjudicating Authority have miscarried itself in law by ordering attachment and confirmation of the attachment in the absence of any “proceeds of crime”. In

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the absence of proceeds of crime the very exercise of powers by the respondents under PMLA is beyond jurisdiction. The contentions of

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FPA-PMLA-1220, 1213 & 1221/MUM/2016 Page 12 of 13

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Appellants have not been met including denial of cross-examination.

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The properties of the appellants were attached towards value thereof. The said properties were not purchased from the proceed of crime. It is inter-se disputes between the appellants and Nilesh J. Thakur about the money parked at the hand of Kalyani Group. However, it is not disputed by any party that the said amount was originally owned by the SPCL which is not tainted even as admitted by the counsel for the ED. Thus, the question of proceed of crime or money laundering by any appellant in all appeals does not arise.

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The appellants‟ properties, therefore, wrongly attached by the ED.

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All appeals are allowed. The impugned order dated 30.12.2015 and provisional attachment orders are set-aside against the appellants. The properties are released forthwith.

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