Partly allowed

FPA-PMLA-1458/CHD/2016 of Brig. (Retd) Jitender Kumar Narang &Ors. v/s The Deputy Director Directorate of Enforcement, Chandigarh

ATFP10 Apr 2019FPA-PMLA-1458/CHD/2016

Case brief

AI extract

What is this about?

The Appellate Tribunal modified the Adjudicating Authority's order confirming provisional attachment in a disproportionate assets proceeding. The Tribunal held that the authority failed to independently apply its mind, ignored the appellant's submissions, and wrongly concluded the scheduled offence was committed before the Special Court's trial concluded. The attachment of bank balances was stayed

What did the court decide?

Bank balances amounting to Rs. 20,26,545.28 were to be appropriated to FDR for two years; the residential property at Noida was allowed to remain attached but not disposed of until the final special c

FPA-PMLA-1458/CHD/2016 of Brig. (Retd) Jitender Kumar Narang… — Property and Title | ATFP (2019)

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

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Date of Decision:-10.04.2019

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MP-PMLA-2767/CHD/2016(Ex-parte Stay) FPA-PMLA-1458/CHD/2016

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Brig. (Retd) Jitender Kumar Narang &Ors. … Appellants/Applicants

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Versus The Deputy Director Directorate of Enforcement, Chandigarh … Respondent

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Advocates/Authorized Representatives who appeared

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For the Appellant	: Shri Rahshekhar Rao, Advocate
	Shri KotlaHarshavardhan, Advocate Shri Ayushman Kotwal, Advocate
For the Respondent	: Shri S.K. Sharma, Advocate

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CORAM JUSTICE MANMOHAN SINGH : CHAIRMAN

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JUDGEMENT

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FPA-PMLA-1458/CHD/2016

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By this order, I propose to decide the present appeal filed under Section 26 of the Prevention of Money-Laundering Act, 2002 against the impugned Order dated 15.07.2016 in Original Complaint No.564 of 2014 passed by the Adjudicating Authority (hereinafter the “ Impugned Order ”). The copy of the Impugned Order was served upon the Appellants by Speed Post on21.07.2016.

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Appellant No. 1 is a retired Army officer. Appellant No. 2 is the wife of Appellant No.1 and Appellant No.3 is the son of Appellant No.1.The present proceedings arise out of a disproportionate assets case filed by the Central FPA-PMLA-1458/CHD/2016 Page 1 of 19

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Bureau of Investigation [“ CBI ”] against the Appellant No. 1. All appellants submit that the income and assets of Appellant Nos. 2 & 3 have been incorrectly attributed to Appellant No.1, income of the Appellant No.1 has been suppressed and several other errors have been made in computation of income, assets and expenditure of the appellants. The Respondent being independent agency without proper investigation under this Act has erroneously concluded that the Appellant No.1 has acquired disproportionate assets to the tune of Rs.2,28,89,632.56 whereas income of Rs.2,20,28,015/- has been suppressed.

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The following properties owned by the appellants have been provisionally attached by the respondent vide the Provisional Attachment Order and by the impugned order, the confirmation order was passed:-

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S. No. Amount involved Details of the asset/ property

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i. Bank Account No. 01810120022494, in the Rs. 5,66,604.74/name of Appellant Nos. 2 & 3, @ Kotak Mahindra Bank, Sector-18, Noida

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Note: Frozen by the CBI

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ii. Bank Account No. 00431000084976, in the name of Appellant Nos. 1 & 2, @ HDFC Rs.14,59,940.54 Bank, Saket, New Delhi

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Note: Frozen by the CBI

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iii. Property bearing No. C-80, Sector 47, Noida, Rs. 2,09,18,000/in the name of Appellant Nos. 1 & 2

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Note: Sole residential property where the A reside.

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The brief facts as per the case of appellants are that –

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a) Appellant No. 1 joined Indian Army as Lieutenant in Corps of Engineer on 14.03.1981. Due to the merit of his hard work and dedication as an officer in the Indian Army, he was promoted to the rank of Captain in January 1983, Major on 12.05.1990, Lt. Col. In

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FPA-PMLA-1458/CHD/2016 Page 2 of 19

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May 1997, Colonel in June 2000, and subsequently to the rank of Brigadier in June 2007. Appellant No. 1 remained posted at HQ DGBR, New Delhi, for the period from June 2006 to May 2007. As Brigadier/Chief Engineer, Project Deepak, BRO Shimla for the period from June 2007 to February 2009, as Chief Engineer, Project Shivalik, BRO for the period from Feb 2009 to March 2010, at HQ DGBR, New Delhi for the period from March 2010 to July 2011 and Engineer-in-Chief, New Delhi from July 2012 up to retirement. Appellant No. 1 retired as Brigadier from the service of the Indian Army on 30.09.2013.

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b) The Central Bureau of Investigation (hereinafter „CBI‟), on the basis of source information, registered a F.I.R. being RC 0962012A0003 dated 18.10.2012 u/s 13(2) read with Sec 13(1)(e) of the Prevention of Corruption Act, 1988. The source information allegedly revealed that Appellant No. 1 and his family members during the period from 01.01.2007 to 23.02.3012 acquired disproportionate assets worth Rs.1,68,63,936/- which was allegedly about 122.77% of his known sources of his income.

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c) Based on the said F.I.R. dated 18.10.2012, the C.B.I. conducted investigation and filed final report dated 19.12.2014 in the court of Learned Special Judge CBI, Shimla, HP. The CBI alleged that Appellant No. 1 while holding key posts acquired movable and immovable assets in his name as well as in the name of his family members during the check period from 01.01.2007 till 23.02.2012, which were disproportionate to his known sources of income. Therefore, the check period for calculation of the Appellant No. 1‟s income, assets, and expenditures was taken from 01.01.2007 till 23.02.2012. The Final Report alleged, inter-alia , that:

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FPA-PMLA-1458/CHD/2016

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i) Appellant No. 1 and his family members held assets to the tune of Rs.86,51,669.88/-, prior to the check period.

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ii) Appellant No. 1 and his family members acquired assets to the tune of Rs.3,65,32,218.49/-, during check period.

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iii) The Appellant No. 1 and his family members earned an income of Rs.2,37,61,629.79/-, during check period.

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iv) The Appellant No. 1 and his family members incurred a total expenditure of Rs.1,87,70,713.74/- during the check period.

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d) It is submitted that the CBI incorrectly inflated the assets and expenditure of Appellant No. 1, and wrongly concluded that Appellant No. 1 accumulated disproportionate assets to the tune of Rs.2,28,89,632.56/- in conspiracy with Appellant No.3 (his son) Mr. Sumant Narang and one K. S. Dhaliwal. The CBI also wrongly concluded that Appellant No.2 - wife of the Appellant No 1 - abetted him in the commission of the offences.

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e) The CBI charged the Appellants for having committed the offences punishable under Sections 13(2) r/w 13(1)(e) of the Prevention of Corruption Act, 1988 and under Section 120-B r/w Sections 465, 471 of the IPC 1860.

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f) On the basis of the Final Report filed by the CBI, the Respondent registered case being ECIR No. SHSZO/01/2015 dated 22.05.2015 against the Appellants for having committed offences of Money Laundering punishable under Section 4 of the Prevention of Money Laundering Act, 2002 (hereinafter “PMLA”).

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g) Appellant No.1‟s statement was recorded under Section 50(2) & 50(3) of the PMLA 2002 on 08.10.2015 wherein Appellant No.1 stated in detail the sources of his income for acquisition of all of his assets and

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demonstrated that his assets were purchased through his legally earned income.

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h) Appellant No. 1 also made a representation vide letter dated 09.11.2015, wherein, Appellant No. 1 demonstrated that the CBI had not only unfairly attributed various immovable and movable properties to him, but also incorrectly inflated the assets and expenditure of Appellant No. 1 while suppressing legitimate income, which led to an unnatural ballooning of the alleged disproportionate assets.

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i) On the basis of the Final Report dated 19.12.2014 filed by the CBI, the Respondent, without any independent application of mind, passed the Provisional Attachment Order No. 01 of 2016 dated 18.03.2016 (hereinafter “Provisional Attachment Order”) and attached monies held in two bank accounts and the house of the Appellants. It is submitted that the extraordinary power of provisional attachment has been abused by the Respondent in a wholly arbitrary, callous and irresponsible manner without even satisfying the mandatory preconditions laid down under Section 5(1) of PMLA and presumably for extraneous considerations.

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It is submitted by the appellant that the immovable property – being C-80, Sector-47, Noida – attached vide the Provisional Attachment Order is the Appellants‟ residence and, therefore, it is the Respondent ex facie erred in attaching the property as there could be no apprehensions of the Appellants alienating the said property and frustrating PMLA proceedings. It is stated that in view of lack of any application of mind on part of the Respondent is evident as the Provisional Attachment Order does not contain even a whisper as to the “ reasonable grounds to believe ” held by the Respondent that the attached

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properties would have been concealed, transferred or otherwise dealt with in any manner to frustrate the confiscation proceedings under the Act.

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It is submitted that on the basis of Complaint No. 564 of 2014 dated 11.04.2016 which is forwarded by the Respondent (hereinafter “Complaint”), the Adjudicating Authority issued Notice to Show Cause dated 13.04.2016 (hereinafter “Show Cause Notice”) to the Appellants without satisfying itself that there is “ reason to believe that any person has committed an offence under section 3 or is in possession of proceeds of crime ”.

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The Appellants filed a Joint Reply dated 16.06.2016 to the Show Cause Notice, along with supporting documents, before the Adjudicating Authority on 16.06.2016, clearly demonstrating inter alia that the Provisional Attachment Order was bad in law since the Complainant had failed to satisfy the mandatory preconditions under Section 5 (1) of the PMLA.The allegations made in the Chargesheet against the Appellants were demonstrably false even as per the documents filed by the CBI in its Chargesheet and therefore, there was no „reason to believe that‟ the Appellants were in possession of „proceeds of crime‟; and the Appellants acquired the Bank Balances and House property attached from legitimate sources of income.The Appellants also further filed additional documents to substantiate the submissions made in the Joint Reply, which were taken on record by the Ld. Adjudicating Authority on 30.06.2016.

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In reply to Section 8(1) of the Act, the appellants (who are the defendants before the Adjudicating Authority) have given full details. The appellants particularly provided the details of the loans received from the relatives and friends with regard to the purchase of the properties, in question. The said details are given in the reply in paras 15 to 33, which read as under:-

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FPA-PMLA-1458/CHD/2016

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Loans received from relatives and friends

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15. It is submitted that theDefendant Nos.2 & 3 have received a total of Rs.45,99,500/- as loans from family and friends during the check period. Defendant No.1 retired from the Indian Army on 30.09.2013 and received retirement benefits to the tune of Rs.75,00,000/-after the check period, out of which the abovementioned loans taken by Defendant Nos.2 & 3 from family and friends have been repaid. The CBI and the Complainant have suppressed this fact. It is submitted that the Complainant has not examined any of the aforesaid persons,which would have demonstrated that the said loans were genuine and ought to have been considered towards income during the check period.

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Details of the loans received from family and friends alongwith proof

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of repayment is annexed herewith and marked as Annexure D-5 (Colly.).

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Inflation of cost of construction

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16. That as per Statement D of the Provisional Attachment Order, an expenditure to the tune of Rs.1,26,38,000/- has been attributed towards cost of construction of three-storey building atPlot No. C-80 Sector-47, Noida. The said statement is as per the CBI Charge Sheet. The said amount is highly inflated and the valuation so done by the CBI is misconceived and has not been independently considered by the Complainant.

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17. At the outset, it is relevant to note that the check period expired on 23.02.2012, the valuation was based on an inspection done 14 months later, i.e. on 16.04.2013.

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18. It is submitted that the valuation done by the CBI is wholly exaggerated inasmuch as per the valuation report of an Independent Government approved Surveyor appointed by the Defendants, the correct total value of construction arrived at is Rs.85,64,000/-. Therefore, it is submitted that the CBI has inflated this expenditure by at least Rs.40,74,000/-. The reason for such inflation is that the CBI has adopted the plinth area method which is a rough estimate method, whereas, the independent surveyor commissioned by the Defendants has adopted item rate method which is more accurate.Furthermore, the CBI has incorrectly assumed that all the work was complete by January 2012, whereas work on the building, including major woodwork, plumbing etc. was completed in late 2013.

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19. It is further pertinent to mention that the Defendants incurred a substantial expenditure of nearly Rs.23,00,000/-on the cost of construction after the check period, which has not been accounted for by the CBI in its Charge Sheet, and thus has also been ignored by the Complainant due to the lack of any independent inquiry conducted by the latter.

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20. It is, therefore, submitted that an amount of Rs.70,17,047/- ought to have been reduced from the cost of construction as expenditure incurred by the Defendants during the check period. The report so prepared by the Independent Government appointed Surveyor commissioned by the Defendants has been annexed along with the letter dated 09.11.2016 filed hereto.

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Double/wrong accounting of assets and expenditure

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21. Rs.5,00,000/- paid to RK Enterprises, accounted as expenditure by the CBI, was one of the payments made towards cost of construction and ought to have been deducted from the total cost of construction.

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22. Investment of Rs.20,000/- in Infra Bonds is shown both as an asset and an expenditure.

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23. Investment of total of Rs.5,20,000/- by Defendant No.2 to M/s MKR was received back by her, and hence ought not to have been shown as expenditure.

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24. Similarly, an amount of Rs.3,50,000/- paid by the Defendant No.2 to Shyam Singh Tawatia was also received back and hence ought not to have been shown as expenditure.

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Details of the double/wrong accounting is annexed herewith and marked as Annexure D-6 (Colly.).

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Incorrect Opening Balances taken for Shares and Mutual Funds

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25. It is submitted that the CBI has wrongly taken Opening balance of the Defendants’ investment in Shares and Mutual Funds at the beginning of the check period,thereby, leading to suppression of assets of Rs.29,52,987/-at the beginning of the check period.

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Details of the opening balance of the Defendants’ investment in Mutual Funds and Shares at the beginning of the check period is annexed herewith and marked as Annexure D-7.

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Miscellaneous

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26. 50% of Plot No.11, Aradhana Enclave, Dehradun, was acquired by Mr. M.S. Ahuja, who is a relative of Defendant No.1.The entire consideration was paid by Mr. Ahujafor purchase of this property and nothing was contributed by the Defendant No.3. It is submitted that the same ought not to have be considered for the purpose of computation of disproportionate assets. It is submitted that the only reason for the CBI to consider the said property as an asset is solely on the ground that the Defendant No.3had credit balance in his bank account at the time of purchase of the property. This, it is submitted, is insufficient to conclude that the Defendant No.3in any manner contributed to the acquisition of the said property.

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27. Furthermore, complete non-application is also evident from the fact that the Flat C-1545 at Gurgaon has been shown in the list of assets at the end of the check period despite the admitted fact that the same was disposed of by the Defendants during the check period.

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SOURCES OF INCOME

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28. The source of income for acquisition of the Plot bearing No.C-80, Sector 47, Noida, i.e. the residential property of the Defendants, is as under:

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a.Total value: Acquired for Rs.86,94,000/-

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b.Date of sale/purchase: Acquired on 16.07.2008

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c. Acquirer/Seller: Acquired jointly by Defendant Nos.1 & 2

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d.Fund Flow (with names)

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i. Sale of C-1545, Gurgaon, generated Rs.50,00,000/- which was invested towards purchase of the present property.

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ii. Remainder of Rs.36,99,050/- financed by Defendant No.2inter alia through the following gifts, self-acquired funds, and loans:

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1.Rs.50,000 gifted by Smt. Raj Malik (mother of Defendant No.2)

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2.Rs.1,50,000 by Defendant No.3

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3.Rs.1,50,000 by Defendant No.1 FPA-PMLA-1458/CHD/2016 Page 8 of 19

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4.Loans taken and returned:

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a.Saideep Enterprises

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i. 13.06.2008: Rs.6,00,000/-

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ii. 10.07.2008: Rs.2,00,000/b.Mr. G.K. Sharma

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i. 12.07.2008: Rs.5,00,000/-

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ii. 15.07.2008: Rs.5,00,000/c. Mr. Umesh Jain

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i. 11.06.2008: Rs.2,00,000/-

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ii. 08.07.2008: Rs.2,00,000/-

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d.Umesh Jain (HUF)

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i. 08.07.2008: Rs.2,00,000/-

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ii. 24.05.2008: Rs.2,00,000/-

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e. Mr. M.S. Tanwar

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i. 11.06.2008: Rs.5,00,000/-

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f. Ms. Seema Aggarwal

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i. Rs.3,00,000/-

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These loans were received and repaid vide Bankers Cheques. Copies of the receipts disclosing the taking and return of loans are annexed to the letter dated 29.10.2015.

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Copy of A/c Statement for S.B. A/c No. 00431000084976 held with HDFC Bank, Saket is annexed to the letter dated 29.10.2015..

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29. The explanation of the Defendants in respect of the cost of construction has been provided hereinabove. The Defendants are presently compiling the proof of incurring of cost of construction and seek time of two weeks to file the same before this Hon’ble Authority.

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30. It is submitted that the bank balance in the bank accounts attached were accrued from the income of the Defendants accrued during the check period as will be evident from the Chargesheet filed by the CBI.

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31. It is submitted that all the documentation of the Defendants were seized by the CBI during the raid and the documentation relating to the income of the Defendants 2 & 3 were also available with the same. However, the CBI has deliberately only filed selectively documentation along with the Chargesheet to make out a wholly false and untenable case against the Defendants. As such, the documentation is not readily available with the Defendants and they are seeking the assistance of their Chartered Accountant in compiling the relevant documentation from his records. Therefore, the Defendants seek leave of this Hon’ble Authority to file the same within two weeks.

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32. It is submitted that the Defendant No.1 has an unblemished record in the Indian Army, except for the present case, which has been foisted upon him for extraneous reasons at the fag end of his career. The Defendant No.1 has held key posts during his service and has got periodical promotions due to his merit. It is submitted that the Immovable Property, which has been attached is the sole residential house of the Defendants and they do not have any other property in National Capital Territory Region for their residence and therefore, it is most humbly submitted that if the Provisional Attachment Order were to be confirmed, it would cause them grave injustice and irreparable injury.

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33. In conclusion, it is submitted that the Complainant is required to act in a nonadversarial and impartial manner and is required to assist this Hon’ble Authority in discharging its obligations under the PMLA. As such, the Complainant has a fiduciary as well as a statutory duty to place on record all relevant facts, which would enable this Hon’ble Authority to determine whether or not recourse to attachment was even justified. It is submitted that the records in the instant case would categorically demonstrate that the Complainant has selectively placed material on record while leaving out relevant material, which, would have negated the entire basis for proceeding to attach the properties in question. The instant Complaint is liable to be rejected for this reason alone and strong exception of this conduct ought to be taken by this Hon’ble Authority.

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It is also stated in the reply that the chargesheet filed by the CBI is replete with errors and deficiencies, and the alleged disproportionate assets computed by the CBI is erroneous and ought to be ignored for the following reasons:

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A. Income to the tune of Rs.73,72,491/- has not been considered;

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B. Loans received from family and friends to the tune of Rs.45,99,500/- has not been considered;

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C. Cost of construction of building at Plot No.C-80 inflated by CBI by over

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Rs.40,74,000/-

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D. Cost of construction of about Rs.23,00,000/- towards building at Plot No.C-80 incurred after the check period incorrectly considered as expenditure during the check period

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E. Double/wrong accounting of assets and expenditure to the tune of

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Rs.15,70,000/-

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F. Value of Plot No.11, Aradhana Enclave, Dehradun of Rs.5,22,690/- has beenwrongly included in the assets at the end of check period

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G. Opening balance of the Defendants‟ investment in Shares and Mutual Funds at the beginning of the check period wrongly taken leading to reduction of assets of Rs.29,52,987/- at the beginning of the check period.

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It is stated on behalf of appellant that all of the above totals to an amount of Rs.2,40,28,215/- , thereby,demonstrating that the computation of the CBI, and the consequent blind adoption by the Complainant, of alleged FPA-PMLA-1458/CHD/2016 Page 10 of 19

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disproportionate assets is incorrect and wrong. It is alleged that the aforementioned deficiencies were brought to the attention of the Complainant in the Defendants‟ letters dated 29.10.2016 and 09.11.2016, which have been completely ignored by the Complainant before issuing the present Provisional Attachment Order. The said explanations are repeated herein below for ease of reference of this Authority as per the case of the appellants:-

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Suppression of Income

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i) The CBI,and consequently also the Complainant, has suppressed the income of Defendant No.3 and Defendant No.2 and has unfairly clubbed the same with Defendant No.1. This unfair clubbing has led to the incorrect conclusion that both Defendant No.2 and Defendant No.3 had no ability to purchase assets on their own.

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ii) Assuming that the methodology adopted by the CBI is correct, it is submitted that they have suppressed the income of Defendant No.3 from 2007-08 to 2011-12 amounting to Rs.15,78,740/-; and the income of Defendant No.2 from 2007-08 to 2011-12 amounting to Rs.18,19,040/-, which ought to have been considered towards income.

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iii) The CBI and the Complainant have further erred in not considering that an Agreement to Sell dated 15.04.2011 with regard to Flat bearing No. A-403 was entered into by the Defendant No.3 and one another person. Under the said agreement, the Defendant No.3 had received advance sale consideration to the tune of Rs.25,00,000/-. The said amount has not been considered by the Complainantthough the same was received by the Defendant No.3 during the check period. The said transaction has been alleged to be a false/sham transaction, ignoring the fact that the said matter was compromised

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between the Defendant No.3 and the vendee, whereby the said amount has been returned with interest vide cheques by way of compromise deed dated 10.10.2013.

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A copy of the compromise deed dated 10.10.2013 is also filed as Annexure D-4.

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It is submitted that the CBI, and thus the Complainant, has not considered a sum of Rs.10,27,711/- being dividends received by the Defendant No.1 during the check period.

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It is argued by learned counsel for the appellants that the charge-sheet filed by CBI has many errors and deficiencies about the assets computed by CBI. As far as this para is concerned, this Tribunal is not empowered to go through the said errors, if committed by the CBI. However, the respondent is the agency which has to investigate the matter independently. It is also the duty of the Adjudicating Authority to consider the reply filed by the concerned parties before coming to final conclusion. As far as CBI case is concerned, this Tribunal does not wish to express any opinion. The contention of the appellant would be considered by the Special Court on merit after recording the evidence.

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In the present appeal, the only concern is as to whether order passed is sustainable under this Act or not. It is not disputed by either party that Section 8(2) mandates that the Adjudicating Authority shall decide the matter after considering the reply and taking all the relevant materials placed on record. The said mandatory provision cannot be ignored by the Adjudicating Authority under any circumstances.

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Section 5 in the Provisional Attachment Order, there is no discussion whatsoever in the Complaint and/or in the Provisional Attachment Order as to how the ingredients of Section 5(1) of the PMLA are satisfied in the instant case particularly since the property attached vide the Provisional Attachment Order is the property being C-80, Sector-47, Noida, is the residence of the Appellants, therefore, it is submitted that the Complainant has wrongly attached the same as there ought to be no “reasonable apprehension” of the same property being alienated by the Appellants. As such, there is no basis for the apprehension on the part of the Complainant that “ 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 ”, which is a pre-requisite for any action of attachment under the PMLA. No reasons to believe are produced either at the stage of Section 5(1) and Section 8(1) of the Act. The reasons to believe are also not mentioned in the notice itself nor any copy was annexed with the counter-affidavit filed. The contention of the respondent is that it is not required.

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The Adjudicating Authority issued the shows cause notice in a mechanical manner without applying its mind to the Complaint and materials forwarded by Appellant No.1 and without recording its satisfaction that it had reasons to believe that the Appellant had “ committed an offence under section 3 or is in possession of proceeds of crime ”, as is mandated under Section 8(1) of the Act without compliance of mandatory provisions of Section 8(1) and (2) of the Act as the Adjudicating Authority did not understand the judgement of the Hon‟ble Supreme Court,, while interpreting the expression „reason to believe‟ in an another stature, holding that there must be grounds mentioned for formation of „reason to believe‟ in a given case, and the legality of these grounds must then be tested by assessing whether they have any nexus with the formation of such beliefs; by disregarded the judgement of the Hon‟ble Supreme Court India in FPA-PMLA-1458/CHD/2016 Page 13 of 19

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Aslam Mohammed Merchant vs. Competent Authority , [(2008) 14 SCC 186] where while setting aside attachment proceedings for failure to record reasons to believe in a Show-Cause Notice, it was held that when the “ proceedings themselves were not initiated validly, the competent authority did not derive any jurisdiction to enter into the merit of the matter ”. The said decision was rendered in the context of NDPS Act, provisions of which are substantially inparimateria with PMLA on the point of provisional attachment;

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The Adjudicating Authority appears to have not even perused the Joint Reply filed by the Appellants to the Show Cause Notice which is evident from its wholly incorrect finding in the Impugned Order that “ Counsel for the defendant has submitted reply where he has mentioned that certain incomes have been left out, loans received from the family and friends are also not considered, construction cost is inflated and even expenses incurred after check period have been included. Beside this some other points have also been brought to the notice which reduce the amount of disproportionate assets but prima faciely it appears that some of these are after thoughts and have been mainly suggested for reducing disproportionate assets.

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16. The case of the appellant is that all these points were not brought to the notice of the investigative agencies in the beginning . At this stage, it does not appear appropriate to differ with the estimates prepared by the CBI and subsequently adopted by the ED. Hence, both these amounts in the bank accounts are in the category of proceeds of crime which deserves to be attached. The aforesaid finding that “ these points were not brought to the notice of the investigative agencies in the beginning ” is factually incorrect finding and has been passed in ignorance of the letters dated 29.10.2015 and 09.11.2015 sent by the Appellants to the Respondent containing detailed explanations and highlighting

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incorrect calculations made by the CBI. It is submitted on behalf of the appellant that all these aspects were brought to the attention of the Adjudicating Authority in the Joint Reply and the said letters dated 29.10.2015 and 09.11.2015 were also filed with the Joint Reply. The Appellants have suffered grave injustice in as much as the Respondent blindly adopted the CBI version without considering the explanations offered by the Appellants vide letters dated 29.10.2015 and 09.11.2015, and now, the Adjudicating Authority has accepted the Respondent‟s version without even perusing the Joint Reply to the Show Cause Notice.

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The findings in the impugned order are arrived in para 7 of the order as well as last part of the conclusion, the same are read as under:-

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“7. (1) First two movable properties consisting of balance amount in accounts in Kotak Mahindra Bank and HDFC Bank, Saket, New Delhi totaling Rs.20,26,545/-. As has been said earlier according to CBI investigation defendants are alleged to possess disproportionate assets of more than Rs.228.9 lacs. Therefore they could not have surplus funds legally possessed by them for keeping in these accounts and if the process of estimation/determining the assets, income, expenditure etc used by CBI is reliable then the money held in these two accounts in the name of defendants can only be tainted money and that makes these two movable assets proceeds of crime. In my view the process adopted by CBI prima facie appears to be reliable and on the basis of these calculations they have put up the case in the court also. Hence the matter becomes subjudice also. Counsel for defendant has submitted reply where he has mentioned that certain incomes have been left out, loans received from family and friends are also not considered, construction cost is inflated and even expenses incurred after check period have been included. Besides this some other points have also been brought to the notice which reduce the amount of disproportionate assets but prime facily it appears that some of these are after thoughts and have been mainly suggested for reducing disproportionate assets. All these points were not brought to the notice of investigation agencies in the beginning. At this stage, it does not appear appropriate to differ with the estimates prepared by the CBI and subsequently adopted by the ED. Hence both these amounts in the bank accounts are in the category of proceeds of crime which deserves to be attached.”

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“ Conclusion

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1. On a through perusal of the PAO, complaint, relied upon documents, the investigations conducted by the ED and the

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statements recorded under Section 50 of the PMLA and on careful consideration of the arguments advanced on behalf of the complainant & Defendants, undersigned comes to the prima facie conclusion that the defendant have committed the Scheduled Offences, generated proceeds of crime and laundered them. No doubt the properties attached are proceeds of crime or value thereof and are involved in money laundering. Undersigned therefore orders confirmation of the above Provisional Attachment Order. This order shall continue during the pendency of the proceedings relating to any offence under this Act before court or under the corresponding law of any other country, before the competent court of criminal jurisdiction outside India as the case may be and become final after an order of confiscation is passed under sub-section (5) to subsection (7) of Section 8 or section 58B or sub Section 2a or Section 60.”

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It appears from para-7 of the impugned order, ED (being an independent agency), who is supposed to investigate the entire matter in independent manner and also other than the investigation of CBI or its charge-sheet filed, it is stranged to notice from the said para wherein it is held that the process adopted by CBI appears to be reliable and it does not appropriate to differ with them, the same is not the scheme of the Act. It is always argued on behalf of ED that it is an independent agency who investigates all matters independently and its findings are its own. In some of the cases, proceed of crime is much more than figures arrived by the CBI. If that is the position, the Adjudicating Authority and ED are duty bound to give its own finding on the basis of independent investigation rather to rely upon the calculation of other agency. The said findings are not only given in the present case, but in large number of other cases wherein the appeals are pending.

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The CBI in its final report has merely charged the appellants for having committed the offences punishable under sections 12(2) r/w 13(1)(e)of the Prevention of Corruption Act, 1988 and under Section 120-B r/w Sections 465, 471 of the IPC 1860, however in the conclusion last para of the impugned order, it is concluded by the Adjudicating Authority that the appellants have committed the schedule offence. The said conclusion is on the face of is without any basis as theevidence in the schedule offence is yet beconcluded,such declaration made by the Adjudicating

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Authority is an abuse of theprocess

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of court. How can any authority comes to the conclusion in advance. The final judgement is yet to be delivered by the Special Court after evidence as to whether the accused has committed the schedule offence or not.In other cases, also similar observations are made against the person who are not evenname in the FIR or any charge-sheet is filed under this Act. The Authority under this Act is duty bound to deal with the reply and materials on record within the meaning of Section 8(2) of the Act and decide the same on merit rather to simply adopt the CBI report and to give sweepingfindings that the person concerned has committed the schedule offence when such matter is still pending before Special Court.

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The Adjudicating Authority in the Impugned Order merely on presumptions has come to the conclusions arrived at merely on the basis the CBI Final Report dated 19.12.2014, without conducting any independent inquiries, despite the Act requiring the authority to independently apply its mind to the entire matter.

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It is evident that the impugned order passed in complete non-application of mind is evident from a perusal of the Impugned Order, which shows a cut-paste method has been applied by the Adjudicating Authority, reproducing the Complaint and Reply filed by the parties along with even the typographical errors contained therein.

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As already mentioned that in the reply paras 15 to 33 where the details of the loan amount received from the relatives and friends, source of income, wrong accounting of assets & expenditure, the same have not been dealt in the impugned order. The impugned order is of 43 pages. Upto page 37 of the impugned order, the pleadings of the parties have been reproduced. The main discussions are mentioned in para 7 of the impugned order.

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When it was pointed out to the learned counsel for the respondent who supports the impugned order. The said explanation is unimpressive as it is the FPA-PMLA-1458/CHD/2016 Page 17 of 19

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duty of the Adjudicating Authority to deal with the plea of the person concerned and material placed on record but the same has not been discussed. Section 8(2) of PML Act, 2002 is a mandatory provision if the reply and material available on record are not dealt with in the impugned order. The same is liable to be set aside.

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The prescribed period of 180 days for adjudication has already been expired under Section 5 of the Act. Thus, there is no need to remand back the matter. Counsel for the appellant after hearing made the fair suggestion without prejudice which is quite reasonable.

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Under these circumstances, the impugned order is accordingly modified. I is the admitted position that the charge-sheet against the appellants under the scheduled offence as well as prosecution complaint under PMLA and under this Act is also pending before the Special Court.

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Without expressing any opinion on merit, the impugned order is modified to the following extent:-

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a) That as far as account maintained by Smt. Minni Narang and SumantNarang ( A/c. No. 0181012002249 of Kotak Mahindra Bank, Sector-18, NOIDA - balance amount as Rs.5,66,604.74) and also account maintained by Smt. Minni Narang and Sh. J.K. Narang (account no. 00431000084976 of HDFC Bank, Saket, New Delhi – balance amount as 14,59,940.54) – totalling Rs. 20,26,545.28, the said amount be appropriate by the respondent. Without prejudice, the FDR be prepared initially for a period of two years in the nationalized bank till the date of final judgement passed by the Special Court. It can also be reviewed for further period in case the final order is not passed.

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b) With regard to the property bearing no. C-80, Sector 47, NOIDA(U.P), without prejudice, the attachment of the said property shall continue till final judgement is passed by the Special Court. However, the attachment will continue and the and the appellant shall not dispose of the said property till the final order is passed after recording the evidence.

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c) The observation made by the Adjudicating Authority in the conclusion part of the impugned order shall not be used against the appellants. TheSpecial Court even otherwise is to pass the final order after recording the evidence without having any influence of the impugned order dated 15.7.2016.

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