FPA-PMLA-2056/ Chd /2017 of Amanpreet Singh Sodhi v/s The Deputy Director Directorate of Enforcement, Chandigarh

ATFP10 Apr 2019FPA-PMLA-2056/ CHD /2017

Case brief

AI extract

What is this about?

This single-judge order addressed an appeal against an EO's order freezing bank accounts and immovable properties under PMLA. The Tribunal held that while the freezing of bank accounts was unsustainable due to lack of 'reasons to believe', immovable properties cannot be defreezed due to serious allegations in the FIR. It partially modified the order, allowing account operations without dealing wit

What did the court decide?

Bank accounts de-frozen; appellant allowed to lease out frozen immovable property during pendency of retention proceedings; interim order on properties continues till Special Court's final order.

FPA-PMLA-2056/ Chd /2017 of Amanpreet Singh Sodhi… — Pension and Retirement Benefits | 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: 10.04.2019

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FPA-PMLA-2056/ CHD /2017 Amanpreet Singh Sodhi … Appellant 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 Arshdeep Singh, Advocate Shri Manish Jha, Advocate
For the respondent	: Mr. Atul Tripathi, Advocate
CORAM
JUSTICE MANMOHAN SINGH	: CHAIRMAN

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JUDGEMENT

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FPA-PMLA-2056/ CHD /2017

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By this order, I propose to decide the appeal filed by the appellant under section 26 of the Prevention of Money Laundering Act, 2002 against the impugned order dated 12^th September, 2017 passed by the Adjudicating Authority.

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The following are the allegations against the appellant and other parties as per the pleadings of the respondent in the application for retention of the property are that the CBI, BS & FC, New Delhi had registered an FIR No. RCBD1/2016E/0007 dated 08.08.2016 u/s 120B

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FPA-PMLA-2056/CHD/2017

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Page 1 of 10

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r/w 420 of IPC and Section 13(2) r/w 13(1)(d) of PC Act, 1988 on the following allegations:

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(i) The accused Mr. Ashu Mehra had been working as an Assistant Manager, Forex Department, Indian Overseas Bank, Chandigarh Main Branch since 2010 and was also having the authority to make and check all SWIFT messages of the Bank. Besides, the Accused Mr. Ashu Mehra, two more officers, namely accused Mr. Nitish Negi, Mr. Gaurav Bhatia have been named by the bank in their complaint letter to have been working as Assistant Managers in the Bank and further informed to be also handling forex operations & were having the authority to make & check all SWIFT messages of the Bank branch.

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(ii) The accused Ashu Mehra in collusion with other customers of the Bank, namely M/s. Vision Procon (through its Proprietor Mr. Dinesh Kumar, Accused), M/s. Heights International (through its Proprietor Mr. Aman Preet Singh Sodhi, Accused ) and M/s. Sai Bhakti Impex Pvt. Ltd. Accused (through its Directors Mr. Aman Kirpal -Accused and Mr. Gaurav Kirpal – Accused ) have been alleged by IOB to have caused loss to the bank to the tune of USD 47.86 Million equivalent to approximate Indian Rs.321.00 crores (Calculated @ Rs.67 per USAD) as on date.

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(iii) IOB has further informed that M/s. Colour Wave ( H K) Ltd. Accused having office address at G/F, CAR, PO, Commercial Building, 18-20, Lyndherst Terrace Central Hong

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FPA-PMLA-2056/CHD/2017

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Page 2 of 10

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Kong (Also at 4/E, Flat D-E, Wah Factory Building, 50-60 Wong Chuk Hang Road, Aberdeen) is the beneficiary of all the fraudulent SWIFT Messages sent.

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(iv) Further, Brigadier (Retd.) M.S. Dullat, Accused , is

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the father-in-law of Accused No.1 and is Director in M/s. Vyapar Agrotech Limited in which the Accused No.5 Mr. Aman Preet Singh Sodhi is another Director.

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(v) The Indian Overseas Bank ( IOB in short) has informed that the Accused No.1 (Mr. Ashu Mehra), the master mind, was indulging in issuing Letters of Comfort (LOC)/Letters of Undertaking through SWIFT messages fraudulently in collusion with others to cheat the Bank: that further the overseas banks had provided Buyers Credit to their customers on the basis of the LOC issued by the IOB, Chandigarh and hence the said overseas banks were demanding IOB to remit the said amount to them. It has been further informed by the IOB that on verification of their records, it was found that no such request for letter of comfort to the Buyers Credit was authorized by the Branch Manager and Letter of Comfort/Letter of Undertaking were issued through swift messages by Mr. Ashu Mehra and his other bank staff (Accused Nos. 2 & 3) by abusing their official position.

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(vi) Mr. Ashu Mehra of IOB, in collusion with other staff members by indulging in afore-said modus-operandi had created liability against the bank to the tune of Rs. 321.00

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FPA-PMLA-2056/CHD/2017

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Page 3 of 10

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Crore (calculated at the exchange rate of Rs.67.00) which is due for payment between 01.07.2016 to 28.01.2017; that further it was alleged that there was no movement of goods & services or underlying commercial transactions behind these fraudulent transfers of funds.

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(vii) On the basis of the LOCs issued by Sh. Ashu Mehra, the foreign banks have credited the accounts of the beneficiary i.e. M/s. Colour Wave (HK) Ltd. that the Bank had also informed that from their preliminary investigations it was found that the accused Mr. Amanpreet Singh Sodhi, Proprietor of M/s. Heights International is also Director in M/s. Colour Wave (HK) Ltd., Hong Kong, which is beneficiary for all the Buyers Credit; that further Mr. Dinesh Kumar, Proprietor of M/s. Vision Procon, is an authorized signatory for the operations in the account of M/s. Heights International and that there are also inter-account transactions between these three entities.

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(viii) The copy of FIR No.RCBDI/2016/E/0007 dated 08.08.2016 of the CBI against the afore-said 10 accused is enclosed and it is marked as Annexure A – 1 . The Chargesheet in this case is awaited.

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Sections 420 & 120B of the Indian Penal Code, 1860 and Section 13(2) r/w 13(1)(d) of the Prevention of Corruption Act, 1988 are the scheduled offences (relating to cheating, criminal conspiracy and criminal misconduct/abuse of official position) under PART A. Chargesheet yet to be filed. The respondent submit the present case of suspected offence of Money Laundering, therefore, a case was registered FPA-PMLA-2056/CHD/2017 Page 4 of 10

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by the Directorate of Enforcement, Chandigarh Zonal Office vide ECIR dated 19.09.2016.

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One of the grievances of the appellant is that his personal bank accounts No. 400022471690019 maintained with Deutsche Bank, Pakhowal Road, Ludhiana and account No. 0000060212701271 maintained with Bank of Maharashtra, Gill Road, Ludhiana which are unrelated to the scope of ongoing inquiry have been ordered to be frozen by the Respondent no. 2 on 07.04.2017.

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The immovable properties of he appellant were also freezed. The details of which are mentioned in item no. 9 of Table-3 and serial no. 1 & 9 of Table-8 of retention application filed under section 17(4) of the Act. The prayer of the said application was allowed by the impugned order which is also challenged by the appellant apart of other defendants.

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Case of the appellant is that:

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(a) Against the Bank account of the Appellant in question, not a single transaction has been pointed out to justify its freezing, even though it is alleged by the ED that the account statement of such bank account were examine. The Appellant‟s bank account was frozen on the following on the basis of apprehension

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“ 14. that, certain bank accounts of the Accused and their associates were also identified which might have been used for money-laundering. ”

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(b) The Appellant‟s bank account was kept frozen based only on

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a presumption that the said accounts “might have been” involved in money laundering.

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FPA-PMLA-2056/CHD/2017

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Page 5 of 10

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(c) The said Show-Cause Notice did not put the appellant to notice as to freezing of his bank accounts and continuation thereof. The Show-Cause Notice does not even pertain to the immovable properties for which the Respondent-ED has issued the Show-Cause.

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(d) The Show Cause Notice issued to the appellant is defective for the reason of being incomplete, vague and cryptic. The ShowCause Notice fails to fulfil the basic ingredients as laid down by a Constitutional Bench of the Hon‟ble Supreme Court in Khem Chand vs. Union of India [AIR 1958 SC 300] and it is vitiating all proceedings held pursuant thereto. Reliance is place on Aslam Mohammad Merchant vs. Competent Authority [2008 (14) SCC 186].

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(e) The Impugned Order was challenged by a co-defendant in the captioned Original Application before the Hon‟ble Punjab & Haryana High Court, wherein it was observed vide Order dated 26.09.2017 that prima facie it is non-application of mind.

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It is submitted on behalf of the appellant that the properties under the PMLA and their consequent adjudication under section 8, PMLA are concerned, “reasons to believe” have to be recorded in writing by the Respondent and the Adjudicating Authority at three stages, which are as follows –

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FPA-PMLA-2056/CHD/2017

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Page 6 of 10

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(i) The officer carrying out the freezing action under 17(1A) has to record his reasons to believe in writing in terms of section 17(1) (i) to (iv), PMLA;

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(ii) After the property is frozen the officer has to record his reasons to believe in writing and pass an Order for continuation of freezing of the property in terms of section 20(1) read with 20(2), PMLA;

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(iii) The Adjudicating Authority has to record its reasons to believe in writing under section 8(1) at the stage of adjudication.

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It is correct that the Respondent-ED has not complied with the mandatory requirement of Section 20(1) read with Section 20(2), PMLA. Copy of reason to believe not produced. Copy of the same was not served.

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It is also the case of appellant that there is no question of retention in the present case since the said amount was never seized by the Respondent, i.e., retention would only arise if a property were seized by the Respondent under Section 17(1), PMLA, and is, consequently, in its possession. In the instant case, however, the said bank account was frozen under section 17(1A), therefore there is no case of any retention. The Respondent in the present case ought to have prayed for “ continuation of the order of freezing served under sub-section (1A) ”.

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During the pendency of appeal, the appellant had also filed an application allowing the appellant to leased out the frozen property to third party, it was contended by the appellant that after deduction of FPA-PMLA-2056/CHD/2017 Page 7 of 10

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expenses, the appellant shall deposit the remaining amount with ED. The said prayer was opposed mainly on the ground that the lease deed was executed between the appellant and third party during the pendency of retention application. Counsel for appellant no doubt admits that against the appellant, no proceedings says that there was no bar as the property was not attached under section 5(1) and it was merely frozen. It would cause no hardship if rental be earned. Counsel for the respondent no doubt admits that against the appellant no proceeding were initiated u/s 5(1) of the Act and the immovable property was never attached, however, it is argued by him that the appellant may use the property by his personal use however third party interest cannot be created.

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It appears from the material placed on record by the appellant that the respondent, despite of interim order on 26.3.2018 passed by this Tribunal, has issued a communication to other authority not to grant the approval/license to the appellant. The said act of the respondent is clearly in breach of interim order passed by this Tribunal. The respondent has no jurisdiction for violation of the order. The explanation given by the counsel that since the appellant during retention proceeding entered into an agreement with third party, therefore, the respondent has issued such communication. The said explanation is not valid. The respondent is duty bound to comply all the orders of the Court included of this Tribunal. If the respondent wanted to issue communication to the authority, the respondent could have filed the application for seeking the permission of this Tribunal in this regard.

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FPA-PMLA-2056/CHD/2017

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Page 8 of 10

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Even notice issued u/s 8(1) is defective, as the details of the property is not mentioned nor the reasons to believe are given. The plea taken by the appellant is of serious in nature, however, this tribunal at present is not inclined to pass the order to defreeze the immovable property in question in view of serious allegations made in the FIR though the charge-sheet in the schedule offence is yet to be filed. The role of appellant would have to be seen once the charge-sheet is filed. Till that time, the appellant should be allowed to lease-out the property to third party. I am of the view that once the retention proceedings under section 17(4) were pending, the appellant ought to have waited before execution of lease-agreement with third party. In view of alleged allegations mentioned in the FIR, the immovable property cannot be defreezed.

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Thus, the impugned order is partly modified in view of the finding arrived in paras 8 & 12 of my order. As far as freezing of bank accounts are concerned, the same are de-freezed subject to the condition that the appellant shall not deal with the balance amount lying in the accounts. The said accounts, however can be operated by the appellant.

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As far as immovable properties are concerned, the interim order passed on 26.03.2018 shall continue till the final order passed by the Special Court after recording the evidence. However, the freezing order pertaining to immovable properties shall continue till the final order is passed by the Special Court.

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