Allowed

FPA-PMLA-2119/DLI/2017 of Smt. Neha Lohani v/s The Deputy Director Directorate of Enforcement, Delhi

ATFP23 Apr 2019FPA-PMLA-2119/DLI/2017

Case brief

AI extract

What is this about?

The appellate tribunal allowed an appeal filed by an innocent bona fide purchaser challenging the confirmation of provisional attachment of property under the PMLA. The court held that thefailure to issue a statutory notice to the claimant violated mandatory procedural safeguards.

What did the court decide?

Provisional Attachment Order against property at 15A/18, East Patel Nagar, New Delhi is quashed.

FPA-PMLA-2119/DLI/2017 of Smt. Neha Lohani v/s The Deputy… — Money Laundering | 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: 23^rd April, 2019

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MP-PMLA-4144/DLI/2017 (Stay) MP-PMLA-4145/DLI/2017 (Exem.) & FPA-PMLA-2119/DLI/2017 Smt. Neha Lohani … Appellant Versus The Deputy Director Directorate of Enforcement, Delhi … Respondent

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… Respondent

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Advocates/Authorized Representatives who appeared

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For the appellant	:	Shri H.S. Kohli, Advocate Shri Raghav Mehdiratta, Advocate
For the respondent	:	Shri Nitesh Rana, Advocate Shri A.R. Aditya, Advocate Shri Atul Tripathi, Advocate
CORAM
JUSTICE MANMOHAN SINGH SHRI G.C. MISHRA	: :	CHAIRMAN MEMBER

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JUDGEMENT

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FPA-PMLA-2119/DLI/2017, MP-PMLA-4144/DLI/2017 (Stay) & MPPMLA-4145/DLI/2017 (Exem.)

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The present appeal has been filed against order dated 27.10.2016 (communicated to the Appellant on 21.11.2017), passed by the Adjudicating Authority, who confirmed the provisional attachment made by the

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FPA-PMLA-2119/DLI/2017

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Complainant in respect of property bearing no. 15A/18, East Patel Nagar, New Delhi.

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In the Confirmation Order passed by the Adjudicating Authority, no role of commission of crime was attributed to the appellant. The said order has been challenged by the appellant who says that she is an innocent purchaser of the property prior to the date of offence. She is not charged with any offence by any agency. After hearing, we have orally pronounced the order of allowing the appeal, now reasons are to be given below.

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It is not denied on behalf of respondent that the appellant was not arrayed in the FIR or charge sheeted. She was not involved in schedule offence. No prosecution complaint is pending against her and seller.

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The brief facts as per appellant are that the complaint made by Dy. Director, Directorate of Revenue Intelligence (DRI), Lucknow, Zonal Office a case was registered at P.S. Kavi Nagar, Ghaziabad (U.P.) as FIR No. 76 of 2015, u/s. 420, 467, 468, 471 & 469 of IPC, on premise of allegations that the accused Manish Jain & Ors. were indulged in making illegal foreign remittance to Hong Kong through Banking channels by submitting fake import documents to the Bank authorities.

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It was also alleged in the aforesaid FIR that in course of search of the residential & business premises of aforesaid Manish Jain & Associates, various incriminating materials were seized, comprising of huge no. of blank FPA-PMLA-2119/DLI/2017 Page 2 of 14

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postal wrappers of Hong Kong post & bogus pan cards, ID cards in the name of factious identities, which were being allegedly appropriated for the aforesaid illegal activities being professed by the accused persons.

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On the basis of offences alleged in the said FIR against the suspected persons (since scheduled offences under PMLA 2002), an ECIR was registered against the accused persons at Lucknow Zonal office of Enforcement Directorate vide ECIR No. ECIR/03/LKZO/2015 dated 10.08.2015, which was transferred to Delhi Zonal office, as such, it was renumbered as ECIR No. 21/DLZO/2015 on 01.12.2015, for further investigation as to involvement of accused persons for commission of offences punishable u/s. 3 & 4 of Act, as amended.

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In exercise of its power u/s. 5 of the Act, the Complainant, Dy. Director with Directorate of Enforcement, PMLA, Delhi Zone, issued PAO (Provisional Attachment Order) on 11.5.2016, pursuant thereto a complaint was filed before the adjudicating authority on 09.06.2016, u/s Sec. 5 of PMLA against the accused persons, arrayed herein as Respondent No. 3-11.

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The provisional attachment order passed by the Complainant, sent a notice for Bimla Wadhwa, Respondent No. 9 vide letter dated 30.01.2017,

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FPA-PMLA-2119/DLI/2017

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alleging her to be resident of property in question, was in fact received upon the aforesaid property by the appellant in the month of June, 2017. The appellant immediately approached the Dy. Director, with Directorate of Enforcement.

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9. The notice dated 30.01.2017 was sent on the property, in question, in the name of Smt. Bimla Wadhwa. She had clarified her position and claimed the title of the said property, being it lawful bonafide owner, by furnishing the relevant document of conveyance executed in her favor by the erstwhile owner, after receipt of lawful sale consideration. The copy of the sale deed executed in her favor on 02.02.2015 in respect of property in question, which was also registered with the Sub Registrar of Documents was also furnished to the Dy. Director, Directorate of Enforcement, PMLA, alongwith representation made to its office, which was duly acknowledged by the office of the Complainant.

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During the course of investigation on the aforesaid complaint under PMLA, various documents were seized by the Enforcement Directorate & statement of various persons including witnesses; accused/suspects were recorded in terms of Sec. 50 and 17 of PMLA. It was observed in the impugned order that aforesaid Manish Jain, Rajeev Wadhwa & other associate persons, co-eccused in the case were involved in setting up various fake entities in the name of non-existing persons by forging ID’s & opened accounts with the various banks for depositing cash & thereafter, to transfer

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FPA-PMLA-2119/DLI/2017

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the same in the account of the such created entities, which was being laundered outside India under the garb of import advance by using fake import documents. It is further observed in the impugned order, as was being claimed, the complainant had reasonably believed, based on the aforesaid investigation that the accused persons & its entities purchased various movable & immoveable properties from the proceeds of crime, thus are involved in money laundering in terms of Sec. 2 (1) (u) r/w Sec. 3 of the Act of 2002.

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The impugned order was served upon at (with regard to property in question) addressed to the Respondent No. 9 vide Notice dated 21.11.2017, which was served upon the appellant on 29.11.2017, which came to the appellant represented the complainant as well as to the Adjudicating Authority vide letter dated 30.11.2017, which was sent to the concerned authorities under post.

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The Respondent No. 9, Smt. Bimla Devi, seller had represented in unambiguous terms as to having no claim in respect of property in question, being sold in February, 2015. However, the Adjudicating Authority while returning its finding on the nexus of the properties attached by the Dy. Director, Directorate of Enforcement PMLA with the proceeds of crime at page 34 given its finding, showing has not considered the documents comprising sale deed executed in favor of the appellant in respect of property

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FPA-PMLA-2119/DLI/2017

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in question, returned finding recorded at page 39 of the impugned order

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observing:-

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“…… Even during the pendency of the adjudication & subsequent to raising of objection by D7, the Assistant Director, ED addressed other letters dated 17.05.2016 & 31.08.2016 to the Sub Registrar of Basai Darapur, in response whereof E Sub Registrar -2, Basai Darapur, pointed out that the information has already been sent to the Enforcement Directorate. In view thereof there is nothing to show that the property is already sold by the D-7 to the other purchaser. D-7 has failed to produce the complete copy of Regd. Sale Deed which would disclose the sale transaction…. “

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The Adjudicating Authority has observed that no details of receipt of payment of sale consideration in respect of sale transaction qua property in question. As a matter of fact, the sale consideration was paid to the parties for sale & purchase of the property in question through banking channels. The appellant had paid the sale consideration to the tune of Rs.90,00,000/by raising loan from ICICI Bank, which was sanctioned vide letter dated 29.01.2015 & the same was tendered for payment to the erstwhile owner by way of demand drafts.

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The copy of letter of sanction of home loan in respect of suit property is annexed hereto as Annexure P/6, which was disbursed in due course and the demand drafts for sale consideration of the suit property were encashed in the account of the erstwhile owner, which fact is certified by the bankers vide certificate of encashment of demand drafts vide letter dated 04.12.2017, copy of which is annexed as Annexure P/7, perusal of which would show

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FPA-PMLA-2119/DLI/2017

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that the observations of the Adjudicating Authority as to having no reflection of payment details in the accounts of the erstwhile owner are not correct. The same are contrary to the record available. Based on the said finding, the Adjudicating Authority confirmed the attachment by passing the impugned order.

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The appellant is occupying the property in question under her independent title from that of the accused persons, which fact has been asserted by the appellant, by seeking mutation of the property in the record of the municipal authorities and had been remitting the property tax qua property in question before the Municipal authorities, falsifies the claim of the complainant, as to title of Respondent No. 9 in respect of property in question.The copy of Order of mutation of the property in question passed by Deputy Assessor and Collector, Karol Bagh Zone of North Municipal Corporation of Delhi is annexed herewith as Annexure P/9 and the copies of the property tax remitted by the appellant with the Municipal Authorities since Acquisition of its title by the appellant till date are annexed hereto as Annexure P/10 .

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The Respondent no.1 in their reply in Para 18 admitted the fact the property in question is in the name of the appellant. Thereafter, it is submitted on behalf of appellant that the property is not a proceed of crime but the appellant is a bonafide purchaser. It has not come on record that Smt. Bimla Devi had acquired the property from proceed of crime.

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FPA-PMLA-2119/DLI/2017

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The detail of the impugned property from the year 1999 upto the date of Sale Deed dated 2^nd February, 2015 are given as under:-

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i) Smt. Lila Wati above named had sold her all rights, titles and interests in respect of above mentioned entire property to (1) Shri Arun Bhatia s/o Shri B.M. Bhatia and (2) Smt. Deepika Bhatia w/o Shri Arun Bhatia vide four separate sale deeds all entered in the office of the Sub Registrar, Sub Distt. No. II, Janak Puri, New Delhi, as per details given below:-

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a. Sale Deed Regd. as No. 9767, in Addl. Book No. I,Volume No. 9430, on Pages 55 to 64, dated 21.12.1999 in respect of entire first floor without terrace roof rights out of above mentioned property;

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b. Sale Deed Regd. as No. 9766, in Addl. Book No. I,.Volume No. 9430, on Pages 45 to 54, dated 21.12.1999 in respect of entire second floor without terrace roof rights out of above mentioned property;

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c. Sale Deed Regd. as No. 640, in Addl. Book No. I, Volume No. 9460, on Pages 61 to 66, dated 20.01.2000 in respect of ½ undivided share of entire ground floor without terrace roof rights out of above mentioned property;

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d. Sale Deed Regd. as No. 6401 in Addl. Book No. I, Volume No. 9460, on Pages 67 to 72, dated 20.01.2000 in respect of ½ undivided share of entire ground floor without terrace roof rights out of above mentioned property. On the basis of

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above mentioned Regd. Deeds, (1) Shri Arun Bhatia and Smt. Deepika Bhatia above named have become the complete owners of above mentioned entire property.

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ii) Shri Arun Bhatia and Smt. Deepika Bhatia have sold their all right, title and interest in respect of above mentioned entire property to Smt. Neelam Jolly w/o Shri Praveen Kumar Jolly, vide two separate sale deeds in respect of ½ undivided share each of above mentioned entire property, both entered in the office of the Sub Registrar, Sub Distt. No. II, Janak Puri, New Delhi, as per details given below:

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a. Regd. Sale Deed as No. 35972, in Addl. Book No.I, Volume No. 19501, on Pages 85 to 94 dated 31.12.2011;

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b. Regd. Sale Deed as No. 3284, in Addl. Book No. I, Volume No. 19618, on Pages 14 to 22 dated 08.02.2012. On the basis of above mentioned Regd. Sale Deeds, Smt. Neelam Jolly above named has become the complete owner of above mentioned entire property.

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iii. The aforesaid entire property has been reconstructed/redeveloped comprising of parking area at stilt floor, ground floor, first floor, second floor and thied floor Sanction Plan passed by the M.C.D. Karol Bagh Zone, New Delhi

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iv. Smt. Neelam Jolly above named sold her all rights, titles, interests in respect of built up entire second floor, without terrace roof rights measuring 200 Sq. Yards, along with 1/4^th share in parking space at stilt area (below ground floor), out of freehold property bearing No. 15-A/18, along with proportionate undivided, indivisible and impartiable ownership rights of the underneath land measuring 200 Sq. Yards, with super structure

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situated in the abadi of East Patel Nagar, New Delhi-110008 to the Vendor – Smt. Bimla Devi Wadhwa, vide Regd. Sale Deed as No. 3117 in Addl. Book No. I,.Volume No. 21564, on Pages 32 to 40, dated 19.02.2014, entered in the office of the SubRegistrar, Sub-Distt. No. II, Basai Darapur, New Delhi. On the basis of the above mentioned Regd. Sale Deed, the Vendor has become the complete owner of the above mentioned property under sale.

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v. The Vendor has got full rights, clear titles and absolute authority to sell and transfer the built up entire Second Floor, without terrace roof rights along with 1/4^th share in parking space at stilt area (below ground floor) out of the mentioned property, and there is no impediment in transferring the same.

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vi. The Vendor has agreed to sell the built up entire Second Floor, without terrace roof rights measuring 200 Sq. Yards, along with 1/4^th share in parking space at stilt area (below ground floor), out of freehold property bearing No. 15-A/18, along with proportionated undivided, indivisible and impartiable ownership rights of the underneath land measuring 200 Sq. Yards, with super structure situated in the abadi of East Patel Nagar, New Delhi-110008, for her bonafide needs and requirements, with fitting and fixtures, with watter and electric connections in working order along with separate water and electric meters, with common lift, and the Vendee has agreed to purchase the same for a sum of Rs.90,00,000/- (Rupees Ninety Lac only).

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It is argued on behalf of the appellant that once the entire payment of the purchase consideration was made, the Appellant became owner of the said Property and had acquired proprietary rights and title a ‘claimant’ to

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the said Property in terms of the Proviso to Section 8(2), Prevention of Money Laundering Act, 2002 being interested/aggrieved party.

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It is also correct that the Appellant is not even named/ mentioned in the FIR or the ECIR or the captioned Original Complaint. It was not even the case of the Enforcement Directorate/Respondent No. 1 that at the time when the PAO was issued and at the time of filing of the captioned O.C., that the Appellant was involved or connected in any offence or with the alleged offence under PMLA or the predicate offence.

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Therefore, it is evident that the appellant is an innocent bona fide purchaser and the said Property could not have been attached under Section 5, PMLA. It is also not the case of respondent no. 1 that the consideration was received by Smt. Bimla Devi. Even, the appellant has paid the consideration after obtaining the bank loan. The respondent could have traced out the said consideration, if so required, and attached the said amount equivalent to value thereof, however, it had not happened.

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21. The proviso of Section 8(1) and 8(2) of PMLA, 2002 are read as under:-

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“ Provided that where a notice under this sub-section specifies any property as being held by a person on behalf of any other person, a copy of such notice shall also be served upon such other person: Provided further that where such property is held jointly by more than one person, such notice shall be served to all persons holding such property.

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(2) The Adjudicating Authority shall, after – (a) considering the reply, it any, to the notice issued under sub-section (1);

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(b) hearing the aggrieved person and the Director or any other officer authorized by him in this behalf, and

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(c) taking into account all relevant materials placed on record before him,

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by an order, record a finding whether all or any of the properties referred to in the notice issued under sub-section (1) are involved in money-laundering:

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Provided that if the property is claimed by a person, other than a person to whom the notice had been issued, such person shall also be given an opportunity of being heard to prove that the property is not involved in money-laundering.

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It is evident from the material available on record and from the Impugned Confirmation Order that Respondent and the Adjudicating Authority were aware that the Appellant was a ‘Claimant’ to the said Property in terms of proviso to Section 8(2), PMLA.

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Despite of having full knowledge about the transaction, Respondent No. 1 and the Adjudicating Authority failed to issue notice to the Appellant or to afford a hearing to her, during the adjudication proceedings. Thus, the Respondent No. 1 and the Adjudicating Authority have not complied with the mandatory statutory requirement of the Proviso to Section 8(2), PMLA The appellant had interest in the property in question, but no mandatory notice required under section 8(2) was served. Section 8(2) is a mandatory provision, it is mandated under the proviso that if property is claimed by a person other than accused, he shall also be given an opportunity of being heard to prove that the property is not involved in money laundering. Despite of above, no notice was given.

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The appellant is, no doubt, claimant in the attached property. It is not understood why the requisite notice was not issued by the respondent and Adjudicating Authority. Despite being Appellant’s claim to the said Property, Respondent failed to fulfill its statutory duty, in terms of Rule 3(2) PML (Issuance of Provisional Attachment Order) Rules, 2013, to supply a copy of the Provisional Attachment Order to the Appellant at the time of the issuance of the same.

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The Respondent-ED even prima facie is not able to establish any collusion/connection of the Appellant and accused person/seller .

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26. Even in the case of B. Rama Raju Vs. UOI decided by (DB) of High Court of Judicature, Andhra Pradesh at Hyderabad, the Judgment reported in 2011 S.C.C on lines AP-152 in para – 103 and 104, it was hold as under:-

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“103 S ince proceeds of crime is defined to include the value of any property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence, where a person satisfies the adjudicating authority by relevant material and evidence having a probative value that his acquisition is bona fide, legitimate and for fair market value paid therefor, the adjudicating authority must carefully consider the material and evidence on record (including the reply furnished by a noticee in response to a notice issued under Section 8 (1) and the material or evidence furnished along therewith to establish his earnings, assets or means to justify the bona fides in the acquisition of the property); and if satisfied as to the bona fide acquisition of the property, relieve such property from provisional attachment by declining to pass an order of confirmation of the provisional attachment; either in respect of the whole or such part of the property provisionally attached in respect whereof bona fide acquisition by a person is established, at the stage of the Section 8(2) process. A further opportunity of establishing bona fide acquisition of property or that

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the property in question is not proceeds of crime involved in money-laundering is available and mandated, prior to the adjudicating authority passing an order of confiscation, under Section 8(6).

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104. Proceedings for attachment and confiscation of proceeds of crime are a process distinct and dissimilar to the process for prosecution of the offence of money-laundering. Deprivation of property involved in money-laundering is the sanction in the first process while deprivation of personal liberty is the sanction enjoined in conviction for the offence. Mens rea is not a jurisprudentially non-derogable adjunct for visitation of civil consequences and therefore the legislative policy in this area is eminently within the domain of legislative choice. This challenge must therefore fail. Challenge to dispossession before conviction of the accused:

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