Dismissed

FPA-PMLA-2498/CHN/2018 of M/s. Vgn Property Developers Pvt. Ltd. v/s The Deputy Director Directorate of Enforcement, Chennai & Ors.

ATFP18 Jul 2019FPA-PMLA-2498/CHN/2018

Case brief

AI extract

What is this about?

The Appellant sought review of an order directing them to provide alternate security for alleged proceeds of crime. The Tribunal held that a subsequent closure report filed by the CBI was not final since the matter was pending in other courts. Consequently, no sufficient ground for review under PMLA Section 35(2)(f) was found, and the director to secure proceeds of crime stood restored.

What did the court decide?

Review petition dismissed; direction to provide security remains in force.

FPA-PMLA-2498/CHN/2018 of M/s. Vgn Property Developers Pvt. Ltd… — 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: 18.07.2019

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MP-PMLA-6059/CHN/2019(Review) &

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FPA-PMLA-2498/CHN/2018

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M/s. VGN Property Developers Pvt. Ltd.

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… Appellant/Applicant

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Versus

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The Deputy Director Directorate of Enforcement, Chennai & Ors.

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… Respondent

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Advocates/Authorized Representatives who appeared

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For the appellant	:	Shri Nikhil Rohtagi, Advocate Advocate Shri Shashank Khurana, Advocate
For the respondent no. 1	:	Mohammad Faraz, Advocate
For the respondent no. 2	:	Mr. Nikhil Pillai & Mr. Krishna Datta Multani , Advocates
For the respondent no. 3	:	Mr. Manoranjan Sharma, Advocate
For the respondent no. 4	:	Mr. Siddhartha Aggarwal and Mr. Nikhil Pillai, Advocates
CORAM
JUSTICE MANMOHAN SINGH SHRI G.C. MISHRA		: CHAIRMAN : MEMBER

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JUDGEMENT

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MP-PMLA-6059/CHN/2019(Review) & FPA-PMLA-2498/CHN/2018

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The Appellant/Review Petitioner (hereinafter referred to as the “Appellant” ) has filed the present Application under Section 35(2)(f) of the Prevention of Money Laundering Act, 2002, for review of the judgment dated 14.02.2019 passed by this Tribunal.

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No reply has been filed by the respondent no. 1. The other respondents are not opposing the prayer.

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Page 1 of 7

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FPA-PMLA-2498/CHN/2018

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By order dated 14.02.2019, this Tribunal allowed the Appeal filed by the Appellant to set aside the order passed by the Adjudicating Authority holding that there were no proceeds of crime and also that there were no valid “reasons to believe” in furtherance of which the Appellant‟s property at Guindy, Chennai could have been attached. It was held that by selling a property for a consideration below the Guideline Value/Circle Rate is not an offence and the transaction was almost entirely funded by the Banks, there is no question of either money laundering or proceeds of crime.

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However, direction was issued in Para 77, by which the Appellant had been directed to give an alternate property situated at Sekkadu Village, Avadi Taluk in order to secure 115 crores claimed to be proceeds of crime by the ED.

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As far as power of review of order is concerned, no doubt, Section 35 (2)(f) of the PMLA, 2002 is akin to that of the Civil Court under Order XLVII Rule 1, if any case is made out, the prayer can be allowed.

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The following are the grounds, inter-alia, available to review its own order:-

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a) Discovery of new or important matter or evidence which the applicant could not produce at the time of initial decision despite exercise of due diligence, or the same was not within his knowledge; or

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b) The order to be reviewed suffers from some mistake or error apparent on the face of the record; or

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c) There exists some other reason, which, in the opinion of the Tribunal, is sufficient for reviewing the earlier order/decision.

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Page 2 of 7

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FPA-PMLA-2498/CHN/2018

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Counsel for the appellant has referred number of decisions, the same

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are -

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a) The Hon‟ble Supreme Court of India in Kamlesh Verma v. Mayawati , (2013) 8 SCC 320 (See Para 20) has held that the words “any other sufficient reason” have been interpreted to mean “a reason sufficient on grounds at least analogous to those specified in the rule”. It is relevant to mention herein that the said judgment has been approved by the Hon‟ble Supreme Court of India recently in the judgment dated 02.07.2019 in Civil Appeal No. 5140 of 2019 titled Sunil Vasudeva v. Sundar Gupta.

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b) The Hon‟ble Supreme Court of India in State of West Bengal & Ors. v. Kamal Sengupta & Anr. (2008) 8 SCC 612 (See Para 21) has held that when review is sought on the ground of discovery of new matter or evidence, such matter of evidence must be relevant and must of such a character that if the same has been produced, it might have altered the judgment. Further, the party seeking review has also to show that such additional matter or evidence was not within its knowledge and even after exercise of due diligence, the same could not be produced before the Court earlier.

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c) The Hon‟ble Supreme Court of India in BCCI v. Netaji Cricket Club & Ors. (2005) 4 SCC 741 (See Para 89-93) held that an application for review would be maintainable not only upon discovery of a new and important piece of evidence or when there exists an error apparent on the face of the record but also if the same is necessitated on account of some mistake or for any other sufficient reason. It was further held that the words “sufficient reason” in order XLVII Rule 1 are wide enough to include misconception of fact or law by a Court. It was further held that if the Court finds that the error pointed out in the review petition was under a mistake and the earlier judgment would not have been passed but for an erroneous

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FPA-PMLA-2498/CHN/2018 Page 3 of 7

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assumption which in fact did not exist and its perpetration shall result is miscarriage of justice, nothing would preclude the Court from rectifying the error.

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It is submitted by Mr. Rohtagi that, as explained hereinabove, the Tribunal can review its order/decision not just on the basis of the error apparent on the face of the record, as stated herein-above, but also based on the discovery of aforesaid new facts, which have come into existence subsequent to filing of the earlier review petition. It is stated by him that in the present case, the twin conditions as provided under Order 38 Rule 5 have not been satisfied. Further, vide the Impugned Judgment, since the attachment of Appellant‟s property at Guindy, Chennai had been set aside holding that there was no reasons to believe, no proceeds of crime and therefore no money laundering, in such circumstances, there was no reason/occasion for this Tribunal to have provided the ED with any security.

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It is true that the Hon‟ble Supreme Court of India in Raman Tech. & Process Engg. Co. vs Solanki Traders (2008) 2 SCC 302 (See Para 4-6) has held that attachment before judgment is a drastic and extraordinary power and such power should not be exercised mechanically or merely for the asking. It should be used sparingly and strictly in accordance with the Rule. It was held that if the averments in the plaint/petition and the documents produced in support of it, do not satisfy the Court about the existence of a prima facie case, the Court will not go to the next stage of examining whether the interest of the Plaintiff/Petitioner should be protected by exercising power under Order XXXVIII Rule 5.

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The Hon‟ble Supreme Court of India in Vareed Jacob v. Sosamma Geevarghese (2004) 6 SCC 378 (See Para 15) held that attachment before Judgment is an extraordinary relief given to the Plaintiff, in appropriate cases where the Court finds a strong prima facie case in favour of the

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FPA-PMLA-2498/CHN/2018 Page 4 of 7

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Plaintiff and if the Court is satisfied that the defendant is likely to defeat the decree in future as and when it is passed. It was however clarified that the Court shall order withdrawal of attachment when the suit is dismissed.

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It is stated on behalf of applicant that ED has neither made out a prima facie case nor has the ED been able to satisfy the Court that the Petitioner herein is likely or trying to dispose of the property. Further, this Tribunal has already come to the conclusion that there were no proceeds of crime and therefore no money laundering, and in such circumstances, there was no occasion for this Tribunal to have provided the ED with any security. Further, the alternate property located at Sekkadu Village, Avadi Taluk, which is a personal property of the Managing Director of the Appellant, had been offered by the Appellant at an interim stage, in order to release the property at Guindy, Chennai due to the suffering of its customers.

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The main reason for filing the present review petition is that in the present case, the ED‟s ECIR was registered solely on the basis of registration of FIR by the CBI. However, the CBI having now filed a Closure Report, the direction to the Petitioner herein to secure the amount of Rs. 115 crores, alleged to be the proceeds of crime by the ED, is clearly an error apparent on the face of the record. It is submitted that closure report having been filed, the same would constitute a sufficient reason within the meaning of Order 47 Rule 1 CPC for this Tribunal to review its earlier decision.

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As far as decisions referred by Mr. Rohtagi are concerned, we agree with each and every finding arrived in the said judgement.

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This Tribunal is empowered to confirm, modify or set-aside the order appealed under Section 26(4) of the Act.

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It is true that the impugned order has been set-aside, but subject to condition. If Section 26 of PMLA is read, the power for modification of order is also given. Rightly or wrongly, after having gone through the entire gamut

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FPA-PMLA-2498/CHN/2018 Page 5 of 7

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of the matter, this Tribunal felt that while passing the final order, the condition imposed in the interim stage should also to be imposed as the appellant purchased the land after loan from bank/financial institution. Therefore, in the interest of purchasers of flats and banks, the said condition was imposed.

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The appellant/applicant has not challenged our order, rather the same has been challenged by the ED as informed.

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As far as filing of closure report by CBI is concerned, it is true that the respondent no. 1 has registered ECIR on the basis of allegation made by CBI. The said closure report has not attained finality. Either the appellant should have waited for the same, otherwise what would happen if the report is not accepted by High Court and Supreme Court. No doubt, it is a subsequent event in favour of the appellant but the said event is not final. The respondent no. 1 is claiming independent claim other than the happening of schedule offence. The said controversial issue is sub-judice before the Division Bench of Delhi High Court and in the Supreme Court also in other matter.

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It is also true that the appellant is not remediless as if the appellant is highly relying upon the closure report, the appellant is at liberty to move the application for quashing of PMLA proceeding on the basis of said report. We have noticed that in many orders, PMLA proceedings have been quashed depending upon the merit of the case.

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Secondly, the appellant has also remedy to challenge the order by filing the appeal before the Hon‟ble High Court.

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Therefore, we are of the view that the decisions referred by Mr. Rohtagi are not directly applicable in the fact s and circumstances of the present case as the said report has not attained finality. It may be that the

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FPA-PMLA-2498/CHN/2018 Page 6 of 7

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appellant may be having a good case on merit. But, in the present case, we are not inclined to remove the said condition.

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