Remanded

FPA-PMLA-3124/DLI/2019 of M/s. Mainak Agency Pvt. Ltd. v/s The Deputy Director, Directorate of Enforcement, Delhi

ATFP23 Aug 2019FPA-PMLA-3124/DLI/2019

Case brief

AI extract

What is this about?

The Appellate Tribunal set aside the premature encashment of mutual funds by the Enforcement Director. Directed restoration of funds or creation of a Fixed Deposit for the appellants, pending the High Court appeal challenging the freezing order, in violation of procedural rules.

What did the court decide?

Mutual funds to be restored to Reliance Nippon Life Asset Management Ltd or a Fixed Deposit shall be prepared to secure the amount pending the final appeal.

FPA-PMLA-3124/DLI/2019 of M/s. Mainak Agency Pvt. Ltd. v/s The… — Money Laundering | 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: 23^rd August, 2019

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(1) MP-PMLA-6204/DLI/2019 (Stay) FPA-PMLA-3121/DLI/2019

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Shri Sandeep Tyagi … Applicant Versus The Deputy Director, … Respondent Directorate of Enforcement, Delhi

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(2) MP-PMLA-6207/DLI/2019 (Stay) FPA-PMLA-3124/DLI/2019 M/s. Mainak Agency Pvt. Ltd. … Applicant Versus The Deputy Director, Directorate of Enforcement, Delhi … Respondent

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Advocates/Authorized Representatives who appeared

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For the Appellant	:	Shri Manav Gupta, Advocate Ms. Esha Dutta, Advocate Shri Sahil Garg, Advocate Shri Devang Kumar, Advocate
For the Respondent	:	Shri Vikas Garg, Advocate Ms. Sanjana Rajput, Advocate
CORAM JUSTICE MANMOHAN SINGH	:	CHAIRMAN

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ORDER 23.08.2019

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FPA-PMLA-3121 & 3124/DLI/2019

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These two appeals have been filed by the present appellants and other appellants were taken on 11^th July, 2019 when after long hearing, the status quo order was passed in respect of confirmation of the provisional attachment order.

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FPA-PMLA-3121 & 3124/DLI/2019

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Page 1 of 11

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The above-mentioned two appellants have also challenged the order dated 30.05.2019 by filing of separate appeals.

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As far as attachment of properties are concerned, on the last date, the order was passed to continue the same. The main issue of dispute is only with regard to mutual funds owned by the above mentioned appellants in which arguments were addressed by both parties. The same were encashed by the respondent before passing the interim order. Mr. Sandeep Tyagi is the Director of M/s. Mainak Agency Pvt. Ltd. The followings are the details of the mutual funds:

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S. No.	Name	Amount (Rs.) and asset
1.	Shri Sandeep Tyagi	1,41,62,473.77
2.	M/s. Mainak Agency Pvt. Ltd.	2,41,94,487.69

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It is a matter of record that the Current Bank

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Accounts/FDRs/Mutual Funds of the appellants had been seized by the CBI in May, 2018 on the basis of identical allegations as arraigned in the PAO/OC/SCN. It is pertinent to note that vide Order dated 11.3.2019, the Ld. CBI Court has passed the order by defreezing the frozen assets, subject to conditions. The relevant observations of the Trial Court are reproduced as hereunder:

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“ 17. In the case in hand, it is alleged that accused Sanjeev Tyagi, Director of M/s. Mainik Agency P. Ltd. & Sandeep Tyagi have taken bribe amount in cash in the year 2004-2005 and acted as middleman, to gain favour to M/s. Agusta Westland, relation to sale of 12 VVIP Chopper of Agusta Westland Co. The bribe amount was paid in 2004-2005, while applicant M/s. Mainak Agency P. Ltd. was purchased in the year 2009. It cannot be said it was purchased out of the same bribe money which was taken by the accused in 2004-2005. Even as per the prosecution, number of transactions have taken place after purchase of said Mainak Agency P. Ltd and the laundered amount received from M/s. Agusta Westland was routed back through banking channel in the guise of acquiring M/s. Mainak Agency P. Ltd. and that the said amount have been invested/reinvested by M/s. Mainak Agency P. Ltd. in acquiring mutual funds, shares and FDRs. It is also noted that the said firm FPA-PMLA-3121 & 3124/DLI/2019 Page 2 of 11

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Page 2 of 11

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continued to work from the year 2009 and its accounts/FDRs have been seized in the year 2018 after filing of charge-sheet in the year 2017 i.e. after about 14 years of alleged taking of bribe by accused Sanjeev Tyagi and Sandeep Tyagi. Here, it is also noted that Sandeep Tyagi even not named as accused in the present matter.

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18. Thus, the prosecution has failed to show that Current Account/FDR/ Mutual Funds of M/s. Mainak Agency P. Ltd. and Mutual Funds in the name of Sandeep Tyagi are directly related to commission of crime or the FDR/ current account or Mutual Funds had created suspicion of commission of crime. So far as document regarding different transactions are concerned, same would be with the bank and can be seized and can be preserved.

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19. Under the aforesaid facts and circumstances, the mutual funds i.e. Motilal Oswal Dynamic fund, Aditya Birla S L Balanced 95 Fund, Reliance Liquid Fund Cash Plan, Reliance Equity Hybird Fund, SBI Blue Chip Fund, IDFC Mutual Fund, FDR No. 50300207068675 with HDFC Bank, Current Account bearing no. 30826597719, all in the name of applicant no. 1 are directly to be defreezed. The investigation if stated to be pending. Thus the applicant no. 1 shall execute a bond that he shall deposit the amount equivalent to freezed Assets, as and when directed by this court.

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20. Further the mutual funds i.e. Motilal Oswal Dynamic Fund, Motilal Oswal Multicap 35 Fund, Reliance Equity Saving Fund, Kotak Medium Term Fund, Kotak Select Focus Fund, DSP Black Rock Equity Regular Fund and DSP Black Rock Equity Saving Fund in the name of applicant no. 2, are directed to be defreezed. The applicant no.2 shall execute a bond that he shall deposit the amount equivalent to freezed Assets, as and when directed by this court.”

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Admittedly, the CBI had filed an appeal challenging the Order dated 11.3.2019 before the Hon‟ble Delhi High Court and got an exparte stay against the said order, being M.C. No. 2571 of 2019 which is pending for adjudication. The said order was passed on 17.05.2019.

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On 17.5.2019, the following order was passed:-

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“ IN THE HIGH COURT OF DELHI AT NEW DELHI

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CRL.M.C.2571/2019

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CENTRAL BUREAU OF INVESTIGATIION …. Petitioner  Through: Mr. D.P. Singh, SPP with Mr. Manu Mishra, Mr. Ashwin Manoharan, Advocates with DSP Anil Yadav

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FPA-PMLA-3121 & 3124/DLI/2019

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Page 3 of 11

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M/S. MAINAK AGENCY PVT. LTD & ANR. … Respondents

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CORAM:

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HON’BLE MR. JUSTICE R.K. GAUBA

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ORDER

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17.05.2019

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Crl.M.A. 10323/2019 (Exemption)

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Allowed subject to just exceptions

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CRL.M.C. 2571/2019 and Crl.M.A.10322/2019

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Issue notice to the respondents on appropriate steps being taken by the petitioner, returnable for 10.7.2019.

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Meanwhile, the operation of the impugned order dated 11.3.2019 shall remain stayed.

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Dasti under the signatures of the Court Master.

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R.K.GAUBA, J

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MAY 17, 2019”

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After passing the impugned confirmation order as well as passing of the order by the Hon‟ble High Court, the respondent has issued a letter dated 8^th June, 2019, the contents of which are reproduced hereunder:-

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GOVERNMENT OF INDIA DIRECTORATE OF ENFORCEMENT MINISTRY OF FINANCE, CENTRAL REGION DELHI ZONAL OFFICE, MTNL BUILDING, 1^ST FLR, J.L. NEHRU MARG, NEW DELHI-110002

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F.No. ECIR/12/DLZO/2014/104/JS Date: 08.06.2019

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To,

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The Managing Director, Reliance Mutual Funds 7^th floor South wing & 5^th floor north wing, Prabhat Colony, RD. Sen Nagar, Santacruz East, Mumbai-400055

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Sub:- Possession of attached properties post confirmation of Provisional Attachment Order NO. 01/2018 dated 08.12.2018 in ECIR/15/DLZO/2014 in the case of Agusta Westland and othersreg.

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Ref:This office letter of even no. dated 12.12.2018. (R-11)

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FPA-PMLA-3121 & 3124/DLI/2019

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Page 4 of 11

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The Deputy Director, Enforcement Directorate, Delhi Zonal Office, New Delhi vide his Provisional Attachment Order (PAO) No. 01/2018 dated 08.12.2018 had provisionally attached the Mutual Fund account nos. mentioned below maintained at your branch in terms of Section 5(1) of the Prevention of Money Laundering Act (PMLA), 2002:

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Reliance Mutual Funds	403127549606 Ltd.	Mainak Agency Pvt.
Reliance Mutual Funds	403191057977 Ltd.	Mainak Agency Pvt.
Reliance Mutual Funds	401143468537 Ltd.	Mainak Agency Pvt.
Reliance Mutual Funds	499114249906 Ltd.	Mainak Agency Pvt.
Reliance Mutual Funds	40313226043 S	_andeep Tyagi _
Reliance Mahindra Mutual Funds	493143590403	Sanjeev Tyagi

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2. Further, the Hon’ble Adjudicating Authority, PMLA has also confirmed the Provisional Attachment Order under Section 8(3) of PMLA, 2002, vide its Order dated 30.05.2019 passed in Original Complaint No. 1074/2019 (copy enclosed).

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3. Now, in exercise of the powers conferred upon the undersigned in terms of Section 8(4) of PMLA, 2002, you are hereby directed to hand over the possession of the Investments lying (as on date) in the above mentioned accounts, through NEFT/RTGS transfer to the below mentioned account:

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IFSC Code	:	UBIN0535249
Beneficiary A/c No.	:	352402010906377
Beneficiary A/c Holder	:	Joint Director, Directorate of Enforcement (PMLA)
Name of the Bank	:	Union Bank of India, Lodhi Colony, New Delhi

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4. An intimation to this effect may also be sent to the undersigned.

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Encls: As above

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Sd/(Yogeshwar Sharma) Deputy Director

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The factum of de-freezing the mutual funds by the Special Court as well as passing the stay order passed by the Hon‟ble High Court of Delhi has not been mentioned by the respondent in its letter.

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Thereafter, on 11^th June,2019, on the basis of direction issued by ED, a letter has been issued by Reliance Nippon Life Asset Management Ltd. and the same is reproduced below:-

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FPA-PMLA-3121 & 3124/DLI/2019

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Page 5 of 11

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Ref: RMF/June/2019/SR 58900156

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June 11, 2019 RELIANCE NIPPON LIFE ASSET MANAGEMENT LTD Nippon Life Company

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To, Sanjeev Tyagi 91-E, Eastern Avenue Sainik Farms Near Ram Mandir Deoli South Delhi Delhi-110062

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Sub: Release of investments as per notice from Directorate of Enforcement

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Dear Mr. Tyagi,

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We are in receipt of a Notice in view of the powers conferred upon the Directorate of Enforcement in terms of Section 8(4) of PMLA, 2002 requesting us to hand over the possession of the investment lying (as on date), towards the investments held by you, in favour of their ED bank account.

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We would like to inform you that we have accordingly acted upon the said notice and followed the instructions as per the notice served on us.

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We hereby enclose a copy of the Notice received from Directorate of Enforcement by us for your ready reference.

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Thanking You, Yours Sincerely, For Reliance Capital Asset Management Ltd.

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Sd/Ganesh Gawde Senior Manager-Customer Service

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Enclosures:

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Exhibit 1: Copy of the Notice received from Directorate of Enforcement.

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No notice had been issued to the appellants before taking such steps, nor any information given to Special Court, who has passed the de-freezing order, nor any permission is taken from the Hon‟ble High Court of Delhi.

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The contention of Mr. Manav Gupta, learned counsel appearing on behalf of the above-mentioned two appellants is that the

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FPA-PMLA-3121 & 3124/DLI/2019

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Page 6 of 11

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respondent has encashed the mutual funds despite of the appeal pending before the High Court by the CBI where the operation of the order of Special Court has been stayed. It is stated by him that the act of respondent, who was aware about the said proceedings with utter disregarded the procedure established by law as the same counsel who is appearing on behalf of ED has appeared before the Hon‟ble High Court on behalf of CBI in appeal when the interim order was passed. It is argued by Mr. Manav Gupta that the respondent has even no power to sell or alter the assets of “person concerned”, in this manner which is contrary to Sub-rule (4) of Rule-4 of PMLA, as the trial is yet to be conducted. It is stated by him that the respondent has not waited the decision of the High Court in the appeal filed by the CBI. It is done by the respondent in order to redundant the order of Special Court which is sub-judice before the High Court.

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On the other hand, Mr. Vikas Garg, learned counsel appearing on behalf of the respondent states that the respondent is entitled to encash the mutual funds once the confirmation order has been passed without waiting the result of appeal. However, it is not denied by him that in the charge-sheet filed by the CBI in FIR being RC No. 217 2013 A 003, they are not named.

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The Prevention of Money Laundering Act taking possession of attached or frozen properties confirmed by the Adjudicating Authority Rules 2013, in particular, Rule 4(4) specifically provides that –

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“ Where the attached property confirmed by the Adjudicating Authority is in the form of shares, debentures, units of mutual fund or instruments, the authorized officer shall cause to get such shares, debentures, units of Mutual Fund or instruments to be transferred in favour of the Director of Enforcement .”

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FPA-PMLA-3121 & 3124/DLI/2019

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Page 7 of 11

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It is evident that the respondent by encashing the mutual

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funds at the pre-mature stage is directly contrary to Sub-rule (4) of Rule-4 without expiry of period of appeal.

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It is stated by the learned counsel for the appellants that only in the 3^rd supplementary complaint dated 17.07.2018, the Special

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Judge, CBI had passed the order dated 24.07.2018 and issued summons against the named persons in charge-sheet as well as to the appellants. It is stated that the charges are yet to be framed. It is stated on behalf of appellants that under the schedule offence, the

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appellant – Sandeep Tyagi is not charge-sheeted.

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16. The argument of the learned counsel for the appellants says

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that since the conduct of the respondent is contrary to the rules, the status-quo ante be passed on the date of passing the confirmation order directing the respondent to restore the mutual funds with the financial institutions till the appeals are finally decided in the same manner as the respondent has not only followed the sub-rule (4) of rule-4, but also interfere with the judicial process as the appeal pending in the Hon‟ble High Court filed by the CBI is yet to be decided.

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FPA-PMLA-3121 & 3124/DLI/2019

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Page 8 of 11

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Sub-rule (4) of Rule 4 mandates that at the best, the mutual

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funds can only be transferred in favour of Directorate of Enforcement. The rule does not stipulates to change or alter the status of the property.

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The mutual funds are the subject matter of the challenge of order dated 11.3.2019 passed by the CBI Court. In the present case, the impugned order was passed on 30.5.2019, which was received by the appellant on 6.6.2019. As per statute, 45 days time is granted for filing the appeal against the impugned order before this Tribunal. However, in the present case, it has been noticed that one day after the receipt of the impugned order on 7.6.2019, the respondent has encashed the mutual funds/securities.

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It is correct that the respondent is an independent agency

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and once the order is confirmed, after serving the notice under Section 8(4) and subject to filing of appeal and passing of an order, the respondent is entitled to take the possession. With regard to movable property, the sub-rule 4 of Rule 4 has to be complied very strictly. In case any breach of the said rule, the Appellate Tribunal has a power to interfere with.

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FPA-PMLA-3121 & 3124/DLI/2019

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Page 9 of 11

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The Hon‟ble Supreme Court of India in the matter of

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Kanhaiyalal V. Dr. D.R. banaji and others [1959 SCR 333] has held as

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under:-

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“it is settled law that proceedings taken in respect of a property which is in the possession and management of the Receiver appointed by Court under Order 40, rule 1 of the Code of Civil Procedure without leave of that court are illegal in the sense that the party proceeding against the property without the leave of the Court concerned, is liable to be committed for contempt of the Court, and that the proceedings so held do not affect the interest in the hands of the Receiver who holds the property for the benefit of the party who, ultimately, may be adjudged by the Court to be entitled to the same.”

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As far as merit of the case is concerned, I do not wish to express any opinion at this stage. However, prima facie, it appears that the IO in the matter has encashed the mutual funds at the premature stage which is contrary to rule and it would have been better if IO should have either approached to the High Court to bring to the notice of Court before altering the property or he would have waited the decision of the High Court where CBI has filed the appeal against the order passed by Special Court, CBI, who released the said property subject to certain conditions. At the maximum, mutual funds could have been taken into its possession till the orders are passed by the Hon‟ble High Court of Delhi. No harm would have caused as the attachment orders are already continuing redundant.

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The IO ought to have informed the Hon‟ble High Court of Delhi

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at New Delhi in advance before taking any steps in respect of mutual FPA-PMLA-3121 & 3124/DLI/2019 Page 10 of 11

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Page 10 of 11

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funds which are the subject matter of appeals filed by the CBI, in

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order to alter the status of movable property which was released by the Special Court in relation to same subject matter of property.

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Under these circumstances, prima facie, I am of the view that

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the mutual funds must be restored to the original position with the Reliance Nippon Life Asset Management Ltd. If it is not possible, the IO shall prepare the FD for the same amount in the name of „Sandeep Tyagi‟ for the period of one year and shall keep the same with the respondent. It is clarified that once the compliance is made, the status quo order shall continue. The appellants shall not deal the said money or mutual funds after maturity in any manner.

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In view of this order, the order passed on 11^th July, 2019 for status quo is also modified and after compliance, both parties shall maintain status quo in respect of mutual funds or the FD prepared.

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( Justice Manmohan Singh ) Chairman

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New Delhi, 23^rd August, 2019

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„skb‟

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FPA-PMLA-3121 & 3124/DLI/2019

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FPA-PMLA-3124/DLI/2019 of M/s. Mainak Agency Pvt. Ltd. v/s The Deputy Director, Directorate of Enforcement, Delhi

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FPA-PMLA-3124/DLI/2019 of M/s. Mainak Agency Pvt. Ltd. v/s The Deputy Director, Directorate of Enforcement, Delhi

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