Allowed

FPA-PMLA-1110/PTN/2015 of Makhru Singh @ Anil Singh v. The Joint Director Directorate of Enforcement, Patna

ATFP6 May 2024FPA-PMLA-1110/PTN/2015

Case brief

AI extract

What is this about?

This order allowed appeals by appellants against the confirmation of provisional attachment of their properties under PMLA, 2002. The Tribunal held that since the appellant was finally acquitted of all scheduled offences forming the predicate, the bedrock of the PMLA case was removed, and the properties were released.

What did the court decide?

The impugned order confirming attachment was set aside, and the properties of the appellants were released under PMLA, 2002.

FPA-PMLA-1110/PTN/2015 of Makhru Singh @ Anil Singh Vs. The Joint… — Money Laundering | ATFP (2024)

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APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI

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1. MP-PMLA-4971/PTN/2018 (A.D.) MP-PMLA-3224/PTN/2017 (A.D) MP-PMLA-2141/PTN/2015 (Stay) MP-PMLA-2142/PTN/2015 (A.D.) FPA-PMLA-1110/PTN/2015 Makhru Singh @ Anil Singh … Appellant 2. MP-PMLA-4972/PTN/2018 (A.D.) MP-PMLA-3225/PTN/2017 (A.D) MP-PMLA-2143/PTN/2015 (Stay) MP-PMLA-2144/PTN/2015 (A.D.) FPA-PMLA-1111/PTN/2015 Pammi Devi … Appellant Versus The Joint Director Directorate of Enforcement, Patna … Respondent

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Advocates/Authorized Representatives who appeared For the Appellants : Mr. Abhay Pandey, Adv. For the Respondents : Mr. Chandra Prakash, Adv. Mr. Abhinav Kumar, Adv. CORAM SHRI G. C. MISHRA : MEMBER SHRI V. ANANDARAJAN : MEMBER

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FINAL ORDER 06.05.2024

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Through this order, we propose to dispose of the appeals filed by the above-mentioned appellants against the order of the Ld. Adjudicating Authority dated 19.08.2015 in Original Complaint (OC No.479/2015) confirming the provisional attachment of assets made by the respondent Directorate vide Provisional Attachment Order (PAO No. 02/2015) dated 30.03.2015.

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Facts in Brief

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2. The relevant facts briefly are that information was received by the respondent Directorate from the Superintendent of Police, Economic Offences Unit (EOU), Patna vide a letter dated 09.10.2013 which revealed that 28 FIRs had been registered against Shri Makhru Singh @ Anil Singh, resident of Balgudar, P.S. Lakhisarai, District Lakhisarai, Bihar and others, for various offences punishable under the Indian Penal Code, 1860 and the Arms Act, 1959.

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3. A perusal of the charge sheets revealed that Makhru Singh @ Anil Singh (the appellant in Appeal No. FPA NO.1110/PTN/2025 herein) had been charged inter alia, for murder, attempt to murder, robbery and dacoity, extortion, providing assistance in concealment of stolen properties, cheating and using as genuine forged documents, and possession of illegal arms and ammunitions in Lakhisarai District, Bihar. The offences under Sections 302, 307, 387 and 120B of Indian Penal Code, 1860 and Section 27 of the Arms Act, 1959 are Scheduled Offences as mentioned in Part "A" of the Schedule to PMLA, 2002. Accordingly, out of the aforesaid 28 FIRs, 7 FIRs were in respect of offences which constitute 'Scheduled Offences" under the Prevention of Money Laundering Act, 2002 (PMLA, 2002). The same are as follows:

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Sl.	Name of the	FIR No. and	Charge Sheet	Scheduled offence
No.	Police Station	date	No. and date	under PMLA
1.	Lakhisarai,	145/2011	374/2011	302, 307, 387,
	Bihar	Dated	Dated	120B of IPC and 27
		14.04.2011	30.07.2011	of Arms Act

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2.	Lakhisarai,	229/2011	509/2011	302 and 307 of IPC
	Bihar	Dated	Dated	and 27 of Arms Act
		10.06.2011	12.09.2011
3.	Lakhisarai,	444/2012	91/2013	120B of IPC and 27
	Bihar	dated	dated	of Arms Act
		14.12.2012	31.03.2013
4.	Barahiya,	60/2011	203/2011	302, 307, 387 and
	Bihar	Dated	Dated	120B of IPC and 27
		11.06.2011	24.10.2011	of Arms Act
5.	Barahiya, Bihar	19/2011 Dated 20.02.2011	224/2011 Dated 30.11.2011	307, 387 of IPC and 27 of Arms Act
6.	Barahiya, Bihar	10/2011 Dated	220/2011 Dated	302, 120B of IPC and 27 of Arms Act
		19.01.2011	30.11.2011
7.	Barahiya,	35/2011	114/2011	302, 307, 387,
	Bihar	Dated	Dated	120B of IPC and 27
		24.03.2011	16.07.2011	of Arms Act

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3. On the basis of the aforesaid information, an ECIR (ECIR No. PTZO/04/2014 dated 07.01.2014) was recorded in respect of the said seven offences and the case was taken up for investigation by the Directorate. Investigations carried out by the Directorate revealed that the appellant Makhru Singh @Anil Singh had acquired properties in the name of his wife Smt. Pammi Devi from the proceeds of the above-mentioned crimes, by investing the said proceeds of crime in various movable and immovable properties.

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4. Based on the investigations carried out, the Directorate, vide PAO No.02/2015 dated 30.03.2015, attached properties valued in all at Rs.87,50,922/-.

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5. An Original Complaint (“OC”) having been filed before the Adjudicating Authority (“AA”) as required under the Act, the Ld. AA vide the impugned order dated 19.08.2015, held that the properties were “proceeds of crime” within the meaning of PMLA, 2002 and confirmed the provisional attachment of the subject properties. Aggrieved by the said order of the Ld. AA, the appellants have filed the present appeals.

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Arguments on Behalf of the Appellants

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6. The main grounds taken by the appellants in their written pleadings filed at the time of filing the appeals were that the accused Shri Makhru Singh had not committed any offence. He already stood acquitted in four out of the seven FIRs which constituted the basis of the ECIR and the prosecution had not gone for further appeal in those cases. In the remaining three FIRs, the evidence had been concluded and none of the prosecution witnesses had named the appellant as accused. The appellant was expected to be acquitted in those cases too. Copies of relevant judgments wherein he stood acquitted were also filed. It was contended that if the appellant stood acquitted in the scheduled offences, then action under PMLA, 2002 would not be attracted.

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7. It was also contended that the impugned order was illegal as the Act does not permit a single Member/Acting Chairman to pass the order; that Ld. AA failed to appreciate the fact that the appellant is a whistle-blower

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and raises his voice against the discriminatory and corrupt political system; that the appellant was engaged in contractual works as contractor; that the appellant was also doing agriculture on a large-scale for commercial purposes and the appellant is income-tax payee as well; that the appellant had stated before the respondent under Section 50 of the Act that he purchased five acres of land before 2005 and 10 acres of land after 2005 and inherited three acres of land, and that he does work of sand excavation and dairy farming and also does contract of Bus Stand and small construction works; that the appellant had also stated under section 50 of PMLA that all kinds of business are looked after by his wife; that the appellant has bought the properties in the name of his wife, from his own funds as well as from the funds of his wife; and that the nothing incriminating has been recovered/seized from the premises of the appellant and there is no evidence on record to prove that the money has been laundered by the appellant. The appellant had purchased the properties in the name of his wife, the parokar in the present appeal, out of the income earned from legal sources. There is no evidence either direct or indirect on the basis of which it can be said that the said properties were purchased by the appellant out of proceeds of crime; that in the absence of any link between the appellant's properties and the scheduled offence, the order of attachment is unsustainable in eyes of law and as such deserves to be set aside.

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Arguments on Behalf of the Respondent

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8. On the other hand, the respondents in their pleadings, strongly opposed the contentions raised on behalf of the appellants. It was inter alia contended by them that investigations had revealed that the cash deposits in the bank account of Smt. Pammi Devi were to the extent of Rs.

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2.21 crore for which no licit source of income was submitted. Similarly, the cash deposits in the bank account of Makhru Singh to the tune of Rs. 3.50 lakh were also without any licit source of income in the absence of any evidence being furnished by him. A comparison of the income declared by them vis-à-vis cash deposits in the bank accounts revealed that the cash deposits were far in excess of the income declared.

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9. It was further contended by the respondents that the balance sheets in the name of Shri Makhru Singh @ Anil Singh submitted by Smt. Pammi Devi in the course of her statement under section 50 of the Act, were manipulated so as to show cash-in-hand every year in the balance sheet. Further, the column of loans and advances in the ITRs filed in the name of Shri Makhru Singh @ Anil Singh for the period AY 2009-10 to 2013-14 was found to be blank whereas, loans and advances were shown in the balance sheets submitted by Smt. Pammi Devi in the course of her statement under Section 50 of the PMLA. Further, the ITRs filed in the name of Smt. Pammi Devi for the period AY 2009-10 to 2013-14 revealed that the income declared by her was not genuine and was not substantiated by documentary evidence. A conscious attempt was made by Shri Makhru Singh @ Anil Singh to generate income in the name of his wife Smt. Pammi Devi for utilization of proceeds of crime available with him in cash in the garb of such income for the purpose of acquisition of properties. Having no substantial income of his own, the accused had acquired properties worth Rs. 87,50,922/- out of undisclosed income which appears to have been acquired out of proceeds of crime. The income so acquired through undisclosed sources has been utilized to purchase the properties in his name, in the name of his wife, and in the names of

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his minor sons so as to project them as untainted. In view of the above, these properties can only be treated as acquired by Shri Makhru Singh @ Anil Singh out of the proceeds of crime.

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10. The respondents also submitted that proceeds of crime were also found to have been transferred from one account to another for the purpose of “layering” of the tainted funds and then invested in immovable and movable properties so as to "integrate" the proceeds of crime into the legal economy as normal business funds to hide the taint of crime and to project the said proceeds as untainted. This action on the part of the appellant constituted the offence of money laundering as defined under section 3 of PMLA, 2002. Thus, it was submitted by the respondents, that Shri Makhru Singh @ Anil Singh is primarily responsible for the offence of money laundering and his role was clearly covered under the definition of the offence of money laundering under section 3 of PMLA 2002, which is punishable under section 4 of PMLA 2002.

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11. It was also contended that Smt. Pammi Devi had directly involved herself in the process or activity connected with proceeds of crime amounting to Rs. Rs. 87,50,922/- as she had been found to have knowingly assisted Shri Makhru Singh @ Anil Singh and/or knowingly became a party to transactions connected with proceeds of crime by holding part of the proceeds of crime in her own name and/or projecting it as untainted property and hence committed the offence punishable under section 4 of the PMLA, 2002.

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Analysis and Findings

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12. We have given careful consideration to the material on record and the rival contentions of the parties. We find that the factual averments made from either side regarding the sources of acquisition of the properties which have been attached by the respondents have become redundant in these cases on account of subsequent developments. As already mentioned, at the time of filing of appeals, it was submitted by the appellant that out of the seven FIRs which constituted the basis of the ECIR, the appellant Shri Makhru Singh @ Anil Singh already stood acquitted in four, and the prosecution had not gone for further appeal in those cases. It was further submitted that the remaining cases were in progress and he expected to be acquitted in those cases also. When the cases were finally heard on 03.04.2024, the learned counsel for the appellant took us through the orders passed by the jurisdictional criminal court in each of the seven FIRs and submitted by relating each of the FIRs to the corresponding order passed by the jurisdictional criminal court that the appellant had been acquitted in each and every one of the seven FIRs which comprised scheduled offences and formed the basis of the ECIR recorded filed by the respondent Directorate.

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13. In his response, the learned counsel for the respondent advanced various arguments on facts and law. It was pointed out by him that a prosecution complaint had been filed under the PMLA, 2002 in this case before the Ld. District and Sessions Court-cum-Special PMLA Court, Patna, Bihar, cognizance thereof had been taken by the Court, charges had been framed, and the present stage is that the trial is going on and witnesses are being examined. He further contended that the investigation conducted by the Directorate had clearly established that the appellants had no licit sources of income to explain the assets; that the existence of a

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prima facie case, which is the key requirement for attachment of properties under Section 5(1) is evident from the very fact that the Ld. Special Judge has taken cognizance of the case. However, he was not in a position to controvert the basic fact that the appellant Shri Makhru Singh @ Anil Singh, stood acquitted of all the seven scheduled offences on the basis of which the PMLA case was initiated.

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14. It is a settled position of law by now that in the absence of a scheduled offence, the charges of money laundering under the PMLA, 2002 cannot be sustained and if the person in question has been finally discharged or acquitted of the scheduled/predicate offence, there can be no charge of money laundering against the said person. The aforesaid position clearly emerges from paragraphs 52, 60, 65, 76 and 187(v)(d) of the landmark judgment of the Hon‟ble Supreme Court in Vijay Madanlal Choudhary and Ors. v/s. Union of India and Ors., 2022 SCC Online SC 929 (web copy as available at https://main.sci.gov.in/judgments). The Apex Court has summarized its conclusions in para 187 of the judgment. The relevant sub-para which pertains to the issue at hand is 187(v)(d) which reads as below:

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“ CONCLUSION:

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187. In light of the above analysis, we now proceed to summarize out conclusion on seminal points in issue in the

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following terms:

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(i) ……………………………………… (ii) ………………………………………

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(iii) ……………………………………..

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(iv) ……………………………………..

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(v)(a) ………………………………….

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(v)(b) ………………………………….

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(v)(b) ………………………………….

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(v)(c) ………………………………….

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(v)(d) The offence under Section 3 of the 2002 Act is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. It is concerning the process or activity connected with such property, which constitutes the offence of money-laundering. The Authorities under the 2002 Act cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal complaint before the competent forum. If the person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by the Court of competent jurisdiction, there can be no offence of money- laundering against him or any one claiming such property being the property linked to stated scheduled offence through him."

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15. Following the ratio laid down by the Apex Court in the aforesaid case, the Hon'ble High Court of Delhi in Emta Coal Limited and Ors. vs. The Deputy Director Directorate of Enforcement and Ors. [MANU/DE/0181/2023] , Vijay Madanlal Choudhary , has held as follows:

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"24. In the facts of the present case, the Trial Court, in the complaint case which was pending before it, has clearly come to a conclusion

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that the closure report deserves to be accepted and no criminality is ascertainable as the documents in respect thereof were not available.

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25. In view of the settled legal position in Vijay Madanlal Choudhary (supra) and the subsequent decisions and orders thereafter, the impugned attachment orders dated 14th February, 2022 and 20th June, 2022 as also the ECIRs. are quashed."

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16. The above order passed by the Hon'ble High Court of Delhi was challenged by the Respondent Directorate before the Hon'ble Supreme Court in SLP (Civil) Diary No. 15235/2023. The Respondents, however, admitted before the Apex Court that since there is a closure report in the predicate offence, no further proceedings under the PMLA Act could be continued. Hence, the Hon'ble Supreme Court vide Order dated 06.07.2023 has disposed of the said matter, as follows:-

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"Delay condoned.

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Learned Additional Solicitor General submitted that since there is a closure report in the predicate offence, therefore, no further proceedings under the PMLA Act could be continued as per the observations of the High Court in the impugned order(s).

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He, however, submitted that in the event any further action is taken in respect of the predicate offence, then liberty may be reserved to the petitioner herein to take further steps under the said Act, including reviving these proceedings. The submission of learned ASG is placed on record.

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The Special Leave Petitions are disposed of in the light of the aforesaid submission and liberty is accordingly reserved to the petitioner.

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Pending applications shall stand disposed of."

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17. In Nayati Healthcare and Research NCR Pvt. Ltd. and Ors v/s. Union of India Ministry of Home Affairs and Ors., MANU/DE/7062/2023, the Hon‟ble Delhi High Court relied upon the aforesaid precedent to hold as follows:

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"14. In view of the aforesaid legal position, the present complaint filed by the ED and the proceedings arising therefrom cannot survive. Considering that the FIR has been quashed by this court and that it has not been challenged till date, there can be no offence of money laundering under section 3 of the PMLA against the petitioners.

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15. Accordingly, the present petition is allowed and the ECIR bearing No. ECIR/51/DLZO-II/2021 and proceedings arising therefrom are quashed. Consequently, the Look Out Circular issued against the petitioners in respect of the aforesaid ECIR also stands quashed."

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18. In Omkar Realtors and Developers Private Limited v/s. Adjudicating Authority, Prevention of Money Laundering and Ors. [MANU/DE/1159/ 2023], the Hon‟ble Delhi High Court held as below:

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"18. Therefore, considering the facts and circumstances of the present case, it is clear that the PAO deserves to be quashed in view of the legal position as held in the above judgments and orders of the

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Supreme Court and also the recent decision of this Court in EMTA Coal Limited (supra).

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19. Accordingly, the PAO dated 14th January, 2022 passed by the ED is set aside. In view of the settled legal position in Vijay Madanlal Choudhary (supra) and the subsequent decisions and orders thereafter, the properties of M/s. Omkar Realtors and Developers Pvt. Ltd., which were attached by the impugned PAO, shall be released."

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19. Similarly, in Manturi Shashi Kumar and Ors. v/s. The Director, Directorate of Enforcement and Ors. [MANU/TL/ 0641/2023], the Hon‟ble Telangana High Court held as follows:

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"28. Thus, according to Supreme Court, the offence under Section 3 of PMLA is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. If the person is finally discharged or acquitted of the scheduled offence or the criminal case against him is quashed by the court, there can be no offence of money laundering against him or anyone claiming such property being the property linked to the scheduled offence. It is immaterial for the purpose of PMLA whether acquittal is on merit or on composition.

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30. Adverting to the facts of the present case, it is evident that upon closure of the criminal case and acquittal of appellant No. 1 on discharge, there is no scheduled offence against the appellants. In the absence of any crime, question of any proceeds of crime would not arise."

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20. In The Directorate of Enforcement v/s. Hemal Arun Mehta, in SLP(Crl) Diary No. 28128/2023, the respondent Directorate admitted that when a predicate offence has been quashed then the matter becomes infructuous. Thus, the Hon'ble Supreme Court vide its Order dated 18.09.2023 has passed the following order:

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"Shri S. V. Raju, learned ASG submits that the FIR on predicate offence has been quashed on 10.05.2023. In such circumstances, the petition becomes infructuous. The special leave petition is dismissed as withdrawn as having become infructuous.

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Learned ASG also wants this Court to observe that in this event quashing order is subsequently overturned by a superior forum, his client would have the right to revive the proceedings. We do not make any comment in that regard except Mr. Raju's client shall be entitled to take such steps in such situation as may be permissible under the law."

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21. The same position has been taken in various decisions of this Appellate Tribunal. In Ashok Bajaj and Ors. v/s. The Deputy Director, Directorate of Enforcement, Chennai [MP-PMLA-10800/CHN/2023 vide Order dated 13.03.2023 the Appellate Tribunal has held as follows:

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"17. It is an admitted fact that the Hon'ble High Court of Madras has quashed the prosecution complaint vide C.C. No. 12 of 2017 on the file of the XIV Additional Court for CBI cases, Chennai which has arisen out of the aforesaid ECIR. It is not denied by the Respondent that the said prosecution complaint is no more pending in view of the

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order passed by the Hon'ble High Court, Madras. This being so, now the short question before us is whether the present Appeals/Applications are to be allowed or otherwise in the given facts and circumstances of the Appeals in hand.

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20. There is no controversy so far as the orders passed by the Hon'ble High Court of Madras (supra) is concerned. During the course of hearing, it is submitted from the side of the Appellants that the Learned Special Court, has accepted the order dated 18.02.2022 of Hon'ble High Court, Madras (supra) and that the said prosecution complaint is no more pending and that there is no dispute from the side of the Respondent in this regard.

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24. We are not in agreement with the submissions made from the side of the Respondent that this Tribunal cannot release the property. This power is inherent once it is held by this Tribunal that the impugned order is quashed and set aside, corollary to it is that the attachment of the property does not survive and that the prosecution complaint has been quashed before the commencement of Trial so, the property has to be released. However the aforesaid order like any other order of the Tribunal is subject to the order passed under Section 42 of PMLA, 2002. In view of the above, we are of the considered view that in the present facts and circumstances of the case this Tribunal has power to give directions for release of the property."

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22. In Pulkit Garg and Ors. v/s. The Deputy Director, Directorate of Enforcement, Delhi FPA-PMLA- 2342/DLI/2018 etc. vide Order dated 16.03.2023, the Appellate Tribunal has held as below:

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"6. It is pointed out in the miscellaneous application that vide order dated 12.12.2019 passed by Learned Special Judge (PC Act) CBI, closure report filed by CBI pertaining to schedule offence under Section 13(2) of Prevention of Corruption Act was accepted and further vide order dated 23.12.2021 passed by Learned Special Judge (PMLA), Learned ASJ-2 (East), Karkardooma Court, accused were discharged in the complaint case for commission of offence under section 3 of PMLA. In view of the above development after filing of appeals, during the intervening period, for accepting the closure report vide order dated 12.12.2019 by Ld. Special Judge, CBI Court and discharge of the accused person in complaint case vide order dated 23.12.2021, by Ld. Special Judge, PMLA Court, the present miscellaneous application No. 9751 of 2022 is hereby allowed, and thereby all the present appeals No. 2342, 2343, 2358, 2359, 2346 of 2018, are also consequently allowed, resulting in the release of all the attached properties, attached by Ld. Adjudication Authority vide impugned order dated 19.04.2018 in original complaint No. 854/2017 confirming the provisional attachment order dated 08.11.2017. However, it is made clear that this final order in present cases is subject to any attachment order under law." Income Tax Act or any other law”

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23. In light of the decision of the Hon‟ble Supreme Court in Vijay Madanlal Choudhary (supra), which has been respectfully followed by the

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lower judicial/appellate authorities, including various High Courts as well as this Appellate Tribunal, the legal position is well-settled by now that where a person is finally discharged/acquitted of the scheduled offence, or where the criminal case against him is quashed by the Court of competent jurisdiction, there can be no charges of money-laundering against him or anyone claiming such property being the property linked to stated scheduled offence through him.

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24. In the present case, the respondents are not in a position to dispute fact that the appellant Shri Makhru Singh @ Anil Singh now stands acquitted in all the seven FIRs filed against him in offences which constitute scheduled offences under PMLA, 2002. The other appellant before us, namely, Mrs. Pammi Devi, is the wife of Shri Makhru Singh and did not stand accused of any scheduled offence as per the filings and submissions from either side. Thus, the acquittal of Shri Makhru Singh @ Anil Singh in the scheduled offences has removed the bedrock upon which the edifice of the PMLA case leading to the attachment of the properties in question in these cases was built. In the light of the judgment of the Apex Court which has been followed in other cases cited above, the Provisional Attachment Order passed by the respondent Directorate and the impugned order passed by the Ld. AA confirming the same, have no legs to stand on. In the absence of any scheduled offence, there cannot be any „proceeds of crime‟, i.e., “property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property”.

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25. In the light of the above, we have no option but to set aside the impugned order of the Ld. AA confirming the attachment of the subject

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properties. Consequently, the present appeals are allowed. The properties shall stand released from attachment under PMLA, 2002.

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26. It is, however, made clear that in the event the orders of acquittal/discharge passed by the relevant courts of criminal jurisdiction which tried those cases are subsequently overturned by a superior judicial forum, the respondent Directorate shall be entitled to take such steps in such situation as may be permissible under the Law.

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27. With the above order, the Appeals No. FPA NO.1110/PTN/2015 and FPA NO.1111/PTN/2015 shall stand disposed of along with pending applications, if any.

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28. No order as to costs.

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(V. Anandarajan) (G. C. Mishra) Member Member

New Delhi

6th May, 2024

„AM‟

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