This appeal challenged the freezing of M/s RAP Events' bank account. The Tribunal held that funds traced to proceeds of crime could not be released merely because the appellant was not charged, dismissing the appeal.
The disputed bank account freeze was upheld; no release was granted.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI
FPA-PMLA-2090/CHD/2017
M/s RAP Events … Appellant
Versus
The Deputy Director, Directorate of Enforcement, Chandigarh
… Respondent
Advocates/Authorized Representatives who argued
| For the Appellant | : | Mr. Saurabh Kapoor, Adv. Mr. Rishabh Kapoor, Adv. Ms. Madhvi Khandelwal, Adv. |
|---|---|---|
| For the Respondent | : | Mr. Arjun Sawhney, Adv. Mr. Rohan Bhambri, Adv. |
CORAM SHRI G.C. MISHRA : MEMBER SHRI RAJESH MALHOTRA : MEMBER
FINAL ORDER 12.09.2024
Dictated by: Rajesh Malhotra
Present appeal u/s 26 of the Prevention of Money Laundering
Act, 2002, is filed by the appellant company against the impugned order dated 12.09.2017 passed by the Adjudicating Authority in Original Application No. 93/2017, whereby it allowed the respondent ED to retain/seize/freeze the documents, digital records, bank accounts etc., seized from the premises of various persons including the present appellant company, during the search conducted on 07.04.2017.
FPA-PMLA-2090/CHD/2017
M/s RAP Events v. E.D., Chandigarh
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Procon), Mr. Aman Preet Singh Sodhi (Proprietor, M/s. Heights International), M/s. Sai Bhakti Impex Pvt. Ltd., Mr. Gaurav Kirpal, Mr. Aman Kirpal, M/s. Colour Wave (H K) Ltd. Hongkong, Brigadier (Retd.) M.S. Dullat and other unknown public servants & private persons on the following allegations:
FPA-PMLA-2090/CHD/2017
M/s RAP Events v. E.D., Chandigarh
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FPA-PMLA-2090/CHD/2017
M/s RAP Events v. E.D., Chandigarh
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International is also Director in M/s. Colour Wave (HK) Ltd., Hong Kong, which is beneficiary for all the buyers credit Further, Mr. Dinesh Kumar, Proprietor of M/s. Vision Procon, had been an authorized signatory for the operations in the account of M/s. Heights International and there are also inter-account transactions between these three entities.
Sections 420 & 120B of the Indian Penal Code, 1860 and Section 13(2) r/w 13(1) (d) of the Prevention of Corruption Act, 1988 are the Scheduled Offences (relating to cheating, criminal conspiracy and criminal misconduct/abuse of official position) under Part A, paragraph 1 & 8 respectively to the Schedule to the Prevention of Money Laundering Act, 2002 as also defined under Section 2 (1) (y) of the said Act. This being a case of suspected offence of Money Laundering, a case was registered by the Directorate of Enforcement, Chandigarh Zonal Office vide ECIR dated 19.09.2016. A copy of the ECIR No. CDZO/06/2016 dated 19.09.2016 against Ashu Mehra and other co-accused persons.
The complainant bank, IOB, further informed that on verification of swift messages, it was observed that five fraudulent swift messages were also sent earlier in February and March, 2015 as LOUs, but on due date or on demand from the Overseas Bank, the due amount equivalent to USD 6.345 Million was paid by debiting account of M/s. Heights International and amount equivalent to USD 9.879 Million was paid by debiting account of M/s. Vision Procon. Therefore, total amount of USD 16.224 Million (Rs.108.70 crores) was paid from the accounts of M/s. Heights International and M/s. Vision Procon. In view of the above, this
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M/s RAP Events v. E.D., Chandigarh
5
amount was not due for payment, the amounts having been paid before due date. The investigation revealed that in a similar fashion Buyers Credit was sanctioned on the basis of illegally issued swift messages by accused Ashu Mehra since 2012. It was noticed that the payments in respect of all the Buyers Credit, except for those mentioned in Table No.1, were made back to the banks in time before due date. The investigation has revealed that Ashu Mehra by way of issuance of illegal swift messages, vide which Buyers Credit facilities were granted to the Indian importers and payments thereof, were made to M/s. Colour Wave (H K) Ltd., Hong Kong, had created a liability of Rs. 321 crores on the Indian Overseas Bank, Branch at Sector 7, Chandigarh. This amount of Rs. 321 crores are still outstanding on IOB.
In order to unearth/trace the proceeds of crime under PMLA on 07.04.2017 searches u/s 17 of PMLA were conducted on various places/premises. Thereafter, many bank accounts, lockers and properties were frozen.
Thereafter, Original Application being OA No. 93 of 2017 (OA) in ECIR No. CDZO/06/2016 was filed by the respondent under section 17(4) of the PMLA, 2002, in May 2017 seeking for directions to retain certain articles/vehicles/ documents seized and properties & the bank accounts frozen by the respondent, as listed in the aforesaid OA No. 93 of 2017. The said OA No. 93 of 2017 was allowed vide order dated 12.09.2017.
Aggrieved by the said order, appellant filed the present appeal.
FPA-PMLA-2090/CHD/2017
M/s RAP Events v. E.D., Chandigarh
6
On the basis of the FIR No. RCBD No. 1/2016 filed by CBI, the following bank account of the appellant was seized/frozen:
| S. | Bank Name | Appellant | A/c No. | Amount |
|---|---|---|---|---|
| No. | ||||
| 1. | HDFC Bank | M/s RAP Events | 13212000000590 | 5,40,37,520.79 |
Ld. Counsel for the appellant submitted that the firm entered into a family arrangement dated 20.03.2017 to commence the commercial activity for exploring all available channels into the market to optimize the income from all investments. Under the said family arrangement, the answering appellant received from another firm in the name and style of M/s Prenda Creations an amount of Rs. 5.00 Crores to be invested in commercial activities. A new unit was to be established for taking advantage of investment-oriented and highly remunerative events.
The planned track of venture in contemplation of the firm an immediate event i.e. International Yoga Day was visualized for good opportunity. Such an event required procurement of huge number
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M/s RAP Events v. E.D., Chandigarh
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of dresses which according to market cost could be estimated to be around Rs. 8.00 Crores. Thereafter, aforesaid firm in the name and style of M/s Prenda Creations being run by the persons well known to the appellants agreed to invest their funds in the projects of grand celebrations of International Yoga Day. Under these circumstances, a sum of Rs. 6.05 Crores were remitted by M/s Prenda Creations in favour of the appellant.
Ld. Counsel for the appellant submitted that the Partners of the appellant firm Sh. Rakesh Kumar & Sh. Rohitaaz Kumar are neither charge-sheeted for the predicate offence after investigation of the police/CBI or prosecution complaint filed by ED. Even the Original Complaint filed by the respondent ED does not refers to appellant’s involvement in commission of any offence or acquiring any proceeds of crime.
He pointed out that bank account of this company is frozen by respondent ED, and hence, the said account could not be operated. He further submitted that day to day affairs of the company were managed through this bank account,and thus, question of freezing this account does not arise. Prayer is accordingly made to allow the present appeal and thereby direct the respondent ED to release the above bank account.
FPA-PMLA-2090/CHD/2017
M/s RAP Events v. E.D., Chandigarh
8
respondent ED. Sh. Aman Kirpal along with other bank officials of Indian Overseas Bank main branch Chandigarh fraudulently intercepted messages and issued letter of conformity/letter of undertaking to the foreign banks for the Buyers Credit extended by them.
Sh. Aman Kirpal along with others issued 24 Line of Credit (LOC) fraudulently through SWIFT messages to provide buyers credit facility which was to supposed to export goods but the same was granted to the aforesaid company through fraud. But as per the bank, there was no movement of goods & services or underlying commercial transaction between these fund transfers. The amount due on account of Buyers Credit was not paid to the bank before the due date resulting in liability of Rs. 321 crores. This was done in collusion with the accused companies and their directors/proprietors and have caused loss to the bank to the tune of USD 47.86 million equivalent to approximately Indian Rs. 321 crores. In view of the above, various documents, properties, bank account, cash and lockers including foreign currency etc. were seized.
He argued that admittedly, sum of Rs. 6.05 Crores were received by M/s RAP Events in its aforesaid account from M/s Prenda Creations. He contended that even if the present appellant was innocent receiver of the said amount, even then, the said amount is liable to be frozen/attached being transferred out of proceeds of crime amounting to Rs. 321 Crores. He stressed that appellant failed to prove that he tendered any services or supplied
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M/s RAP Events v. E.D., Chandigarh
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any material to M/s Prenda Creations against the amount of Rs. 6.05 Cores received in its account. He submitted that appellant failed to file any invoice in this regard. He pointed out that the frozen amount is quite less than the amount of proceeds of crime received from the account of M/s Prenda Creations.
Prayer is accordingly made to dismiss the present appeal being devoid of any merits.
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M/s RAP Events v. E.D., Chandigarh
10
Appeal Dismissed.
Pronounced on this 12th Day of September, 2024.
(Rajesh Malhotra) (G.C. Mishra) Member Member
‘AB’
3 issues framed by the court
Whether a company's bank account can be released under PMLA if the funds received appear to be proceeds of crime despite the company not being a named accused.
Whether ignorance of the nature of a remittance allows a recipient to claim the frozen amount against the respondent ED.
Whether the freezing of bank accounts containing larger amounts of proceeds of crime is justified under PMLA.
2 provisions across 1 enactments
M/s RAP Events
The Deputy Director, Directorate of Enforcement, Chandigarh
G.C. Mishra
Rajesh Malhotra
As recorded by the court registry
2 orders share this CNR
Judgements on the same questions, provisions and authorities, from every court
