Dismissed

FPA-PMLA-2373/RNC/2018 of Purushottam Lal Saroj v. The Deputy Director, Directorate of Enforcement, Ranchi

ATFP24 Jul 2024FPA-PMLA-2373/RNC/2018

Case brief

AI extract

What is this about?

The Appellate Tribunal dismissed the appeal filed by a partner of a construction firm against the attachment of security deposits by the Enforcement Directorate. Relying on Supreme Court precedents, the Tribunal upheld the attachment of the deposits as the 'value thereof' of proceeds of crime generated by a conviction for fraud involving fake bitumen invoices.

What did the court decide?

The appeal was dismissed; the impugned order dated 23.04.2018 confirming the attachment of security deposits was upheld.

FPA-PMLA-2373/RNC/2018 of Purushottam Lal Saroj Vs. The Deputy… — Money Laundering | ATFP (2024)

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APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI

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FPA-PMLA-2373/RNC/2018 Purushottam Lal Saroj … Appellant Versus

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The Deputy Director, Directorate of Enforcement, Ranchi

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… Respondent

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Advocates/Authorized Representatives who Argued For the Appellant :Mr. Arav Pandit, Adv. For the Respondent : Mr. N.K. Matta, SPP Mr. Aaditya Raj Sharma, Adv. Mr. Mohd. Faizan Khan, Adv.

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CORAM

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SHRI G.C. MISHRA : MEMBER SHRI RAJESH MALHOTRA : MEMBER

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FINAL ORDER

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24.07.2024

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Dictated By : Rajesh Malhotra

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Present appeal is filed against the impugned order dated 23.04.2018 passed by Ld. Adjudicating Authority in Original Complaint No.855/2017 vide which properties attached vide Provisional Attachment Orders 04/2017 dated 15.11.2017, were confirmed for attachment, which are detailed as under:

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Sl. No.	Amount (in Rs.)	Details of property
1.	Rs. 12,56,591/-	Lying with the Road Construction Department, Road Division, Hazaribagh, Jharkhand as “Security Deposit” for the work “widening and strengthening of Jihu-Itkhori-Road in KM 0 to 9.8”.
2.	Rs. 17,58,534/-	Lying with the Road Construction Department, Road Division, Chatra, Jharkhand as „Security Deposit‟ for „widening and Strengthening of Jihu-Itkhori-Roadin Km9.8 to 29”.
Total	Rs. 30,15,125/-
2. A	s per the facts of	the case, FIR No. RC/12(A)/2009-R was

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registered by the Central Bureau of Investigation, Ranchi on 16.09.2009 for commission of offences u/s 120B IPC r.w. 420, 468, 471 IPC and also r.w. 13(2) r.w.s. 13(1)(d) of Prevention of Corruption Act, 1988 and substantive offences thereunder, lodged against Shri Shyam Sunder Singh, the then Junior Engineer, Shri

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FPA-PMLA-2373/RNC/2018Purushottam Lal Saroj v. E.D., Ranchi

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Sudhir Kahlo,the then Executive Engineer Road Construction Department, Hazaribagh; M/s Sunny Construction Pvt Ltd, Jhumri Taliyah and other unknown persons. After investigation, CBI filed charge-sheet on 30.11.2010 for the aforesaid offences, against Sudhir Khalkho, the then Executive Engineer; Shri Shyam Sunder Prasad, Junior Engineer; Shri Sanjay Rampal and M/s Sunny Construction and Company JhumriTilaiya; Shri Purushottam Lal Saroj Partner of M/s Sunny Construction Pvt Ltd. The said accused persons were convicted and sentenced to undergo rigorous imprisonment for three years with fine of Rs. 20,000/- vide judgment of conviction dated 20.12.2016 delivered by Ld. Special Judge, CBI, Ranchi.

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After the filing of charge-sheet, the Enforcement Directorate Special Zonal Office registered in ECIR No. 03/PAT/2012/PMLA dated 13.03.2012 for investigation of offence under the provisions of Prevention of Money Laundering Act, 2002.

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During investigation by CBI, it is disclosed that M/s Sunny Construction & Company, JhumriTallaiya, Koderma was awarded a contract for execution of work of widening and strengthening of Jihu-Itkhori-Road in Km 0 to 9.8 for the year 2005-06 at a contractual value of Rs. 2,59,99,260/- and an Agreement vide No. 15F2/05-06 on 23.03.2006 to this effect was executed between the partner of M/s Sunny Construction and Company and the then Executive Engineer, Road Division, Hazaribagh. For the purported execution of the said work, the contractor of M/s Sunny Construction and Company was paid Rs.1,96,12,204/- through

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FPA-PMLA-2373/RNC/2018Purushottam Lal Saroj v. E.D., Ranchi

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twelve running account bills. payments of the bills received by the contractor included the bituminous works and cost of bitumen.

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It is further disclosed that as per the decision of the Government, the material for the execution of the work was required to be procured and supplied by the contractor. Accordingly, in the subject agreement, an authority letter no. 920 dated 24.08.2006 was issued by the then Executive Engineer, Road Construction Department, Road Division, Hazaribagh to the Oil Companies for allowing lifting of 462.578 MT of bitumen by the contractor, which was required to be used in the said contractual work.

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It is further alleged that as against the above authority letter, total bitumen of 442.1255 MT was lifted by the contractor M/s Sunny Construction and Company from IOCL vide 46 bitumen invoices. The said company however submitted only 10 invoices, out of the referred 46 invoices in this work. They used the remaining invoices in other works executed by them under Road Construction Department, Chatra and Road Construction Department, Koderma.

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It is further alleged that M/s Sunny Construction Company submitted a total of 43 bitumen invoices for execution of the work in question; 17 out of 43 invoices submitted by the contractor were fake; only 26 invoices submitted by the contractor were genuine; out of 26 genuine invoices submitted by M/s Sunny Construction and Company, 10 genuine invoices were issued against the authority letter issued by the Executive Engineer, Road

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FPA-PMLA-2373/RNC/2018Purushottam Lal Saroj v. E.D., Ranchi

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Construction Division, Hazaribagh in the instant work and the remaining 16 invoices submitted by M/s Sunny Construction and Company, were actually generated against the authority letter/delivery orders issued for other works under Road Construction Division, Koderma and NH Division, Hazaribagh. The details of 17 fake invoices submitted by M/s Sunny Construction Company are as follows:

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S. No.	Assignment No.	Date of invoices	Amount of bitumen (in MT)	No. of Drum	Name Comp where purpo invoic	of the any/location bitumen rtedly procured es issued
i.	20082345B004235	30.05.07	15.024	96	IOCL,	Namkum
ii.	20082345B004235	01.06.07	15.024	96	IOCL,	Namkum
iii.	20082345B004235	31.05.07	15.024	96	IOCL,	Namkum
iv.	20082345B004235	31.05.07	15.024	96	IOCL,	Namkum
v.	20082345B004235	30.05.07	15.024	96	IOCL,	Namkum
vi.	20082345B004235	02.06.07	15.024	96	IOCL,	Namkum
vii.	20082345B004235	04.06.07	15.024	96	IOCL,	Namkum
viii.	20082345B004235	06.06.07	15.024	96	IOCL,	Namkum
ix.	20082345B004235	07.06.07	15.024	96	IOCL,	Namkum
x.	20082345B004235	08.06.07	15.024	96	IOCL,	Namkum
xi.	20082345B004235	09.06.07	9.077	96	IOCL,	Namkum
xii.	20082121B075838	08.03.08	9.077	58	IOCL,	Haldia
xiii.	20082121B042893	11.03.08	9.077	58	IOCL,	Haldia
xiv.	20082121B069142	13.03.08	9.077	58	IOCL,	Haldia
xv.	20082121B020708	07.03.08	9.077	58	IOCL,	Haldia
xvi.	20082121B020774	14.03.08	9.077	58	IOCL,	Haldia
xvii.	20082121B086248	15.03.08	9.007	58	IOCL,	Haldia
TOTA	L		219.726	1404

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It is further alleged that less bitumen was utilized in the said work and the Company did not return empty bitumen drums to the department though an amount of Rs. 3,45,920/- was recovered from their bills on account of non-return of the 2899 empty bitumen drums, even after specific condition provided in the agreement that the contractor was supposed to deposit the empty bitumen drums after use of bitumen in the contractual work to the executing Department Road Division, Hazaribagh.

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FPA-PMLA-2373/RNC/2018Purushottam Lal Saroj v. E.D., Ranchi

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It was further alleged that the concerned Junior Engineer, Shri Shyam Sunder Prasad and Assistant Engineer, Shri Sudhir Khalkho certified the bitumen invoices submitted by the contractor. The concerned Junior Engineer and Assistant Engineer without verifying the genuineness of the bitumen invoices made favourable remarks and facilitated less utilization of bitumen in the execution of subject work and consequently illegal payment to the contractor on the basis of the fake invoices were made. Though, the consignments as described on the fake bitumen invoices were never issued from IOCL, Namkum and Haldia, the certificates given by the concerned Junior Engineer and Assistant Engineer made it clear that they were in conspiracy with the contractor and in pursuance thereof made false certification on fake bitumen invoices and prepared/forwarded bills of the contractor for payment.

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The CBI investigation thus disclosed that, M/s Sunny Construction and Company submitted 43 bitumen invoices, out of which 17 were found to be fake. No bitumen was produced/supplied against those fake bitumen invoices. The contractor and aforesaid public servants are thus, liable for commission of substantive offences like cheating, forgery and using forged documents as genuine. The accused public servants i.e. the Junior Engineer and the Assistant Engineer in criminal conspiracy among themselves and with the contractors committed gross criminal misconduct and misused their respective official positions in as much as they did not verify the genuineness of bitumen invoices and facilitated the utilization of less amount of bitumen in

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FPA-PMLA-2373/RNC/2018Purushottam Lal Saroj v. E.D., Ranchi

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the contractual work and ensured payment on fake invoices by certifying the supplies against them.

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Directorate of Enforcement also interrogated the suspects and the other persons and recorded their statement u/s 50 of PMLA, 2002. Shri Purushottam Lal Saroj , partner of M/s Sunny Construction & Company, resident of R.N. Yadav Marg, Hazaribagh, Jharkhand, in his statement dated 22.03.2017 given before the Assistant Director, Directorate of Enforcement, Ranchi, stated that Mr. Sanjay Rampal, partner of M/s Sunny Construction & Company, signed on the Agreement No. 15T-2 of 2005-06 on behalf of the firm M/s Sunny Construction & Company and as a working partner of the firm, his duty was to look after the day to day field activity like arrangement of labour and their payments. He further stated that Sanjay Rampal joined the firm only on honorary basis and he had not invested any amount in this firm. He stated that the Executive Engineer, Road Construction Department, Road Division, Hazaribagh issued the authority letter and authorized him to lift the bitumen from Indian Oil Corporation (IOC) and the grade and quantity of the said bitumen was 60/70 and 462.578 MT (approx.) respectively. Further, he stated that he authorized Mr. Sanjay Kumar, an employee of M/s Sunny Construction & Company working as Munshi, to lift the Bitumen from Indian Oil Company. He also stated that Bitumen invoices were computer generated documents and every invoice/challan prepared mentioning therewith consigners name, grade of Bitumen Quantity, date and time, vehicle no. & quantity of Bitumen.

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FPA-PMLA-2373/RNC/2018Purushottam Lal Saroj v. E.D., Ranchi

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Upon being asked about the details of quantity of bitumen, billing procedure thereof, total amount received against this work, empty drums etc., he, stated that final consumption was around 453 MT in the said work and the consignee of bitumen used to send three copies of invoices through transporter and hand over the invoices (two copies) to the godown keeper of the firm or concerned engineer of the Department and the bills were prepared by the then Junior Engineer and countersigned by Assistant Engineer and finally checked by the concerned Executive Engineer for the payment through Account section and accordingly, an amount of Rs. 1,96,12,204/- was received by the firm. He has not returned any bitumen drum, rather he had opted for recovery on panel rate as per the provision of the agreement that the payments received from Road Construction Department, Road Division, Hazaribagh for the said work for deposited in account number 11071861262 of M/s Sunny Construction & Company maintained with SBI, Hazaribagh Branch. Further, in response to the question asked about the movable and immovable property, he replied that he did not know about the property of the company in detail.

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Similar statement was made by the partner Sanjay Rampal.

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During investigation, ED also collected various documents viz. contract agreements dated 23.03.2006, measurement book and running account detailed bitumen invoice – work order no. 356 dated 23.03.2006, authorization letter no. 920 dated 24.08.2006 issued by Executive Engineer.

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FPA-PMLA-2373/RNC/2018Purushottam Lal Saroj v. E.D., Ranchi

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Perusal of said documents revealed that 12 running account

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bills were passed by the then Executive Engineer as under:

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Sr. No.	Bills Number/Date	Cheque No./Date	Amount (Rs.)
1.	Vr. No. 01 dt. 01.08.06	813869/dt. 01.08.06	4685660.00
2.	Vr. No. 01 dt.20.12.06	813884 dt.20.12.06	726424.00
3.	Vr. No. 01 dt. 12.02.07	865302dt. 12.02.07	1300864.00
4.	Vr. No. 10 dt.20.03.07	865339 dt.20.03.07	2206446.00
5.	Vr. No. 12dt.26.03.07	865345 dt.26.03.07	690597.00
6.	Vr. No. 02dt. 11.05.07	865356 dt. 11.05.07	2954299.00
7.	Vr. No. 01 dt. 06.06.07	865358 dt. 06.06.07	1147883.00
8.	Vr. No. 07 dt.26.07.07	865387 dt.26.07.07	1735736.00
9.	Vr. No. 04 dt. 18.09.07	897109 dt. 18.09.07	873162.00
10	Vr. No. 02dt. 03.01.08	897154 dt. 03.01.08	678101.00
11.	Vr. No. 01 dt. 11.03.08	897188 dt. 11.03.08	1179109.00
12	Vr. No. 14 dt.29.03.08	922310 dt.29.03.08	1233923.00
		Total	1,94,12,204

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Perusal of agreement no. 15 F-2/2005-06 dated 23.03.2006 executed between Executive Engineer and Sanjay Rampal partner of M/s Sunny Construction Company, revealed that as per Notice Inviting Tender (NIT), which are part and parcel of agreement and the contractor himself purchased packed bitumen of grade 60/70 from the government oil companies and will submit the proof of quality of bitumen/proof of purchase/receipt to the Road Construction Department.

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As M/s Sunny Construction and Company and others submitted 17 fake invoices covering 219.726 metric tons of bitumen worth Rs. 60,30,625/- and received payment against such 17 fake invoices. The said partnership firm and accused persons caused a loss of Rs. 60,30,625/- to the State Government exchequer. Out of the said defrauded amount, sum of Rs. 30,15,500/has already been deposited with the Road Construction Company, Division, Hazaribagh, Jharkhand, as per direction of the Hon‟ble High Court of Jharkhand in the CBI case.

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FPA-PMLA-2373/RNC/2018Purushottam Lal Saroj v. E.D., Ranchi

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Accordingly, balance proceeds of crimewascalculated as Rs. 30,15,125/-. As per intimation received from Road Construction Department, Jharkhand, the amount to the tune of Rs. 12,56,591/- and Rs. 13,38,249/- were lying as security deposit and extension of time deposit respectively.

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Similarly, Rs. 25,26,583/- and 5,60,703/- are also lying with Road Division, Chatra, Jharkhand for further stretch of road from 9.8 km to 29 km as security deposit and extension of time respectively.

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Accordingly, sum of Rs. 12,56,591/- lying as security deposit for the work of Jihu-Itkhori Road from 0 km to 9.8 km with Road Construction Department, Hazaribagh, Jharkhand was provisionally attached, for realization of the balance proceeds of crime of Rs. 30,15,125/-. The remaining proceeds of crime of Rs. 17,58,534/- was also provisionally attached from the security deposit of Rs. 25,26,583/lying with Road Construction Department, Jharkhand for the work of Jihu-Itkhori Road for the stretch from 9.8 km to 29 km. The said provisional order was passed on 15.11.2017 and thereafter, Original Complaint No. 855/2017 was filed before the Adjudicating Authority for confirmation of the said amount of Rs. 30,15,125/-.

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Ld. Adjudicating Authority issued the show cause notice to the defendants and after receiving the replies and rejoinders and going through the material on record confirmed the attachment of the said amount vide order dated 23.04.2018.

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FPA-PMLA-2373/RNC/2018Purushottam Lal Saroj v. E.D., Ranchi

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Aggrieved by the said order, appellant Purushottam Lal Saroj filed the present appeal.

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During the arguments, Ld. Counsel for the appellant submitted that respondent ED attached his two security deposits; firstly, entire security deposit of Rs. 12,56,591/- lying with the Road Construction Department, Hazaribagh, Jharkhand for the work of construction of Jihu-Itkhori Road of 0 km to 9.8 km; secondly, sum of Rs. 17,58,534/- from the security deposit of 25,26,583/- lying with the Road Construction Department for the work of Jihu-Itkhori Road km 9.8 to 29; total Rs. 30,15,125/-. He argued that the said security deposit lying with the Road Construction Department, Jharkhand is not under the control and custody of the appellant, and hence, there is no apprehension for misappropriation of the said amount. Accordingly, Ld. Counsel for appellant contended that the said security deposit is wrongly attached by respondent ED and wrongly confirmed by the Adjudicating Authority. He argued that the said security deposit is not proceeds of crime in any manner, as the said amount is security tendered with Road Construction Department prior to construction of road i.e. prior to alleged commission of offence. He further contended that the alleged offences were not scheduled offence being allegedly committed before the amendment of the schedule and hence, the amended provision of schedule cannot be applied retrospectively. Prayer is accordingly made to allow the present appeal and thereby release the security deposits in favour

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FPA-PMLA-2373/RNC/2018Purushottam Lal Saroj v. E.D., Ranchi

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of Road Construction Department, by setting aside the impugned order dated 23.04.2018.

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On the other hand, Ld. Counsel for the respondent ED submitted that the said security deposit of Rs. 30,15,125/- is attached by the respondent ED as value thereof, in absence of nonavailability of direct proceeds of crime. He pointed out that the contractor firm submitted 43 invoices for execution of work.On verifying the same, it was found that out of the said invoices, 17 were fake and fabricated which points towards the direction that less bitumen was utilized and the empty bitumen drums were not returned for cross checking and the quality of the road was also very poor. He pointed out that Hon‟ble High Court of Jharkhand took cognizance of the matter and directed the CBI to register the FIR and on direction of Hon‟ble High Court, M/s Sunny Construction Company deposited sum of Rs. 30,15,500/- vide two demand drafts dated 22.12.2011 & 15.03.2012. He further submitted that all the accused are already convicted by Ld. Special Judge, CBI Court, Ranchi vide judgment of conviction and order on sentence dated 20.12.2016. He pointed out that as balance proceeds of crime for sum of Rs. 30,15,125/- could not be traced, the security deposit of firm M/s Sunny Construction & Company, with Road Construction Department, Jharkhand was attached. He further argued that the said amount is correctly attached and confirmed as value thereof of the proceeds of crime, as the said partnership firm has right to claim back the total deposit after completion of the work, though the irregularity and poor quality of

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work was found at the spot. He further argued that present appellant has no locus standi to challenge the impugned order in individual capacity without filing any appeal on behalf of the partnership firm M/s Sunny Construction & Company, as the security deposit was made by the said partnership firm. Prayer is accordingly made to dismiss the present appeal being devoid of any merits and thereby uphold the impugned order passed by the Ld. Adjudicating Authority.

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After hearing the rival submissions, we have given our thoughtful consideration to the same. We are convinced that the submissions made by Ld. Counsel for the respondent ED as mentioned in the preceding para. As per the judgment of Hon‟ble Supreme Court of India in case Vijay Madanlal Choudhary v. Union of India , 2022 SCC Online SC 929, the other assets of the culprit can be attached as value thereof in absence of nonavailability of direct proceeds of crime, as mentioned in para no. 62 of the said judgment wherein para no. 235 of the report titled as “Anti-Money – Laundering and Combating the Financing of Terrorism” dated June 25, 2010 was reproduced as under:

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“235. The definition of proceeds of crime and property in the PMLA are broad enough to allow for confiscation of property derived directly or indirectly from proceeds of crime relating to a scheduled (predicate) offence, including income, profits and other benefits from the proceeds of crime. These definitions also allow for value confiscation, regardless of whether the property is held or owned by a criminal or a third-party…”.

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Further, it is held that-

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“ 68 . It was also urged before us that the attachment of property must be equivalent in value of the proceeds of crime only if the proceeds of crime are situated outside India. This argument, in our opinion, is tenuous. For, the definition of "proceeds of crime" is wide enough to not only refer to the property derived or obtained as a result of criminal activity relating to a scheduled offence, but also of the value of any such property . If the property is taken or held outside the country, even in such a case, the property equivalent in value held within the country or abroad can be proceeded with. The definition of "property" as in Section 2(1)(v) is equally wide enough to encompass the value of the property of proceeds of crime. Such interpretation would further the legislative intent in recovery of the proceeds of crime and vesting it in the Central Government for effective prevention of money-laundering.

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69 . We find force in the stand taken by the Union of India that the objectives of enacting the 2002 Act was the attachment and confiscation of proceeds of crime which is the quintessence so as to combat the evil of money-laundering. The second proviso, therefore, addresses the broad objectives of the 2002 Act to reach the proceeds of crime in whosoever's name they are kept or by whosoever they are held. To buttress this argument, reliance has been placed on the dictum in Attorney General for India 17 and Raman Tech. & Process Engg. Co. and Anr. v. Solanki Traders MANU/SC/8119/2007: (2008) 2 SCC 302.”

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Accordingly, the present appeal is liable to be dismissed in view of the aforesaid judgment, as the security deposits are rightly attached by respondent ED in lieu of the proceeds of crime siphoned by the accused/suspects, including the present appellant.

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In sequel to our discussion in the preceding para, the present appeal is hereby dismissed being devoid of any merits and thereby the impugned order dated 23.04.2018 passed by the Adjudicating Authority for confirmation of properties is hereby upheld.

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Appeal Dismissed.

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FPA-PMLA-2373/RNC/2018Purushottam Lal Saroj v. E.D., Ranchi

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Pronounced on this 24^th Day of July, 2024.

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RajeshMalhotra G.C. Mishra Member Member

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„AB‟