Dismissed

FPA-PMLA-827/MUM/2015 of Yashovardhan Birla v. The Deputy Director Directorate of Enforcement, Mumbai

ATFP15 Apr 2024FPA-PMLA-827/MUM/2015

Case brief

AI extract

What is this about?

An appellant challenged the confirmation of provisional attachment of assets by the Adjudicating Authority. He argued that attachment lapsed because the prosecution complaint was filed over three years after confirmation, citing retrospective effect of amendments imposing a 90-day limit. The Tribunal held the amendment provided reasonable time for existing cases and dismissed the appeal.

What the court decided

AI extract

FPA-PMLA-827/MUM/2015 of Yashovardhan Birla Vs… — Pension and Retirement Benefits | ATFP (2024)

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APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI

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MP-PMLA-2546/MUM/2015 (Misc.) MP-PMLA-2122/MUM/2015 (Misc.) FPA-PMLA-827/MUM/2015

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Yashovardhan Birla

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… Appellant

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Versus The Deputy Director Directorate of Enforcement, Mumbai

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… Respondent

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Advocates/Authorized Representatives who appeared

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For the appellant : Counsel appeared. For the respondent : Mr. Mrinal Kumar, Adv.

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CORAM SHRI G. C. MISHRA : MEMBER SHRI V. ANANDARAJAN : MEMBER

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FINAL ORDER 15.04.2024

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Through this order, we propose to dispose of the appeal filed by the

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above-mentioned appellant on 04.03.2015 against the order of the Ld. Adjudicating Authority (“AA”) dated 19.01.2015 in Original Complaint (“OC”) No. 360/2014 (“impugned order”) confirming the provisional attachment of assets made by the respondent Directorate vide Provisional Attachment Orders (“PAO”) dated 02.09.2014.

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RELEVANT FACTS IN BRIEF

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2. The relevant facts leading to the aforesaid order of the Ld. AA briefly are that a complaint was filed by one Shri Bhavin Seth, before the Marine Drive Police Station, Mumbai. Based on the complaint, An FIR (FIR No. 187/13 dated 30/12/2013) was registered against M/s Birla Power

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Solutions Ltd., Shri Yashovardhan Birla (Chairman/Director), Shri P.V.R. Murthy (Managing Director), Shri Y.P. Trivedi (Director), Shri Rajesh Shah (Director), Shri Upkar Singh Kohli (Director), Shri M.S. Arora (Director), Shri Ashish Mahendrekar (Manager & Authorized Signatory), Shri Tushar Dey (Group President & General Counsel of Yash Birla Group), Shri Anant Vardhan (Director) and Shri Manish Malani (Director) under Section 406, 420, 120(B) of the IPC and Section 3 and 4 of the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999 (“MPID Act”).

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3. The case was subsequently transferred to the Economic Offences Wing (EOW), Mumbai Unit which filed a charge sheet on 29/03/2014 in the MPID Court against the arrested accused Shri P.V.R. Murthy. It was alleged that the accused company M/s Birla Power Solutions Ltd., their group entities and their director offered attractive interest on fixed deposits by way of advertisement. Investments to the tune of approximately Rs. 300 to 400 crores were collected from around 100 to 150 companies/persons. As per the charge sheet submitted by the EOW, an amount of Rs 57.04 crore and Rs 214 crores remained unpaid towards Fixed Deposit (FD) and Inter-Corporate Depositors (ICD) respectively.

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4. As an offence under Sections 420 and 120-B of the IPC is a scheduled offence under the Prevention of Money Laundering Act, 2002 (“PMLA, 2002”), the Directorate of Enforcement registered a case vide ECIR/16/MZO/2014 dated 17.01.2014 against M/s Birla Power Solutions Ltd., its Director Shri Yashovardhan Birla, Shri P.V.R. Murthy and others whose names have been mentioned in para 2 above.

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FPA-PMLA-827/MUM/2015

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5. Investigations conducted by the respondent Directorate revealed that M/s Birla Power Solution Ltd. collected funds in the form of FDs by publishing advertisements in the newspapers promising a high rate of interest. It was further revealed that the company also raised funds in the form of ICDs. Such deposits were raised from individuals as well as corporate entities through finance brokers. Trusting the company's name and that of its director, they had given loans to M/s Birla Power Solution Ltd. through the finance brokers. Initially, they got their returns but in December 2012, investors stopped receiving interest on due dates and when they deposited the post-dated cheques given towards repayment, the same were not honoured. The total number of FDs was 8800 and the total number of ICDs was around 400.

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6. The investigations further revealed that the FDs collected by giving advertisements were not utilised by Birla Power Solution Ltd., but the money was transferred to other companies of Yash Birla Group. Thus, the money was siphoned off by diverting the funds to several group companies to hide its true source and to use the funds for other purposes. Similarly, the money raised by way of ICDs was also diverted to other group companies and was further transferred from one group company to another, thus creating a web of interconnected transactions for the purpose of layering and integrating the proceeds of crime generated from cheating and conspiracy.

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7. Based on the findings from the investigations, the respondent Directorate provisionally attached certain immovable properties, namely, lands situated at Village Rajewadi, District Satara, Maharashtra, lands in Village Lunkaransar, District Bikaner, Rajasthan, and shares of Vijay

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Puranjay Minerals Pvt. Ltd. Consequently, as mandated by the Act, an Original Complaint (OC) was filed by the respondent Directorate under Section 5(5) of the Act before the Ld. Adjudicating Authority. In pursuance of the same, the Ld. AA, vide the impugned order dated 19.01.2015, confirmed the provisional attachment of the properties in question. Aggrieved by the said order of the Ld. AA, the appellant has filed these appeals before us.

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ARGUMENTS AND CONTENTIONS ON BEHALF OF THE APPELLANT

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8. Upon perusal of the appeal paper book, it is seen that the appellant had raised several grounds therein. It was inter alia contended that the impugned order of the Ld. AA is contrary to the express provisions of the law; the Ld. AA has ignored the definition of „proceeds of crime‟ under PMLA, 2002, failed to apply its mind and simply reproduced the allegations made in the PAO and acted as a mere rubber stamp; that the deposits were invited strictly in compliance with the provisions of the Companies Act and all the transactions were regular financial transactions which cannot invite criminal prosecution even if there was any error of judgement in normal course of financial business transactions; that the ingredients of Section 5(1) and Section 8 were not met and no reasonable person could have had the requisite „reason to believe‟ under the said provisions; that the ingredients of the alleged offences under the IPC, including cheating and criminal breach of trust were not present and the requisite dishonest/fraudulent intent was absent on the part of the appellant; that the prosecution complaint filed by the Mumbai Police on the basis of which action under PMLA, 2002 were initiated are not likely to sustain as the ingredients of the offence under the MPID Act were not present; that there are discrepancies in quantification of the alleged proceeds of crime and varying figures have

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cited in different documents filed by the authorities; that Birla Power Solutions Limited and Birla Surya Limited had gone into liquidation by virtue of orders dated 28.08.2014 and 21.07.2014 passed by the Hon‟ble Bombay High Court and the ownership of the properties in question which have been attached vested in the Official Liquidator by the operation of law, and the same could not have been attached without including the Official Liquidator as a party.

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9. It may, however, be pointed out categorically at this stage that none of the above grounds have been pressed before us by the appellant at the stage of the final hearing of the case. The only issue raised and arguments presented before us by way of the Written Synopsis of arguments filed by the appellant on 13.03.2024 relate to the alleged failure of the respondent Directorate to file a prosecution complaint against the appellant within the limitation period, as a consequence of which, the attachments made are claimed to have lapsed. This issue has been discussed in detail in the paragraphs that follow.

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10. It is contended by the appellants that under PMLA, 2002, as it stood at the time of confirmation of PAO 14/2014 dated 02.09.2014, there was no timeline provided for filing of prosecution complaint. To address this ambiguity, an amendment was made in 2018 whereby the Act was amended to the effect that ED was obliged to file the prosecution complaint within 90 days from the confirmation of the PAO. Subsequently, through an amendment in 2019, the time limit was changed to 365 days. It is pointed out that in the present case, the respondent ED filed the prosecution complaint before the Ld. Special Court after a delay of more than 3 years from the date of confirmation of

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the PAO. It is contended that the amendment to the Act introducing a time limit for filing of prosecution complaint being curative and clarificatory in nature, would apply retrospectively. It is submitted that the Hon‟ble Supreme Court in a catena of judgements has upheld this legal position. It is argued that it is not necessary that an express provision be made to make a statute retrospective and the legal presumption against retrospectivity may be rebutted by necessary implication, especially where the new law is made to cure an acknowledged evil for the benefit of the community as a whole and retrospective operation may be permitted.

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11. In the above context, it is pointed out that in the present case, the PAO dated 02.09.2014 was confirmed by the Ld. AA on 19.01.2015. However, the prosecution complaint was filed only on 16.07.2018, i.e., after a delay of more than 3 years from the date of confirmation of the PAO. It is contended that the intention behind the amendment of the PMLA, 2002 was to prevent “timeless attachment of the property of the innocent by the hands of the Director to Enforcement”. The judgement of the Hon‟ble Supreme Court in Vijay Madan Lal Choudhary v. Union of India, 2022 SCC online SC 929 is inter alia relied upon for the proposition that attachment made during the course of the investigation cannot be done for a timeless period in the spirit of Section 8(3)(a) of the PMLA, 2002. The Respondent (ED) did not file the prosecution complaint within the stipulated period of 90 days from the date of confirmation by the Ld. Adjudicating Authority and still enjoys the attachment of the said property, in the teeth of the provisions of section 8(3)(a) of PMLA. It is contended that when the law provides a thing to do in a particular manner, then the same should be done in that manner only and not in

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any other manner. Once the attachment of properties under the Act is done, ED was bound to file its prosecution complaint within the stipulated time of 90 days. Hence the attached properties of the appellant were liable to be released. The amendment of 2018 does not empower ED to file prosecution complaint even for cases where the confirmation of attachment happened years back. Rather it restricts such power. The count of 90 days for filing the prosecution complaint would start from the date of confirmation. The decision of the Hon‟ble Supreme Court in Sree Sankaracharya University of Sanskrit and Others v. Dr Manu and Another, 2023 SCC online SC 640 (order dated 16.05.2023) is relied upon wherein it was held that if a statute is curative or merely clarificatory of the previous law, retrospective operation thereof may be permitted. The decision of the Apex Court in Zile Singh v. State of Haryana 2004 8 SCC 1 is cited for the proposition that it is not necessary that an express provision be made to make a statute retrospective and the presumption against retrospectivity may be rebutted by necessary implication, especially in a case where the new law is made to cure an acknowledged evil for the benefit of the community as a whole.

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12 . In summary, it is the contention of the appellants that the right of the appellants to get their properties released accrued on 11.04.2015 and grave injustice has been caused to them because of the inordinate delay on the part of the Respondent (ED).

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13. Apart from the cases already mentioned above, the following other case laws are relied upon for the propositions mentioned against them:

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FPA-PMLA-827/MUM/2015

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i) Commissioner of Income Tax, Bombay v. Podar Cement Pvt. Ltd., (1997) 226 ITR 625 (SC) – the circumstances under which an amendment or modification was introduced, and the consequences thereof would have to be borne in mind while deciding the issue as to whether the amendment was clarificatory or substantive in its nature, and whether it would have retrospective effect or not.

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ii) Allied Motors Pvt. Ltd. v. Commissioner of Income Tax, Delhi, (1997) 224 ITR 677 (SC) - A proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole. If a statute is curative or merely declaratory of the previous law, retrospective operation is generally intended. The amendment would not serve its object in such a situation unless it is construed as retrospective.

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iii) Vishnu Thakur v. State of Maharashtra (1994) 4 SCC 602; AIR 1994 SC 2623 -

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A statute which affects substantive rights is presumed to be prospective in operation unless made retrospective either expressly or by necessary intendment whereas a statute which merely affects procedure, unless such a construction is textually impossible, is presumed to be retrospective in its application, should not be given an extended meaning and should be strictly confined to its clearly defined limits

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Law relating to forum and limitation is procedural in nature, whereas law relating to right of action and right of appeal even though remedial is substantive in nature

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Every litigant has a vested right in substantive law but no such right exists in procedural law

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A procedural statute should not, generally speaking, be applied retrospectively where the result would be to create new disabilities or obligations or to impose new duties in respect of transactions already accomplished

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A statute which not only changes the procedure but also creates new rights and liabilities shall be construed to be prospective in operation unless otherwise provided, either expressly or by necessary implication.

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iv) Memon Abdul Karim Haji Tayab v. Dy. Custodian-General AIR 1964 SC 1256 - It is well settled that procedural amendments to a law apply, in the absence of anything to the contrary, retrospectively in the sense that they apply to all actions after the date they come into force even though the actions may have begun earlier or the claim on which the action may be based may be of an anterior date

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v) Trilok Chand Vs. State of Himachal Pradesh Criminal Appeal No.1831/2010 (SC) - If an amendment is beneficial to the accused, then it will be applied retrospectively. The Hon'ble Supreme Court, while adjudicating the matter, referred to a judgment passed by this Hon'ble Court itself in T. Barai Vs. Henry Ah Hoe & Anr. (1983) 1 SCC 177 wherein it was observed in Para 22 that it is only a retroactive criminal

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legislation that is prohibited under Article 20(1) of the Constitution of India. The prohibition contained in Article 20(1) is that no person shall be convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence prohibits nor shall he be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence.

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vi) OPTO Circuits India Ltd. SLP (Crl.) No.4171 of 2020 – If a statute provides for a thing to be done in a particular manner, then it has to be done in that manner alone and in no other manner.

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vii) Mohinuddin Jamal Alvi 2016 [12] SCC 608 - Even an authority higher in rank would not be competent to give the approval as required under Sub-section (1) of Section 21A of the TADA Act because if the statute provides for a thing to be done in a particular manner, then it must be done in that manner alone. All other modes or methods of doing that thing must be deemed to have been prohibited.

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ARGUMENTS AND CONTENTIONS ON BEHALF OF THE

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RESPONDENTS

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14. The respondent Directorate has contested the averments made on behalf of the appellant. In their written reply to the appeal, the respondents have addressed the issues raised in the grounds of appeal. It is contended that the funds raised from investors were not utilised for the intended purpose and were ultimately used for a cause which was not disclosed to the investors in the advertisement published by the appellant. The fraudulent intention of the appellant is proved from the fact that the funds received from investors were initially diverted to own sister concerns and ultimately to one Shri Madan Diwan and his companies.

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Out of these funds, Madan Diwan transferred back Rs. 98 crore to Yash Birla group companies. This clearly reveals the fraudulent intention of the appellant. Funds were collected from investors for expansion and filling of gap of working capital of Birla Power Solution Ltd. but the same were never used for the intended purpose and were routed to various companies of their own group and ultimately transferred to Madan Diwan and were finally utilized for Birla Surya Ltd. project which was subsequently abandoned due to adverse market conditions for their products. It was an act of dishonesty committed by the appellant on the investors to hide the true purpose of raising the funds. It is mentioned that Madan Diwan and his companies received a total of Rs. 234.43 crore from Birla Group of Companies and out of this, Madan Diwan and his companies retained Rs. 136.43 crore with them and transferred back Rs. 98 crore to Birla group companies. It was further revealed that Madan Diwan and his company entered into contract with Birla group of companies, namely, Godavari, Nirved, Shearson and Birla Power Solution Ltd. etc., for executing various works such as transfer of technology (complete power plant with latest technology valued at Rs.186 crore), and against the said contract, Madan Diwan and his companies made advanced payment of Rs. 98 crore to the above Birla group companies. Madan Diwan, in his statement, admitted that the fund so transferred by him to Birla Group of companies for the transfer of Technology was actually an oral arrangement and they have not received any Technology from Birla Group companies. Madan Diwan was made the intermediary for acquisition of land from local farmers. It is pointed out by the respondents that in normal commercial dealing, a person would first identify the property and based on the market price, would evaluate the value of the property, and only after that payment to the sellers would be

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released. But in the present case, Rs. 234.43 crore was transferred into the account of Madan Diwan group of companies by Birla group of companies with the sole intention to layer and integrate the fund into Birla Surya Limited to project the tainted money as untainted.

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15. During the verbal hearing of the case, the learned counsel for the respondent relied upon the contents of the impugned order to explain the modus operandi adopted by the appellant to raise the money fraudulently from investors and divert the same to other entities for purposes other than those for which the money was raised. Insofar as the issue of filing of the prosecution beyond the limitation period is concerned, no specific arguments were presented before us by the learned counsel for the respondent at the stage of final hearing.

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ANALYSIS AND FINDINGS

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16. We have given careful consideration to the rival contentions of the parties and perused the material on record. As already stated in para-10 above, at the stage of final hearing, no arguments on the merits of the case have been presented before us by the appellant. The case was argued solely on grounds of limitation period for filing of prosecution complaint. Accordingly, while taking note of the submissions made by the respondents which have been summarised in the preceding paragraph, we do not express any view on the rival contentions made on the merits of the alleged money-laundering transactions.

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17. Insofar as the issue of limitation period for filing of prosecution complaint u/s 8(3)(a) is concerned, we find that the legal position is as below:

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Upto 18.04.2018 No time limit 19.04.2018 to 90 days from the date of Adjudicating 19.03.2019 Authority‟s order W.e.f. 20.03.2019 365 days from the date of Adjudicating Authority‟s order

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18. We have taken note of the fact that the relevant amendment to Section 8(1)(a) was made through the Finance Act, 2018. The accompanying „Notes on Clauses‟ of the Finance Bill, 2018 reads as below:

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“Clauses 204 and 205 of the Bill seeks to amend certain provisions of the Prevention of Money-laundering Act, 2002, which include the following, namely:-

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(i) ………………. (ii) ……………….

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(iii) to amend section 8 of the said Act relating to adjudication so as to allow Enforcement Directorate reasonable time to file prosecution and also to provide for the Special Court to consider the claim of the claimant for the purpose of restoration of such properties even during trial in such manner as may be prescribed.” [Relevant text emboldened]

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19. It is seen from the above that the intention of the legislature in bringing about the said amendment was to “allow Enforcement Directorate reasonable time to file prosecution”. The same cannot, in our

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view, be used to nullify provisional attachment of properties already made by them in the past and duly confirmed by the Ld. Adjudicating Authority. Further, with regard to the date of the effectivity of Part-XIV of the Finance Bill, 2018 which contained the proposed amendments to the Prevention of Money-Laundering Act, 2002, Clause 204 said Bill provided as follows:

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“204. The provisions of this Part shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.”

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20. The relevant notification in this regard is GSR 383(E) dated 19.04.2018 and the amended clause came into effect on the date of publication of the notification, i.e., 19.04.2018. Accordingly, we are of the view that the respondent Directorate had 90 days from 19.04.2018 to file the prosecution complaint. As per appellant‟s own admission, the prosecution complaint in this case was filed on 16.07.2018. The said date was within the limitation period of 90 days.

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21. In this context, we have also perused the case laws cited by the appellant but did not find anything in the same which could support the appellant‟s contention. There is nothing in para 246 of the judgment of the Hon‟ble Supreme Court in Vijay Madanlal Choudhary (supra) to even remotely support the appellant‟s case. In Sree Sankaracharya University of Sanskrit and Ors., while upholding the position that if a statute is curative or merely clarificatory of the previous law, retrospective operation thereof may be permitted, the Hon‟ble Supreme Court also pointed out that in order for a subsequent order/provision/amendment to be

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considered as clarificatory of the previous law, the pre-amended law ought to have been vague or ambiguous. It is only when it would be impossible to reasonably interpret a provision unless an amendment is read into it, that the amendment is considered to be a clarification or a declaration of the previous law and therefore applied retrospectively. It was also held that merely because a provision is described as a clarification/explanation, the Court is not bound by the said statement in the statute itself, but must proceed to analyze the nature of the amendment and then conclude whether it is in reality a clarificatory or declaratory provision or whether it is a substantive amendment which is intended to change the law and which would apply prospectively. No such difficulty in interpretation or implementation existed vis-à-vis the PMLA, 2002 which made the provisions of Section 8(3)(a) impossible to interpret without the amendment made vide Finance Act, 2018.

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22. The primary proposition emerging from Zile Singh’s case, as per the appellant‟s own submission is that every statute is presumed to apply prospectively. This presumption can be rebutted not only by the express language of the statute but also by necessary implication, especially in a case where the new law is made to cure an acknowledged evil for the benefit of the community as a whole. In the present case, the necessary implication is to the contrary. It could not have been the legislative intention that in all PMLA cases which were older than 90 days and where prosecution complaints had not as yet been filed (there being no limitation of time to do so), the attachment of property would lapse immediately upon the amendment coming into force. Especially so when the

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amendment was expressly stated to be to allow the Enforcement Directorate reasonable time to file prosecution.

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23. The other case laws cited by the appellant are also distinguishable. In the instant case, the amendment was neither clarificatory nor declaratory and brought in a new time limit which did not exist until then. Thus, the proposition stated in CIT v. Podar Cement and Allied Motors v. CIT would not apply. In Vishnu Thakur , it was inter alia held that a procedural statute should not, generally speaking, be applied retrospectively where the result would be to create new disabilities or obligations or to impose new duties in respect of transactions already accomplished. This is clearly against the appellant‟s case rather than in its support. In Memon Abdul Karim Haji Tayab’s case the Apex Court noted that it is well-settled that procedural amendments to a law, in the absence of anything to the contrary, apply retrospectively in the sense that they apply to all actions after the date they come into force even though the actions may have begun earlier or the claim on which the action may be based may be of an anterior date. In the present case, the Directorate has complied with the requirement of the amended law after it came into force by filing the prosecution complaint within 90 days of that date.

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In light of the above discussion, we do not find any merit in the appellant‟s contention that the subject properties which were provisionally attached were liable to be released on account of the respondent Directorate‟s failure to file a prosecution complaint within 90 days of the order of the Ld. AA dated 19.01.2015. The period of 90 days would commence on the date the amendment came into force, i.e., 19.04.2018.

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The respondent‟s having complied with the requirement of filing the prosecution complaint within 90 days of 19.04.2018, there is no illegality in the continued attachment of the properties during the pendency of the same.

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Accordingly, the appeal is dismissed and disposed of along with pending applications, if any.

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No order as to costs.

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