Dismissed

FPA-PMLA-930/HYD/2015 of M/s Stylish Holms Real Estates Pvt. Ltd. v. The Joint Director, Directorate of Enforcement, Hyderabad

ATFP21 Nov 2024FPA-PMLA-930/HYD/2015

Case brief

AI extract

What is this about?

Appeals against confirmation of provisional attachment orders under PMLA were dismissed. The Tribunal held that property acquired prior to the offence can be attached as value equivalent to proceeds of crime when tainted assets are unavailable, rejecting arguments that the properties were pre-crime or lacked nexus.

What did the court decide?

Appeals dismissed; nothing in this order affects the right of any party to claim attached property via Section 8 proceedings before the Special Judge.

FPA-PMLA-930/HYD/2015 of M/s Stylish Holms Real Estates Pvt. Ltd… — Money Laundering | ATFP (2024)

¶1

APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI

¶2

1. FPA-PMLA-912/HYD/2015
Emaar Hills Township Pvt. Ltd.	… Appellants
2. FPA-PMLA-914/HYD/2015
Indukuri Syam Prasad Reddy	… Appellants
3. FPA-PMLA-929/HYD/2015
K.L. Narayana	… Appellants
4.FPA-PMLA-930/HYD/2015
M/s Stylish Holms Real Estates Pvt. Ltd.	… Appellants
5. FPA-PMLA-925/HYD/2015
M/s. Southend Projects & Foundations Pvt. Ltd.	… Appellants
6. FPA-PMLA-931/HYD/2015
Koneru Pradeep	… Appellants
7. FPA-PMLA-2112/HYD/2017
K. Ravindranath	… Appellants

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Versus

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The Joint Director, Directorate of Enforcement, Hyderabad … Respondent

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Advocates/Authorized Representatives who Argued

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For the Appellant No.1:S/Sh. Siddharth Aggarwal, Abhinav Agnihotri, Dipan Sethi &Prabhav Garg Advocates; For the Appellant No.2: S/Sh. Raavi Yogesh Venkata,KotteVenkata,

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Pawan Kumar,Advocates;

¶8

For the Appellant No.3: S/Sh. Amit Khemka,Ayush Saini, Advocates; For the Appellant No.4 & 5: Sh. Divyank Yadav, Advocate; For the Appellant No.6: S/Sh. Mr.AshwaniTaneja, Mr. Udit Atul, Adv.;

¶9

For the Appellant No.7: S/Sh. Amit Khemka, Mr. Ayush Saini, Advs; For the Respondent :Mr. Munindra Dvivedi, Advocate, Mr. Kshitiz Aggarwal, Advocate.

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CORAM SHRI GOPAL CHANDRA MISHRA : MEMBER SHRI RAJESH MALHOTRA : MEMBER

¶11

FINAL ORDER

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21.11.2024

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Dictated By Rajesh Malhotra:

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FPA-PMLA-912,914,925, 929-931/HYD/2015 &FPA-PMLA-2112/HYD/2017 Emaar Hills Township Pvt. Ltd& Ors v. Directorate of Enforcement, Hyderabad

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Present appeals under Section 26 of Prevention of Money Laundering Act, 2002 are filed by appellants against the impugned order dated 09.04.2015 passed by the Adjudicating Authority, in Original Complaint No. 386/2014 vide which the following properties of the appellants attached in PAO No. 03/2014 dated 21.11.2014 were confirmed for attachment:-

¶17

S. No	Description of the property	Property held by	Value in Rs.
1.	Fixed deposits of worth Rs. 20 Crores vide FD A/c No. 027320100079584,027320100079690, 27320100079788, 027320100080058, 27320100080535, 027320100080508,27320100080517, 027320100080526 held in the name of M/s Southend Projects & Foundations Pvt. Ltd. with Andhra Bank,Jayanagar Branch,Bangalore.	M/s Southend Projects & Foundations Pvt. Ltd.	20,00,00,000
2.	Shares of 2,52,10,000 No‟s of Sri Indukuri Syam Prasad Reddy in M/s Indu Projects Limited of face value Rs. 10/- each vide share Certificate No. IME367101018 (Total shares 3,62,06,155 No‟s)	Sri Indukuri Syam Prasad Reddy	25,21,00,000
3.	Land of 36 Acres 14 Gunts at Bikal and Mallikarjunagiri Villages Marpalle Mandal, Ranga Reddy District vide Doc. No‟s 5807/2006 dated 06.11.2006 for 584 Gunts, 6252/2006 dated 22.11.2006 for 644 Gunts, 0381/2007 dated 20.01.2007 for 134 Gunts, 2494/2007 dated 16.04.2007 for 60 Gunts 2495/2007 dated 16.04.2007 for 15 Gunts, 2565/2007 dated 19.04.2007 for 33 Gunts, 3369/2007 dated 31.05.2007 for 40 Gunts with area 1454 Gunts(36 Acres 14 Gunts).	Sri Koneru Pradeep S/o Sri Koneru Rajendra Prasad	12,83,000
4.	14 unsold plots with M/s EHTPL, vide Plot No‟s A-6 (1490 Sq. Yds.); A-43 (1361 Sq. Yds.), A-47 (1060 Sq. Yds.); B-2a (595 Sq. Yds), B-6 (1109 Sq. Yds); B-24 (1595 Sq. Yds.), B-33 a (763 Sq. Yds); B-35 (1349 Sq. Yds), B-43a (818 Sq. Yds); B-66 (869 Sq. Yds), B-67 (849 Sq. Yds); B-66 (869 Sq. Yds.), B-67 (849 Sq. Yds.); B-68 (854 Sq. Yds.), B-69 (941 Sq. Yds.); B-72 (970 Sq. Yds.) 14624 Sq. Yds. in total @ Rs. 25,000/- per Sq. Yds.	M/s Emaar Hills Township Pvt. Ltd.	36,56,00,000
5.	Land of 2057 Sq. Yds held in the name of M/s Stylish Holmes situated in Gachibowli village, Serilingampally Mandal, Ranga Reddy District vide doc. No. 19790/2006 (1019 Sq. Yds.) & 19791/2006 (1038 Sq. Yds.) dated 29.09.2006 registered at SRO,RR District	M/s Stylish Holmes Real Estates Pvt. Ltd.	1,02,85,000
6.	Land of 4.80 Acres in Survey No. 15 in Nanakramguda Village, in the name of M/s EHTPL (valued @ Rs. 25,000/- per Sq. Yd.) Total	M/s Emaar Hills Township Pvt. Ltd.	58,08,00,000 (attachment to the extent of Rs. 13,09,07,000) 96,01,75,000/-

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FPA-PMLA-912,914,925, 929-931/HYD/2015 &FPA-PMLA-2112/HYD/2017 Emaar Hills Township Pvt. Ltd& Ors v. Directorate of Enforcement, Hyderabad

¶20

As per the facts of the case, FIR No. RC-35-2011-A-0018 dated 17.08.2011 was registered by the Central Bureau of Investigation, Hyderabad, against Sh. BP Acharya, IAS, Chairman & MD of Andhra Pradesh Industrial Infrastructure Corporation (herein after called referred as APIIC); M/s Emaar Properties PJSC, Dubai; M/s Emaar Hills Township Pvt. Ltd., Hyderabad; unknown officials of Government of Andhra Pradesh & unknown others for the offences punishable under Section 120-B read with 420, 409,420 & 477-A of Indian Penal Code, 1860 and Section 13(2) r/w Sec. 13(1) (c) &(d) of the Prevention of Corruption Act, 1988 and substantive offences thereunder.

¶21

As the said offences are scheduled offences, ECIR/08/HZO/2011 dated 30.08.2011 was registered under PMLA by respondent ED for investigation.In the meantime, after completion of investigation CBI filed charge sheet before Ld. Special Judge, CBI Court, at Hyderabad, on 01.02.2012, which reflects following material facts:-

¶22

The Government of Andhra Pradesh (AP), issued Govt. Order (G.O) Ms. No. 359 dated 04.09.2002 for the development of an integrated project including multi-use development (Residential and Commercial Development) at Manikonda Village, R.R District on 535 acres of land as detailed below: The land use proposed at Manikonda

¶23

S. N.	Title	Area	Land Transaction
1.	Golf Course	235 Acres	Land to be provided on lease basis with upfront cost
			of Rs. 1.45 lakhsper acre deposit capitalized as equity

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FPA-PMLA-912,914,925, 929-931/HYD/2015 &FPA-PMLA-2112/HYD/2017 Emaar Hills Township Pvt. Ltd& Ors v. Directorate of Enforcement, Hyderabad

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			in the SPVs and an annuity as 2% of annual gross turnover on all Golf Course components for a period of 66years.
2.	Multi-use	285 Acres	Land to be conveyed on sale basis @ Rs. 29 lakhs per Acre.
3.	Un-usable land	15 Acres	Water bodies.
T	otal Land	535 Acres

¶27

The Government of AP issued GOMS No. 14 on 11.01.2005, amended by GOMS 22 dated 27.01.2005 for Development of Township Project at Manikonda by M/s Emaar Hills Township Pvt. Ltd. (EHTPL in short) as Special Purpose Vehicle (SPV)-1, with equity structure of 74:26 to the Developer and Andhra Pradesh Industrial Infrastructure Corporation (in short APIIC)respectively. It was also specified that the equity from APIIC was on land value basis alone @ Rs.29.00 lakhs per Acre for the saleable land for the Township project, i.e. 285 Acres of land.

¶28

EHTPL was incorporated on 20.08.2003 with Shri Vijay Menon and Sri AJ Jaganathan, as the initial Directors of the Company, and subsequently, in the Board Meeting dated 30.11.2004, Sri Koneru Rajendra Prasad was appointed as an Additional Director of the Company.

¶29

M/s Emaar MGF Land Pvt. Ltd. was incorporated on 18.02.2005 having registered office at 17-B, MGF House, New Delhi and subsequently, changed to M/s Emaar MGF Land Ltd. (EMGF in short). Sri Shravan Gupta and Sri Siddhartha Gupta were the initial Directors of the company.

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FPA-PMLA-912,914,925, 929-931/HYD/2015 &FPA-PMLA-2112/HYD/2017 Emaar Hills Township Pvt. Ltd& Ors v. Directorate of Enforcement, Hyderabad

¶32

Development Agreement dated 03.11.2006 executed between EHTPL and EMGF. As per clause 2.8.1 of the agreement, the Developer i.e. EMGF was required to undertake the entire development and bear all the cost of the project, for which Developer (EMGF) was entitled to 75% of the gross revenue in the total covered and uncovered built up area, including common areas and common facilities either through the sale and/or lease proceeds.

¶33

Subsequently, a Development Agreement-cum-General Power of Attorney (GPA) was executed between EHTPL and EMGF on 25.07.2007, sharing the gross revenue between EMGF and EHTPL in the ratio of 75:25 on the sale and lease proceeds. Subsequently an Addendum to Development Agreement & GPA dated 23.07.2008 was executed reducing revenue sharing pattern from 75:25 to 95:5.

¶34

An agency agreement dated 29.01.2005 was entered by M/s Emaar Properties PJSC, Dubai and M/s Stylish Holmes Real Estates Pvt. Ltd., 100 villa plots to be sold @ Rs. 5,000/per Sq. Yd., and the remaining Villa Plots (beyond 100) were to be sold at the prevailing market rates and it was the responsibility of EMGF to fix the rates in tune with market rates.

¶35

Instead of fixing the rates in line with the market rates, as per the instructions of Sri Shravan Gupta, Director of EMGF, floated 10 different companies (7 at New Delhi and 3 at

¶36

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FPA-PMLA-912,914,925, 929-931/HYD/2015 &FPA-PMLA-2112/HYD/2017 Emaar Hills Township Pvt. Ltd& Ors v. Directorate of Enforcement, Hyderabad

¶38

Ernakulam) with its employees as Directors/Shareholders and booked Villa Plots in the @ Rs. 5,000/- per Sq. yd., so that the same could be sold at premium rates in future. The funds required were transferred from the account of M/s Discovery Estates Pvt. Ltd., in which Sri Shravan Gupta and his wife are having 99% shares. 18 Villa Plots were blocked in the name of these 10 companies @ Rs. 5000/- per Sq. yd. during the year 2010, when the prevailing market rate was Rs. 50,000/- per Sq. yd. and Villa Plots were being sold to other buyers in this project @ Rs. 50,000/- per Sq. yd.

¶39

The 16 Villa Plots were also sold by EMGF at much higher rates during the period 2009-10 (which is evident from the information retrieved from the laptop of Sri Vijay Raghav through CFSL and from the statements of some Villa plot buyers), however only the amount @ Rs. 5000/- was accounted for in the books of accounts of M/s EMGF.

¶40

As per the revenue sharing agreement and as per the books of accounts, EMGF was required to pass on 25% of the Gross Annual Revenue to EHTPL amounting to Rs. 48 Crores for further revenue sharing between EHTPL and APIIC. However, it was never transferred to the books of accounts of EHTPL and further to APIIC, thus APIIC was deprived from its due revenue share. EHTPL was being managed by the staff of EMGF, and thus, EHTPL was reduced to a shell company with sole objective to deprive APIIC from its due revenue share and misappropriate the revenues from the integrated project.

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FPA-PMLA-912,914,925, 929-931/HYD/2015 &FPA-PMLA-2112/HYD/2017 Emaar Hills Township Pvt. Ltd& Ors v. Directorate of Enforcement, Hyderabad

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As per the provisions of G.O.s issued by the Government of AP and Collaboration Agreement and Supplementary Agreement executed between APIIC and M/s Emaar Properties PJSC, Dubai, EHTPL was required to develop the project land by way of constructing Villas and Apartments. It was never intended by the Government of AP and also by APIIC to sell Villa Plots in the Township Project. Thus, the agency agreement dated 29.01.2005 executed by the Chairman, M/s Emaar Properties PJSC, Dubai on behalf of M/s EHTPL agreeing to sell the plots @ Rs. 5000/- per Sq. Yd. for a period of 5 years was nothing, but a clandestine arrangement in furtherance of the criminal conspiracy by the Developer to dispose-off the project land, without developing the same, and thereby, deprive APIIC from its legitimate revenue share from the developed land.

¶44

APIIC conveyed 258.36 acres of land in favour of EHTPL vide conveyance deed dt. 28.12.2005 for development of the integrated project. EHTPL executed a Development Agreement dt. 03.11.2006 with EMGF,inducting it as a Co-Developer. But EHTPL and M/s Stylish Holmes Real Estates Pvt. Ltd., booked as many as 43 villa plots till 27.12.2005 i.e. even before execution of Conveyance Deed dated 28.12.2005 by APIIC in favour of EHTPL.

¶45

The 31 villa plots (excluding three model villas) were sold by EHTPL and EMGF at the documented rate of Rs. 5000/- per sq. yd., though the prevalent market rates were much higher.

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FPA-PMLA-912,914,925, 929-931/HYD/2015 &FPA-PMLA-2112/HYD/2017 Emaar Hills Township Pvt. Ltd& Ors v. Directorate of Enforcement, Hyderabad

¶47

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M/s Stylish Holmes Real Estates Pvt. Ltd. was not involved in the sale of these villas and villa plots.

¶49

Investigation has revealed that 13 villa plots, including three model villas (constructed at Plot No's: A-70, A-71 and A- 73) were sold by EHTPL and EMGF directly to the buyers. During investigation, one of the above said villas/plot buyers confirmed having paid excess amount of Rs. 2,80,40,000/- in cash over and above the documented price of Rs. 5000/- per sq. yd., and the said amount was sent by him to the office of EMGF, Hyderabad, as per the Instructions of Sri Vijay Raghav.

¶50

Investigation revealed that ten villas/plots Nos. A-70, A- 71,A-72, A-73, A-74, A-75, A-76, A-77 &A-78/79 were sold by EMGF, between May, 2009 and March, 2010. Two villa plot buyers, who purchased plot Nos. A-75 & A-78/79 respectively during the same period have confirmed to have paid excess money @ Rs. 20,000/- per Sq. Yd., in cash over and above the documented price @ Rs. 5000/- per Sq. Yd.

¶51

Further the following 18 Villa plots were booked by EMGF through their 10 shadow companies, in the name of the following companies @ Rs. 5000/- per Sq. Yd. and an amount equivalent to 10% of the sale consideration was paid from the accounts of the above said 10 companies in favour of EMGF, as per the details as under:

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S. No.	Plot No.	Name of the buyer	Extent in Sq. Yds.	Amount Paid (Rs.)
1.	A-47	M/s Unicorn Infocom Pvt. Ltd.	1060	5,30,000/-
2.	A-48	M/s Shalin MarketingServices(Kerala)Pvt. Ltd.	1303	6,51,000/-

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FPA-PMLA-912,914,925, 929-931/HYD/2015 &FPA-PMLA-2112/HYD/2017 Emaar Hills Township Pvt. Ltd& Ors v. Directorate of Enforcement, Hyderabad

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3.	B-51	M/s Eco AgrotechPvt. Ltd.	1271	6,35,500/-
4.	B-60	M/s NavagrahRealconPvt. Ltd.	1298	6,49,000/-
5.	B-61	M/s KingstarRealconPvt. Ltd.	1447	7,23,500/-
6.	B-62	M/s Crave Infratech Pvt. Ltd.	1033	5,16,500/-
7.	B-63	M/s Frolic Constructions Pvt. Ltd.	1005	5,02,500/-
8.	B-64	M/s Unicorn Infocom Pvt. Ltd.	1200	6,00,000/-
9.	B-65	M/s Proma Professional Solutions Pvt. Ltd.	1042	5,21,000/-
10.	B-66	M/s Shalin MarketingServices(Kerala)Pvt. Ltd.	869	4,34,500/-
11.	B-67	M/s Stacomp Consultancy & Compliance Services Pvt. Ltd.	849	4,24,500/-
12.	B-68	M/s Bliss InfracomPvt. Ltd.	854	4,27,000/-
13.	B-69	M/s Frolic ConstrutionsPvt. Ltd.	941	4,70,500/-
14.	B-70	M/s Stacomp Consultancy & Compliance Services Pvt. Ltd.	1200	6,00,000/-
15.	B-71	M/s KingstarRealconPvt. Ltd.	1074	5,37,000/-
16.	B-72	M/s Eco AgrotechPvt. Ltd.	970	4,85,000/-
17.	B-73	M/s Crave Infratech Pvt. Ltd.	1042	5,21,000/-
18.	B-74	M/s NavagrahRealconPvt. Ltd.	1138	5,69,000/-

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However, EMGF issued cancellation letters dated 04.10.2010, though the amount of initial deposit was received from these companies still remain with EMGF. The intention of EMGF behind booking 18 plots in the name of the companies incorporated/acquired in the name of their employees, was to block the villa plots @ Rs. 5000/- per Sq. Yd. and subsequently for resale at premium rates. Since, APIIC was entitled for a revenue share from the consideration received from first sale of villa plots and not from the resale.

¶57

Thus, investigation revealed the existence of a very wellknit criminal conspiracy on the part of EMGF, and others to deprive APIIC of its lawful revenue share, by booking villa plots @ Rs. 5000/- per Sq. Yd. The criminal intent of EMGF is also evident from the fact that villa plots were sold to Sri Rahul Raju @ Rs. 23,198/- per Sq. Yd., and two other buyers @ Rs. 25,000/- per Sq. Yd. However, in furtherance of the conspiracy the amounts of Rs. 2,80,40,000/- and Rs. 4,05,20,000/collected from the two villa plot buyers in cash as part of sale

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FPA-PMLA-912,914,925, 929-931/HYD/2015 &FPA-PMLA-2112/HYD/2017 Emaar Hills Township Pvt. Ltd& Ors v. Directorate of Enforcement, Hyderabad

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consideration of the villa plots allotted to them, have not been accounted for in the books of accounts of M/s EMGF.

¶61

Investigation by CBI also revealed that Sri Madhu Koneru, S/o Shri Koneru Rajendra Parsad, who is carrying business in Dubai has received an amount of USD 2,50,000/- into his personal account No.8900056630 with National Bank of RASAL-KHAIMAH on 09.08.2007 from Sri Parthasarathy, buyer of villa plot in M/s EHTPL. Sri Parthasarathy, in his statement recorded under Section 164 of Cr.PC 1973, stated that he purchased villa plot no. B-34 at a cost of Rs. 50,000/- per Sq. Yd., out of which, he paid Rs. 5,000/- per Sq. Yd. through cheque and the balance amount of Rs. 45,000/- per sq. yd. amounting to Rs.5,13,00,000/-, he paid Rs. 4,08,00,000/- to Sri Tummala Ranga Rao in the residence of Sri Koneru Rajendra Prasad and balance of Rs.1,05,00,000/- equivalent to USD 2,50,000 to Madhu Koneru. On the advice of Sri Koneru Rajendra Prasad, Sri Madhu Koneru refunded the said amount stating that the said amount as loan given by Sri Parthasarathy. However, Sri Parthasarathy denied the said transaction as loan. Similarly, Sri Madhu Koneru had received USD 1,40,000 equivalents to Rs. 65 Lakhs in his savings A/c No. 2750064022 from Sri Challa Suresh who purchased Villa plot A-28 in M/s EHTPL and this fact has been confirmed by Sri Suresh and Sri Tummala Ranga Rao.

¶62

Investigation also revealed that Sri GV Vijay Raghav, Finance Head-South, EMGF, has collected an amount of Rs.

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FPA-PMLA-912,914,925, 929-931/HYD/2015 &FPA-PMLA-2112/HYD/2017 Emaar Hills Township Pvt. Ltd& Ors v. Directorate of Enforcement, Hyderabad

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6,85,60,000/- from sale of three villa plots over and above the documented price @ Rs. 5,000/- per Sq. Yd., during the period 2008-2010. Sri Tummala Ranga Rao has collected excess amount of Rs. 96.01 Crores from villa plot buyers, thus an amount of Rs. 102,87,35,000/- collected from villa plot buyers over & above the rate of Rs. 5000/- per Sq. Yd., should have gone to the books of accounts of EHTPL. Even if, the expenditure reflected in the books of accounts of M/s EHTPL is taken into consideration, the revenue of EHTPL and the share of APIIC in the profit of EHTPL, is detailed in the following table:

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Income/Expenditure		Financial Year					Total (in Rs.
		2006-07	2007-08	2008-09	2009-10	2010-11	Crores)
Income		5.95	2.10	25.17	11.39	15.33	59.94
Expenses		18.07	1.41	9.02	3.49	1.21	33.20
Profit Before Tax(PBT)		-12.12	0.69	16.15	7.90	14.12	26.74
Revenue not admitted		0.00	2.18	14.23	24.14	-2.88	37.67
Revised PBT		-12.12	2.87	30.38	32.04	11.24	64.41
Cash Component Stylish Holmes)	(M/s	From 2005 t	o 2010				96.02
Cash Component Emaar MGF Land Ltd.)	(M/s	From 2008 t	o 2010				6.86
Total							167.29

¶67

The investigation by CBI revealed that EMGF and M/s Emaar Properties PJSC, Dubai obtained undue pecuniary advantage of Rs. 167.29 Crores.

¶68

CBI also filed supplementary charge sheet on 23.04.2012.The said supplementary charge sheet reveals that on reference of Sri Koneru Rajendra Prasad, M/s Emaar Properties PJSC, Dubai, appointed M/s Stylish Holmes & Real Estates Pvt. Ltd. (M/s Stylish Holmes in short) represented by Sri Tummala Ranga Rao as its sole agent for marketing the

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FPA-PMLA-912,914,925, 929-931/HYD/2015 &FPA-PMLA-2112/HYD/2017 Emaar Hills Township Pvt. Ltd& Ors v. Directorate of Enforcement, Hyderabad

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plots and Residential units constructed in the land integrated project on 29.01.2005, without consulting APIIC.

¶72

The first 100 plots were to be sold by the agent M/s Stylish Holmes at an agreed price of Rs. 5000/- per sq. yd. and the balance plots were to be sold at prevailing market rates as determined by EHTPL. As per the agency agreement, M/s Stylish Holmes can collect additional 4% of the sale value as the commission from the villa plot buyers.

¶73

As per the instructions of Sri Koneru Rajendra Prasad, M/s Stylish Holmes started booking of villa plots in the township from March, 2005, well before the land for the project was Conveyed in favour of EHTPL.

¶74

As per the agency agreement dated 29.01.2005, first 100 plots were to be sold at Rs. 5000/- per Sq. Yd., whereas, Sri Koneru Rajendra Prasad fixed higher prices ranging from Rs. 4000/- to Rs. 45000/- per Sq. Yd. and instructed Sri Tummala Ranga Rao of M/s Stylish Holmes to collect the excess sale consideration from villa plot buyers in cash. As per his instructions, Sri Tummala Ranga Rao has collected the excess amount of Rs. 96.01 Crores from 82 Villa plot buyers in cash over and above the documented price of Rs. 5000/- per Sq. Yd., during 2005-10, which was confirmed by Sri Tummala Ranga Rao and his Accountant/Manager, who gave statements recorded under Section 164 of Cr.PC, 1973 before the Hon‟ble Metropolitan Magistrate, Secunderabad.

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FPA-PMLA-912,914,925, 929-931/HYD/2015 &FPA-PMLA-2112/HYD/2017 Emaar Hills Township Pvt. Ltd& Ors v. Directorate of Enforcement, Hyderabad

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Sri Tummala Ranga Rao had handed over the excess amounts so collected (aggregating to Rs. 96.01 Crores) to Sri Koneru Rajendra Prasad and to Sri N. Sunil Reddy, as per the instructions of Sri Koneru Rajendra Prasad. Both Sri Tummala Ranga Rao and his Manager/Accountant Sri K. Srinivas have confirmed the same in their statements under Section 164 Cr. PC, 1973 and that on most of the cases Sri N. Sunil Reddy used to come to their office to collect the excess amount collected from Villa Plot Buyers and as per the instructions of Sri Koneru Rajendra Prasad, they used to hand over the cash amount to Sri N. Sunil Reddy.

¶78

Sri N. Sunil Reddy along with his father Sri N. Sangi Reddy, floated a company by name M/s Sunil Projects and Foundations Pvt. Ltd., as directors, on 10.05.2006. Thereafter, Sri Narapa Manohar Reddy and his wife Smt. Narapa Saradha Reddy were appointed as directors w.e.f. 10.10.2009 and the name of the company was changed to M/s Southend Projects and Foundations Pvt. Ltd. from 25.01.2010. Sri N. Sunil Reddy and his father Sri N. Sangi Reddy have resigned from the company w.e.f. 01.10.2010.

¶79

M/s Southend Projects & Foundations Pvt. Ltd. has received funds of Rs. 45.21 Crores from the following 11 companies during 2009-10.

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S. N.	Company Name	Amount Received (Rs.)
1.	M/sAmydaleInfoTech Pvt. Ltd.	3,05,00,000
2.	M/sAramidTextilesPvt. Ltd.	5,75,00,000
3.	M/sBloomery Steel IndustriesPvt. Ltd.	3,40,00,000

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FPA-PMLA-912,914,925, 929-931/HYD/2015 &FPA-PMLA-2112/HYD/2017 Emaar Hills Township Pvt. Ltd& Ors v. Directorate of Enforcement, Hyderabad

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4.	M/sBlueskyEnterprisesPvt. Ltd.	3,60,00,000
5.	M/s Chakri IndustriesPvt. Ltd.	1,15,00,000
6.	M/sInvarSteelsPvt.Ltd.	2,50,00,000
7.	M/sMegallan EnterprisesPvt.Ltd.	11,90,00,000
8.	M/sPashmina TextilesPvt. Ltd.	6,85,00,000
9.	M/sPunarvasuEnterprisesPvt. Ltd.	1,55,00,000
10.	M/s Scanners Systems & Technology Pvt. Ltd.	2,46,00,000
11.	M/sEtread.com Pvt. Ltd.	3,00,00,000
	Total	45,21,00,000

¶84

These companies did not exist at the given addresses during the relevant period & as on date also there is no trace of these companies at the given addresses. It was also revealed that no trade licenses were given to some of these companies including M/s Southend Projects & Foundations Pvt. Ltd. by Greater Hyderabad Municipal Corporation. This clearly shows that these companies were floated only for the purpose of transfer of funds.

¶85

The said excess amount of Rs.96.01 Crores collected/received by Sri Koneru Rajendra Prasad and Sri N. Sunil Reddy from Sri Tummala Ranga Rao and his Manager/Accountant has not presented for accounting in the books of accounts of M/s EHTPL.

¶86

It is pertinent to mention here that after registration of ECIR/08/HZO/2011 dated 30.08.2011, PAO No. 01/2012 dated 25.09.2012 was already issued for attachment of the properties value at Rs.71.027 crores, which were also confirm by Ld. Adjudicating Authority vide order dated 15.02.2013 in previous Original Complaint no. 158/2012.

¶87

FPA-PMLA-912,914,925, 929-931/HYD/2015 &FPA-PMLA-2112/HYD/2017 Emaar Hills Township Pvt. Ltd& Ors v. Directorate of Enforcement, Hyderabad

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With regard to the remaining amount of Rs.96.01 crore received in cash by Shri Tummala Ranga Rao of M/s Stylish Holmes, CBI filed supplementary charge sheet no. 05/2012 dated 23.04.2012. While initiating further investigation under the Act, it was noticed that Shri Tummala Ranga Rao has given a statement before Hon‟ble Metropolitan Magistrate, under Section 164 Cr.PC on 09.01.2012 in which he stated as under:-

¶90

He established M/s Stylish Holmes Real Estates Pvt. Ltd. on 16.09.2004 as per the instructions of Sri Koneru Rajendra Prasad, at Plot No. 15, Site II of Film Nagar, Jubliee Hills, Hyderabad, which is a residence of Sir Koneru Rajendra Prasad and family.He was taken to the office of M/s Emaar Properties PJSC in Dubai by Sri Koneru Rajendra Prasad in January, 2005 and entered into an agreement with M/s EHTPL on 29.01.2005 specifying that- 30 plots to be sold within 6 months from the date of the first sale of the plot; 100 villa plots to be sold at agreed price of Rs.5000/- per Sq. Yd.; Agent may collect 4% on the sale value as commission from the buyer; remaining plots should be sold as per the price fixed by M/s EHTPL, as per the market conditions prevailing. In March 2005, Sri Koneru Rajendra Prasad told him to collect excess amounts in cash from the buyers of the plots in addition to the price of the plots of Rs.5000/- per Sq. Yd. fixed by M/s EHTPL and to give the same to Sri Koneru Rajendra Prasad, so that he can utilize the amount for the persons, who helped to M/s Emaar Properties PJSC in getting the project. Accordingly, Sri Tummala Ranga Rao has

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collected cash in excess of documented value of Rs. 5,000/-per Sq. Yd. from the buyers and handed over to Sri Koneru Rajendra Prasad under the impression that the officials of M/s Emaar Properties PJSC were aware of the same.As per the instructions of Sri Koneru Rajendra Prasad, he paid 10% advance for 11 plots on behalf of M/s Stylish Holmes to M/s EMGF and out of these 11 plots, 8 plots were allotted to the persons suggested by Sri Koneru Rajendra Prasad and the remaining 3 plots (A-21, A-43, B-24) were still with M/s Stylish Holmes.He further provided the names of villa plot buyers who paid excess amount ranging between Rs. 4000/- to Rs.45000/- per Sq. Yd., collected by himself or by his manager Sri K. Srinivasa Rao or by Sri Koneru Rajendra Prasad in different times. From this excess amount collected, he has paid an amount of Rs.2.50 Crores to farmers to purchase lands for family members of Sri Koneru Rajendra Prasad, as per the instructions of Sri Koneru Rajendra Prasad.Sri Koneru Rajendra Prasad used to finalize the buyer and the sale consideration and as instructed by Sri Koneru Rajendra Prasad, Sri K. Srinivas Rao and Sri Tummala Ranga Rao used to handover the excess cash collected from the buyers either to Sri Koneru Rajendra Prasad or to Sri N. Sunil Reddy. As per the instructions of Sri Koneru Rajendra Prasad, two villa plot buyers Sri P.S. Parthasarathi and Sri Challa Suresh, as part of excess payment, have deposited Rs.1 crore and Rs.65 lakhs respectively in the foreign account of Sri Koneru Madhu, S/o Sri Koneru Rajendra Prasad.As per the instructions of Sri Koneru

¶94

FPA-PMLA-912,914,925, 929-931/HYD/2015 &FPA-PMLA-2112/HYD/2017 Emaar Hills Township Pvt. Ltd& Ors v. Directorate of Enforcement, Hyderabad

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Rajendra Prasad, no records were maintained by the M/s Stylish Holmes with regard to cash transactions between the buyers and Sri Koneru Rajendra Prasad, which were collected and paid to Sri Koneru Rajendra Prasad by Sri Tummala Ranga Rao and by his accountant Sri K. Srinivas Rao and they did not disclose the cash transactions to anybody as instructed by Sri Koneru Rajendra Prasad .

¶97

Accordingly, ED issued the summons under Section 50 of PMLA, and thereafter, recorded the statements of several persons and also obtained financial accounts and bank statements of M/s Stylish Holmes, Shri Tummala Ranga Rao of M/s Southend Projects and Foundations Pvt. Ltd., Sri N. Sunil Reddy, Sri K. Rajendra Prasad and the other persons associated with the transactions.

¶98

Investigation revealed that Sri N. Sunil Reddy received Rs.45.21 crores in cash from Sri Tummala Ranga Rao and invested the same in M/s Southend Projects through eleven Bogus Companies for the purpose of transfer of funds to M/s Southend Projects and were converted in to share capital amount with high premium, as against the paid-up capital of Rs.10.73 crores made by the promoters. Hence, the amount of Rs.45.21 crores dissolved in M/s Southend Projects was considered as proceeds of crime.

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FPA-PMLA-912,914,925, 929-931/HYD/2015 &FPA-PMLA-2112/HYD/2017 Emaar Hills Township Pvt. Ltd& Ors v. Directorate of Enforcement, Hyderabad

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The remaining amount of Rs.50,80,75,000/- out of cash of Rs.96,01,75,000/-, collected by Shri Tummala Ranga Rao was handed over to Shri Koneru Rajendra Prasad.

¶102

Accordingly, ED vide PAO No. 03/2014 dated 21.11.2014, attached the assets of appellants (as detailed in para no. 1 above), and thereafter filed Original Complaint No.386/2014 before Ld. Adjudicating Authority for confirmation of the said properties. Ld. Adjudicating Authority after going through the material on record, issued show cause notice to the defendants (herein appellants). After going through the replies filed by them and hearing both the sides confirmed the attachment vide order dated 09.04.2015.

¶103

Aggrieved by the said order, the appellants filed the present appeals.

¶104

During the arguments Ld. Sr. Counsel for appellant M/s Emaar Hills Townships Pvt. Ltd. submitted that Section 5(1) of PMLA, 2002 is not attracted in the present case for passing the Provisional Attachment Order No. 03/2014 dated 21.11.2014, by respondent ED and thereafter filing the Original Complaint No.386/2014 before Ld. Adjudicating Authority. He pointed out that conditions must be fulfilled before passing any PAO. Firstly, the reason to believe that any person is in possession of any proceeds of crime and secondly, such proceeds of crime are likely to be concealed, transfered or dealt with in any manner, which may result in frustrating any

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proceedings relating to confiscation of such proceeds of crime. He pointed out that the properties attached by ED are not derived or obtained directly or indirectly, as a result of any criminal activity of schedule offence or liable for attachment as value of proceeds of crime. The land was purchased and acquired by appellant company through legally executed agreements and for payment of due consideration from the legitimate sources. He stressed that at the relevant time, the circle rate of residential plots in Village Manikonda on 01.07.2005 was Rs. 1000/- per sq. yards and on 01.08.2006, it was Rs. 3500/- per sq. yards and hence, question of generating any excess amount does not arise. The plots were sold on first come first serve basis, without any premium and with transparency. The said attached property is not covered in the definition of the proceeds of crime in terms of Section 2(1) (u) of PMLA. He contended that the proceeds of crime include the properties directly purchased from the proceeds of crime, but the properties unrelated to the proceeds of crime cannot be attached as value thereof. He further submitted that proceeds of crime cannot be derived or obtained prior to the criminal activity or the scheduled offence alleged to be committed and hence, the properties purchased prior to the said period of commission of offence are not liable for attachment in any manner. He stressed that the properties of appellant were already attached by the Income Tax Authorities vide letter dated 26.09.2013 and hence, there was no occasion on the part of

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appellant company to dispose of or transfer the said properties. He submitted that even prior to the said attachment the appellant was unable to transfer or deal with the properties in terms of the order dated 21.12.2010 passed by Hon‟ble Company Law Board, Chennai bench, in CP No. 608/2010 without the consent of Conciliation Board. He argued that Ld. Adjudicating Authority without appreciating the fact that there is no material in OC 386/2014 to issue show cause notice, issued the same without any application of mind and thereafter confirmed the same vide order dated 09.04.2015, by ignoring the defence of the appellant as mentioned in his reply. He argued that PAO by ED and its confirmation by Adjudicating Authority without reasons is a nullity and needs to be set aside. He contended that in absence of any proceedings qua the offence of money laundering, in absence of any prosecution complaint under PMLA against him, the question of attaching and confirming his/its properties does not arise.Ld. Counsel for appellant company submitted that ED failed to make out any case against it under the provisions of PMLA, as ED quantified the proceeds of crime for sum of Rs. 96.01 Crore collected by Sri Tummala Rangarao and was given to Shri Koneru Prasad and Shri Sunil Reddy. Out of which, Rs. 45.21 Crores are admittedly invested with M/s Southend Projects & Foundation Pvt. Ltd. and the remaining Rs. 50.80 Crore remained with Koneru Prasad. He submitted that,even otherwise, the said statement of Tummala Rangarao u/s 164Cr.P.C. is self-

¶111

FPA-PMLA-912,914,925, 929-931/HYD/2015 &FPA-PMLA-2112/HYD/2017 Emaar Hills Township Pvt. Ltd& Ors v. Directorate of Enforcement, Hyderabad

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contradictory and not corroborated with any other documentary evidence. He argued that since appellant company has not received any amount out of the alleged proceeds of crime, the question of attaching and confirming its properties does not arise, simply because Sri Koneru Prasad was one of the directors of the appellant company. He pointed out that the alleged conspiracy involving M/s Stylish Holmes, Sri Tummala Rangarao, Sri Koneru Prasad and Sri Sunil Reddy came to the knowledge of appellant company, only after the CBI filed the chargesheet in the Court. Accordingly, he argued that question of attaching the properties of appellant company by ED and its subsequent confirmation by Ld. Adjudicating Authority is without any basis and needs to be set aside.

¶114

Ld. Counsels for the remaining appellants adopted the most of the arguments submitted on behalf of appellant M/s Emaar Hills Township Pvt. Ltd. In addition to the said arguments, Ld. Counsel for appellant Sri Indukuri Syam Prasad Reddy submitted that Ld. Adjudicating authority failed to appreciate that the monies paid by M/s Southend Projects &Foundations Ltd. to M/s Asara Theme Projects Pvt. Ltd. towards the purchase of land is a genuine business transaction, which did not fructify due to the contractual breach on the part of M/s Southend Projects & Foundations. The said transaction does not have any nexus or connection with the proceeds of crime in any manner. Even otherwise, the appellant was not aware about the source of fund invested by

¶115

FPA-PMLA-912,914,925, 929-931/HYD/2015 &FPA-PMLA-2112/HYD/2017 Emaar Hills Township Pvt. Ltd& Ors v. Directorate of Enforcement, Hyderabad

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the said company with M/s Asara Theme Projects Pvt. Ltd. The Ld. Adjudicating Authority erred in not giving due credence to the fact that by the time of transaction of M/s ATPPL with M/s Southend Projects & Foundation Pvt. Ltd., Mr. Sunil Reddy has nothing to do with the said company and he is neither a director, nor a shareholder in the said company and as such, the department ought not to have linked a routine/normal business transaction done by M/s ATPPL with completely different transactions between Mr. N. Manohar Reddy and Mr. Sunil Reddy. He pointed out that ED attached the properties of appellant without enquiring into the other possible assets of the alleged perpetrators. The property of appellant is attached without appreciating the fact that he has no connection with the alleged criminal activity and without verifying the fact that Mr. Sunil Reddy was in possession of other properties. He stressed that attachment of shares of the appellant owned by him in his personal capacity in M/s Indu Projects Ltd. is quite erroneous, as the company M/s ATPPL and its directors and shareholders are different legal entities. He contended that ED has attached the said shares on its face value of Rs. 10each totalling to Rs. 2,52,10,000/-, without appreciating the actual/fair market value of the said shares on the date of attachment. He pointed out that the said shares were acquired by the appellant ranging from Rs. 130 to Rs. 183. He argued that appellant is bona-fide third party and is not involved in

¶118

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any conspiracy with the accused persons/suspects. Prayer is accordingly made to allow the present appeal.

¶121

Ld. Counsel for appellant Dr.K.L. Narayana in additional arguments submitted that none of the 102 plots sold by M/s Emaar Hills township Pvt. Ltd./ Emaar MGF Land Ltd. was sold by the said company at the time of passing PAO and therefore, the attachment of only 14 plots including the plot no. B-6 held and purchased by appellant was wrongly included for attachment. He argued that appellant is a bona-fide purchaser for value. He was not having any knowledge regarding the commission of any fraud and hence his plot is wrongly attached by ED. Prayer is accordingly made to release his plot from any attachment.

¶122

Ld. Counsel for the appellant M/s Stylish Holms Real Estates Pvt. Ltd. arguedthat its land measuring 2057 Sq. Yds situated in Gachibowli village, Serilingampally Mandal, Ranga Reddy District, is wrongly attached by Respondent ED and confirmed by Ld. Adjudicating Authority, without appreciating the fact that appellant company was not beneficiary in any manner. It has not received any cash above the amount mentioned in the agreement. The job of the appellant was only to scout for the clients and they use to give cheques in the name of M/s Emaar Hills Township Pvt. Ltd. and Emaar MJF Ltd.. It received only commission from the buyers of the plots and was not party to any conspiracy as alleged. He argued that appellant company paid service tax, income tax and other taxes

¶123

FPA-PMLA-912,914,925, 929-931/HYD/2015 &FPA-PMLA-2112/HYD/2017 Emaar Hills Township Pvt. Ltd& Ors v. Directorate of Enforcement, Hyderabad

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on the legitimate commission received from the various buyers as per norms. He stressed that selling of plots as agent on commission basis is not a criminal activity in any manner. He contended that in-spite of the explanation pertaining to sources of income the said land was wrongly attached. He argued that there is nothing on record that the appellant company was floated neither intention to deprive APIIC from share of income or for causing any wrongful loss. The attached land was not purchased from any proceeds of crime, but out of the commission earned by the respondent company and therefore, same cannot be treated as value of such property. In support of his contention he pointed out the bank account statement of the appellant company reflecting the payments made to the land owners in 2009. No attempt is made by the Respondent ED to attach the property of the real culprits as value of such property in their hands, in lieu of absence of direct proceeds of crime. He argued that his attached land is not part of the properties from proceeds of crime and no part of the same is involved in the case registered by CBI or ED. He further submitted that the appellant is not an accused in CBI case or prosecution complaint filed by ED. He pointed out that Tummala Ranga Rao Director of appellant company is already discharged from the CBI case by Ld. Special Judge Hyderabad, by granting him pardon and making him as a witness in the said case. Accordingly, he pointed out that as per section 8(5) of PMLA the attachment of his land ceases to have any effect, once

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he is acquitted in the predicate offence by way of pardon and hence, his property needs to be released, by allowing the present appeal.

¶129

Ld. Counsel for appellant Southend Projects & Foundations Pvt. Ltd. submitted that its FDRs to the extent of Rs. 20 crores were wrongly confirmed for attachment without appreciating the reply and contention of the appellant. He pointed out that appellant company is not arrayed as accused in predicate offence investigated by CBI. Appellant company has not received any share from the alleged proceeds of crime. No enquiry was conducted by ED regarding any money trail from the accused person to the account of appellant company, if any. There is nothing on record to show that the appellant company continue to have business with the accused company, even after its exit from the said company in year 2009. Appellant company has not participated in commission of any offence and for sharing the proceeds of crime, as alleged. He argued that Ld. Adjudicating authority relied upon the statement of co-accused Tummala Ranga Rao, who was granted pardon in the CBI case without appreciating the fact that there is no documentary evidence to corroborate the said statement recorded under Section 164 Cr.PC. He contended that in absence of any predicate offence against the appellant company, question of attaching its property does not arise.

¶130

Ld. Counsel for the appellant Koneru Pradeep in additional argumentssubmitted that no opportunity was given

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to the appellant for cross-examination of Tummla Ranga Rao. He argued that PAO 03/2014 dated 21.11.2014 was passed on the basis of material in existence, even prior to 25.09.2012, without appreciating the fact that while passing the previous PAO on 25.09.2012, no finding was given with respect to material on record for attaching the said properties subsequently in year 2014. There is no provision to pass PAO in piece meal manner one after another on the same material evidence.No fresh cause of action arose after passing the previous PAO on 25.09.2012. Appellant has nothing to do with the commission of alleged scheduled offences. There is no material to connect the alleged excess cash amount of Rs. 96.01 Crores collected by Tummala Ranga Rao and Sri K.S. Rao, as the attached properties were never purchased from the alleged proceeds of crime. He further argued that the persons in possession of alleged money were not even examined by ED. He further argued that Ld. Adjudicating authority failed to appreciate that during investigation his statement was recorded and the bare perusal of the same will reflect that appellant has not been asked regarding the source of fund for purchasing the land. Moreover, the documents produced by the appellant i.e. the copies of the sale deed were not relied upon by ED in Original Complaint No. 386/2014 or in PAO no. 03/2014. He argued that appellant was not asked as to how much payment was made by him to the land owners whose land were purchased by the appellant Pradeep Koneru. On the other

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hand, appellant explained all the sources of fund for purchasing the said attached property. Prayer is accordingly made to allow the present appeal.

¶137

Ld. Counsel for the appellant K. Ravindranath submitted that as per the chargesheet filed by the CBI, the Provisional Attachment Order issued by the ED and all other documents clearly mention that the said plot was purchased by the appellant. He further submitted that none of the 102 plots were sold by EHTPL/Emaar MGF Land Ltd. to any person by way of registered sale deed and hence, only 14 plots, including the one B-33a heldand purchased by appellant was wrongly included for attachment. He argued that appellant is a bonafide purchaser for value. He was not having any knowledge regarding the commission of any fraud and hence his plot is wrongly attached by ED. Prayer is accordingly made to release his plot from any attachment.

¶138

On the other hand, Ld. Counsel for the respondent ED strongly opposed the grounds of appeal and the same will be taken into account in our discussion in the subsequent paras. 5. As per the first contention of appellants Section 5 (1) of the PMLA is not attracted in the present case for passing the PAO No.03/2014 dated 21.11.2014 by Respondent ED, as there is nothing on record that appellants are in possession of any proceeds of crime. Moreover, there is nothing on record that such proceeds of crime are likely to be conceive, transfer or dealt with in any manner by the appellants. Appellant M/s

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FPA-PMLA-912,914,925, 929-931/HYD/2015 &FPA-PMLA-2112/HYD/2017 Emaar Hills Township Pvt. Ltd& Ors v. Directorate of Enforcement, Hyderabad

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Emaar Hills Township Pvt. Ltd. took the specific plea that even prior to the passing of PAO, the appellant was unable to transfer or deal with the properties in terms of the order dated 21.12.2010 passed by Hon‟ble Company Law Board Chennai Bench in CP No.608/2010 without the consent of the Conciliation Board.

¶142

To analyze the aforesaid argument, it would be gainful to quote definition of Proceeds of Crime given u/s 2(1)(u) of the Act of 2002 and is quoted thus:

¶143

“(u) “ proceeds of crime ” means any 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 [or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad];

¶144

Explanation . For the removal of doubts, it is hereby clarified that "proceeds of crime" include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence ;]”

¶145

A perusal of this definition would show that the “proceeds of crime” includes the property derived or obtained directly or indirectly out of criminal activity, but that is not end of the definition of Proceeds of Crime. It can be for “ value of any such property’’ . The aforesaid words used in the definition of

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“ Proceeds of Crime ” is to cover those properties which are not derived or obtained directly or indirectly out of the criminal activity, but attached for value equivalent to the Proceeds of Crime, if money acquired has been vanished. The Act of 2002 was enacted pursuant to the International Convention to address the offence of money laundering. If the definition of “Proceeds of Crime” is given restricted meaning to hold that it shall include only the properties obtained or derived directly or indirectly from the criminal activity then it would nullify the very objects of the enactment and the consequence of it would be serious. It would result to a situation where the accused would immediately try to vanish or siphon off the proceeds, so that the properties may not be attached. In light of the same, the definition has been framed after taking care of all the circumstances, and therefore, it is not that only the property derived or obtained directly or indirectly from the crime would come within the sweep of Proceeds of Crime, but it would also be the property of equivalent value as well which may not have nexus with the proceeds of crime. It would also be when the property is taken or held outside the country then the property of equivalent value held within the country. The argument that attachment can be only of the property derived or obtained directly or indirectly out of the criminal activity was an issue before the Delhi High Court in the case of Enforcement Directorate v. AxisBank , reported in 2019 SCC OnLine Del 7854 and PrakashIndustries Ltd. v. Directorate of

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Enforcemen t, reported in 2022 SCC OnLine Del 2087. The Ld. Counsel for the Appellants also referred a judgment of Kerala High Court in W.P.(Crl) No. 406/2024 Satish MotilalBidri vs. Union of India dated 28^th June, 2024 to press upon the argument that attachment can be only of the proceeds obtained directly or indirectly out of criminal activity and it cannot be of any other property of equivalent value. Para 9, 17 and 18 of the judgment in the case of Satish Motilal Bidri(Supra) has been referred and are quoted thus:

¶152

“9. On a perusal of the above schedule which specifies the properties that have been provisionally attached, it is evident that the immovable property attached was purchased by the petitioner on 05.01.2004. From Ext.P11 it can be understood that M/s Masters Finserv - the proprietary concern promoted by the accused in the predicate offence, commenced its operations in 2017 while the predicate offences are alleged to have been committed between 27-01-2021 and 14-11-2022. Therefore, it is evident that the immovable property that has been provisionally attached as per the impugned order was purchased more than a decade and a half before the alleged offence took place.

¶153

17. The aforesaid observations indicate that the properties that can be proceeded against, exercising the powers of attachment must be those that have been acquired utilizing the proceeds of crime. The contention of

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the learned counsel for the respondents that the term proceeds of crime will also include the value of the property which had been acquired even earlier is, according to me, too farfetched and will not be justifiable in the light of the constitutional provisions of fairness and reasonableness. It is also necessary to observe at this juncture that the purpose of the PMLA is to remove tainted money and also to initiate proceedings against the proceeds of crime which have been transformed or converted into other property or intermingled with legitimate sources and then the value of the intermingled gain will assume the colour of proceeds of crime. Such a provision cannot be used to enable the authorities to proceed against properties that are unconnected with any of the criminal activity in question.

¶157

18. Viewed in the above perspective, as the provisionally attached immovable property was purchased in 2004 more than a decade and a half before the predicate offence was allegedly committed, the order attaching the immovable property is ex-facie, ultra vires the powers of the statute and totally illegal and arbitrary to the extent of the said attachment. Since ex facie illegal acts can be interfered with under Article 226 of the Constitution of India, notwithstanding the existence of an alternative remedy, this Court is of the view that the provisional attachment of the immovable property as seen from schedule A to Exhibit P11 order dated 22.05.2024 is liable to be set aside. However,

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as relating to the provisional attachment mentioned in schedule B to Exhibit P11, i.e. those relating to the amount in the bank accounts the petitioner has an effective alternative remedy provided by the statute.”

¶161

The perusal of the judgment in the case of Satish Motilal Bidri(supra) would show reference of the earlier judgment of different High Courts, which includes the judgment in the case of SeemaGarg Vs. Deputy Director, Directorate of Enforcement 2020 SCC online Punjab & Haryana 738 and also the judgment in the case of Axis Bank (supra) .

¶162

We, however, do not find reference of relevant para of the judgment of the Apex Court in the case of Vijay MadanlalChaudhary &Ors. Vs. Union of India 2022 SCC

¶163

online Supreme Court 929rather makes reference of other paras . Para 68 of the said judgment is relevant and quoted thus:

¶164

“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

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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.”

¶168

The para quoted above was not referred before Kerala High Court though a judgment of the Supreme Court in the case of Pavana Dibbur Vs. Directorate of Enforcement 2023 SCC online SC 1586has been referred. The arguments in reference to the issue of definition of proceeds of crime to the words “ value of any such property ” was raised and decided in the judgment of Vijay Madanlal Chaudhary (Supra). It is by three Judge Bench and would be binding on us. At this stage, we may also refer to the relevant paras of the judgment of Delhi High Court in the case of Axis Bank (Supra) and are quoted thus:

¶169

“106. Among the three kinds of attachable properties mentioned above, the first may be referred to, for sake of convenience, as “tainted property” in as much as there would assumably be evidence to prima facie show that the source of (or consideration for) its acquisition is the product of specified crime, the essence of “money laundering” being its projection as “untainted property” (Section 3). This would include such property as may have been obtained or acquired by using the tainted property as the consideration

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(directly or indirectly). To illustrate, bribe or illegal gratification received by a public servant in form of money (cash) being undue advantage and dishonestly gained, is tainted property acquired “directly” by a scheduled offence and consequently “proceeds of crime”. Any other property acquired using such bribe as consideration is also “proceeds of crime”, it having been obtained “indirectly” from a prohibited criminal activity within the meaning of first limb of the definition.

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107. In contrast, the second and third kinds of properties mentioned above would ordinarily be “untainted property” that may have been acquired by the suspect legitimately without any connection with criminal activity or its result. The same, however, are intended to fall in the net because their owner is involved in the proscribed criminality and the tainted assets held by him are not traceable, or cannot be reached, or those found are not sufficient to fully account for the pecuniary advantage thereby gained. This is why for such untainted properties (held in India or abroad) to be taken away, the rider put by law insists on equivalence in value. From this perspective, it is essential that, before the order of attachment is confirmed, there must be some assessment (even if tentative one) as to the value of wrongful gain made by the specified criminal activity unless it be not possible to do so by such stage, given the peculiar features or complexities of the case. The confiscation to be

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eventually ordered, however, must be restricted to the value of illicit gains from the crime. For the sake of convenience, the properties covered by the second and third categories may be referred to as “the alternative attachable property” or “deemed tainted property”.

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The issue aforesaid was considered by Delhi High Court even in the case of Prakash Industries (supra) and relevant paras of the judgment are also quoted hereunder:

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“105. It would be pertinent to recall that properties which were acquired prior to the enforcement of the Act may not be completely immune from action under the Act in light of what this Court had held in Axis Bank. As was explained by the Court in Axis Bank, the expression proceeds of crime envisages both ―tainted property as well as ―untainted property with it being permissible to proceed against the latter provided it is being attached as equal to the “value of any such property” or “property equivalent in value held within the country or abroad”. However, both the italicised categories would be liable to be invoked in cases where the actual tainted property cannot be traced or found out. It is only where the respondents are unable to discover the tainted property that they can take the statutory recourse to move against properties which may fall within the ambit of ―value of any such property or ―property equivalent in value held within the country or abroad. To the aforesaid limited extent, properties purchased prior to 01 July 2005

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may also become vulnerable and subject to action under the Act. However, enforcement action against such properties would have to satisfy the tests and safeguards as propounded in Axis Bank with the learned Judge observing that in such a situation it would have to be established that the person accused of money laundering had an interest in such property at least till the time that he indulged in the proscribed criminal activity. The learned Judge further observed that bona fide rights acquired by third parties prior to the commission of the predicate offense would stand saved.”

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The issue as to whether the properties acquired prior to the commission of the offence can be attached. The issue aforesaid has been dealt with by this Tribunal in the case of AyushKejriwal vs. The Deputy Director, Directorate ofEnforcement, Kolkata , FPA-PMLA-4358/KOL/2021. Relevant paras are quoted hereunder for ready reference:

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“15. It is also necessary to clarify that if the accused derived or obtained the property out of the crime has parked it with other person, then the person holding such property can be subjected to attachment or seizure though he may not be accused in the FIR. It is for the reason that if the interpretation otherwise is taken, it would frustrate the object of the Act of 2002. It can be in a manner that the person who derived or obtained the property out of the crime may immediately park it with a third person and the

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property in that case would not be liable for attachment or seizure for the reason that the person holding the property has not been named as an accused, in that case, the very purpose and object of the Act would be frustrated. In view of the above, even if the appellant is not named as an accused but he is holding the `proceeds of crime‟ and even if the property if not directly or indirectly obtained out of the crime but is of the value thereof, it would fall in the definition of “proceeds of crime” and such property or document can be subjected to seizure.

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16. In the instant case, serious allegations of fraudulent transactions to the tune of Rs.164.99 crores exists against many accused which includes appellant’s grandfather. The appellant’s grandfather purchased a property in the year 1988 but it was gifted to the appellant in the year 2020 after registration of the FIR in the year 2017 and even the ECIR. It was by way of gift the property was transferred to the appellant to overcome with the fraud committed by him with the bank and to save the property from seizure and attachment. It was not gifted bonafide but to save the property from seizure and attachment after registration of FIR though it was not obtained out of the proceeds of crime but is for the value thereof in absence of the availability of the total proceeds out of the crime i.e. Rs.164.99 crores.

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xxxx

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18. The fact is that the property was originally belonging to the accused Nirmal Kumar Kejriwal, the grandfather of the appellant. A gift was made in the year 2020 in favour of the appellant whereas the FIR was registered in the year 2017 followed by the ECIR in the year 2019. The way property was given to the appellant has been noticed and as it was earlier belonging to one of the accused thus, the documents were seized by the respondent and we do not find any illegality in it. The words “the value of such property” does specify it to be earlier to the crime or subsequent and we can insert words “thus value of such property” would mean the property acquired prior or subsequent to the crime.”

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It is not that only those properties which have been were derived or obtained directly or indirectly out of the crime can be attached rather in case of non-availability of the property derived or obtained directly or indirectly i.e. when it is vanished or siphoned off, the attachment can be of any property of equivalent value.

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It is necessary to clarify that the proceeds of crime would not only include the property derived or obtained directly or indirectly out of the criminal activity relating to the scheduled offence, but any other property of equivalent value. The word “ or ” has been placed before “ the value of any such property ” and is of great significance. Any property of equivalent value can be attached when the proceeds directly or indirectly obtained out of the crime has been vanished or siphoned off. Here,the

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significance would be to the property acquired even prior to commission of crime. It is for the reason that any property acquired subsequent to the commission of crime would be directly or indirectly proceeds of crime and then, it would fall in the first limb of the definition of proceeds of crime. In the second limb, which refers to “ the value of any such property” would indicate any other property which was acquired prior to the commission of crime and it would be attached only when the proceeds directly or indirectly obtained or derivedout of the criminal activity is not available. It may be on account of siphoningoff or vanished by the accused. In

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thosecircumstances the property of equivalent value can be attached.The word “ the value of any such property ” signifies without any embargo that it should be the property purchased after the commission of crime or prior to it rather it would apply in both the eventuality in the given circumstance. Thus, we are not in agreement with the counsel for the appellant who has questioned the attachment in reference to the property acquired prior to commission of crime. We are not going even further that the properties have nexus with the proceeds out of the crime but even in given circumstances and scenario that the property was acquired prior to commission of crime then, also under certain circumstances, it can be attached for “ the value of any such property .”

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The issue otherwise has been dealt with by this Tribunal in the case of Ayush Kejriwal (Supra) and the present matter is squarely covered by the aforesaid.

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Ld. Sr. Counsel for the appellant M/s Emaar Hills Township Pvt. Ltd. contended that even prior to the passing of PAO, the appellant was unable to transfer or deal with the properties in terms of the order dated 21.12.2010 passed by Hon‟ble Company Law Board Chennai Bench in CP No.608/2010 without the consent of the Conciliation Board.

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We are not satisfied with the contention of the appellant in this regard, as appellant company can press for the release of the property by paying the dues/penalty under the Income Tax Act, and the respondent ED cannot be directed to keep a continuous watch to wait for the said eventuality and thereafter to pass the fresh PAO. This course of action may result in disposal of the property in the meantime. The situation might have been different if the property was attached or secured as per procedure under any other criminal law other than PMLA. Hence, we are not inclined to set-aside the attached on aforesaid ground.

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As per the contention of the appellants at the relevant time, the circle rate of residential plots in Village Manikonda on 01.07.2005 was Rs. 1000/- per sq. yards and on 01.08.2006, it was Rs. 3500/- per sq. yards and hence, question of generating any excess amount does not arise. The plots were sold on first come first serve basis, without any premium and with

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transparency, and hence, question of generating any proceeds of crime does not arise.

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We are not convinced with the above contention, as the value of residential plots in village Manikonda cannot be equated with the value of plots in well planned big residential township project to be developed by APIIC through M/s EHTPL on 285 acres of land, and thus, the said township can be separately categorised and differentiated from the residential area of the villageabadi. Even otherwise, the fixing of circle rate is only for the purpose of taking minimum rate for stamp duty on any sale transaction, irrespective of any market rate of the area. It is mostly seen that the market value is more than the circle rate of the area. Even otherwise, there is nothing on record that the floating of the said township project was widely published in the newspapers to sell the plots on first come first serve basis. Even, brochure of the said housing project reflecting terms & conditions alongwith the rate price and number of plots is not produced by the appellants.

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The charge sheet filed by the CBI revealed that M/s EMGF & M/s Emaar Properties PJSC obtained undue pecuniary advantage of Rs.167.29 Crores. Thereafter, CBI also filed Supplementary charge sheet against the accused persons. The detailed allegations against all the appellants are mentioned in para no.2 above. The said allegations are also supported with the statement of Tummala Ranga Rao & Parthasarathy U/s 164 Cr.P.C., the statement of the buyers namely, Rahul Raju, Sri

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Challa Suresh and the other buyers of villas & plots etc. clearly reflects the generation of proceeds of crime by the present appellants by selling the plots on high rates on premium, but on record reflecting the sale price as only Rs.5,000/- per Sq.yd. and thereby, generating the excess amount/proceeds of crime of Rs.102,87,35,000 (Rs.96,01,75,000+Rs.6,85,60,000).

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The next contention of the appellants that the SCN was issued by the Adjudicating Authority against them without any application of mind is also devoid of any merits, in view of the detailed allegations mentioned against the appellants in Original Complaint no.386/2014 filed by the ED before the said Adjudicating Authority along with relied upon documents. The said allegations are also reproduced in para no.2 of this final order.

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The contention of the appellant Koneru Pradeep that the properties cannot be attached in piece meal manner one after another is also no ground to allow the appeal, as the properties can also be attached in subsequent PAO, if the additional properties come to the knowledge of ED and the proceeds of crime generated or received by any person is much more than the value of his properties attached.

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The contention of some of appellants that they are not arrayed as the accused persons in the predicate offence investigated by CBI, is also not a valid ground to release the properties, if there is evidence on record that they received the part of any proceeds of crime without any knowledge that the

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said proceeds of crime are generated by the accused persons by commission of any crime. Even arraying the said person in prosecution complaint under PMLA is not mandatory, but any part of proceeds of crime received by him or any property attached as value thereof cannot be released. 11. AppellantsDr. K. L. Narayana and K. Ravindranath have taken the plea that they are thebonafide purchaser of plot no. B-6 and B-33a respectively, and hence, the said plots needs to be released. Admittedly, no sale deed is executed by the vendor in their favour till date, though they have made full payment for purchase of plots at the rate of Rs. 5000/- per sq. yd. for plots measuring 1109 and 763 sq. yds. respectively. Admittedly, these two appellants are neither in physical possession of the plots, nor any sale deeds are executed in their favour. The issue that whether they are the bonafide purchasers/allottees of the plots needs to be decided by the Trial Court, under PMLA, Act,2002. Under such circumstances, these two appellantsmay press for their claim before Ld. Special Judge, PMLA Court under Section 8(6) to 8 (8) of PMLA, 2002, if they are the genuine and bona fide purchasers of the said plots.

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In view of our discussion from para 5 to 11, the present appeals are hereby dismissed, being devoid of any merits. However, it is made clear that nothing express herein will affect the right of any party to claim the attached property as per Section 8(6) to 8(8) of PMLA, 2002 and for the said purpose Ld.

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Special Judge PMLA Court will apply his mind independently

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on the basis of facts and evidence on record.

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Pending applications, if any, are disposed of accordingly.

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All Appeals Dismissed .

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