2025 (6) TMI 1671 - AT - Money Laundering

Money Laundering - provisional attachment order - collusion with group of customers by way of interlinked fraudulent transactions - discounting of forged cheques - discounting of forged inland bills and availing of overdraft facility against non-existent LIC policies - siphoning off the funds of the bank for illegal personal gains - HELD THAT - The respondent have considered the proceeds of crime in the hands of the appellant Shri Anoop Bartaria and his associate Shri Kamal Sharma even for the sum obtained by them as a loan from the Syndicate Bank. It was an independent loan taken by them to purchase office units in World Trade Park and had no connection with the scam and accordingly it was repaid to the Syndicate Bank which has issued the NOC on its repayment. The amount of the loan in the hands of the appellant Shri Anoop Bartaria and his associate Shri Kamal Sharma taken from the Syndicate Bank was a sum of Rs. 4.08 Crores and Rs. 4.98 Crores repaid by the appellant and NOC thereof has been submitted and is on record. The respondent erroneously taken it to be proceeds of crime knowing it well that the loan was obtained by Shri Anoop Bartaria and his associate Shri Kamal Sharma independently and had no connection with the scam at the instance of the main accused Shri Bharat Bomb. They even ignored the payment of the loan in instalment and otherwise the payment of entire amount. The appeal in the case of Syndicate Bank was allowed by this Tribunal and therefore there are no substance in the allegation against Shri Anoop Bartaria for commission of crime on alleged non-submission of NOCs from IDBI and DHFL for creation of second charge of Syndicate Bank rather Syndicate Bank itself has taken stand in favour of appellant Shri Anoop Bartaria and he has not committed an offence. The loan amount was paid by Shri Anoop Bartaria and Shri Kamal Sharma and NOC of the bank is on record - The respondent failed to clarify the aforesaid aspect while making allegation for commission of crime by Shri Anoop Bartaria while fact on record shows otherwise. It is coming out from the pleadings of the appeal filed by the Syndicate Bank thus there remains no substance in the allegation against Shri Anoop Bartaria for commission of crime. The Counsel for the respondent failed to clarify that not only professional fee was received by the appellant Shri Anoop Bartaria from the entities of Shri Bharat Bartaria but was reflected in the ITR and Service- tax Return how it could be treated to be proceeds relying on the statement of Shri Bharat Bomb against the documentary evidence. The voluminous records in the shape of correspondence between two for the architectural advice and accounted in the ITR and Service-tax Return much before a complaint for scam by Shri Bharat Bomb in connivance with the Syndicate Bank officials. The TDS certificate has been referred to show disclosure of the professional fee received by the appellant and is prior to the FIR in the year 2016. Conclusion - The respondent failed to explain as to how they can enlarge the scope of the case beyond the allegation in the FIR and can introduce the parties who are not even the complainant and otherwise documents on record show that IDBI DHFL and UCO bank never made an allegation against the appellant for commission of offence rather issued NOC on repayment of loan and even for creation of second charge. It is unable to accept the arguments of the Counsel for the respondent to justify the attachment of the properties and accordingly cause interference in the impugned orders and are set-aside. With the aforesaid both the appeals are allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the Provisional Attachment Orders (PAOs) issued against the appellant and his companies in connection with the Syndicate Bank scam were justified and lawful.

- Whether the properties and amounts attached in the hands of the appellant and his companies constitute proceeds of crime under the Prevention of Money Laundering Act, 2002 (PMLA).

- Whether the amounts received by the appellant and his companies from entities controlled by the main accused in the Syndicate Bank scam were legitimate business transactions or proceeds of crime.

- Whether the amounts paid towards maintenance charges (CAM and HVAC) by the appellant's companies can be treated as proceeds of crime.

- Whether the loans independently taken by the appellant and his associate from Syndicate Bank were connected to the scam and can be treated as proceeds of crime.

- Whether the respondent (Enforcement Directorate) exceeded its jurisdiction by investigating and attaching properties based on loans and charges involving financial institutions (IDBI, DHFL, UCO Bank) that were not complainants and had issued No Objection Certificates (NOCs).

- Whether there was double attachment of properties in respect of amounts already attached in the hands of the main accused and his entities.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legality and justification of Provisional Attachment Orders (PAOs)

Legal framework and precedents: The PMLA empowers the Enforcement Directorate (ED) to provisionally attach properties suspected to be proceeds of crime under Section 5(1) and Section 68 of the Act. The attachment must be based on the satisfaction that such property is involved in money laundering.

Court's interpretation and reasoning: The Tribunal noted that the PAOs were issued against the appellant and his companies in relation to alleged proceeds of crime arising out of the Syndicate Bank scam. However, the investigation and attachment must be confined to the allegations and scope of the FIR and predicate offence. The respondent cannot exceed its jurisdiction by investigating matters beyond the FIR or attaching properties without sufficient basis.

Key evidence and findings: The appellant's companies constructed commercial properties and sold them to various buyers, including entities controlled by the main accused, Shri Bharat Bomb. The appellant's companies received amounts from these entities, some of which were refunded upon change of registration names. The appellant also took independent loans from Syndicate Bank, which were repaid with NOCs issued by the banks.

Application of law to facts: The Tribunal found that the respondent failed to justify attachment of properties and amounts that were either refunded or related to legitimate transactions. The loans taken independently by the appellant were not connected to the scam and had been repaid with NOCs. The respondent's investigation went beyond the FIR and included parties not complainants.

Treatment of competing arguments: The respondent argued that the appellant benefited from proceeds of crime and that the amounts received were proceeds of crime. The appellant countered by showing bona fide business transactions, repayment of loans, issuance of NOCs, and that amounts paid for maintenance charges were legitimate. The Tribunal accepted the appellant's submissions and rejected the respondent's arguments.

Conclusion: The PAOs were not justified to the extent they attached properties and amounts that were not proceeds of crime or were already attached in the hands of the main accused. The respondent exceeded its jurisdiction and failed to establish that the properties/amounts were proceeds of crime.

Issue 2: Whether the amounts received from entities controlled by the main accused constitute proceeds of crime

Legal framework and precedents: Under PMLA, proceeds of crime include property derived or obtained directly or indirectly by any person as a result of criminal activity. The burden is on the respondent to establish the link between the property and the crime.

Court's interpretation and reasoning: The Tribunal noted that the appellant's companies received amounts from entities controlled by the main accused, but these amounts were consideration for sale of commercial properties. The appellant refunded amounts initially received from some entities when registration was sought in the name of other entities. The properties were registered in the names of the purchasers, including the main accused and his entities, who have themselves had their properties attached.

Key evidence and findings: Correspondence between the parties, sale deeds, registration documents, and bank statements showed that the appellant acted in good faith and conducted bona fide business transactions. The respondent's own prosecution complaint acknowledged that the properties were purchased by the main accused and his entities and attached accordingly.

Application of law to facts: The amounts received by the appellant were part of legitimate sale consideration for commercial units. The refund of amounts to original entities and registration in new entities' names demonstrated bona fide business practices. The respondent's attachment of the same amounts in the hands of the appellant amounted to double attachment.

Treatment of competing arguments: The respondent contended that the amounts were proceeds of crime as they originated from fraudulent loans. The appellant rebutted by showing the transactional chain and registration in the names of the main accused and entities, with corresponding attachments. The Tribunal accepted the appellant's position.

Conclusion: Amounts received by the appellant from entities controlled by the main accused were legitimate sale proceeds and not proceeds of crime. Attachment in the hands of the appellant for these amounts was unjustified and amounted to double attachment.

Issue 3: Treatment of amounts paid towards maintenance charges (CAM and HVAC) and their characterization as proceeds of crime

Legal framework and precedents: Maintenance charges payable under the terms of sale and agreements for upkeep of common areas are legitimate payments and do not constitute proceeds of crime. The Apex Court's judgment in Rasila S. Mehta vs. Custodian (2011) 6 SCC 220 was cited to clarify that maintenance charges on attached properties remain payable and cannot be treated as proceeds of crime.

Court's interpretation and reasoning: The Tribunal observed that amounts paid by the appellant's company Sincere Infrastructure Pvt. Ltd. towards CAM and HVAC charges were contractual obligations under the sale deed. These payments were for maintenance and management of common areas and were payable by all purchasers.

Key evidence and findings: The sale deed clause detailed the obligation to pay maintenance charges monthly, including insurance, municipal taxes, and other common expenses. The appellant claimed outstanding maintenance charges due from the main accused and associates, showing the legitimacy of the charges.

Application of law to facts: Since the maintenance charges were payable under contract and for upkeep of the property, they could not be treated as proceeds of crime. Attachment of properties on account of such payments was unjustified.

Treatment of competing arguments: The respondent failed to clarify the basis for treating these payments as proceeds of crime. The appellant's reliance on the Apex Court precedent was accepted.

Conclusion: Payments towards maintenance charges are legitimate and cannot be treated as proceeds of crime. Attachment of properties on this ground was illegal.

Issue 4: Whether loans taken independently by the appellant and his associate from Syndicate Bank were connected to the scam and proceeds of crime

Legal framework and precedents: Loans taken independently and repaid with issuance of NOCs by banks cannot be treated as proceeds of crime unless linked to predicate offences.

Court's interpretation and reasoning: The Tribunal found that the appellant and his associate took loans from Syndicate Bank for purchase of office units and repaid the loans fully. NOCs were issued by the banks, and the loans were independent of the Syndicate Bank scam.

Key evidence and findings: The Syndicate Bank itself filed an appeal before the Tribunal stating that valid charges were created in its favour and the properties were not purchased from proceeds of crime. The FIR alleging non-creation of charge was stayed by the Rajasthan High Court. The appellant produced NOCs and repayment evidence.

Application of law to facts: The loans taken by the appellant and associate were unrelated to the scam and were repaid. Therefore, these amounts could not be included as proceeds of crime for attachment.

Treatment of competing arguments: The respondent argued the loans were part of proceeds of crime. The appellant rebutted with documentary evidence and bank's stand. The Tribunal accepted the appellant's submissions.

Conclusion: Loans independently taken and repaid by the appellant and associate cannot be treated as proceeds of crime. Attachment on this basis was erroneous.

Issue 5: Jurisdictional limits of investigation and attachment beyond FIR allegations and parties

Legal framework and precedents: Investigation and attachment under PMLA must be confined to allegations in the FIR and predicate offences. Parties not named in the FIR or complainants cannot be subjected to attachment without proper cause.

Court's interpretation and reasoning: The Tribunal noted that the respondent extended investigation to loans and charges involving IDBI, DHFL, and UCO Bank, which were not complainants and had issued NOCs. The respondent failed to justify this extension of scope.

Key evidence and findings: The appellant produced NOCs from these banks and showed repayment of loans. The respondent did not produce any FIR or complaint from these banks against the appellant.

Application of law to facts: The respondent's jurisdiction did not extend to investigate or attach properties based on loans from banks that had not complained and had issued NOCs. The respondent's arguments on these issues were rejected.

Treatment of competing arguments: The respondent argued the loans were connected to the scam and justified attachment. The appellant disproved this by showing NOCs and repayment. The Tribunal sided with the appellant.

Conclusion: The respondent exceeded jurisdiction by investigating and attaching properties beyond FIR allegations and parties. Such attachment was invalid.

Issue 6: Double attachment of properties

Legal framework and precedents: Under PMLA, attachment of property must be singular and not duplicated in the hands of different persons for the same proceeds of crime.

Court's interpretation and reasoning: The Tribunal observed that properties and amounts corresponding to proceeds of crime were already attached in the hands of the main accused and his entities. The respondent also attached properties in the hands of the appellant for the same amounts, resulting in double attachment.

Key evidence and findings: The respondent's prosecution complaint and correspondence acknowledged registration and attachment of properties in the names of the main accused and his entities for amounts overlapping with those attached in the hands of the appellant.

Application of law to facts: Attachment of properties in the hands of the appellant for amounts already attached in the hands of the main accused was unjustified and unlawful.

Treatment of competing arguments: The respondent did not adequately address the issue of double attachment. The appellant highlighted this as a fundamental error.

Conclusion: Double attachment of properties for the same proceeds of crime is impermissible. The attachment against the appellant was accordingly set aside.

3. SIGNIFICANT HOLDINGS

"The respondent failed to explain as to how they can enlarge the scope of the case beyond the allegation in the FIR and can introduce the parties who are not even the complainant and otherwise documents on record show that IDBI, DHFL and UCO bank never made an allegation against the appellant for commission of offence, rather issued NOC on repayment of loan and even for creation of second charge." (Para 47)

"The amount received from M/s Omnia was included in the total consideration towards the purchase of property and recorded in the sale deed and the property therein has been attached by the respondents in the hands of the main accused. Thus, with no stretch of imagination, it could have taken the amount of Rs. 4.10 Crores to be the proceeds of crime, rather, it was part of the consideration amount for sale of the properties." (Para 56)

"The payment of Rs. 5.37 crores has also been alleged to be proceeds of crime apart from a sum of Rs. 50 lakhs received from M/s BK Builders ignoring the fact that the aforesaid amount were included in the total sum received from the entities of Shri Bharat Bomb for purchase of commercial and office units in World Trade Park and was registered in the name of the entities of Shri Bharat Bomb and have been attached. Attachment of the property in the hands of the appellant would be nothing but the double attachment in reference to proceeds of crime." (Para 62)

"The loans taken independently by Shri Anoop Bartaria and Shri Kamal Sharma were repaid and NOC of the bank is on record. The respondent erroneously taken it to be proceeds of crime knowing it well that the loan was obtained independently and had no connection with the scam." (Para 63)

"The Syndicate Bank itself took a categorical stand that valid charge had been created in its favour and properties were not purchased by Shri Anoop Bartaria and Shri Kamal Sharma out of the proceeds of crime." (Para 65)

"The appellant was in the business of selling the commercial space after commencement of the construction. It agreed to sell the commercial space and office units to Shri Bharat Bomb. It was with the admission that the appellant was otherwise in pressing requirement to pay the loan amount to the financial institutions, thus a very competitive rates was given." (Para 50)

"The payment towards maintenance charges are payable by all the purchaser as per the terms of the sale deed, thus could not have been considered to be the proceeds of crime." (Para 61)

"The respondent failed to clarify the aforesaid aspect while making allegation for commission of crime by Shri Anoop Bartaria while fact on record shows otherwise." (Para 67)

"The entire transaction was duly reflected in his service tax and income tax returns." (Para 18)

"The appeals are allowed." (Para 70)