TMI Blog2019 (1) TMI 832X X X X Extracts X X X X X X X X Extracts X X X X ..... h Pothy has been filed. This is because of the reasons that the appellants are not directly or indirectly involved in the money laundering. They have no direct link or nexus with deceased who has now passed away. The appellants have no objection if criminal proceedings already pending against accused parties may continue as per law. The appellants despite of above are agreeable to deposit a sum of ₹ 6,47,25,000/- as value assessed by the ED in the Investigation Report with the respondent (without prejudice) in order to secure the entire value of the property filed by the ED in the reason to believe. The figure mentioned by the hearing officer in the impugned order is fanciful and accepted as per the case of ED in subsequent pleadings. The real figures are mentioned in the reason-to-believe on the basis of which the provisional attachment order was passed. The said figures could not have been changed. The appellant is directed to deposit a sum of ₹ 6,47,25,000/- with the respondent without prejudice within the period of six weeks from today as security amount. In case the final orders are passed against the accused, the said amount shall be kept by the ED. In ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of ₹ 5,30,74,500/-. The said Ms. Dhanalakshmi Sridhar is the daughter of one Mr. Sridhar Dhanapal, (who was facing criminal prosecution by the Tamil Nadu Police for alleged offences and shown as accused in the many FIRs registered under provisions of law, including Scheduled offence and under Prevention of Money Laundering Act, 2002). The said accused Sridhar Dhanapalan has now expired during the pendency of appeals. The appellants had no relation with him. They are not arrayed as accused in the FIR, nor any charge-sheet is filed. The property attached was not purchased from accused who had not received any money from the appellants. In the nutshell, no link and nexus established by the respondent against the appellants between the late Sridhar and appellants. 6. The background of purchase of the larger extent of land is that on 21.08.2010, the Appellants through mediators purchased property from Mrs. Kumari, registered as Doc. No. 3308 / 2010 on the file of Sub Registrar Office, Kancheepuram for a consideration of ₹ 1,00,00,000/-, measuring an extent of 4921 sq. feet. The case of the appellant is that they had ventured for other properties and one such prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed. 10. The source of funds were that they are into retail business and their sources of funds are reflected from the bank details and statements who produced documents such as Bank Statement of account and also individual income tax returns before the Adjudicating Authority to show the means of the funds for purchase of the subject property. The amounts shown as credits in the Bank account filed before the Adjudicating Authority are the credits of short term loans availed by the Appellants Company from City Union Bank Ltd. Further the Appellants being in the retail business, the credits to the Appellants Company Bank account is by transactions reflecting through Credit/Debit cards (referred as POS {point of sale} transactions) and cash deposits of daily collections. Even, it is not the case of respondent that the said amount paid by the appellant was tainted or proceed of crime. 11. The Appellants have also produced by way of document, the certificate of the Bank for having credited the Short Term Loan to the Bank account and also the regular cash deposits from the sales in the retail outlets. The Appellants have also produced the Auditor certificate to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chi and M4 Police Station, Red Hills, Kancheepuram District, Tamil Nadu and 19 FIRs were filed by the respective Police Stations against Shri Sridhar Dhanapal. Shri Sridhar Dhanapal has been evading the judicial proceedings in India for past 3 years and a Red Corner Notice No. A-4947/8-2013 was issued against him by Central Bureau of Investigation, National Central Bureau- India Interpol, New Delhi. It is learnt that the above Sridhar Dhanapal has also obtained a residence permit in UAE vide (UID No. 108676751 dated 26.12.2014 in File No. 201/2011/7227961) using his Dubai Passport No. Z2506281. He flew away from India in the year 2013 to evade judicial proceedings. He has obtained/purchased several properties in India in his name, in the name of his wife Smt. Kumari and in the name of his daughter Ms. Dhanalakshmi out of the illgotten earnings from the crimes committed by him vide FIR Nos. 522/09, 1456/12 117/16 registered by B1 Police Station at Sivakanchi, FIR Nos. 809/09, 1162/09, 149/10, 228/11, 229/11, 319/13 and 278/15 registered B3 Police Station at Kanchi Taluk, FIR Nos. 1736/12, 710/13, 13/14, 80/15 and 1362/15 registered by B2 Police Station at Vishnu Kanchi a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16.08.2016 22.08.2016 3. Ms. S. Dhanalakshmi, D/o Shri Sridhar 12.03.2016 Appeared on 16.03.2016 rendered her voluntary statement 4. Sh. D. Senthil, Younger Brother of Sh. Sridhar Appeared on 26.05.2016 rendered his voluntary statement. 5. Sh. Ramesh Pothy Managing Director of M/s Pothys Private Ltd. 04.04.2016 Appeared on 12.04.2016 rendered his voluntary statement. 15. The main findings out of investigation under PMLA, 2002 as per the case of the Respondent with regard to the impugned property is that: Shri Ramesh Pothy and his 4 brothers of M/s Pothys Private Ltd. , had purchased immovable properties from Smt. Kumari in the year 2010 and from Ms. Dhanalakshmi Sridhar during February 2016, however, the sale consideration was given to Smt. Kumari through her Bank Account. The details of such properties are as detailed below: a) Immovable Property in the form of land to the extent of 4921 Sq. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein Shri Ramesh Pothy is the Managing Director, in three tranches (Rs. 2 Crores on 31.12.2015, ₹ 1.65 Crores on 13.01.2016 and ₹ 1.35 Crores on 23.02.2016) into the Bank Account No. 50100001455442 held by Smt. S. Kumari with HDFC Bank as mentioned above, for the purchase of immovable properties from Ms. Dhanalakshmi Sridhar, vide Document No. 1184/2016 registered with Joint II Sub Registrar, Kanchipuram, for a sale consideration of ₹ 5,30,74,500/- on 29.2.2016. Out of the balance amount of ₹ 30,74,500/- , an amount of ₹ 25,43,755/- was paid by the Shri Ramesh Ptohy and 4 brothers to Ms. Dhanalakshmi Sridhar on the day of Registration and the remaining amount of ₹ 5,30,745/- was deducted being 1% TDS of the sale consideration, which is as per the sale deed document referred to above. Ms. Dhanalakshmi Sridhar has acquired the two immovable properties totally valued at ₹ 5,20,08,500/- (3,06.5700 + 2,13,51,500) vide Document No. 03/2016 and Document No. 18/2016 respectively, whereas she had sold the said two immovable properties for a very meagre amount as sale consideration of ₹ 5,30,74,500/- to Shri Ramesh Pothy and to his 4 br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason to believe, that Shri Sridhar and Shri D. Senthil and their associates, who have committed offences vide various FIRs registered by various Police Stations at Kanchipuram, Tamilnadu have derived proceeds of crime and have laundered the same by buying and selling immovable properties. One such immovable property as detailed below in the Schedule, which was acquired by laundering the said proceeds of crime by Shri Sridhar in the name of his wife, Smt. S. Kumari and immediately the said property was settled/transferred to her daughter Ms. Dhanalakshmi Sridhar and subsequently sold to Shri Ramesh Pothy and his 4 brothers that too below the guideline value prescribed by the Government and instead of making payment to the actual seller viz. Ms. Dhanalakshmi Sridhar, aged 21 years, the sale consideration was paid through the bank account of Smt. S. Kumari only, who is not a seller in the said transaction, by the company M/s Pothys Private Ltd., in the process of laundering the proceeds of crime. The entire laundering process was held within a period of 7 days and while purchasing the said property, Shri Ramesh Pothy and his 4 brothers were very well knowing that the investigations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht of foregoing discussions, I also have reasons to believe, based on the materials available in my possession that if the said proceeds of crime in the form of immovable property involved in money laundering is not attached immediately, under Section 5(1) of PMLA, 2002, the non-attachment of the said properties are likely to frustrate any proceedings under PMLA, 2002. Therefore, I order that the aforesaid property specified at Para 20 above, totally valued at ₹ 6.47 Crores (approximately) are attached provisionally in terms of Section 5(1) of PMLA, 2002, for a period of 180 days (One Hundred and eighty days) and further order that the same shall not be transferred, disposed, removed, parted with or otherwise dealt with, until or unless specifically permitted to do so. 17. On 02.09.2016 the Enforcement Directorate issued Provisional Attachment Order. The said order was confirmed by the Adjudicating Authority on 29.12.2016, the appellants have challenged both orders by filing the present appeals. 18. It is not denied by the respondent that in the reason of believe, the impugned property was valued at about ₹ 6.47 crores. It is also admitted that the property was p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t him under the schedule offence. The respondent has filed large number of documents, however, later on, it was agreed to decide the present appeals as per pleadings which were available before the adjudicating authority on the date of passing the impugned order. 22. In the counter affidavit filed by the Respondents, the statement given by Mrs. S. Kumari on 01.12.2016 has been reproduced which clearly indicates that the Appellants have paid the total sale consideration for the subject property and the same was credited in her bank account in HDFC Bank at Kancheepuram. The relevant portion of the statement are reproduced:- .I purchase the said landed property from various owners and got the same registered in my name and also the remaining portion of that property was purchased in the name of my daughter Dhanalakshmi, then transferred the entire landed property in the name of the daughter Dhanalakshmi, who subsequently sold the same under one single document to Shri. Ramesh Pothy. I know that the extent of the land is around 12700 Sq. ft., but I do not know the amount for which the same was sold to Shri. Ramesh Pothys. I know the amount towards the sale of said property was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndering, the Appellants are put to serious hardship since their project for opening the new showroom is getting stalled and the huge property behind the said attached property is rendered useless and the recent media news referring to the proceeding against the Appellants under PMLA, apart from causing them serious monetary loss, is also causing a dent to their reputation developed over decades of commitment and hard work. 29. Under the Transfer of Property Act and the Registration Act, there is no method or process to either find out about the existence of any FIR nor there is any provision to mandatorily disclose the existence of any FIR against the Vendors or their family members. The No Encumbrance Certificate which is issued in the state of Tamil Nadu does not have any such clause whereby the FIR against the relatives or family members of vendors are reflected. 30. The respondent for the first time in the rejoinder, the Enforcement Directorate refers to a newspaper report, in paragraph 7, where it was mentioned that the property was worth ₹ 45 Cr. As per settled law, the rejoinder is not a pleading in law. In the judgment of the Hon ble Delhi High Court in M/S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he counsel for the respondent and IO (who once appeared before us) that is there any cogent and clear evidence available in order to show that any of the appellants were aware before the transaction that late Sh. Sridhar and his family members were involved in many serious offences and many FIR s are pending. There was no clear answer except it was stated that he was hard-core criminal and they must be aware. 35. Section 8 (1) of PMLA, states as follows: 8. Adjudication.-(1) On receipt of a complaint under subsection (5) of section 5, or applications made under sub section (4) of section 17 or under sub-section (10) of section 18, if the Adjudicating Authority has reason to believe that any person has committed an offence under section 3 or is in possession of proceeds of crime, it may serve a notice of not less than thirty days on such person calling upon him to indicate the sources of his income, earning or assets, out of which or by means of which he has acquired the property attached under subsection (1) of section 5, or, seized or frozen under section 17 or section 18, the evidence on which he relies and other relevant information and particulars, and to show cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he was not even law-graduate. He, without involving legal member in the bench, has passed the order in such complicated matter in a mechanical manner and stereotyped order is passed. 40. In the final judgment passed on 22.09.2015 delivered by the Hon ble High Court of Sikkim Gangtok in W.P. (Crl) No. 02/2015 in the matter of ‗ EIILM University vs Joint Director ED , the Hon ble Court by allowing the petition, passed the following directions in para-19 of the Judgement:- (i) The Respondent No. l shall take appropriate steps with the concerned authorities of the Central Government for appointment of the Judicial Member of the Adjudicating Authority urgently within a period of 3 (three) months and not later than that; (ii) On appointment of the Judicial Member, the Chairman of the Adjudicating Authority shall constitute the Bench consisting of a Judicial Member keeping in view the observations made above having regard to the nature of the lis and the anxiety expressed by the Petitioner- University. (iii) Soon after it is constituted, the Bench shall then issue notice upon the Petitioner-University and the Petitioner- University shall appear before the Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals, the appellants have produced documents such as Bank Statement of account and also individual income tax returns before the Adjudicating Authority to show the means of the funds for purchase of the subject property. 44. The amounts shown as credits in the Bank account filed before the Learned Adjudicating Authority are the credits of short term loans availed by the Appellants Company from City Union Bank Ltd. Further the Appellants being in the retail business, the credits to the Appellants Company Bank account is by transactions reflecting through Credit/Debit cards (referred as POS {point of sale} transactions) and cash deposits of daily collections. The certificate of the Bank for having credited the Short Term Loan to the Bank account and also the regular cash deposits from the sales in the retail outlets. However, there is no finding after discussions of these documents. Only the vague findings are given. 45. The Adjudicating Authority in its finding has concluded that the market value of the property is over ₹ 25 Cr. The said findings are not supporting with evidence. In the reason to believe, the value of property not mentioned. Even nothing is disclos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Value at the time of the sale, comparative sale deeds of the time, as well as revision of the Guideline Value as per Appellants, they have paid fair market value from their legitimate sources of income. 49. The Adjudicating Authority have miserably failed to consider since the subject property was purchased bona-fidely by the Appellants with legal sale consideration. Therefore, the said property losses the character of proceeds of crime and the sale proceeds in the hands of vendor only could have been attached. The counsel for the respondent does not dispute that the appellants have made the untainted amount to the sellers i.e. the wife and daughter of Late Sridhar. Nor it is the case of respondent (even there are no proceedings of respondent ) that the original vendors who had sold the property to the family member of Late Sridhar were originally purchased by them from proceed of crime. In fact, it appears prima facie that they have sold their own properties which were purchased by themselves. There is no material on record to show that any action is brought by any of them, except allegations mentioned in the FIR and in the pleadings of ED. No doubt, the said allegations are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons holding such property. (2) The Adjudicating Authority shall, after- (a) considering the reply, if any, to the notice issued under subsection (1); (b) hearing the aggrieved person and the Director or any other officer authorised by him in this behalf, and (c)taking into account all relevant materials placed on record before him, by an order, record a finding whether all or any of the properties referred to in the notice issued under sub-section (1) are involved in money-laundering: Provided that if the property is claimed by a person, other than a person to whom the notice had been issued, such person shall also be given an opportunity of being heard to prove that the property is not involved in money-laundering, section 58 B or sub-section (2 A) of section 60 by the Adjudicating Authority (4) Where the provisional order of attach 56. There are judicial pronouncements whereby it has been laid down that the innocent parties can approach the Adjudicating Authority for release of property by showing their bonafides in their dealings with the property. In the case of Sushil Kumar Katiyar (Appellants) Vs UOI and Ors. (Respondents) MANU/UP/0777/2016 decided on 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor with knowledge or ever assisted any process or activity in connection with proceeds or crime and the question of his involvement does not arise as he is third party, then the Tribunal/ Adjudicating Authority can consider the said plea depending upon whether there exist bona fide in the said plea or not and proceed to adjudicate the plea of innocence of the said party. 57. This is due to the reason that Section 8 allows the Adjudicating Authority to only retain the properties which are involved in money laundering which means as to whether properties attached are involved in money laundering or not is a pre-condition prior to confirming or attachment by Adjudicating Authority. Therefore, at that time, if the plea is raised that the party whose property is attached is innocent or is without knowledge of any such transaction with respect to money laundering, then the Tribunal can consider the said plea and proceed to release the said property out of the properties by holding that the said property is not involved in money laundering. 58. For the purposes of determining whether the property is involved in money laundering, the Court may consider the ingredients of Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a, MANU/SC/0161/1993 : 1993 Supp (2) SCC 497 the Hon'ble Supreme Court has held as follows- 5. Under the Indian penal law, guilt in respect of almost all the offences is fastened either on the ground of intention or knowledge or reason to believe . We are now concerned with the expressions knowledge and reason to believe . Knowledge is an awareness on the part of the person concerned indicating his state of mind. Reason to believe is another facet of the state of mind. Reason to believe is not the same thing as suspicion or doubt and mere seeing also cannot be equated to believing. Reason to believe is a higher level of state of mind. Likewise knowledge will be slightly on a higher plane than reason to believe . A person can be supposed to know where there is a direct appeal to his senses and a person is presumed to have a reason to believe if he has sufficient cause to believe the same. The same test therefore applies in the instant case where there is absolutely no material or circumstantial evidence whatsoever, oral or documentary, to show that any of the petitioners, 'Knowingly', assisted or was a party to, any offence. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direct/ indirect involvement in the proceeds of the crime or its dealings can be made to suffer by mere attachment of the property at the initial stage and later on its confirmation on the basis of mere suspicion when the element of mensreaor knowledge is missing. 60. Similar principle has been laid down by Chennai High Court in the case of C. Chellamuthu (Appellants) Vs The Deputy Director, Prevention of Money Laundering Act, Directorate of Enforcement (Respondent) MANU/TN/4087/2015 decided on 14.10.2015, relevant portion of which are reproduced below:- 20. The said sections read as follows:-- 23. Presumption in inter-connected transactions Where moneylaundering involves two or more interconnected transactions and one or more such transactions is or are proved to be involved in money-laundering, then for the purposes of adjudication or confiscation (under section 8 or for the trial of the moneylaundering offence, it shall unless otherwise proved to the satisfaction of the Adjudicating Authority or the Special Court), be presumed that the remaining transactions form part of such inter-connected transaction. 24. Burden of proof In any proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onies to purchase the property in question. There is nothing on record to show that the respondent had verified these statements. Especially, the respondent has not verified the Bank statement produced by the Appellants to ascertain the genuineness of the same and whether the money deposited came from genuine purchasers or from the persons involved in fraud and Money Laundering. The respondent does not allege that Appellants are Benamies of G. Srinivasan or no sale consideration passed to the vendor. 23. Considering the materials on record and judgments reported in MANU/MH/1011/2010: 2010 (5)Bom CR 625 [supra] and : [2011] 164 Comp Cas 146(AP) [supra], I hold that appellants have rebutted the presumption that the property in question is proceeds of crime. The respondent failed to prove any nexus or link of Appellants with G. Srinivasanand his benamies. Once a person proves that his purchase is genuine and the property in his hand is untainted property, the only course open to the respondent is to attach sale proceeds in the hands of vendor of the appellants and not the property in the hands of genuine legitimate bona fide purchaser without knowledge. 24. Before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her the properties bought by any person against clean money and without any knowledge that properties have been acquired directly or indirectly though scheduled offence could be subject matter of provisional attachment order. 24. It is an admitted position that the Defendants (D-2 to D-8) had no knowledge that the properties in the hands of the vendor was proceeds of crime. They have also verified the papers relating to these properties before the deal. No point has been raised with regard to the financial capability of these Defendants to buy these properties. However, the Bombay High Court decision in Radha Mohan Lakhotia has been pressed into service to make out a plea that the properties could be attached in such circumstances under the PMLA. Provisional attachment was sought to be continued only based on the judgment of Bombay High Court in Radha Mohan Lakhotia's case. 25. A reading of paragraphs 21 to 24 clearly reveals that both the Adjudicating Authority as well as Appellate Authority failed to properly appreciate the facts and findings in Radha Mohan lakhotia's case. In that case, the Department had placed substantial and acceptable facts to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved in the money laundering. They have no direct link or nexus with deceased who has now passed away. 53. The appellants have no objection if criminal proceedings already pending against accused parties may continue as per law. 54. The appellants despite of above are agreeable to deposit a sum of ₹ 6,47,25,000/- as value assessed by the ED in the Investigation Report with the respondent (without prejudice) in order to secure the entire value of the property filed by the ED in the reason to believe. The figure mentioned by the hearing officer in the impugned order is fanciful and accepted as per the case of ED in subsequent pleadings. The real figures are mentioned in the reason-to-believe on the basis of which the provisional attachment order was passed. The said figures could not have been changed. 55 The appellant is directed to deposit a sum of ₹ 6,47,25,000/- with the respondent without prejudice within the period of six weeks from today as security amount. In case the final orders are passed against the accused, the said amount shall be kept by the ED. In case, the prosecution complaint filed by the ED under PMLAS is dismissed, the entire amount shall be r ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
