TMI Blog2019 (8) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... had engaged Mr. NimmagaddaPrasad as its Local Partner under the MOU and Concession Agreement, the rationale for identifying a sum of ₹ 267.45 Cr. (instead of which ₹ 274.45 Cr. approx. has been actually attached) is found at pages 82-87 of the Complaint. As per appellants, two sets of investments made and a donation by the Appellants have been wrongly identified as illegal gratification paid to Y. S. Jagan Mohan Reddy. Section 35 of PMLA provides the Procedure and powers of the Appellant Tribunal which says that Tribunal shall not be bound by the procedure laid down by Code of Civil Procedure but shall be guided by the principles of natural justice and subject to the other provisions of this Act and Appellant Tribunal shall have powers to regulate its own procedure.One of the main objects and reasons of this Act is to confiscate of proceeds of crime apart to the criminal liability if the accused has committed under the provisions of this Act and schedule offense. Till the time final order is passed by the Special Courts, if a valid case is made by ED, the proceeds of crime must be preserved so that after final order it should be confiscated for the benefit of Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1229, 1230, 1228/DLI/2014 (Stay), 1216/DLI/2014 (U/s 26), 4298/HYD/2018 (Stay), FPA-PMLA-751 to 755, 673, 747, 672, 670, 671 And 668/DLI/2014, FPA-PMLA-2202/HYD/2018 - - - Dated:- 26-7-2019 - MANMOHAN SINGH: CHAIRMAN For the Appellants: Shri Mukul Rohtagi, Sr. Advocate for the appellant in Appeal no. 673/2014., Shri Niranjan Reddy, Sr. Advocate on behalf of Jagati Publication Ltd. and group companies of Jagan Moahn Reddy and Shri Raghenth Basanth, Senior Advocate with Shri Arshdeep Singh Khurana, Advocate, Shri Kotla Harshvardhan And Kshitij Maheshwari, Advocates, Shri Rajshekhar Rao Shri Karthik Sundar, Advocates For the Respondent: Mohammad Faraz, Advocate ORDER JUSTICE MANMOHAN SINGH: CHAIRMAN FPA-PMLA-751 to 755, 673, 747, 672, 670, 671, 668/DLI/2014 FPAPMLA-2202/HYD/2018 1. By this order, this Tribunal proposes to decide above-mentioned twelve appeals. These appeals were earlier heard, however, before rendering order, the Hon ble Member resigned from this Tribunal. Left with no option, but to rehear the appeals. The appeals were again heard and reserved for orders. 2. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ster Late Dr. Y.S. Rajshekhar Reddy granted favours/benefits/concessions to certain private individuals/companies as a quid-pro-quo for investments made by the said private individuals and corporations in companies promoted by Mr. Y.S. Jagan Mohan Reddy. d) Subsequently, the Respondent registered the present ECIR No.09/HZO/2011 dated 30.08.2011. e) Several Charge-sheets have been filed in pursuance of the FIR in respect of each instance of an alleged quid pro quo. The present case i.e. set of 11 appeals, pertains to the VANPIC Project (Vodarevu and Nizampatnam Ports and Industrial Corridor), in respect of which the CBI filed a Charge Sheet dated 13.08.2012 (hereinafter the CBI Charge sheet ), wherein, Vanpic Projects Pvt. Ltd., one of the Appellants hereto, was arraigned as Accused No.10 for commission of offences under section 120B r/w 409, 420, 467, 468, 471 and 477-A of IPC. Vanpic Ports Pvt. Ltd. has not been arraigned as an accused in the Charge-sheet. Charges are yet to be framed, therefore, the trial has not even began. 6. On the basis of the CBI Charge-sheet, the Respondent, passed the Provisional Attachment Order No. 01 of 2014 dated 4t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v) GoAP facilitated acquisition of large extent of nearly 11,000 Acs for industrial corridor including by enabling the transfer of government and assigned land apart from acquiring private land. vi) GoAP issued a series of orders exempting various charges like land ceiling and conversion charges on 19,329 Acs of land alienated to VANPIC Projects as well as seigniorage fee, stamp duty and registration charges to VANPIC Ports. 10. First of all, I shall deal with the rival submissions of the parties in relation to VANPIC Project, which is main issue. 10.1 In 1994, as per its port policy, Government of Andhra Pradesh (Hereinafter GoAP ), issued advertisements for privatization of 11 minor ports, which also included Vadarevu and Nizampatnam ports. In 1996, GoAP issued notifications for declaration of port limits for inter aliaVadarevu and Nizampatnam ports. 10.2 In 1999-2000, GoAP awarded the project for setting up of a portcum- ship breaking unit in Vadarevu to M/s Andhra Seaports Limited on MoU basis, but it was not materialised. The idea was abandoned due to public resistance and environmental concerns. 10.3 After p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia, as they had coal-mines in Indonesia. Therefore, in January 2008, vide a letter dated 10.01.2008, the then Crown Prince Deputy Ruler Ras al Khaimah, who is now the Supreme Council Member of UAE Ruler of Ras al Khaimah, expressed an interest to participate in the development of Nizampatnam Port SEZ on G2G basis with the GoAP. Relevant extracts of the said letter are extracted below for ease of reference: With reference to the above subject the Government if Ras Al Khaimah and the RAK Investment Authority (along with RAK Port) wishes to convey its expression of interest to undertake and participate in the Nizampatnam Port SEZ. We would anticipate taking up this port and its related activities, in collaboration with our partners, on G2G basis with the Government of Andhra Pradesh. This expression of interest is subject to detailed due diligence including consideration of investment requirements, pre-feasibility studies including financial viability to be established after a detailed project report is completed [Emphasis supplied] 11.3 Subsequently, this was followed up by a letter dated 12.02.2008 by the then advisor to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a conspiracy to acquire VANPIC project under deception without regard to the fact that the concept of Indian partner was as a part of the initial MOU. It is also alleged by CBI that criminality in regard to the share-distribution pattern between RAIKIA and Matrix, in reply it is alleged on behalf of appellants that there is no bar in MoU entered with Go AP. MoU stipulates a condition that RAKIA shall contribute money not less than 51% of the GoAP approved project cost but it does not stipulate any condition on the share distribution patterns with regard the sharing between Indian partner and RAKIA. It also deals with number of directors to be appointed and who will have the control over the Board and day to day affairs and therefore concessions given to SPV in regard to duty exemption and other relaxations as being vitiated by conspiracy. Such concessions are enabled under the Industrial Policy of the State at the relevant point in time for backward areas and have been accorded to all similar projects. 15. The observations of the Hon ble Supreme Court of India in Kasturi Lal Lakshmi Reddy v. State of Jammu and Kashmir,inwhich it was held that with approval by the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or feeding the factory to be set up by the 2nd respondents. The predominant purpose of the transaction was to ensure setting up of a factory by the 2nd respondents as part of the process of industrialisation of the State and since the 2nd respondents wanted assurance of a definite supply of resin as a condition of putting up the factory, the State awarded the tapping contract to the 2nd respondents for that purpose.If the State were giving tapping contract simpliciter there can be no doubt that the State would have to auction or invite tenders for securing the highest price, subject, of course, to any other relevant overriding considerations of public weal or interest, but in a case like this where the State is allocating resources such as water, power, raw materials etc. for the purpose of encouraging setting up of industries within the State, we do not think the State is bound to advertise and tell the people that it wants a particular industry to be set up within the State and invite those interested to come up with proposals for the purpose. The State may choose to do so, if it thinks fit and in a given situation, it may even turn out to be advantageous for the State to do so, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as invalid merely because no advertisements were issued inviting offers for setting up a factory and taking the tapping contract as an integral part of the transaction. [Emphasis supplied] 16. The case of Nimmagadda Prasad and its group companies pertaining to the project is that VANPIC stands for Vodarevu and Nizampatnam Ports and Industrial Corridor. VANPIC Project is slated to come up in the districts of Prakasam and Guntur in the State of Andhra Pradesh in a backward region which currently has little industrial activity. The vision behind the VANPIC Project is to develop a world class port -based integrated industrial corridor and trade zone to fuel economic growth and generate employment . In particular, it is stated objective as per the Concession Agreement dated 11.07.2008: Whilst liberalisation and deregulation have opened up the economy in India in the last decade, there has been change in the scenario of cargo traffic at ports and the significance of ports has increased manifold; the Andhra Pradesh coast will have a very large requirement of port facilities to meet the increasing traffic demand due to major deve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here would be captive cargo as well as passenger demand arising from VANPIC Project for Air Traffic and therefore, proposed that a regional Airport be also developed. 16.2 The development of VANPIC Project was targeted to speed up the economic development of Prakasam, Guntur and adjacent landlocked districts with potential for large-scale employment. 16.3 Indicus Analytics, an economic research and data analysis firm consisting of prominent economists such as Professor Bibek Debroy, Dr. Subir Gokarn, Professor ShubhashisGangopadhyay, Dr. Ashok Desai, Dr. S L Rao, and Professor D.B. Gupta have concluded that the VANPIC Project would have a multiplier effect on the economic development of Prakasam Guntur Districts, with benefits arising in terms of a) increment in GSDP b) increment in Tax revenues of AP and c) increase in employment opportunities. 16.4 It brought out a reportivon the VANPIC Project in the year 2011 observing that the economic impact of VANPIC Project would be as under; The estimated incremental effect of VANPIC investments on the Gross State Domestic Product (GSDP) of Andhra Pradesh in FY 2017-18, on the assumptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.03.2008 and concession agreement dated 11.07.2008. 17.1 It is submitted that the assertion of the Respondent No.1 that GoRAK was required to have 51% equity in the VANPIC SPVs as per the MoU dated 11.03.2008 is a complete falsehood and is contrary to the express terms of the MoU. It is submitted that as per Article 1 Clause 2 (b) of the MoU, GoRAK was required to contribute 51% of the GoAP approved project cost . There is no reference to any equity participation on behalf GoRAK leave alone a reference to 51% equity in the MoU. 17.2 MoU dated 11.03.2008, by its very nature, is a mere understanding between GoAP and GoRAK laying down terms for future discussions and steps to be taken for development of VANPIC Project. 17.3 The MoU, as stated, is only preliminary in nature and non binding and subject to further due diligence, technical and financial viability, and stands terminated on entering into Concession Agreement and State Support Agreement. 17.4 The MoU merely outlines the intent of the main parties to the VANPIC Project and steps to be taken for evolving a definitive framework. Therefore, it appears that bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) After several rounds of discussions held between 11th and 25th June 2008, wherein the then Secretary, I I was present, several substantial changes were made to the DCA and some concessions sought by the Vanpic Ports Pvt. Ltd. were either reduced or deleted entirely, as alleged. c) Thereafter, the DCA internally finalized after consultations with several departments of GoAP was finally circulated to the Council of Ministers, for consideration in its meeting on 30.06.2008, under the cover of a Cabinet Memorandum prepared by Mr. Manmohan Singh, the then Secretary, I I Department. d) The DCA so circulated was approved by the Cabinet vide Council Resolution No. 231/2008 dated 30.06.2008. e) On 11.07.2008, the DCA as approved by the Cabinet was executed as the Concession Agreement between VANPIC Ports Pvt. Ltd. and GoAP. It is submitted that there is no difference between the Concession Agreement dated 11.07.2008 and the DCA that was approved by the Cabinet vide Council Resolution No. 231/2008 dated 30.06.2008. This fact has been subsequently verified by the Principal Secretary, I I Department and in a file noting endorsed by him on 14.04.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent No.1 at Paragraph 10.3 vi of the Provisional Attachment Order and they are reproduced herein for ready reference: A. Ports, power plants and industrial corridors are proposed to be developed by different SPVs. B. Only two ports are to be developed on BOOT model by the SPV M/s Vanpic Ports Pvt. Ltd. C. Power plants are proposed to be developed by GenexxEnpower Corporation Pvt. Ltd. D. Industrial corridor is to be developed by Matrix Enport Holdings Pvt. Ltd., a private company exclusively owned by Shri Nimmagadda Prasad. E. Requirement of about 27,257.33 acres of land proposed for the entire project as the Initial master Plan; F. Cost of port lands to be initially borne by the company and would be later adjusted against concession fee payable to Government. [Emphasis supplied] h) It is submitted that the above is a deliberate misstatement by the Respondent No.1.The Respondent No.1 has deliberately not forwarded a copy of the said Cabinet Memorandum to the Adjudicating Authority, which would have demonstrated the falsity of the allegations being made by the Respondent No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adas is falsely sought to be made out by the Respondent No.1. It is submitted that GoRak holds 30% of the stake in the Vanpic Projects Pvt. Ltd., which is to the knowledge of the Respondent No.1. 20. It is refuted on behalf of appellants that the allegation of the Respondent No.1 that the Cabinet was misled by not mentioning crucial issues in the Cabinet Memorandum does not stand scrutiny of logic and it would be absurd to expect the Cabinet Memorandum, which is effectively aconcise note, to contain the impact of each and every term of the Concession Agreement. The allegation of misleading of the cabinet cannot stand so long as the Draft Concession Agreement was placed before the Cabinet for its perusal and there are no differences between the Concession Agreement eventually executed and the Draft Concession Agreement. And more particularly so when the entire Cabinet is not accused of any wrongdoing which should have been the case if the allegations were, in fact, taken to be correct. In respect of the failure to mention in the Cabinet Memorandum, the clear extent of land required for Industrial Corridor, it is submitted that the same has no consequence in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as, all these are very large and complex infrastructure projects which are completely different in nature due to various factors and each of which are the subject of hard-nosed negotiations between private parties and the State authorities. The conditions on which each project is awarded must necessarily be different or at the very least contain certain differences which would be based on a variety of factors including, inter alia, the quantum of investment to be made by the private party, the duration of such investment, the location and other benefits to investor, the state and the region. For example, the cost of construction of ports at Vadarevu and Nizampatnam Ports is far in excess of the cost of construction of Gangavaram and Krishnapatnam Ports due to certain natural site conditions. v) It is submitted that the Respondent No.1 and the CBI selectively highlight the advantages given to the Vanpic Project, they conveniently suppress the areas where Gangavaram and Krishnapatnam Ports have been granted additional concessions and they also suppress the fact that the land for Krishnapatnam SEZ was granted on outright purchase basis and not on BOOT basis. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 107 Crores and about 5,000 Acres of Prime Land in Hyderabad city acquired at the Governments Cost provided on lease with exemption of lease rentals for first 8.5 years. b) GoAP has given ₹ 1458 Crores as VGF to Hyderabad Metro Rail Project. c) GoAP has provided 2800 Acres of Land acquired at their cost to Gangavaram Port Ltd. out of which 1,800 Acres were given in lieu of equity at ₹ 2.86 Lakhs per Acre for GoAP, when the prevailing market rates were much higher, and balance 1,000 Acres on Lease basis. d) GoAP has proposed to provide ₹ 335 Crores as financial assistance and land of 5,324 Acres on lease basis to Machilipatnam port. e) GoAP has proposed to provide 5,800 Acres of land to Krishnapatnam Port on Lease basis out of which about 3,000 Acres has been handed over. VANPIC Project has not been provided with any financial assistance by GoAP 24. It has come on record that the project is located in a backward area with no industrial development. GoAP has not provided any land free of cost or has not given any concession in respect of the same. Entire land for VANPIC Project has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en as per the Respondent No.1, GoRAK has held a minimum of 26% equity in all of the Project SPVs at all points of time and it is submitted that the same is sufficient to maintain control over the said companies. GoRAK exercises complete control over the Vanpic Ports Pvt. Ltd. and Vanpic Projects Pvt. Ltd. by virtue of their articles of association of, whereby, significant matters are reserved matters wherein GoRAK has veto and no decision can be taken without their concurrence and approval. Some of the reserved matters inter alia include; Any transaction with any related party; Appointment or removal of CEO/CFP; Change of authorised signatory for bank accounts for transactions in excess of ₹ 20 lacs; To change the auditor; etc. It is admitted position that the project is more than 10 years old. The rival Government in the State has ruled between 2015-2019. None of the agreements was cancelled. 28. It has also come on record that Mr. Nimmagadda Prasad hails from a background from a lower middle class family. On completion of his Masters Degree in Physics from the University of Delhi, he started hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich nearly 45% of patients being treated for AIDS all over the world (including India) are being treated with the products developed by Matrix Labs. vi) In his endeavour to give back to the society, Mr. Nimmaggada Prasad has set up the Nimmagadda Foundation, which is involved philanthropic activities in healthcare, education, entrepreneurship development, employment generation and empowerment of the underprivileged in some of the most backward regions of our country. So far, the Nimmagadda Foundation has committed over ₹ 130 Crores and, in fact, spent over ₹ 80 Crores for several causes ranging from project for eradication of needless blindness in children in Andhra Pradesh by 2020 to setting up of a world class badminton training academy The Gopichand Badminton Academy, Hyderabad. vii) The Gopichand Badminton Academy,has produced several talented players in India, including SainaNehwal, P.V Sindhu and K. Srikant. Similarly, Mr. Nimmaggada Prasadwas one of the Trustees of the Chennai Mathematical Academy which is a center for excellence in teachingand research for mathematical sciences and has been recognized as a University under Section 3 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above company was changed to Vanpic Projects Pvt. Ltd. pursuant to a board resolution dated 30.07.2008 so that it would be easily identifiable as a VANPIC SPV. Thereafter, the change in name came into effect on 05.08.2008 by virtue of the Fresh Certificate of Incorporation dated 05.08.2008 issued by the ROC and immediately on the very same day, GoAP was notified that VANPIC Projects Pvt. Ltd. as a VANPIC SPV, vide letter dated 05.08.2008. At this time, a nominee of GoRAK was already on its Board of Directors. Furthermore, GoRAK holds more than 26% shareholding in Vanpic Projects Pvt. Ltd. and satisfies the requirements of the Concession Agreement. 30. In view of the above, it is evident that the allegation that Vanpic Projects Pvt. Ltd. is merely a private company exclusively owned by Shri Nimmagadda Prasad is not a valid submission. The records would reveal otherwise. RAK S COMMITMENT TO THE PROJECT 31. Both agencies have question the role of GoRAK in the VANPIC Project and consequently the nature of the Project being Government-to-Government. The GoRAK has invested approx. 121 million US Dollars viz₹ 535.82 crores (About 65% of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation entrepreneurial spirit in India. What appealed to us is his ability to turn around sick companies into high value companiesand thus generating huge employment opportunities. One such example is Matrix Laboratories Limited, an India listed sick company, Mr. Prasad transformed it from a million dollar to a billion dollar market cap company in a short span of six years. We would like to bring to the notice of your esteemed Government that despite all our original intentions, this vital project on India s strategic East Coast has not been able to takeoff to our planned expectations, and now seems mired in various difficulties beyond the control of an principals to decision making viz. the State Government of Andhra Pradesh and the civil service in the state. We further bring to your kind notice that, already about USD 200 million has been invested into the project. Indeed, neither we, nor our Indian partner are able to make headway in spite of repeated efforts. Our greatest concern now is that this project is being delayed for myriad reasons, not all of which are clear to us, and our original investment is unable to generate returns, while relevant input costs for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... representatives of GoRAK were given written queries by the CBI. 36. Thereafter, Dr. Khater Massaad forwarded his written answers to the queries raised by the CBI under the cover of his letter dated 05.08.2012, a copy of which was also faxed to the offices of the Appellants. However, charge-sheet filed on 17.08.2012 does not mention the said response dated 05.08.2012sent by GoRAK. Itprima facie shows that VANPIC Project was initiated as a Government-to-Government Project, whereby the Government of Ras al Khaimah continues to be the principal stakeholder in the Project. The aforesaid responses itself would show that the VANPIC Project is not solely controlled by Mr. NimmagaddaPrasadand the Government of Ras al Khaimah is a front party at the behest of Mr. Nimmagadda Prasad. 37. One is not sure as to whether the Respondent No.1 has recorded any statements of any of the representatives of GoRAK. If recorded, the same is not placed on record before the Adjudicating Authority. It is stated by the appellant that presumably knowingly fully well that examination of any representatives of Ras al Khaimah would disprove the case made by the CBI as well as the Responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to VANPIC Project and all lands have been acquired at the cost of the Appellants 10 11 and other VANPIC SPVswith no financial contribution from the State Government and with the caveat that they would be used solely for the purpose of the VANPIC Project and for no other purpose. 41. Thereafter, after following the necessary processes, each proposal for Land Acquisition/Alienation was placed before the Council of Ministers for approval. Only on obtaining the approval of the Council of Ministers, GoAP issued G.O.Ms. 1110 of 2008, 1115 of 2008, 233 of 2009, 270 of 2009, 35 of 2009 and 36 of 2009 for acquisition of 22,990 acres (Government Lands =1094 acres, Assigned Lands = 18,638 acres and Patta Lands = 3258 acres) for the VANPIC Project. Therefore, the allegation against the Cabinet are incorrect. No action was taken against any Cabinet Minister if any illegality is done in the meeting. Most of the lands earmarked for acquisition by GOs are categorized as Dry Waste Lands . It has come in record that after extensive field investigations and detailed techno environmental studies conducted by VANPIC, the total extent of land earmarked for acquisition has been reduced t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Assigned Lands till date. Therefore, it is difficult to presume that there has been no undue benefit/gain to the Vanpic Ports Pvt. Ltd. and Vanpic Projects Pvt. Ltd. for acquisition of land and there is no loss to the Government exchequer on account of land acquisition for the VANPIC Project. 44. The allegation that some of the lands disposed of at a very high rate and thereby made illegal profits is denied by the appellants as alleged on behalf of Respondent No.1 as the same is contrary to the records filed with the Chargesheet, which would show:- i) All lands acquired/alienated for the purposes of Vanpic Project are dry wasteland. ii) Till date no lands have been disposed ofnor can they be disposed of as alleged. At the best, they can be leased out to third parties for use strictly in consonance with the VANPIC Project. iii) In fact, in furtherance of the requirements of the VANPIC Project, a VANPIC SPV viz., Vanpic Projects Pvt. Ltd., entered into a Memorandum of Understanding dated 16.08.2010 02.09.2010 have been entered into by with two Companies viz. SEW Thermal Corporation Ltd. and Coastal Sirohi Ltd. which would have pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omitted to show the second page of the board resolution which shows that on the very same day Mr. KhaterMassad, CEO of Ras Al Khaimah Investment Authority ( RAKIA ) was appointed to the Board of Directors. Even as per the Enforcement Directorate, GoRAK owns 30% of the shareholding in Vanpic Projects Pvt. Ltd. 48. Few clauses of the Concession Agreement dated 11.07.2008, which the Respondent conveniently failed to show this Tribunal: i. Clause 1.20 states: Developer means Government of Ras-Al- Khaimah represented by RAK Investment Authority (by itself or through its subsidiary) and/or Matrix Enport (as defined below) ii. Clause 1.14 states: Concession means the exclusive right and authority granted by GoAP to Concessionaire for designing, financing, building, maintaining, operating and transferring greenfield, all-weather, deep water, multi-purpose ports at Vadarevu and Nizampatnam together with a right to levy, collect and retain appropriate charges for Port Services rendered to Port users during the Concession Period iii. Clause 1.2 of Schedule A State Support states: Developer may on its own or together with s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were waste of papers, even these were purchased on higher market price in order to oblige the Chief Minister and ultimately has given the favour to the appellants. Unless and otherwise established in evidence, prima facie, it appears to this Tribunal that the said shares were sold to French Company on higher price. Those were not waste of papers. No material so far filed by the respondent no. 1 is available to establish that the purchase of shares or investment thereof is wholly bribe money and the same investment is done in order to get the project. 50. From the entire gamut of the matter and material placed on record, prima facie, it appears that subject to the other allegations with regard to proceed of crime amount, the same will be considered and discussed at the later part of my order, prima facie, the MOU/agreement cannot be treated as sham documents. As far as enforcement about concession agreement is concerned, this Tribunal does not wish to make any comment or to give any finding in this regard as the Tribunal is having limited jurisdiction. It is for the State Government to take the decision. It is also a matter of record thatfor the last about 10 years, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (FDs worth 4.14 Crs; Shares in Indira Television for 172.46 Crs and Plant and Machinery for ₹ 273.39 Crs - @ Pg. 5 of Impugned Order) iii) ₹ 20.00 Crs - M/s. Carmel Asia Holdings Pvt. Ltd. (Shares in Jagati Publications) b) Mr. Nimmagadda Prasad Group/ Investors - ₹ 325.02 Crs. i)₹ 37.83 Crs - Mr. Nimmagadda Prasad (Immovable property worth ₹ 1.7 Crs, Shares in Sandur Power for ₹ 35 Crs and in G2 Trade Centre for 1.13 Crs - @ Pg. 7 of Impugned Order) ii) ₹ 97.82 Crs - M/s. Alpha Avenues Pvt. Ltd. (Shares in Jagati Publication) iii) ₹ 35.90 Crs -M/s. Alpha Villas Pvt. Ltd. (Shares in Jagati Publication) iv) ₹ 45.85 Crs - M/s. Gilchrist Investments Pvt. Ltd. (Shares in Jagati Publication for ₹ 44.78 Crs and immovable properties for 1.07 Crs) v) ₹ 49.98 Crs - M/s. G2 Corporate Services Ltd. (immovable property of 6 Crs, 43.08 Crs for shares of various companies and receivable loan of 0.9 Crs) vii) ₹ 7.00 Crs - M/s. Suguni Constructions Pvt. Ltd. (receivable loans) vii) ₹ 23.23 Crs - M/s. VANPIC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r allotment of the Vadarevu and Nizampatnam Ports and Industrial Corridor Project (hereinafter Vanpic Project ) and other benefits from the State Government of Andhra Pradesh. The allegation is that the investments made by Shri Nimmagadda Prasad were at a very high premium and more than the market valuation of the companies. Therefore, it was to be examined as to whether the said investment was genuine or it is bribe/quid pro quo. 57. In the provisional attachment of the properties, paragraphs13.10 to 13.13 of the PAO are reproduced, as under: 13.10 Investigation under PMLA has revealed that M/s Classic Realty is another group company of Shri Jagan Mohan Reddy. Thus the proceeds of crime amounting to ₹ 57 crore lying in M/s Silicon Builders Pvt. Ltd. as shareholders money has been received back by the said two companies of Shri N. Prasad from M/s Classic Realty. Thus ₹ 57 crore now lying in possession of the said companies of Mr. N. Prasad is the proceeds of crime because, as a result of change in the shareholders and receipt of the amount back since March 2010, is the amount given under quid pro quo as illegal gratification . This amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid. 5) The proceeds of crime initially invested totaling to to₹ 252.50 crore in M/s Raghuram Cement and ₹ 57 crore in M/s SIlicon Builders Pvt.Ltd. have been received back alongwith some additions through the sales of the instruments purportedly to conceal the payments made under quid-pro-quo. Thus the total sale proceeds of the instruments received to conceal the initial payment under quid pro quo is ₹ 617.45 crore and is proceeds of crime in possession of Shri N. Prasad/his companies. 6) The proceeds of crime held with M/s Suguni Constructions Pvt. Ltd. to the tune of ₹ 7 crore are attachable at the end of M/s Smilax Realtors Pvt. Ltd. because a sum of ₹ 10.02 crore was given as a loan by M/s Suguni Constructions Pvt. Ltd. 7) The status of the French company (innocent investor) and Shri Jagan Mohan Reddy can not be equated. Therefore the amount of ₹ 33 crore has been attached from Shri Jagan Mohan Reddy is attachable being proceeds of crime in his possession. 13.13 Investigation under PMLA and records submitted duing the course of investigation have revealed that out of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 2014) are that Mr. Y.S. Jagan Mohan Reddy in a criminal conspiracy with his father,Dr. Y.S. Rajashekara Reddy and certain public officials got extended various undue favours including VANPIC projects and large scale concessions from the Government to Mr. Nimmagadda Prasad and his group of companies between 2006 and 2009.As a quid pro quo, Mr. Nimmagadda Prasad had transferred ₹ 35 Crs to Mr. Y.S. Jagan Mohan Reddy in guise of purchasing shares of M/s. Sandur Power Company Ltd (Sandur Power) between 19.01.2007 and 27.07.2007 held by Mr. Y.S. Jagan Mohan Reddy.Further, Mr. Nimmagadda Prasad s group company, M/s. Alpha Villas transferred ₹ 33 Crs to Mr. Y.S. Jagan Mohan Reddy in guise of purchasing shares of M/s. Bharathi Cements Company Ltd. (BCCL) between July/August, 2009 held by Mr. Y.S. Jagan Mohan Reddy.Therefore, the Respondent seeks to attach a total amount of ₹ 68 Crs as Proceeds of Crime at the hands of Mr. Y.S. Jagan Mohan Reddy. 59. Reply to allegations on behalf of Y.S. Jagan Mohan Reddy about the monies received by Mr. Y.S. Jagan Mohan Reddy (Appeal No. 668 of 2014) - i . Sale of Sandur Power Shares to Mr. Nimmagadda Prasa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17 Crs doubling the profitability of Sandur Power. The hydro plant owned by Sandur Power continues to have one of the best PLF in all of Karnataka. Apart from the above, the net worth of Sandur Power at the time of the above transaction was over ₹ 250 Crs and therefore the purchase of Sandur Power shares by Mr. Nimmagadda Prasad was a genuine transaction with commercial interest. Therefore, the allegation of respondent are not sustainable in view of facts as stated. With regard to sale of shares of M/s. Bharathi Cements Company Limited (BCCL to Mr. Nimmagadda Prasad s group Company; Alpha Villas by Mr. Y.S. Jagan Mohan Reddy, the appellants have denied all the allegations on the following reasons:- a) Sale of shares of BCCL held by Mr. Y.S. Jagan Mohan Reddy to Mr. Nimmagadda Prasad s group company, Alpha Villas is a genuine business transaction and after mutual deliberation, Mr. Y.S. Jagan Mohan Reddy agreed to sell the same at ₹ 1450 per share. b) BCCL is a profit making company and has been acquired by M/s. PARFICIM SAS, France for a total of ₹ 2711 Crs in April 2010. c) Mr. Nimmagadda Pras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valuation of Jagati Publications shares were arrived after taking the entire enterprise valuation of Sakshi News Paper Project with size and circulation into effect. Sakshi regional newspaper was launched with a circulation of about 12 lakh copies with 23 printing centers simultaneously in States of Andhra Pradesh, Telangana, New Delhi, Karnataka, Tamil Nadu and Maharashtra. d) The valuation of Jagati Publications shares is based on Discounted Cash Flow Method (DCF, which has been approved by the Reserve Bank of India under Foreign Exchange Management Act Notification number FEMA 205/2010 issued on 07.04.2010) which is a futuristic valuation technique for valuing a company even before the commencement of its operations. e) It is pertinent to note that a total of 60 investors (including Mr. Nimagadda Prasad and his group companies) had purchased Appellant s shares at ₹ 360 per share with a premium of ₹ 350 per share. Therefore, singling out one certain business transaction/ investment only to accuse the same as quid pro quo without any basis would be arbitrary and illegal. f) Further, the various investors have contributed for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n OC 276 of 2014, the respondents seek to make further attachments of shares worth face value of ₹ 15 Crs (and recognised market value of much higher) of BCCL held by M/s. Silicon Builders Pvt. Ltd. and ₹ 51.20 Crs of dividends thereon in OC 618 of 2016 (BCCL Attachment) on the contention that M/s. Silicon Builders Pvt. Ltd. received monies from Carmel Asia and had used the same amounts to purchase BCCL shares. 64. Before going to the merit of the case with regard to investment, let this Tribunal may deal with the legal issues involved as argued by the parties. Section 5 of PMLA, 2002 reads as under:- 5. Attachment of property involved in money Laundering.- (1) Where the Director or any other officer not below the rank of Deputy Director authorized by the Director for the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that- (a) any person is in possession of any proceeds of crime; and (b) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder subsection (3) of section 8, whichever is earlier. (4) Nothing in this section shall prevent the person interested, in the enjoyment of the immovable property attached under subsection (1) from such enjoyment. Explanation.- For the purposes of this sub-section, person interested , in relation to any immovable property, includes all persons claiming or entitled to claim any interest in the property. (5) The Director or any other officer who provisionally attaches any property under sub-section (1), shall, within a period of thirty days from such attachment, file a complaint stating the facts of such attachment before the Adjudicating Authority. 65. Section 5 of the PMLA mandates that the concerned authority, before passing the Provisional Attachment Order, has reasons to believe and the reasons for such belief to be recorded in writing, i.e. (i) any person is in possession of proceed of crime and (ii) such proceed of the crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating the proceedings .. 66. Section 5(1) imposes a stringent duty upon the offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble Supreme Court of India. 70. In Kranti Associates v. Masood Ahmed Khan (2010) 9 SCC 496, the legal position was summarized as under: a. In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially. b. A quasi-judicial authority must record reasons in support of its conclusions. c. Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well. d. Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power. e. Reasons reassure that discretion has been exercised by the decision maker on relevant grounds and by disregarding extraneous considerations. f. Reasons have virtually become as indispensable a component of a decision making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies. g. Reasons facilitate the process of judicial review by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ni Mewaldas 1976 (3) SCR 956, the Supreme Court held that there should be a live link or close nexus between the material before the ITO and the formation of his belief that income had escaped assessment. More recently, in Aslam Mohd Merchant v. Competent Authority (2008) 14 SCC 186, the entire legal position has been explained elaborately by the Supreme Court as under: 28. It is, however, beyond any doubt or dispute that a proper application of mind on the part of the competent authority is imperative before a show cause notice is issued. Section 68-H of the Act provides for two statutory requirements on the part of the authority viz: (i) he has to form an opinion in regard to his `reason to believe'; and (ii) he must record reasons therefor. Both the statutory elements, namely, `reason to believe' and `recording of reasons' must be premised on the materials produced before him. Such materials must have been gathered during the investigation carried out in terms of Section 68-E or otherwise. Indisputably therefore, he must have some materials before him. If no such material had been placed before him, he cannot initiate a proceeding. He cannot issue a sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 35. It is humbly submitted that the investigation in this case is still in progress. At present there is adequate material on record as aforesaid, to draw a reasonable belief that the properties provisionally attached and as mentioned in para 2 of the complaint (to the tune of ₹ 863.71 crore as mentioned in the provisional attachment order no. 01/2014 dated 04.03.2014) are the proceeds of crime in terms of section 2 (1)(u) of PMLA and is liable for confirmation. [Emphasis supplied] 73. In Radha Mohan Lakhotia v Deputy Director PMLA, which is relied upon by the Respondent No.1, the Hon ble Bombay High Court therein reiterated the mandatory nature of S. 5(1) (c) of PMLA, 2002, as under: 11. Section 5 authorises the Director or any other officer not below the rank of Deputy Director authorised by Director for the purposes of the said section to resort to action of attachment of property if he has reason to believe and the reason of such belief has been recorded in writing arrived at on the basis of material in his possession. That action is intended to freeze the proceeds of crime, which property, is derived or obtained d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is submitted on behalf of appellant that in the above thereof the Adjudicating Authority ought not to have even issued notice under S. 8(1) of the Act, leave alone confirm the Provisional Attachment Order. The relevant para-21 of Provisional Attachment Order is reproduced hereunder: 21. NOW THEREFORE , on the basis of material in my possession as per Annexure - R and in exercise of the powers conferred upon me under section 5(1) of the PMLA, 2002 (15 of 2003), the authority vested in me by the Authorization dated 07.02.2007 and its addendum dated 12.10.2011 issued by the Director of Enforcement in exercise of his powers under sub-section (1) of section 5 of the PMLA, 2002 (15 of 2003), I hereby order for provisional attachment of the properties as per Annexure A and further order that the same shall not be transferred, FPA-PMLA-751 to 755, 673, 747, 672, 670, 671 668/DLI/2014 Page 66 of 119 disposed, parted with or otherwise dealt with in any manner, whatsoever, by the holders having ownership and/or possession until and unless specifically permitted to do so by the undersigned. viii [Emphasis supplied] The Provisional Attachment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. (3) Where the Adjudicating Authority decides under subsection (2) that any property is involved in money laundering, he shall, by an order in writing, confirm the attachment of the property made under sub-section (1) of Section 5 or retention of property or record seized or frozen under Section 17 or Section 18 and record a finding to that effect, whereupon such attachment or retention or freezing of the seized or frozen property or record shall- (a) continue during investigation for a period not exceeding ninety days or the pendency of the proceedings relating to any offence under this Act before a court or under the corresponding law of any other country, before the competent court of criminal jurisdiction outside India, as the case may be; and (b) become final after an order of confiscation is passed under sub-section (5) or sub-section (7) of Section 8 or Section 58 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is satisfied that the claimant has acted in good faith and has suffered the loss despite having taken all reasonable precautions and is not involved in the offence of money laundering: Provided further that the Special Court may, if it thinks fit, consider the claim of the claimant for the purposes of restoration of such properties during the trial of the case in such manner as may be prescribed. 76. In terms of Section 8(1) of the PMLA, the Adjudicating Authority is required to examine the complaint filed under Section 5(5) of the PMLA or an application made under Section 17(4) of the PMLA. If on receipt of such complaint or application, the adjudicating authority has reason to believe that a person has committed an offence of money laundering or is in possession of the proceeds of crime, he is required to 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 or the means with which he has acquired the property which is provisionally attached under Section 5(1) of the Act or seized or frozen under Section 17 of the PMLA. 77. The mandate of Section 8(2) (c) cast ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31. Once the notice to show cause is found to be satisfying the statutory requirements which are condition precedent therefor, a valid proceeding can be said to have been initiated for forfeiture of the property. Only in a case where a valid proceeding has been initiated, the burden of proof that any property specified in the notice is not illegally acquired property, would be on the person affected. 40. Both the statutory elements, namely, reason to believe and recording of reasons must be premised on the materials produced before him . Such materials must have been gathered during the investigation carried out in terms of Section 68-E or otherwise. Indisputably, therefore, he must have some materials before him. If no such material had been placed before him, he cannot initiate a proceeding. He cannot issue a show-cause notice on his own ipse dixit. A roving enquiry is not contemplated under the said Act as properties sought to be forfeited must have a direct nexus with the properties illegally acquired. 41. It is now a trite law that whenever a statute provides for reason to believe , either the reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in question; what was in question was non-application of mind on the part of the authority prior to issuance of the notice. Conclusion 60. We are not unmindful of the purport and object of the Act. Dealing in narcotics is a social evil that must be curtailed or prohibited at any cost. Chapter V-A seeks to achieve a salutary purpose. But, it must also be borne in mind that right to hold property, although no longer a fundamental right, is still a constitutional right. It is a human right. 61. The provisions of the Act must be interpreted in a manner so that its constitutionality is upheld. The validity of the provisions might have received constitutional protection, but when stringent laws become applicable as a result whereof some persons are to be deprived of his/her right in a property, scrupulous compliance with the statutory requirements is imperative. [Emphasis supplied] 80. In the present case, it is submitted on behalf of appellants that the Provisional Attachment Order has been issued on 04.03.2014 in relation to an FIR registered on 17.08.2011 and a Final Report dated 13.08.2012 under S. 173(8) of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion) Rules, 2005 , The Director or the authorised officer, as the case may be, shall prepare an index of a copy of the order, and the material and sign each page of such index, order and the material and shall also write a letter while forwarding such index, order and the material to the Adjudicating Authority in a sealed envelope . However, the copy of the Provisional Attachment Order supplied to the Appellants does not contain the signatures of the Respondent No.1 as stipulated under Rule 3. 84. The Adjudicating Authority did not notice the said fact or ignored the same to the effect that the Provisional Attachment Order suffered from serious infirmity including, inter alia, for failing to comply with the mandatory preconditions under Section 5 (1) (b) of the PMLA. Under the circumstances, the following observations in the Impugned Order are completely shocking: But it is seen these case laws do not apply to the provisions of the PMLA. As per the provisions of Section 5 of the PMLA reasons are required to be recorded in writing by the Respondent No.1 but these are not required to be conveyed as it is to the defendants. It is further seen that whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Adjudicating Authority before issuing notice under section 8(1) of the Act, but it has not happened. 89 The Original Complaint No. 276/2014was filed by the Respondent No.1 under Section 5(5) of the PMLA after passing PAO alleging that proceeds of crime to the tune of ₹ 267.45 Cr. are in possession of the Appellants. It is evident from the PAO which indicates that the properties have not been attached as proceeds of crime but to secure the value thereof. Thus, it appears that even ED s case was that the properties are not per se involved in money laundering but have been attached merely to secure the value of the alleged proceeds of crime . 90. It is stated on behalf of the appellants that the material appended to the Provisional Attachment Order is insufficient as it does not contain a number of documents adverted to in the Respondent No.1 and the Provisional Attachment Order, on the basis of which the Respondent No.1 has purportedly formed an opinion that the Appellants are allegedly in possession of proceeds of crime . 91. It is submitted that the main allegation of the CBI, which has now been relied upon by the Respondent No.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of mind, therefore, the attachment of the sum of ₹ 7 Cr. ought not to be confirmed. 94. The properties sought to be attached, valued by the Respondent No.1 at ₹ 267.45Cr (actual attachment being equivalent to ₹ 274.45 Cr approx.) obtained from the sale of shares in Bharati Cement Corporation Ltd. and Silicon Builders Pvt. Ltd., ₹ 33.74 Cr. The same has admittedly been transferred to the Government of India by the Appellants by way of Advance Tax. An additional amount of ₹ 21.69 Crores was paid to the Government of India towards the total liability of income tax of ₹ 55.43 Crores on capital gains accrued from the said transactions. The same has not been accounted for by the Respondent No.1, who ought to have deducted the quantum of tax paid from the value of purported proceeds of crime , because the said quantum of the purported proceeds of crime are no longer in possession of the Appellants and already vests with the Central Government. 95. With regard to the question of tax, the Adjudicating Authority finds as under: 35. The issue has been raised by the defendants that the amount of income tax paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara Reddy extended undue favours to Mr.Nimmagadda Prasad, inter alia, in the form of allotment of VANPIC Project. This was, allegedly, a quid pro quo for investments made by Mr. Nimmagadda Prasad through his group companies to the tune of ₹ 854.50 Crores in the companies controlled by the Y. S. Jagan Mohan Reddy (the son of Dr. Y.S. Rajashekhara Reddy), which allegedly is the bribe paid for award for allotment of the VANPIC Project. The issue of VANPIC has already been discussed in earlier part of my order. 99. It is rightly submitted by the appellants that if the phrase proceeds of crime is characterized as has been done by the Respondent No.1 in this case, without reference to any causal nexus with the scheduled offences in question, it would lead to a situation where any revenues generated by persons accused of a scheduled offence would be attached, regardless of whether there is a causal link with criminal activities or not. Clearly, this would be contrary to the scheme and object of the PMLA. One is also failed to understand that on the one hand respondent no. 1 submits that it was a bribe amount and proceed of crime, the issuance of shares are just eyewash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of GoAP. The lands for the development of Industrial Corridor of the VANPIC Project were illegally acquired by the Vanpic Projects Pvt. Ltd., a private company allegedly exclusively owned by the Mr. Nimmagadda Prasad. Mr. Nimmagadda Prasad misappropriated and diverted monies invested by the Government of Ras al Khaimah in the Vanpic Project. Mr. Nimmagadda Prasad/Matrix Laboratories Ltd. were granted exemptions under the Urban Land Ceiling Act. 101. It is submitted on behalf of appellants that the said allegations are contrary to the records. It is submitted that there is no reason to believe that the Appellants are in possession of proceeds of crimes or that the properties attached are proceeds of crime . 102. It has come on record that after disinvestment in Matrix Labs, Mr. Nimmagadda Prasadidentified five sectors with excellent growth prospects in the long run for the purpose of Investments, viz. a) Core infrastructure b) Power c) Healthcare d) Entertainment Media e) Hospitality His investments were made taking into consideration the following factors which would ensure retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 9. Annapurna Studios Media Entertainment 10. Jagati Publications (Sakshi) Media Entertainment 11. Object One Media Entertainment 12. Bharati Cements Core Infrastructure 13. Indu Projects Core Infrastructure 14. VANPIC Project Core Infrastructure 105. It is submitted that Mr.Nimmagadda Prasad s investments in Companies controlled/owned by Mr. Y. S. Jagan Mohan Reddy are one amongst the many given above, and guided by the above principles and no extraneous motive ought to be imputed for such investments, which were purely guided by commercial interests as will be demonstrated herein below. 106. It is stated on behalf of appellants that if Mr. Nimmagadda Prasad s investments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are framed in the schedule offence. 109. Mr. Nimmagadda Prasadexplained reasons for investing in Raghuram Cement Corporation Ltd.in his statements dated 15.02.2012 and 16.03.2012 respectively: I state that I have personally worked out the viable and profitable fields of business and it was Healthcare, Hospitality, Media Entertainment, Core Infrastructure, Core Industries (Cement, Steel, Power). Accordingly, I venture in these lines in and outside India. As regards the investment in Raghuram Cements is concerned I state that the parameters for a growing cement factory are capacity, credibility Access to Markets leaving aside the other features which are considered before investments in the other fields. I noticed that Raghuram Cement at the time of my investment planned 2.5 MTPA (scalable to 5 MTPA with marginal cost). Focus on quality (Robotic Technologies) access to Markets such as Andhra/Tamil Nadu/ Karnataka Kerala. xi As a part of my preferred and identified sector of Investment I came to know from Mumbai investment circles of an opportunity to invest in M/s Raghuram Cements. I knew, based on my study that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommercial considerations, wherein, Mr. NimmagaddaPrasadmade a handsome profit. 112. The Appellant companies invested a total of ₹ 285 Crores for equity of 14.50% at an average price of ₹ 341/- per share and exited Bharathi Cements (Formerly known as Raghuram Cements) by sale of equity to M/s Parcifim SAS for a total sale consideration of ₹ 560.45 Crores (at a price of ₹ 671/- per share).While investing in Raghuram Cements, Mr. Nimmagadda Prasad was informed that the Promoters held an indirect stake in Bharathi Cements through Silicon Builders Pvt. Ltd. and offered an investment opportunity. Mr. Nimmagadda Prasad decided to purchase a stake in Silicon Builders Pvt. Ltd. to further consolidate the stake in Raghuram Cements. 113. It is stated on behalf of the appellants that the At the time of exit from Raghuram Cements/Bharati Cements, Mr. Nimmagadda Prasad simultaneously exited from Silicon Builders Pvt. Ltd. at the acquisition price keeping in mind the overall profit for the exit from Bharathi Cements. Therefore, it is submitted that the Mr. Nimmagadda Prasad and his companies obtained a total return of ₹ 617 Crores against an i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sl. No. Company Name Share Price (Rs. Ps.) Market Capitalization in Rs. Crores 1 TCS 1864.20 699,520 2 Infosys 726.55 317,404 3 Wipro 330.95 149,757 4 HCL Tech 947.05 131,889 5 Tech Mahindra 707.30 69,404 6 Oracle Financial 3670.00 31,472 7 L T Infotech 1733.80 30,067 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he group of investment vehicles/companies controlled by the Nimmagadda Prasad. Sources of income of acquisition of each of the properties provisionally attached was explained in detail in the Reply filed by the Appellant, which has been completely ignored by the Adjudicating Authority in the Impugned Order. 121. It is stated on behalf of the appellants that the Memo dated 23.09.2013 filed by the CBI in RC 19(A)/2011-CBI-HYD, wherein, the CBI has categorically stated that no instance of quid pro quo was uncovered in respect of Carmel Asia Holdings Pvt. (Hereinafter Carmel Asia ) and Sandur Power Company Ltd. (Hereinafter the Sandur Power ). It is stated that thus the investments of the Appellant companies cannot come under any cloud of suspicion.The Mr. Nimmagadda Prasad was invited to invest in Carmel Asia, which is the holding company of Jagathi Publications Ltd., Janani Infrastructure Pvt. Ltd. and Indira Television Ltd., which are the operating companies of Sakshi Newspaper and News Channel.Mr. Nimmagadda Prasad s investment in Jagati Publication was on the same terms as offered to many other investors who have arraigned as accused either by the CBI or by the Respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blications Ltd., which directly held the Sakshi Newspaper business. 124. It is submitted that the Mr. Nimmagadda Prasaddid not depend on any valuation report for the investment in Jagati Publications but relied inter alia, on the valuation being discussed amongst the concerned people, in the proposed investment (January 2007) by Blackstone in Eenadu newspapers wherein, the valuation was estimated at over USD One Billion Dollars (Then approx. ₹ 4230 Crores). Therefore, the appellants believed that if Sakshi Newspaper achieved a projected circulation of 10 lakh - 10.5 lakh, within the first one and half year (which in fact it achieved in 2009), then a similar valuation would apply thereby fetching a substantial return on the investment made by the Appellant. It is stated that the appellants instinct in the inherent value of the Newspaper and News Broadcast industries was reinforced by the subsequent investment of ₹ 1450 Crores byMr. NimeshKampani s group company in Eenadu for a 21.32% stake at an enterprise valuation of ₹ 6,800 Crores in January 2008. 125. By April 2010, Mr. NimmagaddaPrasadheld2.6% direct stake in Jagathi Publications and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Companies controlled by Y. S. Jagan Mohan Reddy were for purely for commercial reasons and not for other reasons, as alleged by the CBI and the Respondent No.1.In any event, the aforesaid facts demonstrate that the investments had no nexus whatsoever with the alleged undue favours viz., the VANPIC project. 129. The essential facet of natural justice is procedural fairness and fair opportunity of hearing, which includes the right to know the opposing case. It would, therefore, be relevant to refer to the observations of Lord Denning in this regard: If the right to be heard is to be real right which is worth anything, it must carry with it a right in the accused man to know the case which is made against him. He must know what evidence has been given and what statements have been made affecting him: and then he must be given a fair opportunity to correct or contradict them. xiii [Emphasis supplied] 130. It is the case of the appellants that the Adjudicating Authorityhad declined to direct the Respondent No.1 to serve advance copies of the rejoinders to the Appellants. Under the circumstances, the counsel for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 9. However defendant has stated that matter is pending at level of Advocate General of Andhra Pradesh who is yet to respond. xiv [Emphasis supplied] It is submitted that the Appellants were never afforded an opportunity to respond to the allegations in the Rejoinder that constitute an entirely new case which is entirely impermissible. Therefore, the above finding is crucial finding by the Authority which forms the basis of confirmation of the Provisional Attachment Order was in violation of law. 133. The Adjudicating Authority has dealt with the objection of the Appellants for non-provision of the copy of the Rejoinder in the Impugned Order as under: As per practice after filing the complaint by the complainant one opportunity is allowed to the defendants to file their detailed written submissions with evidence and on such written submissions one opportunity is allowed to the complainant side to file and present their detailed counter reply or rejoinder. Thereafter both sides present their argument which they did on 6 days as indicated above. There is no practice of rejoinder on rejoinder or reply on reply. Thereafter opport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y reference is made to it in the order. The learned Judges animadverted on this feature and we concur with them that this is far from satisfactory. Learned Counsel for the respondent drew to our attention the rules which have been framed under Section 59 of the Act which lay down the procedure to be followed by Revenue Officers conducting these enquiries, Rule 30(2) read with Rule 17(2) and pointed out that these rules did not require any record being kept of the evidence adduced and that in the absence of any such statutory provision there was no need for these tribunals to follow the procedure adopted by regular courts and that it could not be said that any principle of natural justice was violated by such a record not being kept. We agree that the maintenance of a record of the oral evidence adduced is not the requirement of any specific rule. It should not however be forgotten that the order passed in an enquiry into an objection filed under Section 44(1) of the Act is subject to an appeal under Section 44(3) to a prescribed Tribunal as authority. That appeal lies both on the facts as well as on any legal questions which might arise and be decided and is not confined to any pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Adjudicating Authority to apply its mind. No valid reasons are mentioned on the notice itself or any separate order is passed before issuance of notice which is requirement as per settled law. 139. The Impugned Order is consisting of 206 pages. In first 192 pages, there is a reproduction of the OC, Reply filed by the Appellants and the Rejoinder of the Respondent No.1 and in 13 pages, discussions was taken place. The discussions of the Authority demonstrates that almost the same stand is taken as per charge-sheet filed by the CBI. The Authority has not applied its mind to the Common Reply filed by the Appellants and has even failed consider and deal with majority of the submissions made by the Appellants. 140. In paragraph 23 at internal page 89 of the Impugned Order, the Adjudicating Authority that M/s Classic Realty Pvt. Ltd. is however in possession of proceeds of crime is not wholly contrary to the record but even contrary to the Respondent No.1 s observation which reads as under: 25. The investigation under PMLA has so far revealed that Shri N. Prasad and his companies had indirectly derived proceeds of crime amounting to ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illogical that when French Company wanted transaction at market value, how this transaction has taken place at such high rate of ₹ 671 per share and why French Company did nor object. [Emphasis supplied] 143. It is admitted position that Respondent No.1 never questioned the investment by M/s Paraficim, the French company and in fact, treated it as genuine investments. The aforementioned findings by the Adjudicating Authority are therefore completely out of record/pleadings before it and finds place for the first time in the Impugned Order. M/s. Paraficim which is French company is not accused either in the schedule offence nor in the prosecution complaint. 144. The said finding shows complete non-application of mind by the Respondent No.1 in as much as there was no Section 3 (1) (c) in the Companies Act, 1956 and Section 3 (1) (c) of the Companies Act, 2013 (which is not applicable to the transactions in the instant case) pertains to One Member Companies. This is not only absurd but reeks of a desperate attempt to justify the predetermined outcome of the proceedings before the Authority. 145. Mr. Y. S. Jagan Mohan Reddy was th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is to be noted that my investment was done on commercial basis after due diligence. 146. No contrary arguments are addressed on behalf of respondent no. 1, rather it was admitted that the Pacifism SAS, French Company has bona-fide purchaser of shares. They are not involved for any offence. The said company is not even party to any criminal proceedings included prosecution complaint and their money was the clean money. Once the said admission is made by the respondent no. 1, subsequent investment by Nimmagadda Prasad and his group company cannot be treated as tainted money. There is no force in the arguments of the respondent no. 1 that investment is just eyewash and useless papers. Rather it proves that the investment may be genuine. 147. It is the case of the appellants quantification of Proceeds of Crime and Attachment in various heads amounts to double attachment: Double Attachment: ₹ 178.5 Crs worth of shares purchased by Mr. Nimmagadda Prasad s group companies (Alpha Avenues, Alpha Villas, Gilchirst Investment) in Jagati Publications have been attached at their hands. The respondents further sought to attach th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the prevalent market value. By adopting such erroneous method, the respondents have resorted to causing the attachment of a maximum number of properties. The term value of any such property as enumerated in Sec. 2(1)(u) of PMLA would require the respondents to take the current value of the entire property into consideration for the purpose of attachment. Therefore, the value of the said property held by Mr. Y.S. Jagan Mohan Reddy would amount to much higher than the purported value ascribed by the respondents. S.No. Property Value (in Crs) Guidance Value (in Crs) 1 42.44 Acs of Agricultural Land at Vempally Mandal, Idupulapaya, Kadapa Dist. 0.06 0.54 2 10.36 Acs of land, Pulivendula Mandal, Bakarapuram Village, Kadapa Dist. 0.01 6.51 3 6.65 Acs of land, Pulivendula Mandal, Bakarapuram Village, Kadapa Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same suffers from many infirmities with regard to assessing the proceed of crime and attachment of properties. Thus, the impugned order and provisional attachment order are liable to be modified. Discussion and findings 149. The details of attachment of properties and findings are given as under:- Mr. Y. S. Jagan Mohan Reddy Group ₹ 538.31 Crs i) ₹ 68.31 Crs - Mr. Y.S. Jagan Mohan Reddy (Shares in Sandur Power for ₹ 54.94 Crs and immovable properties for ₹ 13.35 Crs) ii) ₹ 450.00 Crs - M/s. Jagati Publications Ltd. (FDs worth 4.14 Crs; Shares in Indira Television for 172.46 Crs and Plant and Machinery for ₹ 273.39 Crs) iii) ₹ 20.00 Crs - M/s. Carmel Asia Holdings Pvt. Ltd. (Shares in Jagati Publications) 150. Firstly, let me deal with the attachment at the hand of Jagan Mohan Reddy at head i) of ₹ 68.31 crores i.e. shares worth 54.94 crores and immovable property of ₹ 13.35 crores. The allegation is that as quid pro quo, Mr.Nimmagadda Prasad had transferred ₹ 35 crores to Mr. Y.S. Jagan Mohan Reddy in guise of purchasing shares o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bangalore from internal revenue generated by sale of power generated and sold to State Electricity Board of Karnataka (MESCOM) and by availing a bank loan of ₹ 117 Crs doubling the profitability of Sandur Power. The hydro plant owned by Sandur Power continues to be successful in Karnataka. The net worth of Sandur Power at the time of the above transaction was over ₹ 250 Crs and, therefore, prima facie, it appears that the purchase of Sandur Power shares by Mr. Nimmagadda Prasad was a transaction with commercial interest, unless it is proved by CBI, as per its allegation, but ED merely on the basis of allegation cannot allege that it has been prima facie established. Independence evidence was bound to be conducted, no reason to believe indicated and discussed. Therefore, the attachment on this head is also released. 154. The allegationsare about the sale of M/s. Bharathi Cements Company Limited (BCCL) shares to Mr. Nimmagadda Prasad s group company. Nothing contrary has come on record that the sale of shares of BCCL held by Mr. Y.S. Jagan Mohan Reddy to Mr. Nimmagadda Prasad s group company, Alpha Villas is not a genuine business transaction. Mr. Y.S. Jagan M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent also seeks to attach a total amount of ₹ 450 Crs as Proceeds of Crime at the hands of M/s. Jagati Publications Ltd. The valuation of Jagati Publications shares were arrived after taking the entire enterprise valuation of Sakshi News Paper Project with size and circulation into effect. Sakshi regional newspaper was launched with a circulation of about 12 lakh copies with 23 printing centers simultaneously in States of Andhra Pradesh, Telangana, New Delhi, Karnataka, Tamil Nadu and Maharashtra. 156. The valuation of Jagati Publications shares is based on Discounted Cash Flow Method (DCF, which has been approved by the Reserve Bank of India under Foreign Exchange Management Act Notification number FEMA 205/2010 issued on 07.04.2010) which is a futuristic valuation technique for valuing a company even before the commencement of its operations. 157. Pertaining to other remaining attachments, the main allegation against M/s. Carmel Asia Holdings Ltd. is that company is owned and controlled by Mr. Y.S. Jagan Mohan Reddy and has attracted payments of ₹ 20 Crs as quid pro quo from Mr.Nimmagadda Prasad s group of company; M/s. Beta Avenues Pvt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Guntur Dist). 160. As far as attachment as per details mentioned in preceding paras of head vii) and viii) with regard to attachment of ₹ 23.23 crores of VANPIC Port Pvt. Ltd. i.e. about 561 acres land and ₹ 27.72 crores spent by VANPIC Project Pvt. Ltd i.e. about 855 acres of land is concerned, it is vacant land. The possession is not with the appellants who being a partner with RAK has spent huge amount. MOU and agreement have already been executed with regard to VANPIC Project. The said project was in the interest of public. Government of Andhra Pradesh is not the party in the present appeals. This Tribunal is not aware about the stand of the Andhra Pradesh Government as to whether it is still interested in the said project as the same was prime facie between Government to Government. It is also not aware as to whether Government is now agreeable to Nimmagadda Prasad and its group as a partner with RAK or not. Therefore, it is not proper to give any findings in this regard, otherwise it would amount to enforcement of MOU and agreement. However, prima facie, this Tribunal is of the opinion that no purpose would be served to continue the attachment as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been established on record that said shares got 96% profits. The said appellants prima facie placed the material on record that there are sources of funds available for the purpose of investment. 164. The allegation of the respondent no. 1 as well as in the impugned order that Mr. Y.S. Jagan Mohan Reddy has received ₹ 35 crores as quid pro quo for VANPIC Projects, prima facie,there is a material on record that Y.S. Jagan Mohan Reddy received ₹ 30 crores on 22.1.2007 by way of cheque no. 686670 from Mr. Nimmagada Prasad as sale consideration for 21,42,869 shares of Sandur Power held by him and on 19.2.2007 Share Transfer Form in form No.7B authenticated by Assistant Registrar of Companies, Bangalore bearing stamp and date. Mr. Y.S. Jagan Mohan Reddy had signed the said Share Transfer Form for a consideration of ₹ 30 crores on 22.2.2007. Capital Gain Tax of ₹ 6.69 crores paid by Mr. Y.S. Jagan Mohan Reddy on sale consideration of ₹ 30 Crores from Mr. Nimmagadda Prasad on 31.7.2007. 165. From the impugned order as well as provisional attachment order and from the stand of respondent no. 1, it appears that the submissions are n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions with M/s Classic Realty Pvt. Ltd. being proceeds of crime. The Respondent No.1, despite observation by the CBI in its charge sheet , has taken the different view. 165.2 The total amount arising from the sale of shares referred to hereinabove is ₹ 617.45 Cr. The said amount received from Parficim is not the proceeds of crime, nor it was/ is tainted amount as admitted by the respondent. The said amount is clean money and it has no nexus whatsoever with any alleged quid pro quo transaction mentioned in paragraph 24 the Complaint. The only stand of the respondent that shares were purchased earlier was proceed of crime and these shares were sold on higher price to French Company (who is not accused) but the amount received amounts to proceed of crime. 165.3 Out of said amount, ₹ 350 Cr. was subsequently invested in M/s Jagati Publications Ltd. has been attached in its hands. The remaining 267.45 Cr. has been treated as proceeds of crime in the hands of the appellants. The main reasons are given as under:- i) In the Original Complaint, the amount of ₹ 560.45 Cr. received from PARCIFIM (admittedly an innocent party) has been des ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no refund . No criminal statute in India recognizes this idea of refund of gratification, the assumption being that illegal gratification is retained by the person it is paid to. The Respondent No.1 has failed to demonstrate how this concept of refund has any causal nexus with the ingredients of any of the scheduled offences involved in this case. iii) Thirdly, if both PARCIFIM and M/s Classic Realty Pvt. Ltd. are innocent parties (as set out in the Complaint), the purchase of shares by them is clearly untainted. Therefore, monies received from transactions entered into with such innocent parties may be untainted. iv) The monies generated from the sale of shares has no nexus whatsoever to any of the purported favors extended to Mr. Nimmaggada Prasad and his group companies, as set out in the Chargesheet, because other investors have also shareholding to the said French Company. v) The monies paid by the Appellants for the purchase of shares remains within the investee companies in question as share capital. If the same is to be characterized as illegal gratification , it can, at best, be attached in the hands of the said companies. Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporate the said provision to some are the guiding factors. 171. Therefore, in the present situation, in view of peculiar fact and circumstances, the balance can be strike as admittedly the investment in BCCL had got net profit of ₹ 274.95 crores on an investment of ₹ 342 crores which was sold for ₹ 617.45 crores with an IRR of 30% to the French Company, who is admittedly not charge-sheeted and its money was clean money as admitted by the respondent no. 1. However, in view of allegations by CBI, in order to strike balance, certain directions are necessary to be passed, unless the same are disposed or set-aside. 172. The Adjudicating Authority in the impugned order has not discussed all the pleas raised by the appellants. The impugned order has been passed by taking very casual approach rather deciding the matter as per pleadings and law. 173. In the light of above mentioned reasons, the Appeal of Nimmagadda Prasad and group are partly allowed, subject to the condition that the said group of appellants shall furnish the Indemnity Bond for a sum of ₹ 274.95 crores with the respondent within four weeks from today as surety a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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