TMI Blog2019 (9) TMI 999X X X X Extracts X X X X X X X X Extracts X X X X ..... operties of 63 MTL purely based on a mis-interpretation of the concept of value of such property‟ as employed in Sec. 2(1)(u). The principles of equivalent value, could apply only to a person who came into possession of the proceeds of crime. It cannot be applied to attach assets of 3rd party who is not the recipients of any proceed of crime. In the eyes of law, every public-sector company is a distinct/independent company. Doctrine of Tracing - HELD THAT:- Admittedly, no money (except a sum of ₹ 84 Crores ) has travelled from NSEL to 63 Moons Technologies Ltd.‟ from the time NSEL was incorporated in 2005 till it became defunct in 2013 when its trading stopped and its operations were suspended as a result of action by the Department of Consumer Affairs. ₹ 84 Crores deposited in Bombay High Court represents rent, software, other shared services etc. The same is an admitted position by the Respondent No.1. The Hon‟ble Bombay High Court by order dated 12.06.2015 directed the deposit of this amount. Therefore, there would be no issue of doctrine of tracing. Counsel for 63 MTL and NSEL alleged that the case of Enforcement Directorate is flawed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isc.), MP-PMLA-3622/MUM/2017 (Misc.), MP-PMLA-3364/MUM/2017 (Stay) & FPA-PMLA-1735/MUM/2017, MP-PMLA-3365/MUM/2017 (Stay) & FPA-PMLA-1736/MUM/2017, MP-PMLA-3710/MUM/2017 (Misc.), MP-PMLA-3663/MUM/2017 (Stay) & FPA-PMLA-1860/M - - - Dated:- 17-9-2019 - Justice Manmohan Singh (Chairman) And G.C. Mishra (Member) For the appellants : Mr. Mukul Rohtagi Mr. Dayan, Krishnan, both Senior Advocates, with Ms. Tanvi Manchanda, Advocate Ms. Priyanka Vora, Mr. Arvind Lakhawat, Mr. Siddharth Joshi Mr., Akshay Ringe, Advocates, Ms. Malvika Jain, Advocate For the respondent : Shri Rajeev Awasthi, Shri Rajeev Awasthi, Advocate JUDGEMENT FPA-PMLA-1735-1736, 1860, 1738-1739 1862/MUM/2017 1. By this order, we propose to decide all the above-mentioned appeals. The appeal nos. 1738/2017, 1739/2017 and 1862/2017 filed by National Spot Exchange of India Ltd. (for short NSEL ) in the appellant has challenged the following Orders passed by the Adjudicating Authority, confirming the Provisional Attachment Orders (for short PAOs ) passed by Respondent no.1 ED attaching the properties of the Page 3 of 101 appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the Special Judge, PMLA, Mumbai. Therefore, NSEL is aggrieved and has filed the present appeals no. 1738/2017, 1739/2017 and 1862/2017. 4. 63 MTL (a technology service company) was incorporated in 1988. It is a public listed company with its shares listed on the BSE, NSE ASE and has about 63,000 shareholders. 63 MTL founded and promoted 9 exchanges in commodities and securities market worldwide. Multi Commodities Exchange ( MCX ) was one such exchange in which the Appellant held 26% stake at the relevant point of time. 5. MCX, an erstwhile subsidiary of the FTIL incorporates NSEL (Respondent No. 2) in the appeals filed by 63 MTL for carrying on inter alia the business of running a spot trading platform for commodities. 6. In September, 2005, the entire shareholding of Respondent No.2 was transferred by MCX to the 63 MTL . This resulted in 63 MTL becoming 99.99% shareholder (Respondent No.2). The National Agricultural Co-operative Marketing Federation of India holds 0.01%. NSEL applied for a license for establishment of e-marketing in the State of Gujarat under Sec. 31C (2) (B) of the Agricultural Produce Markets Act, 2007. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zing the Trading Clearing Member to trade in the contracts admitted for dealing‟ on the NSEL, on behalf of the Clients. It is stated that there was no privity of contract between NSEL and Trading Clients who transacted through Brokers. It is stated on behalf of NSEL that as an exchange platform facilitated the sale and purchase of commodities where trading members wishing to sell commodities ( Commodity Sellers ), or trading clients wishing to purchase commodities ( Trading Clients ), could sell/purchase commodities on the Exchange through their broker (the Trading Member Broker ). The transactions were required to be settled by payment and delivery within a fixed period. 10. The procedure for transacting as mentioned, is as under:- i) In the first leg of the transaction, a Trading Client (through its Trading Member Broker), would purchase specified commodity from a Commodity Seller, for which the Commodity Seller was required to deliver the requisite commodity and the Trading Client (through its Trading Member Broker), was required to make payment of the purchase price within 2 days of the contract date (the T+2 contract ). The Trading Client ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ull liability for the defaults that took place on the exchange platform; b. categorically stated that the Board of NSEL was not aware of the lapses and irregularities in the functioning of the exchange; c. Anjani Sinha and his senior management team (which included Amit Mukherjee and Jai Bhahukandhi) alone were aware of the day-to-day workings of NSEL. 15. It is stated on behalf of appellants that the Grant Thorton (appointed by NSEL pursuant to FMC s direction) submitted its Report on 21.09.2013. In its Report, it has been stated the following: (i) It has not independently verified or validated any information provided to it. (ii) The Report did not constitute an audit and therefore cannot be relied upon to provide the same level of assurance as a statutory audit. (iii) Should additional information or documentation become available, which impacts upon conclusions reached in the Report, Grant Thornton reserves its right to amend its findings accordingly. 16. Admittedly, the Report contains prima facie allegations of wrongdoing by some officers of NSEL, including the MD CEO. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at though the case has been projected as a scam of ₹ 5600 crores,‟ it needs to be kept in mind that these amounts have not been received by NSEL ..The money invested has not come to NSEL, but has gone to the borrowers i.e. bogus sellers. It is the borrowers who have benefited by the transactions and the money of the investors‟ has gone to them. 23. UOI preferred a Company Petition No.1 of 2015 invoking the provisions of Sections 388B, 388C, 397 and 398 r/w 401-403, 406 and 408 of the Companies Act, 1956 before the erstwhile Company Law Board ( CLB ), inter alia seeking removal of the Board of Directors of 63 MTL . 24. The investigation was initiated by the relevant authority under the PMLA Act and pursuant thereto a Prosecution Complaint No. 04/2015 filed against NSEL and 67 others before the Competent Special Court. 25. The relevant details of investigation under PMLA are given as under:- a) Investigations under the PMLA, 2002 in this matter were initiated by conducting enquiries with NSEL. Upon enquiries with NSEL, it was gathered that NSEL was incorporated in 2005. The controlling shareholder of NSEL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... channeled to scores of other accounts including group company accounts, personal accounts, third party accounts, traders accounts, and accounts of fictitious companies/firms/persons. The funds were then laundered either by way of merging it in their regular business activities or placing it in movable and immovable properties/assets. d) During the course of investigation, a Prosecution Complaint No. 04/2015 has been filed against NSEL 67 others before the Competent Special Court, PMLA, Mumbai on 30.03.2016. The Special Court has taken cognizance of the said complaint on 04.12.2015 and has issued summons against all the accused persons/entities. e) During the course of investigation, inquiries were made with Income Tax Department who had verified stock position with the various defaulters of NSEL. Ongoing through the report received from IT department, it was observed that no equivalent stock was found in any of the godowns of the defaulters. The godowns of the defaulters lacked the capacity to store the equivalent quantity of the goods. In many cases the godowns were locked and no stock verification was allowed. In some case, godowns could not be loca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring and settlement system generated bank files for debiting or crediting the settlement accounts of respective members and such files were sent to the bank electronically; that based on such instructions, the banks debited/credited respective members settlement accounts; that in the settlement account, members did not have cheque book facilities and so settlement account could be used only for (1) transfer or receipt of funds to/from NSEL settlement account; (2) transfer of funds to members‟ client account and receipt of funds from any account; that the operation of client account was totally in the hands of issue cheques to his clients from this account. (iii) On being asked to explain function of business development section and warehousing section of NSEL, he stated that business development team was responsible for development of the market, introduction of new members, identifying new commodities, carrying out ground level due diligence of the parties and if found fit, to introduce them to the Exchange system; that identifying and approving warehouses, maintaining stock in the warehouses, keeping control and vigil on actual commodity inward and outward al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er alia stated that the immovable property situated at Flat No. 1202, Samarpan Royale, 12thFloor, village Magathane, off Western Express Highway, Borivali (East), Mumbai- 400066, was jointly owned by her husband ShriAmit Mukherjee and herself; that the said property was purchased in their joint name in 2013 and payment for the said property was made by Mr. Jai Shankar Srivastav, Director in one of the defaulter member i.e. M/s. Mohan India Pvt. Ltd, M/s. Brinda Commodity M/s. Tavishi Enterprises. As regards the Range Rover vehicle, she stated that though the same was purchased in her name, the payment for the said vehicle was made by Shri Jai Shankar Srivastav. On being asked to furnish the details of funds received from Mohan India Group and its Directors, she stated that she had no knowledge but Shri Amit Mukherjee had told her that Shri Jai Shankar Srivastav had paid for the flat situated at 1202 in Samarpan Royale and the Range Rover. In view of the findings of the Income Tax Authorities and M/s. SGS and the depositions of Shri Anjani Sinha and Shri Bihari Lal and other key management official of NSEL in their respective statements and scrutiny of documents, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tune of ₹ 1 Crores from one of the defaulter Mohan India and paid the same to La-Fin (one of the major shareholder of FTIL having share holding of approx 27 %); that however he returned the said ₹ 1 Crores to Kalpesh Shah immediately after media reports; that as of today ₹ 1 Crores still outstanding with Mr. Kalpesh Shah. (ii) Shri Srikant Javalqekar. Non Executive Director of NSEL IBMA (Indian Bullion Market Association, a subsidiary of NSEL)- During the statement recorded on 15.04.2014 and 05.07.2016, he submitted that from some members maintaining some part of the stock, in most cases, the underlying goods/stock was not maintained by the defaulting members; that the same fact has come to light only after the investigations after August 2013; that NSEL Board were never in knowledge of the absence of stock as at all times, the NSEL management stated that the warehouses had adequate stocks. During the statement recorded on 05.07.2016, he submitted that IBMA is the step down subsidiary of NSEL and engaged in bullion trading; that initially the stake of NSEL in IBMA was 10% to 20% which was gradually increased to 61% later; that IB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rector of M/s Aastha Minmet (India) Pvt Ltd. and the main controlling person of Juggernaut Projects Ltd.- During the statements recorded on 21.12.2013, 23.12.2013 06.02.2014, he submitted that initially their company used to deliver the goods to the NSEL godown; that thereafter, they made an arrangement with NSEL whereby they used to just send an email to NSEL declaring that the traded quantity of goods have been delivered; that there were no deliveries and the trades with NSEL were just paper transactions; that contracts were launched without any physical stock of goods. (ii) Shri Kailash Aggarwal, Director of M/s Ark Imports Pvt. Ltd.:- During his statement recorded on 13.02.2015, he admitted that his company had delivered the goods to NSEL warehouse initially, that the suggestion of Shr. Manish Pandey, Executive of NSEL indicating that there would be no requirement of raw wool stock, no physical stock of raw woo! was delivered to the warehouse and trade was carried out on the basis of warehouse receipts generated by them. (iii) Shri Arun Sharma, Director of M/s. Lotus Refineries Pvt Ltd. - During his state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valent quantities of stock of paddy to the NSEL designated godowns at the time of their T+2 transactions, however, when confronted with the income tax verification report that stock of only ₹ 0.75 Crores was found lying at the godowns, he claimed that NSEL shifted the stock, though the godowns were effectively under their control. When confronted with the SGS Ltd stock taking report wherein they did not allow M/s SGS Ltd to verify the stock, he stated that the stock of paddy belonged to them and therefore they did not allow M/s SGS Ltd to verify the stock. When asked to submit evidences regarding their delivery of stock at the NSEL designated godowns and the removal of stock by NSEL as claimed by them, he could not provide any evidence to back his claim. (vii) Shri Ranjeev Agqarwal. Ex CFQ of P.P. Aqrop-ocessors Pvt. Ltd. During his statement recorded on 02.01.2014,13.02.2014,14.02.2014, 19.02.2014 and 15.03.2014, he submitted that initially, they deposited the stock of paddy/rice with the NSEL warehouse; that in subsequent trades, no physical stock of paddy/ice was delivered to the warehouse and trade was carried out on the basis of warehouse receipts generat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the trades were punched; that no physical stock of castor seeds/castor oil/washed cotton seed oil was delivered to the warehouse and trade was carried out on the basis of warehouse receipts generated by them. (x) Shri Rajesh Mehta, Power of Attorney holder Actual Controller of Swastik Overseas Corporation- - During his statements recorded on 13.01.2015, he disclosed that he was working as a Purchase Manager in M/s N K Industries; that that Shri Rajiv Todi, who was the plant manager of the Kadi Plant of M/s N. K Industries Ltd(one of the defaulter member of NSEL), suggested him that they could start their own business of commodity trading on NSEL exchange and make secure funds; that they did not had any plant or factory; that they started trading on NSEL exchange in November, 2011; that the trading undertaken by them on NSEL exchange had nothing to do with the stock in the warehouses; that no equivalent stocks were either maintained or delivered to the said NSEL designated godown; that the paper transactions for the trades that is the contracts were launched declaring one of their clients of M/s Swastik Overseas Corporation as the seller of the goods i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Gagan Suri to form a company which would become NSEL member; that the funds were utilized towards loan repayments, plant expansion and other business needs of the group; that the transactions entered for the sale / purchase of sugar on the NSEL exchange were paper transactions to generate funds without any physical movement of goods. (xiv) Shri Jag Mohan Garg of M/s Mohan India Pvt. Ltd. M/s Tavishi Enterprises Pvt. Ltd. and M/s Brinda Commodity Pvt. Ltd.- - During the statement recorded on 31.10.2013 and 01.11.2013 he admitted that there was no physical stock of sugar against the trades effected by M/s Mohan India Pvt. Ltd, M/s Tavishi Enterprises Pvt. Ltd. and M/s Brinda Commodity Pvt. Ltd. through the NSEL platform; that he was under the impression that physical stock of commodities was not required for trades effected on NSEL platform. (xv) Shri Jaishankar Shrivastav, other director of Mohan India Pvt. Ltd.- - In his statement recorded on 01.11.2013, he has confirmed the depositions of Sh. Jagmohan Garg and admitted that no stocks of sugar were maintained by them or delivered to NSEL designated godowns against the NSEL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 63 MTL to ED based on the aforesaid newspaper reports. In this letter particulars of total outflow from Appellant to NSEL and inflow from NSEL to Appellant were given, thereby demonstrating a net negative outflow/payment of ₹ 248.43 Crores from 63 MTL to NSEL. Apart from that the ED was also apprised of the various restraining orders operating against 63 moons preventing it from alienating its assets in any event and thereby requesting ED not to take any adverse action. 35. Respondent No.1/ED on 22.8.2016 directed the representative of ‟63 MTL that 63 MTL should furnish details of the payments regarding ₹ 84 Crores deposited by the 63 MTL with the Bombay High Court in WP No. 2187 of 2015. The said detail was immediately supplied by the Appellant vide email dated 23.08.16. 36. On 9th September, 2016, the agenda for the meeting of NCLT Committee scheduled for 15.09.2016 was circulated. One of the agendas for the proposed meeting was to permit the 63 MTL for conducting treasury operations. 37. 63 MTL received an email dated 9.9.2016 from the Enforcement Officer through representative of 63 MTL . The Enforcemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he PAO and had reinvested the same in other instruments (viz Bonds) after obtaining the due approval of the NCLT Committee. 44. The facts of liquidation of the assets after obtaining the prior approval of the NCLT Committee was brought to the notice of the Respondent No.1 by way of a letter dated 27.09.2016. Appellant gave full particulars of reinvestments made and even undertook not to deal with ₹ 306.71 Crores (the value of the attachment made under the 1st PAO). 45. On 30.09.2016, another second PAO No.19 of 2016 was issued by the Respondent No.1 attaching the investment in bonds belonging to the 63 MTL having a face value of ₹ 1065 and the balance of ₹ 30,27,17,055/- in HDFC bank account 00600340030108. It is pertinent to mention that PAO No.17 and PAO No.19 are both issued based largely on the same set of facts, directed against the Appellant and founded on the same premise for attachment. 46. Pursuant to 1st PAO, Complaint being O.C. No.645/16 was filed before the Adjudicating Authority, PMLA. In OC No.645/16, SCN u/s 8 was issued and the same was served upon the Appellant on 20.10.16 without RUD. OC No.645/16 alon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed before the Adjudicating Authority on 28.02.2017. SCN u/s 8(1) of PMLA was issued by the Adjudicating Authority, PMLA in 3rd OC on 6.3.2017. 3rd OC along with RUD served upon the 63 MTL on 29.03.2017 who filed its reply to 3rd OC i.e. OC 697/17 on 18.4.2017. 55. 63 MTL preferred application in 3rd OC on 19.4.2017 thereby seeking release of investments amounting to ₹ 94.52 Crores attached vide 3rd PAO and which are in excess of the amount of proceeds of crime alleged to have been received by the Appellant - 63 MTL‟. 56. In Appeals being Appeal Nos.1735/17 and 1736/17 against order dated 09.03.2017 and 22.03.2017 respectively preferred by them on 9.5.2017. This Tribunal while issuing notice directed parties to maintain status quo with respect to the attached parties. They preferred I.A. No.3622 of 2017 in Appeal No.1735 of 2017 thereby seeking conversion of ₹ 30.27 Crores lying in HDFC Bank account of Appellant to a fixed deposit. 57. Adjudicating Authority allowed 3rd OC i.e. No. 697/17, confirming 3rd PAO i.e. PAO 1/17 on 14.7.2017. 58. This Tribunal after hearing parties in Appeal No.186 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Authority on face value without any independent application of mind of its own to the material produced on record by the Appellant along with its reply. b) The entire gross total income of NSEL for the period of FY 2008- 09 to FY 2013-14 has been sweepingly characterised by R-1 as the alleged proceeds of crime without going at all into the source, nature and legitimacy of the income of NSEL for each financial year under each income-head during the period of FY 2008-09 to FY 2013-14. The Adjudicating Authority failed to consider and deal with the material produced by the Appellant on record as part of its reply clearly demonstrating the source and nature of its income, all of which clearly show (as detailed hereinafter) that no proceeds of crime whatsoever have been received by the Appellant. The Adjudicating Authority failed to appreciate that NSEL was engaged in multiple businesses, being: (a) Exchange Business; (b) Procurement Business; (c) Trading Business; (d) In addition to the above major revenue streams, NSEL also had some collateral management income as well as non-operating revenues such as interest and dividend from investments. Vide letter dated 23.08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Offence as is evident from Para 6.1 and 6.2 of the Complaint itself. f) The Adjudicating Authority failed to appreciate that even within NSEL s gross income of ₹ 245.81 Crores from the Traders‟ Contracts, income of only ₹ 131.73 Crores has been earned by NSEL from the defaulting members. The balance income of ₹ 114.08 Crores has been earned by NSEL from the nondefaulting members. Hence, the income of ₹ 114.08 Crores earned by NSEL from the non-defaulting members is not relevant for the purpose of the present case. The Adjudicating Authority failed to appreciate that even the gross income of ₹ 131.73 Crores earned by NSEL from the defaulting members comprised of various charges levied by NSEL from its members for providing them various legitimate services in the form of providing the facility of trading on the exchange s online trading platform, transfer of warehouse receipts, delivery services, warehousing and storage services etc. Thus, even the said gross income of ₹ 131.73 Crores earned by NSEL from the defaulting members also cannot be said to be proceeds of crime as defined under Section 2 (1)(u) of the PMLA since th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is completely contrary to the record available with the Complainant inasmuch as the report of the IT Dept. at pages 19 and 20 of Vol. 1 of the RUD clearly states that at least in case of the godowns of 3 defaulters, namely Sankhya Investments, Metcore Alloys Industries Ltd. and Topworth Steels Power Ltd., adequate stock of commodities was found. It is further stated in Para 7.1 of the Complaint that, similarly, audit conducted by SGS India Pvt. Ltd. the agency contracted by NSEL, also reported the inspection of the warehouses/stock as aborted‟ (SGS was not permitted to audit the warehouse by the warehouse owner) . Similar allegations have also been made in Para 17 of the PAO. The said allegations in the Complaint and the PAO in respect of the SGS Report are also contrary to the record inasmuch as the SGS report at pages 21 to 172 of Vol. 1 of the RUD clearly demonstrates that SGS was not permitted to audit only some of the warehouses and not all the warehouses. In fact, a bare perusal of the SGS report reveals that adequate stock was found in few warehouses, few warehouses had less than adequate stock and some had no stock. Further, the mere fact that the IT departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isation of difference between the contract rate and the settlement rate i.e. by netting-off, then it shall not be deemed to be a Ready Delivery Con- tract. In other words, if a contract for buying or selling of commodities is performed by tendering of document of title to goods; or by the realisation of difference between the contract rate and the settlement rate i.e. by netting-off, then it shall ipso facto become a Forward Contract irrespective of the fact whether it is settled within 11 days or more. Since NSEL offered an online platform for trading of commodities, its very business model envisaged trading in commodities by way of tendering of document of title (i.e. warehouse receipt) and netting-off. As a result, the contracts traded on NSEL s exchange platform were deemed to be forward contracts. In fact, this was the reason why even the Exemption Notification dated 05.06.2007 also provided that all forwards contracts of one day s duration for the sale and purchase of commodities in NSEL are exempted from the provisions of the FCRA. Hence, it is incorrect to suggest that NSEL was not allowed or meant to have forward contracts. It may be noted that the said Exemption Notificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard member of checks and balance and allowing a free hand to Mr. Anjani Sinha. In the said complaint filed by the Complainant ED before the PMLA Court, there are no allegations of Mr Jignesh Shah being involved in the day to day affairs of NSEL. l) The Adjudicating Authority failed to appreciate that the circulars launching the various contracts for trading on NSEL s exchange platform were never discussed, ratified and approved by the Board of NSEL. The correct factual position is that the circulars launching the various con- tracts for trading on NSEL s exchange platform were drafted, approved and launched by the executive management of NSEL without any prior approval of the Board of NSEL. It is only after these contracts were launched, that they were put up only for post-facto information in the next board meeting wherein the factum of the launch of the said contracts was noted by the Board of NSEL and such noting was accordingly recorded in the minutes of the board meeting. A sample copy of Board minutes of NSEL showing such post-facto noting and a Table showing date of launch of each circular and the date of NSEL s board meeting in which the same was noted on post ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing before the Board of FTIL. It may further be noted that in the Affidavit dated 11.09.2013 (Sr. No. 4 of the RUD) of Mr. Anjani Sinha the then MD and CEO of NSEL which has been confirmed by him in his statement dated 16.10.2013 before R-1 (Sr. No. 5 of the RUD), Mr. Sinha has clearly stated that the policy decisions regarding NSEL were taken by him exclusively and as such the facts pertaining to the missing stocks, increasing exposure and widespread default were admittedly not within the knowledge of even the Board of NSEL. The fact that the Board of NSEL was not in knowledge about the inadequacy of stock is also corroborated by the statement of Mr Shreekant Javalgekar, who was also a Non- Executive Director on the Board of NSEL at the relevant time, which has been relied upon by R-1 in Para 7.3(ii) of the Complaint. Thus, the Adjudicating Authority failed to appreciate that the Complainant failed to bring on record any material showing that the Board of NSEL was in the knowledge of the missing stock in various warehouses across India. o) The Adjudicating Authority failed to appreciate that at the policy level, the Board of NSEL had put in place proper rules, regula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int and electronic media (live TV interview) in the first week of August 2013. (iv) However, when reports of missing stock started coming in, the Board of NSEL appointed an internationally reputed firm SGS to conduct physical verification of stock at all the warehouses across India. The Board of NSEL came to know about the shortage of stocks only when SGS s audit report of physical verification of stock position in various warehouses started to come out in mid-August 2013. This is also corroborated by the statement of Mr Shreekant Javalgekar to the Complainant (Sr. No. 10 of the RUD) (v) On getting to know that there was considerable stock shortage, the Board of NSEL constituted an Internal Inquiry Committee headed by an Ex-SEBI officer to investigate the matter. When the Committee examined Mr. Sinha, he stated that he and his senior employees (such as the AVP-Warehousing Mr. Jai Bahukhandi, AVP-Business Development Mr. Amit Mukherjee etc.) were responsible for the payment defaults. He gave complete clean chit to the entire Board of NSEL and confirmed that the Board had no knowledge about the missing stocks. (vi) Mr. Sinha continued to main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vident from the Chartered Accountant s Certificate dated 08.12.2016 annexed with the Reply filed by the Appellant before the Ld. Adjudicating Authority. Thus, it is clear that the withdrawal of ₹ 236.5 Crores by the Appellant from its SGF was temporary‟ and was for a legitimate business purpose. The Appellant never intended to siphon off the said amount of ₹ 236.5 Crores from the SGF which is evident from the fact that the said amount was replenished in the SGF by the Appellant within 1 (one) month i.e. by 25.04.2013. Thereafter, the entire SGF was utilised for payout to members against their unsettled trades in July 2013 - which was the purpose for which the SGF was meant as per the bye laws of the exchange. It is submitted that even assuming for the sake of argument without admitting that the Appellant unauthorisedly took ₹ 236.5 Crores out of its own SGF to repay its loan to HDFC bank, the act of such unauthorised removal of funds from the SGF does not constitute a Scheduled Offence as defined under Section 2(1)(y) of the PMLA. Therefore, the said amount of ₹ 236.5 Crores cannot be said to be proceeds of crime by any stretch of imagination. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as alleged in the Complaint then where was the need for these defaulting members to even deliver the commodities to NSEL s designated warehouses even initially. Thus, the sweeping generalization by the Complainant that the entire trading on NSEL s exchange platform was merely paper transactions‟ based on nonexistent/ fictitious stock‟ is contrary to the material on record and hence liable to be rejected. s) The Adjudicating Authority failed to appreciate that the theory of the Complainant that there was never any stock of commodities and NSEL s business model was only paper transactions‟ is also belied by the following Court Orders directing sale of stock of commodities found in various warehouses of the defaulters: (i) Vide Order dated 19.05.2015, the Hon‟ble Bombay High Court has directed sale of 18,000 bags of Paddy found in the warehouses of one of the defaulters Namdhari Food International Ltd. (ii) Vide Order dated 15.07.2015, the Hon‟ble Bombay High Court has directed sale of 686.95 Metric Tonne of TMT bars found in the warehouses of the defaulter Aastha group. (iii) The Designated Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aundering as mandated under Section 8 of the PMLA. 64. It is submitted that it is wrongly recorded and given its findings in the Impugned Order about the involvement of the Appellants in the defaults that took place on its trading platform, without any authority, to conclude that the Appellants were fully responsible for the said default. It is submitted that the aforesaid findings are beyond the scope of adjudication under Section 8(2) wherein the Adjudicating Authority is only required to determine the validity of the attachment order passed under Section 5(1) and the involvement of the property attached under Section 5 in money laundering. Contrary to the aforesaid mandate the Adjudicating Authority under the Impugned Order has transgressed its jurisdiction to usurp the jurisdiction vested with the Special Court under Section 44 and made findings on the involvement of the Appellant in the crime of money laundering. Case of ED 65. Mr. Rajiv Awasthi, learned counsel appearing on behalf of respondent no.1 has read the reason to belief recorded in the provisional attachment order and mainly relied upon the impugned orders. He submits that all six appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SEL platform; these contracts were contrary to the approvals given to NSEL by the Government. From the facts above, it is clear that FTIL is fully responsible for the functioning of NSEL and Board of Directors of NSEL was aware about the situation at NSEL. Board of NSEL consisting Key Management Personnel of FTIL allowed to continue to trade in spite of repeated defaults and turned a blind eye towards non-existence of the stock. As such, FTIL also connived with NSEL and as such, FTIL was in possession of the said proceeds of crime. Therefore, properties only worth ₹ 1254 crores of FTIL, not complete investment in the accounts of FTIL i.e more than 2500 Crores were attached under section 5(1) of the PMLA and were confirmed by the Adjudicating Authority. Further, the conduct of the defendant in siphoning off the properties, even after attachment, made it clear that the said properties were needed to be attached immediately. 67. It is submitted by Mr. Awasthi, learned counsel that it is found that the NSEL was acting as a platform for defaulters, which in turn, was totally controlled by the FTIL. The NSEL was earning in the process of charging various fees, charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the affairs of NSEL enabling it to appoint all the Directors on the board of NSEL, through them effective control over the functioning of NSEL. The NSEL board comprising Key Management Personals of FTIL (as S/Shri Jignesh Shah, Joseph Messy) has all the authority to frame the bye-laws, rules and regulations of the company. FTIL regularly approved the actions of NSEL in its Board meetings. From the facts above, it is clear that FTIL is fully responsible for the functioning of NSEL Board of Directors of NSEL was aware about the situation at NSEL. Board of NSEL consisting Key Management Personnel of FTIL allowed to continue to trade in spite of repeated defaults and turned a blind eye towards non-existence of the stock. In these circumstances where the parent company (FTIL) was using its subsidiary (NSEL) as its agent for sham and illegal transactions, the attachment of the properties of the parent company is permissible under the respective laws. 71. Mr. Awasthi in his written submissions has referred the the Judgement dated 02.04.2019 of the Hon‟ble Delhi High Court in the case of Deputy Director, Directorate of Enforcement Vs. Axis Bank Ors. (CRL.A. 143/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordered, however, must be restricted to the value of illicit gains from the crime. For the sake of convenience, the properties covered by the second and third categories may be referred to as the alternative attachable property or deemed tainted property . 108. Generally, there would be no difficulty in proceeding with the attachment or confiscation of a tainted property respecting which there is material available to show that the same was derived or obtained as a result of criminal activity of specified nature, so long as such property is found held by the person who had indulged in such criminal activity, it amounting to money-laundering, as indeed those who may have aided or abetted such acts. Dispute, however, is likely to arise in relation to attachment or confiscation upon questions being raised at the instance of the person suspected of money-laundering (or his abettor) as to sufficiency of the material or reasons to believe for such action, as indeed of the fairness or propriety of the procedure followed. Dispute may also arise in such context if the property has been transferred to another person, after it had been acquired by the transaction relatable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contends. .. .. 160. But, in cases where the enforcement authority seeks to attach other properties, suspecting them to be proceeds of crime , not on the basis of fact that they are actually derived or obtained from criminal activity but because they are of equivalent value as to the proceeds of crime which cannot be traced, it is essential that there be some nexus or link between such property on one hand and the person accused of or charged with the offence of moneyFPA- PMLA-1735-1736, 1860, 1738-1739 1862/MUM/2017 Page 64 of 101 laundering on the other. In cases of this nature, the person accused of money-laundering must have had an interest in such property at least till the time of engagement in the proscribed criminal activity from which he is stated to have derived or obtained pecuniary benefit which is to be taken away by attachment or confiscation. It is with this view that PMLA provides for a possible presumption to be drawn, under Section 24 using the expression may presume , about a property being involved in money-laundering in the case of person other than the one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in force. In this case, the other law like Companies Act, the provisions of the PMLA will have overriding effect. 76. It is stated by him that the proceeding initiated by MCA against FTIL are civil in nature whereas the proceedings under PMLA are of criminal nature. It is settled law that the criminal proceedings will override the civil proceedings, if any conflict arises during the implementation of the law. The PMLA is a special law and substantially a penal Act enacted in consonance with international conventions to curb the menace of money laundering. As such, proceedings initiated by MCA have no bearing on the proceedings under any criminal law like PMLA. 77. It is the case of respondent no. 1 that the Respondent No.1 has traced alleged proceeds of crime to a tune of ₹ 1254.6 crores to National Spot Exchange Ltd. ( NSEL ). However, since NSEL does not have equivalent assets available for attachment, the Respondent No.1 has, therefore, correctly attached assets of its holding company, the 63 MTL‟. This, despite admittedly that no proceeds of crime have been traced from NSEL to the 63 MTL‟. 78. The alleged proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MSR Food Processing 9.05 5-Feb-18 5 Swastik Overseas Corporation 100.83 8-Feb-18 6 White Water Foods Pvt. Ltd. 84.87 6-Feb-18 7 Yathuri Associates 424.64 13-Feb-18 8 Mohan India Pvt Ltd 922.11 5-Apr-18 9 Tavishi Enterprises Pvt Ltd 10 P D Agro Processors Pvt Ltd 680.02 26-Feb-18 11 Lotus Refineries Pvt Ltd 252.56 31-Mar-18 12 NCS Sugars Limited 58.85 20-Feb-18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 Aastha Minmet India Pvt Ltd 48.88 48.88 3 Mohan India Pvt Ltd 183.33 201.50 384.83 4 Spincot Textiles Pvt Ltd 83.71 83.71 5 Whitewater Foods 42.46 42.46 6 N K Proteins 313.8 313.8 7 Yathuri Associates 95.11 95.11 8 Namdhari Foods 23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 MOHAN INDIA PVT LTD 922.00 11-01-18 922.00 3 TAVISHI ENTER-PRISES 4 LOIL CONTINENTAL FOOD LTD 320.02 26-04-18 30-07-18 5 LOIL HEALTH FOODS LTD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 METKORE ALLOYS INDUSRIES LTD. - 83.46 14-09-18 14 SWASTIK OVERSEAS CORPORATION 91.19 18-12-14 - 91.19 - - 15 WHITE WATER FOODS PVT LTD 84.82 23-07-18 - 84.82 - - 16 NAMDHARI FOOD INT. PVT LTD 51.02 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned Defaulters, two (2) other Members with outstanding liability have cleared their liability. The details are stated hereunder: 1. TOPWORTH STEELS POWER PVT. LTD. ₹ 175.25 Crs. 2. SANKHYA INVESTMENTS ₹ 7.23 Crs. These defaulters were members of NSEL and defaulted on their payment obligations on the NSEL-Exchange platform. 81. It is submitted that from the aforesaid, it is clear that the money trail of the default of ₹ 5,600 crores, has been traced to the defaulters on NSEL s exchange and not NSEL. 82. It is submitted on behalf of 63 MTL that the amount of ₹ 1,254.60 crores traced to NSEL are not proceeds of crime under Sec. 2(1)(u) of the PMLA as the said property is not derived, either directly or indirectly by NSEL as a result of any alleged criminal activity, on NSEL s exchange, i.e. the default of ₹ 5,600 crores, as seen above. Therefore, if the aforesaid amount is not proceeds of crime under the PMLA, then any provisional attachment of assets of equivalent value‟ of the 63 MTL /Appellant by Respondent No.1 by way of the PAOs, is illegal and u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification under Section 27 of the Forward Contracts (Regulation) Act, 1952 [ FCRA ] exempting forward contracts of oneday duration for sale and purchase of commodities traded on NSEL from operation of the provisions of the FCRA. NSEL commenced operations in October 2008. On 27.04.2012, the Department of Consumer Affairs [ DCA ] issued a show cause notice to NSEL as to why action should not be initiated against it for permitting transactions in alleged violation of the exemption granted to it under the FCRA. NSEL replied to the show cause notice on 29.05.2012 stating that it had not violated the exemption granted to it. Without adjudicating upon the show cause notice, on 12.07.2013, the DCA directed NSEL to give an undertaking that no further contracts shall be launched until further instructions, and that all existing contracts will be settled on due dates. This was effectively a freezing order. On 22.07.2013, NSEL gave an undertaking to the DCA. 3. Earlier, in January 2013, representatives of MMTC Ltd., a Government of India undertaking, which was one of the trading 3 members of NSEL, visited some of the warehouses which were at different locations in order to veri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equity capital of MCX. The said order is under challenge in Writ Petition No. 337 of 2014 before the Bombay High Court. On 28.02.2014, the Division Bench of the Bombay High Court refused a prayer for stay of the aforesaid order, stating that findings of fact of a serious nature 5 have been recorded against the appellant, and the fraud perpetrated is to the tune of INR 5500 crore. 5. On 06.01.2014, the Economic Offences Wing, Mumbai, filed chargesheets against the Managing Director and CEO of NSEL, Shri Sinha, the Head of Warehousing of NSEL, Shri Babu Kanvi, and two other defaulters. In the chargesheet, it was revealed that the aforesaid three employees of NSEL, in exchange for monetary kickbacks, had colluded with the defaulters to enable them to trade on NSEL s platform without depositing adequate goods in the warehouses, in breach of rules and byelaws of NSEL. 6. On 18.08.2014, the FMC, vide a letter to the Union of India, suggested that FTIL and NSEL be merged. Meanwhile, in the representative Suit No. 173 of 2014, vide order dated 02.09.2014, the Bombay High Court appointed a three-member committee consisting of Mr. Justice V.C. Daga, Mr. J. Solomon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 396(3), a compensation order was made on 01.04.2015, which involved compensation only to a particular shareholder of NSEL. On 28.08.2015, the Central Government issued a notification to merge the functions of the FMC with the Securities and Exchange Board of India [ SEBI ] w.e.f. 28.09.2015. On the same day, the FCRA was also repealed. Thus, SEBI was now vested with the powers of the FMC which is to be governed by the Securities and Exchange Board of India Act, 1992 [ SEBI Act ]. 8. FTIL and NSEL were granted a hearing on their objections to the impugned draft amalgamation order by a committee consisting of Shri Pritam Singh, Additional Secretary to the Government of India, and 8 Shri H.P. Chaturvedi, Joint Secretary and Legal Advisor, Ministry of Law and Justice in October 2015, pursuant to a Bombay High Court order in the Writ Petition 2743 of 2014 pending before it. 9. On 12.02.2016, a final amalgamation order was passed in terms of Section 396(3), thereby merging FTIL and NSEL, wherein all assets and liabilities of NSEL would become assets and liabilities of FTIL. The writ petition already filed was amended on 28.03.2016 to include a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors and employees of NSEL have been attached out of which assets worth ₹ 882.32 crores have already been published in Gazette under MPID Act for liquidation under the supervision of MPID Court and balance assets worth ₹ 3 crore have been attached/secured for attachment by the EOW; MPID Court has already issued notices u/s 4 5 of the MPID Act to the persons whose assets have been attached as above. Thus, the process of liquidation of the attached assets has started. Bombay High Court has appointed a 3- 95 member committee headed by Mr. Justice (Retd.) V.C. Daga and 2 experts in finance and law to recover and monetize the assets of the defaulters. ₹ 558.83 crores have been recovered so far, out of which ₹ 379.83 crore have been received/recovered from the defaulters and ₹ 179 crore were disbursed by NSEL to small traders/investors. 8.2. Enforcement Directorate: ED has traced proceeds of crime amounting to ₹ 3973.83 crore to the 25 defaulters; ED has attached assets worth ₹ 837.01 crore belonging to 12 defaulters; As per the recent amendme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated in the opening is repeated in paragraph 2.14.2 as follows: 2.14.2 The Central Government also carefully considered the proposal received from FMC and DEA and was of the considered opinion that to leverage combined assets, capital and reserves for efficient administration and satisfactory settlement of rights and liabilities of stakeholders and creditors of NSEL, it would be in essential public interest to amalgamate NSEL with FTIL. It will be seen that all the expressions used in relation to public interest have relation only to the businesses of the two companies that are sought to be amalgamated. What is important to note is that there is no interest of the general public as opposed to the businesses of the two companies that are referred to. It is important to notice that the leveraging of combined assets, capital, and reserves is only to settle liabilities of certain stakeholders and creditors when the order is read as a whole, and given the fact that the businesses of the two companies were completely different. So far as achieving economy of scale and efficient administration is concerned, it is difficult to see how this would apply to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usinesses of NSEL and FTIL, is not contained in the answer given to objections in the order. First and foremost, restoring public confidence is no part of the order. What is mentioned is only the fact that public confidence has been shattered, as is reflected by the FMC order dated 17.12.2013. Secondly, the entire expression, which are an integral and essential part of Indian economy and financial system, by consolidating the businesses of NSEL and FTIL is no part even of this answer given, but a gloss given by the High Court itself relatable to this answer. Similarly, when it comes to reason (b), giving effect to business realities of the case contained in the answer to objections does not contain by consolidating the businesses of FTIL and NSEL , nor does it contain and preventing FTIL from distancing itself from NSEL, which is, even otherwise, its alter ego . On the contrary, the High Court itself mentions, in paragraph 355, that this is also not a case where the Central Government has, in fact, lifted the corporate veil, despite the alleged non-existence of the circumstances justifying lifting of such corporate veil , and further, this is not a case where the Central G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce sheet dated 31.03.2015, despite its capital being INR 60 crore, inasmuch as the total reserve and surplus is a negative figure of INR 51.54 crore. As against this, FTIL s balance sheet, as on 31.03.2015, discloses that for the same year, FTIL s net worth is INR 2779.94 crore. Also, FTIL has been paying dividends to its shareholders ranging from 1000% to 250% for the years 2007-2008 till 2015- 2016. On the other hand, NSEL has never paid a single dividend ever since its inception. Post amalgamation, therefore, dividend payable to the shareholders of FTIL is bound to come down. Correspondingly, the marketable value‟ of such shares will also fall. 85. In reply, it is submitted on behalf of respondent no. 1 that the Hon‟ble Supreme Court vide order dated 30.04.2019 has set aside the Order of the Hon ble Bombay High Court and rejected the merger of M/s National Spot Exchange Limited (NSEL) with M/s 63 Moons Technologies Ltd. (Formerly known as Financial Technologies India Ltd - FTIL). In this regard, the question, which was raised in bunch of appeals and Writ Petitions before the Hon‟ble Supreme Court, as to the applicability and construction of Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tock as collateral; 10-20% of open position as margin money; and that the stock currently held in NSEL s 120 warehouses was valued at INR 6000 crores, all of which turned out to be incorrect. 88. On behalf of the respondent no.1, it is alleged that the Hon‟ble Supreme Court itself is making observations with regard to involvement of NSEL, FTIL and Shri Jignesh Shah in the predicate offence as well as money laundering offence. Based on these facts revealed during the course of investigation, which has now been established after the above mentioned observations of the Hon‟ble Supreme Court in its Order dated 30.04.2019, attachment of the properties of FTIL has been made and the same has been confirmed by the Adjudicating Authority. 89. It is difficult to hold that the attachment of assets of 63 Moons Technologies Ltd. (erstwhile Financial Technologies (India) Ltd.) is illegal and ultra vires the statutory definition of Proceeds of crime . Proceeds of Crime in the hands of NSEL if dissipated can only be substituted by other properties of National Spot Exchange ltd. (NSEL) itself. There is no concept of equivalent attachment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e victims. 8.3. The above status indicates that the said enforcement agencies are working as per their mandate . 91. Admittedly, the properties attached are not proceed of crime as defined under Section 2(1)(u) of PMLA. It is submitted on behalf of 63 MTL that the Directorate of Enforcement/ED attempts to make out a case for attachment of properties of 63 MTL purely based on a mis-interpretation of the concept of value of such property‟ as employed in Sec. 2(1)(u). The principles of equivalent value, could apply only to a person who came into possession of the proceeds of crime. It cannot be applied to attach assets of 3rd party who is not the recipients of any proceed of crime. In the eyes of law, every public-sector company is a distinct/independent company. 92. It is submitted on behalf of 63 MTL that NSEL was a Separate legal entity having independent management, 63 MTL was not controlling the functioning of NSEL. The position regarding a holding and a subsidiary has been adequately dealt with by the courts as under: a. Balwant Rai Saluja and Anr. V. Air India Ors. ( 2014) 9 SCC 407 (I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [(2014) 16 SCC 1] as under: 17. There is no dispute that the Appellant, who was wife of the Managing Director, was appointed as a Director of the Company- M/S Elite International Pvt. Ltd. on 1st July, 2004 and had also executed a Letter of Guarantee on 19th January, 2005. The cheques in question were issued during April, 2008 to September, 2008. So far as the dishonor of Cheques is concerned, admittedly the cheques were not signed by the Appellant. There is also no dispute that the Appellant was not the Managing Director but only a nonexecutive Director of the Company. Non-executive Director is no doubt a custodian of the governance of the Company but does not involve in the day- to-day affairs of the running of its business and only monitors the executive activity. To fasten vicarious liability Under Section 141 of the Act on a person, at the material time that person shall have been at the helm of affairs of the Company, one who actively looks after the dav-to-dav activities of the Company and particularly responsible for the conduct of its business. Simply because a person is a Director of a Company, does not make him liable under the N.I. Act. Every person connec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ML Act indicates that an order of provisional attachment can be passed only where the concerned officer has reasons to believe on the basis of material in his possession that: (a) any person is in possession of proceeds of crime; and (b) such proceeds are likely to be concealed, transferred, or dealt with any manner which would result in frustrating any proceedings relating to confiscation of such proceeds of crime. The expression proceeds of crime is defined under clause (u) of Section 2 (1) of the PML Act as under: Section 2 (u) proceeds of crime means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property (or where such property is taken or held outside the country, then the property equivalent in value held within the country). 17. It is clear from the language of Section 2(u) of the PML Act that the expression proceeds of crime refers to a property, which is derived or obtained by any person as a result of criminal activity. Therefore, in order to pass an order of provisional attachment, it was necessary for the ED to have reasons to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proviso thereto, specially keeping in mind the fact that the entire day to day operation of 63MTL is monitored by committee appointed by the NCLT. This Tribunal may call for the file of the Investigation Officer to verify and check there would be no reasons to believe recorded by the Investigating Officer or ED for the invocation of Section 5 at all. 101. Admittedly, all assets investments, in any event, secured, and all treasury operations of 63 MTL/FTIL are monitored Decision for carrying out the treasury operations which included the switching of the funds from one investment to another were approved by the Committee Appointed by the NCLT comprising - one ex-judge of the Supreme Court and one nominee of the Central Government, both of whom enjoyed veto powers. i. CLB Order dated 30.6.2015 ii. SC Order dated 18.04.2016 (confirming CLB order) iii. NCLT Order dated 16.06.2016 - EgJZ23/CCNCLT Committee approved Treasury operations 102. 63 MTL‟/ FTIL was not an accused; either in the Scheduled Offence or in the PMLA Offence at the time of issuance of PAOs at the initial stage. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltd. Vs Financial technologies ltd. has appointed a committee, headed by Justice V.C. Daga (Retd. Judge of the Hon‟ble Bombay High Court) to overlook the same. 105. Counsel for 63 MTL and NSEL alleged that the case of Enforcement Directorate is flawed and it is not that NSEL is a defaulter. The Hon‟ble Bombay High Court where the suits are pending has not given any adverse finding against NSEL or 63 Moons Technologies Ltd. It is submitted by both sets of appellants that the conditions of Section 5 of the Prevention of Money Laundering Act, 2002 (PMLA) for attachment, whether provisional or final to the assets of 63 Moons Technologies Ltd. is not possible. It is argued that the attachment is completely outside the preview of Section 5 of PMLA, 2002 and, therefore, the attachment must be released so that 63 Moons Technologies Ltd., who has 63,000 shareholders with an independent board of directors must not suffer. 106. It is stated by them that merely the fact that 63 Moons Technologies Ltd. holds 99.99% shareholding in NSEL cannot be a ground to attach the assets of 63 Moons Technologies Ltd. Para 59.3 and para 59.5 of judgement of the Hon& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing at them as one entity. The amalgamation u/s. 396 of the Act only formalizes this practical reality in essential public interest. xxx xxx xxx 7.2.8. The FTIL has questioned the jurisdiction of the Central Government to decide on the question of fraud and claimed that it has to be proved beyond reasonable doubt by adducing necessary particulars; the Central Government is invoking section 396 of the Act in essential public interest for the merger of NSEL, which is an almost wholly-owned subsidiary of FTIL. The merger is not an adjudication on the alleged fraud. The merger is targeted to achieve its stated objectives for long term sustainability in the best interest of the stakeholders. (emphasis in original) It will be noticed that the objection raised in paragraph 7.2.1 is that Section 396 can be used in the case of Government companies alone, whereas the answer given is that this cannot be so, given the business realities of the case and the FMC order of 17.12.2013 which throw ample light to the grave shattering of public confidence and the purpose of establishing Commodity Exchange has been defeated . First and foremost, what is important to notice is that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as is contained in the letter of 18.08.2014 by the FMC to the Central Government. We have already seen that this reason, by itself, is the protection of the private interest of a group of investors/traders, as distinct from public interest. 59.5. So far, we have gone by the Central Government order as it stands. The Bombay High Court, in stating reasons (a), (b), and (c) as grounds of public interest, has gone much further than even the answer given to the objections that are contained in the order itself. Restoring/safeguarding public confidence in forward contracts and exchanges, which are an integral and essential part of the Indian economy and financial system, by consolidating the businesses of NSEL and FTIL, is not contained in the answer given to objections in the order. First and foremost, restoring public confidence is no part of the order. What is mentioned is only the fact that public confidence has been shattered, as is reflected by the FMC order dated 17.12.2013. Secondly, the entire expression, which are an integral and essential part of Indian economy and financial system, by consolidating the businesses of NSEL and FTIL is no part even of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l veto powers in the NCLT Committee. By order dated June, 2018, NCLT disposed of the C.P. No. 1 of 2015. The said order has been challenged by 63 MTL as well as UOI and the same is pending adjudication before the NCLAT. Vide order dated 27.06.2018, NCLAT has stayed the order dated 04.06.2018 and continued the aforesaid interim arrangement. 109. Admittedly, as of today, two interim orders passed by the CLB as well as EOW which are continuing and have not been vacated. As far as the judgement referred by Mr. Awasthi in the case of Axis Bank (supra) is concerned, the said judgement does not help the case of the respondent as admittedly, under the scheme of Section 5(1) of the Act, which mandates that the property involved in the money laundering are also to be attached if any person is in possession of proceed of crime. No doubt, if the proceed of crime is parked with the 63 MTL or in the possession of 63 MTL , then said judgement will help the case of the respondent. However, in the present case, as per the investigation as well as the judgement referred by the Hon‟ble Bombay High Court, the amount of ₹ 84 crores which is the license fee, has been depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd his managing staff were responsible for the crisis as well as the borrowers who have benefitted by the prosecution and the money of the investment has gone to them. In view of the above, at the same time, we do not wish to give the clean chit to Shri Jignesh Shah who was the major shareholder of NSEL as we feel that it is a matter of trial. Since the matter is under investigation, whatever money has been transferred to 63 MTL , has already been deposited as per the directions of High Court. In case, during the investigation, it is found that more money has been parked or transferred, the same may also be attached at the end of 63 MTL . Thus, the balance has to be strike at this stage in order to secure the amount. 115. There is also no finding by the adjudicating authority that on the basis of investigation, any other amount has been transferred by NSEL to 63 MTL or any evidence is available in this regard. Once the two authorities i.e. CLB as well as EOW have already restrained the 63 MTL , 63 MTL not to sell or alienate or to create any third party right in assets and interest, the attaching of huge money with the said knowledge by the ED amounts to civi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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