TMI Blog2022 (5) TMI 309X X X X Extracts X X X X X X X X Extracts X X X X ..... registration of the FIR by the CBI which was closed, the Directorate of ED registered ECIR/CEZO/19/2016 under Sections 3, 4 8(5) of PMLA. After the said FIR, Deputy Director (ED) passed an order under Section 5(1) of PMLA on 1.6.2017 attaching the property. For confirmation of attachment, OC No. 785 of 2017 was filed by the Department which is rejected by the Adjudicating Authority while exercising the power under Section 5(5) of PMLA. On analysing the report of I.T. Department and the reasoning given by CBI while submitting the final closure report in RC MA1 2016 A0040 and the order passed by the Adjudicating Authority, it is clear that for proceeds of crime, as defined under Section 2(1)(u) of PMLA, the property seized would be relevant and its possession with recovery and claim thereto must be innocent. In the present case, the schedule offence has not been made out because of lack of evidence. The Adjudicating Authority, at the time of refusing to continue the order of attachment under PMLA, was of the opinion that the record regarding banks and its officials who may be involved, is not on record. Therefore, for lack of identity of the source of collected money, it could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the commission of any offence, would not be enough to quash the proceedings. The Court relied upon the seizure made by the I.T. Department including that of the currency notes of denomination of Rs. 2000 in the context that the currency notes of denomination of Rs. 500 and Rs. 1000 ceased to be legal tender by order of the Government at the time of demonetization and the people were in queue to exchange those old currency notes for new ones. As the seizure of currency notes of Rs. 33 crores in the denomination of Rs. 2000 was made, therefore, the closure report made by Central Bureau Investigation (in short CBI ) in schedule offence cannot be relied upon. 2. Briefly, the facts relevant for the purpose of the appeal are that the appellant J. Sekar Reddy is the Managing Partner of M/s SRS Mining which is a partnership firm engaged in sand mining since 2013 and he had deposited Rs 312.64 Crores in three bank accounts of the firm. On 08.12.2016 and 09.12.2016, the Income Tax Department, Chennai (for short I.T. Department ) conducted search in the official/commercial premises of the appellant and others and seized currency amounting to Rs.106,98,89,800/and 128.495 kg of gold (va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notes through the bank officers and observed that the said allegation is based on speculations, which are not legally tenable. 7. It is relevant to note that RCMA1 2016 A0051 and RCMA1 2016 A0052 were challenged by the appellant as well as other coaccused before the Madras High Court by filing Crl. O.P. Nos. 24200 and 24202 of 2017 invoking the power under Section 482 Cr.P.C., which were decided by a common order dated 27.6.2018 and the High Court in para 32 quashed the RC MA1 2016 A0051 and RC MA1 2016 A0052 against the appellant and other coaccused giving liberty to the CBI to treat the allegations made in FIRs as supplementary allegations or to merge the same in first FIR RC MA1 2016 A0040. 8 It is most relevant to note that CBI after investigation in the main case in RC MA1 2016 A0040 submitted the closure report before the Additional Sessions Judge, CBI Court, Chennai in exercise of power under Section 173(2) Cr.P.C. The said report was accepted vide order dated 25.9.2020 with an observation that for lack of sufficient evidence, nothing incriminating is found which may surface on the part of accused persons. Therefore, from the above facts, it is clear that the CBI regis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord, the offence of money laundering specified in Section 2(1)(p) and also in Section 3 of PMLA is not made out. It is further urged that as per Section 8(1) of PMLA, a show cause notice may be issued regarding the attached property if the said Authority is having reason to believe that any person has committed an offence under Section 3 or is in possession of proceeds of crime. The adjudication proceedings and criminal proceedings are independent to each other but the material for commission of offence recorded by the authorities in those proceedings may be a relevant factor, in particular when for lack of evidence, the Authority itself is satisfied that the attachment of the proceedings in PMLA case cannot be continued. Reliance has been placed on the judgments of this Court in Radheshyam Kejriwal Vs. State of West Bengal (2011)3SCC 581 and Ashoo Surendranath Tewari vs. Deputy Superintendent of Police, EOW, CBI and Another (2020) 9 SCC 636. 13. On the other hand, Shri S.V. Raju, learned Additional Solicitor General on behalf of the respondent contends that the order passed by the Adjudicating Authority under Section 5(5) PMLA is subject to the appeal which is pending before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... New Denomination Rs. 2000 seized (in Rs.) 1 M/s SRS Mining, No.36, Sudhamma Building, Flat No. 1, First Floor, Rear Block, Vijayaragava Road, T. Nagar, Channai 600 017 8,00,00,000 2 M/s SRS Mining, 26/14, Yogammbai Street, T Nagar, Chennai 600 017 1,63,06,000 3 M/s SRS Mining, 3rd Floor, VBC Solitaire, No. 47 49, Bazullah Road, T Nagar, Chennai 600 017 13,16,000 4 G.Venkatesh, Venu Jewellers, No. 127, shop No. 18, NSC Bose Road, Adinath complex, Sowcarpet, Chennai 600 079 11,86,000 5 K. Umapathy, Royal India Gems Jewels P Ltd., No. 226, Old No. 124, Shop No. 18,19,20 4th Floor, Adinath Complex, Chennai 600 079 1,00,000 6 M/s SRS Mining, Tata Ace Vehicle TN23 BC 5757 24,00,00,000 Total 33,89,08,000 The new currencies belong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utor, CBI, praying an order to close the FIR pending before this court in RC MA1 2016 A 0040 U/s 120B r/w 409, 420 IPC and Sec. 13(2) r/w 13 (1) (c) (d) of PC Act, 1989 ..This court perused all the relevant records including the FIR, Statement recorded under Section 161 of Cr.P.C., the documents collected during investigation, by the Investigating Officer and in the final report it is submitted that this court may be pleased to accept this Closure Report under Section173( 2) of Cr.P.C. and may drop the action against A1 to A6 for lack of sufficient Evidence. There was nothing incriminating surfaced on the part of accused persons, as these accused 1 to 6 had in conspiracy with unknown bank officials and public servants cheated the Government of India. 4. The evidence on record is not adequate to launch prosecutable case against the accused persons beyond reasonable doubt to establish that they fraudulently converted the unauthorised cash held by them in old currency notes in to NHD, thereby depriving the public, in enforcing their right and thus the accused 1 to 6 had in conspiracy with unknown bank officials and public servants cheated the Government of India. 6. The in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identification of any bank or bank officers. Nothing is adduced or available on record as to which banks and which bank officers are involved, who have unauthorizedly converted demonetized old currency into new currency. The reasonable belief as is formed by the Deputy Director reveals that the vital aspect concerning the fact that no such bank or bank officers are existing or found is not considered by the Deputy Director at all. The Reasonable Belief is thus impaired. The Reasonable Belief formed by the Deputy Director inter alia is that the accused persons have laundered their unaccounted money in conspiring with the bank officials of various banks who helped them laundering the unaccounted money. There is nothing on record which reveals the name of even single bank, much less, the various banks as stated by the Deputy Director. Similarly not a single bank official is identified or named and there is nothing on record which reveals any such detail. Consequently the Reasonable Belief becomes baseless and is mere speculation of the Deputy Director. Such a belief can not be justified and sustained. The aspect concerning nonidentification and/ or nonavailability of any bank and bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 13,96,88,246 mentioned in para 22 of PAO(para 1 of this order) is not involved in money laundering. 17. In the said sequel of facts, the legal position emerges by the judgment of Radheshyam Kejriwal (supra) is relevant in which this Court has culled out the ratio of the various other decisions pertaining to the issue involved and has observed as thus: 12 After referring to various judgments, this Court then culled out the ratio of those decisions in para 38 as follows: (Radheshyam Kejriwal Case) 38. The ratio which can be culled out from these decisions can broadly be stated as follows: (i) Adjudication proceedings and criminal prosecution can be launched simultaneously; (ii) Decision in adjudication proceedings is not necessary before initiating criminal prosecution; (iii) Adjudication proceedings and criminal proceedings are independent in nature to each other; (iv) The finding against the person facing prosecution in the adjudication proceedings is not binding on the proceeding for criminal prosecution; (v) Adjudication proceedings by the Enforcement Directorate is not prosecution by a competent court of law to attract the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing banks and its officials who may be involved, is not on record. Therefore, for lack of identity of the source of collected money, it could not be reasonably believed by the Deputy Director (ED) that the unaccounted money is connected with the commission of offence under PMLA. Simultaneously, the letter of the I.T. Department dated 16.5.2019 and the details as mentioned, makes it clear that for the currency seized, the tax is already paid, therefore, it is not the quantum earned and used for money laundering. In our opinion, even in cases of PMLA, the Court cannot proceed on the basis of preponderance of probabilities. On perusal of the statement of Objects and Reasons specified in PMLA, it is the stringent law brought by Parliament to check money laundering. Thus, the allegation must be proved beyond reasonable doubt in the Court. Even otherwise, it is incumbent upon the Court to look into the allegation and the material collected in support thereto and to find out whether the prima facie offence is made out. Unless the allegations are substantiated by the authorities and proved against a person in the court of law, the person is innocent. In the said backdrop, the ratio of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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