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TMI Blog2023 (4) TMI 1359X X X X Extracts X X X X X X X X Extracts X X X X ..... s of his income from legitimate sources. It is inter alia alleged that Shri Binod Sinha, with the help of a Chartered Accountant Shri SK Naredi and other close associates, floated/acquired various companies and attempted to change the colour of the tainted money by way of fictitious share application money, or through other accommodation entries. The appellant company is alleged to be one of the companies in which the proceeds of crime generated by Sh. Madhu Koda were invested. The specific allegations and findings of the Ld. Adjudicating Authority with regard to the present appellant are to be found on pages 77 to 82 of the impugned order, which are reproduced below for ready reference: "Def. No. 13 (M/s Smridhi Sponge Pvt. Ltd.) 150. The Deputy Director writes that in December 2007 Sh. Binod Sinha had purchased 50% of shares of this company from Sh. Om Garg by paying Rs. 11 Crores and the shares were parked in the name of M/s Lacky projects Pvt. Ltd. Remaining 50% of the shares of Sh. Om Garg was purchased by Manohar Paul. It is also further stated that M/s Creative Fiscal Services Ltd. paid Rs. 11 Crores to M/s Lacky Projects in March 2008 and purchased the shares of M/s Smr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The cheques details are as under: Name of the Issuer Company A/C No. Cheque Nos. Keshav Tradecom 0515-AA0395-050 783783,783786 to 91 Dayalu Vincom 0515-AA0350-050 714805 to 714811 Pramatma Mercantile Pvt. Ltd. 0515-AA0347-050 714854 to 714860 Padmalaya Dealcom Pvt. Ltd. 0515-AA0348-050 714760 to 714765, 714768, 714769 154. We find several suspicious features with regard to these transactions as detailed hereunder: 1. All these four companies are operating from two rooms in the same address 23A, N.S. Road, Kolkata, as the copies of their letters dated 11-7-2009 addressed to Creative Fiscal indicate. Keshav Tradecom and Pramatama Mercantile are operating from Room No. 19 on the 6th Floor of the same building. (Incidentally Defendant No. 21, Majestic Vinicom is also operating from the same room). Other two companies are operating from Room No. 6A, 8th Floor at the same address. This is highly unusual raising serious doubts about genuine existence of these companies, for any genuine purpose. 2. The authorized signatory on the cheques for Keshav Tradecom and Pramatma Mercantile is the same person i.e. Krishna K. Parshurmka. Authorised signatory for Dayalu Vincom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or are paper companies operating form single rooms is not clear. Did these companies have enough of balance for issue of these cheques? If they had, wherefrom these nondescript companies got so much money in their bank accounts? If presented, were these honoured? These very relevant questions remain unanswered raising a huge question mark on the genuineness of the claim of the alleged share transfers." 3. Based on their findings as above, the Ld. Adjudicating Authority concluded that proceeds of crime were still with the appellant company and the same were much more than the fixed assets amounting to Rs. 6,65,16,129/- attached by the respondent Directorate. Consequently, the Ld. Adjudicating Authority proceeded to confirm the order of the Deputy Director attaching the fixed assets of the appellant company. 4. Aggrieved by the said order of the Adjudicating Authority, the appellant company has preferred the present appeal praying that the impugned order of the Adjudicating Authority be set aside, and also praying for consequential relief. 5. Detailed factual and legal submissions have been presented before us on behalf of the appellant. It is submitted that the appellant company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urisdiction. 8. Creative Fiscal, it is further submitted, is neither accused of any scheduled offence nor accused of money-laundering offence. No complaint under section 3 read with section 4 has been filed against it. Moreover, attachment against Creative Fiscal was set aside by the Ld. Authority vide the same impugned order. With regard to the sale of shares of the appellant company by Creative, it is submitted before us that the Ld. Adjudicating Authority disbelieved the purchase of shares of the Appellant company by four companies from Creative Fiscal in July 2009 as per the chart below and confirmed attachment on imaginary/ unsustainable new allegations. No. of equity Shares Amount Rs. Cheque clearing date Bank statement Page no. Keshav Tradecom Pvt. Ltd. Office No. 19. 6th Floor, 23A, Netaji Shubhash Road Kolkata 700001 2642835 26428350 16-7-2009 16-17 Dayalu Vincom Pvt. Ltd. ----do---- 2500000 25000000 16-7-2009 18-19 Parmatma Mercantile Pvt. Ltd. ----do---- 2500000 25000000 16-7-2009 20-21 Padmalya Dealcom Pvt. Ltd. ----do---- 2935000 29350000 16-7-2009 22-23 10577835 105778350 9. It is furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tone') which is a group company provided funds/ loans to these four companies for payment of sale consideration. These facts can be verified from the bank statements placed on record. As regards source of the source, Milestone had sufficient funds/sources to advance unsecured loan to these four companies. Milestone had raised share capital and premium thereon, of Rs. 15.59 crores during FY 2008-09 which is duly assessed/ admitted by the Income-tax Department in scrutiny assessment u/s 143(3)/148 of I-T Act for AY 2009-10. As regards presenting and payment of cheques given by four companies towards sale consideration to Creative Fiscal on 11-7-2009, it is submitted that all the cheques were presented by Creative Fiscal immediately to its bank and they were debited in the bank accounts of four companies on 16-7-2009 and the amounts were credited to the bank account of Creative Fiscal. 12. It is also pointed out to us that while confirming attachment of assets of Lacky Projects Pvt. Ltd., the Ld. Adjudicating Authority in para 149 of the same order has held that the sale proceeds of 50% shares of Smridhi represent the proceeds of crime. The relevant part of the order reads as rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Based on the above submissions, the appellant contends, it is clear that since Appellant was not in possession of any amount out of alleged proceeds of crime and its asset could not have been attached. The respondent was not in possession of material on the basis of which could have held the requisite belief in terms of the provisions of section 5(1) of the Act. Thus, the attachment of assets of the Appellant is wrong, illegal, against the provisions of law, and void ab initio. 16. Without prejudice to the above submissions and as an alternative plea, it is contended by the appellant that in the present case, admittedly, the total amount of alleged proceeds of crime, i.e., disproportionate assets in the hands of accused Mr. Madhu Koda as quantified in the charge sheet is Rs. 1,40,10,333/- and properties attached in the hands of the accused are more than the total amount of proceeds of crime of Rs. 1.4 crore as is evident from Annexure-A of the Provisional Attachment Order. When the entire proceeds of crime are already attached in the hands of accused Mr Madhu Koda, Mr. Binod/Sunil/Vikas Sinha etc., the Respondent Directorate could not have attached legitimate properties of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the scheduled offence must have been derived or obtained by a person "as a result of" criminal activity relating to the concerned scheduled offence. This distinction must be borne in mind while reckoning any property referred to in the scheduled offence as proceeds of crime for the purpose of the 2002 Act. Dealing with proceeds of crime by way of any process or activity constitutes offence of money-laundering under section 3 of the Act." 18. Based on its submissions as above, the appellant prays that attachment of its properties may be quashed/set aside and the appeal be allowed. 19. The Respondent Department, on the other hand, strongly contested the averments and submissions made on behalf of the appellant on factual as well as legal grounds. To begin with, the Respondent has reiterated the broader allegations contained in the impugned order that Shri Madhu Koda, during his tenure as Minister and Chief Minister, had amassed assets in excess of his income from legal sources by abuse of public office; that the illegal money earned by him was channelized into various assets in his own name as well as in the names of his associates and into certain companies which were floated fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondition laid down in section 5(1). In view thereof, it is contended by the Respondent that it was incumbent upon the Appellant to indicate the sources of income, earning or assets out of which or by means of which the property attached has been acquired, the evidence on which he/it relies and other relevant information and particulars, to show cause why all or any of such properties should not be declared to be the properties involved in money-laundering and confiscated by the Central Government. The above information would have enabled the Adjudicating Authority to make a determination on which of the properties in question are properties "involved in money-laundering". and which are not. The Appellant failed to bring adequate material on record to discharge the burden cast upon them under the PMLA and has failed to do so even in the memorandum of appeal. It is strongly contended that the Appellant herein has completely failed to discharge its burden of proof under sections 23 and 24 of PMLA. Considering the number of inter-connected transactions in the instant case, our attention is drawn to the text of section 23 which states: "23. Presumption in inter-connected transactions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant company had any association or link with Mr. Binod Sinha, Mr. Vijay Joshi, Mr. Madhu Koda or any of the accused persons, that after July 2009, Creative Fiscal, Lacky Project Pvt. Ltd., Binod Sinha, Vijay Joshi or any other accused had no investment in Appellant company, that the entire money used for investment in shares of the appellant company was received back by Creative Fiscal/Lacky Projects, and also that Creative Fiscal is neither accused of any scheduled offence nor accused of money-laundering offence and no complaint has been filed against it, we do not find any merit in these contentions. As has been categorically held by the Apex Court in Vijay Madanlal Choudhary (supra), the precondition for being proceeds of crime is that the property has been derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence. The sweep of section 5(1) is not limited to the accused named in the criminal activity relating to a scheduled offence. It would apply to any person (not necessarily being accused in the scheduled offence) if he is involved in any process or activity connected with the proceeds of crime. Furthermo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jected. 31. The next contention of the appellant is that the share sale transactions were between the seller, Creative Fiscal and four buyer companies. Creative Fiscal received the entire consideration from the four companies and the Appellant did not receive any money out of the said consideration. We are not persuaded by this argument either. It is pointed out by the respondent that proceeds of crime were infused into the appellant company through a circuitous route for the purpose of layering the tainted money. It is the contention of the respondent that in the financial year 2007-08 capital base of the company was increased from Rs. 10 cr. to Rs. 25 cr. and the investment in shares by Mr. Binod Sinha was made at this time. The appellant company, while claiming that it did not benefit in any way from the transaction between Creative Fiscal and the four companies, seeks to gloss over this important fact. It is important to bear in mind that the definition of "proceeds of crime" under section 2(u) of the Act takes within its ambit not only property derived or obtained directly as a result of criminal activity relating to a scheduled offence but also the property derived or obtain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contents of the impugned order thoroughly, we do not find any case of the Ld. Adjudicating Authority exceeding its brief. Under section 8 of the Act, the Ld. Adjudicating Authority is mandated, after considering the reply to the notice issued by it, after hearing the aggrieved person and the Directorate, and after taking into account all relevant materials placed before it, to record a finding whether all or any of the properties in the notice issued under the section are involved in money laundering. In passing the impugned order, the Ld. Authority has only fulfilled its mandate through a detailed, speaking order. Raising of certain questions by the Ld. Adjudicating Authority in their order and proceeding to answer them based on the evaluation of the evidence before them is merely a judicious process of arriving at relevant conclusions. We, therefore, do not find any fault with the process through which the Ld. Adjudicating Authority decided the matter before them. Moreover, the issues discussed by them such as the common address of the companies, same authorized signatory, having accounts in the same bank, same handwriting on cheques, similar transactions undertaken on identical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd which has been presented as an alternative plea is that, in the present case, admittedly, the total amount of alleged proceeds of crime (disproportionate assets) in the hand of the accused Mr. Madhu Koda as quantified in the charge sheet is Rs. 1,40,10,333/- only, and properties attached in the hands of the accused are more than the total amount of such proceeds of crime of Rs. 1.4 crore as is evident from Annexure A of the Provisional Attachment Order. When the entire proceeds of crime are already attached in the hands of accused Mr. Madhu Koda, Mr. Binod/Sunil/Vikas Sinha etc., the Respondent Department, it is contended, could not have attached properties of Rs. 6.65 crore owned by the Appellant. The Respondent has no power to attach properties more than the proceeds of crime. Reliance is placed by the appellant in this regard on the judgment dt. 6-5-2019 of the Appellate Tribunal-PMLA in Baldev Raj Arora (supra). 36. The Ld. Counsel for the Respondent Directorate, on the other hand, submitted before us that proceeds of crime in the present case are not limited to Rs. 1.04 crores and there is nothing on record to show that this is the case. 37. We have given careful consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 5(1) has a limited relevance in so far as it puts a condition for provisionally attaching the property. Once that condition is satisfied its relevance, including the quantum of proceeds from the scheduled offence, if any, comes to an end. 103. Further, as held by the Hon'ble Bombay and Andhra Pradesh High courts it is permissible to attach a property if it represents proceeds of crime even if the person in possession of the property was not charged for any scheduled offence. In such a case there is no charge sheet against him to serve as a point of reference. 104. In view of the above discussion we hold that attachment order cannot be faulted on the ground that the total quantum of attached properties exceeded the disproportionate assets computed in the charge sheet filed against Sri Madhu Koda." 39. Having given careful consideration to the issue raised in this alternative contention of the appellant, we find ourselves in full agreement with the Ld. Adjudicating Authority on this issue. Insofar as the investigation of the offence of money laundering, including the quantum thereof under the PMLA is concerned, the findings recorded in the charge sheet filed in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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