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TMI Blog2025 (5) TMI 317X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009 under the provisions of the PMLA, 2002 based on the FIR No.RC.BD1/2009/E/0014 dated 20.08.2009, filed by the CBI, Bank Securities & Fraud Cell, New Delhi on under section 120-B r/w 420 IPC, section 13(2) r/w 13(1)(d) of the Prevention of Corruption Act, 1988 and substantive offences against Shri Hinish Ramchandani and other partners of M/s SRS Investment Company, having its office at 7/92, Tilak Nagar, Kanpur. They are alleged to have duped the State Bank of India, Main Branch, Kanpur of Rs. 46.42 crore during the period June, 2008 to July, 2009 in connivance with certain officers of the branch by availing credit facilities without having sufficient funds in the account of M/s SRS Company and also by resorting to 'kite-flying'. 3. Consequent upon the completion of investigation, the CBI filed Final Report under section 173 of Cr. P.C. before the Court of Hon'ble Special Judge, Anti-Corruption (Central), CBI Cases, Lucknow on 31.03.2011 against Shri Sanjay Dixit, the then Deputy General Manager, five other senior Officers of State Bank of India, Main Branch, Kanpur, and Sh. Mr. Hinish Ramchandani, for causing loss of Rs. 46 Crores to the bank, u/s 120-8 r/w 420 of IPC and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d forfeited. Further, Clause 13 provided that time would be of the essence of the agreement. 8. It is submitted that the Appellant visited Kanpur on 07.11.2009 but the Vendee expressed its inability to arrange the funds. With a view to give a chance to the Vendee, the Appellant sent a letter dated 14.11.2009 suggesting that time could be extended upto 15.3.2010 subject to the sale consideration being increased and in case this was agreeable to the Vendee, the Vendee should send the same letter to the Vendors after countersigning the same. However, the Vendee did not send any reply. 9. Accordingly, in terms of Clause 8 of the Agreement, the earnest money stood forfeited. 10. Much later, a notice dated 04.09.2010 was received from the counsel for Hinish Ramchandani alleging that the balance sale consideration could not be paid by his client since an FIR had got registered against him and was being Investigated by CBI and the bank accounts had been frozen. 11. The Appellant replied by his lawyer's letter dated 11.09.2010 denying the allegations and mentioned that on account of default by the Vendee, the earnest money stood forfeited. Thus, it is the contention of the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;ble Supreme Court has taken a consistent view on this subject. In the case of Satish Batra v. Sudhir Rawal, (2013) 1 SCC 345 the Hon'ble Supreme Court referred to several earlier decisions. It also referred to Hanuman Cotton Mills v. Tata Air Craft Ltd., (1969) 3 SCC 522 and reproduced there from the principles governing the matter as follows: - "9. This Court, considering the scope of the term "earnest", laid down certain principles, which are as follows: "21. From a review of the decisions cited above, the following principles emerge regarding 'earnest': (1) It must be given at the moment at which the contract is concluded. (2) It represents a guarantee that the contract will be fulfilled or, in other words, "earnest" is given to bind the contract. (3) It is part of the purchase price when that transaction is carried out. (4) It is forfeited when the transaction falls through by reason of the default or failure of the purchaser. (5) Unless there is anything to the contrary in the terms of the contract, on default committed by the buyer, the seller is entitled to forfeit in the earnest." Again, in paras 15 to 17 it is held as under: "15. The Law is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings arising out of the first provisional order of attachment against Hinish Ramchandani and others had, vide Order dated 08.08.2012, allowed the plea of forfeiture raised by one Cinema Capital, a capital venture fund, since Hinish Ramchandani had failed to make the subsequent instalments. It held that upon forfeiture there was no property in existence as defined in S. 2(1) of the PMLA and, therefore, no order of attachment could be passed. The present bench, which had only one Member, was required to follow the order of Three-Member Bench in the earlier round of litigation. 18. Fourthly, it is argued that the effect of findings in proceedings arising out of DRT were not considered. The Ld. Adjudicating Authority could not have altogether disregarded the crucial findings given by the DRAT and the Hon'ble Allahabad High Court as regards the non-liability of the Appellant herein to return the money which had been forfeited by him. Such findings given by judicial authorities having the competence over their respective subject-matter were relevant. It is settled principle of law that Courts/ Tribunals would look into findings given by other competent Courts/ Tribunals and giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the PMLA. It is settled law that an offence cannot be made retrospectively. Any such attempt would be in violation of Article 20 of the Constitution. 22. Based on the above arguments and contentions, it is prayed by the appellant that impugned order and the attachment of the subject properties be set aside. Arguments on behalf of the Respondent (ED) 23. Respondent No.1 (ED) has strongly opposed the arguments and contentions put forward on behalf of the appellant. 24. The claim of the appellant that the advance amount of Rs 2.02 crore, received from M/s SRS Developers, through Mr. Hinish Ramchandani had been forfeited by him on 17/11/2009, i.e., prior to issuance of Provisional Attachment Order, is challenged by the Directorate. It is contended that the letter/notice dated 14/11/2009 (erroneously mentioned as 14/09/2009) on the strength of which this claim is made, suffers from various contradictions. The letter is claimed to have been issued on 14/11/2009 wherein it was mentioned that the amount will be forfeited if the sale was not completed on 17/11/2009 (i.e., within 03 days). This letter was issued from Delhi and it has been claimed that the same was sent to Mr Hinish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fall in the price received from other buyer, he will deduct the same from the earnest money. 27. It further submitted that it was gathered in the course of proceedings before the Ld. AA that the appellant has already sold the said land in question at a higher price to the other buyer. In view this even in terms of the said letter dated 14/11/2009, the appellant would have no claim over the subject amount. It is contended that the fact that the property was sold by the appellant to another buyer at a higher price appears to have been not only suppressed by the appellant before the Ld. AA but also before this Appellate Tribunal. The appellant has not suffered a loss in any manner and his claim over the proceeds of crime of Rs 2.02 Crores shows his intention to grab the crime money. The facts clearly show that neither the appellant intended to forfeit the advance money of Rs. 2.02 Crores nor had he forfeited the same on 17/11/2009 and the claim of forfeiture appears to be an afterthought to grab the proceeds of crime. The action of forfeiture cannot be taken unilaterally by one party without giving any opportunity to the other side. In the said letter dated 14/11/2009, the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant was nothing but the proceeds of crime. For the same reason, the submission of the appellant that the bank in the proceedings before DRT Allahabad, DRAT and the Hon'ble Allahabad High Court had taken the stand that the money paid by SRS Developers through Respondent No. 2 (Sh. Hinish Ramchandani) is a debt and liable to be returned by the appellant, is incorrect. Moreover, the bank itself had the lodged criminal complaint/FIR before the CBI with the allegation that cheating and wrongful loss was committed by Mr. Hinish Ramchandani and his company for offences punishable under section 120-B r/w 420 of IPC 13(2) r/w 13(1) (d) of P.C. Act. The Bank cannot claim before any authority or before the CBI Trial Court that the FIR lodged by them was false. 32. It is reiterated that the funds in the form of FDRs have clear link with the crime money, defrauded from the bank. The Flow Charts, enclosed with the Provisional Attachment Order and Original Complaint has established that the amount of Rs. 2.02 crore has clear and direct link with the crime money. The proceeds of crime were kept by the appellant in form of FDRs made out of proceeds of crime to the tune of Rs. 2.02 Crores paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form of FDR and he will abide by the law. The agreement dated 17/5/2009 was made during the offence period and hence its attachment in 2013 will not change the nature of the crime money. The claim of appellant about forfeiture has been found to be an afterthought to grab the proceeds of crime. It is reiterated that section 71 of the PMLA provides overriding effect to the other law for the time being in force. 35. With regard to the contention that section 120-B r/w 420 of IPC and S. 13 of the PC Act were not Schedule Offences during the relevant period of offence, it is submitted that the Ld. Adjudicating Authority at page 53 & 54 of the Order dt. 26.09.13 has elaborately discussed the ratio of judgments, viz., Judgment dated 06/08/2010 passed by Hon'ble High Court of Jharkhand in W.P. (Cr) no. 325/2010 in the case of Hari Narayan Rai Vs UOI, judgment of the Hon'ble Apex Court in the case of Sajjan Singh Vs. State of Punjab [1964 SCR (4) 630), which clearly indicate that the stand taken in these paras are irrelevant. 36. With regard to the submission of the appellant that in the similar case of one Smt. Preeti Sewani and Nandani Ramchandani amounts of Rs. 30,90,113/- and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of attachment had been passed against it, that neither SRS Investment Company nor respondent No.2 himself were parties to the said agreement and that the earnest money received by the appellant and his mother was from SRS Developers and / or on its behalf and therefore, it could not be said that appellant is holding any proceeds of crime, the respondent contends that the written submissions were submitted by them before the Ld. Adjudicating Authority as per directions. Further, the written submissions do not contain any new facts. The written submissions were the reply/counter reply to the written submissions submitted by the appellant before the Adjudicating Authority. Hence, this ground is not sustainable. Investigation has established that the crime money flew from the bank accounts of M/s SRS Investment Co. to the account of M/s SRS Developers, hence is incorrect to say that the money received by him were not proceeds of crime. Hence, the attachment of proceeds of crime of Rs 2.02 Crores and as confirmation is proper. 38. In view of facts mentioned hereinabove it is prayed by respondent no.1 that this Appellate Tribunal may be pleased to dismiss the instant appeal. Arguments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer of the DRT Allahabad passed appropriate orders keeping in view the facts and evidence on record at that time. The order dated 15.12.2011 passed by DRT Allahabad was perfectly legal and justified and is binding on the parties. 45. The appellant had filed an appeal before the Debts Recovery Appellate Tribunal Allahabad but the said appeal was erroneously allowed vide order dated 13.4.2012 without giving any opportunity of hearing to the respondent bank. The bank has challenged the said order dated 13.4.2012 by filing a Writ Petition before the Hon'ble High Court at Allahabad being Civil Misc. Writ Petition No.15545 of 2013, State Bank of India versus the Chairperson, Debts Recovery Appellate Tribunals and others. The Writ Petition is still pending for disposal before the Hon'ble High Court at Allahabad. The Answering Respondent was not heard on the Review Petition filed by the Respondent No.2 before the Hon'ble Appellate Tribunal, Allahabad. However, in accordance with the provisions of PMLA, 2002 the appellant cannot be allowed and/or entitled to forfeit the amount of advance taken from the Respondent No. 2. Further, the entire amount of Rs. 4.02 Crores constituted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crime is involved in the said property on account of the transaction which took place between the Appellant and Respondent No. 2 therefore, the said property is liable to be attached till the controversy regarding the amount of advance taken by the Appellant is finally adjudicated. At least the M/s Hotel Citypride International Private Limited be restrained from making any constructions of the aforesaid Plot No. 25, Block 6 Ranighat, Kanpur pertaining to which an agreement to sell was executed and the proceeds of crime was exchanged. Further, the appellant has purposely concealed the said facts regarding receipt of the actual amount of sale consideration and has subsequently sold the aforesaid property on a sale consideration of Rs 11.40 Crores to the aforesaid purchaser and thereby earned more than 3 Crores, more than the amount on which it was agreed to be sold to the Respondent No.2. 53. Based on the facts and circumstances stated above the present appeal is liable to be rejected as it devoid the merits. 54. It may be mentioned here that Respondent No. 12 (M/s Volkswagen Finance Pvt Ltd.) have also filed a reply to the appeal. However, the same are in relation to the property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and get sale deed executed and registered before 17.11.2009. As against this, the PAO in this case was passed on 30.03.2013, well after the said date and well after even the last of the dates proposed by the Vendors in their letter dated 14.11.2009. As such, I find merit in the argument of the appellant that as at the date of the passing of the PAO, the earnest money already stood forfeited as per the mutual agreement executed between the Vendor and the Vendee. 57. In this regard, I have also perused the decision of the Hon'ble Supreme Court in Satish Batra vs. Sudhir Rawal (supra) and find that the said judgment supports the contention of the appellant in this regard. 58. I have also perused the judgement of the Hon'ble Pritam Kaur vs. Deputy Director, ED, FPA-PMLA-936/CHD/2015, order dt. 20.12.2017 cited by the appellant, but find that the same is distinguishable on facts. In that case, the agreement specified that the date of execution of the sale deed will not be extended. There was a considerable lapse of time between the last date agreed upon for the execution and registration of the sale deed (01.12.2006), and the passing of the Provisional Attachment Order (31.12.2014). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held as follows: "The PML Act is a special enactment having been enacted to deal with ever increasing menace of money laundering. The provisions of the PML Act have over-riding effect over provisions in other statutes or in other words, the provisions of PMLA prevail over anything inconsistent contained in any other law." 62. Considering the above legal position, I am of the view that there is little room for any doubt that the provisions of the Act, including those relating to attachment of properties under Section 5, would definitely prevail over the agreement signed by the parties in exercise of the general law provisions. This position would prevail even where the party holding the property (the FDs) in question was otherwise neither found to be involved nor complicit in the commission of the scheduled offence in any manner and was not even aware of the tainted nature of the property. The Hon'ble Supreme Court in its landmark judgment in Vijay Madanlal Choudhary & Ors. v. Union of India & Ors. [Special Leave Petition (Criminal) No. 4634 of 2014] has categorically held that the sweep of Section 5(1) is not limited to the accused named in the scheduled offence. It was further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res. Thereafter, he had put in his own money and made FDRs of Rs. 2.02 crores as investment. Therefore, this money cannot be attached as it belongs to the Appellant. In this regard, I find that although a contention has been raised, there is nothing on record to prove the authenticity of the claim. Moreover, once it has been held that the appellant had received an amount of Rs. 2.02 crores out of the proceeds of crime generated by the company, even if it was without knowledge of its tainted nature, the fact that he had utilized a part of the amount and made good the same by adding his own funds would not make the amount immune from attachment under the Act since the definition of 'proceeds of crime' under the Act expressly includes the 'value' of such property. 65. The next contention is that PMLA does not have retrospective operation. About Rs. 1.51 crores were received by the Appellant in May, 2009 and Sections 120-B & 420 IPC and Section 13 of the Prevention of Corruption Act, 1988 were added into the Schedule of the PMLA, 2002 on 01.06.2009 through an amendment. Thus, in any event, on the date on which the said amount came into the hands of the Appellant, there was no offence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r it has been notified as a scheduled offence, such person may be liable to be prosecuted for offence of money laundering under PMLA. 68. The legal position being thus, I do not find any merit in this argument of retrospectivity advanced by the appellant. 69. The next set contentions put forward by the appellant relate to the orders of the DRT/DRAT. These contentions of the appellant do not merit any detailed discussion in my view as they act in a different sphere. The DRAT's order recorded a finding that the DRT had allowed the application for impleadment of the appellant even without issuing a notice to him. It further held that there is no liability of the appellant to pay the amount to the Bank for which application could be initiated against the appellant under Section 19(2) of the RDDBFI Act, 1993. These findings do not have any relevance to attachment of properties under the PMLA, 2002 based on a finding that the same constituted 'proceeds of crime' as defined under section 2(1)(u) of the PMLA, 2002. 70. Finally, the appellant has also contested the claim of the respondent directorate that the appellant had voluntarily agreed to the attachment of the funds. This issue doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been validly attached. 74. It is further stated that the appellant has not filed the copy of the appeal in support of the averments that his mother had bequeathed her share of the property to the appellant by a will dated 27.11.2007. I find that the ownership position of the property after the demise of the appellant's mother is not a matter of dispute in the present appeal. There are no findings to the contrary from the authorities below, nor any material is available on record to indicate towards a different position in this regard. 75. The impact of DRT/DRAT decisions or rather the lack of any impact thereof on the current proceedings under the PMLA, 2002, has already been dealt with in the forgoing paragraphs and do not warrant further discussion. 76. In view of the discussions in paragraphs 56 and 57 (supra), there is little merit in the contention that the amount paid was not earnest money. 77. As regards the claim that the amount of Rs. 2.02 Crores lying the shape of the FDR which has been provisionally attached by the Respondent No.1 and, subsequently, confirmed by the Adjudicating Authority vide order dated 26.9.2013, is required to be refunded to the Bank along with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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