Property purchased bonafide is not ” proceeds of crime “

By | December 9, 2015

Facts of the Case

G. Srinivasan was found to be main accused , he only availed the loan projecting R. Manoharan as Proprietor of M/s. Bhagavathi Textiles Mills Limited. After availing the loan, he purchased about 165 acres of land in Pudukkottai Village from One K. Gunasekaran, G. Selvarani, R. Sivkumar, Shri Chinnakkannu in the names of his Benamie viz., K. Vignesh, P. Venkatachalapathy and P. Rajendran.

These three persons, as per instructions of G. Srinivasan appointed one P.Ayyappan, as their power of attorney,

The said P. Ayyappan, Power of Attorney of these persons sold this 165 acres to one Gunaseelan,

The said Gunaseelan sold the entire 165 acres to the appellants (C. Chellamuthu),

The Deputy Director of Prevention of Money Laundering Act, Directorate of Enforcement,( respondent herein) considering all the materials before him held that there are reasons to believe that property measuring 165 acres in the hands of appellants (C. Chellamuthu), is part of proceeds of crime as defined under Section 2(1)(u) of Provision of Money Laundering Act and is involved in the offence of Money Laundering and is liable for adjudication and confiscation in terms of Section 8 of PMLA, 2002 . The properties are liable to attachment under Chapter III of PMLA, 2002. If the properties are not attached will frustrate further proceedings under the Act and by order dated 10.05.2012, ordered Provisional Attachment of the properties.

(i)           Whether the property in the hands of persons prosecuted for criminal offences and/or scheduled offence alone can be attached;

There is no restriction in respect of person in possession of proceeds of crime. Section 5 does not restrict that property in the hands of persons involved in Money Laundering alone can be attached pending confiscation. This issue was considered by two Division Benches of Bombay High Court and Andra Pradesh High Court referred to above. Both the Courts after elaborately considering this issue referring to relevant Sections of Act referred to above held that proceeds of crime in the hands of persons not involved in Money Laundering or accused of criminal offence can also be attached. Both the Courts have held that person referred to in Section 5 is not restricted to a person accused of crime or involved in Money Laundering. The judgements squarely apply to facts of this case.

The provisional attachment of property is not restricted in the hands of accused persons alone.(Para No 14)

(ii)          Whether the property in the hands of subsequent bonafide purchaser without knowledge of crime purchased by legal consideration can be attached.

As per the Sections 23 and 24 of PMLA, 2002, there is a presumption that property in the hands of Appellants is proceeds of crime. But the appellants have a right to rebutt the said presumption.

The said sections read as follows:—

“23. Presumption in inter-connected transactions Where money-laundering involves two or more inter-connected transactions and one or more such transactions is or are proved to be involved in money-laundering, then for the purposes of adjudication or confiscation (under section 8 or for the trial of the money-laundering offence , it shall unless otherwise proved to the satisfaction of the Adjudicating Authority or the Special Court), be presumed that the remaining transactions form part of such inter-connected transaction.

24. Burden of proof

In any proceeding relating to proceeds of crime under this Act,

(a) in the case of a person charged with the offence of money-laundering under Section 3, the Authority or Court shall, unless the contrary is proved, presume that such proceeds of crime are involve d in money-laundering; and
(b) in the case of any other person the Authority or Court, may presume that such proceeds of crime are involved in money-laundering.

The appellants have given statements under Section 50 of the Act. They have categorically stated that they possess agricultural lands, cultivate Gloriosa Superba seeds and sell the same and derive considerable income. They have named the persons to whom they have sold the Gloriosa Superba seeds and produced Bank statements. Some of the Appellants have stated that they sold their lands and borrowed monies to purchase the property in question. (para 21)

(iii)         Whether property purchased bonafide with legal sale consideration looses the character of proceeds of crime and the sale proceeds in the hands of vendor only can be attached.

Considering the materials on record and judgments reported in 2010 (5) Bom CR 625 (supra) and [2011] 164 Comp Cas 146 (AP) (supra), I hold that appellants have rebutted the presumption that the property in question is proceeds of crime. The respondent failed to prove any nexus or link of Appellants with G. Srinivasan and his benamies. Once a person proves that his purchase is genuine and the property in his hand is untainted property, the only course open to the respondent is to attach sale proceeds in the hands of vendor of the appellants and not the property in the hands of genuine legitimate bonafide purchaser without knowledge. (Para No 24)

Whether the decision in case of Radha Mohan lakhotia’s case , [dated 05.08.2010  Mr. Radha Mohan Lakhotia v. Deputy Director, PMLA, Directorate of Enforcement, Mumbai in first appeal no. 527/2010.]  can be followed in which it was held by Bombay High Court that the property bought without the knowledge that the same is tainted could be subjected to Provisional Attachment Order.

A reading of paragraphs 21 to 24 clearly reveals that both the Adjudicating Authority as well as Appellate Authority failed to properly appreciate the facts and findings in Radha Mohan lakhotia’s case. In that case, the Department had placed substantial and acceptable facts to prove that the property in the hands of third party was proceeds of crime. It is pertinent to note that in Mr. Radha Mohan Lokatia’s case, Department had proved the nexus and link between the person possessing the property and person accused of having committed an offence. All the persons involved in that case were close relatives.

In the present case, the respondent failed to prove that the appellants did not have sufficient financial capacity to buy the property or that the money paid by them as sale consideration was not legitimate money derived by agricultural activities.

No material was produced to show that the appellants are close relatives of person, who involved in criminal activities and the person, who sent monies to purchase the property did not possess financial capacity to provide such huge amounts and that they are not genuine purchasers of agricultural products of appellants.

In view of these facts, the judgment in Radha Mohan lakhotia’s case is in favour of the appellants as they have rebutted the presumption that the property in question is proceeds of crime.

Therefore the  orders of Attachment of Property  are set aside.

Full Judgement :-

HIGH COURT OF MADRAS

C. Chellamuthu

v.

Deputy Director, Prevention of Money Laundering Act, Directorate of Enforcement

V.M. VELUMANI, J.

C.M.A. (MD) NOS. 104 TO 110 OF 2015

OCTOBER  10, 2015

AR.L. Sundaresan and C. Prakasam for the Appellant. K.K. Senthilvelan for the Respondent.

JUDGMENT

1. These appeals are filed challenging the order dated 05.09.2014, passed by Appellate Authority dismissing the appeals filed by appellants and confirming the provisional attachment order of adjudicating authority, dated 07.09.2012, made in complaint No.144/2012.

2. The appeals are against the common order, dated 05.09.2014 passed in FPA-PMLA-Nos.399 to 402, 406 to 408/MUM/2012 and the issue involved is one and the same. Hence, all the appeals are heard together and disposed of, by this common order.

Relevant Facts:

3. (i) One Mr.R. Manoharan projected himself as proprietor of M/s. Bhagavathi Textiles Mills. He produced bogus and fabricated documents in connivance of one S. Arivarasu, the then Business Development Manager of M/s. Global Trade Finance Limited, Coimbatore, availed loan facilities to the tune of Rupees Fifteen Crores. On coming to know of this fraud, one B. Surendran, Vice President and Branch Head of M/s. SBI Global Factors Limited, Coimbatore lodged a complaint against the said R. Manoharan, Proprietor of M/s. Bhagavathi Textiles Mills, G. Srinivasan, S. Arivarasu and others. The said complaint was registered on 07.10.2010 in FIR No.RC.09(E)2010-BS& FC/BLR under Sections 120-B r/w. Sections 420, 467 and 471 of IPC and Section 13(2) r/w. Section 13(1)(d) of the Prevention of Corruption Act, 1988. After investigation by concerned Police, CBI, BS & FC Bangalore, filed charge sheet in C.S.No.6 of 2011 dated 26.07.2011, before the Court of Special Judge, CBI against R. Manoharan, Proprietor of non-existent M/s. Bhagavathi Textiles Mills, G. Srinivasan, S. Arivarasu, K. Vignesh and others for the offences committed under Sections 120(B) r/w. Sections 420,467,468 and 471 of IPC and Section 13 (2) r/w Section 13(1)(d) of Prevention of Corruption Act, 1988 before the Court of Special Judge, CBI cases, Coimbatore.

(ii) In the investigation, one G. Srinivasan was found to be main accused and he only availed the loan projecting R. Manoharan as Proprietor of M/s. Bhagavathi Textiles Mills Limited. After availing the loan, he purchased about 165 acres of land in Pudukkottai Village from One K. Gunasekaran, G. Selvarani, R. Sivkumar, Shri Chinnakkannu in the names of his Benamies viz., K. Vignesh, P. Venkatachalapathy and P. Rajendran. The sale deeds were registered as Document Nos.853 to 855 of 2008, dated 12.06.2008 and Document No.1344 of 2008, dated 02.09.2008 and Document No.1559 of 2009 dated 09.09.2009. These three persons, as per instructions of G. Srinivasan appointed one P.Ayyappan, as their power of attorney, registered as Document Nos.137 and 138 of 2009, dated 07.09.2009 and Document No.807/2009, dated 12.09.2009 and Document No.186 of 2009, dated 22.09.2009. All the four power of attorneys were registered in the office of Sub Registrar of Assurances, Chathirapatti.

(iii) The said P. Ayyappan, Power of Attorney of these persons sold this 165 acres to one Gunaseelan, S/o. Kuppusami Gounder, by four sale deeds registered as Document Nos. 187 to 190 of 2010. The said Gunaseelan sold the entire 165 acres to the appellants, by four sale deeds and registered as Document Nos.379 to 382 of 2010. The said 165 acres was purchased by G. Srinivasan in Benami names from and out of monies obtained by fraud. Hence, the said property is proceeds of crime.

(iv) The Directorate of Enforcement initiated proceedings, on the basis of FIR dated 07.10.2010 and CBI letter dated 19.11.2010. An Enforcement case Information Report (ECIR) Vide F.No.ECIR/06/CZ/PMLA/2011 was registered on 03.01.2011, by Directorate of Enforcement, Chennai. The statements of G. Srinivasan, P. Manoharan, K. Vignesh, P. Venkatachalapathy, P. Rajendiran, R. Ayyappan, K. Gunaseelan, the appellants and others were recorded under Sections 50(2) and 50 (3) of Prevention of Money Laundering Act, 2002 (herein after referred as PMLA, 2002).

(v) During investigation G.Srinivasan admitted on 29.09.2011 that R.Manoharan is looking after his all financial transaction and other activities. In his statement he stated that in the name of M/s. Bhagavathi Textile Mills by submitting bogus bills and documents he obtained Rupees Fifteen Crores as loan. He utilized the said amount to purchase the lands referred to above and also movie rights etc., R.Manoharan, in his statement corroborated this statement of G. Srinivasan. P. Venkatachalapathy, P. Rajendiran and K. Vignesh in their statement stated that the lands referred to above belonged to G. Srinivasan and they are Benami owners. As per the instructions of G. Srinivasan, they executed power of attorney appointing P. Ayyappan as their power agent. They did not receive any money from G. Srinivasan and did not pay any money to G. Srinivasan or anybody else.

(vi) G. Srinivasan filed a complaint against P. Ayyappan, Gunaseelan and appellants, which was registered as FIR No.57/11, dated 30.08.2011, by District Crime Branch, Dindigul, alleging that P.Ayyappan and his men, came to his office at Udumalpet and took all the documents and forced him to give power to P.Ayyappan, with regard to 165 Acres at Chathirappatti Village. K.Vignesh, P.Venkatachalapathy and P.Rajendiran also gave power to Ayyappan who using the power sold the lands to Gunaseelan. The said Gunaseelan in turn sold the property to the appellants.

(vii) The Deputy Director of Prevention of Money Laundering Act, Directorate of Enforcement, respondent herein considering all the materials before him held that there are reasons to believe that property measuring 165 acres in the hands of appellants is part of proceeds of crime as defined under Section 2(1)(u) of Provision of Money Laundering Act and is involved in the offence of Money Laundering and is liable for adjudication and confiscation in terms of Section 8 of PMLA, 2002 . The properties are liable to attachment under Chapter III of PMLA, 2002. If the properties are not attached will frustrate further proceedings under the Act and by order dated 10.05.2012, ordered Provisional Attachment of the properties.

(viii) The respondent filed a complaint under Section 5(5) of the PMLA, 2002 against the appellants and G. Srinivasan, viz., [original complaint] OC No.144/2012. As per Section 5 (2) the respondent sent copies of attachment order to appellants and to adjudicating authority.

(ix) According to the respondent, the said G. Srinivasan involved in scheduled offences in terms of Sections 2(7) of PMLA and the properties are involved in offence of Money Laundering under Section 3 of PMLA, 2002 and prayed to, Adjudicating Authority to confirm the attachment of properties, made under Sub Section 1 of Section 5 of PMLA, 2002.

(x) The appellants filed replies denying all the averments and complaints made by respondent in the complaint. They contended that they are agriculturists. They purchased the property from and out of their agricultural income from Gunaseelan by registered sale deeds after satisfying themselves. They purchased the property without having knowledge that the property bought by them was proceeds of crime. They are bonafide purchasers and the sale consideration paid by them were earned through legal activities like selling lands etc. The sale considerations were paid through the bank, received from purchasers of agricultural products through bank and paid to vendor. The sale consideration were paid through legal source of income through agricultural operations and transactions were carried out through bank and hence, they are bonafide purchasers of the land for value. The respondent attached the property under misconception that property would fall under the provisions of Section 2(u) of the said Act.

(xi) The Adjudicating Authority considering the contentions of appellants and respondent and relying on the judgment of Bombay High Court in the case of Mr. Radha Mohan Lakhotia v. The Deputy Director, PMLA, Department of Revenuereported in 2010(5) Bom CR 625, held that property represent the proceeds of crime and are involved in Money Laundering and consequently up-held and confirmed the attachment of the properties.

(xii) The appellants challenged the order of adjudicating authority dated 07.09.2012 by filing 7 appeals before Appellate Tribunal, Prevention of Money Laundering Act at New Delhi. The Tribunal by the judgment dated 05.09.2014 dismissed all the appeals.

(xiii) Against the said order, the appellants have filed the Civil Miscellaneous Appeals.

4. At the time, the appeals were taken up for hearing, the learned counsel for the respondent raised a preliminary objection that the appeals can be heard and decided only by a Division Bench of this Court. The learned counsel for the Respondent relied on the judgment reported in 1997(3) SCC 261 [L. Chandrakumar v. Union of India and others].

5. Per contra, the learned Senior Counsel appearing for appellants contended that appeals are filed as per Section 26 of the Prevention of Money Laundering Act, 2002. The said Section does not contemplate that only Division Bench can decide the appeal. When the intention of Legislature is that appeal has to be decided by a Division Bench or by Full Bench, the same has been incorporated in the Appeal provisions itself. In the absence of such provisions, the appeal can be decided by single judge. The learned Senior Counsel also contended that the judgment relied on by the counsel for the respondent is not applicable to the facts of the present case. The issue in that case was appeal to Supreme Court from the order of Debt Recovery Tribunal. The Hon’ble Apex Court held that the order of Debt Recovery Tribunal can be challenged in High Court under Article 226 of Constitution of India.

6. The preliminary objection raised by learned counsel for the respondent was already considered at the time of numbering the appeals itself. The Registry raised the issue and it was placed before the Hon’ble Administrative Judge. After orders, it was posted before the learned Single Judge for admission. All the appeals were admitted and Status Quo was granted on 05.02.2015 by the learned Single Judge. Therefore, the contention of learned counsel for the respondent is unsustainable.

7. The learned Senior Counsel for the appellants contended that:—

(i) The action of the joint Director attaching provisionally the property in question in the hands of the appellants is without jurisdiction and is un-sustainable on facts. The confirmation of attachment by Adjudicating Authority as well as dismissal of Appeals filed by Appellate Authority are also contrary to facts and law.
(ii) The Appellants are not accused of being involved in criminal activities. They are not accused in Crime No.RCO 9/E/2010 and charge sheet in C.C.No.6 of 2011. They are not accused of Money Laundering under Section 3 of the Prevention of Money Laundering Act, 2002. Only property in the hands of persons, who are accused of Money Laundering, charged for criminal activities and of having committed scheduled offence as mentioned in the Act can be attached. “Any person” mentioned in Section 5(1)(a) of the Act relates only to person charged with having committed criminal and or scheduled offence. The property in the hands of others cannot be attached. In view of this provisions of Act and facts, the attachment order itself is invalid and all the consequential proceedings are void ab initio.
(iii) The appellants are not connected in any criminal activities of G. Srinivasan and not his Benamies. They were un-aware of the alleged fraud committed by G. Srinivasan and that the property in question is proceeds of crime. They are bonafide purchasers for valuable consideration. They verified the title of the property in the hands of Gunaseelan and then only, they purchased the property. The Appellants are agriculturists for generations owning lands and cultivating it. They were regularly getting income from cultivation. The sale consideration paid by them is legally obtained from the agricultural activities, sale of their lands acquired by inheritance and by partition. They also borrowed monies from friends and relatives. They are no way connected with G. Srinivasan. They are not Benamies or relatives or employees or Benamies of Manoharan and G. Srinivasan. There is nothing on record to show that their vendor Gunaseelan is Benami of G. Srinivasan and that he did not pay any sale consideration to G. Srinivasan through power of attorney Ayyappan. The respondent did not dispute the statement of Gunaseelan recorded under Section 50(2) of the PMLA 2002. Having accepted the purchase by Gunaseelan, it cannot be said that the property in question continued to be proceeds of crime. The respondent can only proceed against the sale consideration as the property in question lost its character of proceeds of crime. The appellants have proved that the property in their hand is untainted property and they purchased the property by sale consideration acquired through legal means and paid through Bank. The learned Senior Counsel relied on the following judgments.
(i) 2010(5) Bom. CR 625, Mr. Radha Mohan Lakhotia v. The Deputy Director, PMLA, Department of Revenue wherein in paragraphs 17, 17h and 19, it has been held as follows:—
“17. The next grievance of the appellant is that the provisional attachment and its confirmation by the Adjudicating Authority is founded on assumption and presumption only. No live link or nexus has been established by the Authorities to prove that the properties attached are proceeds of crime and gifts/money received by the Appellants are not from legitimate sources. This ground may require us to consider the factual aspects of the matter. The action of provisional attachment was resorted to against the appellants under Section 5, on account of reference made by NCB, Mumbai to the Director of Enforcement for investigation under the Act of 2002. The reference was the consequence of the reported scheduled offence in respect of which complaint was filed by the NCB, Mumbai before the Court of Special Judge for NDPS cases. Greater Mumbai on 8th December, 2006. The said case pertains to seizure of 200 kgs of cocaine on ¾ June, 2006 from a container originated from Ecuador, South America declared to contain teak wood imported by M/s. OPM International Pvt. Ltd. The importer placed the order for supply of the said consignment with M/s. Megha International Pvt. Ltd., Singapore and the consignment was shipped from Ecuador. When consignment was intercepted, 200 kgs. Cocaine was recovered. In this connection, NCB, Mumbai arrested Shri O.P. Nogaja, Umesh Bangur, both directors of M/s. OPM International Pvt. Ltd. Ant Vijay A. Throve, Managing Dire ctor of M/s. Mayur clearing Agency, the Customs House Agent under NDPS Act, 1985. The department initiated investigation in the case when it was revealed that there were four firms involved idn the smugling of cocaine, namely, (ik) M/s. OPM International Pvt. Ltd., Mumbai. (ii) M/s. Megha International Pvt. Ltd., Singapore, (iii) M/s. Royal Global Exports Pvt. Ltd., Singapore and (iv) M/s. S.S.M. S. Exports, Ecuador, S. A. it was revealed that all the three foreign based companies at Sr. Nos.(ii) to (iv) above were held by another holding company based in Singapore. It was further revealed that persons behind the said firms were not only common, but close relatives having interests in each others business.”
17(h) That Shri Rajendra Prasad Modani ( R. P.Modani) is the brother-in-law of said Umesh Bangur and real brother of the appellant. He and his wife Smt. Trupti Modani ( sister of Shri Umesh Bangur) both resident of Bangkok, found to have remitted a total amount of Rs.8.45 crores on different occasions into the NRE account No. 6.104.1181 (old A/c. N o. 10233/4) with Bharat Overseas Bank) and the entire amount was found to have been transferred to various individuals including relatives and firm for no economic reasons by placing the funds at the disposal of Shri Umesh Bangur in the form of signed blank cheque leaves. The modus operandi adopted by way of handing over signed blank chek leaves to him. Part of the said checks along with some pay-in slips and signed blank check leaves of SB NRO A/c. No.6.106.197 (old A/c. No. 27) jointly held by said Shri R.P. Modani and his wife Smt. Trupti Modani with M/s. Bharat Overseas Bank, Fort Mumbai were recovered from the residence of Shri Umesh Bangur during the search of his residence by NCB. Thus the said Shri Umesh Bangur was found to be in possession and control over the money lying in the said accounts. The details of transfer of the said money to different individuals and firms have been detailed in the complaint. It is evident that proceeds of crime has been transferred by Shri R.P. Modani and placed at the disposal of Shri Umesh Bangur which was further transferred in the guise of gift to close relatives viz., Shri Radha Mohan Lakhotia, Smt. Asha Lakhotia. Shri Shyam Sunder Modani and Shri Niwas Modani and also in the guise of purchase of shares of unlisted company, viz., M/s. Shubh Laxmi Syntex, for creating further layers to facilitate laundering of money.
19. Besides, it is held that the Appellants were not in a position to rebut the presumption about the interconnected transactions. More so, of the fact that the appellants were involved in projecting the proceeds of crime as untainted properties. That burden was on the appellants. The fact that the Respondent could have acted only if there was reason to believe that a person is in possession of proceeds of crime does not mean that the Authorities at this stage are obliged to prove the fact beyond doubt that the property in possession was in fact proceeds of crime. All that the Authority is required to show is that there was “substantially probable cause” to form opinion that the property under attachment is proceeds of crime. The circumstances adverted to by the Authorities below do indicate that there was substantially probable cause to form such opinion. At this provisional attachment stage as well when the matter goes before the Adjudicating Authority, by virtue of Section 24 of the Act of 2002 the burden of proving that the property possessed by the notices was not proceeds of crime and were untainted properties would be on them. As has been found by the Authorities below, except stating that the amount has come in the bank account of the appellants disbursed from NRE account of R.P. Modani by way of gift, no other justification is offered. The fact that the amount has been disbursed from NRE Account and such remittance is permissible in law does not and cannot legitimise the transaction, until it is established that the amount so gifted by R.P. Modani itself was not tainted funds. The real question is whether the funds in the account of R.P. Modani were tainted or otherwise. The burden to prove that fact is on the appellants themselves, by virtue of Section 24 of the Act. The argument of the appellants that the provisions regarding presumption and burden of proof will have no application as the said Shri R.P. Modani or for that matter M/s. Royal Global Exports Pte. Ltd., has still not been charged of having committed a scheduled offence, is of no avail. In as much as, the fact whether R.P. Modani has still not been charged of having committed a scheduled offence will not extricate the appellants who have been named as accused in offence under Section 3 of the Act of 2002. The burden of proof that properties in their possession are untainted properties, as per Section 24 is on the person accused of having committed offence under Section 3 of the Act of 2002. The appellants cannot absolve themselves by saying that the amount received by them was from the NRE account of Shri R.P. Modani. That is not enough. It was necessary for the appellants to further establish that the amount so disbursed from the account of R.P. Modani was equally untainted amount.”
(ii) [2011] 164 Comp Cas 149 (AP) : [2011] 108 SCL 491 (AP) B. Rama Raju v. Union of India (UOI) Ministry of Finance, Department of Revenue, represented by its Secretary, (Revenue) and others, wherein in paragraphs 37, 38 and 40, it has been held as follows:
“37. Section 8(1) clearly postulates affording of an opportunity to a person in possession of proceeds of crime to indicate the sources of his income, earnings or assets; out of which or by means of which he has acquired the property attached, under Section 5(1) or seized under Sections 17 or 18 the evidence on which he relies and other relevant information and particular s. It is therefore clear that where a property is provisionally attached under Section 5, the person in possession of such property may avail the opportunity under Section 8 to indicate/establish that he has acquired the property attached (prima facie the proceeds of crime) out of his lawful earnings or assets, that he has the means to do so, and that his acquisition is therefore legitimate, bona fide and at fair market value of such property; an d that the value paid for acquisition of the property and not the property in his possession that constitute s proceeds of crime, if at all. On such showing , to the satisfaction of the adjudicating authority, it would perhaps be not the property in possession of a person but the fair value for which he has acquired the property and paid to the transfer or that constitutes proceeds of crime and the authorities may have to proceed against the property or value in the hands of the transferor.
38. In the illustration proffered on behalf of the Petitioners; since the dividend, the higher dividend or the value of the shares sold would be relatable to illegal conduct of a company or its officers (if such illegality is a scheduled offence and the company or a person in management or control of the company is accused of an offence under Section 3) and would be proceeds of crime , so much of the quantum of the dividend received or the value of as hare sold as constitutes proceeds of crime could be liable to attachment and confiscation. This in our considered view is the true and fair construction of the provisions of the Act. At this stage of the proceedings we cannot be oblivious of the fact that the Petitioners and others, whose assets are being subjected to the processes under Chapter III of the Act, are alleged to be closely related to or employees of the individual (s) who orchestrated the massive scam and that these persons had traded in the shares of SCSL (with a presumptive insider information) when those shares had a peak value, achieved on account of the criminal conduct of Sri Ramalinga Raju, and others.
40. Section 24 inheres on a person accused/charged of having committed an offence under Section 3, the burden of proving that proceeds of crime are untainted property. Section 23 of the Act enjoins a presumption in inter-connected transactions that where money-laundering involves two or more inter-connected transactions and one or more of such transactions is or are proved to be involving in money-laundering, then for the purposes of adjudication or confiscation under Chapter-III, the Act enjoins a rebuttable presumption that the remaining transactions form part of such interconnected transaction.”

8. Per contra, the learned counsel for the respondent contended that;

(i) The Proceeds of Crime in possession of the hands of persons can be attached pending conclusion of criminal proceedings. It is not correct to state that the property in the hands of persons prosecuted for criminal offences and/or scheduled offence can only be attached. Section 2(p) and (u) defines “Money Laundering” and “Proceeds of Crime”. Section 3 of the Act deals with the offence of Money Laundering and in Section 4 of the Act, the punishment for offence of Money Laundering has been stated.
(ii) In the present case, the relevant provision is Section 5 of the Act. Only this Section deals with attachment of Proceeds of Crime. It does not confine the attachment of the property in the hands of persons prosecuted for criminal offences and/or scheduled offence only. Section 5(1)(a) of the Act empowers the authorised officer to attach any proceeds of crime in possession of any person. Therefore, the contention of the learned Senior Counsel only when a person is prosecuted the property in his possession can be attached is contrary to Section 5(1)(a) of the Act.
(iii) The prosecution and attachment are two different aspects dealt by different sections namely sections 3, 4, and 5 of the Act. The property in question in the hands of appellants is proceeds of crime.
The property was purchased from and out of loan of Rs. 15 crores obtained by G. Srinivasan by fraud. The property was purchased in Benami names. The subsequent transactions will not convert the tainted proceeds of crime as untainted property. The appellants have not substantiated their claim that they purchased the property without knowing that the same is tainted proceeds of crime. They have not proved that the sale consideration paid by them is from income accrued by agricultural activities. They have not furnished the details of names of persons and amounts borrowed by them. The bank account through which the amounts were received by them and paid through their vendor were opened and operated for this transaction only.
(iv) The learned counsel for the respondent relied on the same two judgments relied on by the learned Senior Counsel appearing for the appellants. The learned counsel for the respondent relied on the following Judgments.
(i) 2010 (5) Bom CR 625 [Mr. Radha Mohan Lakhotia v. The Deputy Director, PMLA, Department of Revenue] wherein in paragraphs 11,12 and 13, it has been held as follows:—
“11. The question is whether Section 5 can be invoked against a person who is not named as an accused in the commission of a scheduled offence? Sub-Section (1) of Section 5 will have to be read as a whole conjointly with the other provisions of the Act already referred to hitherto, including Section 8 there of. Section 5 authorises the Director or any other officer not below the rank of Deputy Direct or authorised by Direct or for the purposes of the said section to resort to action of “attachment of property” if he has reason to believe and the reason of such belief has been recorded in writing arrived at on the basis of material in his possession. That action is intended to freeze the proeeds of crime, which property, is derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence or value of any such property until the criminal action for the scheduled offence is taken to its logical end against the accused name therein. The proceeds of crime means any property or assets of every description, whether corporeal or incorporeal, movable or immovable, tangible or intangible and includes deeds and instruments evidencing title to, or interest in, such property or assets, wherever located which has been drived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence or the value of such property. The proceeds of crime may be or can be in possession of “any person”. Be it a person charged of having committed a scheduled offence “or otherwise”. In the case of any other person in possession of proceeds of crime, if it is also found that he has directly or indirectly attempted to indulge or knowingly assisted or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property, he shall be liable to be prosecuted for offence under Section 3 read with Section 4 of the Act of 2002-in addition to suffering the action of attachment of the proceeds of crime in his possession. Attachment of proceeds of crime in possession of any person (other than the person charged of having committed a scheduled offence) will, therefore, be legitimate within the sweep of Section 5 of the Act of 2002. In our opinion, the thurst of Section 5 is to attach every property involved in money-laundering irrespective of whether it is in possession of the person charged of having committed a scheduled offence or any other person-provided however it must be shown to be proceeds of crime and further, that proceeds of crime are likely to be concealed, transferred or dealt with in any manner, which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under the Act.
12. Going by the definition of “person” occurring in Section 2(s) and on conjoint reading of Section 2(u), which also refers to “any person”; coupled with the purpose and intent for which the enactment has been brought into force, accepting the argument of the appellants would result in a pedantic approach and limiting the plenitude of action of attachment and confiscation of proceeds of crimes only in the hands of the persons who have been charged of having committed a scheduled offence and non else. Where as, the Act has come into being to prevent money laundering and to provide for confiscation of property derived from or involved in, money laundering and formatters connected there with or incidental thereto.
The term “money-laundering” has the same meaning as signed to it in Section 3 of the Act of 2002. It essentially refers to the tainted property which is derived from criminal activity relating to a scheduled offence. Such tainted property may travel at different levels or by way of circular transactions for being eventually projected as untainted property in the hands of or possession of person other than the person charged of having committed a scheduled offence. That involves direct or indirect involvement of person or persons other than the person(s) accuse d of having committed a scheduled offence. Such other person(s) may directly or indirectly attempt to indulge or knowingly assist or knowingly is a party or is actually involved in any process or activities connected with the proceeds of crime and projecting it as untainted property. If such is the nature of activity, the Act of 2002 is intended to deal with the same sternly. In a given case a person can be in possession of any proceeds of crime without his knowledge that the property held by him is tainted. That person may not face prosecution under Section 3 of the Act of 2002. But even in his case, an order of attachment of the proceeds of crime can be invoked and later end up with confiscation there of depending on the outcome of the criminal action against the person charged of having committed a scheduled offence. The action of attachment is not in relation to a person as such but essentially to freeze the proceeds of crime. The interpretation given by the Appellants, if accepted would be destructive of the said legislative intent. Suffice it to observe that the term “person” appearing in Clause (a) of the of Section 5(1) of the Act cannot be limited to the person who has been charged of having committed a scheduled offence. If that was the intent of the legislature, there was no reason to insert Clause (a). In that case, the Legislature would have simply provided for any person who has been charged of having committed a scheduled offence and in possession of any proceed of crime, such proceeds of crime can be attached and confiscated, subject to fulfillment of the specified conditions.
13. The Appellants however, have placed emphasis on the expression “such person” used in Clause (b) of Section 5(1) of the Act. According to them, the word “such” is prefix to the word “person” in Clause (b). That is not superfluous, but is ascribable to the person referred to in Clause (a). Which means that even Clause (a) deals with person who has been charged of having committed a scheduled offence. It is not possible to countenance this sub mission. We are conscious of the fact that penal provisions should be strictly construed. At the same time, we cannot overlook the language of Section 5 as applicable at the relevant time. In our opinion, Clause (a) refers to “any person” – Whether he has been charged of having committed a scheduled offence “or otherwise”. The only requirement is that person should be in possession of any proceeds of crime. The governing factor is possession of any proceeds of crime by a person. Taking any other view may defeat the legislative intent. In as much as, a person who has been charged of having committed a scheduled offence can successfully defeat the object of the enactment of attachment and confiscation of the proceeds of crime by transferring it to some other person who is not so involved with him in commission of stated scheduled offence. In our opinion, on fair reading of Section 5(1) read with Section 8 of the Act, it postulates two categories of persons against whom action of attachment of property can be proceeded with. The first category is any person who is in possession of any proceeds of crime. A person falling in this category need not be a person, charged of having committed a scheduled offence. The second category is of a person who has been charged of having committed a scheduled offence. Besides, being charged of having committed a scheduled offence, that person is found to be in possession of any proceeds of crime. In either case, it is open to take recourse to Section 5 of the Act if the specified Authority has reason to believe and reason for such belief is recorded in writing that the proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime. Indeed, the proviso to Sub-section (1) as was applicable at the relevant time envisaged that no order of attachment can be made unless, in relation to the offence under paragraph 1 of Part A and Part B of the Schedule, a report has been for warded to a Magistrate under Section 173 of the Code of Criminal Procedure, 1973; or paragraph-2 of Part A of the Schedule, a police report or a complaint has been filed for taking cognizance of an offence by the Special Court constituted under Section 36(1) of NDPS Act, 1985. This proviso essentially is directed against the second category of person covered by Sub-section (1), namely, person who has been charged of having committed a schedule offence. In other words, action of attachment of proceeds of crime in possession of the person charged of a scheduled offence can be proceeded only on forwarding of a report to Magistrate under Section 173 of the Code or a complaint has been filed for taking cognizance of offence by the Special Court constituted under the NDPS Act. In so far as the person who is not named in the scheduled offence, there can be no question of filing of any report or complaint for taking cognizance. That stipulation has no application to the person who is not a person having been charged of a scheduled offence. The view that we propose to take is reinforced from the purport of Section 3 and 4 of the Act of 2002. The same deal with the offence of money-laundering and punishment for money-laundering respectively. Both these provisions, even on strict construction, plainly indicate that the person to be proceeded for this offence need not necessarily be charged of having committed a scheduled offence. For, the expression used is “who so ever”. The offence of money-laundering under Section 3 of the Act of 2002 is an independent offence. It is committed if “any person” directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property. Further, it would create a piquant situation as a person who is not charged of having committed a scheduled offence even if can be proceeded for offence of money laundering and even if such person is in possession of any proceeds of crime, no action of attachment and confiscation of the proceeds of crime can be resorted to qua him-albeit the proceeds of crime are in his possession. If the argument of the appellants were to be accepted, even the expression “who so ever” appearing in Section 3 and 4 of the Act will have to be limited to person who has been charged of having committed a scheduled offence. The object of the enactment of 2002 would be completely defeated by such approach. Besides, the view that we propose to take is reinforced also from the purport of Section 8 of the Act of 2002. It provides that the Adjudicating Authority if has reason to believe that “any person” has committed an offence under Section 3, may serve notice up on such person calling upon him to indicate his source of his income, earning or assets, out of which or by means of which he has acquired the property attached under Section 5(1) of the Act. Once again, the legislature has unambiguously used the term “any person” and not person charged of having committed a scheduled offence. Indeed, any person referred to in this provision is a person who has committed an offence under Section 3 of the Act of 2002. He may not necessarily be a person charged of having committed scheduled offence. The proviso to Sub-section (1) there of stipulates that where a notice under the said sub-section specifies any property as being held by a person on behalf of any other person, a copy of such notice shall also be served up on such other person. Suffice it to observe that even Section 8 contemplates adjudication to be done by the Adjudicating Authority after provisional attachment order is passed under Section 5 of the Act and upon receipt of complaint under Section 5(5) of the Act. We are not referring to other provisions mentioned in the said Section 8(1), as we are dealing only with the case arising under Section 5 of the Act. Considering the above, we are of the considered opinion that there is no merit in the argument of the appellants that action under Section 5 of the Act could not have proceeded against them, as they were not charged of having committed a scheduled offence.”
(ii) [2011] 164 Comp Cas 149 (AP) : [2011] 108 SCL 491 (AP) [B. Rama Raju v. Union of India (UOI) Ministry of Finance, Department of Revenue, represented by its Secretary, (Revenue) and others], wherein in 32 to 34 and 39, it has been held as follows:
“32. On the afore-stated scheme the provisions of the Act, the prosecution under the Act; and attachment and eventual confiscation proceedings are distinct proceedings. These two sets of proceedings may be initiated against the same person if he is accused of the offence of money-laundering. Even when a person is not so accused, the property in his possession may be proceeded against for attachment and confiscation, on a satisfaction by the appropriate and competent authority that such property constitutes proceeds of crime.
33.In our considered view, the provisions of the Act which clearly and unambiguously enable initiation of proceedings for attachment and eventual confiscation of property in possession of a person not accused of having committed an offence under Section 3 as well, do not violate the provisions of the Constitution including Articles 14, 21 and 300-A and are operative proprio vigore.
34. While the offence of money-laundering comprises various degrees of association and activity with knowledge and information connected with the proceeds of crime and projection of the same as untainted property; for the purposes of attachment and confiscation (imposition of civil and economic and not penal sanctions) neither mens rea nor knowledge that a property has a line age of criminality is either constitutionally necessary or statutorily enjoined. Proceeds of crime (as defined in Section 2(u) is property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence or the value of any such property. “Property” is defined in Section 2(v) include property of every description corporeal, incorporeal, movable, immovable, tangible, and intangible and includes deeds and instruments evidencing title to or interest in such property or assets wherever located.
39. The contention by the Petitioners that attachment and confiscation of proceeds of crime in possession of a person who is not charged of an offence under Section 3 or who has no knowledge or information as to the antecedent criminality are arbitrary and unfair legislative prescriptions in misconceived.”

9. I have heard the learned Senior Counsel appearing for the Appellants and learned counsel appearing for respondent and carefully perused all the materials on record, the judgments relied on by the learned Senior Counsel appearing for the appellants and the learned counsel for the respondent and their arguments.

10. The following issues arise for consideration in these appeals:—

(i) Whether the property in the hands of persons prosecuted for criminal offences and/or scheduled offence alone can be attached;
(ii) Whether the property in the hands of subsequent bonafide purchaser without knowledge of crime purchased by legal consideration can be attached.
(iii) Whether property purchased bonafide with legal sale consideration looses the character of proceeds of crime and the sale proceeds in the hands of vendor only can be attached.

11. Point No. 1:-

The learned Senior Counsel for appellants contended that the proceedings initiated against appellants for provisional attachment of property in question is without jurisdiction and void ab initio. The appellants are not accused of having committed any criminal offence and or scheduled offence. The property in the hands of those accused persons alone can be attached. The appellants are bonafide purchasers for valuable consideration without knowledge of any criminal activities of their predecessors in title. They paid the sale consideration out of their legitimate agricultural activities. The learned Senior counsel referred to Sections 2(p), 3,4 and 5 of the said Act. According to the learned Senior Counsel, the person mentioned in Section 5 refers only to persons, who are accused of criminal activities or having committed scheduled offence.

12. Per contra, the learned counsel for the respondent contended that person referred to in Section 5 of the Act includes all the persons, who are in possession of proceeds of crime. Section 5 has to be read along with Section 2 (u) of the Act. Sections 2(p), 3 and 4 relates to money laundering and punishment for the same. Punishment for Money Laundering is distinct and different from provisional attachment. The learned counsel relied on paragraphs 11 to 13 of the judgment reported in 2010 (5) Bombay CR 625 [supra] and paragraphs 32 to 34 and 39 of the Judgment reported in [2011] 164 Comp Cas 149 (AP) extracted supra.

13. The Sections 2(p),(s),(u), 3,4, & 5 are extracted for reference.

“2(p) :- “money-laundering” has the meaning assigned to it in section 3;

2(s)”person” includes:-

(i) an individual,
(ii) a Hindu individed family,
(iii) a company,
(iv) a firm,
(v) an association of persons or a body of individuals, whether incorporated or not,
(vi) every artificial juridical person, not falling within any of the preceding sub-clauses, and
(vii) any agency, offence or branch owned or controlled by any of the above persons mentioned in the preceding sub-clauses;

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.

Section 3. Offence of money-laundering-Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected [proceeds of crime including its concealment, possession, acquisition or u s e an d projecting or claiming] it as untainted property shall be guilty of offence of money-laundering.

Section 4. Punishment for money-laundering-Whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine

Provided that where the proceeds of crime involved in money-laundering relates to any offence specified under paragraph 2 of Part A of the Schedule , the provisions of this section shall have effect as if for the words “which may extend to seven years”, the words “which may extend to ten years” had been substituted.

Section 5. Attachment of property involved in money- laundering- Whether the Director or any other officer not below the rank of Deputy Director authorised by the Director for the purposes of this section, has reason to believe (there as on for such belief to be recorded in writing), on the basis of material in his possession, that-

14. There is no restriction in respect of person in possession of proceeds of crime. Section 5 does not restrict that property in the hands of persons involved in Money Laundering alone can be attached pending confiscation. This issue was considered by two Division Benches of Bombay High Court and Andra Pradesh High Court referred to above. Both the Courts after elaborately considering this issue referring to relevant Sections of Act referred to above held that proceeds of crime in the hands of persons not involved in Money Laundering or accused of criminal offence can also be attached. Both the Courts have held that person referred to in Section 5 is not restricted to a person accused of crime or involved in Money Laundering. The judgements squarely apply to facts of this case.

15. For the reasons stated above, the provisional attachment of property is not restricted in the hands of accused persons alone.

Points Nos. 2 & 3:-

16. The learned Senior Counsel for appellants contended that the property in question in the hands of appellants is not the proceeds of crime. The appellants are bonafide purchasers without knowledge of any fraud being committed and that, the property was purchased from and out of monies obtained by playing fraud on Financial Institution. The appellants paid the sale consideration from and out of their agricultural income. The appellants have proved that they belong to agricultural families owning lands and cultivating them. They cultivated Gloriosa Superba seeds which has considerable demand and yields huge income per acre. The appellants have produced acceptable documents to show the sale and given the names of their purchasers. The Authorities without properly considering the documents had passed the impugned orders. In any event, the property lost its character of proceeds of crime in the hands of their vendor Gunaseelan as the respondent failed to prove that he did not purchase the property out of legitimate income or he is a relative, employee or Benami of persons, who had committed fraud.

17. The learned Senior Counsel relied on paragraphs 37, 38 and 40 of the judgment reported in [2011] 164 Comp Cas 146 (AP) (supra) and paragraphs 17, 17h and 19 of the judgment reported in 2010 (5) Bom CR 625 (supra), as extracted above.

18. Per contra, the learned counsel for the respondent contended that by subsequent transactions, the property will not loose its character of ‘proceeds of crime’. The persons, who purchased the property out of amounts obtained by fraud try to project the property as untainted property by subsequent transactions. In the present case, the appellants failed to prove that sale consideration paid by them was obtained by legitimate means. The appellants failed to file any application for filing additional documents at Appellate stage and has not given any reason for not filing those documents before Adjudicating Authority.

19. Considering the rival contentions and the judgment relied on by the learned Senior Counsel, I am inclined to accept the contentions of the learned senior counsel.

20. As per the Sections 23 and 24 of PMLA, 2002, there is a presumption that property in the hands of Appellants is proceeds of crime. But the appellants have a right to rebutt the said presumption.

21. The said sections read as follows:—

“23. Presumption in inter-connected transactions Where money-laundering involves two or more inter-connected transactions and one or more such transactions is or are proved to be involved in money-laundering, then for the purposes of adjudication or confiscation (under section 8 or for the trial of the money-laundering offence , it shall unless otherwise proved to the satisfaction of the Adjudicating Authority or the Special Court), be presumed that the remaining transactions form part of such inter-connected transaction.

24. Burden of proof

In any proceeding relating to proceeds of crime under this Act,

(a) in the case of a person charged with the offence of money-laundering under Section 3, the Authority or Court shall, unless the contrary is proved, presume that such proceeds of crime are involve d in money-laundering; and
(b) in the case of any other person the Authority or Court, may presume that such proceeds of crime are involved in money-laundering.

22. In the present case, one G. Srinivasan is accused of having played fraud and obtained a loan of Rs. 15,00,00,000/- by producing bogus and fabricated documents. From and out of the said amount, the property in question was purchased by him in the names of his Benamies. One Ayyappan was appointed as their Power Agent. One Gunaseelan purchased the property through the Power Agent Ayyappan. The said Gunaseelan was examined and his statement was recorded Under Section 50 of the Act. He had stated that he purchased the property for cultivation. He developed the property but geologist gave opinion that property will not yield proper income. In the circumstances, he sold the property to appellants. The respondent has not produced any document or material to disprove the statement of Gunaseelan. There is nothing on record to show that the transaction in favour of the said Gunaseelan, is not genuine. It is not the case of respondent that the said Gunaseelan is a Benami or employee of G.Srinivasan and that Gunaseelan did not pay any amount as sale consideration or the sale consideration paid by Gunaseelan was not legitimate money. There is no material to show nexus and link of Gunaseelan with G.Srinivasan and his Benamies. In the absence of any verification or investigation by respondent with regard to genuineness or otherwise of the purchase by Gunaseelan; whether he was connected with G.Srinivasan or the sale consideration is legitimate or not the property in the hands of Gunaseelan cannot be termed as proceeds of crime.

23. Further, the appellants have given statements under Section 50 of the Act. They have categorically stated that they possess agricultural lands, cultivate Gloriosa Superba seeds and sell the same and derive considerable income. They have named the persons to whom they have sold the Gloriosa Superba seeds and produced Bank statements. Some of the Appellants have stated that they sold their lands and borrowed monies to purchase the property in question. There is nothing on record to show that the respondent had verified these statements. Especially, the respondent has not verified the Bank statement produced by the Appellants to ascertain the genuineness of the same and whether the money deposited came from genuine purchasers or from the persons involved in fraud and Money Laundering. The respondent does not allege that Appellants are Benamies of G.Srinivasan or no sale consideration passed to the vendor.

24. Considering the materials on record and judgments reported in 2010 (5) Bom CR 625 (supra) and [2011] 164 Comp Cas 146 (AP) (supra), I hold that appellants have rebutted the presumption that the property in question is proceeds of crime. The respondent failed to prove any nexus or link of Appellants with G. Srinivasan and his benamies. Once a person proves that his purchase is genuine and the property in his hand is untainted property, the only course open to the respondent is to attach sale proceeds in the hands of vendor of the appellants and not the property in the hands of genuine legitimate bonafide purchaser without knowledge.

25. Before the Adjudicating Authority it was admitted by complainant that appellants had no knowledge that properties in the hands of their vendor was proceeds of crime. It was also not disputed by complainant that the appellants did not have financial capacity to buy properties. Paragraphs 21, 22, 23 and 24 of order of Adjudicating Authority is extracted herein for better appreciation.

“21. The CBIBS & FC (BLR) has filed a charge sheet in the court of Spl. Judge for CBI cases Coimbatore, against Sh. Arivarasu, Sh. R. Manoharan, Sh. R. Selvakumar, Sh. G. Srinivasan, Sh. K. Murtha Muthu, Sh. V. Indu Nesan , Sh. K. Vignesh, Sh. A. Sainthil Kumar, Sh. M. Ram Krishnan, for the offences punishable under Section 120-Bread with 420,467,471 IPC and section 13(2) read with 13(1)(d) of PC Act 1988. The offences punishable under section 120-B,420,471 are schedule offence under Section 2(1)(y) of the PMLA and therefore on of the condition for issuing provisional attachment order is satisfied. The other important point to be determined is whether the properties attached vide Provisional attachment order are involved in money-laundering. The only defense or explanation raised by Defendants, particularly Def no.2 to 8 is that the landed properties attached by the complainant are not proceeds of crime. These properties were purchased by these defendants without having any knowledge, whatsover, that these properties were derived or obtained through criminal activities relating to schedule offence. It has been demonstrated by them that they verified the title deeds relating to the properties and after due verification of every details entered into the sale transactions as such these are bonafide deals entered by them against proper sale consideration and the money paid to the seller is also well explained.

22. Against the above arguments vehemently raised by the defendants, the complainant without disputing that the deals are bonafide heavily relied on the judgment of the Bombay High Court, dated 05.08.2010 in Mr. Radha Mohan Lakhotia v. Deputy Director, PMLA, Directorate of Enforcement, Mumbai in first appeal no. 527/2010. In this case it held by the Bombay High Court that the property bought without the knowledge that the same is tainted could be subjected to Provisional Attachment Order.

23. In the instant case the only point to be decided is whether the properties bought by any person against clean money and without any knowledge that properties have been acquired directly or indirectly through scheduled offence could be subject matter of provisional attachment order.

24. It is an admitted position that the Defendants (D-2 to D-8) had no knowledge that the properties in the hands of the vendor was proceeds of crime. They have also verified the papers relating to these properties before the deal. No point has been raised with regard to the financial capability of these Defendants to buy these properties. However, the Bombay High Court decision in Radha Mohan Lakhotia has been pressed into service to make out a plea that the properties could be attached in such circumstances under the PMLA.”

Provisional attachment was sought to be continued only based on the judgment of Bombay High Court in Radha Mohan Lakhotia’s case.

26. A reading of paragraphs 21 to 24 clearly reveals that both the Adjudicating Authority as well as Appellate Authority failed to properly appreciate the facts and findings in Radha Mohan lakhotia’s case. In that case, the Department had placed substantial and acceptable facts to prove that the property in the hands of third party was proceeds of crime. It is pertinent to note that in Mr. Radha Mohan Lokatia’s case, Department had proved the nexus and link between the person possessing the property and person accused of having committed an offence. All the persons involved in that case were close relatives.

27. In the present case, the respondent failed to prove that the appellants did not have sufficient financial capacity to buy the property or that the money paid by them as sale consideration was not legitimate money derived by agricultural activities. No material was produced to show that the appellants are close relatives of person, who involved in criminal activities and the person, who sent monies to purchase the property did not possess financial capacity to provide such huge amounts and that they are not genuine purchasers of agricultural products of appellants. The respondent has not made any such investigation and has not produced any such material. Further, the Appellate Authority in fact considered the additional documents produced before it, but rejected the same on the ground that Appellants have not given any valid reasons for not filing the same before the Adjudicating Authority . Having considered the Additional documents, the appellate authority failed to give any finding on merits after verifying with the concerned Bank.

28. In view of these facts, the judgment in Radha Mohan lakhotia’s case is in favour of the appellants as they have rebutted the presumption that the property in question is proceeds of crime.

29. In the result, all the Civil Miscellaneous Appeals are allowed and the impugned orders are set aside. No costs.

Leave a Reply