SAFEMA Tribunal Upholds Attachment of Pre-Offence Overseas Insurance Policy Paid from Crime Proceeds

Koneru Pradeep Vs Deputy Director (Appellate Tribunal Under SAFEMA Delhi)

Property Acquired Before Scheduled Offence Can Be Attached If Later Premiums Were Paid From Proceeds of Crime: SAFEMA Appellate Tribunal Upholds Attachment of Overseas Insurance Policy

The Appellate Tribunal under SAFEMA, New Delhi, upheld the attachment of an overseas insurance policy belonging to Koneru Pradeep in connection with the Emaar land scam money-laundering case. The policy, carrying a maturity value of USD 2,50,000 and an approximate surrender value of USD 1,20,000, had been purchased in 1998, whereas the alleged scheduled offences occurred mainly between 2005 and 2010.

The appellant contended that the policy pre-dated the alleged offence by nearly a decade, that properties equivalent to the entire identified proceeds of crime of ₹167.28 crore had already been attached and that he was not an accused in the predicate offence. He also argued that the proceedings against his brother, who paid the policy premiums, had been quashed.

The Tribunal rejected these contentions. It found that premiums on the policy continued to be paid until 2014 by the appellant’s brother through offshore entities into which the alleged proceeds of crime had been layered and intermingled. Therefore, the fact that the policy was originally acquired before the scheduled offence did not render its attachment illegal. Money laundering was treated as a continuing activity, extending to the subsequent use and integration of tainted funds into apparently legitimate assets.

The Tribunal further held that:

• Attachment is not restricted to the proceeds of crime initially quantified; additional proceeds discovered during further investigation can also be attached.
• Under the second limb of the definition of “proceeds of crime”, property of equivalent value may be attached, even if it was not itself directly purchased from criminal proceeds.
• Property held by any person can be attached if connected with proceeds of crime, even when that person is not named as an accused in the scheduled offence.
• The discharge of the appellant’s brother in the predicate offence did not automatically invalidate the PMLA proceedings against the appellant or other persons.
• An inadvertent reference to an incorrect company in the adjudication order did not invalidate the attachment when sufficient independent material supported the decision.

Accordingly, the Tribunal upheld the attachment and dismissed the appeal.

Cases Discussed

• Dilbag Singh & Ors. v. Union of India & Ors (Punjab & Haryana High Court),MANU/PH/ 3575/2024
• Sadananda Nayak v. The Deputy Director, Directorate of Enforcement, Bhubaneswar (SAFEMA Appellate Tribunal),FPA-PMLA-5612/ BBS/2023
• Ayush Kejriwal v. The Deputy Director, Directorate of Enforcement, Kolkata (SAFEMA Appellate Tribunal),FPA-PMLA-4358/KOL/2021
• Pavana Dibbur v. The Directorate of Enforcement (Supreme Court),2023 SCC OnLine SC 1586
• Prakash Industries Ltd. v. Directorate of Enforcement (Delhi High Court),2022 SCC OnLine Del 2087
• Vijay Madanlal Chaudhary v. Union of India (Supreme Court),2022 SCC OnLine SC 929

FULL TEXT OF THE JUDGMENT APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI

Present appeal under Section 26 of Prevention of Money Laundering Act, 2002 is filed by appellant against the impugned order dated 25.05.2022 passed by the Adjudicating Authority, in Original Complaint No. 1542/2021, whereby the following property of the appellant Pradeep Koneru attached in PAO No.08/2021 dated 08.09.2021 was confirmed for attachment:-

2. As per the facts of the case, FIR No. RC-35-2011-A-0018 dated 17.08.2011 was registered by the Central Bureau of Investigation, Hyderabad, against Sh. BP Acharya, IAS, Chairman & MD of Andhra Pradesh Industrial Infrastructure Corporation (herein after referred as APIIC); M/s Emaar Properties PJSC, Dubai; M/s Emaar Hills Township Pvt. Ltd., Hyderabad; unknown officials of Government of Andhra Pradesh & unknown others for the offences punishable under Section 120-B IPC read with 420, 409,420 & 477-A of Indian Penal Code, 1860 and Section 13(2) r/w Sec. 13(1) (c) & (d) of the Prevention of Corruption Act, 1988 and substantive offences thereunder.

As the said offences are scheduled offences, ECIR/08/ HYZO/2011 dated 30.08.2011 was recorded under PMLA by the Directorate of Enforcement for investigation. In the meantime, after completion of investigation CBI filed charge sheet before Ld. Special Judge, CBI Court, at Hyderabad, on 01.02.2012. After completion of investigation, CBI filed Chargesheet No. 01/2012 dated 01.02.2012 before the Ld. Special Judge for CBI case, Hyderabad. As per the Chargesheet, the following facts emerged:

The Government of Andhra Pradesh (AP), issued Govt. Order (G.O) Ms. No. 359 dated 04.09.2002 for the development of an integrated project including multi-use development (Residential and Commercial Development) at Manikonda Village, Ranga Reddy District on 535 acres of land as detailed below:

The land use proposed at Manikonda

The Government of AP issued GOMS No. 14 on 11.01.2005, amended by GOMS 22 dated 27.01.2005 for Development of Township Project at Manikonda by M/s Emaar Hills Township Pvt. Ltd. (EHTPL in short) as Special Purpose Vehicle (SPV) -1, with equity structure of 74:26 to the Developer and Andhra Pradesh Industrial Infrastructure Corporation (in short APIIC) respectively. It was also specified that the equity from APIIC was on land value basis alone @ Rs.29.00 lakhs per

Acre for the saleable land for the Township project, i.e. 285 Acres of land.

EHTPL was incorporated on 20.08.2003 with Shri Vijay Menon and Sri AJ Jaganathan, as the initial Directors of the Company, and subsequently, in the Board Meeting dated 30.11.2004, Sri Koneru Rajendra Prasad was appointed as an Additional Director of the Company.

M/s Emaar MGF Land Pvt. Ltd. was incorporated on 18.02.2005 having registered office at 17-B, MGF House, New Delhi and subsequently, changed to M/s Emaar MGF Land Ltd. (EMGF in short). Sri Shravan Gupta and Sri Siddhartha Gupta were the initial Directors of the company.

Development Agreement dated 03.11.2006 executed between EHTPL and EMGF. As per clause 2.8.1 of the agreement, the Developer i.e. EMGF was required to undertake the entire development and bear all the cost of the project, for which Developer (EMGF) was entitled to 75% of the gross revenue in the total covered and uncovered built up area, including common areas and common facilities either through the sale and/or lease proceeds.

Subsequently, a Development Agreement-cum-General Power of Attorney (GPA) was executed between EHTPL and EMGF on 25.07.2007, sharing the gross revenue between EMGF and EHTPL in the ratio of 75:25 on the sale and lease proceeds. Subsequently an Addendum to Development Agreement & GPA dated 23.07.2008 was executed reducing revenue sharing pattern from 75:25 to 95:5.

An agency agreement dated 29.01.2005 was entered by M/s Emaar Properties PJSC, Dubai and M/s Stylish Holmes Real Estates Pvt. Ltd., 100 villa plots to be sold @ Rs. 5,000/- per Sq. Yd., and the remaining Villa Plots (beyond 100) were to be sold at the prevailing market rates and it was the responsibility of EMGF to fix the rates in tune with market rates.

Instead of fixing the rates in line with the market rates, as per the instructions of Sri Shravan Gupta, Director of EMGF, floated 10 different companies (7 at New Delhi and 3 at Ernakulam) with its employees as Directors/Shareholders and booked Villa Plots @ Rs. 5,000/- per Sq. yd., so that the same could be sold at premium rates in future. The funds required were transferred from the account of M/s Discovery Estates Pvt. Ltd., in which Sri Shravan Gupta and his wife are having 99% shares. 18 Villa Plots were blocked in the name of these 10 companies @ Rs. 5000/- per Sq. yd. during the year 2010, when the prevailing market rate was Rs. 50,000/- per Sq. yd. and Villa Plots were being sold to other buyers in this project @ Rs. 50,000/-per Sq. yd.

The 16 Villa Plots were also sold by EMGF at much higher rates during the period 2009-10 (which is evident from the information retrieved from the laptop of Sri Vijay Raghav through CFSL and from the statements of some Villa plot buyers), however only the amount @ Rs. 5000/- was accounted for in the books of accounts of M/s EMGF.

As per the revenue sharing agreement and as per the books of accounts, EMGF was required to pass on 25% of the Gross Annual Revenue to EHTPL amounting to Rs. 48 Crores for further revenue sharing between EHTPL and APIIC. However, it was never transferred to the books of accounts of EHTPL and further to APIIC, thus APIIC was deprived from its due revenue share. EHTPL was being managed by the staff of EMGF, and thus, EHTPL was reduced to a shell company with sole objective to deprive APIIC from its due revenue share and misappropriate the revenues from the integrated project.

As per the provisions of G.O.s issued by the Government of AP and Collaboration Agreement and Supplementary Agreement executed between APIIC and M/s Emaar Properties PJSC, Dubai, EHTPL was required to develop the project land by way of constructing Villas and Apartments. It was never intended by the Government of AP and also by APIIC to sell Villa Plots in the Township Project. Thus, the agency agreement dated 29.01.2005 executed by the Chairman, M/s Emaar Properties PJSC, Dubai on behalf of M/s EHTPL agreeing to sell the plots @ Rs. 5000/- per Sq. Yd. for a period of 5 years was nothing, but a clandestine arrangement in furtherance of the criminal conspiracy by the Developer to dispose-off the project land, without developing the same, and thereby, deprive APIIC from its legitimate revenue share from the developed villas.

APIIC conveyed 258.36 acres of land in favour of EHTPL vide conveyance deed dt. 28.12.2005 for development of the integrated project. EHTPL executed a Development Agreement dt. 03.11.2006 with EMGF, inducting it as a Co-Developer. But EHTPL and M/s Stylish Holmes Real Estates Pvt. Ltd., booked as many as 43 villa plots till 27.12.2005 i.e. even before execution of Conveyance Deed dated 28.12.2005 by APIIC in favour of EHTPL.

The 31 villa plots (excluding three model villas) were sold by EHTPL and EMGF at the documented rate of Rs. 5000/- per sq. yd., though the prevalent market rates were much higher. M/s Stylish Holmes Real Estates Pvt. Ltd. was not involved in the sale of these villas and villa plots.

Investigation has revealed that 13 villa plots, including three model villas (constructed at Plot No’s: A-70, A-71 and A-73) were sold by EHTPL and EMGF directly to the buyers. During investigation, one of the above said villas/plot buyers confirmed having paid excess amount of Rs. 2,80,40,000/- in cash over and above the documented price of Rs. 5000/- per sq. yd., and the said amount was sent by him to the office of EMGF, Hyderabad, as per the Instructions of Sri Vijay Raghav.

Investigation revealed that ten villas/plots Nos. A-70, A-71, A72, A-73, A-74, A-75, A-76, A-77 & A-78/79 were sold by EMGF, between May, 2009 and March, 2010. Two villa plot buyers, who purchased plot Nos. A-75 & A-78/79 respectively during the same period have confirmed to have paid excess money @ Rs. 20,000/- per Sq. Yd., in cash over and above the documented price @ Rs. 5000/-per Sq. Yd.

Thus, investigation revealed the existence of a very well-knit criminal conspiracy on the part of EMGF, and others to deprive APIIC of its lawful revenue share, by booking villa plots @ Rs. 5000/- per Sq. Yd. The criminal intent of EMGF is also evident from the fact that villa plots were sold to Sri Rahul Raju @ Rs. 23,198/- per Sq. Yd., and two other buyers @ Rs. 25,000/- per Sq. Yd. However, in furtherance of the conspiracy the amounts of Rs. 2,80,40,000/- and Rs. 4,05,20,000/- collected from the two villa plot buyers in cash as part of sale consideration of the villa plots allotted to them, have not been accounted for in the books of accounts of M/s EMGF.

Investigation also revealed that Sri GV Vijay Raghav, Finance Head-South, EMGF, has collected an amount of Rs. 6,85,60,000/-from sale of three villa plots over and above the documented price @ Rs. 5,000/- per Sq. Yd., during the period 2008-2010. Sri Tummala Ranga Rao has collected excess amount of Rs. 96.01 Crores from villa plot buyers, thus an amount of Rs. 102,87,35,000/- collected from villa plot buyers over & above the rate of Rs. 5000/- per Sq. Yd., should have gone to the books of accounts of EHTPL. Even if, the expenditure reflected in the books of accounts of M/s EHTPL is taken into consideration, the revenue of EHTPL and the share of APIIC in the profit of EHTPL, is detailed in the following table:

During 2006-07 to Aug – 2011, the total realization from villa plots is to the extent of Rs.73.19 Crores and from villas Rs.21.36 Crores totalling to Rs.94.55 Crores. EMGF also realized amounts from the buyers of apartments to extent of Rs.248.33 Crores. From these amounts, Rs. 97.61 Crores is recognized as revenue due to EHTPL by EMGF. After considering the expenses of Rs.33.20 Crores for the project, a total amount of Rs.64.41 Crores was considered as profit before tax to EHTPL, which is a pecuniary gain.

CBI also filed supplementary charge sheet No. 05/2012 dated 23.04.2012 accusing Sri N. Sunil Reddy, Sri G.V. Vijay Raghav, Finance Head of EMGF and Sri Shravan Gupta, MD of EMGF u/s 120-B IPC r.w.s. 420, 409, 109, 468, 471 & 477-A of IPC, 1860 r.w.s. 13 of Prevention of Corruption Act, 1988.

The first 100 plots were to be sold at an agreed price of Rs.5000/- per sq. yd., Sri Koneru Rajendra Prasad fixed higher rates ranging from Rs.40000/- to Rs.45000/- per Sq. Yds. over and above the documented price of Rs.5000/- per Sq. Yds. and instructed Sri T. Ranga Rao of M/s Stylish Holmes to collect the excess sale consideration in cash from villa plot buyers.

As per the instruction of Sri Koneru Rajendra Prasad, Sri Tummala Ranga Rao has collected the excess amount of Rs.96.01 Crores from 82 Villa plot buyers in cash over and above the documented price of Rs. 5000/- per Sq. Yd., during 2005-10, which was confirmed by Sri Tummala Ranga Rao and his Accountant/Manager, who gave statements recorded under Section 164 of Cr.PC, 1973 before the Hon’ble Metropolitan Magistrate, Secunderabad.

Sri Tummala Ranga Rao had handed over the excess amounts so collected (aggregating to Rs.96.01 Crores) to Sri Koneru Rajendra Prasad and to Sri N. Sunil Reddy, as per the instructions of Sri Koneru

Rajendra Prasad. Both Sri Tummala Ranga Rao and his Manager/Accountant Sri K. Srinivas have confirmed the same in their statements under Section 164 Cr. PC, 1973 and that on most of the cases Sri N. Sunil Reddy used to come to their office to collect the excess amount collected from Villa Plot Buyers and as per the instructions of Sri Koneru Rajendra Prasad, they used to hand over the cash amount to Sri N. Sunil Reddy.

M/s Southend Projects & Foundations Pvt. Ltd. has received funds of Rs. 45.21 Crores from the following 11 companies during 2009-10.

These companies did not exist at the given addresses during the relevant period & as on date also there is no trace of these companies at the given addresses. It was also revealed that no trade licenses were given to some of these companies including M/s Southend Projects & Foundations Pvt. Ltd. by Greater Hyderabad Municipal Corporation. This clearly shows that these companies were floated only for the purpose of transfer of funds.

The said excess amount of Rs.96.01 Crores collected/ received by Sri Koneru Rajendra Prasad and Sri N. Sunil Reddy from Sri Tummala Ranga Rao and his Manager/Accountant has not presented for accounting in the books of accounts of M/s EHTPL.

It is pertinent to mention here that after registration of ECIR/08/HZO/2011 dated 30.08.2011, PAO No. 01/2012 dated 25.09.2012 was already issued for attachment of the properties valued at Rs.71.027 crores, which were also confirmed by Ld. Adjudicating Authority vide order dated 15.02.2013 in previous Original Complaint no. 158/2012.

With regard to the remaining amount of Rs.96.01 crore received in cash by Shri Tummala Ranga Rao of M/s Stylish Holmes, CBI filed supplementary charge sheet no. 05/2012 dated 23.04.2012. While initiating further investigation under the Act, it was noticed that Shri Tummala Ranga Rao has given a statement before Hon’ble Metropolitan Magistrate, under Section 164 Cr.PC on 09.01.2012 in which he stated as under:-

He established M/s Stylish Holmes Real Estates Pvt. Ltd. on 16.09.2004 as per the instructions of Sri Koneru Rajendra Prasad, at Plot No. 15, Site II of Film Nagar, Jubliee Hills, Hyderabad, which is a residence of Sir Koneru Rajendra Prasad and family. He was taken to the office of M/s Emaar Properties PJSC in Dubai by Sri Koneru Rajendra Prasad in January, 2005 and entered into an agreement with M/s EHTPL on 29.01.2005 specifying that- 30 plots to be sold within 6 months from the date of the first sale of the plot; 100 villa plots to be sold at agreed price of Rs.5000/- per Sq. Yd.; Agent may collect 4% on the sale value as commission from the buyer; remaining plots should be sold as per the price fixed by M/s EHTPL, as per the market conditions prevailing. In March 2005, Sri Koneru Rajendra Prasad told him to collect excess amounts in cash from the buyers of the plots in addition to the price of the plots of Rs.5000/- per Sq. Yd. fixed by M/s EHTPL and to give the same to Sri Koneru Rajendra Prasad, so that he can utilize the amount for the persons, who helped to M/s Emaar Properties PJSC in getting the project. Accordingly, Sri Tummala Ranga Rao has collected cash in excess of documented value of Rs. 5,000/ -per Sq. Yd. from the buyers and handed over to Sri Koneru Rajendra Prasad under the impression that the officials of M/s Emaar Properties PJSC were aware of the same. As per the instructions of Sri Koneru Rajendra Prasad, he paid 10% advance for 11 plots on behalf of M/s Stylish Holmes to M/s EMGF and out of these 11 plots, 8 plots were allotted to the persons suggested by Sri Koneru Rajendra Prasad and the remaining 3 plots (A-21, A-43, B-24) were still with M/s Stylish Holmes. He further provided the names of villa plot buyers who paid excess amount ranging between Rs. 4000/- to Rs.45000/- per Sq. Yd., collected by himself or by his manager Sri K. Srinivasa Rao or by Sri Koneru Rajendra Prasad in different times. From this excess amount collected, he has paid an amount of Rs.2.50 Crores to farmers to purchase lands for family members of Sri Koneru Rajendra Prasad, as per the instructions of Sri Koneru Rajendra Prasad. Sri Koneru Rajendra Prasad used to finalize the buyer and the sale consideration and as instructed by Sri Koneru Rajendra Prasad, Sri K. Srinivas Rao and Sri Tummala Ranga Rao used to handover the excess cash collected from the buyers either to Sri Koneru Rajendra Prasad or to Sri N. Sunil Reddy. As per the instructions of Sri Koneru Rajendra Prasad, two villa plot buyers Sri P.S. Parthasarathi and Sri Challa Suresh, as part of excess payment, have deposited Rs.1 crore and Rs.65 lakhs respectively in the foreign account of Sri Koneru Madhu, S/o Sri Koneru Rajendra Prasad. As per the instructions of Sri Koneru Rajendra Prasad, no records were maintained by the M/s Stylish Holmes with regard to cash transactions between the buyers and Sri Koneru Rajendra Prasad, which were collected and paid to Sri Koneru Rajendra Prasad by Sri Tummala Ranga Rao and by his accountant Sri K. Sri nivas Rao and they did not disclose the cash transactions to anybody as instructed by Sri Koneru Rajendra Prasad.

Accordingly, ED issued the summons under Section 50 of PMLA, and thereafter, recorded the statements of several persons and also obtained financial accounts and bank statements of M/s Stylish Holmes, Shri Tummala Ranga Rao of M/s Southend Projects and Foundations Pvt. Ltd., Sri N. Sunil Reddy, Sri K. Rajendra Prasad and the other persons associated with the transactions.

Investigation revealed that Sri N. Sunil Reddy received Rs.45.21 crores in cash from Sri Tummala Ranga Rao and invested the same in M/s Southend Projects through eleven Bogus Companies for the purpose of transfer of funds to M/s Southend Projects and were converted in to share capital amount with high premium, as against the paid-up capital of Rs.10.73 crores made by the promoters. Hence, the amount of Rs.45.21 crores dissolved in M/s Southend Projects was considered as proceeds of crime.

The remaining amount of Rs.50,80,75,000/- out of cash of Rs.96,01,75,000/-, collected by Shri Tummala Ranga Rao was handed over to Shri Koneru Rajendra Prasad.

Furthermore, during the course of investigation by ED, it was revealed that Shri Tummala Ranga Rao paid Rs. 2.50 Crores for purchase of lands in Baikal and Mallikarjunagiri Villages in the name of Shri Koneru Pradeep S/o K. Rajendra Prasad out of the amount of Rs. 96.01 Crores of proceeds of crime. In pursuance of investigation, various properties, including that of immovable land held in the name of Sri Koneru Pradeep, totalling to Rs. 96.01 Crores were attached, and the said property was also considered as proceeds of crime.

During further investigation under PMLA, statement of Sri Pradeep Koneru was recorded and during the recording of the statement he stated that his father Shri Koneru Rajendra Prasad set up a firm by M/s Trimex Agencies, Chennai and his mother, Smt. Koneru Vimala Devi was the partner of the said firm. Later on in 1995, the firm was renamed as M/s Trimex Industries Pvt. Ltd. and that he was looking after the affairs of the company till 1998-99 and later his mother was made the Director of the company and looking after the affairs of the company under the guidance of his father and his brother Shri Madhu Koneru is currently looking after the business operations of the entities established in Dubai and he is owner of all the companies established by his father in Dubai. He submitted that he drew salary as an employee of M/s Trimex Sands Pvt. Ltd. and M/s Trimex Industries Pvt. Ltd. and he is also employed with M/s ZED Trading Dubai as Sales Manager and drawing a salary of Rs. 9000 AED per month. He furnished the details of insurance policies held in his name outside India detailed at page no. 15 & 16 of the impugned order.

When questioned regarding the source of funds for purchasing the above insurance policies, Shri Koneru Pradeep stated that the premium for the above mentioned 5 insurance policies was being paid by his elder brother, Shri Madhu Koneru, from his business income, as a gift or being paid by M/s Rescom Holdings, Dubai and that 4 out of 5 insurance policies have completed their tenure before 6 years.

Accordingly, ED vide PAO No. 08/2021 dated 08.09.2021, attached the assets of appellant (as detailed in para no. 1 above), and thereafter filed Original Complaint No.1542/2021 before Ld. Adjudicating Authority for confirmation of the said property. Ld. Adjudicating Authority after going through the material on record, issued show cause notice to the defendant (herein appellant). After going through the replies filed by the Appellant and hearing both the sides confirmed the attachment vide order dated 25.05.2022.

Aggrieved by the said order, the appellant filed the present appeal.

3. During the arguments, Ld. Counsel for the Appellant submitted that the Respondent ED is trying to illegally attach the subject property in excess of the total value of ‘Proceeds of Crime’, which is not in conformity to the legislative intent of PMLA, 2002, as the Respondent ED has already passed two separate PAOs in the year 2012 & 2014 attaching full amount of Rs. 167.28 Crores and thereby there is nothing left to be attached in the light of the proceeds of crime identified. Vide PAO No. 01/2015, an amount of Rs. 71.27 Crores was attached and similarly, vide the second PAO No. 03/2014, an amount of Rs. 96.01 Crores, including one immovable property of the present appellant i.e. 36 Acres and 14 Guntas at Bailkal and Mallikarjunagiri Villages, Marpalle Mandal, Ranga Reddy District, Telangana valued at Rs. 12,83,000/- was attached and confirmed by the Ld. Adjudicating Authority. Thus, the total identified proceeds of crime totalling to Rs. 167.28 Crores was attached, thus, there is no plausible reason for the Respondent ED to attach any more properties unless new reasons to believe are formed for such attachments. Ld. Counsel stressed that attaching anything beyond the identified value of proceeds of crime tantamount to judicial impropriety and goes completely against the principles of justice and equity.

Ld. Counsel for the Appellant stressed that the present proceedings under PMLA have been initiated by Respondent ED only on the basis of statement of the Appellant recorded on 31.08.2021 through which the Respondent ED gained the knowledge about the various insurance policies owned by the Appellant including the policy at para no. 1 above. Moreover, the brother of the Appellant Shri Madhu Koneru has been absolved by the Hon’ble High Court from the charges of commission of any kind of alleged scheduled offence and quashed all the proceedings against him dismissing all the doubts and speculations regarding the alleged infusion of ‘proceeds of crime’ into the subject insurance policy which were purchased by the elder and paid by the elder brother of the Appellant Shri Madhu Koneru. Both the investigating agencies i.e. CBI and ED have failed to prove any kind of illegality involved in the purchase, acquisition or payment of the subject insurance policy.

Ld. Counsel pointed out that the Appellant has submitted a copy of cheque of HSBC Bank, UAE dated 01.04.2006 showing the premium being paid by M/s Rescom Holdings way before the alleged ‘proceed of crime’ were even generated by the alleged Emaar land scam. He further submitted that the subject insurance policy was acquired almost a decade before the alleged offence of money laundering, which is alleged to have been committed mostly between the year 2005-2010 by the concerned persons. He pointed out the fact that the subject insurance policy was purchased by the Appellant on 03.07.1998 and the premium was being paid regularly until 2014. This clearly reflects the malafide and non-application of mind by the Respondent ED. He argued that these facts clearly proves that there is no justification or reason to believe to attach the aforesaid property which was purchased by the Appellant from his clean and legitimate source of income.

Ld. Counsel submitted that it is noteworthy that the premium of the aforesaid insurance policy was being paid by elder brother of the Appellant Shri Madhu Koneru out of the legitimate funds of M/s Rescom Holdings since the year 1998. However, the offences of money laundering against Shri Madhu Koneru, which in any case have been quashed by the Hon’ble High Court of Telangana vide the orders dated 11.07.2022 in Writ Petition No. 32191 of 2021 and the prosecution complaint against him has also been quashed by the Hon’ble Court vide order dated 02.06.2021 in Criminal Petition No. 5130 of 2019, pertained only after the alleged scam period of 2005-2010. Furthermore, the said company M/s Rescom Holdings was never made an accused or party in any of the PMLA proceedings which substantiates the fact that the premium of the aforesaid insurance was paid from clean, genuine and purely business sources.

Ld. Counsel for the Appellant pointed out that the impugned order is fundamentally flawed as the Ld. Adjudicating Authority while making compliance to Section 5 has relied upon an unrelated and incorrect company which has no nexus to the Appellant or the proceedings in any manner. Thus, the gross non-application of mind and gross non-compliance of Section 5(1) is evident and the impugned order deserves to be set aside. Prayer is accordingly made to allow the present appeal and release the insurance policy detailed at para no. 1 above.

4. On the other hand, Ld. Counsel for the respondent ED strongly opposed the grounds of appeal and submitted that the modus operandi of the accused in ECIR and Chargesheet was to collect cash over and above the documents price of the villas and villa plots. Since the entire transactions were done via cash, the actual value of proceeds of crime cannot be accurately identified and verified. So, the contention made by the appellant that assets equivalent to proceeds of crime has already been attached is false and devoid of any merits. He contended that the PAO is not confined to POC identified in the schedule offence only but also to any excess POC traced later in furtherance of investigation. No section or rule of PMLA bars the Respondent to attach such POC to aver that the act of the Respondent is illegal.

Ld. Counsel for the Respondent ED pointed out that the confirmed attached moveable property viz. insurance policy of the Appellant is bought with the proceeds of crime is clearly established from the fact that Shri Koneru Rajendra Prasad (father of the Appellant) was admittedly involved in misappropriation of public money and the said tainted money was thereafter, infused into off-shore companies of the Shri Koneru Rajendra Prasad and ultimately transferred in the name of his son Shri Koneru Madhu (brother of the Appellant). The Appellant also had admitted in his statement that all premiums for the attached & confirmed insurance policy was paid by his brother i.e. Shri Koneru Madhu which clearly reflects that generated PoC was intermingled in business transactions of off-shore entity and same was utilized for paying the premiums for attached insurance policy.

Ld. Counsel contended that the PAO 08/2021 dated 08.09.2021 was issued on the basis of new facts revealed during the course of investigation and the statement of Shri Pradeep Koneru u/s 50 of PMLA on 31.08.2021 which revealed that the premium amount for insurance policies are/were paid by his elder brother Shri Madhu Koneru. He had also submitted a copy of cheque in support of his premium amount being paid by M/s Trimex International FZE. Therefore, the contention of the Appellant in respect of delay and new evidence do not hold any ground.

Ld. Counsel for the Respondent ED submitted that the case of the Appellant’s brother has no bearing upon the present appeal. It is submitted that Shri Madhu Koneru was given relief by the Hon’ble Court on the ground that as he has already been discharged in the predicate offence proceedings in CC No. 06/2012 filed by CBI and SC No. 01/2019 filed by Respondent Department. However, the present Appellant has not succeeded in his discharge petition and is not successful in proving his innocence. Further, CBI & ED proceedings have not been quashed by the Hon’ble High Court against Koneru Rajendra Prasad who is the main master mind behind entire misappropriation of money. He argued that the main ground over which the said proceedings has been quashed is knowledge of Koneru Madhu with regard to the said money being proceeds of crime. The order nowhere touches upon the involvement of Koneru Rajendra Prasad in the said crime.

Ld. Counsel further contended that it is trite law that not only any property of the accused booked for offence u/s 5 of PMLA, 2002 can be attached whether acquired or obtained directly or indirectly from the proceeds of criminal activity constituting scheduled offence but also other asset or property of equivalent value.

Ld. Counsel for the Respondent ED argued that the contention of the Appellant that the said property was purchased from clean and legitimate sources is denied. Also averred that it cannot be said to be the proceeds of crime as the alleged scheduled offence committed at the most between 2005-10. As his brother paid the premium of the aforesaid insurance and it is already enunciated as to how the Appellant’s brother layered the POC. Ld. Counsel submitted that though the policy was purchased in 1998 and its premium was paid till 2014 by his brother using POC, hence the offence continued and it cannot be said that attachment of property purchased prior to the commission of offence is illegal, as PMLA is a continuing offence and the period of consummation of financial gains by the utilization of POC and ploughing them in a way that tainted money goes into economy and comes out as untainted one is chain of action and deeds.

Ld. Counsel submitted that complaint has already been filed against the Appellant in the Special Court and the Court has already taken cognizance against the Appellant vide SC 01/2019. It is expounded that the Appellant was in knowledge of properties acquired out of proceeds of crime. Prayer is accordingly made to dismiss the present appeal being devoid of any merits.

5. After hearing the rival submissions, following issues emerge for discussion:-

i) Whether the properties attached exceed the proceeds of crime?

ii) Whether any property not acquired or obtained directly or indirectly from the proceeds of criminal activity constituting scheduled offence but is of equivalent value can be attached?

iii) Whether the subject insurance policy which was acquired almost a decade before the alleged offence of money laundering be attached?

iv) Whether there were no reasons to believe recorded by the Adjudicating Authority in view of the fact a wrong party was mentioned in the discussion?

v) Whether the discharge of one accused in the predicate offence lead to dismissal of PMLA proceedings against the rest?

vi) Whether the property of the appellant can be attached in view of the fact that he is not an accused in the predicate offence?

6. Coming to issue no. i), we agree with the submission made by the Ld. counsel for the Respondent ED in this regard that the modus operandi of the accused persons was to collect the premium of the villas and villas plots at per prevailing market rate in cash from the vendees, but reflecting the sale price, as Rs. 5000/- psf. in the books of accounts, agreements and sale documents. Since the entire transactions for collecting premium were done via cash, the actual value of proceeds of crime cannot be accurately identified & verified. So, the contention made by the appellant that assets equivalent to proceeds of crime has already been attached is devoid of any merits. Also, the PAO is not confined to POC identified in the schedule offence only, but also to any excess POC traced later in furtherance of investigation. No section or rule of PMLA bars the Respondent to attach such POC to aver that the act of the Respondent is illegal. Moreover, the confirmed attached moveable property viz. insurance policy of the appellant with the proceeds of crime is clearly established from the fact that Shri Koneru Rajendra Prasad (father of the appellant) was admittedly involved in misappropriation of public money and the said tainted money was thereafter, infused in off-shore companies of Shri Koneru Rajendra Prasad and was ultimately transferred in the name of his son Shri Koneru Madhu (brother of the appellant). The appellant has admitted in his statement all premiums for the attached and confirmed insurance policy was paid by his brother i.e. Shri Koneru Madhu which clearly reflects that generated PoC was intermingled in business transactions of off-shore entity and same utilised for paying the premiums for attached insurance policy. Hence, a new PAO was issued and aforesaid property was attached. Even otherwise, the representatives of the accused companies misled the respondent ED during investigation in PMLA that many plots are lying unsold, by concealing the fact about 95% of the sale consideration amount is already received as per agreements, but not accounted, which led to the passing of PAO by ED and its confirmation by the Adjudicating Authority, without notice & knowledge to the said purchasers. Now, the said purchasers are claiming for the release of their respective plots on the ground of Bonafide purchasers. If the said plots are released by Ld. Special Judge, PMLA Court, then the remaining attachment will stand drastically reduced.

Hence, this issue is decided against the appellant and in favour of the ED, as the attachment does not exceed the proceeds of crime.

7. Coming to issue no. ii), to analyze this issue, it would be gainful to refer to the definition of “proceeds of crime” given under Section 2(1) (u) of the Act of 2002 and is quoted thus-

2. Definitions -(1) In this Act, unless the context otherwise requires, -xxxx xx xx xx xx xx

(u) “proceeds of crime” means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property’ [or where such property is taken or held outside the country, then the property equivalent in value held within the country] [or abroad];

[Explanation.— For the removal of doubts, it is hereby clarified that “proceeds of crime” include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence].

xx xx xx xx xx xx xx xx

The perusal of the definition reveals three limbs of the definition out of which first part refers to the property acquired or derived directly or indirectly by a person relating to the criminal activity to a scheduled offence. The second part includes “the value of any such property”. The second part is generally mixed with third party for giving interpretation. However, an elaborate judgment on the issue has been given by the Delhi High Court in the case of Prakash Industries Ltd. v. Directorate of Enforcement reported in 2022 SCC OnLine Del 2087, wherein in para 105 it is held as under:-

“105. It would be pertinent to recall that properties which were acquired prior to the enforcement of the Act may not be completely immune from action under the Act in light of what this Court had held in Axis Bank. As was explained by the Court in Axis Bank, the expression proceeds of crime envisages both ―tainted property as well as ―untainted property‖ with it being permissible to proceed against the latter provided it is being attached as equal to the “value of any such property” or “property equivalent in value held within“` the country or abroad”. However, both the italicised categories would be liable to be invoked in cases where the actual tainted property cannot be traced or found out. It is only where the respondents are unable to discover the tainted property that they can take the statutory recourse to move against properties which may fall within the ambit of ―value of any such property or ―property equivalent in value held within the country or abroad‖. To the aforesaid limited extent, properties purchased prior to 01 July 2005 may also become vulnerable and subject to action under the Act. However, enforcement action against such properties would have to satisfy the tests and safeguards as propounded in Axis Bank with the learned Judge observing that in such a situation it would have to be established that the person accused of money laundering had an interest in such property at least till the time that he indulged in the proscribed criminal activity. The learned Judge further observed that bona fide rights acquired by third parties prior to the commission of the predicate offense would stand saved.”

Further, this Tribunal has also given an elaborate judgment on the issue in the case of Sadananda Nayak v. The Deputy Director, Directorate of Enforcement, Bhubaneswar in FPA-PMLA-5612/ BBS/2023 on 14.10.2024, where all the judgments on the issue have been considered and thereby this issue was decided in favour of ED.

Further, in view of the para 68 of the judgment of Hon’ble Supreme Court of India in the case of Vijay Madanlal Chaudhary v. Union of India 2022 SCC OnLine SC 929, wherein, it is held that-

“68. It was also urged before us that the attachment of property must be equivalent in value of the proceeds of crime only if the proceeds of crime are situated outside India. This argument, in our opinion, is tenuous. For, the definition of “proceeds of crime” is wide enough to not only refer to the property derived or obtained as a result of criminal activity relating to a scheduled offence, but also of the value of any such property. If the property is taken or held outside the country, even in such a case, the property equivalent in value held within the country or abroad can be proceeded with. The definition of “property” as in Section 2(1)(v) is equally wide enough to encompass the value of the property of proceeds of crime. Such interpretation would further the legislative intent in recovery of the proceeds of crime and vesting it in the Central Government for effective prevention of money-laundering.”

The paras quoted above show a detailed discussion to the interpretation to the definition of “proceeds of crime”. The judgment of the Apex Court in the case of Smt. Pavana Dibbur v. The Directorate of Enforcement reported in 2023 SCC OnLine SC 1586 has also been considered. However, findings given by three judges Bench of the Apex Court in the Vijay Madanlal Choudhary v. Union of India (supra) has been relied to give interpretation to the definition. Similar view has been taken by Hon’ble Punjab & Haryana High Court in case Dilbag Singh & Ors. v. Union of India & Ors. MANU/PH/ 3575/2024. In the light of the aforesaid, second limb of the definition of “proceeds of crime” has been applied to attach the property, which is quite less than the proceeds of crime, as decided in para no.6 above.

Hence, this issue is decided against the appellant and in favour of the appellant.

8. Coming to issue no. iii), it is established from the fact that Shri Koneru Rajendra Prasad (father of the Appellant) was admittedly involved in misappropriation of public money and the said tainted money was thereafter, infused into off-shore companies of the Shri Koneru Rajendra Prasad and ultimately transferred in the name of his son Shri Koneru Madhu (brother of the Appellant). The Appellant also  had admitted in his statement that all premiums for the attached & confirmed insurance policy was paid by his brother i.e. Shri Koneru Madhu which clearly reflects that generated PoC was intermingled in business transactions of off-shore entity and same was utilized for paying the premiums for attached insurance policy.

Further, the PAO 08/2021 dated 08.09.2021 was issued on the basis of new facts revealed during the course of investigation and the statement of Shri Pradeep Koneru u/s 50 of PMLA on 31.08.2021 which revealed that the premium amount for insurance policies are/were paid by his elder brother Shri Madhu Koneru. He had also submitted a copy of cheque in support of his premium amount being paid by M/s Trimex International FZE. Therefore, the contention of the Appellant in respect of delay and new evidence do not hold any ground. Further, the contention of the Appellant that the said property was purchased from clean and legitimate sources is denied. Also, appellant has averred that it cannot be said to be the proceeds of crime as the alleged scheduled offence committed at the most between 2005-10. But, since his brother paid the premium of the aforesaid insurance and it is already enunciated as to how the Appellant’s brother layered the POC, hence, though the policy was purchased in 1998 but since its premium was paid till 2014 by his brother using POC, thus, the offence continued and it cannot be said that attachment of property purchased prior to the commission of offence is illegal, as PMLA is a continuing offence and the period of consummation of financial gains by the utilization of POC and ploughing them in a way that tainted money goes into economy and comes out as untainted one is chain of action and deeds.

Moreover, the issue aforesaid regarding the legality of attachment of properties acquired prior to the commission of predicate offence has been dealt with by this Tribunal in the case of Ayush Kejriwal v. The Deputy Director, Directorate of Enforcement, Kolkata, FPA-PMLA-4358/KOL/2021. Relevant paras are quoted hereunder for ready reference:

“15. It is also necessary to clarify that if the accused derived or obtained the property out of the crime has parked it with other person, then the person holding such property can be subjected to attachment or seizure though he may not be accused in the FIR. It is for the reason that if the interpretation otherwise is taken, it would frustrate the object of the Act of 2002. It can be in a manner that the person who derived or obtained the property out of the crime may immediately park it with a third person and the property in that case would not be liable for attachment or seizure for the reason that the person holding the property has not been named as an accused, in that case, the very purpose and object of the Act would be frustrated. In view of the above, even if the appellant is not named as an accused but he is holding the `proceeds of crime‟ and even if the property if not directly or indirectly obtained out of the crime but is of the value thereof, it would fall in the definition of “proceeds of crime” and such property or document can be subjected to seizure.

16. In the instant case, serious allegations of fraudulent transactions to the tune of Rs.164.99 crores exists against many accused which includes appellant’s grandfather. The appellant’s grandfather purchased a property in the year 1988 but it was gifted to the appellant in the year 2020 after registration of the FIR in the year 2017 and even the ECIR. It was by way of gift the property was transferred to the appellant to overcome with the fraud committed by him with the bank and to save the property from seizure and attachment. It was not gifted bonafide but to save the property from seizure and attachment after registration of FIR though it was not obtained out of the proceeds of crime but is for the value thereof in absence of the availability of the total proceeds out of the crime i.e. Rs.164.99 crores.

xxxx

18. The fact is that the property was originally belonging to the accused Nirmal Kumar Kejriwal, the grandfather of the appellant. A gift was made in the year 2020 in favour of the appellant whereas the FIR was registered in the year 2017 followed by the ECIR in the year 2019. The way property was given to the appellant has been noticed and as it was earlier belonging to one of the accused thus, the documents were seized by the respondent and we do not find any illegality in it. The words “the value of such property” does specify it to be earlier to the crime or subsequent and we can insert words “thus value of such property” would mean the property acquired prior or subsequent to the crime.”

It is not that only those properties which have been were derived or obtained directly or indirectly out of the crime can be attached rather in case of non-availability of the property derived or obtained directly or indirectly i.e. when it is vanished or siphoned off, the attachment can be of any property of equivalent value.

It is necessary to clarify that the proceeds of crime would not only include the property derived or obtained directly or indirectly out of the criminal activity relating to the scheduled offence, but any other property of equivalent value. The word “or” has been placed before “the value of any such property” and is of great significance. Any property of equivalent value can be attached when the proceeds directly or indirectly obtained out of the crime has been vanished or siphoned off. Here, the significance would be to the property acquired even prior to commission of crime. It is for the reason that any property acquired subsequent to the commission of crime would be directly or indirectly proceeds of crime and then, it would fall in the first limb of the definition of proceeds of crime. In the second limb, which refers to “the value of any such property” would indicate any other property which was acquired prior to the commission of crime and it would be attached only when the proceeds directly or indirectly obtained or derived out of the criminal activity is not available. It may be on account of siphoning off or vanished by the accused. In those circumstances the property of equivalent value can be attached. The word “the value of any such property” signifies without any embargo that it should be the property purchased after the commission of crime or prior to it rather it would apply in both the eventuality in the given circumstance. Thus, we are not in agreement with the counsel for the appellant who has questioned the attachment in reference to the property acquired prior to commission of crime. We are not going even further that the properties have nexus with the proceeds out of the crime but even in given circumstances and scenario that the property was acquired prior to commission of crime then, also under certain circumstances, it can be attached for “the value of any such property.”

The issue otherwise has been dealt with by this Tribunal in the case of Ayush Kejriwal (Supra) and the present matter is squarely covered by the aforesaid.

Hence, this issue is decided against the appellant and in favour of the ED.

9. Coming to issue no. iv), it is the contention of the appellant that Ld. Adjudicating Authority while making compliance to Section 5 has relied upon an unrelated and incorrect company which has no nexus to the Appellant or the proceedings in any manner and thus, the gross non-application of mind and gross non-compliance of Section 5(1) is evident. However, we agree with the contention of the Respondent ED that the same was a mistake and that there exists ample material on record to pass the order against the appellant. Merely, an inadvertent error does not affect the facts of the case as the respondent ED has shown the generation, existence and utilization of proceeds of crime. Moreover, the present complaint has been after discovery of new evidence from the statement of the appellant recorded on 31.08.2021 under Section 50 of PMLA, 2002, wherein he revealed that the premium amount for purchase of the insurance policies are/were paid by his elder brother Mr. Madhu Koneru, as a gift through his company M/s Trimex International FZE (now known as M/s Rescom Holdings), which he supported by submitting a copy of the cheque in support of premium amount paid by M/s Trimex International FZE. Further, the nature of the movable property sought to be attached is such that can be easily transferred to any third party as mortgage and thus non attachment of the same may frustrate the PMLA proceedings. Also, a Supplementary Prosecution has also been filed in the matter. Hence, this issue is decided against the appellant and in favour of the ED.

10. Coming to issue no.v), we agree with the contention of the Respondent ED that the case of the Appellant’s brother has no bearing upon the present appeal. Shri Madhu Koneru was given relief by the Hon’ble Court on the ground that as he has already been discharged in the predicate offence proceedings in CC No. 06/2012 filed by CBI and SC No. 01/2019 filed by Respondent Department. However, the present Appellant has not succeeded in his discharge petition and is not successful in proving his innocence. Further, CBI & ED proceedings have not been quashed by the Hon’ble High Court against Koneru Rajendra Prasad who is the main master mind behind entire misappropriation of money. Also, the main ground over which the said proceedings has been quashed is knowledge of Koneru Madhu with regard to the said money being proceeds of crime. The order nowhere touches upon the involvement of Koneru Rajendra Prasad in the said crime and on the role of present appellant in acquiring the moveable property from the proceeds of crime collected by Shri Koneru Rajendra Prasad. Further, in support of this discussion, we mention Section 43 of the Indian Evidence Act, 1872:

43. Judgments, etc., other than those mentioned in sections 40, 41 and 42, when relevant.- Judgments, orders or decrees, other than those mentioned in sections 40, 41 and 42, are irrelevant, unless the existence of such judgment, order or decree is a fact in issue, or is relevant under some other provision of this Act.

Hence, this issue is decided against the appellant and in favour of the respondent ED.

11. Coming to issue no. vi), the law on this issue now stands settled by the landmark judgment of the Hon’ble Supreme Court in the case of Vijay Madanlal Choudhary and Ors. vs. Union of India (UOI) and Ors. (supra). The relevant text from the judgment is quoted hereunder:

“65……… 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. Such a person besides facing the consequence of provisional attachment order, may end up in being named as Accused in the complaint to be filed by the authorised officer concerning offence Under Section 3 of the 2002 Act.

69. We find force in the stand taken by the Union of India that the objectives of enacting the 2002 Act was the attachment and confiscation of proceeds of crime which is the quintessence so as to combat the evil of money-laundering. The second proviso, therefore, addresses the broad objectives of the 2002 Act to reach the proceeds of crime in whosoever’s name they are kept or by whosoever they are held.” [Emphasis supplied]

Therefore, the property in the hands of any person in possession of proceeds of crime can be attached, even if he is not accused of the offence of money-laundering. This argument of the Appellant is accordingly, rejected.

12. In view of our discussion from para 5 to 11, the present appeal is hereby dismissed, being devoid of any merits.

Appeal Dismissed.

Pronounced on this 11^th Day of August, 2026.