PMLA Attachment Upheld as Money Trail Linked Property to Crime Proceeds: SAFEMA New Delhi

Alive Hospitality & Foods Pvt. Ltd. Vs Deputy Director (Appellate Tribunal under SAFEMA, New Delhi)

Summary: The Appellate Tribunal under SAFEMA, New Delhi dismissed the appeal of Alive Hospitality & Foods Pvt. Ltd. challenging confirmation of attachment of “Jay Bungalow”, purchased by it for Rs. 2.15 crores in a bank auction. The Enforcement Directorate’s case arose from allegations that M/s Vishal Exports Overseas Ltd. and its key persons had defrauded banks through credit facilities obtained using forged and fabricated documents and thereafter routed funds through connected entities. The appellant contended, among other grounds, that there was no valid “reason to believe”, that the property was not “proceeds of crime”, that the relevant predicate offences were not scheduled offences when the property was purchased in February 2009, and that purchase through a public auction had no nexus with the alleged criminal activity.

The Tribunal rejected these contentions. It found detailed reasons recorded in the Provisional Attachment Order and material indicating that the appellant and other companies were formed and controlled through persons associated with Pradeep Mehta and that funds reached the appellant through connected intermediary entities. On retrospectivity, the Tribunal held that money laundering had to be examined with reference to acts constituting money laundering and treated it as a continuing offence. On the money trail, it found sufficient material at the attachment stage connecting funds received by the appellant with the alleged proceeds of crime and relied on Vijay Madanlal Choudhary concerning the scope of “proceeds of crime”. The Tribunal also observed that attachment did not by itself disturb ownership or possession and that physical possession should arise only in exceptional circumstances. Finding no merit in the challenge, it dismissed the appeal, disposed of pending applications and made no order as to costs.

Cases Discussed

• Vijay Madanlal Choudhary vs Union of India — relied upon by the appellant on the requirements for attachment, “proceeds of crime”, Section 24 presumption and possession; also relied upon by the Tribunal while considering the scope of “proceeds of crime” and the legal effect of attachment.
• State of Bihar Vs. Deokaran Nenshi, 1972 SCC 890 (Supreme Court) — relied upon by the Tribunal for the concept of a continuing offence as one susceptible of continuance and recurring from time to time.
• Dyani Antony Paul and Ors. Vs. Union of India and Ors., MANU/KA/4442/2020 (Karnataka High Court) — relied upon for the proposition that money laundering is a continuing offence and, therefore, the issue of retrospective effect does not arise.
• Prakash Industries Limited, WP(C) 14999/2021, order dated 19.07.2022 (Delhi High Court) — referred to by the Tribunal on retroactive application and the distinction between the predicate offence and acts constituting money laundering.
• Ganpati Dealcom Pvt. Ltd., Civil Appeal No. 5783 of 2022, order dated 23.08.2022 (Supreme Court) — referred to along with Vijay Madanlal Choudhary concerning possession of properties attached under the PMLA.

FULL TEXT OF THE JUDGMENT/ORDER OF APPELLATE TRIBUNAL UNDER SAFEMA

The appellant herein has preferred the present appeal challenging the order dated 10.07.2011 passed by the Adjudicating Authority (AA) under the Prevention of Money Laundering Act, 2002, (PMLA, 2002) confirming the attachment of the immovable property hereinafter referred to as “Jay Bungalow”, Ishavashyam Society Vastrapur, Ahmedabad.

Facts in Brief

2. The relevant facts briefly are that a charge sheet was filed by Bank Security and Fraud Cell of Central Bureau of Investigation, Mumbai against M/s Vishal Exports Overseas Ltd., (VEOL), Sh. Pradeep S. Mehta, the then Managing Director, and Sh. Deepak Mehta, Joint Managing Director of VEOL, and others, for defrauding four banks (i.e. Andhra Bank, Punjab National Bank, Vijaya Bank and UCO Bank), apart from the National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED). The charge sheets were filed for offences u/s 120B read with section 420, 467, 471 of IPC and section 13 of Prevention of Corruption Act, 1988 (P.C. Act). The present case relates to charge sheet No. 13 dated 26.11.2009 filed in FIR No. RC 1(E)2008/CBI/BS&FC/Mumbai dated 31.01.2008 by the CBI in respect of Punjab National Bank, International Banking Branch, Ahmedabad for cheating and defrauding the Bank of Rs. 106 crores by VEOL and associates.

3. Investigation conducted by CBI revealed that VEOL had misused the credit facilities given to it by Punjab National Bank (PNB) such as corporate loan, packing credit, ad-hoc packing credit, short-term corporate loan and foreign bill discounting facility, and had defrauded the bank to the tune of Rs. 106 crores by use of forged and fabricated documents. Certain PNB officials who have been named by the CBI, were allegedly involved in facilitating the credit to VEOL.

4. As VEOL failed to repay the loan amounts availed from the banks by cheating and fraud, the banks had taken over under SARFAESI Act certain immovable properties, including the property which is under consideration in this appeal. The said property along with another property with which we are not directly concerned in the present appeal, was put on auction by the consortium of bankers led by State Bank of India. The two properties were purchased in the auction by the M/s JMD Media (P) Ltd. and the present appellant M/s Alive Hospitality & Foods Pvt. Ltd., respectively. The subject property, which is under consideration in this appeal (Jay Bungalow) was purchased for Rs. 2.15 crores by the appellant herein. The Joint Director’s case is that the purchasers were merely front companies of Sh. Pradeep Mehta and his associates and have acquired these properties through auction by use of proceeds of crime, i.e., the money drawn from the bank by cheating and fraud. The case of the appellants is that they are the Bonafide third party purchasers of the properties by use of their own resources which is clean money.

5. The Directorate of Enforcement registered an ECIR based on the information and conducted its own investigations under PMLA, 2002 and found that the two companies which were purchasers of the properties, namely, M/s J.M.D Media Pvt. Ltd. and the present appellant, M/s Alive Hospitality and Foods Pvt. Ltd., were formed in June 2008 by Pradeep Mehta, Managing Director of VEOL and he routed money through two intermediate companies, namely, M/s Global Nutrition and Products Pvt. Ltd. and M/s Vikalp Rasayan Pvt. Ltd. to M/s J.M.D. Media Pvt. Ltd. and M/s Alive Hospitality and Foods Pvt. Ltd. In the complaint, the Joint Director has given details of the transfer of various amounts of money on different dates by the intermediary companies to J.M.D Media and Alive Hospitality. These are detailed in pages XVI to XXII of the complaint.

6. Apart from transfer of money from the intermediary companies, M/s Alive Hospitality and Foods Pvt. Ltd. had received Rs. 40 lacs as so called share application money from five persons, i.e., Rakhi Gupta, Anil Gupta, Ayush Patel and Swalika Patel and Lila Patel. The Joint Director found that this money was arranged by Sh. Pradeep Mehta and Deepak Mehta. The Joint Director concluded that these loans as well as the said share application money belong to Pradeep Mehta and Deepak Mehta. He observed that though, admittedly, there was no business activity between the intermediary companies and M/s J.M.D media Pvt. Ltd. and M/s Alive Hospitality and Foods Pvt. Ltd., yet there has been movement of substantial funds which defies logic.

7. At para 9.3 of the complaint, the Joint Director has identified the directors of M/s J.M.D Media Pvt. Ltd., M/s Alive Hospitality and Foods Pvt. Ltd. as well as intermediary companies, M/s Vikalp Rasayan Pvt. Ltd. and M/s Global Nutrition and other companies to show how Pradeep Mehta, through his known persons as Directors, had complete control over these companies.

8. During the course of Investigation under PMLA, statements of Pradeep Mehta, Managing Director of VEOL, Praveen T Halvadia, Director, JMD and Alive Hospitality, Smt. Falguni Bhatt, Ex Director JMD and Alive, her husband Rakesh Bhatt, Director, M/S Global Nutritions were recorded. The Deputy Director also had recorded the statement of Sh. Jagdish Patel and his son Ankit Patel who had dealt with the purchase of Vishal House.

9. Analyzing the statements, the Joint Director concluded that Mr. Pradeep Mehta was the master-mind of the whole operation and all these companies involved, i.e., the J.M.D. Media Pvt. Ltd., Alive Hospitality & Foods Pvt. Ltd., Vikalp Rasayan, Global Nutrition etc. were controlled by him. The main directors of these companies Sri Praveen Halvadia, Rakesh Bhatt and Sh. Nirmal Aggarwal, were made directors by Sh. Pradeep Mehta. Smt. Falguni Bhatt, in her statements, has admitted that she was not aware of the activities of the companies in which she was made director by Pradeep Mehta. She used to sign documents and cheques on Pradeep’s directions.

10. As regards the share application money and the loans which were availed by M/s Alive Hospitality and Foods Pvt. Ltd. and Global Nutrition, Rakesh Bhatt, Director had stated that this was arranged by Sh. Pradeep Mehta and Deepak Mehta and he (Rakesh Bhatt) was not aware of the identity and whereabouts of these persons. The Joint Director has observed that there is a distinct pattern in the transactions in relation to share application money and loans and these were the funds belonging to Sh. Pradeep Mehta and Deepak Mehta.

11. Finally, the Joint Director concluded that the amount of investment by J.M.D. Media Pvt. Ltd. in acquisition of Vishal House through bidding amounting to Rs. 1.89 crores and investments by M/s Alive Hospitality and Foods Pvt. Ltd. in Jay Bungalow through bidding amounting to Rs. 2.15 crores were proceeds of crime obtained by Pradeep Mehta and associates by defrauding the banks. He has observed that the intermediary companies were created not for any business activities but circulation of proceeds of crime for its layering and integration for the purpose of money laundering.

12. in consequence of the investigations, a Provisional Attachment Order (PAO) No. 02/2012 dated 15.03.2012 was passed attaching properties including the subject property, „Jay Bungalow‟ which is in contention in this appeal. A complaint having been filed before the Ld. Adjudicating Authority (AA) as per the requirement of Section 5(5) of the Act, the Ld. AA, vide its order dated 10.07.2012, confirmed the attachment of the properties, including Jay Bungalow. Aggrieved by the said order of the Ld. AA, the appellant has filed the present appeal challenging the attachment of Jay Bungalow on various factual & legal grounds.

Arguments on behalf of the appellant:

13. It is firstly contended that the provisional attachment u/s 5 was without jurisdiction and illegal. The Hon’ble Supreme Court has held that the essential prerequisite for attaching a property under Section 5 is a “reason to believe” on the basis of “material in his possession” that: (i) any person is in possession of “proceeds of crime”, and, (ii) such “proceeds of crime” are likely to be concealed, transferred, dealt with in any manner which is likely to result in frustrating any proceedings concerning confiscation. This reason to believe cannot be on the basis of assumption. It is also held attachment can only be of property which is “proceeds of crime” and to be proceeds of crime, property must be derived or obtained directly or indirectly “as a result of criminal activity relating to a scheduled offence. Paragraphs 31-33, 56-57, 59 66-67, 70 of the judgment of the Hon‟ble Apex Court dated 27.7.2022 in the case of Vijay Madanlal Choudhary vs Union of India are relied upon.

14. It is next contended that the subject property was purchased by the appellant on 19.2.2009, at which point of time S. 120-B, 420, 468, 471, 477A of IPC and S. 13(2) read with S 13(1)(d) of the PC Act were not scheduled offences. The legislature has not given retrospective effect to the amendment to the Schedule w.e.f. 1.6.2009. Therefore, the monies used for purchasing the subject property were not “proceeds of crime under PMLA Act at the relevant time. Moreover, assuming without admitting that the monies used for purchasing the subject property are “proceeds of crime”, both the alleged involvement in any process or activity connected with the alleged proceeds of crime and alleged projection thereof as untainted property was complete by 19.2.2009. Therefore, any action which is based on a retrospective application of the amended Schedule would in fact violate Article 20 of the Constitution since it would result in giving retrospective effect to the offence of money laundering under Section 3 of PML Act.

15. It is further contended that even otherwise, the subject property is not “proceeds of crime” since the same was sold to the appellant in a public auction conducted by SBI (which is a perfectly legal activity) and the consideration paid by the appellant for the same in 2009 has absolutely no linkage to the alleged criminal activities mentioned in the FIR dated 31.1.2008 and Charge-sheet dated 26.11.2009 (i.e. there is no linkage between the loans granted by PNB to VEOL in 2005-06 and the monies utilised by the appellant to purchase the subject property in the auction conducted in 2009). No such linkage is even alleged in the PAO or the impugned order. In fact, the source of funds shown in the impugned order is completely different. There cannot be such an allegation since the loans granted by PNB were in 2005-2006 whereas the auction sale of the subject property by SBI was in 2009. Further, there is no allegation anywhere that the sources of funds are the result of some criminal activity or scheduled offence in respect of which FIR/Charge- sheet is filed.

16. It is also submitted that the Charge-sheet nowhere alleges that PNB loans were utilized, directly or indirectly, to pay the sale consideration of the subject property. The statements of various persons which were recorded by the Enforcement Directorate, assuming without admitting that the same were made without any duress, nowhere allege that PNB loans were utilized, directly or indirectly, to pay the sale consideration of the subject property.

17. The only allegation in the PAO is that, instead of repaying the loans, Sh. Pradeep S. Mehta and Sh. Dipakbhai arranged for finances for purchase of the subject property by the appellant and, thereby, again cheated PNB. This cannot be the basis for attaching a property since this allegation does not constitute a linkage to the PNB loans of 2005-06 nor is it an offence or a scheduled offence for which any Charge-Sheet is filed.

18. In light of the above, it is submitted that there is no foundation/material based on which the authority could have a “reason to believe” that the subject property is “proceeds of crime”.

19. It is further contended that the PAO does not disclose any reason to believe that the property was likely to be concealed, transferred, dealt with in any manner which is likely to result in frustrating any proceedings concerning confiscation or that if not attached immediately, that would frustrate proceedings under the Act. Para 6 of the Provisional Attachment Order only reproduces the provision without in fact giving any basis for “reason to believe”. Therefore, even this requirement for exercising jurisdiction under Section 5 of the PML Act was not met while purporting to provisionally attach the subject property.

20. It is next contended that even the proceedings u/s 8 were without jurisdiction and illegal. Under Section 8(1), the Adjudicating Authority can issue notice only if it has “reason to believe that the person has committed an offence under Section 3 or is in possession of proceeds of crime. Whether it be an allegation of offence under Section 3 or whether it be allegation of possession of proceeds of crime, both are dependent on the requirement of the property being “proceeds of crime”. Hence, the Authority, in its notice u/s 8(1), would have to specify the “reason to believe that the subject property is “proceeds of crime”, which was not done in its notice dated 13.4.2012.

21. Further, Section 8(2)(c) provides that the Adjudicating Authority shall, after taking into account all relevant materials placed on record before him, by an order record a finding whether all or any of the properties referred to in the notice issued under sub-section (1) are “involved in money laundering”. Under Section 8[3], the Adjudicating Authority has to decide that a property is “involved in money laundering” before he can confirm the attachment. Looking to the Section 2(p) read with Section 3, a person can be said to have committed “money laundering” if and only if he is involved in an activity connected with “proceeds of crime. Paragraphs 43, 52, 53, 54 of SC judgment dated 27.7.2022 in the case of Vijay Madanlal Choudhary us Union of India (supra) are relied upon in this respect. Therefore, to decide whether or not a property is “involved in money laundering”, the Adjudicating Authority has to record a finding based on evidence that the property was “proceeds of crime which was projected as untainted property. As explained hereinabove, the subject property is not “proceeds of crime and hence, neither the subject property not the purchase consideration thereof can be said to be “involved in money-laundering”. Hence, the attachment could not have been confirmed.

22. Insofar as legal presumption under Section 24 of the PMLA Act,2002, is concerned, it is submitted that the Hon’ble Supreme Court has held that in either case of S. 24(a) or (b), legal presumption is about involvement of proceeds of crime in money laundering For such legal presumption to arise, authorities have to establish three basic foundational facts: (i) criminal activity relating to scheduled offence is committed, (ii) property in question is derived or obtained directly or indirectly by any person as a result of that criminal activity, (iii) person concerned is directly or indirectly involved in any process or activity connected with said property being proceeds of crime. (Paragraphs 97, 99, 101 of SC judgment in the case of Vijay Madanlal Choudhary (supra) are relied upon. It is contended that the authority has not established that the subject property is “proceeds of crime” or that appellant is directly or indirectly involved in any process or activity connected with said property being proceeds of crime. Thus, there is no question of any presumption arising in this case under S. 24 of the PMLA Act. In any case, even assuming there can be such presumption, it is rebuttable. Paragraphs 97, 98, 99, 100, 101 of the same SC judgment are referred to in support of the contention. It is submitted that the appellant has proved that the subject property is not “proceeds of crime and has thus discharged the burden of proof if any.

23. It is next contended that the subject property cannot be confiscated and hence the attachment cannot stand in law. Section 8(3)(b) of the PMLA, 2002 inter alia empowers the Adjudicating Authority to confirm the attachment of a property which is “involved in money- laundering”, which attachment would then continue during the pendency of proceedings relating to an offence under the PMLA, 2002 and becomes final after an order of confiscation is passed under Section 8(5). Section 8(5) of the Act provides for confiscation of a property which is found by the Special Court to be “involved in money laundering” or which is found to be “used for commission of the offence of money-laundering” on the conclusion of the trial of an offence under the PMLA Act. As such, an attachment of a property is in aid of its ultimate confiscation by the Government. An attachment is akin to an interim measure in aid of confiscation. This is evident from the provisions of Section 5(1) as well as Section 8(3)(b) of the PML Act. Therefore, if there is no scope for confiscation on the face of it, there can be no attachment since the purpose of attachment would be to facilitate confiscation. In other words, if the admitted facts establish that a particular property itself is not “involved in money laundering” or “used for commission of the offence of money laundering” even if an offence of money-laundering is later proved to have been committed, then there can be no attachment or confirmation of attachment of such property.

24. It is submitted that in the present case, as explained in detail hereinabove, the subject property cannot be said to be “proceeds of crime” or “involved in money laundering” or “used for commission of the offence of money-laundering” Therefore, the subject property cannot be ultimately confiscated under Section 8(5) of the PML Act. Since it cannot be confiscated, it cannot be attached by way of interim measure.

25. Next, it is forcefully contended that even if attachment is upheld, possession should not be taken. The Hon’ble Supreme Court has held that direction u/s 8(4) to take possession merely on the basis of confirmation of provisional attachment order should be an exception and not a rule. Extreme and drastic action of physical dispossession not warranted in every case until formal order of confiscation is passed. Before confiscation, dispossession would be a serious miscarriage of justice, if not abuse of process. It does not serve any purpose. Para 74, 75, 76 of SC judgment dated in the case of Vijay Madanlal Choudhary us Union of India (Supra) in relied upon.

26. It is further submitted that the attached property is a residential property (bungalow) which has been very well maintained till date. If the government takes possession of the property, it will not be maintained. The Hon’ble Gujarat High Court had in fact directed that status quo till this Appellate Tribunal takes final decision on the pending appeal. This status quo ensures protection of the subject property.

27. Considering the aforesaid, it is submitted by the appellant in case this Tribunal holds against the appellant on merits, the extreme step of taking physical possession is not warranted and would be an abuse of process.

Arguments on behalf of the Respondents:

28. The respondents have strongly opposed the submissions made on behalf of the appellants.

29. Ld. Counsel for the respondent drew attention to the charge-sheet filed by the CBI which is available on record. He contended that the fundamental allegation against the appellants is of collusion with officials of the Punjab National Bank to avail fraudulent loans and diverting the same for purposes other than those stated at the time of borrowing. He also drew the attention to para 3 of the charge-sheet filed in CBI case No. RC/1/E/2008/CB/BS/FC/MUMBAI, and pointed out that investigations by the CBI had revealed that a conspiracy to cheat the Punjab National Bank, International Banking Branch Ahmedabad was hatched during 2005-06 in borrowal accounts of M/s Vishal Export Overseas limited, Ahmedabad through its Director Sh. Pradeep Mehta, Sh. Deepak Mehta, Sh. Shubhashchandra Mehta, Sh. R.N. Sawarkar, then Chief- Manager and Sh. L.V. Raghavan, the then Manager of PNB, IBB, Ahmedabad. The object was to avail 50 crores as corporate loan by mis-representing the facts regarding the financial position of the company and allowing the funds thus released to be diverted. Proceeds of crime were generated in the manner described in para (ii) of the page II of the Provisional Attachment Order. The said paragraph reads as below:

The investigations carried out by CBI, BS&FC, Mumbai prime facie established that Shri Subhashchandra C. Mehta – Chairman VEOL, Shri Pradeep S. Mehta – Managing Director VEOL, Shri Dipak S Mehta – Joint Director, Shri Ravindra N. Sawarkar, then Assistant General Manager, Punjab National Bank and Shri L.V. Raghvan, the then Manager, Punjab National Bank in conspiracy had cheated Punjab National Bank, International Banking Branch, Ahmedabad by facilitating the credit to M/s VEOL on the basis of forged & fabricated documents and caused wrongful loss of more than Rs. 106Crores to the Bank which is exclusive of bank’s interest and thereby caused corresponding wrongful gain to themselves. Consequently Charge-Sheet No. 13 dated 26.11.2009 in RC. 1/(E)/2008/CBI/BS&FC/MUM was filed by CBI, BS&FC, Mumbai for various offences under IPC including Sections 120-B r/w 420, 471 of Indian Panel Code and Section 13(2) read with Section 13(d) of Prevention of Corruption Act, which are Scheduled Offences under the PMLA”

30. He also drew attention to para 9.3 of the OC filed in the case which highlights the web of corporate entities created by the appellant group in order to launder the money. The said paragraph of the O.C. is extracted below for ready reference:

31. He contended that all these entities were controlled and managed by the principal accused, Sh. Pradeep Mehta. The Director of the appellant company M/s Alive Hospitality was a childhood friend and associate of Sh. Pradeep Mehta. In his statement, he disclosed that the affairs of the company were managed and controlled by the Sh. Pradeep Mehta. In this regard, he drew attention to the statements of Sh. Pravin Halvadia, Smt. Falguni Bhatt and also to the statement of Sh. Pradeep Mehta himself to establish the link between the various entities.

Analysis and Finding

32. I have given careful consideration to the facts on record and the rival contentions of the parties. The facts emerging from investigations conducted by the CBI in the scheduled offence case and by the Respondent Directorate in the case under PMLA, 2002 is that Sh. Pradeep Mehta and Sh. Deepak Mehta, who were the key persons behind M/s Vishal Exports Overseas Pvt. Ltd. and others Vishal group companies, allegedly siphoned off funds to the tune of over Rs. 100 Crores which had been taken as credit from four public sector banks, namely, the Andhra Bank, Punjab National Bank, Vijaya Bank and the UCO Bank, against submission of forged and fabricated documents. The properties mortgaged by M/s Vishal Export Overseas Pvt. Ltd. and its associate companies for availing credit were taken over by the banks under SARFAESI Act and were put on auction by the State Bank of India, (SBI), the consortium leader. With the intention to purchase the said properties, two new companies, namely, M/s J.M.D Media Pvt. Ltd., Ahmedabad, and M/s Alive Hospitality & Foods (P) Ltd. were set up on the directions of Sh. Pradeep Mehta, Managing Director of M/s Vishal Exports Overseas Ltd. Thus, the money fraudulently borrowed from the bank was utilized to purchase the subject property in the name of current appellant, M/s Alive Hospitality.

33. The first contention of the appellant in the appeal is that there was no reason to believe on the basis of information in possession that the appellant is in possession of proceeds of crime. Having perused the record, I find that reasons to believe have been discussed elaborately in the Provisional Attachment Order passed by the respondent. The relevant part of the order is extracted below for ready reference:

“WHEREAS, it is seen from the material placed on record before me in the instant PMLA Case No. ECIR/51/AZO/2010 dated 11.06.2010, including (i) the copy of Report under Section 173 Cr. P.C. submitted by central Bureau of Investigation, Bank Securities and Fraud cell Mumbai filed in the Court of Hon’ble Additional Chief Judicial Magistrate Court No. 4 for CBI cases, Nyayamandir, 4th Floor, Mirzapur, Ahmedabad against M/s Vishal Exports Overseas Ltd. [hereinafter referred as VEOL], Opp. Sales India, Behind Oriental Bank of Commerce, Ashram Road, Ahmedabad- 380009 and Shri Subhashchandra C. Mehta, Chairman VEOL, Shri Pradeep S Mehta, Managing Director, VEOL, Shri Dipak S. Mehta Jt. Managing Director VEOL, Shri Ravindra N. Sawarkar, then Assistant General Manager, Punjab National Bank and Shri L.V. Raghvan, the then Manager, Punjab National Bank (Charge-Sheet No. 13 dated 26.11.2009 in FIR No. RC. 1(E)/2008/CBI/BS&FC/MUM (PNB Case) dated 31.01.2008 for commission of offence under Section 120-B of Indian Penal Code read with Sections 420, 468,471 & 477-A of Indian Penal Code) and Section 13 (2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988; and (ii) Statements of various persons recorded under Section 50 of PMLA and documents collected during the course of investigation, I have reasons to believe that;

(i) VEOL, a Public Limited company, was engaged in trading/export of Agro products/ Precious stones as a Merchant Exporter and Shri Pradeep S. Mehta resident of Bungalow No. 18, Vasuma Hills Society, Near L.J. College, Near Nirman School, Opp. Saket Bungalows, Vastrapur, Ahmedabad-380015 was the Chief Executive of the said company: that VEOL had availed fund and non fund based credit facilities from 23 banks under consortium arrangement with State Bank of India as the lead banker The instant case relates to credit facilities such as Corporate Loan, Packing Credit, Ad-hock Packing Credit, Short Term Corporate Loan, Foreign Bill Discounting Facility misued by VEOL to the extent of Rs. 106 Crores by use of forged & fabricated documents.

(ii) The Investigations carried out by CBI, BS&FC, Mumbai prima facie established that Shri Subhashchandra C. Mehta Chairman VEOL, Shri Pradeep S. Mehta – Managing Director, VEOL, Shri Dipak S. Mehta Joint Director, Shri Ravindra N. Sawarkar, then Assistant General Manager. Punjab National Bank and Shri L. V. Raghvan, the then Manager, Punjab Bank, in conspiracy, had cheated Punjab National Bank, International Banking Branch, Ahmedabad by facilitating the credit to M/s. VEOL on the basis of forged & fabricated documents and caused wrongfút loss of more than Rs. 106 Crores to the Bank which is exclusive of bank’s interest and thereby caused, corresponding wrongful gain to themselves. Consequently Charge-Sheet No. 13 dated 26.11.2009 in RC. 1/(E)/2008/CBI/BS&FC/MUM was filed by CBI, BS&FC, Mumbai for various offences under IPC Including Sections 120-B r/w 420, 471 of Indian Penal Code and Section 13(2) read with Section 13(d) of Prevention of Corruption Act, which are Scheduled Offences under the PMLA.

(iii) During the course of investigations carried out under PMLA till date by the officers of Directorate of Enforcement it has been revealed that two new companies namely M/s. JMD Media Pvt. Ltd, Ahmedabad and M/s. Alive Hospitality and Foods Pvt. Ltd., Ahmedabad were formed in June, 2008 on the direction of Shri Pradip Mehta, Managing Director of M/s. Vishal Exports Overseas Ltd. with the intention to purchase the properties which were mortgaged by M/s. Vishal Exports Overseas Ltd. for availing the loan/advance credit facilities from consortium of 23 Banks. These properties were put on auction by State Bank of India, the leader of the Consortium. No business activities were carried out in said companies other than receipt of funds for purchasing properties in auction and other rotation of funds for their layering and integration. To hide the direct connection of newly formed companies with himself, Pradip Mehta – Managing Director and Shri Deepak Mehta Joint Managing Director, VEOL, had arranged their trusted persons/relatives to become Directors of companies. It has also been revealed during the investigation that source of funds were from M/s. VEOL and routed through other intermediate companies named M/s. Global Nutrition & Products Pvt. Ltd., Ahmedabad and M/s. Vikalp Rasayan Pvt. Ltd, Ahmedabad and finally the funds had reached the bank accounts of Mis. JMD Media Pvt. Ltd and M/s. Alive Hospitality and Foods Pvt. Ltd for the purchase of properties in auction. It is also revealed during investigations that though M/s, VEOL had funds to repay the loan to the Bank for reducing loss of the Bank, but rather than re-paying to the bank, Shri Pradip Mehta & Shri Deepak Mehta had acted in malafide manner and again cheated the bank. The funds so provided by VEOL/Pradeep Mehta are nothing but proceeds of Crime derived from Criminal Acts as described in above- mentioned Charge-Sheet No. 13 dated 26.11.2009 filed by CBI, BS & FC, Mumbai.

(iv) For the property “Vishal House’ an agreement for sale was entered into by M/s. JMD Media with one Jagdish Patel and his family, under directions of Shri Pradip Mehta. In view of the directions given by Directorate of Enforcement, the concerned Sub-Registrar refused to register the Sale Deed and the ownership of the said property is, still with M/s. JMD Media Pvt. Ltd, a company controlled by Shri Pradip Mehta. Against this Jagdish Patel has filed Special Civil Application No. 1059 of 2012 before Hon’ble High Court of Gujarat Directorate of Enforcement has filed Affidavit-in- Reply top the Said application and the matter-is-pending before Hon’ble High Court of Gujarat. No restraint order has been passed by Hon’ble High Court of Gujarat in respect of the said property.”

34. In view of the detailed and very specific reasons which have been discussed in detail in the Provisional Attachment Order, and also considering the discussions in paragraphs 48-51 of the impugned order by the Ld. AA before whom this very issue had been raised by the defendants therein, I do not find any merit in the contention that there was no material in the possession of the officer passing the order to have reason to believe that the appellant was in possession of proceeds of crime. Accordingly, this contention of the appellant is hereby rejected.

35. It is next contended that the subject property was purchased by the appellant on 19.02.2009 and at that time, the relevant provision of the Indian Penal Code (IPC) and the Prevention of Corruption Act, 1988 (PC Act) were not scheduled offences and the Legislature has not given retrospective effect to the amendment to the Schedule which came into force w.e.f. 01.06.2009. The appellant has also referred to Article 20 of the Constitution.

36. With respect to the above contention of the appellant, it is by now well-settled that the issue of retrospectivity or otherwise in so far as offence of money laundering is concerned has to be examined with reference to the act which constitutes “money laundering” under Act, regardless of the time of occurrence of the scheduled offence. Further, the offence of money laundering is a continuing offence. A continuing offence is one which is susceptible of continuance and is distinguishable from one which is committed once and for all. A continuing offence occurs and re-occurs, and each time, an offence is committed. It was so held by the Hon‟ble Supreme Court in State of Bihar Vs. Deokaran Nenshi (1972 SCC 890). In Dyani Antony Paul and Ors. Vs. Union of India and Ors. Manu/KA/4442/2020, the Hon‟ble Karnataka High Court has held that money laundering is a continuing offence and, as such, the issue of retrospective effect does not arise. The decision of the Hon‟ble Delhi High Court in Prakash Industries Limited (WP (C) 14999/2021 (Order dated 19.07.2022) may also be referred to in this context, wherein, it was held that it is well settled relating to retroactive application of penal previous that merely because requisite or facet for initiation of action pertains to a period prior to the enforcement of the statute, that would not be sufficient to characterize statute as being retrospective. It must be borne in mind that the Act with which we are concerned penalizes acts of money laundering. It does not create a separate punishment for a crime prescribed under the Penal Code. The Act does not penalize the predicate offence. That offence merely constitutes the substratum on which charge of money laundering is being raised.

37. In view of the above position, regardless of when the predicate offence was committed, the act of Money Laundering has to be reckoned with reference to the dates on which any of the actions which constitute „money laundering‟, including its concealment/ possession/ acquisition/use/ projecting or claiming as untainted property, took place and not with reference to the date on which the act of constituting an offence under the PC Act or the IPC which comprised the predicate offences (scheduled offences) in the present case, took place.

38. The next contention of the appellant is that the appellant company had acquired the property in a public auction conducted by the SBI which was a perfectly legal activity and the consideration paid by the appellant for the same has absolutely no linkage to the alleged criminal activity. In this regard, I find that the issue has been discussed elaborately in paragraphs 62-67 (pages 32 to 37) of the impugned order, wherein the money trail leading to the appellant company, M/s Alive Hospitality, has been discussed in detail as also the evidence against the appellant. The statement of Sh. Praveen T. Halvadia is also on record wherein he has stated that Sh. Pradeep Mehta had made him Director of Alive Hospitalities & Foods Pvt. Ltd. and he was not aware of the activities of the company. He also did not know who participated in the auction conducted by SBI. The said Sh. Halvadia was a childhood friend of Sh. Pradeep Mehta. It is stated therein that money reached the appellant company and M/s J.M.D Media Pvt. Ltd. (another group entity) meandering through the intermediatory companies, i.e., Global Nutrition and Vikalp Rasayan Pvt. Ltd. which were all connected entities controlled by Sh. Pradeep Mehta. The money travelled through only one bank account of each company maintained in one bank, namely, Kalupur Commercial Co-operative Bank Ltd., Swastik Char Rasta Branch, Ahmedabad. The inflow and outflow of money into the account is also reflected in a chart on pages 32-33 of the said order. Perusal of the said chart reveals that so far as the present appellant, M/s Alive Hospitality Foods Pvt. Ltd. is concerned, money flowed to it from other connected entities, namely, Trust Capital (Ind.) Service Pvt. Ltd. Darshit Hydro Power Project Pvt. Ltd., Well Worth Overseas Ltd. through an associated concern, M/s Vikalp Rasayan. Money flowed from the said three entities into the account of Vikalp Rasayan and flowed out of the said company into the account of the appellant company on the same or next day in nearly back-to- back transactions. As such, there is no merit in the appellant‟s contention that there is no linkage between the alleged „proceeds of crime‟ and the acquisition of the assets by the appellant company. It is to be noted that the definition of proceeds of crime under Section 2(1)(u) includes not only property derived or obtained directly as a result of criminal activity, but also property derived indirectly as a result criminal activity. Furthermore, it is also includes the „value of such property‟. In this regard, the Hon‟ble Supreme Court in its landmark judgment in the case of Vijay Madanlal Choudhary SLP (Criminal) No. 4634 of 2014 has held that the definition of „proceeds of crime‟ is vide enough to not only refer to property derived or obtained as a result of criminal activity relating to a scheduled offence, but also the value of such property. The definition of “property” as in Section 2(1)(v) is equality vide enough to encompass the value of property of proceeds of crime. The Hon‟ble Apex Court held that such interpretation of the term 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. As such, the appellant‟s contention that three was no link or nexus between the subject property and the alleged criminal activity is absolutely without merit. Furthermore, the burden of proof was also squarely on the appellant in view of the previous of Section 8(1) & Section 24. Similarly, the presumption u/s 23 would also come into play in as rightly pointed out by the Ld. AA in para 68 (page 37) of their order. The interest of brevity, the contents of the said paragraph are not reproduced here.

39. It is next contended that the notice issued by the Adjudicating Authority under Section 8(1) was not valid because the same is dependent on the requirement of the property being proceeds of crime. Several of the other arguments advanced by the appellant also spring from the same underlying contention, namely, that there were no proceeds of crime in the present case. In light of the discussions in the preceding paras, these contentions of the appellants are hereby rejected. As already held, there was more than sufficient evidence to come to the conclusion at this stage of the proceedings that the subject property constituted „proceeds of crime‟ so as to place it under attachment until the outcome of criminal proceedings under the Act. It may be mentioned in this context that the legal position is well-settled that attachment of property is a balancing arrangement to secure the interests of the person, as also ensure that the proceeds of crime remain available to be dealt with in the manner provided by the Act. Mere attachment of property does not alter the position with regard to the ownership to even possession/use of the properties which are the subject matter of such attachment. The Hon‟ble Supreme Court has held in the aforesaid case of Vijay Mandanlal Choudhary, and further clarified in the case of Ganpati Dealcom Pvt. Ltd. Civil Appeal No. 5783 of 2022 (order dated 23.08.22) that possession of properties attached under the PMLA, 2002 can only be taken under exceptional circumstances, such as crimes involving terrorist activities, drug cartels or organized criminal activities. Therefore, at this stage, when the criminal trial of the appellants herein is still pending before a court of competent jurisdiction, even the balance of interests lies in favour of continued attachment of the subject properties. The same by itself neither disturbs the ownership title of the appellants, nor deprives them of possession/ enjoyment of the same.

40. The appellant has also put forward arguments against taking possession of the attached property by the Directorate. It is submitted that extreme and drastic action of physical dispossession is not warranted. The legal position in this regard has already been clarified in the preceding para. As such, this issue need not be dwelled upon any more.

41. In light of the above discussions the present appeal is hereby dismissed.

42. Pending applications, if any, shall also stand disposed of.

43. No order as to costs.