Triad Trading Services P. Ltd. Vs Union of India (Madras High Court)W
Conclusion: A person who has purchased the property using proceeds of crime cannot said to have any interest in the property and the protection under Article 300 A cannot be pressed into service by a perpetrator of a crime. Mere order of attachment could not be said to be violative of the constitutional right to property of the Article 300 A of the Constitution of India.
Held: A provisional attachment order was passed which included the properties of assesse. It was found that money stipend from the Bank had been routed through the account of assessee. The properties belonging to assesse company were attached as it was one of the group Companies of the said R.Subramaniam. Subsequently, the adjudicating authority initiated proceedings for making the attachment order absolute for taking over the properties on which provisional attachment order under Section 5 of the Prevention of Money Laundering Act had been passed. The adjudicating authority found that the lands for which the provisional attachment had been passed are all proceeds of crime. Assessee had filed a petition contending to strike down the provisions of Section 8 (4) of the Prevention of Money Laundering Act, 2002 and the Prevention of Money Laundering (Taking Possession of Attached or Frozen Properties confirmed by Adjudicating Authority) Rules 2013 as they were violative of Article 14 of the Constitution of India. It was held that Article 300A, is attracted to those situations where the property of a person is acquired only by an administrative/executive order, and not on the basis of any law, validly made. However, even legislations which have the effect of depriving a person of his property rights without any object whatsoever also can be challenged that such legislations are violative of the Constitutional mandate under Article 300 A. A person who has purchased the property using proceeds of crime cannot said to have any interest in the property and the protection under Article 300 A cannot be pressed into service by a perpetrator of a crime. Provisional attachment was under Section 5 (1) of the Act. Adjudicating Authority while exercising its powers under Section 8 confirmed the attachment after hearing all the parties. The order confirming the attachment was appealable to the Tribunal under Section 26 of the Act and a further appeal lied to the High Court. The property was confiscated only after the criminal Court found that the offence under Section 3 of the Act had been committed. Mere order of attachment could not be said to be violative of Article 300 A of the Constitution of India. The challenge on this score could not be accepted.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
Prayer in the instant writ petition is for a declaration, declaring as ultra vires the provisions of Section 8 (4) of the Prevention of Money Laundering Act, 2002 (herein after called as the Act) and the Prevention of Money Laundering (Taking Possession of Attached or Frozen Properties confirmed by Adjudicating Authority) Rules, 2013, (hereinafter called as the Rules) as being unjust, manifestly arbitrary and therefore, violative of Article 14 of the Constitution of India.
2. In Section 3 of the Act, whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money laundering.
3. Section 5 of the Act, provides that where an Officer not below the rank of Deputy Director has reason to believe on the basis of the material in his possession that any person is in possession of any proceeds of crime and such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime, he may order for a provisional attachment of such property for a period not exceeding 180 days.
4. The order passed under Section 5 (1) comes up for consideration before the Adjudicating Authority who is appointed under Section 6 of the Act. Section 6 of the Act provides that a person shall not be qualified as a member of the Adjudicating Authority in the field of law unless he is qualified to be appointed as a District Judge or has been a member of the Indian Legal Service and has held a post in Grade – I of that service. In the field of Finance, Accountancy or Administration, the member must possess such qualifications as may be prescribed.
5. Section 8 provides that on receipt of a complaint, under Section 5 (5), or applications made under Section 17 (4) or Section 18 (10) if the Adjudicating Authority has reason to believe that any person has committed an offence under Section 3 or is in possession of proceeds of crime, he may serve a notice on such person calling upon him to indicate the source of his income, earning or assets out of which or by means of which he has acquired the property attached under Section 5 (1) or seized or frozen under Section 17 or 18. Sub-Section 2 of Section 18 provides that after considering the reply to the notice sent by the authority to the person concerned and after hearing the aggrieved person and the Director appointed under Section 49 (1) of the Act, and after taking into account all the relevant material decides as to whether the properties referred to in the notice issued under sub-Section 1 of Section 8 are involved in the offence of Money Where the Adjudicating Authority decides that the property is involved in the offence of Money Laundering, then an order is passed under sub-Section 3 of Section 8 confirming the provisional attachment of the property made under Section 5 (1). Sub-Section (4) of Section 8 of the Act, provides that where the provisional order of attachment gets confirmed, the Director or any other Officer authorised by him in this behalf shall forthwith take the possession of the property attached under Section 5, in a manner that is prescribed. For this purpose, the Prevention of Money Laundering (Taking Possession of Attached or Frozen Properties confirmed by Adjudicating Authority) Rules 2013 have been framed. Under these Rules, where the attachment order had been confirmed by the adjudicating authority for an immovable property, the authorised Officer shall issue a notice of eviction of ten days, so as to prevent the person from enjoying such property and after issuing of such notice, if the premises is not vacated in time, the occupant is evicted and possession is taken with the assistance of local authorities in terms of Section 54 of the Act.
6. The petitioner Company has been arrayed as fifth accused in C.C.No.4 of 2018 on the file of the Principal Sessions Judge in the designated Special Court for Prevention of Money Laundering Act cases in respect of offences under the Act. The said criminal case has arisen out of ECIR/CEZO/8/2014, on the file of the Assistant Director, Directorate of Enforcement, Chennai Zonal Office. Case in ECIR No.8 of 2014 was registered on 26/9/2014 by the Assistant Director in the office of the Joint Director, Enforcement Directorate, Chennai Zonal Office. Based on a complaint by Bank of Baroda, Central Bureau of Investigation, Bank Securities & Fraud Division, registered a case of criminal conspiracy, cheating and criminal misconduct against one R.Subramanian, Managing Director, M/s. Subiksha Trading Services Limited, K.P.Vairavan, the then AGM and Branch Head, Bank of Baroda, Corporate Financial Services Branch, Chennai and M/s. Subiksha Trading Services Ltd., having its registered office at No.146, II Floor, R.K.Mutt Road, Mandaveli, Chennai, vide FIR No.18/2013, dated 26/7/2013. After the investigation, CBI had filed a charge sheet in C.C.No.9635 of 2014 dated 13/8/2014 against the said accused for having caused a loss of 77.39 crores to Bank of Baroda, for offences under Sections 120 (B), 420 of the Indian Penal Code which are Scheduled Offences, as defined under Section 2 (1) (y) of Prevention of Money Laundering Act, 2002. On the basis of FIR and the documents, the office of the Assistant Director, formed an opinion that a prima facie case for an offence of Money Laundering under the Act had been made out. This resulted in initiation of investigation of offence of Money Laundering under Section 3 of the Act.
7. A provisional attachment order was passed which included the properties of the appellant. It was found that money stipend from the Bank had been routed through the account of the appellant. The properties belonging to the petitioner Company were attached as it was one of the group Companies of the said R.Subramaniam. Subsequently, the adjudicating authority initiated proceedings for making the attachment order absolute for taking over the properties on which provisional attachment order under Section 5 of the Prevention of Money Laundering Act had been passed. The adjudicating authority found that the lands for which the provisional attachment had been passed are all proceeds of crime. The relevant portion of the order reads as under:-
“18. As per the provisions of Section 2 (1) (u) of PMLA, 2002 “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. In the instant case, the default loan amount of Rs.75 crores, which amounts to “Proceeds of crime” were purposely integrated/mingled with the other amounts of M/s. STSL and the proceeds of crime are not clearly distinguishable. In absence of disclosure of properties acquired by Shri.R.Subramanium either in his name or in the name of the group companies of STSL, it is relevant that any such movable or immovable property available either with M/s. STSL and R.Subramanian, which are equivalent to the proceeds of crime amounting to Rs.75 crores, would constitute proceeds of crime. Accordingly, in the instant case, in terms of Section 2 (1) (u) of PMLA, 2002, the properties held in the name of M/s. STSL and their Managing Director, Shri R.Subramanian as well as in the name of his group of companies would constitute the “Proceeds of Crime”.
19. Investigation conducted with regard to the properties acquired in the name of STSL, R.Subramanian and his group of companies revealed that an immovable property of 10.4 acres of land at Marakanam village, Villupuram District, acquired by R.Subramanian and available in the name of one of his group companies M/s.TTSL and Shri.R.Subramanian, has kept the same untainted in the name of one of his group companies M/s.TTSL. Investigation further revealed that an immovable property in the form of Residential house is available in the name of his wife Smt.Srividya Subramaniam, at No.2/583, Singaravelar Main Road, I Cross Street, Chinna Neelankarai, Chennai 41.
20. Verification conducted with the records of the 10.4 acres of landed property at Markanam revealed the following:
a. the property at 10.4 acres of land at Marakanam Vilalge, Vilupuram District was initially purchased by Smt.Srividya Subramanian, wife of Shri.R.Subramanian, who had purchased the land in small parcels in the year
b. Srividya Subramanian and her husband Shri.R.Subramanian entered into a partnership deed in the name of “ARESS INVESTMENTS” in the year 2008. As per the covenants, this property goes to the partnership deed.
c. In the year 2009 the said partnership deed was dissolved with mutual consent and the rights of the property were given back to Shri.R.Subramanian as per the
d. As per the documents available, an Arbitration Order dated 18/1/2010 was issued by Shri R.Hariharan, Company Secretary, Executive Director of M/s. Viswapriya Financial Services, one of the main Companies promoted by R.Subramanian. The contents of the said arbitration order says that R. Subramanian took a loan of Rs.5.50 crores from a partnership firm TIL in his personal capacity in the year 2008 and that the loan amount was not repaid. Since the loan amount was not paid, TIL under a deed of novation dated ¼/2009 had transferred the loans and liabilities to M/s. Triad Trading Services Limited, another group company of R.Subramanian. Since R.Subramanian was not able to pay the amount along with interest, a compromise was arrived between M/s. Traid Trading and R.Subramanian to accept the full and final settlement of the dues for a consideration of Rs.3.25 crores of which Rs.75 lacs would be paid by transfer of conveyance of 10.4 acres of Marakanam property on or before 31/3/2010; that the balance amount of Rs.2.50 cores would be paid back by borrower R.Subramanian along with interest.
e. The entire process had been designed by R.Subramanian in order to escape the attachment order of the DRT, Chennai in the non-repayment of loan of Rs.50 crores given by Bank of India, Chennai who had filed OA Application before the DRT-II, Chennai, for recovery of the loan amount. BOI filed an interim application before the DRT-II, Chennai for attachment of this property – 10.4 acres of land at Marakanam and obtained an ex parte order for the attachment of the said on 26/4/2013. Based on this an EC was created in the records of Sub-Registrar’s office Marakkanam. Sensing that the said property would be attached by Bank of India on the ordes of DRT-II, Chennai, R.Subramanian appeared to have created the records retrospectively as if he obtained a loan of Rs.5.50 crores from his group Company TIL, a partnership Company, deed of novation dated 1/4/2009 to transfer the loan liabilities to another group company TTSL, arbitration order dated 18/1/2020 which facilitates transfer of the said property to TTSL. Based on the said arbitration order an Executive Petition (EP) was filed before the Hon’ble District Judge, Villupuram by TTSL and on the orders of the Hon’ble Court, the property was transferred to TTSL vide sale deed dated 12/6/2014.
f. As per the report of jurisdictional DRO, Chennai the stamp paper of the said sale deed dated 12/6/2014 was in the name of KASIR ARUL ANANDA and not in the name of TTSL as mentioned in the said stamp paper and hence it appears that the said said deed document is not
(g). S.Shri Augustine and Shri.R.Venkataramanan, the two current Directors of TTSL and as per the ROC they are Directors w.e.f.10/8/2014 and 14/3/2015 had stated that they were employees of TTSL and that they are not aware of the details of TTSL and signed all the documents relating TTSL at the instance of R.Subramanian.
h. Shri Augustine, Director of TTSL who signed the sale deed documents on 12/6/2014 is not Director of the Company as per the DIR-12 report filed with ROC (he is director w.e.f.10/8/2014) and hence it appears that the said sale deed document is not valid.
(i). The following observations confirm that the entire process was a stage managed by R.Subramanian on sensing the clutches of attachment initiated by Bank of India against the 10.40 acres of land at Marakanam.
