Penny-Stock LTCG Cannot Disguise Bribe Money; PMLA Attachment Upheld: SAFEMA

Dr. Mansukhbhai Kanjibhai Shah Vs Deputy Director (Appellate Tribunal under SAFEMA, New Delhi)

Penny-Stock LTCG Cannot Disguise Alleged Bribe Money—PMLA Attachment Upheld Where Dummy Buyers Were Funded to Purchase Shares at Inflated Prices: SAFEMA Tribunal

The Appellate Tribunal under SAFEMA has upheld the attachment of assets allegedly generated by converting cash bribes received from medical students into exempt long-term capital gains through manipulated transactions in shares of non-functional companies. The Tribunal held that the extraordinary appreciation in the shares of companies without any corresponding business activity, coupled with evidence that the purchasers were dummy persons funded by third parties, constituted sufficient material to continue the attachment until completion of the scheduled-offence and money-laundering trials.

Background

Dr. Mansukhbhai Shah was the President of the Sumandeep Vidyapeeth Trust, which operated Sumandeep Vidyapeeth University. The Enforcement Directorate alleged that he collected substantial cash amounts from students and their parents for admission to medical courses and for permitting students to appear in examinations.

According to the ED, this cash was routed through cheque discounters, middlemen and several bank accounts. The funds were ultimately transferred to the accounts of dummy purchasers, who used them to purchase shares held by the appellant and his family members at artificially inflated prices.