V. Chamundeswarnath Vs Deputy Director (Appellate Tribunal Under SAFEMA Delhi)
SAFEMA Appellate Tribunal: ED Cannot Continue Attachment of Plots Purchased with Accounted Money by Bona Fide Buyers for Fraud Committed by the Developer
The Appellate Tribunal under SAFEMA allowed the appeals of four purchasers and held that villa plots purchased by bona fide buyers with accounted funds cannot be treated as “proceeds of crime” merely because the developer and its officials were allegedly involved in money laundering and diversion of sale proceeds. The Tribunal emphasized that the property attached must itself represent or be derived from the proceeds of crime, and innocent purchasers cannot be penalised for the misconduct of the seller.
The case arose out of the Emaar Hills Township project, where the Enforcement Directorate had attached four villa plots purchased by the appellants pursuant to investigations into the alleged diversion of funds, under-reporting of sale consideration and collection of substantial cash over and above the documented price by the developer and its associates. The attachment was confirmed by the Adjudicating Authority, leading to the present appeals.
The Tribunal noted that the appellants had entered into agreements to purchase the plots, paid about 95% of the sale consideration through banking channels, disclosed the payments in their income-tax returns, and were neither accused in the scheduled offence nor shown to have participated in the alleged conspiracy. The non-execution of the sale deeds was attributable to the developer and governmental restrictions, and not to any default on the part of the purchasers.
The Tribunal further observed that the alleged proceeds of crime consisted of the unaccounted cash collected by the developer and its agents, and not the plots purchased by the appellants with legitimate funds. If the ED had already identified the persons and entities who received the illicit money, it ought to have traced and attached those proceeds or equivalent assets, rather than properties acquired by innocent purchasers. The attachment of the appellants’ plots, despite the availability of evidence regarding the actual recipients of the illicit funds, was held to be legally unsustainable.
Accordingly, the Tribunal held that bona fide purchasers who acquire property for valid consideration from accounted sources cannot be deprived of their rights merely because the seller subsequently faces proceedings under the PMLA, and granted relief to the appellants by setting aside the attachment of their plots.
Cases Discussed
- Dr. K.L. Narayana, Appeal Nos. 929/Hyd/2015 & 2112/Hyd/2017
- K. Ravindranath, Appeal Nos. 929/Hyd/2015 & 2112/Hyd/2017
FULL TEXT OF THE JUDGMENT APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI
