SAFEMA Tribunal: ED Cannot Attach Bona Fide Buyers’ Accounted Plots for Developer’s Fraud

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

Present appeals under Section 26 of Prevention of Money Laundering Act, 2002 are filed by appellants against the impugned order dated 15.02.2013 passed by the Adjudicating Authority, in Original Complaint No. 159/2012, whereby the following properties held by M/s Emaar Hills Township Pvt. Ltd. (but claimed by the present appellants) attached by ED in PAO No. 01/2012 dated 25.09.2012 were confirmed:-

Facts of the case

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 called 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.

3. As the said offences are scheduled offences, ECIR/08/ HZO/2011 dated 30.08.2011 was recorded by respondent Directorate of Enforcement for investigation under PMLA. In the meantime, after completion of investigation CBI filed charge sheet before Ld. Special Judge, CBI Court, at Hyderabad, on 01.02.2012, which reflects following material facts:-

4. 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, R.R District on 535 acres of land as detailed below:

The land use proposed at Manikonda

5. 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.

6. 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.

7. 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.

8. 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.

9. 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.

10. 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.

11. 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 in the @ 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.

12. 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.

13. 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.

14. 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 land.

15. 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.

16. 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 31 villas and villa plots.

17. Investigation has revealed that 13 villa plots, including three model villas (constructed at Plot No’s: A-70, A-71 & 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.

18. Investigation revealed that ten villas/plots Nos. A-70, A-71, A-72, 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.

19. Further the following 18 Villa plots were booked by EMGF through their 10 shadow companies, in the name of the following companies @ Rs. 5000/- per Sq. Yd. and an amount equivalent to 10% of the sale consideration was paid from the accounts of the above said 10 companies in favour of EMGF, as per the details as under:

20. However, EMGF issued cancellation letters dated 04.10.2010, though the amount of initial deposit was received from these companies still remain with EMGF. The intention of EMGF behind booking 18 plots in the name of the companies incorporated/acquired in the name of their employees, was to block the villa plots @ Rs. 5000/- per Sq. Yd. and subsequently for resale at premium rates. Since, APIIC was entitled for a revenue share from the consideration received from first sale of villa plots and not from the resale.

21. 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.

22. Investigation by CBI also revealed that Sri Madhu Koneru, S/o Shri Koneru Rajendra Parsad, who is carrying business in Dubai has received an amount of USD 2,50,000/- into his personal account No.8900056630 with National Bank of RAS-AL-KHAIMAH on 09.08.2007 from Sri Parthasarathy, buyer of villa plot in M/s EHTPL. Sri Parthasarathy, in his statement recorded under Section 164 of Cr.PC 1973, stated that he purchased villa plot no. B-34 at a cost of Rs. 50,000/- per Sq. Yd., out of which, he paid Rs. 5,000/- per Sq. Yd. through cheque and the balance amount of Rs. 45,000/- per sq. yd. amounting to Rs.5,13,00,000/-, he paid Rs. 4,08,00,000/- to Sri Tummala Ranga Rao in the residence of Sri Koneru Rajendra Prasad and balance of Rs.1,05,00,000/- equivalent to USD 2,50,000 to Madhu Koneru. On the advice of Sri Koneru Rajendra Prasad, Sri Madhu Koneru refunded the said amount stating that the said amount as loan given by Sri Parthasarathy. However, Sri Parthasarathy denied the said transaction as loan. Similarly, Sri Madhu Koneru had received USD 1,40,000 equivalents to Rs. 65 Lakhs in his savings A/c No. 2750064022 from Sri Challa Suresh who purchased Villa plot A-28 in M/s EHTPL and this fact has been confirmed by Sri Suresh and Sri Tummala Ranga Rao.

23. 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:

The investigation by CBI revealed that EMGF and M/s Emaar Properties PJSC, Dubai obtained undue pecuniary advantage of Rs. 167.29 Crores.

24. CBI also filed supplementary charge sheet on 23.04.2012. The said supplementary charge sheet reveals that on reference of Sri Koneru Rajendra Prasad, M/s Emaar Properties PJSC, Dubai, appointed M/s Stylish Holmes & Real Estates Pvt. Ltd. (M/s Stylish Holmes in short) represented by Sri Tummala Ranga Rao as its sole agent for marketing the plots and Residential units constructed in the land integrated project on 29.01.2005, without consulting APIIC.

25. The first 100 plots were to be sold by the agent M/s Stylish Holmes at an agreed price of Rs. 5000/- per sq. yd. and the balance plots were to be sold at prevailing market rates as determined by EHTPL. As per the agency agreement, M/s Stylish Holmes can collect additional 4% of the sale value as the commission from the villa plot buyers. As per the instructions of Sri Koneru Rajendra Prasad, M/s Stylish Holmes started booking of villa plots in the township from March, 2005, well before the land for the project was Conveyed in favour of EHTPL.

26. As per the agency agreement dated 29.01.2005, first 100 plots were to be sold at Rs. 5000/- per Sq. Yd., whereas, Sri Koneru Rajendra Prasad fixed higher prices ranging from Rs. 4000/- to Rs. 45000/- per Sq. Yd. over and above the rate of Rs.5,000/- per Sq. Ft. and instructed Sri Tummala Ranga Rao of M/s Stylish Holmes to collect the excess sale consideration from villa plot buyers in cash. As per his instructions, 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.

27. 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.

28. Sri N. Sunil Reddy along with his father Sri N. Sangi Reddy, floated a company by name M/s Sunil Projects and Foundations Pvt. Ltd., as directors, on 10.05.2006. Thereafter, Sri Narapa Manohar Reddy and his wife Smt. Narapa Saradha Reddy were appointed as directors w.e.f. 10.10.2009 and the name of the company was changed to M/s Southend Projects and Foundations Pvt. Ltd. from 25.01.2010. Sri N. Sunil Reddy and his father Sri N. Sangi Reddy have resigned from the company w.e.f. 01.10.2010.

29. M/s Southend Projects & Foundations Pvt. Ltd. has received funds of Rs. 45.21 Crores from the following 11 companies during 2009-2010.

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.

30. 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.

31. It is pertinent to mention here that after recording 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.

32. 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. Srinivas 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.

33. 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.

34. Accordingly, ED vide PAO No. 01/2012 dated 25.09.2012, attached the assets of the defendants (including the present appellants, who were not impleaded as defendants as detailed in para no. 1 above), and thereafter filed Original Complaint No.159/2012 before Ld. Adjudicating Authority for confirmation of the said properties. Ld. Adjudicating Authority after going through the material on record, issued show cause notice to the defendants. After going through the replies filed by them and hearing both the sides confirmed the attachment vide order dated 15.02.2013. Aggrieved by the said order, the appellants filed the present appeals, on the ground that they are the Bonafide purchasers of the plots.

Arguments on behalf of Appellants

35. During the arguments Ld. Counsel for appellants pointed out that EHTPL had not issued any cancellation letters to the appellants and this fact is also investigated & concluded by the CBI in its investigation, as mentioned in its supplementary chargesheet that EHTPL had prepared back dated cancellation letters in its computer system when the investigation was started and the said letters were never issued & delivered. They pointed out that the appellants were in physical & constructive possession of the said plots, when the attachment was made by the Respondent Department, as even mentioned in the order of the Hon’ble High Court of Andhra Pradesh in the WP filed by some of the purchasers. The appellants were not impleaded in any of the proceedings before the I.O. or the Ld. Adjudicating Authority. No Provisional Attachment Order, Original Complaint or even the copy of the Impugned Order was served to the Appellants despite they being the legitimate owners of the aforementioned plots.

36. Ld. Counsels for the appellants pointed out that the MOUs, Agreement to Sale executed jointly by EHTPL & EMGFLL in favour of the appellants for purchase of villa plots, which are tabulated as under:-

It is contended that they agreed to purchase the villa plots on the basis of Advertisements published in many newspapers and number of hoardings in the City, without any connivance or collusion with the accused persons. They stressed that as consideration as per the Agreement was already paid by the Appellants, and they are Bonafide purchasers. The allegation that APIIC was not given its share, and the same was misappropriated by certain persons/accused companies has nothing to do with the present Appellants. They argued that the appellants are the victims, who have parted with a substantial amount of sale consideration to the extent of about 95%, as balance of about 5% was payable at the time of execution of sale deed. Now, even the Plot has been attached by the ED, despite none of their fault, on account of misdeclaration by EHTPL to the investigation agencies that these are unsold plots. They contended that the Appellants have declared the entire amount paid to EHTPL in their respective ITRs. They pointed out that the basis of the ED to conclude that the allotments stood cancelled itself is erroneous, as it relied upon the statement dated 16.07.2014 of one Sri S. Madhusudan Rao, Chief Financial officer of EHTPL and Statement dated 23.08.2012 of one Shir Rakshit Jain, Senior Manager of EMGF, who are both main accused persons and gave false statements. They stressed that it is a trite law that the ‘statement of a co-accused’ is not to be construed as a substantive piece of evidence, especially in the absence of any other corroborating evidence, or material, but in the instant case, the Respondent has failed to bring on record any corroborating evidence even after 10 years of investigation. They argued that these self-serving statements made by culprits cannot be used against the Appellants, without providing any opportunity of cross-examination. They contended that even in the investigation of the CBI, it was categorically concluded that the “Plots remained allotted to the respective buyer” and no such cancellation had taken place and in fact, the main accused persons had hatched a criminal conspiracy to prepare cancellation letters with respect to the Villa Plots in back dates, without notice to the purchasers, who have already tendered 95% of the sale consideration, with an undertaking to tender the balance amount at the time of execution of sale deed. They pointed out that all the 134 Plots in question, the Allotment Letters & Agreements to Sell were executed, but no conveyance deed was ever executed in favour of any purchaser, and thus, the other 100 Plot Buyers, whose Plots were not attached by the ED are in no better position, as compared to the Appellants. They submitted that the plot owned by the appellants do not fall within the definition of the term “proceeds of crime’. The plots were sold by EHTPL to the appellants out of 29.92 acres of land purchased by it from APIIC and duly conveyed to it vide conveyance deed dt. 20.08.2008 on consideration. The appellant purchased the plot from EHTPL by paying consideration and the entire amount was declared by the appellants in their Income Tax Returns and paid income tax thereon. They contended that the Appellants have nothing to do with the commission of Scheduled Offences, which in this case has been identified by CBI is of excess cash collected for sale of villa plots, which was not accounted, and the equity of 26% to be given to APIIC was reduced to only 5%-6.5%. However, the plots which were allotted to the appellants were not derived out of criminal activity relating to schedule offences, but was purchased with the accounted, and clean money of the Appellants, which has admittedly nothing to do with any ‘Proceeds of Crime’.

37. Ld. Counsels for the appellants stressed that in any case, it has already been ascertained and concluded that any excess amounts collected, which are ‘Proceeds of Crime’ are/must be with the accused companies or their agents. However, no effort has been made to trace the proceeds with such persons despite knowing the destination of such ‘Proceeds of Crime’. The PAO clearly mentioned that 114.14 acres of land is still not sold by EHTPL. No efforts are made by the ED to identify properties of EMGF & EHTPL though it has large land holdings in and around Delhi and these details would be available in their balance sheets. They pointed out that it is mentioned in para 58 of the impugned order that none of the properties of EMGFL were attached. The attachment of properties purchased by innocent buyers shows lack of Bonafide’s or expertise on the part of ED. There is no reason to attach the plots bought by the Appellants in a Bonafide manner, and therefore, the same must be released forthwith.

38. They argued that the attachment of properties belonging to the appellants on the ground that since sale deed was not executed, they are not the owners of the properties. This is incorrect finding, as it is an admitted fact that the appellants had paid 95% of the amount and the balance amount of 5% was to be paid at the time of registration. But the registration could not be done by EHTPL since the Govt. of Andhra Pradesh issued a MO No. 1279 dated 08.10.2010 prohibiting the registration of the plots. For non-registration of the villa plots in favour of the appellants, by the seller due to the prohibition imposed by the Government. The appellants/buyers cannot be deprived of their respective right on the property, which is agreed to be purchased under Agreement of Sale.

39. In additional arguments they submitted that none of the 102 plots sold by M/s Emaar Hills township Pvt. Ltd./ Emaar MGF Land Ltd. was sold by the said company at the time of passing PAO and therefore, the attachment of only 14 plots, including the plots purchased by appellants was wrongly included for attachment. They argued that appellants are the bona-fide purchasers for value. Appellants were not having any knowledge regarding the commission of any fraud, and hence, their plots are wrongly attached by ED.

Prayer is accordingly made to allow the present appeals and thereby release their plots from any attachment (as detailed in para no.1 above).

40. On the other hand, Ld. Counsel for the respondent ED strongly opposed the grounds that M/s EHTPL have entered into an agreement with M/s APIIC to develop township project into 85 Acres with a revenue sharing pattern of 74:26 respectively. CBI Hyderabad conducted investigation regarding the irregularities and filed chargesheet on 01.02.2012 and supplementary chargesheet on 23.06.2012. He pointed out that as per agreement dated 03.11.2006 EHTPL has entered into an agreement with Emaar MGF Land Ltd. (EMGF) to undertake the entire development and bear all the cost of the project (SPV-1), for which they are entitled to a gross revenue share of 75%, leaving balance 25% to EHTPL. He contended that as per agreement, EHTPL has to develop the land and construct villas, whereas EHTPL and EMAAR MGF have sold only villa plots which is a deviation from the agreements entered and thereby avoided their investment into the project, but earned undue high returns of more than 95% of the income on sale of Villa plots. In this endeavour, APIIC, who has invested in the form of land was not given any share in the revenues or in the profits earned by EHTPL or by EMGF. He pointed out that as per present OC, EMGF has collected Rs. 6.86 Crores of cash from villa plot buyers and they are in the possession of the same. Hence, money earned by EHTPL and EMGF by causing loss to APIIC by diluting its share in the project to an extent of Crores of Rupees is considered as Proceeds of Crime. He submitted that as per the EMGF books of accounts, EHTPL revenue share is Rs. 26.74 Crore as profit before Tax and Rs. 37.67 Crore revenue not admitted totaling to Rs. 64.41 Crores, 19 plots (A-7, A-11, A-21, A-48, B-28, B-30, B-44, B-46, B-51, B-60, B-61, B-62, B-63, B-64, B-65, B-70, B-71, B-73 and B-74) of EHTPL have been attached. M/s EMGF has unaccounted cash component to the tune of Rs. 6.86 crores, for which land of 4.864 Acres of M/s Eternal Buildtech Pvt. Ltd, which is a 100% subsidiary of M/s EMGF, have been attached. The present appeals are filed by the Appellants regarding the four plots, attached by the Respondent being Bonafide purchasers. He submitted that the Appellants contended that the sale agreement has been entered with EHTPL on 20.08.2008 on payment of 95% of the plot value and on receipt of payment, EHTPL handed over the vacant villa plots to them, as per the agreement to sell. However, the contention of the appellants is not true as the said plots are not handed over to the appellants and were lying in the possession of the EHTPL at the time of attachment of the same on 25.09.2012 vide Provisional Attachment Order No. 01 of 2012 and confirmed by the Ld. Adjudicating Authority vide impugned order dated 15.02.2013. The said fact has been confirmed by Shri Rakshit Jain, the then Senior General Manager in M/s Emaar MGP Land Ltd., in his statement recorded under Sec. 50 (2) & (3) of PMLA, 2002 on 21.08.2012, that out of 134 plots in EHTPL, 100 plots were sold out and 34 were unsold and the said unsold plots are with EHTPL. He pointed that EHTPL/EMGF has not executed the sale deeds in respect of any of the 34 plots in favour of the appellants. The possession of the plots is not given to the Appellants, as the sale deed is not executed and the property was in the possession of EHTPL at the time of attachment, and hence, the plots are considered for attachment by the Respondent. He also contended that the physical possession of the unsold plots has already been taken over by the Respondent from EHTPL vide Panchnama dated 25.09.2013, as such, the possession lies with the Respondent, as on date. He argued that the Appellants in the garb of the present appeal are seeking a relief of declaratory nature, which is not permissible under law and would be otherwise barred by law of the limitation. Further, it is no res integra, that an unregistered agreement to sell does not confer any right whatsoever in favour of the proposed buyers. Nevertheless, as per EHTPL, the purported Agreement to Sell relied upon by the Appellants stood cancelled way back vide cancellation letter dated 04.10.2010 issued by EHTPL. Pertinently, it is the admitted case of the Appellants that no action has thus far been taken by them against EHTPL, EMGF and/or Stylish Homes Pvt. Ltd. seeking specific performance of the alleged Agreement to Sell, nor any complaint has been made in this regard, which puts a cloud of suspicion on the underhand transaction that took place between the Appellants and EHTPL. He pointed out that the attached proceeds of crime are already prayed for confiscation and the trial is pending before the Ld. PMLA Court, where the Appellants would be required to lead cogent evidence w.r.t. ownership of the attached plot vis, a vis. the veracity of the purported Agreements to Sell upon which the Appellant has relied upon in the present Appeal in view of the presumptions under Section 23 & 24 of the PMLA, 2002 and cancellation letter dated 04.10.2010 and without discharging the onus to prove either of the respective documents to be genuine, the ownership of the attached property cannot be conclusively determined. Accordingly, the present Appellants may be directed to approach the concerned PMLA Court u/s 8(8) of PMLA, 2002, to raise their respective claims over the attached property, if any, as a Bonafide claimant. He pointed out that a similar direction was passed by this Appellate Tribunal in Appeal Nos. 929/Hyd/2015 & 2112/Hyd/2017 in appeals filed by Dr. K.L. Narayana and K. Ravindranath.

Prayer is accordingly made to dismiss the present appeals and thereby uphold the impugned order.

Discussion & Findings:

41. It is not in dispute that the charge sheet filed by the CBI reveals that M/s EMGF & M/s Emaar Properties PJSC obtained undue pecuniary advantage of Rs.167.29 Crores. Thereafter, CBI also filed Supplementary charge sheet against the accused persons. The detailed allegations against all the appellants are mentioned in para no.2 to 34 above. The said allegations are also supported with the statement of Tummala Ranga Rao & Parthasarathy recorded U/s 164 Cr.P.C., and the statement of the buyers namely, Rahul Raju, Sri Challa Suresh and the other buyers of villas & plots etc., which clearly reflects the generation of proceeds of crime by the main accused persons by selling the plots on high rates on premium, but on record reflecting the sale price as only Rs.5,000/- per Sq. yd. and thereby, generating the excess amount/proceeds of crime of Rs.102,87,35,000 (Rs.96,01,75,000 + Rs.6,85,60,000) and causing loss to APIIC.

42. The issues raised by Ld. Counsels for the appellants as mentioned in para 35 to 39 seems to be quite convincing, if same are true & correct. Appellants have taken the plea that they are the Bonafide purchasers of respective Villa Plots, and hence, the said plots need to be released. In order to substantiate these facts, they pointed out the Agreement to Sale and payment details upto about 95% of the agreed sale consideration, which is tabulated as under:-

Admittedly, no sale deed is executed by the vendors/accused companies in their favour, till date, though they have made 95% of the sale consideration mentioned in the Agreement to Sale. There is nothing on record that they received any share from the proceeds of crime in any manner.

Out of the above appellants, appellant Sh. Bijay Kumar Mandhani has not furnished the details of payments to the Vendors. In absence of the same it cannot be said he is a Bonafide purchaser of the plot in question.

Appellant Sh. K. Ramcharan Tej has not filed copy of any Agreement to Sale for the reasons best known to him. It is not clear whether any agreement was executed in his favour or not, but payment of sale consideration by him is not disputed, as apparent from his IDBI Bank statement at page 154.

If the sale transactions pointed out by appellants are genuine, then certainly there was a misdeclaration on the part of the vendors/ accused persons to the investigation agencies to mislead, which resulted in attachment of the aforesaid villa plots. This falsifies the contention of the respondent ED that out of 100 plots, 34 plots are lying unsold (including the plots of the present appellants), seeing the fact that this aspect/misdeclaration stands contradicted during the investigation conducted by CBI, as mentioned in para no.35 above. This fact also stands substantiated from the fact that no request for cancellation of plot was made by any of the present appellants, nor they received back the 95% of the sale consideration from the vendors/developers or their agents, till date. This amounts to commission of fraud on the Bonafide purchasers, as well as with the investigation agencies. The appellants could not file the objections against the attachment alongwith supporting documents, as they were not joined during investigation conducted by respondent ED or as defendants in Original Complaint no. 159/2012 filed before the Adjudicating Authority for confirmation of PAO no.1/2012, on account of ignorance regarding the Bonafide purchasers. However, this appellant tribunal cannot give a conclusive finding that whether they are the Bonafide purchasers of their respective plots or were in collusion with the main accused persons, in any manner. The issue that whether they are the Bonafide purchasers/ allottees of the plots needs to be decided by the Trial Court, in prosecution complaint filed under PMLA, Act, 2002, after appreciating the prosecution and defence evidence. Respondent ED is also at liberty to reinvestigate and to check & verify the contention of the appellants as Bonafide purchasers and file report before the PMLA court for release of said properties, in order to avoid unnecessary harassment to the appellants, if they are victims of misdeclaration. In absence of any action on the part of respondent ED, within a reasonable period, the present appellants may press for their claim before Ld. Special Judge, PMLA Court at appropriate stage, if they are the genuine and Bonafide purchasers of the said plots and in case their claim is admitted, then direction can be issued for execution of sale deeds in their favour, subject to deposit of the remaining consideration amount in the form of FDRs, before the Ld. Special Judge, PMLA Court for disposal in terms of Section 8 (8) of PMLA, 2002.

43. In view of discussion in para 42 above, the present appeals are hereby disposed of with aforesaid liberty. However, it is made clear that nothing expressed herein will affect the right of any party to claim the attached property, as per law.

Appeals Disposed of with Directions.
Pronounced on this 06^th Day of August, 2026.