Smt. R. Booma Vs S. P. Rajendran (Appellate Tribunal Under SAFEMA Delhi)
SAFEMA Tribunal Upholds PMLA Attachment in Gold Loan Fraud; Grants Limited Relief for Court Security Deposit
The Appellate Tribunal under SAFEMA substantially upheld the attachment of movable and immovable properties belonging to S.P. Rajendran and R. Booma in a PMLA case arising out of a ₹6.33 crore gold loan fraud on the South Indian Bank. The ED alleged that the appellants, in collusion with a bank-approved gold appraiser, fraudulently obtained loans by pledging spurious gold ornaments and that ₹82 lakh earned as commission constituted the proceeds of crime, which was invested in various properties. The Tribunal found that most of the attached assets had either been acquired from the alleged proceeds of crime or loans relating to those assets had been repaid using the tainted funds.
The Tribunal rejected the appellants’ contention that properties acquired prior to the scheduled offence could not be attached, holding that even pre-existing or otherwise untainted properties may be attached as the “value of the proceeds of crime” where the actual proceeds are unavailable. It distinguished the Supreme Court’s decision in Pavana Dibbur and relied on its earlier decision in Sadanand Nayak as well as the Punjab & Haryana High Court’s judgment in Dilbag Singh. The Tribunal also rejected the challenge to the reliance placed on the appellant’s statement recorded under Section 50 of the PMLA, observing that the subsequent allegation of coercion was only an afterthought and that such statements, including retracted statements supported by other material, are admissible evidence.
However, the Tribunal granted limited relief regarding the ₹50 lakh security deposit lying with the Judicial Magistrate as a bail condition. Holding that the amount was already under the custody of the criminal court, it found that the ED had failed to establish the statutory requirement that the property was likely to be concealed, transferred or dealt with so as to frustrate confiscation proceedings. Accordingly, the attachment was set aside only in respect of the security deposit, while the attachment of the remaining properties was upheld, with liberty reserved to the ED to invoke Section 5(1) afresh if circumstances subsequently warranted.
Cases Discussed
- Aditya Krishna v. Directorate of Enforcement, 2025 SCC OnLine Del 435
- Abhishek Banerjee v. Enforcement Directorate (SC), (2024) 9 SCC 22
- Pavana Dibbur v. Enforcement Directorate (SC), (2023) 15 SCC 91
- Vijay Madanlal Choudhary v. Union of India (SC), 2022 SCC OnLine SC 929
- Rohit Tandon Vs. Directorate of Enforcement (SC), 2018 (11) SCC 46
- Directorate of Enforcement, Telstar Travels Pvt. Ltd Vs. Enforcement Directorate (SC), (2013) 9 SCC 549
- Tarun Kumar vs. Assistant Director, SLP (Crl.) No.9431 of 2023
- Dilbag Singh @ Dilbag Sandhu v. Union of India & Ors. (Punjab & Haryana HC), CWP-22688-2024 (Order dated 13.11.2024)
- Sadanand Nayak v. Dy. Director, FPA-PMLA-5612/BBS/2023
- Suma Sooraj v. Deputy Director, Directorate of Enforcement, FPA-PMLA-3182/COCHIN/2019
- Seema Garg vs. Deputy Director, Directorate of Enforcement, 2020 (2) RCR (Criminal) 701
- Abdullah Ali Balsharaf’s case
- Kumar Pappu Singh’s case
- HDFC Bank’s case
- M/s Himachal Amta Power Limited’s case
- Hemanshu Rajnikant Shah’s case
- Axis Bank’s case
- Prakash Industries case
FULL TEXT OF THE JUDGMENT APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI
These appeals have been filed against the order of the Adjudicating Authority (“AA”) established under the Prevention of Money Laundering Act, 2002 (PMLA) dated 28.11.2016, whereby, the Provisional Attachment Order (PAO) No. 12/2016 dated 10.06.2016 attaching certain movable and immovable properties in the names of the appellants herein was confirmed.
2. The relevant facts briefly are that an FIR dated 06.08.2013 was registered by the District Crime Branch, Karur, on the complaint of the Branch Manager of South Indian Bank against Sh. S.P. Rajendran, Smt. R. Booma, Shri Thangaadurai, Shri Jobbi Varghese, Shri Harikrishna and Shri Nallaswamy. The FIR invoked Sections 120-B, 406, 420, 464, 465, 468, 471 and 477-A of the Indian Penal Code. It was alleged that during internal inspection conducted by the Head Office of the Bank, several gold ornaments pledged for obtaining gold loans were found to be spurious. Investigation revealed that 178 gold loan accounts had been opened between May 2012 and March 2013 in the names of Shri S.P. Rajendran, his wife Smt. Booma (the appellants herein), their relatives, friends and associates. Shri S.P. Rajendran was found to have acted in collusion with the Bank’s approved gold appraiser, Shri Thangadurai, who facilitated the acceptance of the spurious gold ornaments as genuine, thereby enabling the fraudulent sanction of loans. The value of loans obtained against the allegedly fake gold ornaments was assessed at approximately Rs. 6.33 crore, resulting in a corresponding loss to the Bank.
3. Based on the FIR, an ECIR was registered by the respondent, the case of the Respondent Directorate being that S.P Rajendran charged 15% commission for arranging loan, and thereby, received an amount of Rs. 82 Lakh (identified as proceeds of crime) as commission for facilitating fraudulent gold loan transactions and invested the same in movable and immovable properties standing in his name and in the name of his wife, R. Booma, also an appellant herein.
4. Based on the findings of the investigation, certain properties of the appellants were attached u/s 5(1) of the PMLA, and subsequently, the attachment thereof was confirmed by the Ld. Adjudication Authority.
5. Aggrieved by the said order of the Ld. AA, the present appeals have been filed challenging the same on factual and legal grounds as discussed in greater detail hereinbelow.
Submissions from the side of the Appellants:
6. The Ld. Counsel of the appellants, firstly, submitted that the attached properties were acquired much prior to the alleged commission of the scheduled offence, i.e., 2012-2013, and even before the registration of the FIR, and, therefore, these properties had no nexus with the alleged proceeds of crime and could not have been attached as proceeds of crime by the respondent. It is further contended that the properties were reflected in the ITRs filed by the appellants. The Ld. Counsel of the appellants relied on the judgement of the Hon’ble Supreme Court in the case of Pavana Dibbur v. Enforcement of Directorate, (2023) 15 SCC 91 to argue that properties acquired prior to the period of the scheduled offence cannot be attached. The Ld. Counsel of the appellant further stated that one property was gifted by the father of Smt. R. Booma through a settlement deed and, therefore, it was the Streedhan, i.e., the absolute property of the appellant.
8. With respect to the remaining properties, the Ld. Counsel for the appellants submitted that these properties were purchased out of legitimate and explained sources, including business and agricultural income was Shri S.P. Rajendran’s business income or personal resources derived from family resources.
9. The Ld. Counsel of the appellants also argued that he statements made u/s 50 of the Act cannot be relied upon as the statements had not been made voluntarily and had been later retracted.
10. It is also contended that the respondent failed to record any reason under section 5(1) of the Act that the properties were likely to be alienated which would defeat the purpose of the proceeding. Moreover, as regards the amount of Rs.50,00,000/- in the form of security deposit with the Judicial Magistrate No. II, Kulithalai, as a condition for grant of bail, there could have been no reason to believe that the said amount would be concealed, transferred or dealt with in a manner which would frustrate the proceedings relating to confiscation thereof.
11. Based on the above contentions, it is prayed by the appellants that the impugned order be set aside and the appeals be allowed.
Submission from the side of the Respondent:
12. Ld. Counsel for the respondent strongly contested the arguments and contentions raised on behalf of the appellants. He placed reliance on the appellant’s statement recorded under Section 50 wherein certain admissions were made by the appellant. He referred to the relevant discussions which are to be found in para 3.4 (page 8 to 10) of the impugned order. With regard to the house property which has been attached, he submitted that the same was no doubt acquired prior to the period of offence, but the loan has been repaid out of the proceeds of crime, which was also admitted by the appellant. As regards reason to believe in respect of security deposit made with the Ld. Judicial Magistrate, he submitted that the Directorate legitimately apprehended that the amount could be released by the Court at any time in view of the statutory provision of the Criminal Procedure Code (Cr. P. C.) with regard to the surety amount. Further, the ED has also made a submission in this regard before the Ld. Court informing about the attachment. He referred to the property wise of discussion of each attached properties which occurs Page 10 onwards in the impugned order. He also placed on record the fact that prosecution complaint in this case has already been filed against both the appellants herein, though the trial is yet to commence.
Analysis, Findings and Order
13. I have given careful consideration to the rival submissions and perused the material on record. The background facts of the case have already been discussed briefly in paragraphs 2 and 3 above. The findings of investigation in the predicate (scheduled) offence case are that the appellants, in connivance with the bank officials of South Indian Bank, Kaniyalampatti Branch, fraudulently availed gold loans against spurious gold ornaments, resulting in a loss to the Bank of approximately Rs. 6.33 crore. S.P. Rajendran, the appellant in one of these two appeals, also acted as an agent to assist other people in availing loan fraudulently, using the same scheme, and earned a commission of 82 lakh, which has been identified as the ‘proceeds of crime’ in the hands of the appellants and was utilized to buy several movable and immovable properties.
14. The first argument on behalf of the appellants is that the attached properties have no nexus with the alleged proceeds of crime. It is contended that the scheduled offence pertains to the period 2012-2013 whereas the attached properties were acquired prior thereto and were duly reflected in the Income Tax Returns of the appellants. A careful perusal of the impugned order, however, reveals that the Ld. AA has categorically recorded in Para 4.2 (page 16 of 35) of the impugned order that all the immovable properties, except the properties listed at Sl. Nos. 1 & 3, were purchased during the period 2012-13 from the commission of Rs. 82 lakhs illegally derived by the appellants from criminal activity. Even, as regards the immovable properties at Sl. No. 1, the finding recorded is para 42 of the impugned order is that although the property was purchased in the year 2009, the appellant had constructed a house on the said land during the year 2010 by obtaining loans from some individuals. He deposed in his statement dated 02.09.2015 that he had repaid the said loans obtained for construction of the house by using the amount of Rs. 82 lakhs received as commission. Similar is the situation of the movable properties. He had settled the loan taken for the car out during the alleged offence period and therefore, it could be presumed that the proceeds of crime were utilized to settled the loans. As regards the FD of Rs. 5 lakh, the same was also deposited out of the 82 lakhs received as commission for pledging spurious gold.
15. It is contended that the properties were duly reflected in the Income Tax Returns. However, the findings recorded in the impugned order is that Smt. Booma was a housewife, who was not working anywhere outside the house, and had not filed any returns of income. Nor was she aware of the sources of income for acquiring the properties which have been attached. These facts have not been refuted by the appellants by production of any cogent material. Only a copy of one assessment order has been appended as a part of the appeal paper book filed in the case of Shri S.P. Rajendran which is for Assessment Year 2013-14. Perusal of the assessment order reveals that the return in respect of that assessment year was filed belatedly on 26.04.2014, which was subsequently revised on 02.09.2014. The original as well as the revised returns were filed after the registration of FIR in the scheduled offence case on 06.08.2013 and appear to have been prompted by the need to show legitimate income in the hands of the appellant to explain the purchase of properties. Moreover, mere declaration of tainted income as income from untainted sources in the ITR would even otherwise not absolve the appellants from the charge of money-laundering or possession of proceeds of crime. It has to be borne in mind that the entire purpose of money laundering is to claim or project tainted property/income as untainted. Declaration of proceeds derived from criminal activity in the ITR as legitimate income is merely one more step in this direction. The primary focus of the Income Tax Department is to tax the income derived by the taxpayer. The Department may not, in the ordinary course, go into the genuineness of the source of the income declared, unless specific inputs in this regard become available to it from internal or external sources. Nearly 99% of the returns of income are accepted by the Department at face value, without scrutiny.
16. Even from the legal perspective, the argument put forward on behalf of the appellants that properties acquired prior to the alleged period of crime cannot be attached placing reliance on the judgment of the Hon’ble Supreme Court in Pavana Dibbur v. Enforcement Directorate, (2023) 15 SCC 91, is untenable. The underlying legal issue has been discussed in detail in the order dated 14.10.2024 of this Appellate Tribunal passed in the case entitled Sadanand Nayak v. Dy. Director, FPA-PMLA-5612/BBS/2023 (paragraphs 12 to 24) wherein, after a thorough review of all the authoritative case laws on the subject, including the aforesaid judgment of the Hon’ble Supreme Court in the case of Pavana Dibbur, no merit was found in contention that properties acquired prior to the alleged period of the scheduled offence cannot be attached as ‘proceeds of crime’ as defined under section 2(1)(u). Furthermore, in a judgment passed subsequent to the aforesaid order of this Appellate Tribunal, the Hon’ble Punjab and Haryana High Court in Dilbag Singh @ Dilbag Sandhu v. Union of India & Ors., CWP-22688-2024 (Order dated 13.11.2024), also did not find any merit in the argument that, as a rule, property acquired prior in time to the period of the alleged scheduled offence cannot be attached. The relevant paragraphs of the said judgment are reproduced hereunder:
1. Factual Matrix:
1.1 With the consent of learned counsel for the parties, as many as seven writ petitions involving common issues shall stand disposed of by this common order. The facts in this case have been derived from CWP-22688 2024, in which the arguments were made.
1.2 The petitioner has raised the following issues:
“A. Whether any property of the petitioner can be attached which were acquired prior to the scheduled offence and cannot be said to have any connection with the proceeds of crime in view of the Hon’ble Supreme Court judgment in Pavana Dibbur vs. Directorate of Enforcement 2023 SCC Online 1586 as well as the Division Bench judgment in Seema Garg vs. Deputy Director, Directorate of Enforcement 2020 (2) RCR (Criminal) 701 upheld by the Hon’ble Supreme Court and followed by various High Courts?”
* * * *
“3.8 Moreover, the reasoning adopted in Seema Garg’s case (supra) to the effect that there was no need to insert third part in the definition of the ‘proceeds of crime’ and that ‘value of such property’ is superfluous does not appear sound. It appears that transformative journey of the definition of phrase ‘proceeds of crime’ was not brought to the notice of the Division Bench in Seema Garg’s case (supra). In Abdullah Ali Balsharaf’s case (supra), Delhi High Court inadvertently overlooked the sub-category (i) of second part of definition of ‘proceeds of crime’. Similarly, Andhra Pradesh High Court in Kumar Pappu Singh’s case (supra) was not properly assisted. Furthermore, the attention of Patna High Court was not drawn to part 2(i) in HDFC Bank’s case (supra). Similar is the position in M/s Himachal Amta Power Limited’s case (supra). In this case, the attention of the Bench was not drawn to the second broader category of the definition. In Hemanshu Rajnikant Shah’s case (supra) the Court relied upon Seema Garg’s case (supra) and held that the properties acquired before the alleged crime and before the enforcement of the ‘2002 Act’ cannot be attached.
3.9 On the other hand the judgments passed in Vijay Madanlal Chaudhary’s case (supra), Axis Bank’s case (supra) and Prakash Industries case (supra) completely answer the question in favour of ED.
3.10 The petitioner’s counsel has also heavily relied upon Pavana Dibbur’s case (supra). This Bench has carefully read the aforesaid judgment. The aforementioned case involved attachment of properly falling under the category of ‘direct’ or ‘indirect’ proceeds of crime. The complaint under Section 44-45 of 2002 Act was quashed by the Supreme Court. The Bench was never called upon to analyse the contentions based upon Section 2(i)(u) of 2002 Act, whereas, in Vijay Madanlal Chaudhary’s case (supra) the Court directly answered the aforesaid question. Hence, there is no substance in the first argument of learned counsel for petitioner.”
17. In light of the position of law as discussed above, even property that was acquired prior to the alleged period of crime and for that matter even property which has been acquired form the otherwise untainted sources can be attached as ‘value’ of the proceeds of crime where the direct/indirect proceeds of crime are no longer available or have been made to disappear. The argument put forward on behalf of the appellants that properties acquired prior to the alleged period of crime cannot be attached, therefore, lacks merit and is consequently, rejected.
18. The appellants also contended that the respondent has placed substantial reliance upon the statement of S.P Rajendran recorded under Section 50 of the Act of 2002. According to the appellants, the statement was recorded under duress and the appellant had, before the Adjudicating Authority, disputed the voluntary nature of the said statement. I have perused the statement of the appellant and find that in the said statement, Sh. S.P Rajendran made several important admissions. Furthermore, it is seen that no formal retraction of the statement was made by S.P Rajendran, but only a submission was made before the Ld. AA that the statement had been made under duress and he does not stand by it. Having considered the contents of the statement as well as the manner of ‘retraction’, I am of the view that the so-called retraction is clearly an afterthought to which not much credence can be given. Furthermore, the legal position emerging from the judgments of the Hon’ble Supreme Court in a catena of cases, including, Rohit Tandon Vs. Directorate of Enforcement 2018 (11) SCC 46, Aditya Krishna v. Directorate of Enforcement [2025 SCC OnLine Del 435], Abhishek Banerjee v. Enforcement Directorate, (2024) 9 SCC 22, Vijay Madanlal Choudhary v. Union of India, 2022 SCC OnLine SC 929, Tarun Kumar vs. Assistant Director SLP (Crl.) No.9431 of 2023, Directorate of Enforcement, Telstar Travels Pvt. Ltd Vs. Enforcement Directorate [(2013) 9 SCC 549] , is that statements recorded under section 50 of the PMLA, can be relied upon as evidence in proceeding under the said Act. In the last-mentioned case, it was held that even retracted statements can be relied upon where supporting material exists.
19. The last contention put forward on behalf of the appellant is that insofar as the amount of Rs. 50 lakh deposited as security deposit with the Ld. Judicial Magistrate No. II, Kulithalai is concerned, no reason to believe could have existed in respect of the said amount as the amount was already in custody of the Court and could not have been alienated or dealt with by the appellants. The submission from the side of the respondent directorate in this regard is that in view of the provisions of the Cr. P.C. the respondent had such reasonable apprehension. With regard to this issue, in its judgment in the case of Smt. Suma Sooraj v. Deputy Director, Directorate of Enforcement FPA-PMLA-3182/COCHIN/2019 had held as follows:
“It is submitted that an order of attachment requires reasons to believe in writing and it should be on the basis of the material in possession that a person is in possession of proceeds of crime and such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may frustrate the confiscation of the property. An order of attachment pre supposes the conditions referred to above and given under Clause (a) and (b) of sub Section (1) of Section 5. In the instant case, the respondents have failed to show any likelihood of concealment or transfer of the properties so as to frustrate the proceeding of confiscation rather the property in question was attached by the Special Court much prior to the order for provisional attachment. The Special Court attached the properties by its order dated 19.03.2015 thus there was no likelihood of transfer or concealment of the property. Ignoring the requirement and mandate of Section 5(1) of the Act of 2002, the order of provisional attachment was passed. It is no doubt that the provisions of the Act of 2002 are having over riding effect to other legislation in case of conflict but in this case we do not find any conflict between two legislations. The property can be attached by the respondent department under Section 5 of the Act of 2002 but it can be when they possess material to show that property may be concealed, transfer or be dealt with in any manner to frustrate the proceeding of confiscation. When the property was already attached by the Special Court, how it could have been transferred or concealed. We, therefore, find that reasons to believe were recorded without application of mind. The material to attract Clause (b) of Sub Section (1) of Section 5 of the Act of 2002 is missing.
Accordingly, the last argument raised by the appellant is accepted and accordingly the order of provisional attachment so also the order passed by the Adjudicating Authority are set aside. It is however with clarity that if, the Special Court withdraws the attachment order or the trial pursuant to the FIR is completed, the respondents would be at liberty to exercise their authority under Section 5 (1) of the Act of 2002 in case of an apprehension of concealment or transfer of property. With the aforesaid, appeal is disposed of.”
20. The above legal precedent has subsequently been followed by this Appellate Tribunal in a number of subsequent judgments. Accordingly, as regards the said amount of Rs. 50 Lakh which was with the Ld. Judicial Magistrate No. II, Kulithalai, the contention of the appellant is upheld. Accordingly, the impugned order passed by the Ld. Adjudicating Authority would stand set aside qua the said property. However, respondent would be at liberty to take appropriate measures to ensure that they are kept informed of the developments in relation to the proceedings before the Ld. Judicial Magistrate for substitution/release of the said security deposit, and also be at liberty to exercise their authority under Section 5 (1) of the Act of 2002 in case of an apprehension of concealment or transfer of property.
20. In light of the above discussion, the impugned adjudication order passed by the Ld. Adjudicating Authority shall stand modified to the limited extent as discussed in the preceding paragraph.
21. Accordingly, these appeals would stand disposed of along with pending applications, if any.
22. No order as to costs.
