Suraj Satish Chavan Vs Deputy Director (Appellate Tribunal Under SAFEMA Delhi)
SAFEMA Tribunal Upholds PMLA Attachment in BMC ‘Khichdi’ Scam; Rejects Salary and Loan Defence for ₹1.25 Crore Receipt
The Appellate Tribunal under SAFEMA dismissed the appeal filed by Suraj Satish Chavan, upholding the provisional attachment of his properties under the Prevention of Money Laundering Act, 2002 in connection with the alleged BMC “Khichdi” scam. The Enforcement Directorate alleged that contractors engaged to supply 300-gram Khichdi packets to the Brihanmumbai Municipal Corporation instead supplied 100-gram packets, causing a wrongful loss of over ₹6.37 crore to the civic body. During the investigation, it was found that ₹1.25 crore had been transferred from M/s Force One Multi Services to the appellant, who was alleged to have used his political influence to facilitate the award of the contract.
The appellant contended that he had been denied adequate opportunity before the Adjudicating Authority, that he had no role in securing the contract, and that the amount received represented either salary or a loan, and therefore could not constitute proceeds of crime. The Tribunal rejected these submissions, observing that the appellant failed to produce any appointment order or employment records to support the claim that ₹1.25 crore was salary. It also found the loan explanation untenable, as no loan agreement or repayment evidence was produced despite being specifically called upon to do so.
The Tribunal held that the appellant had failed to satisfactorily explain the receipt of ₹1.25 crore, which was traced through banking channels from an entity allegedly involved in the scheduled offence. Accepting the Enforcement Directorate’s case that the appellant had received the amount for facilitating the award of the contract, the Tribunal concluded that the attached properties represented proceeds of crime liable to attachment pending the conclusion of the criminal proceedings. Finding no merit in the appeal, it dismissed the challenge and upheld the provisional attachment.
FULL TEXT OF THE JUDGMENT APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI
By this appeal under Section 26 of the Prevention of Money Laundering Act, 2002 (in short “the Act of 2002”), a challenge has been made to the order dated 28.08.2024 passed by the Adjudicating Authority confirming the Provisional Attachment Order dated 12.03.2024.
Facts of the case:
2. It is a case where FIR No. 504/2023 was registered by EOW, Mumbai on 01.09.2023. It was for the offence under Section 34,406,409,420,120-B IPC, 1860 against Vaishnavi Kitchen, Sahyadri Refreshment, Sunil Kadam, Rajiv Salunkhe, Sujit Patker, partners of Force One Multi Services, partners of Sneha Caterers and others. Mumbai Police conducted preliminary enquiry and found that in two work orders for supply of “Khichdi” to Brihanmumbai Mahanagara Palika (BMC/MCGM) by M/s Vaishnavi Kitchen (M/s Sahyadri Refreshment) owned by Mr. Sunil Kadam and Mr. Rajiv Salunkhe and M/s Force One Multi Services, BMC/MCGM paid Rs.5.93 Crores to M/s Sahyadri Refreshment for supply @ Rs.33/- per packet. However, M/s Sahayadri Refreshment supplied lesser quantity of “Khichdi” and illegally gained Rs.2.73 Crores. In the similar manner, BMC/MCGM paid Rs.8.64 Crores to M/s Force One Multi Services for “Khichdi” packets @ Rs.33/- per packet. It illegally gained Rs.3.64 Crores. Those funds were disguised as employee salaries of M/s Force One Multi Services resulting in a total loss of Rs.6.37 Crores to BMC/MCGM in respect of these two work orders.
3. The serious allegation exists against the entities involved in getting order for supply of “Khichdi” at a fixed rate of Rs.33/- per packet. The preliminary enquiry of EOW made analysis of work orders issued to M/s Force One Multi Services. The entity was not possessing the kitchen or any license from the Health Department or Food and Drug Administration yet awarded the work order for supply of “Khichdi”. It was not even meeting the eligibility parameters yet order for supply of “Khichdi” was given to the said entity.
M/s Force One Multi Services entered into MOU with Mr. Sanjay Mali of M/s Sneha Caterers to prepare 300 gms of “Khichdi” packet @ Rs.16.50/-. Instead of preparing the packet of 300 gms of “Khichdi”, the packet containing 100 gms “Khichdi” was prepared and supplied to the BMC @ Rs.33/-per packet and thereby the entities got involved itself in the crime.
4. The complainant further placed on record the enquiry report with the finding regarding obligation to supply “Khichdi” packets weighing 300 gms to BMC, M/s Force One Multi Services, through its sub-contractors M/s Sneha Caterers & M/s Golden Star Banquet Hall, supplied “Khichdi” packets of lesser weight. As a result, M/s Force One Multi Services received a total amount of Rs. 8.64 Crore from BMC, of which around Rs. 4.20 Crore was paid to Sanjay Mali of M/s Sneha Caterers and around Rs. 84 Lacs to Amanpreet Keer of M/s Golden Star Banquet Hall for preparing the “Khichadi” earning a wrongful gain of around Rs. 3.64 crore.
5. M/s Sahyadri Refreshment, maintaining bank account with Vaishya Sahakari Bank Ltd. bearing no. 003110100001615, received an amount of Rs. 5,92,17,002.90 from BMC/MCGM during the period from 01.04.2020 to 31.03.2021, against work orders for supply of “Khichdi” packets. The examination of the said bank account revealed that an amount of Rs. 2,65,00,000.00 was transferred to the bank account of M/s FNJ Enterprises Pvt. Ltd. and an amount of Rs. 45,00,000/- was transferred to the bank account of M/s Force One Multi Services during the said period. The transactions were confirmed by the inward receipts in the bank account no. 50200019111511 of M/s FNJ Enterprises Pvt Ltd (maintained with HDFC Bank) and bank account no. 010110000000874 of M/s Force One Multi Services (maintained with Thane Bharat Co-op Bank). Thus, it was confirmed that from the amount of Rs. 5.92 Crores received from BMC Authorities against supply of “Khichdi” packets, an amount totaling to Rs. 3.10 Crore was transferred to the firms tasked to prepare “Khichdi” on behalf of M/s Sahyadri Refreshment, leaving an amount of Rs. 2.82 Crore with M/s Sahyadri Refreshment. Sunil Kadam, acting on behalf of M/s Sahyadri Refreshment, had no intention of preparing/supplying “Khichdi” in the proper manner and as per the Work Order. M/s Sahyadri Refreshment exploited the flawed mechanism of BMC Authorities, who could not ensure check-balances/proper supervision of the work orders related to supply of “Khichdi” during the Covid-19 epidemic. M/s Sahyadri Refreshment did not carry out any tangible work in the supply of “Khichdi” or fulfill its responsibility as per the work order obtained (based on Sunil Kadam’s influence in BMC). Considering the allegations in the FIR and based on further investigation under the Act of 1999, it became apparent that an excess amount of Rs. 2.82 Crore is an illegitimate gain obtained by M/s Sahyadri Refreshment.
6. M/s Force One Multi Services, maintaining Bank Account No. 010110000000874 with Thane Bharat Co-op Bank, received an amount totaling to Rs. 8,63,94.985.68 from BMC/MCGM for the period 01.04.2020 to 31.03.2021, against work orders for supply of “Khichdi” packets. The examination of the said bank account of M/s Force One Multi Services revealed that an amount of Rs. 4,14,73,000.00 was transferred to M/s Sneha Caterers and an amount of Rs. 82,05,000 was transferred to M/s Golden Star Banquet Hall. The transactions were confirmed by the inward receipts in the bank account nos. 10110000000981 and 5202000100001500 of M/s Sneha Caterers & Decorators maintained with Thane Bharat Co-op Bank and Karnataka Bank, respectively, and bank account no. 60321018676 of M/s Golden Star Banquet Hall & Catering Services maintained with Bank of Maharashtra. Thus, it was ascertained that from the amount of Rs. 8.64 Crores received from BMC against the supply of “Khichdi” packets, an amount of Rs. 4.96 Crore was transferred to the firms tasked to prepare “Khichdi” on behalf of M/s Force One Multi Services, leaving an amount of Rs. 3.68 Crore with M/s Force One Multi Services. Mr. Suraj Chavan, acting on behalf of M/s Force One Multi Services, applied influence on the BMC Authorities for obtaining work order in the name of M/s Force One Multi Services. Further, M/s Force One Multi Services, with no intention of preparing/supplying “Khichdi” in the proper manner as laid down by BMC, blatantly flouted the terms & conditions of the work order for supply of “Khichdi”. Without carrying out any tangible work or fulfilling its responsibility, M/s Force One Multi Services wrongfully gained Rs. 3.68 Crore. Thus, Rs. 3.68 Crore was treated to be illegitimate gain obtained by M/s Force One Multi Services.
7. So far as the appellant is concerned, he is recipient of the proceeds of crime to the extent of Rs.1.35 Crores. He was arrested on 17.01.2024 and was granted bail almost after a period of one year. He was found to be in possession of property to a sum of Rs.88,51,500/- and accordingly provisional attachment of the property was caused to that extent.
8. The role of the appellant for acquisition of proceeds of crime was found during the course of investigation. It was revealed while making inquiry of the bank account of M/s Force One Multi Services and examination of the documents. It revealed that an amount of Rs.8,63,94,985/- was received by M/s Force One Multi Services from BMC. The part of the aforesaid amount was transferred in the bank account of the appellant Suraj Chavan. It was to the tune of Rs.1.25 Crores. The appellant was involved in getting the work order in favour of the entities and in response, he received Rs.1.25 Crores through the banking transaction and accordingly his property has been provisionally attached. The Provisional Attachment Order has been confirmed by the Adjudicating Authority. Aggrieved by the aforesaid, the present appeal has been filed.
Arguments of counsel for the appellant:
9. The learned counsel for the appellant submitted that a proper opportunity of hearing was not provided to the appellant. He was behind bar for nearly one year. He was served with a notice without providing time to file the reply. He appeared before the Adjudicating Authority through an Advocate to make a prayer to adjourn the matter. The prayer aforesaid was not accepted, rather the impugned order was passed in contravention of the Act of 2002. A proper opportunity of hearing was not provided to the appellant though represented through the Advocate.
10. The learned counsel for the appellant further submitted that the entities said to be involved in commission of crime have no connection with the appellant, rather he has wrongly been involved in the case and provisional attachment order was caused accordingly. It is without realizing the fact that appellant had no role for getting the contract for supply of “Khichdi”. His property has, yet, been attached and, therefore, the appeal has been preferred to seek release of the property.
11. It was further submitted that the appellant has not been named as an accused, rather he is said to be an instrument in getting the work for supply of “Khichdi”. It is by using his political position. However, the Provisional Attachment Order has been caused in ignorance of the fact that an amount of Rs.1.25 Crores was received by the appellant towards salary. The Adjudicating Authority failed to consider the aforesaid aspect of the matter while passing the impugned order adverse to the appellant. The salary amount could not have been considered to be the proceeds of crime but ignoring the aforesaid fact, the impugned order has been passed.
12. The learned counsel for the appellant further submitted that appellant had taken loan from the accused. The fact aforesaid has also not been considered by the Adjudicating Authority while confirming the Provisional Attachment Order. On the aforesaid ground also, the impugned order deserves to be set aside.
13. The learned counsel for the appellant did not raise any other argument than referred to above. It is despite an opportunity to raise any other factual or legal issue. The learned counsel for the appellant restricted his argument to what has been referred above.
Arguments of counsel for the respondent.
14. The appeal was contested by the learned counsel for the respondent. Elaborate arguments were raised to deal with each and every aspect of the matter. It would be referred while recording finding on the issues raised by the appellant to avoid repetition of facts and for the sake of brevity.
Finding of the Tribunal:
15. I have considered the rival submissions of the parties and perused the record.
16. The facts on record show serious allegations against the entities involved in the commission of crime. They entered into agreement for supply of “Khichdi” @ Rs.33/- per packet and accordingly were required to supply “Khichdi” with the quantity of 300 gms. It was, however, found that the supply of “Khichdi” was in 100 gms packet only. The two entities involved in this case received Rs.5.93 Crores and Rs.8.64 Crores. The amount aforesaid was received by the accused entities and out of which they had paid a sum of Rs.1.25 Crores to the appellant. The amount aforesaid was transferred in the bank account of the appellant bearing No. 279100100000115.
17. The learned counsel for the appellant could not explain the source though tried to refer transfer of the amount of salary and alternatively transfer of the amount as loan. The counsel for the appellant was called upon to show appointment order to make out a case for receipt of salary. The counsel failed to refer any appointment order so as to prove working of the appellant on salary. The counsel further failed to clarify as to whether one would receive salary of Rs.1.25 Crores in one go. Thus, receipt of the amount towards salary remains for the sake of it.
18. It was further stated that the amount aforesaid was received towards the loan by the appellant. The appellant was called upon to show a loan document. The learned counsel for the appellant failed to show loan document to prove the case. It is coupled with the fact that whenever somebody takes the loan, it is repaid. In the instant case, there is no element of repayment of the amount alleged to have been taken on loan. Thus, it was taken to be the proceeds of crime by the appellant in his bank account and accordingly provisionally attached property in reference to the allegations levelled against the appellant.
19. The appellant is said to be a politician and was instrumental in getting the contract for the accused entities and accordingly received huge amount. The amount was received through the banking channel. The appellant failed to justify receipt of huge amount of Rs.1.25 Crores which was neither the loan nor the salary thus was provisionally attached to secure the property till the conclusion of trial.
20. In the light of the facts given above, I do not find any merit in the appeal and accordingly it fails and is dismissed.
