Mr. Radha Mohan Lakhotia vs The Deputy Director

Indian National and Citizen, ) Aged 45 Years, ) r/at: A:4/501, Alakh CHS Limited, ) Sector 19A, Nerul, Navi Mumbai - 400 706. )... Appellant

Vs.

The Deputy Director, ig ) PMLA, Directorate of Enforcement, )

Ministry of Finance, ) Department of Revenue, ) having his office at 2nd floor, Mittal ) Chambers, Nariman Point, ) Mumbai 400 021. )... Respondent

WITH FIRST APPEAL NO. 528 OF 2010

Mr. Radha Mohan Lakhotia (HUF) ) Through its Karta, Radha Mohan Lakhotia, ) having its office at A:4/502, ) Alakh CHS Limited, ) Sector 19A, Nerul, Navi Mumbai - 400 706. )... Appellant

Vs.

The Deputy Director, ) PMLA, Directorate of Enforcement, ) Ministry of Finance, ) Department of Revenue, ) having his office at 2nd floor, Mittal )

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Chambers, Nariman Point, ) Mumbai 400 021. )... Respondent

FIRST APPEAL NO. 529 OF 2010

Mrs. Asha Lakhotia, ) Indian National and Citizen, ) Aged 43 Years, )

r/at: A:4/501, Alakh CHS Limited, ) Sector 19A, Nerul, Navi Mumbai - 400 706. )... Appellant

Vs.

The Deputy Director, ig ) PMLA, Directorate of Enforcement, ) Ministry of Finance, ) Department of Revenue, )

having his office at 2nd floor, Mittal ) Chambers, Nariman Point, ) Mumbai 400 021. )... Respondent

Mr. Vikram Nankani with Sushant Murthy & Sagar Kulkarni i/b.

Madhur Baya for the appellants.

Mr. Rajeev Awasthi with N.R.Prajapati i/b. Shri A.S.Rao for Respondents.

CORAM:- A.M.KHANWILKAR AND A.A.SAYED, JJ

DATED:- AUGUST 5, 2010

JUDGMENT:

(Per A.M.Khanwilkar,J)

1. Heard Counsel for the parties at length. By consent, we are

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finally disposing of the three appeals by this common Judgment and

Order as the questions involved therein are overlapping.

2. These appeals are directed against the Judgment and Order

passed by the Appellate Tribunal under Prevention of Money

Laundering Act, New Delhi dated November 23, 2009 in appeals

filed by the Appellants herein to challenge the order of the

Adjudicatory Authority at New Delhi on Complaint Nos. 1,2,3 and 4

of 2007 dated 1st June, 2007, which in turn confirms the provisional

attachment order passed by the Deputy Director, Mumbai Zonal

Office, Directorate of Enforcement against the Appellants herein

under section 5(1) of the Prevention of Money Laundering Act, 2002

(hereinafter referred to as the Act of 2002 for the sake of brevity) read

with Notification No. GSR.441(E)dated 1st July, 2005.

3. Briefly stated, sometime on 8th December, 2006, a complaint

was filed by the Mumbai Zonal Office of the Narcotic Control

Bureau(for short "the NCB") bearing Complaint No. NDPS Spl. Case

192/2006. As a consequence of the said complaint, the Deputy

Director, incharge of Mumbai Zonal Office, issued the impugned

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provisional attachment orders against each of the Appellants. He not

only took into account the copy of the abovesaid complaint but also

statements of bank accounts, report forwarded by the NCB and

statements of the Appellants. After considering the material

available with him he was of the view that action against the

Appellants and others ought to proceed under the provisions of the

Act of 2002. For, he had reason to believe that the Appellants herein

as well as others were in possession of properties of crime. Further,

they had directly or indirectly indulged in money laundering. They

had invested the money received by them through the specified

Demat account held with Infrastructure Leasing and Financial

Services Ltd., Mumbai. Further, he was of the opinion that the stated

properties were likely to be concealed, transferred or dealt with in

such a manner so as to frustrate proceedings relating to confiscation

under Chapter III of the Act of 2002. Accordingly, the said Authority

in exercise of powers under the Act of 2002 issued separate

provisional attachment orders against each of the appellants herein, as

also other persons involved in the transaction. Provisional

attachment orders served on the respective appellants read thus :

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IN APPEAL NO.527 OF 2010

"PROVISIONAL ATTACHMENT ORDER-1/2007

(under sub-section(1) of Section 5 of the Prevention of Money Laundering Act, 2002)

In exercise of authorization dtd.07.02.2007 issued by the Director of Enforcement under sub-section (1) of section 5 of the Prevention of Money Laundering Act, 2002 (15 of 2003) read with Notification No.GSR.441(E) dated 1st July, 2005, I, ATUL VERMA, Deputy Director, incharge of Mumbai Zonal Office make the following

order:

WHEREAS on the basis of material placed before me such as copy of complaint No.NDPS Spl.Case No.192/2006 dtd.08.12.2006 filed by the Mumbai Zonal Office of the Narcotics Control Bureau, statement of

bank accounts, report forwarded by the Narcotics Control Bureau and statements of Shri Radhamohan Lakhotia in case of ECIR/04/MZO/07 dtd. 24.01.07 and on its examination, I have reason to believe-

(a) the Shri Umesh Bangur, Bldg. No.11-B, Flat No.501, 502, Kalpak Estate, Antophill, Mumbai -400 037 is in possession of proceeds

of crime;

that part of the said money has been parked with Shri Radhamohan Lakhotia,

that the said Radhamohan Lakhotia had invested the money so received

in shares through the Demat Account No.1601480000009377 held with Infrastructure Leasing and Financial Services Ltd., Mumbai which is

more particularly detailed below;

(b) that the said Shri Umesh Bangur has been charged of having committed the schedule offence under section 23 & 27 (a) of the NDPS Act, 1985 in Complaint No.NDPS Spl. Case No.192/2006 dtd.

08.12.2006 filed by the Mumbai Zonal Office of the Narcotics Control Bureau; and

(c) that the said Shri Umesh Bangur has invested the proceeds of crime through Shri Radhamohan Lakhotia for the purpose of laundering to project the said proceeds as untainted property;

that the properties detailed below are likely to be concealed, transferred or dealt with in such a manner that, I have reason to believe that if no Provisional Attachment Order is passed in this case at this crucial stage, it may result in frustrating proceedings relating to confiscation under Chapter III of the Prevention of Money Laundering Act, 2002(15 of 2003)

NOW THEREFORE, I, order that the properties mentioned in

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the Annexure to this order are provisionally attached for a period of 90(ninety days) and further order that you shall not remove, part with or otherwise del with such properties without my previous permission.

Details of Properties

Movable properties Immovable Properties 1. Shares held by Shri Radhamohan Nil Lakhotia in the Demat Account No. 1601480000009377 held with

Infrastructure Leasing enclosed annexure.

SEALED AND SIGNED ON THIS 9TH DAY OF MARCH, 2007

Sd/-

09.03.2007

(ATUL VERMA) DEPUTY DIRECTOR ig MUMBAI ZONAL OFFICE DIRECTORATE OF ENFORCEMENT, 2nd floor, Mittal Chambers, Nariman Point, Mumbai.

SEAL

To (1) Shri Umesh Bangur, Bldg.No.11-B, Flat No.501,502, Kalpak Estate, Antop hill,

Mumbai - 400 037.

(2) Shri Radhamohan J. Lakhotia, A:4/502, Alak CHS Ltd., Sector-19 A, Nerul, Navi Mumbai -400 706.

(3) M/s. Infrastructure Leasing & Financial Services Ltd.(DP:14800) IL & FS House, Plot No.14, Raheja Vihar, Chandivali, Andheri(East), Mumbai-400 072.

Copy to:-

(1) Shri R.M.Sharma, Chairperson, Adjudicating Authority Chairperson, Adjudicating Authority, Room No.408, A-Wing, 4th Floor, Shastri Bhavan, Dr. Rajendra Prasad Road, New Delhi-110001.

(2) The Director, Directorate of Enforcement, Head Quarters, NEW Delhi. (3) The Additional Director (PMLA), Directorate of

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Enforcement, Mumbai.

ANNEXURE TO ATTACHMENT ORDER

Sr. Name of the Date of No. of shares Purchase

No. company acquisition value

1. Peerless Shipping 05.06.06 2000 304660

2. Glenmark Jan-Feb'07 2275 1342250 Total 1646910

Note:

The purchase value of Rs.1646910/- is inclusive of the profit derived out of disposal of shares purchased earlier and disposed."

ig IN APPEAL NO.528 OF 2010

"PROVISIONAL ATTACHMENT ORDER-2/2007 (under sub-section(1) of Section 5 of the Prevention of Money

Laundering Act, 2002)

In exercise of authorization dtd.07.02.2007 issued by the Director of Enforcement under sub-section (1) of section 5 of the Prevention of Money Laundering Act, 2002 (15 of 2003) read with

Notification No.GSR.441(E) dated 1st July, 2005, I, ATUL VERMA, Deputy Director, incharge of Mumbai Zonal Office make the following order:

WHEREAS on the basis of material placed before me such as copy of complaint No.NDPS Spl.Case No.192/2006 dtd.08.12.2006 filed by the Mumbai Zonal Office of the Narcotics Control Bureau, statement of bank accounts, report forwarded by the Narcotics Control Bureau and

statements of Shri Radhamohan Lakhotia in case of ECIR/04/MZO/07 dtd. 24.01.07 and on its examination, I have reason to believe-

(a) the Shri Umesh Bangur, Bldg. No.11-B, Flat No.501, 502, Kalpak Estate, Antophill, Mumbai -400 037 is in possession of proceeds of crime;

that part of the said money has been parked with Shri Radhamohan Lakhotia,

that the said Radhamohan Lakhotia had invested the money so received in shares through Shri Radhamohan J. Lakhotia(HUF) in the Demat Account No.16014800000048216 held with Infrastructure Leasing and Financial Services Ltd., Mumbai which is more particularly detailed below;

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(b) that the said Shri Umesh Bangur has been charged of having committed the schedule offence under section 23 & 27 (a) of the NDPS

Act, 1985 in Complaint No.NDPS Spl. Case No.192/2006 dtd. 08.12.2006 filed by the Mumbai Zonal Office of the Narcotics Control Bureau; and

(c) that the said Shri Umesh Bangur has invested the proceeds of crime through Shri Radhamohan Lakhotia for the purpose of laundering to project the said proceeds as untainted property;

that the properties detailed below are likely to be concealed, transferred or dealt with in such a manner that, I have reason to believe that if no Provisional Attachment Order is passed in this case at this crucial stage, it may result in frustrating proceedings relating to confiscation under Chapter III of the Prevention of Money Laundering Act, 2002(15 of

2003)

NOW THEREFORE, I, order that the properties mentioned in

the Annexure to this order are provisionally attached for a period of 90(ninety days) and further order that you shall not remove, part with or otherwise deal with such properties without my previous permission.

Details of Properties Movable properties Immovable Properties 1. Shares held by Shri Radhamohan Nil Lakhotia in the Demat Account No.

16014800000048216 held with

Infrastructure Leasing enclosed annexure.

SEALED AND SIGNED ON THIS 9TH DAY OF MARCH, 2007

Sd/-

09.03.2007

(ATUL VERMA) DEPUTY DIRECTOR MUMBAI ZONAL OFFICE DIRECTORATE OF ENFORCEMENT, 2nd floor, Mittal Chambers, Nariman Point, Mumbai.

Seal

To (1) Shri Umesh Bangur, Bldg.No.11-B, Flat No.501,502, Kalpak Estate, Antop Hill, Mumbai - 400 037.

(2) Shri Radhamohan J. Lakhotia,

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A:4/502, Alak CHS Ltd., Sector-19 A, Nerul, Navi Mumbai -400 706.

(3) M/s. Infrastructure Leasing & Financial(in respect of shares at Services Ltd.(DP:14800) St.No.1-7 of Annexure)

IL & FS House, Plot No.14, Raheja Vihar, Chandivali, Andheri(East), Mumbai-400 072.

(4) Franklyn Templrton Mutual Fund(in respect of 30000 units of 1st floor, Sakhar Bhavan, -Franklyn India Smaller Cos. Fund) 230, Backbay Reclamation, Nariman Point, Mumbai - 400 021.

Copy to:-

(1) Shri R.M.Sharma, Chairperson, Adjudicating Authority Chairperson, Adjudicating Authority, Room No.408, A-Wing, 4th Floor, Shastri Bhavan, Dr. Rajendra Prasad Road, New Delhi-110001.

(2) The Director, Directorate of Enforcement, Head Quarters, NEW Delhi.

(3) The Additional Director (PMLA), Directorate of Enforcement, Mumbai."

ANNEXURE TO ATTACHMENT ORDER

Sr. Name of the Date of No. of shares Purchase No. company acquisition value

1. Firstsource 30.01.07 136 8704 Solutions

2. Glenmark 22.12.06 100 62452

3. Honeywell 23.02.07 75 127340 26.02.07 210 356132 285 483472

4. Idea Cellular 12.02.07 344 25456

5. Larsen & Toubro 26.06.06 50 105116 28.06.06 25 51522 18.07.06 50 10330 BONUS 125 0 250 166968

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6. Power Finance 01.02.07 136 11560 Corp.

7. Tata Consultancy 26.06.06 50 82788 BONUS 50 0 21.10.06 10 10993

110 93781

8. Mutual Fund 13.01.06 30000 300000 Franklin India Smaller Cos.

2199901736686

1152393

AND

"PROVISIONAL ATTACHMENT ORDER-3/2007 (under sub-section(1) of Section 5 of the Prevention of Money ig Laundering Act, 2002)

In exercise of authorization dtd.07.02.2007 issued by the Director of Enforcement under sub-section (1) of section 5 of the

Prevention of Money Laundering Act, 2002 (15 of 2003) read with Notification No.GSR.441(E) dated 1st July, 2005, I, ATUL VERMA, Deputy Director, incharge of Mumbai Zonal Office make the following order:

WHEREAS on the basis of material placed before me such as copy of complaint No.NDPS Spl.Case No.192/2006 dtd.08.12.2006 filed

by the Mumbai Zonal Office of the Narcotics Control Bureau, statement of bank accounts, report forwarded by the Narcotics Control Bureau and statements of Shri Radhamohan Lakhotia in case of ECIR/04/MZO/07 dtd. 24.01.07 and on its examination, I have reason to believe-

(a) the Shri Umesh Bangur, Bldg. No.11-B, Flat No.501, 502, Kalpak Estate, Antophill, Mumbai -400 037 is in possession of proceeds of crime;

That part of the said money has been parked with Shri Radhamohan Lakhotia,

That the said Radhamohan Lakhotia had invested Rs,11 Lakhs with M/s. E.V.Homes, 303, Vardhaman Chambers, A-Wing, Sector - 17, Vashi, Navi Mumbai - 400 703 as advance towards purchase of Shop No.17, Millenium Park, No.22 & 23, Sector 25, Nerul, Navi Mumbai;

(b) that the said Shri Umesh Bangur has been charged of having committed the schedule offence under section 23 & 27 (a) of the NDPS Act, 1985 in Complaint No.NDPS Spl. Case No.192/2006 dtd.

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08.12.2006 filed by the Mumbai Zonal Office of the Narcotics Control Bureau; and

(c) that the said Shri Umesh Bangur has invested the proceeds of crime through Shri Radhamohan Lakhotia for the purpose of laundering to project the said proceeds as untainted property;

That the properties detailed below are likely to be concealed, transferred or dealt with in such a manner that, I have reason to believe that if no Provisional Attachment Order is passed in this case at this crucial stage, it may result in frustrating proceedings relating to confiscation under

Chapter III of the Prevention of Money Laundering Act, 2002(15 of 2003)

NOW THEREFORE, I, order that the properties mentioned in the Annexure to this order are provisionally attached for a period of

90(ninety days) and further order that you shall not remove, part with or otherwise del with such properties without my previous permission.

ig Details of Properties

Movable properties Immovable Properties

1. Nil Shop No.17, Millenium Park, No. 22 & 23, Sector 25, Nerul, Navi Mumbai.

ISSUED AT MUMBAI ON THIS 9TH DAY OF MARCH, 2007

Sd/-

09.03.2007 (ATUL VERMA) DEPUTY DIRECTOR MUMBAI ZONAL OFFICE

DIRECTORATE OF ENFORCEMENT, 2nd floor, Mittal Chambers, Nariman Point, Mumbai.

SEAL

To

(1) Shri Umesh Bangur, Bldg.No.11-B, Flat No.501,502, Kalpak Estate, Antop Hill, Mumbai - 400 037.

(2) Shri Radhamohan J. Lakhotia, A:4/502, Alak CHS Ltd., Sector-19 A, Nerul, Navi Mumbai -400 706.

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(3) M/S EV Homes, 303, Vardhama Chambers,

A-Wing, Sector-17, Vashi, Navi Mumbai- 400 703.

With further directions to M/s. E.V.Homes that if the title of this property is not transferred to Shri Radhamohan J. Lakhotia, no further transfer to be allowed and the advance of Rs.11 lakhs along with interest or the appreciated rate should not be parted with.

Copy to:-

(1) Shri R.M.Sharma, Chairperson, Adjudicating Authority Chairperson, Adjudicating Authority, Room No.408, A-Wing, 4th Floor, Shastri Bhavan, Dr. Rajendra Prasad Road, New Delhi-110001.

(2) The Director, Directorate of Enforcement, Head Quarters, NEW Delhi. (3) igThe Additional Director (PMLA), Directorate of Enforcement, Mumbai."

IN APPEAL NO.529 OF 2010

"PROVISIONAL ATTACHMENT ORDER-4/2007 (under sub-section(1) of Section 5 of the Prevention of Money Laundering Act, 2002)

In exercise of authorization dtd.07.02.2007 issued by the

Director of Enforcement under sub-section (1) of section 5 of the Prevention of Money Laundering Act, 2002 (15 of 2003) read with Notification No.GSR.441(E) dated 1st July, 2005, I, ATUL VERMA, Deputy Director, incharge of Mumbai Zonal Office make the following order:

WHEREAS on the basis of material placed before me such as copy of complaint No.NDPS Spl.Case No.192/2006 dtd.08.12.2006 filed by the Mumbai Zonal Office of the Narcotics Control Bureau, statement of bank accounts, report forwarded by the Narcotics Control Bureau and statements of Smt. Asha Lakhotia in case of ECIR/04/MZO/07 dtd.

24.01.07 and on its examination, I have reason to believe-

(a) the Shri Umesh Bangur, Bldg. No.11-B, Flat No.501, 502, Kalpak Estate, Antophill, Mumbai -400 037 is in possession of proceeds of crime;

that part of the said money has been parked with Smt. Asha Lakhotia,

that the said Smt. Asha Lakhotia had invested the money so received in

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shares held by the Demat Account No.1601480000009417 held with Infrastructure Leasing and Financial Services Ltd., Mumbai which is more particularly detailed below;

(b) that the said Shri Umesh Bangur has been charged of having committed the schedule offence under section 23 & 27 (a) of the NDPS

Act, 1985 in Complaint No.NDPS Spl. Case No.192/2006 dtd. 08.12.2006 filed by the Mumbai Zonal Office of the Narcotics Control Bureau; and

(c) that the said Shri Umesh Bangur has invested the proceeds of

crime through Shri Radhamohan Lakhotia for the purpose of laundering to project the said proceeds as untainted property;

that the properties detailed below are likely to be concealed, transferred or dealt with in such a manner that, I have reason to believe that if no

Provisional Attachment Order is passed in this case at this crucial stage, it may result in frustrating proceedings relating to confiscation under Chapter III of the Prevention of Money Laundering Act, 2002(15 of

2003)

NOW THEREFORE, I, order that the properties mentioned in

the Annexure to this order are provisionally attached for a period of 90(ninety days) and further order that you shall not remove, part with or otherwise del with such properties without my previous permission.

Details of Properties

Movable properties Immovable Properties

1. Shares held by Smt. Asha Lakhotia in the Nil Smt. Asha Demat Account No.1601480000009417 Lakhotia. held with Infrastructure Leasing and Financial Services Ltd., Mumbai as per enclosed annexure.

ISSUED AT MUMBAI ON THIS 9th DAY OF MARCH, 2007

Sd/-

09.03.2007 (ATUL VERMA)

DEPUTY DIRECTOR MUMBAI ZONAL OFFICE DIRECTORATE OF ENFORCEMENT, 2nd floor, Mittal Chambers, Nariman Point, Mumbai.

Seal

To (1) Shri Umesh Bangur,

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Bldg.No.11-B, Flat No.501,502, Kalpak Estate, Antophill, Mumbai - 400 037.

(2) Smt. Asha Lakhotia, A:4/502, Alak CHS Ltd.,

Sector-19 A, Nerul, Navi Mumbai -400 706.

(3) M/s. Infrastructure Leasing & Financial Services Ltd.(DP:14800)

IL & FS House, Plot No.14, Raheja Vihar, Chandivali, Andheri(East), Mumbai-400 072.

Copy to:-

(1) Shri R.M.Sharma, Chairperson, Adjudicating Authority

Chairperson, Adjudicating Authority, Room No.408, A-Wing, 4th Floor, Shastri Bhavan, Dr. Rajendra Prasad Road, New Delhi-110001.

(2) The Director, Directorate of Enforcement, Head Quarters, NEW Delhi. (3) The Additional Director (PMLA), Directorate of Enforcement, Mumbai."

ANNEXURE TO ATTACHMENT ORDER

Sr. Name of the Date of No. of shares Purchase No. company acquisition value

1. Peerless Shipping 24.05.06 3601 583145

2. Glenmark Nov'06-Feb'07 1620 931500 Total 1514645

4. As required by section 5(2) of the Act of 2002, the authorised

Officer forwarded the copy of the Provisional Attachment orders

alongwith the material in his possession to the Adjudicating

Authority in the manner provided by the said provision. The

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Adjudicating Authority on receipt of the provisional attachment

orders considered the question as to whether the provisional

attachment orders were just and proper in exercise of power

conferred under section 8(1) of the Act of 2002. The appellants and

others, who were served with provisional attachment order filed their

replies. The appellants had raised preliminary objection that the

complaints were not maintainable and should be dismissed at the

threshold. For, the sine qua non for proceeding against the person

involved in money laundering is his connection with the proceeds of

crime. If the same is absent as in the present case, the action is

without authority of law. According to the appellants, the complaint

as filed itself mentions that no proceeds of crime were generated by

way of sale of 200 kgs. cocaine, which fact is reinforced from the

communication of Superintendent of NCB, Mumbai dated 23rd

January, 2007 addressed to the Assistant Director of Enforcement.

The said communication clearly stated that the investigation carried

out could not establish any link with the seized 200 kgs. cocaine and

the funds transferred from Shri R.B.Modani to various individuals

and companies in India. This was the principal argument canvassed

before the Adjudicating Authority as can be discerned from the

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Judgment dated 1st June, 2007. The Adjudicating Authority examined

the said argument and answered the same against the appellants. It

found that the investigating machinery under the Act of 2002 and

NDPS are distinct. Besides, the scope and object of the two

enactments was entirely different. Therefore, the observations of the

Superintendent of NCB, Mumbai would not bind the complainant

under the Act of 2002. It then found that the proceeds of crime can

be from the crime committed in earlier point of time and need not be

limited to the actual offence regarding sale of 200 kgs. of cocaine,

which is the subject matter of complaint under NDPS Act dated 8th

December, 2006. It has placed reliance on section 23 to buttress this

opinion. It has also adverted to section 2(u), which is very wide and

would cover any person even if he is not accused of a scheduled

offence or not directly involved in the commission of such scheduled

offence. It opined that it is a notorious fact of which a judicial notice

can be taken that in any illegal activity one gets paid after

performing his role successfully. The cocaine was successfully

loaded and smuggled out of Ecuador and reached India. The overseas

persons have carried out their job successfully and must have

received their payments. Such payments are not dependent on the

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final outcome of the operations i.e. whether cocaine has reached the

indent final destination and has been sold or not. It has then analysed

the factual position emerging from the record that M/s. OPM

International Private Ltd. was regularly importing from Ecuador

through the same route with the active involvement of the same

persons and firms who are controlled by the close relatives and had

close nexus with each other. It held that it was obvious that all

payments in question were remitted from the account of R.P.Modani.

Further, no reliable material was produced by the Appellants, who

were obliged to do so, to persuade the authority to take the view

much less prima facie view that money remitted from the account of

Shri R.P.Modani was out of his legitimate earnings. On the other

hand, the material on record would indicate that the amount in the

account of Shri R.P.Modani was not legitimate. On this analysis the

adjudicating authority opined that the money in question in the hands

of the Appellants was proceeds of crime. It then adverted to three

different stages before the provisional attachment property is finally

confiscated under section 8(6) of the Act. Firstly, of issuance of

provisional attachment by the Director or authorised officer of the

Director in that behalf under section 5(1) of the Act. Secondly,

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confirmation of the provisional attachment by the Adjudicating

Authority under section 8(3) of the Act. And lastly, final order of

confiscation by the Adjudicating Authority under section 8(6) of the

Act. The stage at which the present proceedings came up before the

Adjudicating Authority was to confirm the provisional attachment

order under Section 8(3) of the Act. It went on to observe that

satisfaction of the Adjudicating Authority at this stage is limited one

so as to enquire as to whether the property in question is ascribable to

money laundering or not. It held that at this stage, it was

unnecessary to assess or weigh the full evidence as is required at the

stage of final decision, which may be necessary for the final order of

confiscation to be passed under section 8(6) of the Act, which

outcome would depend on the fact as to whether the accused has

been found guilty or not. Having said this, the Adjudicating

Authority then proceeded to examine the broad factual matrix of the

case on hand, so as to find out as to whether there was reliable

evidence forthcoming to support the plea of the appellants that the

properties in their hand was out of the legitimate sources of the

remittances of Rs.8.45 crores. It prima facie found that such

evidence was lacking. As a concomitant to that finding, it would

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follow that the properties in the hands of the appellants was proceeds

of crime. It also affirmed the opinion of the Deputy Director that he

had reason to believe that the said proceeds of crime were likely to be

concealed, transfered and dealt with in such a manner that may result

in frustrating any proceedings relating to confiscation of such

proceeds of crime. On that finding, the provisional attachment order

was directed to be continued during the pendency of the proceedings

relating to scheduled offence before the Court and to become final

after the guilt of the person is proved in the trial and order of such

trial Court becomes final. We think it apposite to reproduce the

relevant extract of the decision of the Adjudicating Authorities, which

reads thus:

"13. There are four firms involved in this smuggling of Cocaine viz.

(i) M/s.OMP International Pvt.Ltd., Mumbai

(ii) Mega International Pvt.Ltd., Singapore

(iii) M/s.Royal Globel Exports Pvt.Ltd., Singapore, and

(iv) M/s. SSMS Exports, Ecudor, S.A.

The Managing Director of M/s. OPM International

Pvt.Ltd. Shri Omprakash, Nogaja(accused No.1) in NDPS Cases is a ral brother of one of the Directors of M/s. Royal Globel Exports Pvt.Ltd. Shri Manek Maheshwari. The other directors M/s. OPM International Pvt.Ltd., Shri Umesh Bangur (defendant herein and accused No.2) in NDPS Case is real brother of the wife of Shri Manek Maheshwari i.e. Smt.Madhubala Maheshwari and Smt. Trupti Modani, wife of Sri R.P.Modani. Smt. Madhubala Maheshwari and Smt.

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Nirmala Biyani @ Neelu (W/o Shri Shambu Prasad Biyani, another director of M/s. Royal Globel Exports Pvt.Ltd.) jointly hold 74% shares of M/s. OPM International Pvt.Ltd. Shri Manek

Maheshwari of Royal Global Exports had paid the freight charges of the consignment of timber in which Cocaine was seized, inspite of the fact that the consignor was M/s. Mega

International Pvt.Ltd., Shri Rasha Mohan Lakhotia and Smt. Asha Lakhotia w/o Shri Radha Mohan Lakhotia and Sister of Shri R.P.Modani.

14. R.P.Modani is residing at Bangkok and there is no proof

that he has any business either at Singapore or in India. It is surprising that he has accounts NRE & NRO with Baharat Overseas Bank, Fort, Mumbai. His status as certified by the Embassy of India Bangkok vide certificate No.67/2006 dated 29.6.06 is that of an employee of M/s. Trupti International as is

available from record Annexure-5. There are huge remittances of US$ 1106235 and Euro 514791 were effected from Singapore into the NRE account of R.P.Modani. Out of said amount US$

634140 was remitted by M/s. Royal Globel Exports Pvt.Ltd., Singapore and the remaining on the self basis. It is surprising when there are no business relation existing between

R.P.Modani and M/s. Royal Globel Exports Ltd., Singapore, they have remitted the money into the account of Shri R.P.Modani for business reasons. This warrants a reasonable inference that the remittances by M/s. Royal Globel Exports Ltd., and the self remittances from Singapore into the account of Shri Modani is nothing but generated out of proceeds of illicit

trade of narcotics drugs in the guise of timber trade. We have already stated herein above about the link of M/s. Royal Globel

Exports, Singapore to the companies engaged in the exports of timber to India. Over the money in the account of R.P.Modani, Umesh Bangur has a complete control. It is appeared on the record that according to this Umesh Bangur himself, blank signed cheque leaves were left with him by R.P.Modani and he

had the freedom to fill in the names of payee as well as the amount payable to those payees in those blank signed cheques. Thus the funds in NRE account of R.P.Modani which according to Indian currency is Rs.8.45 crores was completely at the disposal of his brother in law Shri Umesh Bangur. It is also on record that the entire amount was transferred into the account of

various firms and individuals for no economic reasons such as gifts, purchases of shares, etc. Thus the above suspected proceeds of crime having changing hands with Chartered Accountants S/Shri R.P.Modani, Umesh Bangur and Radha Mohan Lakhotia. In reply, it has been contended on behalf of accused that Shri R.P.Modani has earned over US$ one million out of salary and business which is equivalent to Rs.4.5 crores approx. Prma facie there is no reliable evidence therefore. Even assuming it to be reliable, the legitimate sources of the

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remittances of Rs.8.45 crores is not justified. This is more particularly so because of his other investments i.e. holding of 49% equity in M/s. Trupti International Bangkok, holding shares

worth 74 lakh Thal Bath etc. as required. Further the documents at page 4 and 5 of the compilation of documents annexed to the reply of defendant no.2 Shri Radha Mohan J. Lakhotia indicate

the uneconomic transaction i.e. Smt. Madhubala Maheshwari and Mohit Maheshwari have transferred US$ One lakh each to R.P. Modani which in turn was transferred by him to his NRE A/C, which was placed at the disposal of Umesh Bangur and it was further transferred in the guise of gifts etc.

As an upshot of the above discussion and findings it is held that the properties, detailed in the respective provisional attachment orders, which are the subject matter of the above detailed respective complaints, are involved in money

laundering, consequently this Authority hereby confirms the attachment of the properties detailed in the respective provisional attachment orders. Order that the attachment shall

(a) continue during the pendency of the proceedings relating to scheduled offence before a Court; and

(b) become final after the guilt of the person is proved in the trial Court and order of such trial Court becomes final."

5. Against this decision, the Appellants carried the matter in

appeal before the Appellate Tribunal under Prevention of Money

Laundering Act, New Delhi. The Appellate Authority upon

considering the material on record and the relevant provisions

answered the grounds of challenge against the Appellants. Before the

Appellate Authority essentially two grounds were urged. First

ground was that the order of provisional attachment and its

confirmation by the Adjudicating Authority was on the basis of

assumption and presumption only and no link or nexus has been

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established by the Authorities under the Act to prove that the

properties attached are proceeds of crime and gifts/money received

by the appellants are not from legitimate sources. Secondly, the

Appellants have not been charged of having committed a Scheduled

Offence which is a sine qua non to initiate proceedings for

provisional attachment under section 5 of the Act. As aforesaid, on

analysis of all aspects of the matters both these grounds were

answered against the Appellants by the Appellate Authority vide

Judgment and Order dated November 23, 2009. The Appellate

Authority affirmed the opinion of the Deputy Director as well as that

of the Adjudicating Authority and concluded that the conclusion

reached by the said Authorities was founded on the material in

possession of the Authorities that there was reason to believe and

reason for such belief has been recorded in writing that the Appellants

were in possession of proceeds of crime and the said proceeds of

crime were likely to be concealed, transferred or dealt with in a

manner which may result in frustrating the proceedings relating to

confiscation of such proceeds of crime. Accordingly, Appellate

Tribunal confirmed the opinion of the Deputy Director as well

Adjudicating Authority regarding provisional attachment of the

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properties in question.

6. This common decision is the subject matter of challenge in the

present appeals. Notably, besides the three appeals before this Court

from the Judgment under appeal, it is noticed that six other appeals

filed by the other persons who were common to the transaction in

question were also decided by the same common Judgment. For the

time being, only three appeals have been filed by the above named

appellants. The grounds which were urged before the Appellate

Tribunal have been reiterated even before this Court.

7. Before we proceed to examine the same, we would deal with

the scope of present appeals. The present appeals have been filed

under section 42 of the Act of 2002. It provides that any person

aggrieved by any decision or order of the Appellate Tribunal may file

an appeal to the High Court on any question of law or fact arising out

of such order. Indeed, going by this provision, it may appear that the

appeal will have to proceed on question of law as well as fact as if it

is a first appeal. However, considering the scheme of enactment

since the appellants have exhausted one statutory remedy of appeal

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before the Appellate Tribunal against the order passed by the

Adjudicating Authority, the remedy of appeal under section 42 of the

Act of 2002 is in the nature of Second Appeal. However, we would

not express any final opinion on this plea pressed by the

Respondents. At the same time, we are in agreement with the

argument of the Respondent that the findings on facts recorded by the

Deputy Director, which has been confirmed by the Adjudicating

Authority and in the appeal before the Appellate Tribunal being

concurrent findings on the point in issue, the same cannot be lightly

brushed aside by this Court unless it is shown that the same are

manifestly wrong or perverse.

8. Be that as it may, the second plea taken before the Appellate

Tribunal by the Appellants is a pure question of law. In that, whether

action under Section 5 of the Act of 2002 can be proceeded only

against a person charged of having committed a Scheduled Offence.

We shall straightaway address this question. In doing so, we may

have to keep in mind some of the provisions of the enactment such as

section 2(p), which defines the term "money-laundering". It has the

same meaning as assigned to it in Section 3 of the Act. The term

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"person" has been defined under section 2(s). It is an inclusive

definition. It includes individual, who may be an offender of

Scheduled Offence "or otherwise". The term "proceeds of crime"

which has some significance in construing section 5 of the Act, is

defined under section 2(u). It means any property derived or

obtained, directly or indirectly, by "any person" as a result of criminal

activity relating to a scheduled offence or the value of any such

property. Once again, the expression used in this definition is "any

person" and not limited to offender or person charged of having

committed a Scheduled Offence. The definition of "proceeds of

crime" refers to property derived or obtained as a result of criminal

activities. The term "property" has been defined in section 2(v) to

mean any property or assets of every description, whether corporeal

or incorporeal, movable or immovable, tangible or intangible and

includes deeds and instruments evidencing title to, or interest in,

such property or assets, wherever located. The definition clauses also

defines "scheduled offence" to mean the offences specified in Part A

of the Schedule; or the offences specified in Part B of the Schedule, if

the total value involved in such offences is thirty lakh rupees or more.

In so far as the case on hand is concerned, it is common ground that

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it is covered by paragraph-2 of the Part A of the Schedule. We shall

now turn to section 5 of the Act around which the entire argument

revolves. Section 5 of the Act "as was in force" at the relevant time

when the provisional attachment order was passed in March, 2007,

the same read thus:

5. Attachment of property involved in money-

laundering.-- (1) Where the Director, or any other officer not below the rank of Deputy Director authorised by him for the

purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that--

(a) any person is in possession of any proceeds of crime;

(b) such person has been charged of having committed a scheduled offence; and

(c) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter, he may, by order in writing,

provisionally attach such property for a period not exceeding ninety days from the date of the order, in

the manner provided in the Second Schedule to the Income-tax Act, 1961 (43 of 1961) and the Director or the other officer so authorised by him, as the case may be, shall be deemed to be an officer under sub-rule (e) of rule 1 of that Schedule:

Provided that no such order of attachment shall be made unless, in relation to an offence under:

(i) Paragraph 1 of Part A and Part B of the Schedule, a report has been forwarded to a Magistrate under

section 173 of the Code of Criminal Procedure, 1973 (2 of 1974); or

(ii) Paragraph 2 of Part A of the Schedule, a police report or a complaint has been filed for taking cognizance of an offence by the Special Court constituted under sub-section (1) of section 36 of the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985).

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(2) The Director, or any other officer not below the rank of Deputy Director, shall, immediately after attachment under sub-section (1), forward a copy of

the order, along with the material in his possession, referred to in that sub-section, to the Adjudicating Authority, in a sealed envelope, in the

manner as may be prescribed and such Adjudicating Authority shall keep such order and material for such period as may be prescribed.

(3) Every order of attachment made under sub-section

(1) shall cease to have effect after the expiry of the period specified in that sub-section or on the date of an order made under sub-section (2) of section 8, whichever is earlier.

(4) Nothing in this section shall prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment.

Explanation.- -For the purposes of this sub-section, "person interested", in relation to any immovable

property, includes all persons claiming or entitled to claim any interest in the property.

(5) The Director or any other officer who provisionally attaches any property under sub-section (1) shall, within a period of thirty days from such

attachment, file a complaint stating the facts of such attachment before the Adjudicating Authority."

9. The argument of the Appellants proceeds in the context of

wording of Sub-section (1) of Section 5 to the effect that the said

action can be resorted to only against a person who has been charged

of having committed a scheduled offence.

10. Admittedly, the appellants are not named as accused in any

scheduled offence. However, action has been resorted to against the

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properties in question referred to in the Provisional Attachment

Orders which were incidentally in the hands of or possession of the

Appellants, on the basis that the same are proceeds of crime. For,

the same had originated from or its acquisition could be directly

traced to amount received by the appellant from the account of one

R.P.Modani who is a non-resident Indian and residing in Bangkok

since 1993-1994. He held NRE Account No.06-104-1181 and NRO

account No.027 with Bharat Overseas Bank Ltd., Fort Branch,

Mumbai. The activities of the said R.P.Modani has come under

scanner after the seizure of 200 kgs. of cocaine. It is stated that the

NCB is pursuing for registration of scheduled offence against him.

That process has taken some time as R.P.Modani is resident of

Bangkok. The said properties in the hands of the Appellants have

been acquired by them out of the amounts received from the said

accounts of R.P.Modani, who incidentally is related to the appellants.

11. The question is whether section 5 can be invoked against a

person who is not named as an accused in the commission of a

scheduled offence? Sub-section (1) of Section 5 will have to be read

as a whole conjointly with the other provisions of the Act already

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referred to hitherto, including section 8 thereof. Section 5 authorises

the Director or any other officer not below the rank of Deputy

Director authorised by Director for the purposes of the said section to

resort to action of "attachment of property" if he has reason to believe

and the reason of such belief has been recorded in writing arrived at

on the basis of material in his possession. That action is intended to

freeze the proceeds of crime, which property, is derived or obtained

directly or indirectly as a result of criminal activity relating to a

scheduled offence or value of any such property until the criminal

action for the scheduled offence is taken to its logical end against the

accused named therein. The proceeds of crime means any property or

assets of every description, whether corporeal or incorporeal,

movable or immovable, tangible or intangible and includes deeds

and instruments evidencing title to, or interest in, such property or

assets, wherever located - which has been derived or obtained,

directly or indirectly, as a result of criminal activity relating to a

scheduled offence or the value of such property. The proceeds of

crime may be or can be in possession of "any person". Be it a

person charged of having committed a scheduled offence "or

otherwise". In the case of any other person in possession of proceeds

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of crime, if it is also found that he has directly or indirectly attempted

to indulge or knowingly assisted or knowingly is a party or is actually

involved in any process or activity connected with the proceeds of

crime and projecting it as untainted property, he shall be liable to be

prosecuted for offence under section 3 read with section 4 of the Act

of 2002 - in addition to suffering the action of attachment of the

proceeds of crime in his possession. Attachment of proceeds of crime

in possession of any person(other than the person charged of having

committed a scheduled offence) will, therefore, be legitimate within

the sweep of Section 5 of the Act of 2002. In our opinion, the thurst

of section 5 is to attach every property involved in money-laundering

irrespective of whether it is in possession of the person charged of

having committed a scheduled offence or any other person- provided

however it must be shown to be proceeds of crime and further, that

proceeds of crime are likely to be concealed, transferred or dealt with

in any manner, which may result in frustrating any proceedings

relating to confiscation of such proceeds of crime under the Act.

12. Going by the definition of "person" occurring in Section 2(s)

and on conjoint reading of section 2(u), which also refers to "any

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person"; coupled with the purpose and intent for which the enactment

has been brought into force, accepting the argument of the

appellants would result in a pedantic approach and limiting the

plenitude of action of attachment and confiscation of proceeds of

crimes only in the hands of the persons who have been charged of

having committed a scheduled offence and none else. Whereas, the

Act has come into being to prevent money laundering and to provide

for confiscation of property derived from or involved in, money

laundering and for matters connected therewith or incidental thereto.

It is the outcome of the Political Declaration and Global Programme

of Action, as annexed to the resolution S-17/2 adopted by the

General Assembly of the United Nations at its seventeenth special

session on the twenty-third day of February, 1990. It has come into

being also on account of the Political Declaration adopted by the

Special Session of the United Nations General Assembly held on 8th

to 10th June, 1998 which called upon the Members States to adopt

national money-laundering legislation and programme. The term

"money-laundering" has the same meaning assigned to it in Section

3 of the Act of 2002. It essentially refers to the tainted property

which is derived from criminal activity relating to a scheduled

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offence. Such tainted property may travel at different levels or by

way of circular transactions for being eventually projected as

untainted property in the hands of or possession of person other than

the person charged of having committed a scheduled offence. That

involves direct or indirect involvement of person or persons other

than the person(s) accused of having committed a scheduled

offence. Such other person(s) may directly or indirectly attempt to

indulge or knowingly assist or knowingly is a party or is actually

involved in any process or activities connected with the proceeds of

crime and projecting it as untainted property. If such is the nature

of activity, the Act of 2002 is intended to deal with the same sternly.

In a given case a person can be in possession of any proceeds of

crime without his knowledge that the property held by him is tainted.

That person may not face prosecution under section 3 of the Act of

2002. But even in his case, an order of attachment of the proceeds of

crime can be invoked and later end up with confiscation thereof

depending on the outcome of the criminal action against the person

charged of having committed a scheduled offence. The action of

attachment is not in relation to a person as such but essentially to

freeze the proceeds of crime. The interpretation given by the

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Appellants, if accepted would be destructive of the said legislative

intent. Suffice it to observe that the term "person" appearing in

clause (a) of the of Section 5(1) of the Act cannot be limited to the

person who has been charged of having committed a scheduled

offence. If that was the intent of the legislature, there was no reason

to insert clause (a). In that case, the Legislature would have simply

provided for any person who has been charged of having committed a

scheduled offence and in possession of any proceed of crime, such

proceeds of crime can be attached and confiscated, subject to

fulfillment of the specified conditions.

13. The Appellants however, have placed emphasis on the

expression "such person" used in clause (b) of section 5(1) of the Act.

According to them, the word "such" is prefix to the word "person" in

clause (b). That is not superfluous, but is ascribable to the person

referred to in clause (a). Which means that even clause (a) deals with

person who has been charged of having committed a scheduled

offence. It is not possible to countenance this submission. We are

conscious of the fact that penal provisions should be strictly

construed. At the same time, we cannot overlook the language of

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section 5 as applicable at the relevant time. In our opinion, clause (a)

refers to "any person"- whether he has been charged of having

committed a scheduled offence "or otherwise". The only requirement

is that that person should be in possession of any proceeds of crime.

The governing factor is possession of any proceeds of crime by a

person. Taking any other view may defeat the legislative intent. In as

much as, a person who has been charged of having committed a

scheduled offence can successfully defeat the object of the enactment

of attachment and confiscation of the proceeds of crime by

transferring it to some other person who is not so involved with him

in commission of stated scheduled offence. In our opinion, on fair

reading of section 5 (1) read with section 8 of the Act, it postulates

two categories of persons against whom action of attachment of

property can be proceeded with. The first category is any person who

is in possession of any proceeds of crime. A person falling in this

category need not be a person, charged of having committed a

scheduled offence. The second category is of a person who has been

charged of having committed a scheduled offence. Besides, being

charged of having committed a scheduled offence, that person is

found to be in possession of any proceeds of crime. In either case,

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it is open to take recourse to section 5 of the Act if the specified

Authority has reason to believe and reason for such belief is recorded

in writing that the proceeds of crime are likely to be concealed,

transferred or dealt with in any manner which may result in

frustrating any proceedings relating to confiscation of such proceeds

of crime. Indeed, the proviso to subsection (1) as was applicable at

the relevant time envisaged that no order of attachment can be made

unless, in relation to the offence under paragraph 1 of Part A and Part

B of the Schedule, a report has been forwarded to a Magistrate under

section 173 of the Code of Criminal Procedure, 1973; or paragraph-2

of Part A of the Schedule, a police report or a complaint has been

filed for taking cognizance of an offence by the Special Court

constituted under section 36(1) of NDPS Act, 1985. This proviso

essentially is directed against the second category of person covered

by sub-section (1), namely, person who has been charged of having

committed a schedule offence. In other words, action of attachment

of proceeds of crime in possession of the person charged of a

scheduled offence can be proceeded only on forwarding of a report to

Magistrate under section 173 of the Code or a complaint has been

filed for taking cognizance of offence by the Special Court

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constituted under the NDPS Act. In so far as the person who is not

named in the scheduled offence, there can be no question of filing of

any report or complaint for taking cognizance. That stipulation has

no application to the person who is not a person having been charged

of a scheduled offence. The view that we propose to take is

reinforced from the purport of section 3 and 4 of the Act of 2002.

The same deal with the offence of money-laundering and punishment

for money-laundering respectively. Both these provisions, even on

strict construction, plainly indicate that the person to be proceeded

for this offence need not necessarily be charged of having committed

a scheduled offence. For, the expression used is "whosoever". The

offence of money-laundering under section 3 of the Act of 2002 is an

independent offence. It is committed if "any person" directly or

indirectly attempts to indulge or knowingly assists or knowingly is a

party or is actually involved in any process or activity connected

with the proceeds of crime and projecting it as untainted property.

Further, it would create a piquant situation as a person who is not

charged of having committed a scheduled offence even if can be

proceeded for offence of money laundering and even if such person is

in possession of any proceeds of crime, no action of attachment and

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confiscation of the proceeds of crime can be resorted to qua him-

albeit the proceeds of crime are in his possession. If the argument of

the appellants were to be accepted, even the expression "whosoever"

appearing in section 3 and 4 of the Act will have to be limited to

person who has been charged of having committed a scheduled

offence. The object of the enactment of 2002 would be completely

defeated by such approach. Besides, the view that we propose to take

is reinforced also from the purport of section 8 of the Act of 2002. It

provides that the Adjudicating Authority if has reason to believe that

"any person" has committed an offence under section 3, may serve

notice upon such person calling upon him to indicate his source of

his income, earning or assets, out of which or by means of which he

has acquired the property attached under section 5(1) of the Act.

Once again, the legislature has unambiguously used the term "any

person" and not person charged of having committed a scheduled

offence. Indeed, any person referred to in this provision is a person

who has committed an offence under section 3 of the Act of 2002.

He may not necessarily be a person charged of having committed

scheduled offence. The proviso to sub-section (1) thereof stipulates

that where a notice under the said sub-section specifies any property

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as being held by a person on behalf of any other person, a copy of

such notice shall also be served upon such other person. Suffice it to

observe that even section 8 contemplates adjudication to be done by

the Adjudicating Authority after provisional attachment order is

passed under section 5 of the Act and upon receipt of complaint under

section 5(5) of the Act. We are not referring to other provisions

mentioned in the said section 8(1), as we are dealing only with the

case arising under section 5 of the Act. Considering the above, we

are of the considered opinion that there is no merit in the argument of

the appellants that action under section 5 of the Act could not have

proceeded against them, as they were not charged of having

committed a scheduled offence.

14. We would now refer to the argument of the Counsel for the

Respondents that even the amendment to Section 5 of the Act of 2002

effected by the Prevention of Money-Laundering (Amendment) Act,

2009 (Act 21 of 2009) would also throw light on the point in issue.

According to him the amendment to proviso below sub-section (1) of

Section 5 is only declaratory and clarificatory. However, we cannot

rest our conclusion on the basis of the amended provision which had

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no application to the case on hand at the relevant time. Accordingly,

we do not wish to dilate on this argument any further.

15. We however, find force in the argument of the Respondents

that the Act of 2002 has been enacted by the Parliament with intent to

cause deterrence to the assets and properties which are derived and

obtained from the proceeds of crime generated out of the act of crime

mentioned in the schedule under that Act. The aims and objects for

enacting the said act envisages as under :

"The Prevention of Money Laundering Act, 2002 intends to make money laundering an offence under Section 3 thereof and provides for

punishing which extends to imprisonment as well as imposition of fine under Section 4. This part, the scheme of the Act envisages attachment of all properties involved in money laundering, i.e. where the proceeds

of the crime which fall within the scope of the Act have been invested in property-movable or immovable, tangible or intangible- and attempts have been made to show that the property is untainted."

16. We find force in the argument of the respondents that the

legislation has predicated two parallel proceedings. One, with regard

to the attachment of the properties derived and obtained from the

proceeds of crime and its confiscation after the guilt of the person in

schedule offence is established before the concerned Court. The

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second action contemplated by the Act is, prosecution and

punishment for commission of offence covered by section 3 of the

Act and upon being found guilty, impose punishment under section 4

of the Act. From the scheme of the provisions of the enactment under

consideration, no property can be confiscated unless it is attached in

the first instance. The provisional attachment is an emergent measure

to be taken by the Authorised Officer upon being satisfied and having

reason to believe that the proceeds of crime are likely to be

concealed, transferred or dealt with in any manner, which may result

in frustrating any proceedings relating to confiscation of such

proceeds of crime. On the basis of material in his possession, the

Authorised Officer upon identifying the property derived from the

proceeds of crime is competent to order provisional attachment of

such property. That power flows from section 5 of the Act. At the

same time, until, the proceeds of crime are finally confiscated under

section 8(3), the same have to be protected and preserved until the

guilt or innocence of the person, as the case may be, is established.

In the present case, we are dealing only at the stage of issuance of

provisional attachment order passed by the Authorised Officer, which

has been affirmed by the Adjudicating Authority and further upheld

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by the Appellate Tribunal.

17. The next grievance of the appellant is that the provisional

attachment and its confirmation by the Adjudicating Authority is

founded on assumption and presumption only. No live link or nexus

has been established by the Authorities to prove that the properties

attached are proceeds of crime and gifts/money received by the

Appellants are not from legitimate sources. This ground may require

us to consider the factual aspects of the matter. The action of

provisional attachment was resorted to against the appellants under

section 5, on account of reference made by NCB, Mumbai to the

Director of Enforcement for investigation under the Act of 2002. The

reference was the consequence of the reported scheduled offence in

respect of which complaint was filed by the NCB, Mumbai before the

Court of Special Judge for NDPS cases, Greater Mumbai on 8th

December, 2006. The said case pertains to seizure of 200 kgs of

cocaine on 3/4 June, 2006 from a container originated from Ecuador,

South America declared to contain teak wood imported by M/s.

OPM International Pvt.Ltd. The importer placed the order for supply

of the said consignment with M/s. Megha International Pvt.Ltd.,

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Singapore and the consignment was shipped from Ecuador. When

the consignment was intercepted, 200 kgs. Cocaine was recovered.

In this connection, NCB, Mumbai arrested Shri O.P.Nogaja, Umesh

Bangur, both directors of M/s. OPM International Pvt.Ltd. And Vijay

A. Throve, Managing Director of M/s Mayur Clearing Agency, the

Customs House Agent under NDPS Act, 1985. The department

initiated investigation in the case when it was revealed that there were

four firms involved in the smuggling of cocaine, namely, (i) M/s.

OPM International Pvt.Ltd., Mumbai, (ii) M/s. Megha International

Pvt.Ltd., Singapore, (iii) M/s. Royal Global Exports Pvt. Ltd.,

Singapore and (iv) M/s. S.S.M.S.Exports, Ecuador, S.A. It was

revealed that all the three foreign based companies at Sr.Nos. (ii) to

(iv) above were held by another holding company based in

Singapore. It was further revealed that persons behind the said firms

were not only common, but close relatives having interests in each

others business. Inter-relation and nexus between them has been

stated by the department as under :

"(a) The Managing Director of M/s. OPM International Pvt.Ltd., Shri Om Prakash Nogaja(accused No.1 in NDPS case) is a real brother of one of the Directors of M/s. Royal Global Exports Pte.Ltd. Shri Manek Maheshwari.

(b) The other director of M/s. OPM International Pvt. Ltd., Shri Umesh Bangur (accused No.2 in NDPS case) is real brother

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of wife of Shri Manek Maheshwari i.e. Smt. Madhubala Maheshwari.

(c) Shri Umesh Bangur is real brother of Smt. Trupti Modani wife of Shri R.P.Modani, who had remitted the proceeds of crime into his NRE Account and placed the same under the

control of Shri Umesh Bangur by providing signed cheque leaves.

(d) Smt. Madhubala Maheshwari and Smt. Nirmala Biyani (wife of Shri Shambhu Prasad Biyani, another director of M/s.

Royal Global Exports Pte. Ltd.) jointly hold 74% shares of M/s. OPM International Pvt.Ltd. by way of investing approx. Rs.7 crores.

(e) Shri Manek Maheshwari of M/s. Royal Global Pte. Ltd. had

paid the freight charges of the consignment of Tiber in which cocaine was seized, inspite of the fact that the consigner was M/s. Megha International Pte. Ltd.

(f) Shri Radha Mohan Lakhotia and Smt. Asha Lakhotia, the defendants in the Original Complaint No. 1 to 4 are brother-in-

law and real sister respectively of Shri R.P. Modani,

(g) S/Shri Shyam Sunder Modani and Shriniwas. Modani, are the real brothers of the said Shri R.P. Modani.

(h) That Shri Rajendra Prasad Modani (R.P. Modani) is the

brother-in-law of said Umesh Bangur and real brother of the appellant. He and his wife Smt. Trupti Modani (sister of Shri

Umesh Bangur) both resident of Bangkok, found to have remitted a total amount of Rs. 8.45 crores on different occasions in to the NRE account No.6.104.1181 (old A/c. No. 10233/4) with Bharat Overseas Bank) and the entire amount was found to have been transferred to various individuals including relatives

and firm for no economic reasons by placing the funds at the disposal of Shri Umesh Bangur in the form of signed blank cheque leaves. The modus operandi adopted by way of handing over signed blank check leaves to him. Part of the said checks alongwith some pay-in-slips and signed blank check leaves of SB NRO A/c. No. 6.106.197 (old A/c. No. 27) jointly

held by said Shri R.P. Modani and his wife Smt. Trupti Modani with M/s. Bharat Overseas Bank, Fort Mumbai were recovered from the residence of Shri Umesh Bangur during the search of his residence by NCB. Thus the said Shri Umesh Bangur was found to be in possession and control over the money lying in the said accounts. The details of transfer of the said money to different individuals and firms have been detailed in the complaint. It is evident that proceeds of crime has been transferred by Shri R.P. Modani and placed at the disposal of

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Shri Umesh Bangur which was further transferred in the guise of gift to close relatives viz. Shri Radha Mohan Lakhotia, Smt. Asha Lakhotia. Shri Shyam Sunder Modani and Shri Niwas

Modani and also in the guise of purchase of shares of unlisted company, viz. M/s. Shubh Laxmi Syntex, for creating further layers to facilitate laundering of money.

18. We have already adverted to the order of provisional

attachment and the same has been reproduced as a whole pertaining

to the respective appellants. We have also reproduced the relevant

part of opinion recorded by the Adjudicating Authority while

confirming the order of provisional attachment. The Appellate

Tribunal has upheld the opinion so recorded by the Authorised

Officer as well as the Adjudicating Authority. That being concurrent

finding of fact, needs no interference in the present appeals. We shall

presently briefly indicate our reasons to sustain those decisions. The

Appellate Tribunal has found that various parties i.e. companies,

their directors and shareholders and other individuals involved in

illegal import of 200 kgs. Cocaine are closely related and their

activities are spread across international borders i.e. India,

Singapore, Thailand, South America etc. Further, the funds remitted

into the NRE account of R.P.Modani by M/s. Royal Global Exports

Pvt. Ltd. and on self basis from Singapore and further transfer of

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these funds by way of gifts/share application money etc. are for no

commercial/business/economic reasons. The bank's pay in slips for

depositing cheques drawn on NRE account of Shri R.P.Modani into

the bank accounts of appellants M/s. Shubhlaxmi Syntex and Sri

Niwas Modani, seized during search of residential premises of

Umesh Bangur and admission of Shri Niwas Modani and Shyam

Sunder Modani in their statements before the Respondents reveal

that they were not aware as to who deposited the cheques/pay order

in their accounts for such huge amount. Yet, the amount is used to

purchase the property in question. This does prima facie indicate

that the properties attached are proceeds of crime and involved in

money laundering. The Appellate Tribunal has further held that in

view of the fact that value of 200 kgs. of cocaine runs into several

hundred crores and such a huge illegal import of cocaine cannot be

the first ever crime of Shri Om Prakash Nogaja and Shri Umesh

Bangur, directors of M/s. OPM International Pvt.Ltd, and others who

have been regularly importing teak logs in the past from Ecuador,

South America and the Freight charges were paid by Shri Manek

Maheshwari of M/s. Royal Global Exports Pte. Ltd. in relation to the

consignment in which cocaine was seized. For all these reasons, the

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opinion formed by the Authority that the remittances in the NRE

account of R.P.Modani was the proceeds of crime is reinforced.

After having recorded this finding, the Appellate Tribunal proceeded

to hold that there was sufficient material to make out prima facie case

that all appellants have received proceeds of crime from the same

account of R.P.Modani. The Appellate Tribunal has also adverted to

the fact that offence is already registered against the appellants under

section 3 read with section 4 of the Act of 2002 in respect of which

process has been issued to the appellants. The said order issuing the

process has been confirmed right up to the High Court. In the

circumstances, the Appellate Tribunal has found that there was no

infirmity in the order of provisional attachment issued by the Deputy

Director and subsequently confirmed by the Adjudicating Authority.

The view so taken by the Appellate Tribunal in our opinion, is a

possible view. If the said opinion is to be upheld, the argument

propounded by the Appellants that the provisional attachment order

and confirmation thereof by the concerned authorities is on the basis

of assumption and presumption falls to the ground.

19. We shall now revert back to the argument that the provisional

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attachment of properties is sans any material to show that the said

properties are derived from the transaction of import of 200 kgs. of

cocaine. Counsel for the Appellants vehemently argued that the

Respondents have not been able to even remotely show that the

properties under provisional attachment were acquired out of the sale

proceeds of cocaine transaction in question, which in fact happened

in June, 2006. Whereas the properties provisionally attached were

already acquired by the respective appellants between November,

2005 to May, 2006. The argument though attractive has been rightly

repelled by the Authorities below on the finding that the transaction

resulting in scheduled offence may not be the first of its kind and

there is reason to believe that similar transactions must have taken

place in the past, which have gone unnoticed. The Authorities have

adverted to the purport of Section 23 of the Act to buttress this

opinion. Besides, it is held that the Appellants were not in a position

to rebut the presumption about the interconnected transactions.

Moreso, of the fact that the appellants were involved in projecting the

proceeds of crime as untainted properties. That burden was on the

appellants. The fact that the Respondents could have acted only if

there was reason to believe that a person is in possession of proceeds

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of crime does not mean that the Authorities at this stage are obliged to

prove the fact beyond doubt that the property in possession was in

fact proceeds of crime. All that the Authority is required to show is

that there was "substantially probable cause" to form opinion that the

property under attachment is proceeds of crime. The circumstances

adverted to by the Authorities below do indicate that there was

substantially probable cause to form such opinion. At this provisional

attachment stage as well when the matter goes before the

Adjudicating Authority, by virtue of section 24 of the Act of 2002 the

burden of proving that the property possessed by the noticees was not

proceeds of crime and were untainted properties would be on them.

As has been found by the Authorities below, except stating that the

amount has come in the bank account of the appellants disbursed

from NRE account of R.P.Modani by way of gift, no other

justification is offered. The fact that the amount has been disbursed

from NRE Account and such remittance is permissible in law does

not and cannot legitimise the transaction, until it is established that

the amount so gifted by R.P. Modani itself was not tainted funds. The

real question is whether the funds in the account of R.P.Modani were

tainted or otherwise. The burden to prove that fact is on the

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appellants themselves, by virtue of Section 24 of the Act. The

argument of the appellants that the provisions regarding presumption

and burden of proof will have no application as the said Shri

R.P.Modani or for that matter M/s.Royal Global Exports Pte. Ltd. has

still not been charged of having committed a scheduled offence, is of

no avail. In as much as, the fact whether R.P.Modani has still not

been charged of having committed a scheduled offence will not

extricate the appellants who have been named as accused in offence

under section 3 of the Act of 2002. The burden of proof that

properties in their possession are untainted properties, as per Section

24 is on the person accused of having committed offence under

section 3 of the Act of 2002. The Appellants cannot absolve

themselves by saying that the amount received by them was from the

NRE account of Shri R.P.Modani. That is not enough. It was

necessary for the appellants to further establish that the amount so

disbursed from the account of R.P.Modani was equally untainted

amount.

20. Suffice it to observe that there was enough material before the

Authority as also the Adjudicating Authority to initiate action under

section 5 of the Act of 2002 of provisional attachment of the

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proceeds of crime. The Apex Court in the case of Aslam

Mohd.Merchant v/s. Competent Authority & ors. reported in JT in

2008(7) SC 446: 2008(14) SCC 186, in paragraph-29 has expounded

that whenever a statute provides for reason to believe, either the

reasons should appear on the face of the notice or they must be

available on the material, which was placed before him. It is also

open to the Authority to disclose the reason when called upon to do

so. The question is whether the reasons recorded by the Authority in

the provisional attachment order were sufficient to initiate action

under section 5 of the Act. The provisional attachment order not only

records satisfaction about the reasons to believe that the property in

question in possession of the appellants was outcome of the proceeds

of crime, but also the fact that the said property was likely to be

concealed, transferred or dealt with in such a manner that if no

provisional attachment was passed at this crucial stage, it may result

in frustrating proceedings relating to confiscation under the Act of

2002. For recording the said satisfaction, the Authority has relied on

the contents of the complaint filed by the NCB under provisions of

NDPS Act dated 8th December, 2006 as also the statements of Bank

account, reported forwarded by the NCB and statements of the

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appellant in the concerned case. The order also records that Shri

Umesh Bangur has been charged of having committed a scheduled

offence under sections 23 and 27 of the NDPS Act in the complaint

dated 8th December, 2006 filed by the NCB. Further, the said Umesh

Bangur had invested the proceeds of crime through the appellants for

the purpose of laundering to project the said proceeds as untainted

property. On analysing the said material, the Authority has recorded

its satisfaction that the property in possession of the appellants, which

needs to be provisionally attached, was proceeds of crime. Thus

understood, from the circumstances spelt out in the order of

attachment as well as by the Adjudicating Authority and has been

upheld by the Appellate Tribunal, the action under section was

inevitable. There is material on record which goes to show that

prima facie link is established that the properties attached are

proceeds of crime and the so called gifts/money received by the

appellants from R.P. Modani were not from the legitimate source. At

this stage, it is enough to consider whether the prima facie view so

expressed by the Authorities below is a possible view or manifestly

wrong. In our opinion, it is not possible to take a different view of

the matter. If so, keeping in mind the observations of the Apex Court

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in the case of Mamad Hassam Bhagad & Ors. Vs. State of Gujarat &

ors reported in (1996) 8 SCC 574, no interference is warranted.

That was a case dealing with section 7(A) of Terrorist and Disruptive

Activities(Prevention) Act, 1987, whereunder the properties to be

attached was of persons, who were involved in the offence under that

Act. It was reasonably believed that the property to be attached was

derived from the commission of terrorist activities or was acquired by

the process of terrorism. Even in that case, the decision which was

impugned before the Apex Court by way of appeal under Section 19

of the TADA Act was an order of provisional attachment during the

pendency of the trial in relation to the TADA offence. The Apex

Court opined that at this stage, it will not be appropriate to interfere

with the conclusion reached by the designated court. Following the

same principle, we have no hesitation in rejecting the challenge of the

appellants. Significantly, complaint has been filed under section 3

of the Act of 2002 against the appellants, being Case No.1 of 2008,

before the Designated Judge under the Prevention of Money

Laundering Act, 2002, Sessions Court, Mumbai, dated 25/8/2008. It

gives graphic description of the circular transactions resorted to

project that the money transferred from the account of R.P. Modani

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disbursed to the appellants, was untainted property in possession of

the appellants. On reading the said complaint as a whole, prima

facie, there is enough material to indicate that the property attached

in terms of provisional attachment order under section 5(1) of the Act

possessed by the appellants herein was proceeds of crime. It is

noticed that Umesh Bangur Accused No.3 has stated that his brother

in law R.P.Modani is maintaining NRE account with M/s. Bharat

Overseas Bank, Fort Branch, Mumbai jointly with his wife Trupti and

whenever R.P.Modani visited Mumbai, he used to sign some cheque

leaves of this account and leave it with him for operational

conveyance and that as per the instructions of the said Modani he

used to issue cheques in favour of the payee. He has further admitted

that the documents marked as D-6 to D-8 were in respect of such

payments made to M/s. Subh Laxmi Syntex Ltd. totalling to Rs. 90

Lakhs and the documents marked D-9 and D-10 are pay-in-slips of

ICICI Bank in respect of payments totaling to Rs.1.65 crores made to

S.N.Modani. The document marked D-11 is one of the signed

account payee cheque found with said Umesh Bangur, which was not

used as name of the payee was written wrongly. The document

marked D-13 was in respect of NRO account with M/s. Bharat

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Overseas Bank. Even in respect of the said account, the said

R.P.Modani left some signed and unsigned cheques thereof with

Umesh Bangur. In substance, Umesh Bangur in his statement has

admitted that he was in possession of signed blank cheque leaves of

the said NRE and NRO accounts of R.P.Modani and that he was

transferring money from the said NRE account by using the signed

blank cheques. He also stated that by virtue of having signed blank

cheques, technically he was in possession of the money in the

account of R.P.Modani and he could have transferred the same, if he

wanted, though he did not do so. Notably, on the basis of the case

made out in the said complaint the trial Court has already issued

process against the appellants. The appellants have unsuccesfully

challenged the same right upto this count. The fact that the said

orders have been allowed to become final is not in dispute at all. It

presupposes that prima facie material on record to proceed against the

appellants for offence punishable under Section 3 of the Act of 2001.

For the same reasons the opinion of the Authorities below arrived at

for the purpose of passing order of provisional attachment of

proceeds of crime in possession of the appellants herein would be

unexceptionable. Taking any view of the matter, the satisfaction

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recorded by the Authority and confirmed by the Adjudicating

Authority which has been upheld by the Appellate Tribunal, is

founded on cogent material to justify the said opinion. As a result, no

interference is warranted with the concurrent view taken by the three

Authorities below on the factum of satisfaction and recording of

reasons to believe that the properties placed under provisional

attachment were proceeds of crime and that the same were likely to

be concealed, transferred or dealt with in any manner, which may

result in frustrating any proceedings relating to confiscation of such

proceeds of crime.

21. The Appellate Tribunal has also noticed that there exists many

enactments like The Smugglers and Foreign Exchange

Manipulators(Forfeiture of Property) Act, 1976(SAFEMA), Terrorist

and Disruptive Activities (Prevention) Act, 1987, the Prevention of

Terrorism Act, 2002, Narcotic Drugs and Psychotrophic

Substances(Amendment) Act, 1988(NDPS)(Chapter VA), Code of

Criminal Procedure(Amendment) Act, 1993(Chapter VIII A), which

dealt with illegal acquired properties from specified criminal

activities by providing for forfeiture/confiscation of illegally acquired

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properties. Even Counsel appearing for the parties have placed

before us decisions under the respective enactments, which dealt with

the purport of provisions regarding forfeiture/confiscation of the

properties under the said Acts. On analysing the provisions of those

enactment, though the form of the provision, may appear to be

different, the substance of subject dealt with by the respective

enactment is similar. Since we have already elaborately dealt with

the purport of section 5 of the Act, it may not be necessary to

specifically deal with each of the authorities cited across the bar

which deal with the interpretation of provisions of the concerned

enactment. Moreover, in the facts of the present case we have upheld

the decisions of the Authorities below having found that the same

were unexceptionable and does not suffer from any infirmity nor are

manifestly wrong. But to complete the record, we would refer to the

authorities cited before us, which are as follows:

(i) Smt. Heena Kausar v/s Competent Authority[2008(7) Scale 331]. NDPS Act 1985, Chapter V-A.

(ii) Aslam Mohd. Merchant (supra)- NDPS Act 1985, Chapter V-A.

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57 fa527-529.sxw

(iii) Smt.Kesar Devi v/s. Union of India & Ors.[JT 2003 (6) SC 330]:[2003(7) SCC 427]. SAFEMA Act, 1976.

(iv) P.P.Abdulla & Anr. v/s. Competent Authority & ors.

[(2007) 2 SCC 510]. SAFEMA Act, 1976.

(v) Attorney General of India v/s. Amrat Lal Prajiwan Das & ors.[JT 1994 (3) SC 580] SAFEMA Act, 1976.

(vi) State of M.P. V/s. Balram Mihani & ors.[JT 2010(2) SC 143]. Criminal Procedure Code, 1973, Chapter VII-A.

(vii) Peoples Union of Civil Liberties v/s. Union of India

[AIR 2004 SC 456]. POTA Act, 2002.

(viii) Shobha Suresh Jumani v/s. Appellate Tribunal Forfeited Property[AIR 2001 SC 2288. SAFEMA Act, 1976.

(ix) Noor Aga v/s. State of Punjab and Anr.[(2008) 16 SCC 417]. - NDPS Act, 1985.

(x) Unreported decision of Division Bench of Bombay High

Court in Criminal Writ Petition No. 881 of 2000 decided on 30th September, 2008 in the case of Smt. Neeta N.

Bhanushali v. State of Maharashtra. NDPS Act forfeiture order.

22. Accordingly, all these appeals fail being devoid of merits.

Instead, we confirm the provisional attachment orders as passed by

the Deputy Director and confirmed by the Adjudicating Authority,

which view has been upheld by the Appellate Tribunal. Therefore,

we proceed to pass following order.

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ORDER

All the appeals are dismissed with costs.

(A.A.SAYED, J) (A.M.KHANWILKAR, J)

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