1 96710 SQP-vgm IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION FIRST APPEAL NO.967 OF 2010 Om Prakash Daulat Ram Nogaja, Age 58 years, 1304, Krushal Tower, G.M. Road, Chembur (West), Mumbai – 400 089. ...Appellant Versus 1.Shri Atul Verma, Deputy Director, Directorate of Enforcement, Prevention of Money Laundering Act, 2002. 2.Union of India, Through Joint Secretary, Ministry of Law and Justice, Aayakar Bhawan, Churchgate, Mumbai-400 020. ...Respondents WITH FIRST APPEAL NO.968 OF 2010 OPM International Pvt. Ltd., a company incorporated under the Companies Act, 1965 having its registered office at 31-D, 1st Floor, 9 B Cawasji Patel Street, Fort, Mumbai – 400 001. Through its Director Om Prakash Nogaja ...Appellant Versus 1.Shri Atul Verma, Deputy Director, Directorate of Enforcement, Prevention of Money Laundering Act, 2002. 2 96710 2.Union of India, Through Joint Secretary, Ministry of Law and Justice, Aayakar Bhawan, Churchgate, Mumbai-400 020. ...Respondents ...... Mr. A.A. Kumbhakoni with Mr. Ravi Gurnani and Mr. Sudhan Amre for the Appellants Mr. Rajeev Avasthi with Mr. M.S. Bhardwaj & Mr. G. Hariharan for the Respondents ...... CORAM:- A.M.KHANWILKAR AND R.Y.GANOO, JJ. DATE:- SEPTEMBER 29, 2011. JUDGMENT : (PER A.M. KHANWILKAR, J.) 1. These Appeals under Section 42 of the Prevention of Money- Laundering Act, 2002 (hereinafter referred to as ‘PMLA’) take exception to the common Judgment and Order passed by the Appellate Tribunal under PMLA, New Delhi dated January 31, 2010 in FPA-PMLA-32/MUM/2009 and FPA-PMLA-31/MUM/2009 filed by OPM International Pvt.Ltd. and Mr.Om Prakash Nogaja, Managing Director of the Company respectively. 3 96710 2. At the outset, we may mention that against the same transaction, similar provisional attachment order was passed against other persons involved in connection with that transaction, which order has been confirmed not only by the Adjudicating Authority but by the Tribunal as well as this Hon’ble Court in the case of Radha Mohan Lakhotia, Radha Mohan Lakhotia, HUF and Asha Lakhotia. Those persons had filed Appeals being First Appeal Nos.527, 528 and 529 of 2010, which came to be dismissed by the Division Bench Judgment and Order dated August 5, 2010. Although the appellants in the present Appeals raised similar contentions already answered by the High Court in the above said Judgment, during the course of hearing, the learned Counsel for the appellants fairly accepted that it may not be possible for him to persuade the Court to distinguish the opinion recorded in the said decision on those issues or, for that matter, to re-consider the same. We place on record that the appellants have reiterated those issues even in the present Appeals, but, for the reasons already recorded in the abovesaid decision, we do not think it necessary to elaborate and repeat those matters. The present Judgment, however, will be confined to the other questions which have been raised in the present Appeals. 4 96710 3. We may further place on record that, in view of the exhaustive factual matrix referred to by the Adjudicating authority as well as the Appellate Tribunal and more particularly in the Judgment of this Court in the companion matters referred to above, we do not think it necessary to burden this Judgment with the same. 4. Briefly stated, provisional attachment order No.8/2008 under Section 5 of the PMLA was passed to attach the properties referred to in the said order dated 7th July, 2008. The said order reads thus: “DIRECTORATE OF ENFORCEMENT PREVENTION OF MONEY LAUNDERING ACT DEPARTMENT OF REVENUE – MINISTRY OF FINANCE GOVERNMENT OF INDIA Gram: ENFERA 2nd Floor, Mittal Chambers Phone: 22024820 Nariman Point Fax: 22828930 Mumbai - 400 021 EXHIBIT ‘C’ No. ECIR/04/MZO/2007 PROVISIONAL ATTACHMENT ORDER NO. I/2008 (Under Section 5 of the Prevention of Money Laundering Act, 2002) ........................................ 1. In exercise of the authorization dated 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, in-charge of Mumbai Zonal Office make the following order: 2. WHREAS on the basis of material placed before me such as copy of 5 96710 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, statements of S/Shri Umesh Bangur, Vinay Kumar Nogaja, Om Prakash Nogaja and various documents gathered during the course of investigation in case no. ECIR/04/MZO/07 dated 24th January, 2007 and on its examination, I have reasons to believe that i) During the course of investigation it was revealed that two NRIs namely Smt.Nirmala Biyani and Smt.Madhubala Maheshwari both resident of Singapore had invested Rs. 2,50,00,000/- and Rs. 5,05,26,879/- in M/s. OPM International Pvt. Ltd. for purchase of shares of the company on Non-repatriable basis. ii) Both the said NRIs are wives of persons connected with the supply of consignment of timber in which 200 kgs. of Cocaine was seized by the Narcotics Control Bureau, Mumbai. iii) M/s. OPM International Pte. Ltd. Has been importing timber regularly from M/s. Megha International Pte. Ltd., Singapore in association with M/s. Royal Global Exports Pte. Ltd., Singapore. iv) Smt. Nirmala Biyani is the wife of Mr. Shamboo Prasad Biyani, Director of M/s.Megha International Pte. Ltd. and Smt.Madhubala Maheshwari is the wife of Mr. Manek Maheshwari real brother of Shri Om Prakash Nogaja, Managing Director of M/s. OPM International Pvt. Ltd. v) The abovesaid amount of Rs.2,50,00,000/- and Rs. 5,05,26,879/- received by M/s. OPM International Pvt. Ltd. Is lying in various bank accounts of the said company. vi) The said amount totalling to Rs. 7,55,26,879/- is proceeds of crime which has been invested in the said company for the purpose of laundering to project the tainted money as untainted. vii) The said amount of Rs. 7,55,26,879/- was integrated with the other funds available with the company and was found to have been utilised for general business purposes so as to ensure concealment of the identity of the tainted money. viii) Out of the said amount of Rs. 7,55,26,879/- an amount 6 96710 of Rs. 6,25,40,171/- is found lying in various bank accounts of M/s. OPM International as detailed below. ix) The said amount of Rs. 6,25,40,171/- lying in various banks as 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). 3. I, NOW THEREFORE in exercise of powers conferred upon me under the provisions of the Prevention of Money Laundering Act, 2002 referred to at para 1 above, order that the properties mentioned below 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 prior permission. DETAILS OF PROPERTIES SR. NO. NAME OF THE BANK ACCOUNT NO. Type of Account Amount(Rs.) 1. BANK OF RAJASTHAN 06702411017229 Term Deposit 1,67,48,144 2. BANK OF RAJASTHAN 0670301115094 Current 23,44,051 3. HDFC BANK LTD. 0602320009475 Current 1,22,12,453 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. PUNJAB NATIONAL BANK 3731002104760684 3731002104761850 37310031000081939 373100PR00007724 373100PR00009184 373100PR00009218 373100PS00000658 373100PS00000667 373100PR00000861 373100PR00001091 373100PR00001204 373100PR00001365 373100PR00001383 Current Current F.D. F.D. F.D. F.D. F.D. F.D. F.D. F.D. F.D. F.D. F.D. 41,11,675 10,62,893 57,060 3,77,933 88,31,361 15,35,281 14,00,000 2,00,000 15,47,781 8,50,000 3,50,000 8,75,000 8,00,000 17. BANK OF INDIA, HYDERABAD 100562 Current 34,45,005 7 96710 18. PUNJAB NATIONAL BANK, GANDHIDHAM 019002100034844 Current 57,88,179 19. CITIBANK, FORT, MUMBAI 340237005 Current 3,355 TOTAL 6,25,40,171 SEALED AND SIGNED ON THIS 7th DAY OF July, 2008 Sd/- (Atul Verma) Deputy Director Mumbai Zonal Office, Directorate of Enforcement, 2nd Floor, Mittal Chambers, Nariman Point, Mumbai SEAL To 1. M/s. O.P.M. International Pvt. Ltd. 30-D, 1st floor, 9-B, Wadia Building, Cawasji Patel Street, Mumbai. 2. Shri Om Prakash Nogaja Managing Director, M/s. OPM International Pvt. Ltd. 30-D, 1st floor, 9-B, Wadia Building, Cawasji Patel Street, Mumbai. ..... ” 5. Consequent to the provisional attachment order, show cause notice was issued to the appellants which reads thus: “EXHIBIT ‘D’ FORM NO.I Regd. A.D. NEW DELHI BENCH OF ADJUDICATING AUTHORITY, NEW DELHI 8 96710 NOTICE TO SHOW CAUSE O.C. No. 13/2008 Shri Atul Verma .... Complainant Dy. Director, Directorate of Enforcement, Prevention of Money Laundering Act, 2002 Mittal Chambers, 2nd Floor, Nariman Point, Mumbai-400021 Versus M/s. O.P.M. International Pvt. Ltd., .... Defendant 30-D, 1st floor, 9-B, Wadia Building, Cawasji Patel Street, Mumbai. Above named complainant has filed a complaint under sub-section (5) of section 5 against you. You are called upon to indicate the source of your income, earning or assets out of which or by means of which you have acquired the property provisionally attached under sub-section (1) of Section 5 of the Prevention of Money Laundering Act, the evidence on which you rely and other relevant information and particulars and to show cause why all or any of such property should not be declared to be the properties involved in money-laundering, and confiscated by the Central Government. You are directed to appear before Adjudicating Authority at Jeevan Deep Building, 4th Floor, Room No. 25, Parliament Street, New Delhi in person or through an advocate/authorized representative, duly instructed on the 27th day of August Year 2008 at 10.30 a.m., failing which the complaint shall be heard and decided in your absence. Given under my hand and the seal of the Adjudicating Authority, this 15th day of July, 2008. Sd/- Suptd./Admn. Officer/Registrar Adjudicating Authority PMLA SEAL 9 96710 Recd. Sd/- 18/07/08 (Om Prakash Nogaja) M.D. OPM. Intl. Pvt. Ltd.” 6. Pursuant to the said show-cause notice, the appellants filed their response and contested the proceedings before the Adjudicating Authority. The Adjudicating Authority, upon considering all aspects of the matter, rejected the objections raised by the appellants. The Adjudicating Authority opined that it is admitted position that the provisional attachment order in respect of moneys transferred to the NRI Account of R.P. Modani to Umesh Bangur which were considered by the Adjudicating Authority in its order dated 1st June, 2007, 6th October, 2007 and 17th March, 2008. Those provisional attachment orders have been confirmed. Further, the present proceedings are also arising out of the same investigation. It then proceeded to hold that during the course of investigation carried out by the complainant, it has come on record that Umesh Bangur, one of the accused in the case could not give any specific answer about investment of those funds. Further, Ms. Madhubala Maheshwari had only stated that the money may have been generated from the business or other sources. Regarding Smt. Nirmala Biyani, it has been stated that her husband, S.P. Biyani is director in M/s. Royal Exports Global 10 96710 Pvt. Ltd. which is a family concern and investment has been made at the instance of Umesh Bangur. On the basis of the said material, the Adjudicating Authority came to a prima facie conclusion, in the earlier proceedings, that investment made in the appellant company was proceeds of crime, in respect of which, prosecution has already been launched under the PMLA. It then went on to observe that in the present case also, on the basis of material placed on record, prima facie, it appears that the investments made by Ms. Madhubala Maheshwari and Mrs. Nirmala Biyani in the shares of appellant company are proceeds of crime and have been projected as untainted property. It is noticed that, in spite of opportunity afforded to the appellant company which is holding the money, it has failed to indicate the source of investments of those persons. The Authority then went on to consider the additional argument of the appellants that the appellant company is a separate legal entity. The authority distinguished the reported decisions relied by the appellants by observing that the said decisions were concerning the proceedings under NDPS Act, 1985 wherein the issue under consideration was one of forfeiture of illegally acquired properties. On the other hand, in the present proceedings, the question relates to only provisional attachment under the provisions of PMLA 2002. As per the Scheme of the present enactment, action of forfeiture would be 11 96710 resorted to when the Court of competent jurisdiction finally concludes that the properties involved in the case are proceeds of crime. At this stage, the properties are required to be secured by provisional attachment thereof, so that, the same is not transferred or concealed resulting in frustration of proceedings relating to confiscation of such properties in case the scheduled offence is proved. The Authority further observed that even if the appellant company is a separate legal entity, the fact that it is in possession of proceeds of crime makes the property liable for attachment to avoid further layering of the property. The Authority thus concluded that the appellants have failed to prove the source of income, earning or assets out of which or by means of which they have acquired the property attached. It also noted that the present proceedings against the appellants have emanated out of the same transaction which is subject matter of attachment of properties held by other persons, which provisional attachment has been confirmed. Accordingly, the adjudicating Authority ordered that the provisional attachment of the properties referred to in the order dated 7th July, 2008 shall continue during the pendency of proceedings initiated by NCB, Mumbai before the Special Judge under NDPS cases under Sections 23 and 24 of the NDPS Act and shall become final after the guilt of the person is proved in the Trial Court and the order of such trial becomes final. 12 96710 7. The appellants assailed the abovesaid decision of the Adjudicating authority before the Appellate Tribunal under PMLA at New Delhi by way of two separate Appeals. Both the Appeals were heard and decided together by the Tribunal by a common Judgment dated 31st January, 2010. The Tribunal found that various parties i.e. companies, their directors and shareholders and other individuals were allegedly involved in illegal import of 200 kgs. of cocaine. Those parties are closely related to each other. Their activities are spread across international borders i.e. India, Bangkok, Singapore, Thailand, South America, etc. It noticed that in another transaction by the same set of persons, huge funds were remitted into the NRE account of R.P. Modani by M/s. Royal Global Exports Pte.Ltd. and from Singapore. These funds have been held to be proceeds of crime. Further, properties were acquired out of those funds which have been held to be tainted properties and involved in money laundering by the Adjudicating Authority. That decision of the Adjudicating Authority was upheld by the Tribunal. As mentioned at the outset, the said decision has been upheld even by this Court. The Tribunal in the present case followed the reasons given in the said Judgment and proceeded to hold that the appellants were covered under the provisions of Section 5 of the PMLA. The Tribunal further found that the burden of proof to satisfy that the 13 96710 funds/properties in their hand were not procured out of proceeds of crime was on the appellants, in view of Section 24 of the PMLA. The Tribunal held that the provisional attachment proceedings commenced against the appellants by the Authority under the PMLA were inevitable, considering the fact situation of the case. The Tribunal distinguished the decision of the Apex Court in Aslam Mohammed relied by the appellants on the finding that in the present case, matter related to provisional attachment of properties under the PMLA and not with regard to forfeiture of illegally acquired property under the NDPS Act. The intent of provisional attachment of the disputed properties was to ensure that the same is not concealed, transferred or dealt with in any manner which may result in frustration of any proceedings relating to confiscation thereof under the PMLA. The Tribunal noted that the Scheme of PMLA is that if the person accused for scheduled offence were to be finally acquitted, the attachment of property shall cease to have effect and on the other hand, if the guilt of the accused person is proved and the order of the Trial Court becomes final, the adjudicating authority would proceed to confiscate the subject properties after giving opportunity of being heard to the person concerned. Reverting back to the case on hand, the Tribunal found that considering the fact that the company was neither a Public Limited Company which is 14 96710 listed on Stock Exchange coupled with the fact that the shares of the company are closely held by persons who are relatives, the Corporate veil of the company will have to be lifted to ensure that the purpose of the PMLA is not frustrated by collusive act of omission and commission of such persons. Only that approach would obviate any fraud being perpetrated behind the veil of the company. The Tribunal noted that the two NRI ladies, who invested in the majority shares of the Company, were related. The NRI ladies held 74.363% shares in the Company, and 25.599% shares are held by O.P. Nogaja, appellant in one of the appeals. It is the Company which was issued notice under Section 8 of the Act to file evidence to prove legitimate source of the funds received from two NRI ladies and to discharge the burden of proof that the funds held by the Company were not proceeds of crime or tainted property. The Tribunal held that no law prohibits the Company to seek information from its shareholders to elicit information which can be presented before the Authority to discharge the burden of proof that the funds held by the Company were untainted property. The Tribunal also rejected the contention of the appellants that the funds received by the Company from two NRI ladies towards share value were utilised by the Company for its business activities and got mixed up with the funds and other movable 15 96710 assets of the Company. Thus, the property in question lost its identity, and the same were not available with the Company as a separately identifiable property. The Tribunal held that the funds received from two NRI ladies were converted into stocks through imports, sundry debts, fixed deposits, etc., and the current assets were realised as bank balances which represent a business cycle involving current assets of the Company. Thus, its identity was never lost, but kept on changing its form from one asset to another, which exemplifies layering and integration stages of money-laundering process. The Tribunal also rejected the argument of the appellants that the attachment of property has been made on assumption and presumption basis only that the same are proceeds of crime, without establishing any link / nexus. The Tribunal, instead, noted that Smt. Madhubala Maheshwari is eldest sister of Umesh Bangur and is married to Manek Maheshwari, brother of O.P. Nogaja. Smt. Nirmala Biyani is wife of S.P. Biyani. Notably, both these NRI ladies have conceded in their share applications that they are housewives. Manek Maheshwari and S.P. Biyani are Directors of Royal Global Exports Pte. Ltd., Singapore. Manek Maheshwari paid freight charges of the consignment, in which, 200 Kgs. of Cocaine was seized, though the consignor was Megha International Pte. Ltd. The Company failed to produce evidence to prove the legitimate 16 96710 source of funds like source of income of the NRI investors, copies of their balance sheet, profit and loss account, Income Tax return, bank account, etc. The Tribunal also noted that, so far as persons outside India, i.e., Bangkok, Singapore, etc., are concerned, the “Letter of Rogatory” has been issued, and the investigation is in progress. The Tribunal, therefore, opined that the Appropriate Authority had reasons to believe that the property in question was proceeds of crime, necessitating order of provisional attachment as per the provisions of the PMLA. The Tribunal has also noted that the counsel for the appellants was already given opportunity to prove the genuineness / legitimate source of payment received from the NRE accounts of the two ladies, which opportunity was declined by him. The Tribunal, therefore, upheld the opinion of the Adjudicating Authority that the properties in question were required to be provisionally attached, as the same were involved in money-laundering. 8. The Company and O.P. Nogaja have filed separate appeals before this Court against the decision of the Tribunal. As mentioned earlier, similar orders of provisional attachment passed in respect of properties of the other persons involved in connection with the same transaction have been upheld by this Court by dismissing First Appeal Nos. 527 to 529 17 96710 of 2010 vide judgment and order dated 5th August, 2010. More or less, on same grounds, the appellants have assailed the impugned decision of the Tribunal in the present appeals. The appellants, however, are not in a position to distinguish the opinion recorded by the Division Bench in the earlier matters on the said issues, nor are in a position to point out that the view so taken requires re-consideration. Accordingly, it is not necessary for us to burden this judgment with the same arguments which have already been rejected by this Court. We would, however, examine only those issues which were not put in issue in the earlier appeals. At the same time, we may notice the opinion recorded by the Division Bench in the earlier decisions that this Court cannot lightly brush aside the concurrent findings on facts recorded by the Adjudicating Authority and the Appellate Tribunal in the present proceedings, as also in the connected proceedings in the case of other persons involved with the same transactions. 9. According to the appellants, the statement recorded under the provisions of Section 16(2) of the PMLA of the Directors of the appellant- Company does not, in any way, suggest commission of any offence under the PMLA. In absence of culpability, the provisions of the PMLA are not attracted. In the first place, we may notice that, more or less, similar 18 96710 contention was raised before this Court in the appeals filed by other persons. Even in those appeals, it was contended that the action cannot be proceeded against a person, who is not named as an accused in the commission of a Scheduled Offence. On analysing the relevant provision of the PMLA, the Court opined that, in a given case, a person can be in possession of proceeds of crime, without his knowledge, that the property held by him is tainted. That person may not face prosecution. However, even in such a case, an order of attachment of the proceeds of crime can be resorted to, which may eventually result in confiscation of the property, depending on the outcome of the criminal action against the person alleged to have committed Scheduled Offence. We see no reason to depart from the said view. Furthermore, in the present case, appellant Om Prakash Nogaja is an accused in the Scheduled Offence, and both the appellants are prosecuted for offence under Section 3 of the PMLA. That trial is still pending. The concerned Court has already taken cognizance of the offence. The order taking cognizance dated 26th March, 2009, read with the prosecution case, as stated in the complaint, in particular, paragraph 51, shows that there is sufficient material to make out a prima facie case that all the accused have received proceeds of crime of value exceeding Rs. 30,00,000/-. There is allegation of commission of offence under Part A of 19 96710 the Schedule, and it is alleged that the money involved is proceeds from illicit trafficking of drugs. Suffice it to observe that cognizance of offence punishable under Section 3, read with Section 4 of the PMLA and Section 120-B of I.P.C., has been taken by the concerned Court against all the accused. As a matter of fact, the said order taking cognizance of the offence against all the accused