ICICI Bank Limited vs Assistant Director Directorate Of Enforcement, Hyderabad

MP-PMLA-2789/HYD/2016 (COD) & FPA-PMLA-1483/HYD/2016

The Appellant, has filed the present Appeal under Section 26 of the Prevention of Money-Laundering Act, 2002, against Order Number OC-

555/2016 dated 08.07.2016 passed by the Adjudicating Authority in the matter of ""The Joint Director, Directorate of Enforcement V/s Shri Arun

Kumar Kajjayam & Anr."" by which the Adjudicating Authority has confirmed the Provisional Attachment Order No. 01/2016 dated 26.02.2016 with

respect to the following immoveable and moveable properties:

(a) 242 Square Yards plot at Survey No. 601/1 at Chemmumiapet Village, Kadapa registered vide document no. 335/2012 by SRO Kadapa (Rural),

having value of Rs. 40,00,000/- (Rupees forty lacs only).

(b) Rs. 57,00,000/- (Rupees fifty seven lacs only) in cash lying with ICICI Bank, Cuddapah Branch, Andhra Pradesh.

(c) Gold ornaments worth Rs. 1,25,000/- (Rupees one lac twenty five thousand only) in custody of the police in cae Fir No. 291/2011 U/s. 420.409,

468, 471 IPC registered at Police Station Kadapa (Andhra Pradesh).

The brief facts are that the Appellant is a private sector bank who offers a wide range of banking products and financial services to corporate and

retail customers through a variety of delivery channels.

On 22.12.2011, a complaint was filed by the cluster branch manager (Tirupati Cluster) of ICICI Bank with the Inspector of Police of the Cuddapah

Police Station (Andhra Pradesh). In the said complaint, it was alleged that Mr. Arun Kumar Kajjayam who was working with the Appellant from

2008-2011 had during the course of his employment siphoned/misappropriated a sum of approximately Rs. 1,30,00,000/- (Rupees one crore thirty lacs

only) from the Appellant. Consequently FIR No. 291/2011 was registered U/s. 420/409 IPC at Police Station Kadapa. The money

siphoned/embezzeled by Sh. Arun Kumar Kajjayam was part of the money earmarked for replenishing the ATMs of the Appellant Bank.

The police during its investigation not only discovered that Mr. Arun Kumar Kajjayam had dishonestly and fraudulently taken away the sum of Rs.

1,30,00,000/-(Rupees one crore thirty lacs only) but also discovered that he had utilized a part of the money siphoned from the Appellant to purchase a

242 Square Yards plot at Survey No. 601/1 at Chemmumiapet Village, Kadapa registered vide document no. 335/2012 by SRO Kadapa (Rural),

having value of Rs. 40,00,000/- (Rupees forty lacs only).

Admittedly, the police recovered Rs. 57,00,000/- (Rupees fifty seven lacs only) from Mr. Arun Kumar Kajjayam. The police recovered gold

ornaments worth Rs. 1,25,000/- (Rupees one lac twenty five thousand only) from him. The police seized the papers of the immoveable property, Rs.

57,00,000/- (Rupees fifty seven lacs only) and the Gold ornaments from the custody of Mr. Arun Kumar Kajjayam.

On 23.01.2012, the Appellant filed an Application before the Court of Ist Additional Judicial First Class Magistrate, Kadapa seeking release of the

aforementioned seized articles.

The Ld. Ist Additional Judicial First Class Magistrate, Kadapa by his Order dated 04.02.2012, upon satisfaction of the Appellants ownership on the

sum of Rs. 57,00,000/- (Rupees fifty seven lacs only) handed over the custody of the same to the Appellant. There was no protest on behalf of

prosecution that the same is not recovered from the accused and the said money does not belong to the said offence committed by him. The said order

did not challenge either by the prosecution or the respondent here. The amount was released on superdari to the appellant Bank.

The Respondent on 03.01.2013 the basis of FIR No. 291/11 registered at PS Kadapa, registered its own Enforcement Case Information Report

being ECIR/01/HZO/2013/353 on the ground that the offences U/s. 420 and 471 IPC are scheduled offences under the Prevention of Money-

Laundering Act, 2002 (hereinafter referred to as the ""PMLA"").

On 10.01.2013, the Police after completion of the investigation filed a chargesheet against Mr. Arun Kumar Kajjayam for the commission of the

offences U/s. 409/420/468/471 IPC before the Court of Ist Additional Judicial First Class Magistrate, Kadapa.

On 05.11.2015, the Branch Manager of the Bank's Cuddapah Branch received a letter from Assistant Enforcement Officer, Directorate of

Enforcement, Hyderabad, requesting the Branch Manager to provide information relating to the release of the cash amounting to Rs. 57,00,000/- and

property in Cr. No. 291/2011 which had been in custody of the Court.

On 26.02.2016, the Joint Director, Directorate of Enforcement, Hyderabad (hereinafter referred to as the ""Complainant"") passed a Provisional

Attachment Order No. 01/2016 in ECIR/01/HZO/2013/353 by which the following properties were provisionally attached:

(a) 242 Square Yards plot at Survey No. 601/1 at Chemmumiapet Village, Kadapa registered vide document no. 335/2012 by SRO Kadapa (Rural),

having value of Rs. 40,00,000/- (Rupees forty lacs only).

(b) Rs. 57,00,000/- (Rupees fifty seven lacs only) in cash lying with ICICI Bank, Cuddapah Branch, Andhra Pradesh.

(c) Gold ornaments worth Rs. 1,25,000/- (Rupees one lac twenty five thousand only) in custody of the police in case Fir No. 291/2011 U/s. 420,409,

468, 471 IPC registered at Police Station Kadapa (Andhra Pradesh).

On 22.03.2016, the Deputy Director, Directorate of Enforcement, Hyderabad filed a complaint U/s. 5(5) of PMLA before the Ld. Adjudicating

Authority, Hyderabad. The complaint was subsequently transferred to the Ld. Adjudicating Authority, New Delhi vide letter dated 06.04.2016.

On 24.05.2016, the Appellant upon receipt of the notice U/s. 8(1) of PMLA filed its reply before the Ld. Adjudicating Authority praying that the

Provisional Attachment Order No. 01/2016 in so far as it relates to the attachment of the amount of Rs. 57,00,000/-(Rupees fifty seven lacs only) be

not confirmed.

On 08.07.2016, the Ld. Adjudicating Authority passed the Order being OC-No. 555/2016 (herein after referred to as the ""Impugned Order"")

confirming the Provisional Attachment Order No. 01/2016 passed by the Joint Directorate of Enforcement, Hyderabad continuing the provisional

attachment.

GROUNDS

A. For that the Impugned Order has been passed by the Ld.

Adjudicating Authority in the most arbitrary and casual manner without taking into consideration the facts and circumstances of the case and with

complete disregard to the contentions raised by the Appellant.

In the present case admittedly the cash in question was not in the custody or possession of Mr. Arun Kumar Kajjayam but that of the Appellant in

view of the speaking order passed by the Judicial Order, upon furnishing the bond. It is safe and secure. The Ld. Adjudicating Authority did not

understand that the custody of the cash in question had been handed over to the Appellant by a Judicial Order passed by the Court of Ist Additional

Judicial First Class Magistrate, Kadapa and only after execution of a bond for the sum of Rs. 57,00,000/- (Rupees fifty seven lacs only), which was

submitted before the said Court which was accepted by the court.

There was no basis or need to confirm the order of provisional attachment but even the provisional attachment itself was bad in law. As per S.

5(1) (a) and (b) of PMLA two requirements must be satisfied before an order for provisional attachment can be passed, i.e. firstly the person against

whom such an order is going to be passed must be ""in possession of proceeds of crime"" and Secondly ""such proceeds of crime are likely to

concealed, transferred or dealt with in a manner which will result in frustrating any proceedings relating to confiscation of such proceeds

of crimeâ€​. Therefore unless and until the above two ingredients are satisfied no order of provisional attachment could have been passed, let alone an

order confirming the same.

The Adjudicating Authority failed to appreciate that had the cash in question been in the custody or possession of Mr. Arun Kumar Kajjayam then it

could have been argued that the first ingredient of S. 5(1) (a) of PMLA was satisfied.

As the custody of the said cash had been awarded by the Court itself, by no stretch of imagination can it be said that the money was likely to be

concealed or transferred or dealt with in any manner which would frustrate the confiscation proceedings. Therefore as even the ingredients of S. 5(1)

(b) PMLA were not satisfied, no question of attachment of the said sum of Rs. 57,00,000/- (Rupees fifty seven lacs only) can arise.

Admittedly, the money in question is case property before the Ld. Magistrate in FIR No. 291/2011 and has been released to the Appellant only

pursuant to giving of a bond, thereby acknowledging that the said money can now not be concealed or transferred or dealt with any manner which

would frustrate the confiscation proceedings and yet the order of confirmation of order of provisional attachment was passed. The pre-condition for

passing an order U/s, 8(1) of PMLA is that there must be ""reason to believe'' that any person has committed an offence u/s 3 or is in possession of

proceeds of crime.. In the present case the Appellant was admittedly not the perpetrator of the crime but its victim. The proceeding against the

appellant under Schedule Offence and/or under PMLA, 2002 are pending. It is public money which own by the appellant bank.

By means of the impugned order, the Ld. Adjudicating Authority by depriving the Appellant of the money by confirming the order of provisional

attachment has in fact harmed the Appellant for no fault of its own.

It is settled law that an Order U/s. 8(1) of PMLA can only be passed if the Respondent would prima facie to establishes that act of the Appellant

falls within the preview of the definition of money laundering as defined U/s. 3 of PMLA or is in ""possession of proceeds of crime"", S. 3 of PMLA

defines money laundering as under:

'Whosoever 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 including its concealment, possession, acquisition or use and projecting or claiming it as

untainted property shall be guilty of offence of money-laundering.

It is clear that a person can be said to have committed the offence of money laundering only if he directly or indirectly attempts to indulge or

knowingly assists or knowingly is a party or is actually involved in the process or activity connected with the proceeds of crime.

In the present case it is admittedly not the case of the Respondent that the Appellant has directly or indirectly

attempted to indulge or knowingly assisted or knowingly was a party or was actually involved in any process or activity connected with the proceeds

of crime. It is the admitted position that the Appellant is the victim of the crime.

The victim cannot become accused if the victim has not been involved in any manner for the offence of money laundering. Therefore if this be the

admitted situation then the Impugned Order could not have been passed qua the Appellant.

The expression ""reason to believe"" used in S. 8(1) of PMLA, the Ld. Adjudicating Authority should not confirm the provisional attachment merely

on the basis of suspect. The officer concerned who passed the provisional attachment is duty bound to give valid and cogent and clear reasons in

writing of “reason to believe†as to why he is passing the order of provisional attachment. At the same time, it is also an onerous duty of

Adjudicating Authority to consider all aspects before confirming the provisional attachment. Merely giving the reason that the Adjudicating Authority is

satisfied that it is case of money laundering and proceed of crime involved is not enough as the Hon'ble Supreme Court and various Hon'ble High

Courts have time and again held that """"reason to believe"" is not the same thing as suspicion or doubt and merely seeing also cannot be equated to

believing.â€Reason to believe"" is a higher level of state of mind. A person must have reason to believe if the circumstances are such that a reasonable

man would, by probable reasoning, conclude or infer regarding the nature of the thing concerned.

In the present case, the Adjudicating Authority did not understand the implication of the Order dated 04.02.2012 passed by the Ld. Ist Additional

Judicial First Class Magistrate, Kadapa whereby the Ld. Court handed over custody of the money to the Appellant. The Ld. Adjudicating Authority

erred in holding that ""...The temporary custody of cash given to the Bank does not entitle them to any right unless it is finally proved that the amount

relates to the fraud committed by the first defendant..."". The Respondent failed to understand that the Ld. Magistrate has granted custody to the

Appellant only after prima facie satisfaction of the Appellant's ownership of the money.

The Ld. Adjudicating Authority erred in holding that ""Defendant counsel has not submitted any such proof which would

determine that cash money is entirely out of the cash siphoned off by defendant No. 1"". The said finding is totally contrary to the record because it is

the finding of the investigating agency in FIR No. 291/2011 that the sum of Rs. 57,00,000/-(Rupees fifty seven lacs only) is part of the sum of Rs.

1,30,00,000/-(Rupees one crore thirty lacs only) siphoned by Mr. Arun Kumar Kajjayam. The investigation agency has never disputed the said fact.

The order passed by the Special Court has not been challenged. The trial in the matter is pending.

The request of the respondent to release the moveable and immoveable properties was not allowed by the Special Court even upon filing of an

application.

It is also a matter of fact that Mr. Arun Kumar Kajjayam in his statements recorded U/s. 50 of PMLA does not in any manner state that the

Appellant was involved in the commission of the offence. On the contrary he admits to his wrong doing. He never denied that said money does not

belong to the appellant rather he has confirmed that the money in question belonged to the Appellant.

A mere perusal of the charge sheet filed by the police in FIR No. 291/2011 and the statements of Mr. Arun Kumar Kajjayam recorded U/s. 50 of

PMLA shows that neither he nor his immediate family members had the means to purchase the immoveable property or the gold jewellery or have the

capacity to be in possession of Rs. 57,00,000/-(Rupees fifty seven lacs only).

The Adjudicating Authority has simply passed the mechanical order without applied its mind that the money so embezzled is public money being

held by the Bank on behalf of the account-holders in the Bank.

It is rightly argued on behalf of the appellant that if the duty of the bank to safeguard such money. Therefore, we are of the view that attachment

of the same by the Respondent and confirmation by the Ld. Adjudicating Authority would amount to gross violation of law.

The Impugned Order suffers from various informations as the Ld. Adjudicating Authority after considering all the material, before it held that

...undersigned comes to the prima facie conclusion that the defendant have committed the Scheduled Offences, generated proceeds of crime and

laundered them...â€. The Ld. Adjudicating Authority did not apply its mind to the admission by the appellant that it is a victim of the crime committed

by Mr. Arun Kumar Kajjayam and not the perpetrator of the crime. Thus, the present appeal is allowed by setting aside the Order dated 08.07.2016

bearing OC No. 555/2016 passed by the Ld. Adjudicating Authority confirming the Provisional Attachment Order No. 01/2016 dated 26.02.2016.