M/S. Rag Buildtech Pvt. Ltd. vs Deputy Director, Directorate Of Enforcement, Delhi

Ananya Ray, J

FPA-PMLA-2548/DLI/2018

This is an appeal filed by M/s. RAG Buildtech Pvt. Ltd. (through its Directors namely Shri Anik Garg, Smt. Renu Garg and Smt. Shivani Garg),

who were the defendant No. 2 before the adjudicating authority under PMLA, 2002. The defendant No. 1 Shri Anup Prakash Garg has not filed any

appeal.

Briefly the allegation is that Shri Anup Prakash Garg who was a Director in Andhra Bank between the period of October, 2006 to October, 2009

had hatched a criminal conspiracy with M/s. Sterling Biotech Ltd. (SBL) and had cheated Andhra Bank and other banks to the tune of Rs. 5,382/-

crores. That cash transactions involving the name of one Mr. Garg Director, Andhra Bank totalling to Rs. 1,52,50,000/- between the period October,

2008 to July, 2009 was found in entries in documents which was seized by the Income Tax department, Mumbai during the search operations in the

office premises of one unit by the name of M/s. PMT Machines Ltd., Mumbai which was also incorporated in the investigation by the ED under

PMLA. The ED also conducted searches at various premises relating to SBL group and its associates. It is alleged that the above amount was

received by Mr. Garg as gratification for favouring the above companies in his capacity as Director of the Andhra Bank. The residential as well as

office premises of Shri Garg was also searched under PMLA. The case of the Enforcement Directorate is that this amount of Rs. 1,52,50,000/- which

was received in cash by him has been used/layered into the company M/s. RAG Buildtech Pvt. Ltd. which was set up on 17.01.2011 with his son Shri

Anik Garg, his wife Smt. Renu Garg and his daughter-in-law Smt. Shivani Garg as Directors in the said company.

The learned counsel for the respondent took a preliminary point that the ED has filed a case in the Special Court under PMLA and the Special

Court has already taken cognizance of the same. Therefore he pleaded that this case should be kept pending till the disposal by the Special Court.

The appellant in his appeal as well as in his pleadings before me have argued at length on the merits of the case. Their main argument was that the

ED has nowhere been able to establish that Shri Anup Garg held any position in RAG Buildtech and just because his family members were Directors

in the company it did not mean that Shri Anup Garg had interests in the company. Moreover, the appellant was a company and had its own source of

funds which it had invested in the properties which have been wrongly attached by the ED holding it to be proceeds of crime of Mr. Anup Garg. On

the preliminary issue raised by the counsel for the respondent, the learned counsel for the appellant while not contesting this point and also not

disagreeing with the legal powers of the Special Courts under PMLA has, however, submitted that the orders of the adjudicating authority can be

appealed to the Appellate Tribunal under Section 26 of PMLA and it is this Tribunal which has to take a decision on the order of the adjudicating

authority attaching their properties.

While both the appellants and the respondents have argued at length on the merits of the case, however I think it necessary to first deal with the

preliminary point taken by the respondent. As per Section 44(1)(a) of PMLA “an offence punishable under Section 4 and any scheduled offence

connected to the offence under that Section shall be triable by the Special Court constituted for the area in which the offence has been

committed.………..†The above therefore implies that whoever commits the offence of money laundering shall be tried by the Special Court.

Section 3 of PMLA, 2002 defines what an offence of money laundering is. Section 5(b) states that such proceeds of crime are likely to be............ or

dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime........... In the present

case, the Special Court has already taken cognizance and hence is therefore pending before the said court. Section 8(5) of PMLA reads as “where

on conclusion of a trial of an offence under this Act, the Special Court finds that the offence of money laundering has been committed, it shall order

that such property involved in the money laundering or which has been used for commission of the offence of money laundering shall stand

confiscated to the Central Government.†Section 8(6) further states “where on conclusion of a trial under this Act the Special Court finds that the

offence of money laundering has not taken place or the property is not involved in money laundering, it shall order release of such property to the

person entitle to receive it.†Section 8(8) second proviso reads “provided further that the Special Court may, if it thinks fit, consider the claim of

the claimant for the purposes of the restoration of such properties during the trial of the case in such manner as may be prescribed.â€​

Hence, it is the Special Court only who can adjudge on the offence of money laundering, and the money laundering necessarily relates to the

“proceeds of crimeâ€​ only.

It is pertinent to note that Section 8 deals with adjudication by the adjudicating authority which as per Section 8(3) authorises, the adjudicating

authority to confirm the attachment of the property if it is involved in money laundering. Hence, while the attachment powers are with the adjudicating

authority the power to confiscate, release or restore to a claimant of the said property lies specifically with the Special Courts. This Tribunal has not

been assigned any specific powers under PMLA with relation to confiscation, release or restoration of the property attached. Since the Special Court

has initiated the proceedings in the present case and taken cognizance of the same, it is my considered view that the Special Court has to decide the

case including the offence of money laundering as discussed above, which in any case only the Special Court can decide and not the Appellate

Tribunal.

Further as per Section 44(1)(a) of PMLA “an offence punishable under Section 4 and any scheduled offence connected to the offence under

that Section shall be triable by the Special Court constituted for the area in which the offence has been committed.†This was reaffirmed by the

Honâ€​ble Supreme Court in the case of Nikesh Tarachand Shah vs. Union of India WP (Criminal) No. 67 of 2017 dated 23.11.2017.

“8. Under Section 5 of the Act, attachment of such property takes place so that such property may be brought back into the

economy……….. Section 44 is very important in that the Section provides for the trial of a schedule offence and (emphasis added) the

offence of money laundering together by the same Special Court, which is to try such offences under the Code of Criminal Procedure as

if it were a court of sessions.â€​

The scheme of things as it exists under the PML Act shows that it is the same property which can be provisionally attached, thereafter this

attachment can be confirmed by the adjudicating authority, that the order with regard to the same property would become final after an order of

confiscation is passed by the Special Court (Section 8(3)(b), or released or restored as per Section 8(6) or Section 8(8) second proviso as the case

may be.

In this background, it would be appropriate to keep this appeal in abeyance until the Special Court, who has already taken cognizance finally

disposes of the case. Both the parties are directed to inform this tribunal as and when the final order is pronounced by the Special Court.