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Judgment
FPA-PMLA-3219/CHN/2019
The present appeal has been filed by the appellants on 17.09.2019 under Section 26 of the Prevention of Money Laundering Act, 2002 (hereinafter
referred to as “PMLAâ€) against the order dated 31.05.2017 passed by the Adjudicating Authority (under PMLA, 2002), New Delhi in O.C.
No.674/2017.
The facts of the appeal in brief are as below:
The Enforcement Directorate (ED) passed Provisional Attachment Order (PAO) No.23/2016 dated 22.12.2016 attaching several properties including
following properties involved in the present appeal as described below:
(a) Agricultural Land measuring 1.00 Acre lying at Survey No. SF 91/2A1, 207/2A1 of Kallikappan Village of SRO Theppakulam.
(b) Agricultural Land measuring 4.74 Acre lying at Survey No. SF 207/2A, 91/2A1, 91/2A of Kallikappan Village of SRO Theppakulam.
The Enforcement Directorate (ED) filed Original Complaint (O.C.) bearing No.674/2017 before the Adjudicating Authority for confirmation of the
Provisional Attachment Order (PAO). It is the contentions of the appellants that they were not made parties either in the PAO or in the O.C. by the
ED nor the Adjudicating Authority issued any notice to them even though they are the owner of the said properties and sufficient informations before
them about their ownership. The PAO has been confirmed by the Adjudicating Authority on 31.05.2017.
The questions raised by the learned counsel for the appellants are that:
a) Whether the respondent (ED) could have attach the properties , knowing the right of the appellants to the properties in question and without giving
any notice to the appellants, and
b) Whether the respondent (ED) can attach the properties which are owned by the appellants prior to the alleged commission of offence.
Besides above, it is further pleaded/submitted by the learned counsel for the appellants that:
(i) The above said properties belong to the father of the first appellant Smt. R.M. Sivagami Achi namely Shri Palaniyappa Chettiar, who had executed
a registered settlement deed vide document no.178 of 1966 dated 02.03.1966 in favour of the first appellant and that after his demise, his wife Smt.
Meenakshi Achi adopted the second appellant Shri P.L. Muthuveerappan as her son by adoption deed dated 25.01.1974 and thereafter, the first
appellant had executed a settlement deed vide document no.1142 of 1974 dated 11.07.1974 in favour of her mother Smt. Meenakshi Achi and her
brother, the second appellant, to an extent of 2 acres out of 5.74 acres in UDR Survey No.207/2A and after that settlement deed the said property has
been subdivided as 3.74 acres in new survey no.91/2A1 in favour of first appellant and 2 acres in new survey no.91/2A2 in favour of Smt. Meenakshi
Achi and second appellant. The mother of the appellants died in the year 2002, living the appellants as her only surviving legal heirs and that
subsequent to the death of their mother, the appellants executed a partition deed between themselves on 02.08.2013 vide document no.1759 of 2013
and that in the partition the first appellant got 4.24 acres to her share and the second appellant got 1.50 acres to his share and that out of the aforesaid
5.74 acres only 1 acre of land was given to one Shri Muthaiya Thevar for cultivation and maintenance of the same as a cultivating tenant as per the
records of the Tenancy Act.
(ii) The cultivation rights of the aforesaid properties were only given to Shri Muthaiya Thevar which was transferred to his son Shri M. Veerana
Thevar on Shri Muthaiya Thevarâ€s death who subsequently transferred the cultivation rights to Shri S. Sankanarayanan and Shri P.K.M. Selvam on
24.11.2006 for Rs.81,000/-. The aforesaid transfer was done without the knowledge of both the appellants, who are the original owners of the
properties in question.
(iii) The rest of the properties of the appellants was being cultivated by late Alagar, after whose demise his wife Mrs. Karuppi alias Karuppayi carried
the cultivation rights and karuppiâ€s further transferred the cultivation rights over the land of the appellants to Shri K. Asokan who later on 24.06.2008
for a sum of Rs.50,000/- transferred the cultivation rights to Shri S. Sankarnarayanan and Shri P.K.M. Selvam. The said transfer was completely
unauthorized and without the knowledge of the appellants.
(iv) The appellants were not aware about the proceedings before the Adjudicating Authority nor were served with any summons nor made party to
the proceedings
(v) The appellants came to know about the aforesaid proceedings before the Adjudicating Authority in June, 2019 when the appellants decided to sell
their properties due to financial constraints.
(vi) The appellants have written a letter to the respondent (ED) on 28.06.2019 narrating the status about their land which was illegally attached and
approached the respondent (ED) at their Chennai Office, where they were informed about the present proceedings.
(vii) The appellants have filed the relevant plain copies of the documents such as Settlement Deed dated 28.09.1926, Settlement Deed dated
14.04.1930, Mortgage Deed dated 16.03.1933 & Made-over of the Mortgaged Deed dated 20.02.1936, Deed of Cultivation Made-over Rights dated
24.06.2008 and Deed of Partition dated 02.08.2013 to substantiate the chain of transfer of the aforesaid properties upto the Partition between the
appellants.
During the course of hearing, the learned counsel for the appellants has referred to internal page no(s).131, 161-165 & 176 of the impugned order and
read out the same and submitted that there were sufficient materials available before the Enforcement Directorate and Adjudicating Authority to
notice/summons them during the course of investigations and at subsequent stages of the proceedings but they did not do the same. With reference to
the aforesaid pages of the impugned order it is also submitted that the respondent as well as the Adjudicating Authority had applied their common
sense only and came to a finding only understanding that “…… under agricultural land law, I understand that there is law that land belongs to the
tiller of land if he has tilled the land for a particular period (may be three years) and in this case lease continued to till the land for very very long time
as claimed by defendants themselves.â€
Further during the course of hearing, the learned counsel for the appellants has referred to several documents in respect of his contentions that how
the properties in question have been inherited from the appellantâ€s parents and how they have given the questioned lands to Shri K. Ashokan & Shri
Muthaiya Thevar for cultivation purpose and only the cultivable rights have been transferred not the ownership of the properties. It is the contention of
the learned counsel for the appellants that the Investigating Officer has himself assumed that in view of the long cultivable rights the cultivators have
become the owners of the questioned lands and the ownership deemed to have been transferred.
It is also submitted by the learned counsel for the appellants that ED did not take any step to know whereabouts of the appellants, who are the real
owners of the properties and not even examined them for the purpose. The appellants were kept in dark and the aforesaid properties have been
attached behind their back.
On the aforesaid grounds the learned counsel for the appellants has prayed for allowing the appeal and to set-aside the impugned order with respect to
the appellants properties and to release the same.
On the other hand, the learned counsel for the respondent (ED) has filed reply to the appeal in which the respondent has narrated the registration of
FIRs against M/s. M.S. Granites for Offences under Sections 447, 379, 406 & 420 of IPC, 1860 and Section 3(1) of TNPPDL Act read with Section
4(1)(A), 4(2)(A), 4(3) and 21(b)(5) of Mines and Minerals Development Regulation Act, 1957 and filing of Charge-Sheet dated 19.08.2013 against
M/s. M.S. Granites, M/s. Sri Aiswariya Rock Export, S/Shri Shankaranarayanan, Shri P.K.M. Selvam and 10 others for offences under Section
120(B), 147, 430, 434, 465, 467, 468, 471, 304, 105, 511, 447, 379, 406 & 420 of IPC , 1860 and Section 3(1) of TNPPDL Act read with Section 4(1)
(A), 4(2)(A), 4(3) and 21(b)(5) of Mines and Minerals Development Regulation Act, 1957 and Section 6 read with 3(a), 4(a) of Explosive Substances
Act, 1908.
As out of the aforesaid offences, the offences under Sections 120B, 420 467 & 471 of IPC, 1860 and Section 3(a) & 4(a) of the Explosive Substances
Act, 1908 are Scheduled Offences under PMLA, 2002, therefore, the respondent (ED) registered Enforcement Case Information Report (ECIR)
No.13/2015 dated 31.12.2015 and conducted investigation and on conclusion of investigation, the respondent attached several properties including the
properties involved herein.
In its parawise reply, the respondent (ED) tried to justify as to why the present appellants were not noticed. The said justifications are as below in
brief:
a) That, during the course of investigation a letter dated 01.11.2016 was addressed to the Sub-Registrar, Theppakulam requesting him to provide
details of registration of any immovable property registered in the names of the persons under investigation viz., Defendants 1 to 5 in PAO, either as a
Claimant or as an Executant along with the latest Encumbrance Certificate of the said immovable property. In response, the said SRO vide letter
dated 25.11.2016, enclosed 39 numbers of documents related to the persons mentioned in the Directorateâ€s reference. The said 39 documents
included the documents relating to the properties attached and described in Sl. No.xii & xxv of Schedule A of the Para 33 of PAO dated 22.12.2016
and that the main contention of the Appellant herein is that they are possessing the said lands in the status of a cultivating tenancy and have only lease
cultivating tenancy rights on the said lands and submitted that although the document may evidence that the Defendants have only a cultivating
tenancy rights, it is per se, an ownership and the following substantiate the contentions that:
In respect of both the properties mentioned above, inter-alia, stated that the consideration amount of Rs.81,000/- and Rs.50,000/- were paid , being the
market value to the executants and thereby the cultivation rights have been transferred to Shri S. Sankaranarayanan & Shri P.K.M. Selvam and these
transactions were made as disguised sales which are common where the actual owner is not available and that the person in the possession of the
lands for many years doing cultivation, instead of making sale deed (since he is prohibited as he is not the legal owner) would normally while selling
make only a made-over deed only and therefore, the defendants are the legal owners of the said properties and that the appellants should have been
aware of the present FIRs, etc., and that since the property has been on perpetual lease, which creates an interest over the property and the same is
not transferable, it could clearly be construed that the property has actually been sold and that in the above facts and circumstances it was submitted
that there was no necessity of issuing notice to the present appellants and prayed for dismissal of the appeal.
Heard both sides, perused the materials available on record including the reply to the appeal filed by the respondent (ED). The main question involved
in the present appeal is whether there is any violation of the provisions of law as enunciated in Prevention of Money Laundering Act (PMLA), 2002.
There are two properties involved in the present appeal are described above. These two properties have been attached under Section 5(1) of the
PMLA, 2002 in a case arising out of registration of FIRs under different sections/acts such as IPC, Mines and Minerals Act and Explosive and
Substances Act and filing of Charge-Sheet under different sections of the aforesaid Acts against Shri P.K.M. Selvam, Smt. S. Sankaranarayanan &
Others, who alleged to have committed illegal minings, illegally use of explosive substances in minings and also of cheating, preparation of false &
fabricated documents and using the same as genuine, etc. Out of these predicate offences, some are scheduled offences under PMLA, 2002.
These two properties have been transferred admittedly by the cultivation rights holders in favour of Shri P.K.M. Selvam and Shri S.
Sankaranarayanan by way of cultivable tenancy made-over agreements in the year 2006 & 2008. It is revealed from the impugned order that the
defendants made averments regarding the transfer of these lands by way of made-over agreements for cultivation and the owner is appellant no.1
Smt. Sivagami Achi. The details of which are well reflected in internal page no(s).131 to 134 & 161-165 of the impugned orders. In spite of the above
informations and the documents available on record, these appellants were neither summoned nor noticed nor examined by the respondent (ED).
A duty is cast upon the respondent to examine all those persons who are having interest in the property for coming to a conclusion regarding the
commission of offence under PMLA, 2002. The word “person interested†has been explained under Section 5(4) of the PMLA, 2002 which reads
as follows:
“Section 5.Attachment of property involved in money-laundering.
(4) Nothing in this section shall prevent a person interested in the enjoyment of the immovable property attached under sub-section (1) from
such enjoyment.
Explanation.â€" For the purposes of this sub-section “person interestedâ€, in relation to any immovable property, includes all persons,
claiming or entitled to claim any interest in the property.â€
On perusal of the language of the aforesaid section, it appears that by attaching the properties without any notice, the respondent has deprived the
appellants from the right to enjoyment of property.
Section 8 in The Prevention of Money-Laundering Act, 2002 reads as below:
“8. Adjudication. â€
(1) On receipt of a complaint under sub-section (5) of section 5, or applications made under sub-section (4) of section 17 or under sub-
section (10) of section 18, if the Adjudicating Authority has reason to believe that any person has committed an 13 [offence under section 3
or is in possession of proceeds of crime], he may serve a notice of not less than thirty days on such person calling upon him to indicate the
sources of his income, earning or assets, out of which or by means of which he has acquired the property attached under sub-section (1) of
section 5, or, seized under section 17 or section 18, the evidence on which he relies and other relevant information and particulars, and to
show cause why all or any of such properties should not be declared to be the properties involved in money-laundering and confiscated by
the Central Government:
Provided that where a notice under this sub-section specifies any property 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: Provided further that where such property is held jointly by more than one
person, such notice shall be served to all persons holding such property.
(2) The Adjudicating Authority shall, afterâ€
(a) considering the reply, if any, to the notice issued under sub- section (1);
(b) hearing the aggrieved person and the Director or any other officer authorised by him in this behalf, and
(c) taking into account all relevant materials placed on record before him, by an order, record a finding whether all or any of the
properties referred to in the notice issued under sub-section (1) are involved in money-laundering:
Provided that if the property is claimed by a person, other than a person to whom the notice had been issued, such person shall also be
given an opportunity of being heard to prove that the property is not involved in money-laundering.â€
The second most important point is that as per Section 8 of PMLA, 2002
Adjudicating Authority ought to have given opportunity of being heard to the appellants before deciding the case.
On perusal of the plain copies of the chain of documents, copy of the impugned order, reply made by the respondent it is prima facie that the
appellants are the owners having interest in the properties in question as they had only made-over agreements to different persons for cultivation. A
decision cannot be made on assumption & presumption that as the appellants have leased out the aforesaid properties for cultivation purposes for a
long period amounts to lose of the ownership. It can only be decided by Competent Civil Court. Nothing has been submitted during the course of
hearing that Shri P.K.M. Selvam or Shri S. Sankaranarayanan or the transferors of cultivation rights to these two persons have ever raised any
dispute that the present appellants are not the owners of the aforesaid properties in question.
None of the justification advance by the respondent has merit in this regard. There is a clear violation of principle of natural justice. The appellants
ought to have noticed by the respondent (ED) and Adjudicating Authority before deciding on attachment of the aforesaid properties.
The Adjudicating Authority shall, in accordance with the provisions of sub-section(2) of Section 8 of the PMLA, 2002, record finding whether all or
any of the properties mentioned above are involved in money laundering and pass appropriate orders in accordance with law.
In view of the above, the appeal is allowed. The impugned order dated 31.05.2017 is set-aside and remanded to the Adjudicating Authority for re-
adjudication of the case qua the appellants within 150 days from the date of receipt of this order or from the date of the order when either of the
parties brings it to the knowledge of this order, before the Adjudicating Authority. The appellants are directed to file appropriate application within
thirty (30) days from today raising all the legal & factual issues before the Adjudicating Authority, who shall after giving due opportunity to both the
parties decide all the legal issues and also record findings whether all or any of the properties attached are involved in money laundering.
This Tribunal has not expressed any opinion on merits of the source of income, earnings out of which or by means of which the appellants have
acquired attached properties.
However, the attachments shall continue till the completion of the proceedings before the Adjudicating Authority and both the parties shall maintain
“status quo’ in respect to the attached properties.
In the circumstances, no order as to costs.
The pending applications, if any, shall stand disposed of.
Registry is directed to forward copy of this order to the office of the Adjudicating Authority under PMLA, 2002 for further necessary action.