BEFORE THE HON’BLE APPELLATE TRIBUNAL

(UNDER THE PREVENTION OF MONEY LAUNDERING ACT, 2002)

NEW DELHI
APPEAL NO. 4654 OF 2022
IN THE MATTER OF:
Mr. Hittesh Patel
R/o 329, Courtallam Road
Piranoor Border, Shencottai
Tenkasi District-627809 ……… Appellant
VERSUS
Shri Harish Y.N.
Deputy Director,
Directorate of Enforcement
Madurai-625002 ……...... Respondent
INDEX
Sl. No. Particulars Page No.

1. Counter Reply on behalf of the Respondent against the 1-41

Appeal No. 4654 OF 2022 filed by the Appellant under
Section 26 of the PMLA, 2002 against Order dated
08.02.2022 passed by the Adjudicating Authority (Under
the PMLA, 2002), New Delhi in OC No. 1489/2021.
2. Affidavit 42-43

Through

Dated: .11.2023 Advocate Nattasha Garg

Place: Madurai, Tamil Nadu Counsel for Enforcement Directorate
 1

BEFORE THE HON’BLE APPELLATE TRIBUNAL

(UNDER THE PREVENTION OF MONEY LAUNDERING ACT, 2002)
NEW DELHI
APPEAL NO. 4654 OF 2023
(In the matter of Appeal U/s – 26 of PMLA, 2002 against the order dated
08.02.2022 passed by the Competent Adjudicating Authority for Prevention
of Money Laundering Act in reference No. OC No. 1489/2021)

IN THE MATTER OF:

Mr. Hittesh Patel
R/o 329, Courtallam Road
Piranoor Border, Shencottai
Tenkasi District-627809 ……… Appellant

VERSUS

Shri Harish Y.N.

Deputy Director,
Directorate of Enforcement
Madurai-625002 ……...... Respondent

COUNTER AFFIDAVIT ON BEHALF OF THE RESPONDENT

MOST RESPECTFULLY SHOWETH:

I, Brijesh Beniwal, aged 34 years, currently working as Assistant Director,

Directorate of Enforcement, Department of Revenue, Ministry of Finance,
Govt. of India, No. 1A, P& T Nagar Main Road, Madurai-625017 do hereby
solemnly affirm and sincerely state as follows:
 2

2. That, the respondent/deponent is well conversant of the facts of the case and
has been duly authorized by the Competent Authority to swear and file this
counter affidavit in the instant matter.

3. That, the respondent/deponent has gone through the instant appeal filed by
appellant under Section 26 of PMLA, 2002 and understood the same.

4. That, at the outset the deponent denies the contents of the instant application
including the submissions and the contentions/averments urged by the
applicant as false and baseless except what is admitted herein. All other
averments, contentions and submissions not specifically admitted herein
below shall be deemed to have been categorically denied, though not
traversed.

5. BRIEF FACTS OF THE CASE:-

i) Shri. Kancharla Pramod Kumar Reddy, Assistant General Manager of

erstwhile Corporation Bank (Presently Union Bank of India) having it’s
Zonal Office at Trichy on behalf of the Corporation Bank (Presently
Union Bank of India) filed a complaint with the CBI, BS&FC,
Bangalore for defalcation of various loans by the same group of
companies. On the basis of the said complaint, CBI, BS&FC, Bangalore
registered an FIR in Crime No.17/E/2018-BS & FC/BLR dated 26-09-
2018 against M/s. Shinago Plantations Pvt. Ltd, having its registered
office at 1/4, Vamadam Road, Thennur, Tiruchirapally, Tamil Nadu and
other related entities/persons.
ii) Perusal of said FIR registered by CBI, BS&FC, Bangalore reveals that
M/s. Shinago Plantations Pvt. Ltd, having it’s registered office at 1/4,
 3

Vamadam Road, Thennur, Tiruchirapally, Tamil Nadu along with many

group concerns and their promoters who are mainly family members
availed loans on the basis of inflated value of the properties mortgaged
and indulged in willful diversion of funds through various group
accounts. The case has been declared as fraud by the Bank on 06-12-
2017. The total loans outstanding as furnished by the erstwhile
Corporation Bank (presently Union Bank of India) on 07-01-2019 are as
under:
Table I
S. Name of the Unit Address Loan Promoters/Partners
No. Borrower Amount
(in Rs.
Crs)
1 M/s. Maruthi 1/4, Vamadam Road, 34.28 1) Mr. Nathu K Patel, 2)
Saw Mill Tennur, Trichy - 620 Smt. Pushpa N Patel
017
2 M/s. Bhavani 49/1, Tanjore Main 35.38 1) Gopal K Patel, 2)
Saw Mill Road, Thiruverambur, Ramila G Patel
Trichy - 620 013
3 M/s. Patel No.132/1A, Bye Pass 15.25 1) Jithendra G Patel, 2)
Enterprises Road, Ariyamangalam, Deepika K Patel
Trichy - 620 010
4 M/s. Patel & 55/2B-1B, Thanjavur 15.16 1) Mahesh G Patel, 2)
Company Road, Kattur, Trichy Hema M Patel
5 M/s. Patel 1/4, Vamadam Road, 15.24 1) Mr. Suresh N Patel, 2)
Wood Works Tennur, Trichy - 620 Smt. Hasmitha S Patel
017
6 M/s. Vasani 1/4, Vamadam Road, 39.53 1) Mr. Suresh N Patel, 2)
Wood Works Tennur, Trichy - 620 Hasmitha S Patel
(Trichy) 017
7 M/s Surya 59/1C, Thanjavur Main 25.01 1) Paresh N Patel, 2)
Agencies Road, Near Old Harshitha P Patel
Palpannai, Trichy –
620008
8 M/s. 4/487-A, Tanjore Road, 31.42 1) Mr. Hasmukh S Patel,
KarpagaVinay Opposite to Balaji Smt. Jayamala H Patel
aga and Nagar, Kattur, Trichy
Company
9 M/s. Balaji 4/490, A Tanjore Road, 21.17 Mr. Jithendra G Patel, 2)
 4

Associates Opposite to Balaji Smt. Deepika J Patel

Nagar, Kattur
10 M/s. Surya 1/811, Courtallam 30.67 1) Mrs. Reena H Patel, 2)
Timber Road, Piranoor Border, Mr. Hittesh S Patel
Traders Shencottah
11 M/s. Patidar 349C, Coutallam Road, 16.19 Mr. Dinesh S Patel
Wood Works Piranoor Border,
Shencottah – 627809
12 M/s. K.S.Patel 59/1-C, Thanjavur Main 14.75 1) P.Harshitha Patel, 2)
and Sons Road, Near Old N.Paresh Patel
Palapannai, Trichy –
620008
13 M/s. Global 675, 200 Ft. Inner Ring 14.51 1) S.Dinesh Patel, 2)
Trading Road, Madhavaran, M.ShivjiBhai Patel, 3)
Company Chennai – 600110 Khimji M Patel
14 M/s. Tim India 675, 200 Ft. Inner Ring 14.52 1) Mr. Mahesh G Patel,
Exim Road, Madhavaran, 2) Mrs. Rtanshi M Patel
Chennai – 600110
15 Jayamala Patel 329, Cortallam Road, 0.78 Jayamala Patel
Iranoor, Shencottah
16 Reena H Patel 329, Cortallam Road, 0.99 Reena H Patel
Iranoor, Shencottah
17 Pushpa D 329, Cortallam Road, 0.81 Pushpa D Patel
Patel Iranoor, Shencottah
18 Deepak G 49/2a, Tanjore Main 0.74 Deepak G Patel
Patel Road, Tiruverumbur,
Trichy
19 Harshita P 7, Lakshmipuram, 0.74 Harshita P
Tennur, Trichy
20 Jaishree N 7, Lakshmipuram, 0.73 Jaishree N Patel
Patel Tennur, Trichy
21 Shakuntala 49/2a, Tanjore Main 0.74 Shakuntala
Road, Tiruverumbur,
Trichy
22 Paresh N 7, Lakshmipuram, 0.74 Paresh N
Tennur, Trichy
23 Hema M Patel 49/2a, Tanjore Main 0.72 Hema M Patel
Road, Tiruverumbur,
Trichy
24 Hasmitha S 7, Lakshmipuram, 0.75 Hasmitha S Patel
Patel Tennur, Trichy
25 Depika J Patel 49/2a, Tanjore Main 0.77 Depika J Patel
Road, Tiruverumbur,
 5

Trichy
26 Vanitha Patel 7, Lakshmipuram, 0.73 Vanitha Patel
Tennur, Trichy
27 Hasmukh 329, Cortallam Road, 0.78 Hasmukh Patel
Patel Iranoor, Shencottah
28 Hittesh S Patel 329, Cortallam Road, 0.78 Hittesh S Patel
Iranoor, Shencottah
29 Jithendra G 49/2a, Tanjore Main 0.72 Jithendram Patel
Patel Road, Tiruverumbur,
Trichy
30 Suresh N Patel 7, Lakshmipuram, 0.75 Suresh N Patel
Tennur, Trichy
31 Mahesh G 49/2a, Tanjore Main 0.72 Mahesh G Patel
Patel Road, Tiruverumbur,
Trichy
32 Dinesh Patel 329, Cortallam Road, 0.85 Dinesh Patel
Iranoor, Shencottah
33 Shivgan K 329, Cortallam Road, 0.37 Shivgan K Patel
Patel Iranoor, Shencottah
34 Hirubhai S 329, Cortallam Road, 0.37 Hirubhai S Patel
Patel Iranoor, Shencottah
35 Nathu K Patel 7, Lakshmipuram, 0.37 Nathu K Patel
Tennur, Trichy
36 Ramila G 49/2a, Tanjore Main 0.37 Ramila G Patel
Patel Road, Tiruverumbur,
Trichy
37 Pushpa N 7, Lakshmipuram, 0.37 Pushpa N Patel
Patel Tennur, Trichy
38 Gopal K Patel 49/2a, Tanjore Main 0.37 Gopal K Patel
Road, Tiruverumbur,
Trichy
39 M/s. Vasani 1/4, Vamadam Road, 39.53 1) Mr. Suresh N Patel, 2)
Wood Works Tennur, Trichy – Hasmitha S Patel
(Dindigul) 620017
40 M/s. Shinago 1/4, Vamadam Road, 11.54 Mr. PareshNathu Patel
Plantation Pvt. Tennur, Trichy – and Mrs. Harshitha Patel
Ltd. 620017
(FormalySanth
ivanam
Plantation Pvt.
Ltd.)
Total 390.21
 6

iii) It is further alleged in the said FIR that all these group concerns are
referred to as ‘Prabhat group’ in many of the records of the Bank and the
group consists of different and related firms formed by the members of
‘Patel’ family mainly in Tiruchirapally and other parts of Tamil Nadu.
The group has established many units in Trichy, Dindigul and Tenkasi in
different names with their main business located in Trichy. The group
started dealing with the erstwhile Corporation Bank from 2009 onwards
with Bill Discounting facilities against LCs issued by other banks. Other
group concerns have also availed various loan facilities from the Bank
by providing their immovable properties as collateral securities. The
total exposure of the Group from various branches of the Bank as on 07-
04-2014 was around Rs.829 crores. However, in Para 10 of the said
complaint to the CBI, the lender Bank has stated that the likely loss to
the Bank is Rs.325.08 crores.

iv) The aforesaid Table-I shows the summary of the exposure of the
entities/persons to Corporation Bank. Due to the default in repayment,
the loan accounts of the entities/persons concerned were classified as
Fraud by the Bank on 06-12-2017. It is alleged that the borrowers in
collusion with the valuers, availed the loans on the basis of inflated
value of the properties and indulged in wilful diversion of funds through
various group accounts. The Bank has also noticed fraudulent
connotations in 34 accounts of the group in three of their branches. The
Bank has also mentioned about cash deposits to the tune of Rs.17.10
crores in SBN (Specified Bank Notes) cash during December 2016
(demonetization period). It has been further observed by the Bank that
the Group has diverted an amount of Rs.38.00 crores to its associate
 7

entity Viz. M/s. S.V. Sugars Pvt. Ltd. as part of OTS settlement from
various loan accounts of the Group maintained with Corporation Bank.

v) Accordingly, an FIR No.17/E/2018-BS & FC/BLR dated 26-09-2018

dated 26-09-2018 was registered byCBI, BS&FC, Bangalore. As per the
said FIR, accused thereupon have committed offence under Section 120-
B r/w 406, 420, 468 and 471 of IPC of Indian Penal Code, 1860, out of
which, Sections 120-B r/w 406, 420 and 471 of IPC are Scheduled
Offences in terms of Section 2(1)(y) of Prevention of Money Laundering
Act, 2002. The CBI had also forwarded the details of FIR to this
Directorate in its letter in
No.DPBSB2018/RC.17/E/2018-CBI/BS&FC/BLR/6073 dated 20-11-
2018.

vi) As the offences under section 120-B, read with section 420 and 471 of
Indian Penal Code, 1860 are covered under Paragraph 1 of Part A of the
scheduled offences under the provisions of Prevention of Money
Laundering Act, 2002 (PMLA, 2002), enquiries under PMLA were
initiated in the matter after recording brief facts of scheduled offence in
the ECIR/MDSZO/5/2018 dated 29-11-2018.

vii) During the course of investigation under PMLA, it was revealed that
appellant here-in along with other associated persons/entities have
availed loan of Rs. 829 crores from the complainant bank and caused a
loss of Rs.325.08 crores to the bank. Further, the said loan amounts were
also diverted into the hundreds of bank accounts of the appellant and his
relatives/associated entities with the criminal intention to conceal the
source of generation of proceeds of crime and to mislead the law
enforcement agencies.
 8

viii) During further investigation under PMLA, it was revealed that the
appellant and other associated persons have generated proceeds of crime
through criminal activity related to scheduled offence under PMLA.
Further, it was also revealed that such proceeds of crime have been
siphoned off by the appellant and others. Accordingly, immovable
properties available with appellant and other persons worth Rs. 112.66
Crores were provisional attached under section 5(1) of PMLA, 2002
vide PAO no. 02/2021 (MDSZO) dated 08.06.2021as these properties
were mortgaged with the bank and were used in the commission of the
offence of money laundering in terms of section 2(1)(u) of PMLA, 2002.
Further, the said PAO was confirmed by Hon’ble Adjudicating
Authority, New Delhi vide order dated 08.02.2022.

ix) A prosecution complaint under section 44 and 45 of PMLA, 2002 was

also filed before Hon’ble Special Court (PMLA), Madurai for the
confiscation of the confirmed attached properties as mentioned above.

x) Further, during the course of investigation under PMLA, it is also found

that same group of entities/companies associated with appellant here-in
have also deliberately defrauded loan of various banks and apart from
above, 14 FIRs are also registered against the same entities/individuals
as in the instant case. Thus, it can be inferred from the above that the
appellant and his associates are habitual offenders and have siphoned
off/utilized the proceeds of crime in an attempt to frustrate proceedings
under PMLA.

PARAWISE REPLY:
 9

6. That the contents of the Para 1 to 10 are matter of record and are within the
specific knowledge of petitioner, hence no comments are being offered.

7. That the contents of the Grounds 11(a), 11(b) and 11(c) are completely false,
baseless and misleading. During investigation under PMLA, it has been
established that the appellant and others are in possession of proceeds of
crime generated by the criminal activities related to scheduled offence and
such proceeds of crime are likely to be concealed and transferred to frustrate
the proceedings under PMLA. Hence, immovable properties available with
appellant and other persons worth Rs.112.66 Crores were provisional attached
under section 5(1) of PMLA, 2002 vide PAO no. 02/2021 (MDSZO) dated
08.06.2021. Further, ample opportunities of being heard were given to the
instant appellant by way of issuance of Show Cause notices under section
8(1) of the PMLA as per principles of natural justice but they failed to
provide any plausible explanation in respect of such provisionally attached
proceeds of crime. The Hon’ble Adjudicating Authority while passing its
detailed order correctly upheld the PAO passed by the complainant by
specifically taking care of the money trail as well as how these attached
properties were involved in committing the offence of money-laundering by
the defendants. Moreover, it was duly considered by the Hon’ble
Adjudicating Authority that the defendants were in possession of properties
utilized for commission of scheduled offence as well as in commission of
offence under PMLA, 2002 in terms of Section 2(1) (u) of PMLA, 2002 and
the said properties are utilized as collateral security placed before the bank
that enabled the defendants to avail fraudulent loan from the Bank for their
illegal activities of money laundering by indulging into at complicated web of
transactions by diversion of funds acquired and obtained by illegitimate
means from the Complainant Bank under various nomenclature resulted into
 10

the activities of money laundering by placing the said fund and integrating it
from one bank account to another bank account in order to project the loan
proceeds and Letters of Credits as genuine/ legitimate trade transactions,
therefore, the properties placed before the bank as securities were liable for
attachment under section 5 of PMLA, 2002.Hence, Hon’ble Adjudicating
Authority has complied with the mandatory provisions as provided under
PMLA and has rightly confirmed the provisional attachment of the properties
vide its order dated 08.02.2022 after examining all the facts, documents and
materials placed before it in the instant case. Therefore, it can be said from
the above that the order of confirmation dated 08.02.2022 passed by Hon’ble
Adjudicating Authority is absolutely legal and proper and the grounds raised
by the appellant are arbitrary and baseless.

8. That the contents of the Grounds 11(d) are misleading and are irrelevant to
the present proceedings. In this regard, it is submitted that although the loans
from the complainant bank were fraudulently taken by accused in the year
2014, however, FIR no. 17/2018 (RC0782018E0017) dated 26-09-2018 was
only registered in the year 2018 by CBI, BS&FC, Bangalore on the basis of
the complaint received from the bank in the same date. Further, proceedings
under PMLA were initiated in this case on the basis of said FIR registered in
the year 2018 which is precursor for the initiation of proceedings related to
money laundering as mandated under PMLA. Further, after thorough and
exhaustive investigation conducted under PMLA, the proceeds of crime
utilised by the accused in the commission of scheduled offence were
provisionally attached under PMLA vide PAO No. 02/2021 (MDSZO) dated
08.06.2021. Hence, from the above, it is apparent that there was no
unexplained delay in the investigation by the respondent department as
claimed by the appellant nor it is mandated anywhere in the PMLA statute
 11

regarding the timeframe of commission of offence of money laundering and

subsequent provisional attachment of properties involved.

9. That the contents of the Grounds 11(e) are false and baseless, hence denied.
In this regard, it is humbly submitted that all the averments mentioned in the
written statements submitted by the defendants before Hon’ble Adjudicating
Authority were vehemently opposed and refuted specifically which are
factually, judicially and statutorily wrong. By asserting such false and
arbitrary grounds, the appellant here-in is trying to mislead this Hon’ble
tribunal and wasting the precious and valuable time of the court.

10. That in reply to the contents of the Grounds 11(f), it is submitted that as per
FIR registered by the Central Bureau of Investigation, BS&FC, Bangalore in
Crime No. RC.17/E/2018-BS&FC/BLR dated 26-09-2018 against M/s.
Shinago Plantations Pvt. Ltd, Trichy and 44 others and unknown others based
on a complaint filed by Shri. Kancharla Pramod Kumar Reddy, Assistant
General Manager on behalf of the Corporation Bank (Presently Union Bank
of India), the commission of alleged offences was taken place during the year
2009 to 2017. It is clearly evident from the records and documents furnished
by the defendant bank that the provisionally attached properties were
mortgaged during the said period and were involved in the commission of
offence and subsequent generation of proceeds of crime within the meaning
of Section 2(1) (u) of PMLA, 2002. The said properties were placed as
collateral security before the bank that enabled the defendant No(s).1 to 41 to
avail fraudulent loan from the defendant Bank for their illegal activities of
money laundering by indulging into a complicated web of transactions by
diversion of funds acquired and obtained by illegitimate means from the
erstwhile Corporation Bank under various nomenclature resulted into the
activities of money laundering by placing the said fund and integrating it
 12

from one bank account to another bank account in order to project the loan
proceeds and Letters of Credits as genuine/ legitimate trade transactions and
thereby aforesaid defendants had committed the offence of Money laundering
as contemplated under section 3 of PMLA, 2002. It is also submitted that the
original proceeds of crime have been used up/exhausted by the aforesaid
defendant firms/individuals concerned towards repayment of interest and
earlier loans, repayment of letter of credits, repayment of unsecured loans
availed. Money trail was tracked and flow charts have also been submitted as
annexure to the Original Complaint to show how funds have been routed
through various group entities in a circular movement and round tripping.
These findings clearly substantiate the act of commission of offence of money
laundering by the aforesaid defendants and thus properties involved in the
commission of crime are liable to be attached under section 5 of PMLA,
2002. Further, the Authorised Officer had recorded in page 82 & para X (1)
(l) the PAO, the reasons for immediate attachment which would otherwise
result in frustration of proceedings related to confiscation of POC. Wherein, it
was stated that the Appellants might try to dispose of the properties mortgage
or transfer by cheating the bank by making their benami persons participate in
the auction given their past conduct in the whole episode of this bank fraud. It
was further recorded by the Authorised Officer that considering the
meticulous planning and modus operandi used for laundering the proceeds of
crime generated in this case and also for the fact that the properties attached
were used for commission of offence and subsequent generation of proceeds
of crime.

Furthermore, the averments made by the appellant that the provisions

of SARFAESI ACT, 2002 cannot be overridden are denied and in this regard,
it is submitted that by the virtue of section 71 of PMLA, the PMLA has the
overriding effect over other any other law. Further, it is also submitted that the
 13

Hon'ble High Court of Delhi in its Judgment in the case titled as The Deputy
Director, Directorate of Enforcement, Delhi vs. Axis Bank &Ors. clarified
that if any conflict arises between laws such as money laundering, bankruptcy
code, SARFAESI and other legal provisions for attaching properties obtained
as proceeds of crime PMLA will prevail.

11. That in reply to the contents of the Grounds 11(g) to 11(k) it is submitted that
the assertion made by the appellant “Reasons to Believe” recorded before
provisionally attaching the properties are confusing is false, baseless and is
without any merit. In this regard, it is submitted that on a careful and closer
scrutiny it is found out that before issuing the said PAO ‘reasons to believe’
was duly recorded by the complainant in the said PAO under point number –
X by laying down a number of points exhaustively in it.
Further, case laws cited by the appellant are misplaced and irrelevant to
the instant case and in this regard, it is submitted that the Appellant has put
forth only a general and omnibus averment while quoting the case laws
without even discussing its ratio or the specific Para but nevertheless, the
attention of the Hon’ble Tribunal is directed towards the following Para of the
Delhi HC’s judgment in light of the said averment raised by the Appellant:
“60. As in the case of power of survey, search and seizure, search of
persons, retention of property and power to arrest, for enforcing “provisional
attachment”, it is sine qua non for the empowered officer, acting under
Section 5(1), to record in writing his “reason to believe” that grounds are
made out to direct such provisional attachment.”(Emphasis laid down upon
the underlined part)

Thus, in light of the aforementioned it is humbly submitted that the

reasons to believe was duly recorded by the complainant before passing the
said PAO when seen either through the lens of the PMLA, 2002 or through
 14

the aforementioned cited judgment. Further, it is submitted that the Hon’ble

Adjudicating Authority while passing its detailed order correctly upheld the
PAO passed by the complainant by specifically taking care of the money trail
as well as how these attached properties were involved in committing the
offence of money-laundering by the defendants. Moreover, it was duly
considered by the Hon’ble Adjudicating Authority that the defendants were in
possession of properties utilized for commission of scheduled offence as well
as in commission of offence under PMLA, 2002 in terms of Section 2(1) (u)
of PMLA, 2002 and these said properties are utilized as collateral security
placed before the bank that enabled the defendants to avail fraudulent loan
from the Bank for their illegal activities of money laundering by indulging
into at complicated web of transactions by diversion of funds acquired and
obtained by illegitimate means from the Complainant Bank under various
nomenclature resulted into the activities of money laundering by placing the
said fund and integrating it from one bank account to another bank account in
order to project the loan proceeds and Letters of Credits as genuine/
legitimate trade transactions, therefore, the properties placed before the bank
as securities were liable for attachment under section 5 of PMLA, 2002.
Hence, Hon’ble Adjudicating Authority has complied with the mandatory
provisions as provided under PMLA and has rightly confirmed the
provisional attachment of the properties vide its order dated 08.02.2022 after
examining all the facts, documents and materials placed before it in the
instant case. It is further submitted that as regards the contention as to
constitutional validity of the 2nd proviso to Section 5 of PMLA, the
Respondent places its strong reliance on the ruling laid down by the Hon’ble
Supreme Court of India, which upheld the constitutional validity of the said
provision and held that the provision has inbuild safeguards in the case of
Vijay Madanlal Choudhary vs Union of India, 2022 SCCOnline SC 929 as
follows “ and also held that such provision has sufficient inbuild safeguards
 15

“287. Be that as it may, as aforesaid, sub-section (1) delineates

sufficient safeguards to be adhered to by the authorised officer before
issuing provisional attachment order in respect of proceeds of crime. It
is only upon recording satisfaction regarding the twin requirements
referred to in sub-section (1), the authorised officer can proceed to
issue order of provisional attachment of such proceeds of crime. Before
issuing a formal order, the authorised officer has to form his opinion
and delineate the reasons for such belief to be recorded in writing,
which indeed is not on the basis of assumption, but on the basis of
material in his possession. The order of provisional attachment is, thus,
the outcome of such satisfaction already recorded by the authorised
officer. Notably, the provisional order of attachment operates for a
fixed duration not exceeding one hundred and eighty days from the date
of the order. This is yet another safeguard provisioned in the 2002 Act
itself.

290. As a matter of fact, prior to amendment of 2015, the first proviso

acted as an impediment for taking such urgent measure even by the
authorised officer, who is noless than the rank of Deputy Director. We
must hasten to add that the nuance distinction must be kept in mind
that to initiate “prosecution” for offence under Section 3 of the Act
registration of scheduled offence is a prerequisite, but for initiating
action of “provisional attachment” under Section 5 there need not be a
preregistered criminal case in connection with scheduled offence. This
is because the machinery provisions cannot be construed in a manner
which would eventually frustrate the proceedings under the 2002 Act.
Such dispensation alone can secure the proceeds of crime including
prevent and regulate the commission of offence of money laundering.
The authorised officer would, thus, be expected to and, also in a given
 16

case, justified in acting with utmost speed to ensure that the proceeds
of crime/property is available for being proceeded with appropriately
under the 2002 Act so as not to frustrate any proceedings envisaged by
the 2002 Act. In case the scheduled offence is not already registered by
the jurisdictional police or complaint filed before the Magistrate, it is
open to the authorised officer to still proceed under Section 5 of the
2002 Act whilst contemporaneously sending information to the
jurisdictional police under Section 66(2) of the 2002 Act for registering
FIR in respect of cognizable offence or report regarding non-
cognizable offence and if the jurisdictional police fails to respond
appropriately to such information, the authorised officer under the
2002 Act can take recourse to appropriate remedy, as may be
permissible in law to ensure that the culprits do not go unpunished and
the proceeds of crime are secured and dealt with as per the
dispensation provided for in the 2002 Act. Suffice it to observe that the
amendment effected in 2015 in the second proviso has reasonable
nexus with the object sought to be achieved by the 2002 Act”.

12. That in reply to the contents of the Grounds 11(l), it is submitted that the said
PAO No. 02/2021 (MDSZO) dated 08.06.2021 was issued only in accordance
with powers conferred under section 5(1) of the PMLA, 2002 following due
procedure, under the mandate of law as well as in line with the Constitutional
Courts dictum issued from time-to-time. It is further submitted that the
documents furnished by the defendant bank were perused thoroughly and
relevant documents were made a part of Relied Upon Documents (RUDs) to
the Original Complaint (OC) filed before the Hon'ble Adjudicating Authority
(PMLA), New Delhi for getting the said PAO confirmed. It is also submitted
that the properties attached were used for commission of offence and
 17

subsequent generation of proceeds of crime within the meaning of Section

2(1)(u) of PMLA, 2002. It is also a well-known fact that the properties
attached are acquired before the commission of Scheduled Offence and are
mortgaged with the complainant Bank. This Provisional Attachment Order
was absolutely necessary considering the meticulous planning and modus
operandi used by a number of defendants for laundering the proceeds of
crime generated in this case. Therefore, the properties placed before the bank
as securities are liable for provisional attachment under section 5 of PMLA,
2002.

13. That in reply to the contents of the Grounds 11(m) to 11(p), it is submitted
that the appellant is deliberately diverting the present appeal from the ambit
of the provisions of section 5 of the PMLA. The present proceedings have
been instituted by issuance of provisional attachment order No. 02/2021
(MDSZO) dated 08.06.2021 issued under section 5(1) of the PMLA. The
involvement of an individual in the offence of money laundering as defined
under section 3 of the PMLA is determined by the Special Court PMLA after
the trial and not by this Hon’ble Tribunal.
Further, the law is well settled that proceeds of crime in possession of
any person(even if, not charge sheeted)can be attached under section 5 (1) of
PMLA as has been stated by the Hon’ble Bombay High Court in Radha
Mohan Lakhotia vs ED (FA Nos. 528, 529 / 2010) where the Hon’ble Court
observed that
“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 29
fa527-529.sxw referred to hitherto, including section 8 thereof. Section
5 authorises the Director or any other officer not below the rank of
 18

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 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 thrust of section 5 is to attach every property
involved in money-laundering irrespective of whether it is in possession
 19

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.” Same view has been held by
1) Hon’ble High Court of Andhra Pradesh in Ramalinga
Raju versus Union of India case,
2) Hon’ble Madras High Court in V M Ganesan Vs ED case
3) Hon’ble Bombay High Court in O P Nagoja and M/s
OPM International vs ED case

Further, the burden of proof is on the Appellant to prove that the

attached properties are not tainted. Section 24 of PMLA imposes an onerous
burden on the Appellants to prove that the transaction has no nexus with the
property and proceeds of crime.

14. That in reply to the contents of the Grounds 11(q) and 11(r), it is submitted
that during the course of investigation conducted under the provisions of
PMLA, 2022; it is found that Shri Hittesh Patel (Appellant) is knowingly in
possession of proceeds of crime and said proceeds of crime are invested in
immovable and movable properties acquired in their names and such
properties, being proceeds of crime, are likely to be concealed or transferred
in a manner which may result in frustrating proceedings relating to
confiscation of such proceeds of crime. This is evident from the following:
i) He ensured that the individuals, who are family members and group
entities availed the facilities of loan funds under various nomenclature
such as CTTCC, CCCK, AGDL, AGTL, CVPOD, etc and they utilized
the credit facilities for their own personal interests.
 20

ii) Shri.Hittesh S Patel despite clearly knowing that the group entities
were not making profits inflated the financials. The credit/deposits
taken place in the bank accounts of the related group entities out of
loan funds were camouflaged in such a way that it reflected
credits/deposits of genuine trade proceeds for fraudulently becoming
eligible for higher loan facilities from the Corporation Bank by
indulging in illegal activities caused a huge loss to public money and
corresponding gain to the accused.
iii) Most of the bills/invoices raised within the group concerns was done
without actual physical movements of goods; that the trade credits and
debits were bogus and sham and used only for diverting and
accommodating the loan proceeds. Shri. Hittesh S Patel along with
other faintly members master minded such movement of funds.
iv) Shri. Hittesh S Patel showed off such non-existent trading between the
group entities only to launder the proceeds of loan funds and other
letter of credit funds availed fraudulently from the erstwhile
Corporation bank by the group entities and entering into a network of
transactions among all these firms/companies is only to make these
fictitious transactions appear as genuine trade.
v) Shri. Hittesh S Patel ensured that the money generated out of these
intra group transactions routed ultimately into the accounts of one of
the group entities and projected the same as untainted money.
vi) Shri. Hittesh S Patel played a crucial role in misleading the Bank by
showing off huge (Bill trading) transactions among the different group
entities to inflate the ’Sales’ and thereby to manipulate the bank. This
has been achieved by inflating the closing stock. Shri. Hittesh S Patel
himself explained the manipulation of closing stock by adjusting the
difference in measurement between Malaysian Cubic Meter and Indian
 21

Cubic Meter of the timber has been conveniently used to set right the
accounts and project the accounts were alright.
vii) Shri. Hittesh S Patel got the signature of Shri P. Selvaraj, CA forged in
the income tax returns and financial statements furnished to
Corporation Bank at the time of availing loans, whereas P. Selvaraj, CA
was not at all auditing the entities involved in ECIR for the years
mentioned thereupon. This was crucial in the generation of proceeds of
crime.
viii) Shri. Hittesh S Patel furnished bogus valuation reports of Shri. M. N.
Lingaraju, Valuer who has categorically denied giving any valuation
reports to the Corporation Bank or Prabhat Group.
ix) He used third party (other than group entities) bank accounts by
influencing them to lend their bank accounts, books of accounts on 87
occasions for accommodative purposes, by which major chunk of
proceeds of crime to the tune of Rs. 1 13.89,08,395/- was laundered
through various accounts of non related entities.
x) He also ensured the individual agricultural loans availed by the family
members with their connivance to the tune of around Rs.9 crores are
routed through various group accounts and finally siphoned off the
amount.
xi) He submitted fake and fabricated partnership deeds to the Corporation
Bank to make the business entities look like having different partners at
the time of availing of loans. The details of original partners as on
record and the fake partners are already part of the Material in
Possession as mentioned in the PAO issued in this case.
xii) He has shown bogus inflated turnover to Banks, Income tax
Department and Sales tax Department to show huge turnover in the
books which was actually not there.
 22

xiii) Ensured that the PoC of Rs.325.08 crores obtained from Corporation
Bank was screened away after merging into the finances of running
group concerns.
xiv) Shri. Hittesh S Patel had availed Rs.78 lakhs towards agricultural crop
loan (CCCK) in individual capacity. After availing the loan, the funds
were transferred to various business accounts of the group concerns
where he or his family members were stake holders. Later on the loan
funds were siphoned off.
The accused, therefore, by committing schedule offence had
derived proceeds of crime and thereafter siphoned the proceeds of
crime. Proceeds of Crime was subsequently concealed and projected as
untainted.
It is also submitted that the fundamental rights of the Appellant
have never been scuttled by this Respondent. The Appellant can very
nominate a counsel of his choice and defend his case. The Appellant
being in judicial custody does not in any way amounts to violation of
principles of natural justice. Further, the statements of the Appellants
has evidentiary value and the validity of the same has been upheld by
the Hon’ble Supreme Court of India in the case of Vijay Madanlal
Choudhary vs. Union of India 2022 SCC Online SC 929 “467 (d) (xv)
(a) The process envisaged by Section 50 of the 2002 Act is in the nature
of an inquiry against the proceeds of crime and is not “investigation”
in strict sense of the term for initiating prosecution; and the Authorities
under the 2002 Act (referred to in Section 48), are not police officers as
such.
(b) The statements recorded by the Authorities under the 2002 Act are
not hit by Article 20(3) or Article 21 of the Constitution of India”.

Hence, averments made by appellant in Grounds 11(q) and 11(r) are denied.
 23

15. That in reply to the contents of the Grounds 11(s), it is submitted that the
contentions are completely false and a blatant attempt to mislead the Hon’ble
Tribunal. It appears that the appellant has either not read the provisional
attachment order or is deliberately trying to mislead the Hon’ble Appellate
Tribunal. In this regard, it is submitted that on the basis of material on record,
the Deputy Director, Directorate of Enforcement, Madurai Sub-Zonal Office
has reasons to believe that the appellant was in possession of proceeds of
crime and such proceeds of crime are likely to be concealed, transferred or
dealt with in any manner which may result in frustrating any proceedings
related to confiscation of proceeds of crime. The reasons to believe have
been recorded in writing and explicitly mentioned at Para X of the
Provisional Attachment Order and the reference to some incriminating
document/material is the material in possession mentioned throughout in
the PAO. The Reasons to Believe are being reproduced here for ease of
reference:
“...

REASONS TO BELIEVE

R.1 That the defendant Company/firms/Individuals through its

Director/Partner availed illegitimate higher credit facilities from the
Corporation Bank on the basis of overvalued properties offered as
securities, inflated turnover, inflated closing stocks, fabricated balance
sheets, inflated owned funds; as such defendants borrowed ineligible
higher funds by cheating the bank and later failed to repay the loans to
the bank and thereby caused undue loss to the bank and corresponding
gain to the defendants; whereas, the business performances over the
time last a few years as on date of availing the loan were remained
largely on paper; the funds i.e. credit facilities and Letter of Credit
 24

availed from the bank were used to repay earlier loans and to repay the
earlier Letter of Credits becoming due for payment, as such the loans
were not used for the purpose for which they were obtained resulting in
wilful diversion of funds.
R.2 That the credit/deposit taken place in the bank accounts of the
defendant group entities out of loan funds were camouflaged in such a
way that it reflected credits/deposits of genuine trade proceeds for
fraudulently becoming eligible for higher loan facilities from the
Corporation Bank; that at last defendants failed to repay their loans to
the Bank and the credit facilities became NPA and as such by indulging
in illegal activities caused a huge loss to public money and
corresponding gain to the defendants.
R.3 That the defendants have availed the facilities of loan funds under
various nomenclature such as CTTCC, CCCK, ADTL, CVPOD, etc.
and they utilized the credit facilities for clearing the earlier Letter of
Credits and service of interest of earlier loans without actual physical
movements of goods; that the trade credits and debits were bogus and
sham and used only for diverting and accommodating the loan
proceeds.
R.4 That the defendant entities are all involved in Timber trading.
Assuming that all the timber is purchased in a whole sale manner
form M/s. Prabhat Resources Pvt. Ltd, there was no further need to
make trading transactions between the group entities as the group
entities are said to be making purchased from another group company
only. The purpose behind this nonexistent trading between the group
entities is only to launder the proceeds of crime being loan funds and
other letter of credit funds availed fraudulently from the erstwhile
Corporation bank by the group entities and entering into a network of
transactions appear as genuine trade. Finally money generated out of
 25

these intra group transactions routed ultimately into the accounts of

one of the group entities and projected as untainted money.
R.5 That for the purpose of inflating the ‘Sales’ of each entity a number of
fraudulent transactions were committed between the sisters concerns.
The entities were made look like as if they were made look like as if
they were utilizing the credit facilities extended by the erstwhile
Corporation Bank for the purpose of expansion of trade and thereby
projecting lucrative but non existing sales figures which in turn made
them eligible for availing further higher loans from the erstwhile
Corporation Bank.
R.6 It is crystal clear that the whole and sole purpose behind the said huge
transactions among the different entities was only first to inflate the
‘Sales’ and thereby to manipulate the bank. This has been achieved by
inflating the closing stock, as explained by one of the defendant, Shri.
Hittesh S Patel the difference in measurement between Malaysian
Cubic Meter of the timber has been conveniently used to set right the
accounts and project the accounts were alright.
R.7 That, the group entities have managed to increase its borrowings every
year and to obtain more borrowings, kept inflating stocks and turnover
to help increase owned funds.
R.8 That the credit/deposits in the said accounts of the group entities which
are basically the loan funds out of Letter of Credit/CC availed were
shown in such a way that the credits/deposits were out of genuine sale
proceeds in the said accounts. This enabled the defendants to become
fraudulently eligible for higher loan facilities from the erstwhile
Corporation Bank and at last the entities and individuals concerned
failed to repay their loans to the Bank and the credit facilities became
NPA and as such by indulging illegal activities caused a huge loss to
public money i.e. likely loss at the time of filing complaint by the
 26

Corporation Bank with the Central Bureau of Investigation to the tune

of Rs.325.08 Cores which in the instant case would from the ‘proceeds
of Crime’ and used up in entirety.
R.9 In the manner explained herein above, all the defendant
firms/Company and its partners/Directors have committed the offence
of money laundering as defined in Section 3 of the Prevention of Money
Laundering Act,2002.
R.10 The original proceeds of crime have used up/exhausted by the accused
firms/Company and individuals concerned towards repayment of
interest and earlier loans, repayment of letter of credits, repayment of
unsecured loans availed to for the purpose to show higher owned funds
in the account of the firm for availing higher loan from the bank and
other operational expenses. However, the firms and partners of the
firms are in possession of the property mentioned at Table-VIII at Para
VIII (6) Supra and are liable for attachment under second proviso to
sub-section 5 of PMLA, 2002 as they are properties used in the
commission of offence under this Act or any of the Scheduled offences
in terms of Section 2(1)(v) of the Act.
R.11 That the defendants are in possession of properties utilized for
commission of scheduled offence as well as in commission of offence
under PMLA, 2002 in terms of Section 2(1) (v) of PMLA, 2002 as it is
the utilization of properties as collateral security placed before the
Bank that enabled the suspects of avail fraudulent loan from the Bank
for their illegal activities of money laundering by indulging into a
complicated web of transactions by diversion of funds acquired and
obtained by illegitimate means from the Corporation Bank under
acquired and obtained by illegitimate means from the Corporation
Bank under various nomenclature resulted into the activates of money
laundering by placing the said fund and integrating it from one bank
 27

account to another bank account in order to project the loan proceeds

and Letters of Credits as genuine/legitimate trade transactions,
therefore, the properties placed before the bank as securities are liable
for attachment under section 5 of PMLA, 2002 being properties used
in the offence of money laundering within the meaning of Section 2(1)
(v) of PMLA,2002. It is also imperative to mention here that the loan
funds have also been utilized for service of interest on the mortgage of
the properties and thereby value of the property as on the
determination by the Bank includes the proceeds of crime diverted
towards payment of interest on such mortgage.
R.12 I have further reason to believe that the defendants might try to dispose
of the properties mortgaged or transfer by cheating the bank by making
their benamis participate in the auction given their past conduct in the
whole episode of this Bank fraud. This will surely result in frustrating
the proceedings relating to confiscation of such proceeds of crime
under III PMLA, 2002. Further investigation in the matter is still in
progress.
R.13 AND WHEREAS the aforesaid facts prima facie indicate that the
defendants are involved in criminal activities as mentioned in
Section120 (B), r/w 420 & 471 of IPC covering scheduled offence
under PMLA, 2002.
R.14 Though the properties proposed to be attached were acquired before
the commission of Scheduled Offence and also they are mortgaged with
the Bank, this Provisional Attachment Order is absolutely necessary
considering the meticulous planning and modus operandi used for
laundering the proceeds of crime generated in this case and also in
view of the fact the properties proposed for attachment were used for
commission of offence and subsequent generation of proceeds of crime
within the meaning of Section 2(1)(v) of PMLA, 2002.
 28

....”

16. That the contents of the Grounds 11(t) to 11(v) are false and misleading,
hence denied. In this regard, it is humbly submitted that that the properties
were attached provisionally based on records furnished by the defendant bank
and the same were made a part of Original Complaint and its RUDs. The
latest status of properties offered as primary or collateral securities to the
Corporation Bank (presently Union Bank of India) was furnished by the
Deputy Regional Head, RO (Trichy) of defendant bank through their mail
correspondence in 2020 and based on that the mortgaged properties which
were not auctioned are attached provisionally under section 5 of PMLA,
2002.
It is also submitted that as per FIR registered by the Central Bureau of
Investigation, BS&FC, Bangalore in Crime No. RC.17/E/2018-BS&FC/BLR
dated 26-09-2018 against M/s. Shinago Plantations Pvt. Ltd, Trichy and 44
others and unknown others based on a complaint filed by Shri. Kancharla
Pramod Kumar Reddy, Assistant General Manager on behalf of the
Corporation Bank (Presently Union Bank of India), the commission of
alleged offences was taken place during the year 2009 to 2017. It is clearly
evident from the records and documents furnished by the defendant bank that
the provisionally attached properties were mortgaged during the said period
and were involved in the commission of offence and subsequent generation of
proceeds of crime within the meaning of Section 2(1)(u) of PMLA, 2002.
It is also submitted that the original proceeds of crime have been used
up/exhausted by the aforesaid defendant firms/individuals concerned towards
repayment of interest and earlier loans, repayment of letter of credits,
repayment of unsecured loans availed. Money trail was tracked and flow
charts have also been submitted as annexure to the Original Complaint to
 29

show how funds have been routed through various group entities in a circular
movement and round tripping. These findings clearly substantiate the act of
commission of offence of money laundering by the aforesaid defendants and
thus properties involved in the commission of crime are liable to be attached
under section 5 of PMLA, 2002.

17. That in reply to the contents of the Grounds 11(w), it is submitted that
proceedings under PMLA are completely different from the proceedings
conducted by Income Tax Department under Income Tax Act and declaration
of assets before Income Tax Department, Registrar of Companies do not
absolve any one from the offence of money laundering. Hence, averment
made by appellant in this Para has no relevance here.

18. That in reply to the contents of the Grounds 11(x), it is submitted that the
averments made in this Para are related to the LEA, i.e., complaint made by
bank before agency investigating the scheduled offence i.e., in this case CBI
and on the basis of which FIR was registered.

19. That in reply to the contents of the Grounds 11(y), it is submitted that
investigation in this case and other cases of exactly same nature (Bank Fraud)
is still pending and the proceeds of crime in the form of loan defaulted by
same group of companies in various banks are still being traced as they have
made a complex web of banking transactions for the loan taken by them and
routed them through hundreds of bank accounts pertaining to related group
companies.

20. That in reply to the contents of the Grounds 11(z) and 11(aa), it is submitted
that during the period 2014 to 2017, no sincere or honest efforts were made to
pay existing banking loans and it is submitted that during the course of
 30

investigation under PMLA, it is revealed that for the re-payment of existing

loans, several other loans were also taken and through complex banking
transaction, those loans taken at later stage were utilized in the repayment of
existing loans, thus making the fool of banking systems and making a
mockery of law of India as well as Investigation agencies. Further, the loans
which were utilized in the repayment of existing loans; were also got
defaulted later and several more FIRs were also registered on the basis of
complaint made by other banks against same group of companies/entities
where money laundering investigation is also pending.

21. That in reply to the contents of the Grounds 11(bb) and 11(cc), it is submitted
thatthe non-obstante clause of PMLA shall have precedence as it was notified
later than the SARFAESI Act. In this respect, the decision of the Hon’ble
Apex Court, in Solidaire India Ltd. v. Fairgrowth Financial Services,
(2001) 3 SCC 71, holds relevance. Here, the Apex Court had held as follows:
- “where there are two special statutes which contain non-obstante clauses,
the later statute must prevail. This is because at the time of enactment of the
later statute, the Legislature was aware of the earlier legislation and its own
non-obstante. If the Legislature still confers the later enactment with a non-
obstante clause, it means that the Legislature wanted that enactment to
prevail. If the Legislature does not want the later enactment to prevail then it
could and would provide in the later enactment that the provisions of the
earlier enactment continue to apply”.
In the matter between Deputy Director, Directorate of Enforcement Vs
Axis Bank., 2019 SCC OnLine Del 7854, the Hon'ble High Court of Delhi
has said that properties mortgaged with banks by economic offenders can be
attached under the provisions of the PMLA, 2002. Further the Hon'ble Court
also clarified that if any conflict arises between laws such as money
laundering, bankruptcy code, SARFAESI and other legal provisions for
 31

attaching properties obtained as proceeds of crime PMLA will prevail. The

relevant excerpts from the Judgment held by the Hon'ble High Court of Delhi
in the case titled as The Deputy Director, Directorate of Enforcement, Delhi
Vs. Axis Bank &Ors. are cited below:
147. To sum up on the issue, the objective of the legislation in
PMLA being distinct from the purposes of the three other enactments
viz. RDBA, SARFAESI Act and Insolvency Code, the latter cannot
prevail over the former. There is no inconsistency. The purpose, the text
and context are different. This court thus rejects the argument of
prevalence of the said laws over PMLA.
171 (iii). The empowered enforcement officer has the authority of
law in PMLA to attach not only a "tainted property" - that is to say a
property acquired or obtained, directly or indirectly, from proceeds of
criminal activity constituting a scheduled offence - but also any other
asset or property of equivalent value of the offender of money
laundering, the latter not bearing any taint but being alternative
attachable property (or deemed tainted property) on account of its link
or nexus with the offence (or offender) of money-laundering.
(vi). The objective of PMLA being distinct from the purpose of
RDBA, SARFAESI Act and Insolvency Code, the latter three legislations
do not prevail over the former.

(xii). An order of attachment under PMLA is not illegal only because

a secured creditor has a prior secured interest (charge) in the property,
within the meaning of the expressions used in RDBA and SARFAESI
Act. Similarly, mere issuance of an order of attachment under PMLA
does not ipso facto render illegal a prior charge or encumbrance of a
secured creditor, the claim of the latter for release (or restoration) from
PMLA attachment being dependent on its bonafides.
 32

(xv). If the bonafide third party claimant (as aforesaid) is a "secured

creditor", pursuing enforcement of "security interest" in the property
(secured asset) sought to be attached, it being an alternative attachable
property (or deemed tainted property), it having acquired such interest
from person(s) accused of (or charged with) the offence of money-
laundering (or his abettor), or from any other person through such
transaction (or inter- connected transactions) as involve(s) criminal
activity relating to a scheduled offence, such third party (secured
creditor) having initiated action in accordance with law for enforcement
of such interest prior to the order of attachment under PMLA, the
directions of such attachment under PMLA shall be valid and operative
subject to satisfaction of the charge or encumbrance of such third party
and restricted to such part of the value of the property as is in excess of
the claim of the said third party.
(xvi). In the situations covered by the preceding two sub- paragraphs,
the bonafide third party claimant shall be accountable to the
enforcement authorities for the "excess" value of the property subjected
to PMLA attachment.
The averment made in Para 11(bb) are also denied as by the virtue of
section 71 of PMLA, as the PMLA has the overriding effect over other any
other law. As stated in above para, it is again reiterated that the Hon'ble High
Court of Delhi in its Judgment in the case titled as The Deputy Director,
Directorate of Enforcement, Delhi Vs. Axis Bank &Ors. clarified that if any
conflict arises between laws such as money laundering, bankruptcy code,
SARFAESI and other legal provisions for attaching properties obtained as
proceeds of crime PMLA will prevail. The other relevant Judgments passed
by the Hon'ble Courts in the said matter are as follows.
That Hon'ble Punjab & Haryana High Court in the case of Deputy Director
Vs. PNB Housing Finance Limited &Ors. held that:
 33

"We have gone through the Securitisation and Reconstruction of

Financial Assets and Enforcement of Security Interest Act, 2002 (in
short "SARFAESI Act") as well as Prevention of Money Laundering
Act, 2002 (in short "PMLA"). The purpose of both enactments is
different. The PMLA is a special Act. Section 71 reads as under:-
"71. Act to have overriding effect.-The provisions of this Act shall
have effect notwithstanding anything inconsistent therewith contained in
any other law for the time being in force." The attention of the Court
has been drawn towards Section 26 E of the SARFAESI Act, which
reads as under:-
"26E. Priority to secured creditors. - Notwithstanding anything
contained in any other law for the time being in force, after the
registration of security interest, the debts due to any secured creditor
shall be paid in priority over all other debts and all revenues, taxes,
cesses and other rates payable to the Central Government or State
Government or local authority."
On the conjoint reading of both the Acts, we are of the considered view
that PMLA would prevail over the SARFAESI Act. The adjudicating
authority could not release the properties during the pendency of trial
which commenced pursuant to the FIR dated 25.03.2013."

22. That the contents of the Grounds 11(dd) to 11(gg) are within the specific
knowledge of appellant and are related to internal working of complainant
bank, hence no comments are being offered. Further, appellant is put to strict
proof of the same.

23. That in reply to the contents of the Grounds 11(hh), it is submitted that the
contents of Para 21 above of this counter reply may also be treat as Part and
 34

Parcel for this ground also and the same is not being repeated here for the
sake of brevity.

24. That in reply to the contents of the Grounds 11(ii), it is submitted that the
findings of internal audit conducted by the accused (appellant) can be relied
upon and this regard, it is submitted that during the course of statement
recorded under Section 50(2) and (3) of PMLA, Shri Hittesh Bansal himself
admitted that ‘Audit Report and other financials were not signed by Shri. P.
Selvaraj, CA bearing No.20450, who signed the said financial statements
before furnishing to the Corporation Bank. He also stated that actually it was
done by one Shri. Senthilathan, his ex employee on his instructions; that since
they were desperately in need of money, he used to request Shri.
Senthilnathan to carry out the doctored financial statements and take print
outs; that later on he submitted the same along with the man application
forms’. This clearly shows the criminal intention of the appellant to avail
loans on the basis of false and fabricated audit reports, and hence, such audit
reports cannot be relied upon.

25. That the contents of the Grounds 11(jj) to 11(mm) are false and misleading,
hence denied. In this regard, it is humbly submitted that:
a) During the course of investigation under PMLA it is revealed that the
Prabhat group concerns under the umbrella of Patel Group were involved
in timber importing and trading. Timber was imported from various
African countries and other places. After getting the imports at Tuticorin
and Chennai Ports, under the banner of M/s Prabhat Resources Ltd,
brokers and buyers approach the company for purchase of timber and
depending on the market price they used to sell the timber in a wholesale
manner. There were also local purchase of timber from Estates and others.
But the group was mainly into importing timber. The other group concerns
 35

buy timber from the main importer group company, M/s.Prabhat Resources
Ltd and they do wholesales as well as retailing. Each of the family members
was assigned with different firms and they were made as partners of the
respective firms. It is also noticed that the constitution of the partnership firms
has been frequently changed. The main cause leading to the filing of
complaint by the said Corporation Bank is the apparent over valuation of
securities offered by the loanees at the time of sanctioning the loans. The
total valuation of immovable properties at the time of sanction was
Rs.236.32 crores against the final valuation of Rs.75.87 crores. The debits
and credits in the loan accounts were mainly on account of internal transfers
between the different firms of the Group entities intentionally to show
transactions to the Bank. These internal transfers and trail of money upon
each availment of loan facility has already been described in this order. It is
also noticed that monthly interest in all the loan accounts was serviced
mostly by amounts credited from associate firms which also had loan
accounts with Corporation Bank and the service of the interest was done
purportedly in the guise of sale proceeds.
b) The investigation carried out under PMLA reveals that the said trading in
timber between the group concern as well as out of the group is a complete
fraud as it was merely a circular rotation of funds with the sole motive of
showing more/inflated turnover in its books of accounts and to avail more
loans from Banks against false trading activity and the CC/LC funds, availed
fraudulently from Banks, were routed back to the bank accounts of various
group entities through circular rotation of money. The accused were not able
to furnish any documentary evidences for the trading activity between the
group concerns with regard to the actual delivery of stock between one
concern and other concern for which trade credits and debits have been
claimed to have been made.
 36

c) Examination of bank account statements of the group concerns and the

money trail arrived at in the group transactions have revealed that almost
entire amount of funds/amounts so credited in the accounts of the loanee
concerns by Bank, through Bill/LC discounting/CC limits/Agriculture term
loan, as discussed in the foregoing paragraphs. were either on the same day
or within few days transferred by the respective recipient entity to the bank
account of its related firm and from there immediately to bank accounts of’
other group concerns, through circular rotation of money which is evident.
In the case on hand, the parties involved have resorted to this round tripping
and circular movements of funds despite the pilferage on huge interest
payable to the Banks, only to avail more funds and make the business look
very healthy and going.
d) The CC/LC funds obtained fraudulently by the group concerns as a result of
criminal activity were integrated by the accused into its financial system
through various accounts held in with various Banks. The proceeds of crime
received in Bank accounts were either consumed in same accounts or
transferred to other accounts of’ the Group entities held in other Banks and
consumed therein. The proceeds of crime i.e. funds obtained fraudulently by
each of the group concern and the individuals concerned were utilised by
it/them for repayment of loans. Closure of LCs and for creditors payments,
interest and bank charges on said loans, for transfer to its other Bank
accounts and very rarely as working capital for meeting day to day expanses
towards running their units and factory.
e) The trading operations of the group entities barring few instances on a whole
have every semblance of a genuine business such as its legal ownership by
persons in existence, statutory documentation as necessary for a legitimate
business and documentation trails that a legitimate transaction would
normally follow. The only thing which sets it apart from a genuine business
entity is lack of genuineness in their actual operations. The operations
 37

carried out by these entities, are only to facilitate financial manoeuvring for
the benefit of its stake holders. or, with that predominant underlying
objective, to give the colour of genuineness to the transactions in the guise
of trading activities. The whole act in itself demonstrates that the
transactions through banks were the deliberate steps taken by the accused
with the sole motive of imparting a colour of genuineness and to camouflage
the real nature of transactions.
f) Investigation in the present case further revealed that the group
concerns/persons own the following properties and the same have been
offered as Primary or collateral securities to the Corporation Bank. Erstwhile
Corporation Bank has also provided copy of complete set of documents
relating to said immovable properties taken as collateral security. On 06-08-
2020, the Corporation Bank has also provided the list of properties along
with the valuation details and the relevant portion of’ the table net of
auctioned properties from which it is apparent that the value of the
properties were artificially enhanced with the connivance of valuers by more
than 3 times of the actual value found later on for the purpose to avail and
utilize bank’s fund.

26. That in reply to the contents of the Grounds 11(nn), it is submitted that the
seizure memo is the part of Panchanama for the proceedings conducted under
section 17 of PMLA and both combined only are inclusive in nature.
Therefore, averment made in this para is false and vague and a futile attempt
to mislead this court.

27. That in reply to the contents of the Grounds 11(oo) and 11(pp), it is submitted
that investigation in this case and other cases of exactly same nature (Bank
Fraud) is still pending and the proceeds of crime in the form of loan defaulted
by same group of companies in various banks are still being traced as they
 38

have made a complex web of banking transactions for the loan taken by them
and routed them through hundreds of bank accounts pertaining to related
group companies.

28. That in reply to the contents of the Grounds 11(qq) to 11(vv), it is submitted
that the contents of Para 25 above of this counter reply (including brief facts
of the case) may also be treat as Part and Parcel for this ground also and the
same is not being repeated here for the sake of brevity.

29. That in reply to the contents of the Grounds 11(ww), 12 to 16, it is humbly
submitted that the appellant here-in is not liable for any relief from this
Hon’ble Tribunal owing to following submissions:
i) That the proper understanding concerning the ambit and the coverage of
the offence of money-laundering is certainly misplaced on the part of the
Appellant because money-laundering is considered as a stand-alone
independent and a continuing offence. It is also submitted that ‘money
laundering’ as per Section 3 conceives the offence from the stage of
generation of money to its implanting in the economy, followed by its
rotation through multiple layers This is an ongoing and continuous
activity which makes it distinct from an ordinary offence which was
committed at a certain point of time in part-by-part. Moreover, the
reliance is also placed upon as to what the Karnataka High Court had
recently stated in Mr Dyani Antony Paul vs Union Of India, W.P. No.
38642/2016:

“78. A person acquiring assets through illegal means

who comes before the society and claims that said
money was acquired by proper means, then he would be
guilty of the offence of money laundering. A person
 39

might have committed an offence long back and the

proceeds of it is being placed, layered or sought to be
integrated to the main stream of economy, then also, he
is said to have committed the offence of money
laundering. Incorporation of certain offences in the
Schedule is to bring it within the net of PML Act namely,
proceeds of that crime within the provisions of the Act.
For constituting an offence under Section 3 of PML Act,
it is the connection of transaction to proceeds of crime
which is sufficient and not the crime.”

“79.The main object of PML Act is to ascertain the

proceeds of crime which involved in money laundering
and attachment, confirmation and confiscation of the
proceeds of crime in the form of properties and also to
punish the offenders of money laundering. The date of
acquisition of properties is immaterial but the date of
projecting the proceeds of crime as untainted properties
would only have to be ascertained by conducting
investigation.

“80.What is targeted by Section 3 is ‘laundering of

money’ and therefore, the date of ‘laundering’ would be
relevant. The expression ‘laundering’ as found in Section
3 comprises of involvement in any process or activity by
which the illicit money is being projected as untainted.
Thus, the relevant date is not the date of acquisition of
illicit money but the dates on which such money is being
processed by projecting it as untainted.”
 40

“104.The process of money laundering involves three (3)

stages namely, placement, layering, integration. In the
case of a continuing offence the ingredient of the offence
continued i.e., endure even after the period of
consummation, whereas in a instantaneous offence, the
offence takes place once and for all, when the same
actually takes place. In such cases, there is no
continuing offence even though the damage resulting
from injury may itself continue. The amendments
brought about under the PML Act by Act 20 of 2005, 21
of 2009, 2 of 2013, 28 of 2016 and 13 of 2018 neither
create the new offence nor enhance the punishment nor
they have changed the procedure or forum of trial to
prejudice of the accused and it is only procedural in
nature and as such it would have retrospective effect as
the offence is continuing one. In other words, the money
laundering offence is a continuing offence.”(Emphasis
laid down upon the underlined part)

ii) That the Respondent relies on the decision laid down by the Hon’ble
High Court of Delhi, in the case of Deputy Director Directorate of
Enforcement Delhi vs. Axis Bank and Others, 2019 SCC Online Del
7854, which reads as follows:
“148. In view of the conclusions reached as above,
rejecting the argument of prevalence of RDBA, SARFAESI
Act and Insolvency Code over PMLA, the said laws (or
similar other laws, some referred to above) must co-exist,
each to be construed and enforced in harmony, without one
 41

being in derogation of the other, with regard to assets

respecting which there is material available to show the
same to have been “derived or obtained” as a result of
“criminal activity relating to a scheduled offence”
rendering the same “proceeds of crime”, within the
mischief of PMLA. The PMLA, declares, by virtue of
Section 71, that it has over-riding effect over other existing
laws, such provision containing non-obstante clause with
regard to inconsistency apparently to be construed as
referable to the dealings in “money-laundering” and
“proceeds of crime” relating thereto.”

30. In view of the above said submissions, it is therefore most humbly prayed that
this Hon’ble Appellate Tribunal may be pleased to dismiss the appeal and
pass any other order/s which may deem fit and proper in the circumstances of
the case and thus render justice.

PRAYER

In view of the above, the Hon’ble Tribunal may

graciously be pleased to dismiss the present

appeal or pass any order deemed fit.

(BRIJESH BENIWAL)
ASSISTANT DIRECTOR
 42

Filed through

Counsel for ED
Dated

BEFORE THE HON’BLE APPELLATE TRIBUNAL

(UNDER THE PREVENTION OF MONEY LAUNDERING ACT, 2002)
NEW DELHI
APPEAL NO. 4654 OF 2022
IN THE MATTER OF:
Mr. Hittesh Patel
R/o 329, Courtallam Road
Piranoor Border, Shencottai
Tenkasi District-627809 ……… Appellant
VERSUS
Shri Harish Y.N.
Deputy Director,
Directorate of Enforcement
Madurai-625002 ……...... Respondent

AFFIDAVIT
I, Brijesh Beniwal, S/o Babu Singh Beniwal, aged 34 years, presently
working as Assistant Director, Department of Revenue, Ministry of Finance,
Govt. of India, No. 1A, P& T Nagar Main Road, Madurai-625017 do hereby
solemnly affirm and affirm and declare as under:
1. That I am authorized by the competent authority to file reply on the
behalf of the Respondent in this preferred appeal by the Appellant and I
 43

am also well conversant to swear the contents of this Affidavit as

Deponent herein.
2. That the contents of the accompanying Reply have been drafted by
Deponent’s Counsel under Deponent’s instructions. That the Deponent
has read and well-understood the contents of the accompanying reply
and affirm the same.
3. That the Deponent states that the contents of the instant affidavit are
true and correct in Deponent’s knowledge as gained from the records
kept by the Department and nothing material has been concealed or
suppressed therewith.

DEPONENT

VERIFICATION:

Verified at New Delhi on the ____day of November, 2023 that the

contents of the above filed Affidavit are true and correct to the best of
my knowledge and belief, and nothing therein is false or has been
concealed therefrom.

DEPONENT