Thursday, December 10, 2015

Attachment of property isn't restricted only in hands of accused involved in money laundering

There is no restriction in respect attachment of property of person in possession of proceeds of crime. Section 5 of Money Laundering Act, 2002 does not have restriction that property in hands of persons involved in Money Laundering alone can be attached pending confiscation. Thus, provisional attachment of property is not restricted in hands of accused persons alone.


a)    ‘G’ was accused of having played fraud and obtained a loan of Rs.15 Crores by producing bogus and fabricated documents. Out of the said amount, the property in question was purchased by him in the names of his Benamies. ‘A’ was appointed as their Power Agent. One ‘GS’ purchased the property through the Power Agent ‘A’, later on, ‘GS’ sold property to appellants.

b)    The respondent- Deputy Director, PMLA, Directorate of Enforcement filed a complaint under Section 5(5)of the PMLA, 2002 against the appellants and ‘G’ having reason to believe that property in the hands of appellants was part of proceeds of crime u/s 2(1)(u) of the PMLA,2002 and appellants and ‘G: were involved in the offence of money laundering and held them liable for adjudication and confiscation in terms of Section 8 of PMLA, 2002

c)   The appellants said that they were bonafide purchasers of the land and the consideration was paid through legal source of income through agricultural operations and transactions were carried out through bank also and they were not aware of that property bought by them was a proceed of crime.

d)    The adjudicating authority held that property represented the proceeds of crime and 

National Herald's case: 5 top office bearers of congress to face criminal proceedings

Delhi HC orders 5 Top Office-bearers of Congress Party to face criminal proceedings for forming and misusing a section 25 company as SPV for clandestine acquisition of 99% stake in Old defunct real-estate rich newspaper publication company (AJL) and for misappropriating funds of Congress Party for the purpose


a)    An Old defunct real-estate rich newspaper publication company (AJL) having property worth Rs.2000 crores in many cities but owed Rs.90 crore to employees. In 2008, company was closed and printing of newspapers stopped

b)   If company was liquidated and Rs.90 crores would have been paid off , the old shareholders of the company who bought shares long long ago when rupee had much greater value would have received a fortune

c)   One of the top officer bearers of Congress Party(Treasurer) was Chairman of this company, Instead of liquidating assets, paying off employees and distributing surplus to shareholders, the top office-bearers adopted the following steps to get hold of real estate of AJL :

Interest-free unsecured loan of Rs.90 crores was given by Congress Party to AJL to pay off employees

Now that AJL had no activity, no employees and no liabilities except Rs.90 crores to Congress Party and had Rs.2000 crores real-estate

A section 25 company(YI) was formed by 5 Top Office-bearers of the Congress Party including the Treasurer who was also chairman of AJL

Congress Party assigned Rs.90 crores debt to YI(this new section 25 company) in return for just Rs.50 lakhs and wrote off the balance

Now the new section 25 company(YI) stepped into the shoes of Congress Party and became creditors of AJL for Rs.90 crores

AJL in Board Meeting allotted shares to YI satisfy this Rs.90 crore debt and this gave 99% stake in AJL to YI

Thus the Rs.2000 Cr assets came into the control of office bearers by investing just Rs.50 lakhs, by misappropriating Rs. 89.5 crores of Congress Party and thus the old shareholders who stood with the company in thick and thin were reduced to 1% minority and cheated of their fortune

d) Private criminal complaint was filed against these 5 Office-bearers and summons were issued by Magistrate. The said 5 Office-bearers of Congress Party filed a petition in Delhi HC to quash the criminal proceedings and summons

The Delhi high Court held as under:

1)   Delhi HC finding that the facts of the case prima facie reeked of criminality dismissed the petitions and ordered the 5 petitioners-office-bearers to face criminal proceedings before the Magistrate and also denied exemption from personal appearance.

2)    The Delhi HC rejected arguments of petitioners based on separate legal entity of YI and lifted the corporate veil– Rahul Gandhi v. DR. Subramanian Swamy [2015] 64 117 (Delhi)