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2025 Supreme(Online)(ATFP) 372
APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI I. FPA-PMLA-1640/CHN/2017 Farouk Irani … Appellant II. FPA-PMLA-1642/CHN/2017 Sherna F. Irani … Appellant III. FPA-PMLA-1643/CHN/2017 Irani Family Maintenance Trust … Appellant IV. FPA-PMLA-1674/CHN/2017 Shri Farouk Irani … Appellant V. FPA-PMLA-1675/CHN/2017 Smt. Sherna Farouk Irani … Appellant Versus The Deputy Director Directorate of Enforcement, Chennai … Respondent Advocates/Authorized Representatives who Argued For the appellant : Mr. M R Venkatesh & Mahek Maheshwari, Advs.
For the respondent : Mr. Pankaj Pandey, Adv. ED CORAM SHRI G. C. MISHRA : MEMBER SHRI RAJESH MALHOTRA : MEMBER
Provisional attachment orders under PMLA require adherence to rules ensuring appellants can defend their rights without coercion until the completion of the trial.
Headnote:(A) Prevention of Money Laundering Act, 2002 - Section 26 - Provisional Attachment Orders - Appeals filed against the order of the Adjudicating Authority confirming the attachments of properties under PMLA - Appellants express desire to not press their appeals on the merits of the case - Disposed with liberty to contest in trial court and to refrain ED from coercive action until trial concludes. (Paras 3, 5).
(B) Legal principles on provisional attachment - The Supreme Court ruling underscores that confirmation of a provisional attachment does not equate to confiscation of property until a formal order is passed. (Para 73) Facts of case: The appellants contested the validity of attachment of properties, arguing their right to contest during the trial without prejudgment on merits.
Findings of Court:
Court grants liberty for defense in trial and restricts coercive actions until the criminal trial reaches a conclusion.
Issues: Legality of continued property attachment without trial completion and potential adverse consequences on the appellants.
Ratio Decidendi: The court emphasized the necessity of allowing appellants to lead their defense and restricted ED’s coercive measures, affirming the protective measures outlined under the PMLA.
Result: Appeals disposed of.
FINAL ORDER
21.05.2025 Dictated By:
Rajesh Malhotra Appeals at S. No. I to III, U/s 26 of Prevention of Money Laundering Act, 2002 (PMLA) have filed by the appellants against the order dated 08.12.2016 passed by the Adjudicating Authority in Original Complaint no.615/2016, whereby properties attached by ED vide Provisional Attachment Order (PAO) No. 13/2016 dated 16.06.2016 were confirmed. The details of the said moveable properties/bank accounts are mentioned in para no.1 of the impugned order.
Appeals at S. No. IV & V, U/s 26 of Prevention of Money Laundering Act, 2002 (PMLA) have filed by the appellants against the order dated 30.01.2017 passed by the Adjudicating Authority in Original Complaint No. 629/2016, whereby properties attached by ED vide Provisional Attachment Order (PAO) No. 15/2016 dated 09.08.2016 were confirmed. The details of the said immoveable and movable properties are mentioned in para no. 1 of the impugned order.
2. As per the facts of the case on 10.09.2015, Deputy General Manager, IDBI Bank lodged complaint against M/s First Leasing Company of India Ltd., (herein referred to as the FLCIL) to CBI, BS & FC, Bangalore, and CBI registered FIR No. 06/2015 dated 21.09.2015 against 7 accused persons i.e., (1) Shri A.C. Muthaiah (A-1), Ex-chairman, M/s. First Leasing Company of India, R/o. Adyar Villa, Koturpuram, Chennai - 85 (2) Shri Farouk Irani (A-2), Ex-Managing Director, M/s First Leasing Company of India, R/o. La Reva, No.10, River view road, Kotturpuram, Chennai-85, (3) Shri S. Dilli Raj (A-3), Ex Vice President, M/s. First Leasing Company of India, Chennai, (4) Shri L Sivaramkrishnan (A-4), Ex-Chief Financial Officer, M/s.
First Leasing Company of India, Chennai, (5) M/s. First Leasing Company of India Limited (A-5), No.749, Anna Salai, Chennai (6) M/s Sarathy and Balu (A-6), Chartered Accountants, (7) M/s. M. K. Dandeker & Co. (A-7), Chartered Accountants, and other unknown persons for commission of offence punishable under Sections 120 IPC read with 420, 467, 468, 471 and 477 A of IPC.
Accordingly, the Directorate of Enforcement, Chennai Zone recorded ECIR No.10/CEZO/2015 dated 20.11.2015 for investigation of offence of money laundering under PMLA and to trace out the trail of ‘proceeds of crime’.
In the meantime, General Manager, State Bank of India also lodged complaint to CBI on 06.01.2016 and CBI registered FIR No. RC02(E)/2016 dated 08.01.2016 at CBI, BS & FC, Bangalore against the 7 accused persons as under:
1) Shri A.C. Muthaiah (A-1), Ex-chairman, M/s. First Leasing Company of India, R/o. Adyar Villa, Kotturpuram, Chennai-85
2) Shri Farouk Irani (A-2), Ex-Managing Director, M/s. First Leasing Company of India, R/o. La Reve, No.10, River view road, Kotturpuram, Chennai-85
3) M/s. First Leasing Company of India Limited (A-5), No.749, Anna Salai, Chennai
4) Shri N. Sethuraman (A-4), Partner, M/s. Fraser & Ross, Chartered Accountants
5) Shri K. N. Ramasubramanian (A-5), Partner, M/s. Fraser & Ross, Chartered Accountants
6) Shri V. Balasubramanian (A-6), Partner, M/s. Sarathy and Balu, Chartered Accountants
7) Shri N. R. Sridharan (A-7), Partner, M/s. Sarathy and Balu, Chartered Accountant, and other unknown others. The said FIR was registered for the commission of offence punishable under Section 120 B of IPC read with 409, 420, 467, 468, 471 and 477 A of IPC and substantive offence thereunder.
During the investigation ED recorded the statements of the suspects/accused persons and others under Section 50 of PMLA and also obtained the documents from the investigation agency, Banks etc..
On the basis of investigation conducted by ED, it concluded the following material facts (from para no. 6 of the impugned order):
(i) It is clearly evident that the books of accounts of FLCIL have been manipulated and falsified by making unsubstantial entries in the Books and it was a process for over many years to show inflated income, inflated assets in the books of accounts of FLCIL. As per the records of FLCIL, Shri Farouk
