New Delhi: In a major setback for the Enforcement Directorate (ED), the Appellate Tribunal for Prevention of Money Laundering Act (PMLA) has directed to release the assets of Andhra Pradesh Chief Minister YS Jagan Mohan Reddy and his wife YS Bharathi Reddy that was attached by the agency in a money laundering case. Pointing out serious loopholes in ED's probe and subsequent move to attach the properties, tribunal indicated the action was taken in haste and without due diligence.

The relief to Jagan came two months after he took over as Andhra Pradesh chief minister. The attachment totalling to Rs 746 crore included Rs 569 crore of Jagan and group, Rs 22.31 crore of YS Bharathi Reddy and Rs 154 crore of Bharathi Cements Corporation Private Limited (BCCL). The tribunal questioned the ED move to attach bonafide business transactions of Jagan against which had paid capital gain tax. It also mentioned serious lacunae on ED's part to attach salary amount earned by Jagan's wife terming it as proceeds of crime.

The ED had registered a case against Jagan his wife and several other related companies on 30 August 2011 following a CBI FIR on 17 August 2011. It was alleged that Jagan, in a criminal conspiracy with certain public officials and Jella Jagan Mohan Reddy, got a mining lease wrongfully awarded in favour of M/s Bharathi Cement Corporation Pvt. Ltd. (“BCCL” then M/s. Raghuram Cements Pvt. Ltd.) in violation of the statutory provisions and on the basis of such mining lease, he proceeded to establish BCCL plant and investments were made which were proceeds of crime. The ED had also alleged investments made in the companies linked to Jagan by various other entities was proceeds of crime.

The ED had alleged that Rs 416.20 crore was realised by Jagan from the sale of his shares in BCCL to PARFICIM SAS, France and the same is proceeds of crime. The tribunal observed that investigation showed that it was a genuine business transaction and profit made from selling the shares cannot be treated as proceeds of crime unless the original investment was a bribe amount.

"It is alleged that the Rs 416.20 crores received by YS Jagan Mohan Reddy was utilised for various purposes including purchasing of shares of other companies, investment in form of Share Application Money, clearing of bank loans, donation and payment of taxes. As far as above-mentioned amount received by him by selling of shares to M/s. Parficim SAS, France at the rate of Rs 671.20 is concerned, it is admitted by the respondent (ED) that the said money paid by French Company is not the tainted amount,” the tribunal said.

In case of Jagan's wife, the tribunal said the allegations of the salaries being improperly drawn by her also stand contradicted by the admitted circumstance that BCCL is now controlled in majority by PARFICIM SAS, France, a multinational company.

The tribunal said income derived by a person working in a post can never be, therefore, termed as proceeds of crime and Bharathi Reddy has been serving the company as its director and chairperson and that the company has been generating surplus and profits to the satisfaction of the shareholders.

“The said fact is not denied on behalf of respondent (ED). The fact that the investments made into BCCL by the foreign shareholder and the manner of functioning of BCCL has not been the subject of any enquiry would disclose that there can be no criminality imputed to the functioning of Mrs. Y.S. Bharati Reddy as chairperson and being paid remuneration. No allegations of any such appointment and remuneration paid to Mrs. Y.S. Bharathi Reddy being wrongful have therefore been raised either by the CBI in their investigation nor has been the subject matter of any issue in the enquiry/proceedings under the IT Act initiated by Income Tax Department, which have been substantially relied upon by the CBI and the respondents herein,” the tribunal order noted.

The ED officials, the tribunal said, also undervalued immovable assets in a bid to attach the maximum number of properties and flagged cases of double attachments regarding Sandur Power, Classic Reality and Saraswati Power in the case. The order also pointed out that despite several changes in political dispensation in the state of Andhra Pradesh since September 2009 no attempts have been made either to cancel the mining lease granted in favour of related company or to satisfy the inquiry report submitted by a former judge of Andhra High Court rather licensing fee has been accepted without any protest.

The tribunal directed that one attachment of Rs 192 crore should be released on the condition of submission of bank guarantee of a similar amount in favour of ED till the time final orders are passed in the matter. The other attachments should also be released, the tribunal said.

“As far as allegations of CBI are concerned, this tribunal does not wish to express any opinion on merit and the same have to be considered as per law. The present order has been passed only for the purpose of attachment of properties and confirmation thereof. It is clarified that this order shall have no bearing in any other proceedings in pending matters against the appellants. This order has been passed as per its own merit with regard to attachment of properties," the tribunal order further said.

Updated Date: July 30, 2019 15:36:20 IST

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