Property owned before the offense is not proceeds of crime: AP HC | Hyderabad News

HYDERABAD: In an important decision, PA High Court Judge R Raghunandan Rao ruled that the Law Enforcement Branch (ED) cannot qualify property acquired by an accused as proceeds of crime if it was purchased prior to the commission of such an offense.

The judge made the ruling and ordered the surrender of property attached to an accused, which was purchased before the alleged offense was committed, on March 20. The judge made this order after hearing Kumar Pappu Singh, a resident of the Erramanzil colony in Hyderabad, and some of his companies that have challenged attachment to ED.
In March 2018, the CBI had registered an FIR against Pappu Singh and his companies for allegedly defrauding the Palangi branch of IDBI Bank in the West Godavari district to the tune of Rs 75 crore.
CBI alleged he used the Kisan Credit Card (KCC) ready on behalf of various borrowers and redirected all the money to his savings account before siphoning it. The bank granted KCC loans to 101 borrowers. Bank officials, who processed the loan documents, were also at fault because the loans were sanctioned and disbursed without obtaining the appropriate loan documents and without conducting pre- and post-sanction inspections. Worse yet, they didn’t even bother to verify the end user of the loan.
These loan amounts were disbursed into the beneficiaries’ savings accounts, from where the money was transferred to the accounts of Pappu Singh, who then abused them. CBI accused Papu Singh of cheating on the bank. Since cheating is a planned offense that attracts the provisions of the Prevention of Money Laundering Act (PMLA), ED subsequently entered the scene and unearthed the siphoned money trail.
According to the ED, all money generated by crime is money from crime or proceeds of crime. He may attach such money or an equivalent value of assets purchased with that money. ED had identified that Pappu Singh had embezzled 70 crore to various other companies. He identified some of his current properties and had attached them in December 2019. These were two sets of properties, one set had been acquired before September 2010 and the other after. The second set was acquired with the proceeds of crime, while the old set of properties has nothing to do with the crime or its proceeds. Most of the proceeds of crime have been depleted due to losses suffered by Pappu Singh in aquaculture.
ED objected to any remedy for Pappu Singh on the grounds that he has an alternative remedy under the PMLA in which he could go to the appropriate authority if he has any objections. The petitioner’s lawyer, Vimal Varma Vasireddy, brought to the attention of the Hyderabad High Court judgment in the Satyam Computers case, which stated that the mere existence of an alternative remedy did not preclude a party to apply to a High Court. The judge agreed with him and dismissed ED’s objection on the issue of the maintainability of the case in a high court.
Regarding the issue of the seizure, ED argued that he tied up the defendant’s former assets because he had used up all the money from the fraud in the fish farm and suffered huge losses there. The judge disagreed with this interpretation and said that even the legislature did not intend in this way when amending the law in 2019 and said that ED might have an argument to tie an equal value of assets if the accused diverted the money to foreign shores. In this case, however, the accused had lost the money. Therefore, the seizure of his pre-2010 assets cannot be justified, Judge Raghunandan said in his order.