PMLA Appellate Tribunal Upholds Retention Of N.K. Proteins' Assets In 2013 NSEL Scam-Linked Case

The Appellate Tribunal under the Prevention of Money Laundering Act (PMLA) has dismissed appeals filed by N.K. Proteins Ltd., one of the entities investigated in the National Spot Exchange Ltd. (NSEL) matter, along with its associated entities and directors.

The Tribunal upheld the continued retention and freezing of cash and vehicles seized by the Enforcement Directorate in connection with the money laundering investigation.

A bench of Members Balesh Kumar and Rajesh Malhotra held that the pendency of an existing prosecution complaint arising from the same ECIR was sufficient to sustain the retention of the seized properties.

“We do not find that the aforementioned statutory provisions require a Prosecution Complaint under PMLA to be filed where there is already pendency of the proceedings relating to any offence under the PMLA before the Court. In the present matter the Impugned Order has arisen out of OA No. 236/2018 dated 28.06.2018. The Prosecution Complaint had already been filed on 30.03.2015 in the same ECIR, which is still pending as on date. Therefore, we cannot accept the argument by the Appellants that the seizure and the retention of the impugned properties could not have survived after the stipulated period. ,” the Tribunal observed.

The appeals were filed by N.K. Proteins Ltd., Nilesh K. Patel, Priyam Patel and N.K. Industries Ltd. against a November 2018 order of the Adjudicating Authority. The order had allowed the continued retention and freezing of cash of ₹5 lakh and ₹12 lakh, along with 42 vehicles and 10 cars seized during searches conducted by the ED in May 2018.

The matter traces its origins to a 2013 FIR registered by Mumbai Police against National Spot Exchange Ltd. (NSEL) and various defaulting parties. The FIR alleged that investors were induced to trade on the exchange despite the absence of adequate stocks in exchange-controlled warehouses, resulting in trading in non-existent goods.

According to the order, the ED subsequently registered an ECIR and investigated several entities, including the N.K. Proteins group. The agency alleged that N.K. Proteins had sold castor seeds, castor oil and wash cotton seed oil through contracts on the NSEL platform without corresponding physical stock.

The order records that Nilesh Patel, in a statement under the PMLA, admitted that the sale transactions were “only paper transactions.” The Tribunal also noted the ED's allegation that funds generated through those transactions were diverted for other purposes, including investment in real estate.

The appellants argued that retention of the seized assets could not continue because no fresh prosecution complaint had been filed after the seizure. They also contended that the ED had already attached properties worth ₹305.52 crore despite their claim that the alleged proceeds of crime stood at ₹283.43 crore.

Priyam Patel separately argued that his properties could not be retained because he was not an accused in the pending prosecution complaint.

Rejecting the challenge based on the absence of a fresh complaint, the Tribunal noted that a prosecution complaint filed in 2015 in the same ECIR remained pending before the Special Court.

“Therefore, we cannot accept the argument by the Appellants that the seizure and the retention of the impugned properties could not have survived after the stipulated period,” the Tribunal said.

The Tribunal also rejected Priyam Patel's objection.

“We therefore reject the contention that the seizure and retention of the properties of the Appellant Shri Priyam Patel cannot be sustained as no proceedings under PMLA are pending against him before the Special Court,” it observed.

Addressing the appellants' contention that assets worth ₹305.52 crore had already been attached, the Tribunal referred to the ED's case that the N.K. Proteins group's total outstanding liability arising from NSEL transactions was ₹962.79 crore and that proceeds of crime worth ₹657.27 crore were yet to be identified.

The Tribunal noted that the transactions in question were the subject matter of both the scheduled offence proceedings and the pending money laundering proceedings.

“Given the scale of the alleged scam, wherein the objectivity and the veracity of the transactions occurring on a public platform of NSEL are still under investigation, the possibility that the quantum of proceeds of crime was Rs. 962.79 Crores cannot be ruled out without completion of investigations,” it observed.

The appellants had also challenged the retention on the ground that no separate retention order had been passed by the ED after the seizure. The Tribunal rejected that contention and upheld the Adjudicating Authority's order permitting continued retention and freezing of the seized properties.

The appeals were accordingly dismissed.

For Appellants: Mr S. Vasudevan, Advocate, Mr Mahendra Singh, Advocate, Ms Reeshika Agarwal, Advocate

For Respondent: Mr Aditya Singla, Advocate