Telangana High Court Dismisses ED Appeals In VANPIC Money Laundering Case Linked To Y.S. Jagan Mohan Reddy

The Telangana High Court has recently dismissed a batch of appeals filed by the Enforcement Directorate (ED) in the alleged quid pro quo investments case linked to companies promoted by Y.S. Jagan Mohan Reddy.

The CBI had alleged that companies invested in businesses linked to him in return for favours extended by the then Andhra Pradesh government headed by his father, late Chief Minister Y.S. Rajasekhara Reddy.

The appeals challenged a PMLA Appellate Tribunal order directing the release of more than 13,200 acres attached in the VANPIC Project after the entities furnished indemnity bonds. The High Court declined to interfere, noting that an earlier Division Bench had already upheld the Tribunal's findings that the provisional attachment orders suffered from jurisdictional defects.

A Division Bench of Justices P. Sam Koshy and Suddala Chalapathi Rao held that no grounds had been made out to take a different view from the earlier decision.

"Given the fact that in identical set of facts, the learned Division Bench of this High Court had already passed three set of orders on different dates in three different appeals, this Bench firstly in order to maintain judicial propriety, and secondly, having been found no strong case being made out by the learned counsel for the appellant to take a different view than that which is taken by the learned Division Bench of this High Court in the case of Vanpic Ports Private Limited (supra), is inclined to follow the dictum of the same judgment," the bench observed.

The dispute arose from the VANPIC Project, a Government-to-Government initiative between the Governments of Andhra Pradesh and Ras Al Khaimah in the UAE. Following directions issued by the then Andhra Pradesh High Court, the CBI registered an FIR on August 17, 2011 alleging that the state government had granted benefits and concessions to certain private companies in return for investments made in companies allegedly controlled by Jagan Mohan Reddy.

Based on the FIR, the ED registered an Enforcement Case Information Report on August 30, 2011. It provisionally attached 1,416.91 acres of land in March 2014 and the remaining 11,804.78 acres in July 2017.

On July 26, 2019, the PMLA Appellate Tribunal partly allowed appeals filed by G2 Corporate Services LLP and other entities connected with the project. It set aside the attachment orders, subject to the entities furnishing indemnity bonds, and directed release of the attached properties. Aggrieved by the decision, the ED approached the High Court.

Before the High Court, the ED argued that the tribunal had ignored the material placed before the adjudicating authority and wrongly invalidated the attachment proceedings. It also contended that the Tribunal had failed to appreciate that sufficient material existed to justify the provisional attachment and that the reasons recorded in the provisional attachment order and the original complaint were adequate for issuing the show cause notice under the Prevention of Money Laundering Act.

The respondents, on the other hand, argued that the issues had already been decided by earlier Division Benches of the High Court in connected appeals arising out of the same tribunal order. They submitted that judicial propriety required the Court to follow those decisions because the allegations, legal issues, and the tribunal's common order were substantially the same.

Accepting that submission, the High Court noted that the earlier Division Bench had already upheld the Tribunal's finding that the provisional attachment orders suffered from jurisdictional defects because the mandatory "reason to believe" required under Section 5(1) of the PMLA had not been recorded.

It also referred to the earlier finding that the show cause notice under Section 8(1) had been issued mechanically, without application of mind or the requisite satisfaction that the noticees had committed an offence under Section 3 or were in possession of proceeds of crime.

The bench further noted that the earlier VANPIC judgment is pending before the Supreme Court, where only a status quo order is operating. Since no additional material or fresh grounds had been placed before it to justify a different view, the Court dismissed the ED's appeals and upheld the tribunal's order.

For Appellants: B.Narasimha Sarma, Additional Solicitor General of India, Anil Prasad Tiwari, Standing Counsel for Enforcement Directorate

For Respondent: S.Niranjan Reddy, Senior Counsel, Tarun G.Reddy, Counsel