New Delhi: After a special court ordered the restitution of Rs 12 crore to the 22 lakh victims of fraud in the Rose Valley Group case, the Assets Disposal Committee (ADC) constituted by the Kolkata High Court will work on a plan under the principle of “proportionality” to disburse funds to claimants, ThePrint has learnt.
This means that even if a claimant had lost several lakh rupees, only a portion would be returned since there are 22 lakh claimants in the queue. If the funds were divided equally, the 22 lakh claimants would get Rs 54 each.
The Enforcement Directorate (ED) and the Central Bureau of Investigation (CBI) have accused the Rose Valley Group of illegally amassing deposits from the public by falsely promising high returns and parcels of land.
It all began when the Securities and Exchange Board of India (SEBI) filed a complaint on 25 April 2013 against Rose Valley Real Estates Construction Ltd and its directors stating that the company issued secured debentures from time to time and raised a total of Rs 12.8 crore from the general public without following the norms on Initial Public Offer (IPO) of securities.
In 2014, The Enforcement Directorate (ED) registered two cases under the Prevention of Money Laundering Act (PMLA). In the first, properties worth Rs 12 crore were confiscated, and in the second, properties worth Rs 1,200 crore were attached.
While the case is still ongoing and the special PMLA court has ordered the restitution of assets in the first case, the ED now plans to move for the same outcome in the second case, where the amount is much higher.
“This has paved the way for further restitution of a lot more properties in the second chargesheet. The court has ordered that the Rs 12 crore be disbursed to the bona fide claimants on a pro-rata basis or as directed by the disposal committee. This move will immensely benefit the victims of these financial crimes,” a source in the ED told ThePrint.
The source added that the agency’s plan to file for a similar disposal of attachments in the other case is “under consideration”.
Prime Minister Narendra Modi, too, announced in May this year that the government is exploring options to facilitate the return of money seized by the ED and discussions with legal experts were on.
After the special PMLA court’s order, former BJP MP Dilip Ghosh said in a post on X (formerly Twitter) that it was due to ED’s “tireless efforts” that restitution was possible.
Also Read: What happens to assets, cash seized by ED? A pre-poll promise by Modi sets off debate
‘Rose Valley Group sought restitution’: ED
How can the agency dispose of assets before the trial is complete and what was the ED’s role? Sources in the agency explained that “circumstances in the Rose Valley case” were favourable for such a disposal.
Firstly, as the special court itself had noted, the matter of restitution was not contentious since the Rose Valley Company had given consent in writ applications before the court through oral submission. It had also given its consent in an affidavit allowing the sale of its assets towards the repayment of investor dues.
The ADC told the court that none of the court orders regarding the publication and sale of Rose Valley Group properties had ever been challenged by the company or its directors.
“It was the Rose Valley group that went to the High Court for the setting up of the Assets Disposal Committee for beneficiaries. It is an admission that they were not authorised to float any such scheme and take money. They also made a submission saying money be returned to the victims,” Bhaskar Prosad Banerjee, ED’s lawyer in the matter, told ThePrint.
What law says on restitution
Secondly, the law is also equipped to allow this kind of restitution.
The ED had requested the ADC to approach the special court for the restitution of properties attached or seized by them. Subsequently, the ADC filed the application under section 8(8) of PMLA before the special court.
Section 8(8) of PMLA states that if a property has been confiscated by the central government under section 8(5) of the PMLA, the special court has the authority to direct it to restore the seized property to a claimant with a legitimate interest in the property who has suffered a quantifiable loss as a result of an offence of money laundering.
While the old PMLA rules only allowed for the restoration of property after the conclusion of the trial in the case of money laundering, section 8(8) of the PMLA was amended in 2018 in light of how long the trials take to conclude. A second proviso was inserted in section 8(8) which said that a special court could consider the restoration of the property to the claimant while the trial was ongoing and established a separate procedure for it.
Assets Disposal Committee
In 2015, Rose Valley Estates & Constructions Ltd filed a writ petition in front of the Kolkata High Court leading to the constitution of the Assets Disposal Committee in September 2023 headed by Justice Dilip Kumar Seth (Retd), a former judge of the Calcutta High Court.
The ADC was initially tasked with selling assets of the petitioner located in West Bengal in a “public auction”. Proceeds were to be deposited in a separate account opened by the committee.
The ADC told the special court it was keen to dispose of the properties that it had control of to pay back distressed investors. It said claimants had been invited to submit claims through ADC’s official website and at least 22 lakh had already lodged their claims.
The ADC said that unless it is equipped with sufficient funds to make the refunds to the claimants, the entire exercise would turn futile, asking for the funds to be given to them.
Finally, the court on 24 July ordered restitution and said ED attached 14 fixed deposits with a total value of Rs 11,99,35,385.60 and that the money should be “utilised in returning the bankrupt investors, depositors instead of keeping it idle as NPA (non-performing asset) for a prolonged period because the trial in money laundering offence takes time.”
The court said the attached funds be transferred to the committee and disbursed to bona fide claimants on a pro-rata basis. It also said that the ED shall prepare proper documents for such transfer of attached property which may be used as evidence during trial.
“The committee will now decide the method on how the disbursal will happen. They will chalk out a plan but the principle of proportionality will be invoked,” an ED source said.
Will restitution affect criminal trial
A defence lawyer, representing Rose Valley Group, argued that restituting the attached property may have a bearing on the trial of the case.
The lawyer told the court that the ADC seems to have assumed that the accused is guilty of money laundering which may be prejudicial to the defence case.
The court, however, clarified that nothing of this order shall be construed as an opinion on the merits of a case of money laundering and “no averments of the petition of the Assets Disposal Committee shall cause prejudice to the accused in the trial of the case”.
It said that an order under section 8(8) of the PMLA towards the restitution of the fund to bona fide claimants through the ADC will subserve the goal of serving justice.
Taking into account the eventuality that the accused are acquitted after trial, it said, “The answer is, whatever is the result of the trial, the investors would get their money returned.”
(Edited by Sanya Mathur)