Sarvottam Fincap Limited Vs Deputy Director, Directorate Of Enforcement

1. Present appeals are filed against the order dated 27.01.2023 passed by Ld. Adjudicating Authority, vide which Provisional Attachment Order no. 16 of 2022 dated 27.01.2023, in ECIR No. HYZO/04/2021, was confirmed.

2. The impugned order reflects that a letter dated 29.12.2020 was received from PS Cyber Crime Rachakonda informing about the registration of five FIRs relating to instant loans vide FIR Nos. 651/2020, 697/2020, 698/2020, 699/2020 & 705/2020, for commission of offences under Section 417/419/420 IPC & under Section 66-C/ 66-D of Information & Technology Act. Three accused persons were arrested from a Call Center office of M/s Jiya Liang Infotech Pvt. Ltd., Pune. The said Company was registered on 15.07.2020 and has made agreements for providing tele-caller services for the recovery of the loan payment dues with three Companies namely M/s Bienance Infrastructure Technology, West Mumbai, Maharashtra; M/s Ajaya Solutions Private Limited, Thane, Maharashtra; & M/s Taelde Technology Private Limited, Mysore, Karnataka.

The abovementioned companies were doing online instant loan lending business through various applications and sanctioning the personal unsecured loans through digital apps to the borrowers. After one week of sanctioning the loan, customer data was being provided to M/s Jiya Liang Infotech Pvt. Ltd. for calling the borrowers on their phone numbers asking for repayment of loan along with higher rate of interest without following the Rules/ Regulations of RBI. M/s. Jiya Liang Infotech Pvt. Ltd. procured Laptops, Desktops and Network Routers from China and established Call Centers. Around 650 employees working in the Company were provided with dedicated User IDs & Passwords. They were instructed to use their personal mobile numbers to call the borrowers. They also resorted to systematic abusing, harassing and threatening the defaulters. They even blackmailed the borrowers by sending fake legal notices to them, their relatives and friends.

Further, a letter dated 30.12.2020 was received from Cyber Crime Hyderabad, PS Gachibowli regarding registration of 10 FIRs for Commission of offences under Section 420/506 IPC & 66-D & 67 of Information Technology Act etc. vide No. 1134/2020, 1136/2020, 1162/2020, 1164/2020, 1169/2020, 1181/2020, 1182/2020, 1183/2020, 1187/2020 & 1188/2020. Searches were made at the premises of 8 Companies involved in running various loan applications viz M/s Onion Credit Pvt. Ltd., Hyderabad; M/s Cred Fox Technologies Pvt. Ltd. Hyderabad; M/s Espior 5N2 Enterprises East Block Hyderabad; M/s Best Shine Technologies Pvt. Ltd., Hyderabad; M/s Cubevo Technologies Pvt. Ltd., Hyderabad; M/s Baryonyx Technologies Pvt. Ltd. Bangalore, M/s Fasmate Technology Services Pvt. Ltd. & M/s Topfun Technologies Pvt. Ltd., Goa.

Mr. Zixia Zhang, a Chinese national, Director of M/s Sky Line Innovation Technology India Pvt. Ltd. and Mr. Arjun, Managing Director of M/s Baryonyx Technologies Pvt. Ltd. were the mastermind behind the offence in FIR No. 1162/2020 & 1164/2020 respectively.

By letter dated 06.01.2021 Cyber Crime Hyderabad further informed regarding registration of 28 more FIRs for Commission of offences under Section 354-D/ 420/ 506 IPC & under Section 66-D/ 67 of IT Act vide Nos. 2284/2020, 2342/2020, 2344/2020, 2349/2020, 2368/2020, 2431/2020, 2435/2020, 2442/2020, 2452/2020, 2453/2020, 2454/2020, 2457/2020, 2459/2020, 2460/2020, 2461/2020, 2463/2020, 2464/2020, 2465/2020, 2466/2020, 2469/2020, 2470/2020, 2471/2020, 2472/2020, 2475/2020, 2479/2020, 2489/2020, 2498/2020 & 04/2021.

Mr. Zhu Wei @ Lambo, a Chinese national was overall head of operation of loan apps being run by the said Companies. Around 350 virtual accounts were identified in Razorpay Gateway along with same number of connected bank accounts.

The complainants in the said cases have availed loans through various instant loan apps that have been charging exorbitant interest rates along with high processing fee and GST charges. The said loan apps are being used for running non-banking finance business, without valid licenses from RBI/Concerned Govt. Authorities. Subsequent to non-payment of outstanding amount, the Complainants have been receiving multiple messages/ calls/ E-mails from various numbers demanding for repayment of further amounts. While sanctioning the loans, all contact details, photos and personal data of the complainants were being taken through the said loan apps. All such data is being given to various tele-caller companies, and further, the tele-caller companies have been making calls to the complainants” family members and friends addressing them with abusive language. Tele-callers have also been suggesting victims to make the repayment of existing loans by taking loans from their other loan applications. As such, customers fell into their debt-trap by taking loans in other loan apps as suggested by tele-callers and end-up paying huge amounts. In the said 43 FIRs around 365 loan mobile applications were involved. All the complainants have been receiving further calls/ messages/ e-mails from various mobile numbers to repay further amounts, accordingly, ECIR/HYZO/04/2021 was registered.

During enquiry/ investigation by ED, it has been revealed that the Companies with NBFC (Non-Banking Finance Companies) license started tie-ups with digital lending apps and there was an exponential growth in the loan volume and huge & unusual jump in revenue. The NBFC Companies are not doing any digital lending directly. Its net owned funds are very meager, whereas the loan exposure in the name of these NBFCs were running into hundreds of crores and that was possible by accepting performance guarantees from their Fintech Partner Companies. The loans amounting to about Rs. 44,30,53,96,389/- were disbursed under the name of the NBFCs and were financed by Fintech Companies involved in instant personal loans only. These deposits were received in the name of Performance Guarantee/ Inter Corporate Deposits are not in line with RBI guidelines. The said NBFCs have NOF (Net Owned Funds) in the range of 3 to 10 crores. However, as per RBI Press Release: 2015-16/2935 dated 17.06.2016, RBI has defined systematically important NBFC means a NBFC not accepting/holding public deposits and having total assets of Rs. 500 crores and above as shown in the last audited balance sheet. With this criterion, the said NBFCs are deemed to have NBFC licenses. This condition specified in the press note is that existing NBFC companies will be prohibited from accessing public funds and having customer interface (interaction between the NBFC and the customers while carrying on its business). In case these companies intend to avail public fund or intend to take customer interface in future, they are required to take approval from RBI, Department of Non-Banking Regulation. These NBFCs have not taken any approval from RBI, but they have accepted deposits from Fintech Companies. Being non-systematically important NBFC, the said companies violated RBI Rules by accepting deposits beyond prescribed limit of 1.5 times of NOF without classifying investment grade credit rating in violation of notification RBI/DNBR/2016-17/44 dated 01.09.2016 - ‘Acceptance of Deposit Directions’- RBI Master Directions-NBFC - Non-Systema tically important Non-Deposit taking company (Reserve Bank) Directions, 2016.

Further, multiple Fintech Companies signed MOU with the Indian NBFCs. These Fintech Companies are suspected to be funded from China, Hongkong etc. and having flushed with funds, deposited their funds with the NBFCs under the pretext of “Performance Guarantee”.

NBFCs registered separate Merchant IDs (MID) with payment gateways for each APP and then credited back the same to so called performance guarantee in the MID of NBFC (actually of the APP). Fintech Company is then free to do its lending business using this money. Thus, in reality these Fintech Company are lending from their own money. By doing a MOU with an Indian NBFC Company, they get a de-facto NBFC license. On the other hand, these APPs are playing a risky high return game. They gave instant micro-loans to thousands of customers with minimum KYC requirements and just based on online verification. At the time of loan sanctioning itself, they deduct 25% amount as “processing fee” and on the loan amount they charge heavy rate of interest with high penalty rate etc. At the time of loan sanction, they also illegally captured the mobile data of the customers and their phone contact data. They also employee call centers who are notorious in chasing people online and through threat calls to the customers and their relatives recover the micro loans with high interest. The NBFCs and Fintech Companies have gained amount of Rs. 8,19,61,25,594 on loan of Rs. 44,30,53,96,389, which is proceeds of crime collected by cheating and extorting the borrowers by misusing the personal data and images and threatening them with abusive language and obscene messages. The NBFCs have received share of profit of around 0.5 to 1% of the total loan amount disbursed without spending any amount.

The modus operandi of this fraud reflects that about 365 mobile applications are involved in sanctioning instant micro loans and then its recovery via tele-callers. The entire lending and recovery payment transactions of these mobile applications were routed through payment gateways namely- Paytm, Cashfree and Razorpay. As per the payment gateways, most of the mobile applications/ APPs claimed to have a MOU with one or more Indian NBFCs. Multiple NBFCs are involved in this business and were having MOUs with one or multiple APPs. The basic modus operandi of the fraud is as under;

As per the RBI rules, registered Indian NBFCs can lend money to their customers. Each NBFCs has Net Owned Funds (NOF). As per RBI rules, each NBFC can raise loans upto 5 to 6 times of their NOF.

There are a large number of defunct Indian NBFCs with very small NOF in the range of 1 to 5 Crore. RBI is not issuing any fresh licenses to new NBFC applications.

Thus, large number of Fintech Companies with dubious source of funding, struck MOUs with already registered NBFCs and on the strength of such MOUs, they gave large “security deposits” to these NBFCs. The NBFC in turn opened to MID with Payment Gateways and then allowed the Fintech Company @ APP to do lending business for the same amount of security deposit. The entire lending business and recovery was done by the APPs themselves, without any control by the NBFC.

For each loan sanctioned, the APPs were deducting 15-25% of the micro loan at the time of disbursement itself in the guise of processing charge.

The rate of interest was also high. The amount of loan sanctioned were small in the range of few thousand. The period of lending was short in the range of 7-60 days. At the time of lending, the mobile APPs took various private permissions and had effective access to the Contact list and social media handles of the loanee customer. They employed hundreds of tele-callers to call, threaten and misguide their clients. With all these mechanisms, they had a very high recovery rate up-to 90%.

Although the NBFC was allowed to borrow only up to 5 times its NOF and was not supposed to take deposits, they illegally took “security deposit” and then passed on the same to the same mobile APP company to lend by piggybacking on its license. Thus, NBFCs with minuscule NOF, ended up lending thousands of crore business in a single financial year.

The APPs minted money and had very impressive rate of return and could also turn around the loan amounts after every few weeks and enjoyed very high profits. The Indian NBFC owners also earned substantial commission. There is a suspicion that many of the fintech APPs are sponsored by foreign funds especially from China & Hong Kong and they illegally parked large amounts of profits in off-shore accounts in the guise of bogus outward remittances.

3. Now coming to the role of present appellants M/s Sarvottam Fincap Limited, and M/s VPoint Solution Ltd. (as per page no. 45 of the impugned order), the same is tabulated as under;

The said impugned order at page no. 68 & 69 reflects that appellant Sarvottam Fincap Ltd./ defendant no. 52 has taken the plea that there is no underlying scheduled offence against it. There is no information available on record which shows that the business of answering defendant was in any manner, beyond the scope of law and also there is not even a single allegation that the customers of the answering defendant no. 52 ever received any coercive calls or were met with any harassment. Thus, in the absence of the same, no ground is made out to proceed against the answering defendant, particularly when there is no underlying scheduled offence. The allegations in the chargesheet pertaining to FIR no. 2466 of 2020 have never been levelled against the answering defendant and in the absence of any material on record, no adverse inference can be drawn either by Ld. Adjudicating Authority or by the Complainant Department. There is no mention or any document to substantiate that the answering defendant ever used any such method to either lure customers into a debt trap or conduct its business unlawfully. The defendant no. 52”s vision was to launch the app PAN India and the only way to run its operation speedily and efficiently was to hire a Call Center to collect unpaid loan from the customers.

On the other hand, respondent ED before Ld. Adjudicating Authority stated that a mobile application namely “Paisa Finch” associated with defendant no. 52 has been complained in FIR no. 1136/2020 & 2452/2020. The main allegation in the FIR was cheating by way of misusing the data of the borrower. Further, the said offence comes under the ambit of schedule offence under PMLA, 2002. Thus, proceeds generated out of such criminal activities is the proceeds of crime. The police filed chargesheet only in two FIRs and the chargesheet in the remaining 41 of the FIRs are yet to be filed. The borrowers were given lucrative offers so that maximum number of borrowers would avail loans. However, without their knowledge, during the time of loan application, their vulnerable data were taken and the same was misused in order to compel them to repay their loan along with excessive interest rates, processing fees and other fees, which led them falling into debt trap. Engagement of any service providers were not prohibited by the RBI. However, in the instant case, in the name of recovery, the service providers were resorting to cheating by way of misusing the data of the borrower for harassment, tortures etc. in order to secure the recovery of their loan amount.

Defendant No. 66 M/s VPoint IT Solution Pvt. Ltd. in its reply before Ld. Adjudicating Authority (as reflected at page 77 of the impugned order) stated that the answering defendant or its representative did not receive any summon under Section 50 (2) of the PMLA and that is why it was not able to join investigation through its Authorized Representative. The account bearing no. 754105000013 is not involved in the process of digital lending at all. In the absence of any nexus, the attachment be set-aside.

On the other hand, respondent ED in its rejoinder filed before Adjudicating Authority stated that this is the first time, the defendant has appeared before the Ld. Adjudicating Authority and before this, it avoided investigation and never appeared before ED even after the summons was issued. The defendant has till date failed to comply with the said summons and not appeared before it, till date.

In the concluding part of the impugned order, it is held that in this case the investigation which followed after registration of FIRs under the PMLA establish the generation of proceeds of crime. The complainant (ED) has brought on record the identification of proceeds of crime, generated by Commission of the scheduled offences and there is sufficient evidence of such proceeds of crime having been utilized by the defendants (including the present appellant as defendant no. 52 & 66).

The attached properties pertaining to appellant Sarvottam Fincap Limited are tabulated as under:-

The attached properties pertaining to appellant M/s VPoint IT Solutions Pvt. Ltd. is tabulated as under;

Accordingly, the said amount attached vide PAO was confirmed by Ld. Adjudicating Authority vide order dated 27.01.2023.

4. Aggrieved by the said impugned order dated 27.01.2023 appellants Sarvottam Fincap Limited and M/s VPoint IT Solution Pvt. Ltd. filed the present separate appeals. It is pertinent to mention here that after conclusion of oral arguments appellants filed their written submissions on 27.10.2023 and respondent ED filed its written submissions on 30.10.2023.

5. During the oral arguments, the learned counsel for the appellant/defendant no. 52 submitted that there is nothing to demonstrate any nexus between the alleged schedule offences and the attached property. No “reasons to believe” is disclosed. He further stressed that even for the issuance of a provisional attachment order under Section 5(1) of PMLA, respondent ED needs to arrive at a conclusion that the proceeds of crime viz the property sought to be attached is involved in money laundering.

As a necessary corollary, the respondent ED needs to demonstrate that an offence of money laundering has been committed, before the proceeds of crime involved in such laundering are provisionally attached. The investigation conducted by respondent fail to attribute any mens-rea on the part of the appellant for laundering the alleged proceeds the crime. There is nothing on record that appellant had gained any undue benefit from the commission of the alleged offences, hence, the provisions of PMLA Act cannot be applied. He further argued that the impugned order pertains to the allegations that the NBFCs have linked themselves to other companies like Fintech Companies. However, appellant Sarvottam Fincap Ltd. in its reply to the Show Cause Notice clearly stated that appellant is a NBFC having no link to any third-party company, let alone a Fintech Company with respect to the running of its mobile loan app. The said mobile APP “Paisa Finch” was owned and operated by the appellant itself. Learned counsel for the respondent further pointed out that there is no complaint or sanction by the RBI or any other Govt. body against the appellant for receiving the tainted money or other money which is any manner is illegal. He further submitted that Ld. Adjudicating Authority failed to consider that without there being any allegation with respect to the sources of fund being tainted and without there being any independent investigation with respect to the veracity of sources of fund, the respondent could not have made a case by itself, thereby assuming the role of the RBI. He further contended that as per allegation in the FIR, the accused companies have cheated and harassed the customers to extort loan money from them, however, the PAO was based on the intent that even the initial money used to advance/disburse the loan was itself tainted, without any material on record to show how the said money was tainted in any manner or obtained by committing any schedule offence. Accordingly, he pressed that in the absence of any allegation with respect to the source of funds and absence of any sanction from the RBI with regard to the money so used being tainted, the ED has gone beyond its jurisdiction to attach the property. In absence of any segregation of the proceeds derived after the commission of alleged schedule offence which is liable to attachment from the source of funds being utilized by the appellant and the amount received back as part payment of principal amount, the entire amount lying in the accounts of the appellant company was wrongly and illegally attached by the respondent ED. In support of his contention, he pointed out that Cyber Crime Police Bengaluru found the case of the appellant to be genuine and thus made a request to the appellant”s bank to de-freeze the appellant”s accounts. The said de-freezed account is also attached by respondent ED vide impugned PAO, which is confirmed by Ld. Adjudicating Authority vide impugned order. He further stressed that in absence of any allegation in the FIR regarding generation and quantum of proceeds of crime or the filing of chargesheet, it is wholly impermissible for the ED to itself become the arbiter whether a scheduled offence stands committed or not. Therefore, in the absence of any evidence or conclusion regarding commission of an offence, the foundation of proceedings initiated under the PMLA should fail. In support of his contention, he has relied upon the judgment of Hon”ble Delhi High Court, in case of Prakash Industries Ltd. vs. Union of India & Anr., 2023 SCC OnLine DEL 336 (para 84 to 88, 91 & 92). He pointed out that account no. 50200058917636 at Sr. No. 3 of the table was never used in the process of digital lending, however, the said account was also attached and confirmed vide impugned order, which shows non-application of mind by the Adjudicating Authority.

Ld. counsel for the appellant/defendant no. 66 M/s VPoint IT Solutions Pvt. Ltd. submitted that it was wrongly taken as a Fintech Company, whereas it only gave ICD (Inter Corporate Deposit). The ICD given by VPoint to M/s Sarvottam Fincap Ltd., has been partly returned and the balance amount has to be returned as and when the accounts are defreezed. M/s VPoint was a sister concern of M/s Sarvattam and it was not associated with lending business in any manner. Appellant VPoint has no proprietary rights over the APP “Paisa Finch”. No profit was shared by M/s Sarvottam Fincap Ltd. with appellant M/s VPoint IT Solutions Ltd. or with any other entity.

He further contended that in the present case, the ED was duty bound to satisfy that the appellants are in possession of proceeds of crime and that such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of proceeds of crime . The aforesaid condition has not been satisfied. In the absence of the same, the ED Attachment proceedings should not sustain and thus, the PAO along with OC must be set aside. The ED cannot supersede its functions and powers with respect to the NBFCs whose functions are primarily regulated by the RBI. In this regard it is submitted that the RBI being the primary regulatory body of the NBFCs has neither made any objection to the activity of online money lending by the Appellant, nor any complaint has been made to the RBI regarding any fraud or illegal activity being played. The Appellant M/s Sarvottam Fincap Ltd. provided loan through contactless medium to people living far away on an unsecured basis during June 2020 when the COVID was at its peak. Furthermore, the lending rates were within the limits of the RBI and no sanction was issued by the RBI in this regard. Ld. Adjudicating Authority has failed to consider that the loan was disbursed through mobile app and customers were well aware about the terms & conditions of the loan. Prayer was accordingly made to allow the present appeals and thereby release the attached property of the appellants, after setting aside the impugned order. The same grounds were reiterated by the appellants in their joint written submission.

6. On the other hand, Ld. counsel for the respondent ED in its written submission explained the Modus Operandi of loans APPs for committing fraud. It is further, stated that vide order dated 04.02.2021 in PIL No. 13/2021 filed by Mr. Kalyandeep Dileep Sunkara, Advocate, the High Court of Telangana directed the DGP, Telangana to file a status report on the rampant instant sanctions of loan by instant loan APPs @ 150% to 450% interest and constant harassment of people to repay the loans. Direction was given to take immediate and necessary steps to nab the guilty parties and ensure that such lending APPs are deleted/ blocked. M/s Sarvottam Fincap Ltd. has APP “Paisa Finch” stated to be developed by itself. However, even if it has used its own APP, but it has used the same Modus Operandi as was being used by other NBFC and Fintech Companies. M/s Sarvottam Fincap has used third party services for recovery of their loan amount. M/s Sarvottam Fincap through their app “Paisa Finch” has disbursed a loan amount of Rs.90,49,91,734 out of which a whopping amount of Rs.17,27,97,774 was deducted upfront in the name of processing fees. M/s Sarvottam has received an amount of Rs.79,60,938 from the borrowers towards interest/penalty. It was evident from copy of sanction letter submitted by M/s Sarvottam Fincap that a borrower who availed a loan of Rs. 4500 for a tenure of 7 days, was subjected to pay Rs. 1125 even before disbursal of loan amount, in the name of verification and document fee, convenience fees and collection and compliance fees. Thus the borrowers, could receive only 75% of the sanctioned loan amount and after the expiry of loan period of 7 days, the borrower was subjected to repay the amount with higher interest rate which was often either more or nearer to the sanctioned amount. Thus, within a period of merely 7 days, the borrowers were subjected to pay huge amount as processing fees, interest and penalty.

It is further stated that during the course of investigation it was found that the borrowers who took loan from the app “Paise Finch”, were also harassed in the similar manner as was in the case of other mobile applications. The borrowers harassed after availing loans from “Paisa Finch” had filed FIRs No. 1136 of 2020 & 2452 of 2020. On perusal of the same, it was evident that the appellant was also involved in the same method of recovery i.e. through harassment, torture, threat, intimidation etc. using the data of the borrowers illegally. The allegation was that the borrowers” relatives were contacted, threatened, harassed and abused which would be possible only when the borrowers Contacts List were accessed by the loan provider i.e. the appellant. It is very clear that the complainants in the FIRs bearing No. 1136/2020 and 2452/2020 have been subjected to harassment and the complainant has also been charged exorbitant processing fees and interest rates by the appellant, in the similar manners as done by the others loans providers. Hence, it is very clear that though the APP “Paisa Finch” may have been developed by the appellant, the modus operandi of the entire business remains the same. The appellant stated that the consumers get an option to borrow small amount of money for a shorter period, without any collateral security during the period of Covid-19, but failed to state the period of loan, rate of interest & penalty, rate of processing fees and method of its recovery. In reality the scheme was not to benefit the needy customers, but to extort money from them by blackmailing, abusing, threatening, by using the sensitive data of the borrowers, as explained above. It was only after the investigation by the respondent ED, the appellant was found to be involved in the activity connected to money laundering and acquired the Proceeds of Crime and the same was attached. The learned Adjudicating Authority has recorded detailed reasons and the same was supplied to the appellant along with the Show Cause Notice. The instant case is not based merely on the involvement of foreign entity/person. Rather, the case is based on the 43 FIRs, wherein the borrowers had taken loans from various mobile application. At the time of downloading of their loan applications, their sensitive date such as contact number, images etc. were taken and the same was used towards pressurizing the borrowing to compel them to pay the loan amount along with higher interest, penalty and processing fees.

It is further stated that the NBFC through its third parties, adopted to such method which would compel the borrowers to repay the loan amount. The contact details of the borrowers were accessed and not only the borrowers, but even their family members, relatives and friends were called and harassed to mount the pressure on the borrowers to repay its loan amount alongwith exorbitant interest. Images of the borrowers were accessed and the same were posted on the whatsapp groups created by the loan provider tagging the borrows as chor & fraud persons. Images of female borrowers were morphed with indecent pictures and the same were sent to the borrowers” known persons, thus creating huge pressure on the borrowers to repay the loan amount. Thus, the borrowers who were under the impression that their personal data was safe with such loan providers, were cheated and the same data was used against them to create pressure, to harass, threaten & intimidate so that the borrowers ended up repaying the loan amount along with high interest rates and penalty. The loan providers also suggested that the borrowers repay the existing loans by taking fresh loans from other APPs, with which the loan providers were not directly connected and the borrowers who repaid the existing loans by taking fresh loans from other APPs, were subjected to same high processing fees, interest, penalty and the same method of harassment. Thus, the borrowers fell into debt traps.

With respect to appellant M/s VPoint IT Solutions Pvt. Ltd. it is stated that the said company was incorporated on 14.01.2020 only for a purpose of receiving foreign investment. Mr. Sandip Chhajed was the only non-executive director of this company. The main business of this company as available in the MCA data was computer related activities e.g. maintenance of websites of other forms/ creation of multi-media presentation for other funds etc. Thus, for a newly incorporated company, which has no experience, it was difficult to raise funds/ investments from overseas companies, unless it is well established. However, in the instant case, the said company immediately after its incorporation started receiving investment from overseas companies between February 2020 and May 2020 into his ICICI Account, as if the main purpose of the incorporation of this company was to receive overseas investment. Thereafter, immediately after the investment was received, an amount of Rs. 4.52 crores were transferred to M/s Sarvottam Fincap Ltd., as the main destination of the funds was already decided by the overseas company investing funds and for facilitation of this M/s VPoint IT Solutions was created. M/s Sarvottam Fincap Ltd. was actually in defunct stage and there were not much lending activities in the said company. However, after the funds received from M/s VPoint IT Solutions which in turn was received from overseas company, was transferred to M/s Sarvottam Fincap Ltd. and thereafter its lending activity skyrocketed. Since, the funds which was ultimately utilize d towards lending to the borrowers was of overseas company, it won”t be wrong to state that the actual control over the entire business was of overseas companies, who were having control on the entire business through M/s VPoint IT Solutions. Thus, the main beneficiary is the overseas company, who infused funds with the involvement of M/s VPoint IT Solutions Pvt. Ltd. and M/s Sarvottam Fincap Ltd. Mr. Sandip Chhajed during his statement recorded under Section 50 of PMLA, 2002 has merely stated that the APP “Paisa Finch” was developed by M/s Sarvottam Fincap Ltd., however, he did not produce any documents evidencing the same. It appears that the APP may have been developed by the overseas company and the same was supplied to M/s Sarvottam Fincap Ltd. as in the other similar cases. M/s VPoint IT Solutions was non-cooperative in the investigation being conducted by ED under PMLA, 2002 and that a summons dated 19.02.2022 was issued to MD/Director of appellant for their appearance and the same was also served. However, none appeared in response to the summons.

It is further stated that the appellant company M/s Sarvottam Fincap Ltd. is registered as a Non-Banking Finance Company (NBFC) with RBI. It started disbursing loan to needy borrowers after deducting hefty processing fee and other charges and thereafter recovering the same with very high interest rate from the borrowers by applying threat, pressure, chatting, blackmailing and other coercive measures. Thus, the appellant NBFC committed the scheduled offence of cheating etc. and generated proceeds of crime. Thereafter, the appellant possessed and acquired part of proceeds of crime in this bank accounts/ virtual accounts held with various banks and payment gateways. The proceeds of crime were used by NBFC to disburse fresh loans to the borrowers and thus generate further proceeds of crime. Since, the profits and losses are booked by the appellants and further non-involvement of any foreign company in the running of day-to-day affair of appellants company, as pleaded by them, it does not mean that the appellant M/s Sarvottam Fincap Ltd. was not involved in the offence of money laundering. Prayer was accordingly made to dismiss the present appeals being devoid of any merits.

7. After going through the oral & written rival submissions and documents on record, we have given our thoughtful consideration to the same. The contention of the learned counsel for the appellants that M/s Sarvottam Fincap Ltd. was the only NBFC against which there are no allegations regarding involvement of any Fintech Company is devoid of merit, as it took ICD of Rs. 4.52 crores on 14.01.2020 from its newly incorporated sister company M/s VPoint IT Solutions Pvt. Ltd. and the new company received loan from foreign/overseas companies in the month of February to May 2020. This proves that M/s VPoint IT Solutions Pvt. Ltd. was incorporated by M/s Sarvottam Fincap Ltd. for the purpose of receiving overseas loan from Foreign Fintech Companies. The conspiracy between both the appellants and the overseas investor is apparent on the face of record. The mobile APP “Paisa Finch” was utilised to disburse small loan for shorter period on exorbitant rate of interest and during this process, they took the access of the mobile data of the loanee customers. The mobile data and contact list of the loanee was used to exercise threat, blackmailing and extortion for re-payment on high rate of interest. The extortion by threat & blackmailing committed by agents of appellant M/s Sarvottam Fincap Ltd. As complained in FIR No. 1136 & 2452 of 2020 was not different from the other NBFC/ Fintech Companies. Simply, because no chargesheet is filed against the appellants in the said two FIRs is no ground to allow the present appeals, as conversely no closure report is admittedly filed by the investigation agency, till date. The fact that no sanction or adverse order is passed by the RBI against the appellant companies till date is also no ground to allow the present appeals, being a separate prerogative of the RBI as a Regulatory Authority. The fact that appellant M/s Sarvottam Fincap Ltd. after taking ICD of Rs. 4.52 crores from appellant M/s VPoint IT Solutions Pvt. Ltd. disbursed the small loans on high rate of interest and processing fee shows that huge amount was rotated again and again to earn high profits in a very short span by exercising coercive re-payment techniques, as mentioned above. Respondent ED in its written submissions pointed out that appellant M/s Sarvottam Fincap Ltd. through their APP “Paisa Finch” has disbursed a loan amount of Rs.90,49,91,734, out of which a whopping amount of Rs.17,27,97,774 was deducted upfront in the name of processing fees. M/s Sarvottam has also received an amount of Rs. 79,60,938 as interest/penalty. Thus, the total proceeds of crime are much more than the total attached amount of Rs.5,03,85,408 & Rs.59,416 in the accounts of the appellants respectively. The remaining proceeds of crime could not be attached by respondent ED. Therefore, the contention of the appellant M/s Sarvottam Fincap Ltd. that as per FIR 1136 of 2020 there is allegation of only Rs. 2,80,000/- and in FIR No. 2452 of 2020 the amount is not quantified, is no ground to release the attached amount at this stage, as the amount stated in the said FIRs pertains to particular complainant only, but the total fraud and generation of proceeds of crime from various victims/loanees runs into crores of rupees. It is an admitted fact that appellant M/s Sarvottam Fincap Ltd. earned and returned about 3.5 crores along with interest at the rate of 18% per annum to sister company M/s VPoint IT Solutions Pvt. Ltd. within a short period also points towards the huge generation of proceeds of crime.

8. The contention of the Ld. Counsel for the appellants that the reasons to believe recorded in the Show Cause Notice of the Ld. Adjudicating Authority are merely copy & paste of the allegations made by ED in their original complaint is also devoid of merit. The ECIR was registered on the basis of FIR lodged against the appellants and the allegations made in the said FIRs, is sufficient to form basis for reason to believe by the ED, as well as by Ld. Adjudicating Authority and accordingly recorded. The said reason to believe is not going to change its colour or form a divergent/contradictory view, after perusal of material on record by Ld. Adjudicating Authority.

9. In sequel to our discussion, both the appeals are hereby dismissed being devoid of merits.