…in Denimagic forfeiture battle
Moorosi Tsiane
THE Court of Appeal has effectively confirmed what the Directorate on Corruption and Economic Offences (DCEO) has long alleged — that former textile executive Madhav Vasant Dalvi and his associates used his company, Denimagic (Pty) Ltd, as part of a scheme to siphon funds and property from Presitex and related companies.
In a strongly worded judgment delivered recently, the Court of Appeal dismissed Denimagic’s attempt to overturn the forfeiture of a Masowe 1 property and M176 707 cash seized by the DCEO during investigations into an alleged M700 million fraud and money laundering scandal.
The court ruled that the evidence overwhelmingly showed that the property and cash were proceeds of unlawful activities linked to fraud and money laundering.
The court confirmed the High Court’s ruling that “the Dalvi family used Denimagic as a conduit through which they laundered Presitex’s funds and stole its property”.
Dalvi, who was the sole director of Presitex and its parent company CGM Group, allegedly created shell companies using his wife Sushama Madhav Dalvi, son Chaitanya Madhav Dalvi, CGM administration manager Sharmala Roya, CGM employee Asitha Medawewa, Presitex Manager Jitech John Babu, Presitex employees; Tseko Alphonce Bohloa and ‘Mathabo Klass. He then used the shelf companies to launder the money by pretending that these were providing services to the group.
The DCEO charged them for the M700 million money laundering, corruption and fraud in the Maseru Magistrates Court on 15 May 2024.
They stood accused alongside their other bogus companies; Alchemy (Pty) Ltd, Chane Merchants and Nazimada Textile FZE.
However, Dalvi, his son and wife were a no show. They remain fugitives from justice after they disappeared from Lesotho. The rest were released on M10 000 bail deposit and M100 000 surety each by Chief Magistrate ‘Matankiso Nthunya.
The Denimagic appeal was heard by Justices Petrus Damaseb, Phillip Musonda and ‘Maliepollo Makhetha.
“In view of what is established by a preponderance of evidence as an insidious pattern of less than transparent conduct (and that is putting it charitably) by the implicated individuals as principal actors, including Roya, towards Presitex, I find no compelling reason to fault the court a quo’s (High Court) conclusion that the cash amount represented proceeds of property siphoned from Presitex by those who were its alter ego,” Justice Damaseb wrote, with other two judges concurring.
“That insidious conduct is demonstrable from the admissions of the respondents a quo in terms of which a raft of high value assets acquired with funds from Presitex and United Clothing were conceded to be tainted as concluded by the court a quo. It is spurious for Mr (Qhalehang) Letsika (Denimagic lawyer) on behalf of the appellants to suggest, as he did during oral argument, that the concession that the vehicles and residential properties bought with Presitex’s and United Clothing’s funds should be forfeited did not impute any wrongdoing by Mr Dalvi and his associates.
“First of all, as a former director of Presitex he owed a fiduciary duty to that company to resist the forfeiture of the vehicles to the State. Secondly, the explanation that the vehicles were registered in Mr Dalvi’s name to avoid carjacking in South Africa is farfetched.
“What magic in this world insulates a car from carjacking just because it is registered in the name of a private person as opposed to a corporation? If that were so, one would expect that all vehicles in South Africa would be treated as such given the notorious fact that carjacking is rife in that country.”
The appeal arose after the High Court previously granted the DCEO a forfeiture order over several assets allegedly acquired through diverted Presitex and CGM funds.
Although many properties and vehicles had already been conceded as “tainted” by Denimagic and associated parties in the High Court, the appeal focused only on a residential property at Masowe 1 and the seized cash.
The DCEO investigations stemmed from complaints by CGM and Presitex shareholder, Eugenia Shi-Chang, who accused Dalvi, his wife Sushama, son Chaitanya and close associates of orchestrating a massive scheme to loot company funds through bogus transactions and related entities.
According to the judgment, investigations revealed that funds from Presitex accounts were allegedly used to buy and develop the Masowe property while disguising ownership through suspicious lease arrangements.
The court described the arrangement as commercially irrational.
“I am satisfied that the conspectus of evidence demonstrates that the acquisition and development of the property were financed from accounts associated with the victim (Presitex) entity. The sublease arrangement, extending over an extended period at a nominal rental, is devoid of commercial rationality and effectively denudes the ostensible owners of the substance of ownership. The beneficial occupation and enjoyment of the property by persons connected to the controlling minds of both the victim and beneficiary entities further reinforces that conclusion,” Justice Damaseb said.
Evidence showed that although the property was registered in the names of ‘Maneo Poopa and her late husband, it was subleased to Denimagic for 82 years at a rental fee of just M1, while Presitex allegedly paid Denimagic M24 000 monthly rent for the same property.
The property was said to be occupied by Dalvi’s son, Chaitanya.
The judges said Denimagic failed to explain why Presitex funds were transferred to pay for the acquisition and renovations of the property.
“What are the probabilities that a person who is a beneficial title holder of a lease and therefore beneficial owner of such title (on land in an area of the capital city described by the judge a quo as affluent) would, first, disavow any ownership thereof; second rent out such land to a stranger in return for rental of M1; third allow another (Denimagic) to receive rental in the amount of M 24 000 in respect of that property, fourth, make a stranger effective beneficial owner of the property?” the court asked.
“Unless such title is tainted and she wished to have no part in it!”
The court also upheld the forfeiture of M176 707 seized during a DCEO raid at Denimagic premises.
Denimagic had argued that the money came from legitimate clothing sales under a credit arrangement with Presitex.
But the court said there was no convincing proof of legitimate business dealings between the companies.
“There is a conspicuous absence of contemporaneous commercial documentation — no sale agreements, invoices, receipts or payment records substantiating the alleged transactions during the relevant period,” the judgment stated.
The judges further questioned why some payments to Presitex were allegedly made from Roya’s personal account instead of Denimagic itself.
The appeal court also dismissed claims that the DCEO acted unlawfully by obtaining preservation orders through ex parte (without respondents knowledge) proceedings without disclosing related court cases.
Justice Damaseb ruled that any alleged non-disclosure was not material because the matter was later fully argued in open court.
“Direct evidence of money laundering is seldom available, and courts are entitled to draw appropriate inferences from the cumulative effect of financial flows, commercial arrangements, and surrounding circumstances,” the court said.
The judges stressed that civil forfeiture proceedings are based on proof on a balance of probabilities, not proof beyond reasonable doubt.
“The present appeal discloses no material misdirection of fact or law. The conclusions reached by the court a quo are supported by the evidence and the applicable legal principles.”
Therefore, the appeal was dismissed with costs.
