TaxTMI 
TaxTMI 
2020 (3) TMI 460
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....eeking quashing of Order dated 09.08.2019 (Annexure A-7) passed by Ld. Appellate Tribunal for SAFEMA, FEMA, NDPS, PMLA & PBPT Act, New Delhi (for short 'Tribunal') whereby appeals of the Appellants assailing confirmation of provisional attachment order have been dismissed. 2. Brief facts as borrowed from Appeal No. 1 of 2019 are that on the basis of an FIR No. 126 dated 26.7.2013 registered at PS Division N. 5, Ludhiana under Section 177, 420, 465, 467, 468, 471 of IPC, against M/s Jaldhara Exports (a proprietorship concern of Raman Garg), Ludhiana alleging fraudulent refund of VAT during February-March' 2013, Respondent-Enforcement Directorate on 14.8.2013 registered an Enforcement Case Information Report (for short 'ECIR'). The Deputy Director-Respondent vide order dated 13.12.2017 provisionally attached Plot No. 800, Street No. 2, Baba Gajja Jain Colony, Moti Nagar, Ludhiana belonging to Smt. Seema Garg (Appeal No. 1/2019) & Smt. Sangeeta Garg (Appeal No. 3/2019) and Flat No. 11A, Empire Residential Project, SAS Nagar belonging to Saiyrah Garg (Appeal No. 2/2019). The Respondent praying confirmation of provisional attachment filed a complaint before Adjudicating Authority whi....
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....hereas two different phrases are specifically used for different situations. He further contended that last limb of Section 2(1)(u) i.e. 'or where such property is taken or held outside the country then the property equivalent in value held within the country' was inserted by Section 145 of Act of 2015. There was no need to carry out amendment by Act of 2015 if property of equivalent value was to be 'proceeds of crime' in any or every case. He further contended that if contention of Respondent is correct, there was no need to insert even first limb and it was sufficient to declare any property held or possessed as 'proceeds of crime'. There was no need to trace out 'source of property' and for Adjudicating Authority to call upon persons to explain source of property. He supported his argument with judgment of Andhara Pradesh High Court in the case of M/s Satyam Computer Services Limited Vs. Directorate of Enforcement, Government of India and others 2019 (3) Andh LD 472 and judgment of Delhi High Court in the case of Abdullah Ali Balsharaf & Another Vs. Directorate of Enforcement and Others 2019 (3) RCR (Criminal) 798. As per Section 5 of PMLA, property may be attached if it is l....
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....scheduled offence. Mr. Mittal in support of his contentions cited judgment of Delhi High Court in the case of Abdullah Ali Balsharaf & Another Vs. Directorate of Enforcement and Others 2019 (3) RCR (Criminal) 798. 7. As per written submissions and oral arguments, Mr. Satya Pal Jain gave a totally different shape to the earlier set of arguments & allegations and twisted the findings of Tribunal. Mr. Jain contended that Appellants had mortgaged their property to Allahabad Bank to secure cash credit limit of Rs. 2 Crore for M/s Jaldhara Exports, which committed offence under Section 420, 467 and 471 of IPC, thus immovable property has been used to commit scheduled offence. The offence was committed during February' 2013 to March' 2013 and during said period offence under Section 420, 467 and 471 was a scheduled offence. In the original PMLA, no time limit for continuing attachment during the pendency of investigation was prescribed, however time limit of 90 days was prescribed under the PMLA w.e.f. 19.4.2018 whereas criminal complaint under Section 44 & 45 of PMLA before the Special/Designated Court has been filed on 22.12.2017 i.e. much before the amendment. Therefore, Appellant i....
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....nal activity is held or taken outside India. In case property derived/obtained from criminal activity is held or taken outside India, property of equivalent value held in India or abroad would be proceeds of crime. The second limb, which is the core issue involved in present appeals covers 'value of property' derived/obtained from criminal activity. 8.1 The phrase 'property' has been defined under Section 2(1)(v) of the PMLA which is reproduced as under: Section 2(1)(v) "property" means any property or assets of every description, whether corporeal or incorporeal, movable or immovable, tangible or intangible and includes deeds and instruments evidencing title to, or interest in, such property or assets, wherever located. Explanation- For the removal of doubts, it is hereby clarified that the term "property" includes property of any kind used in the commission of an offence under this Act or any of the scheduled offences. As per above Sub-Section; property includes movable, immovable, tangible, intangible, deeds and instruments evidencing title/interest in assets or property. Patent, copyright, goodwill are best example of incorporeal/intangible assets. 9.....
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....te of order of vacation of such stay order shall be counted. (2) The Director, or any other officer not below the rank of Deputy Director, shall, immediately after attachment under sub-section (1), forward a copy of the order, alongwith the material in his possession, referred to in that sub-section, to the Adjudicating Authority, in a sealed envelope, in the manner as may be prescribed and such Adjudicating Authority shall keep such order and material for such period as may be prescribed. (3) Every order of attachment made under sub-section (1) shall cease to have effect after the expiry of the period specified in that sub- section or on the date of an order made under sub-section (3) of section 8, whichever is earlier. (4) Nothing in this section shall prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment. Explanation- For the purposes of this sub-section, "person interested", in relation to any immovable property, includes all persons claiming or entitled to claim any interest in the property. (5) The Director or any other officer who provisionally attaches any prop....
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....bsection (1) of section 5 or retention of property or record seized or frozen under section 17 or section 18 and record a finding to that effect, whereupon such attachment or retention or freezing of the seized or frozen property or record shall- (a) continue during investigation for a period not exceeding three hundred and sixty-five days or the pendency of the proceedings relating to any offence under this Act before a Court or under the corresponding law of any other country, before the competent Court of criminal jurisdiction outside India, as the case may be; and (b) become final after an order of confiscation is passed under sub-section (5) or sub-section (7) of section 8 or section 58-B or sub-section (2-A) of section 60 by the Special Court. Explanation.- For the purposes of computing the period of three hundred and sixty-five days under clause (a), the period during which the investigation is stayed by any Court under any law for the time being in force shall be excluded. (4) Where the provisional order of attachment made under subsection (1) of section 5 has been confirmed under sub-section (3), the Director or any other officer authorised by hi....
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....he claimant for the purposes of restoration of such properties during the trail of the case in such manner as may be prescribed. [Emphasis supplied] As per Section 5 of the PMLA, any property of any person involved in money laundering may be provisionally attached. The attachment may be made after filing of police report or complaint with respect to scheduled offence, however where attachment is immediately required, it may subject to compliance of inbuilt safeguards, be made even prior to filing of police report or complaint qua scheduled offence. The following safeguards in the form of checks and balances are prescribed under Section 5 of the PMLA: i) Attachment order can be passed only by Director or any Officer not below the rank of Deputy Director authorized by Director; ii) The Officer must record reasons to believe that any person is in possession of any proceeds of crime which are likely to be concealed, transferred or dealt with in any manner which may result in frustrating proceedings relating to confiscation; iii) The reasons must be based upon the material in his possession; iv) The Officer shall forward copy of provisional atta....
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.... (c) acquisition; or (d) use; or (e) projecting as untainted property; or (f) claiming as untainted property, in any manner whatsoever; (ii) the process or activity connected with proceeds of crime is a continuing activity and continues till such time a person is directly or indirectly enjoying the proceeds of crime by its concealment or possession or acquisition or use or projecting it as untainted property or claiming it as untainted property in any manner whatsoever. Section 4. Punishment for money-laundering.- Whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine: Provided that where the proceeds of crime involved in money-laundering relates to any offence specified under paragraph 2 of Part A of the Schedule, the provisions of this section shall have effect as if for the words "which may extend to seven years", the words "which may extend to ten years" had been substituted. Section 3 defines offence of money laundering, the scope of which has been enlarged from....
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....Court of Session. Explanation- For the removal of doubts, it is clarified that, - (i) the jurisdiction of the Special Court while dealing with the offence under this Act, during investigation, enquiry or trial under this Act, shall not be dependent upon any orders passed in respect of the scheduled offence, and the trial of both sets of offences by the same court shall not be construed as joint trial; (ii) the complaint shall be deemed to include any subsequent complaint in respect of further investigation that may be conducted to bring any further evidence, oral or documentary, against any accused person involved in respect of the offence, for which complaint has already been filed, whether named in the original complaint or not. (2) Nothing contained in this section shall be deemed to affect the special powers of the High Court regarding bail under section 439 of the Code of Criminal Procedure, 1973 (2 of 1974) and the High Court may exercise such powers including the power under clause (b) of subsection (1) of that section as if the reference to "Magistrate" in that section includes also a reference to a "Special Court" designated under sectio....
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.... sustainable after the expiry of 90 or 365 days from the date of order passed by adjudicating authority? ii) Whether property acquired prior to enactment of PMLA i.e. prior to 1.7.2005 can be provisionally attached under Section 5 of the PMLA? iii) Whether phrase 'value of such property' occurring in definition of 'proceeds of property' includes any property of any person irrespective of source of property? iv) Whether officer attaching property is required to record reason that property is likely to be concealed, transferred or dealt with in any manner which may frustrate proceedings relating to confiscation? 15. Q.(i). As per clause (a) of Sub-Section (3) of Section 8 of the PMLA, the provisional attachment shall continue during investigation for a period not exceeding 90 days. The aforesaid period of 90 days has been increased to 365 days w.e.f. 01.08.2019 vide amendment Act 7 of 2019. The concept of 90 days period during investigation was introduced w.e.f. 19.04.2018. In the case in hand, the Adjudicating Authority vide order dated 28.05.2018 (Annexure A-3) confirmed provisional attachment wherein it was ordered that attachment shall continue durin....
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....not fall within ambit of first limb of definition of 'proceeds of crime', however it certainly falls within purview and ambit of third limb of the definition. Counsel for both sides have cited judgment of Delhi High Court in the case of Abdullah Ali Balsharaf & Another Vs Directorate of Enforcement and Others 2019 (3) RCR (Criminal) 798 to support their contention. As per said judgment, if property derived or obtained from scheduled offence is taken or held outside India, the property of equivalent value held in India or abroad may be attached irrespective of date of purchase. We fully subscribe to the opinion expressed by Delhi High Court. We find that third limb of definition 'proceeds of crime' covers property equivalent to property held or taken outside India, thus date of purchase of property which is equivalent to property held outside India, is irrelevant. Any property irrespective of date of purchase may be attached if property derived or obtained from scheduled offence is held or taken outside India. The moot question arises that whether property of equivalent value may be attached where property derived or obtained from scheduled offence is not held or taken outside In....
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....erve notice calling upon the person to indicate the source of his income, earning or assets out of which or by means of which he has acquired the property attached under Section 5 of the PMLA. Seeking explanation about source of property and furnishing explanation is meaningless if property inspite of genuine and explained source may be attached. As per Section 24 of the PMLA, burden to prove that property is not involved in money laundering is upon the person whose property is attached. There is no sense on the part of any person to discharge burden qua source of property if any property may be attached, irrespective of its source. As per Section 8(6) of the PMLA, where the Special Court finds that offence of money laundering has not taken place or property is not involved in money laundering, it shall release such property. If contention of Respondent is upheld, there would be no need of recording findings by Special Court with respect to property attached being proceeds of crime, no sooner it is held that offence of money laundering has been committed, then the Special Court would be bound to confiscate every attached property because every property in the hand of a person, w....
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....n of Corruption Act, 1988 is property directly derived from scheduled offence, however if some movable or immovable property is purchased against said cash, the movable or immovable property would be 'value of property' derived from commission of scheduled offence. If a person gets some land or building by committing cheating (Section 420 of IPC) which is a scheduled offence and said building or land is sold prior to registration of FIR or ECIR, the property derived from scheduled offence would not be available, however money generated from sale or transfer of said property in the form of cash or any other form of property may be available. The cash or any other form of property movable or immovable, tangible or intangible would be 'value of property' derived from commission of scheduled offence. Andhara Pradesh High Court in the case of Satyam Computer Services (Supra) has expressed view similar to our above expressed view, however Delhi High Court in the case of Axis Bank (Supra) has expressed contrary view which we do not subscribe because Delhi High Court has declared/treated words 'value of such property' and 'property equivalent in value held within country' at par which c....
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....n of recording of reasons. In Barium Chemicals Ltd. vs. Company Law Board AIR 1967 SC 295, the Supreme Court pointed out, on consideration of several English and Indian authorities that the expressions "is satisfied", "is of the opinion" and "has reason to believe" are indicative of subjective satisfaction, though it is true that the nature of the power has to be determined on a totality of consideration of all the relevant provisions. The Supreme Court while construing Section 237 of the Companies Act, 1956 held in Para 64 as under: " 64. The object of S. 237 is to safeguard the interests of those dealing with a company by providing for an investigation where the management is so conducted as to jeopardize those interests or where a company is floated for a fraudulent or an unlawful object. Clause (a) does not create any difficulty as investigation is instituted either at the wishes of the company itself expressed through a special resolution or through an order of the court where a judicial process intervenes. Clause (b), on the other hand, leaves directing an investigation to the subjective opinion of the government or the Board. Since the legislature enacted S. 637 ....
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.... finds support in Gower's Modern Company Law (2nd Ed.) p. 547 where the learned author, while dealing with S. 165(b) of the English Act observes that "the Board of Trade will always exercise its discretionary power in the light of specified grounds for an appointment on their own motion" and that "they may be trusted not to appoint unless the circumstances warrant it but they will test the need on the basis of public and commercial morality." There must therefore exist circumstances which in the opinion of the Authority suggest what has been set out in sub-clauses (i), (ii) or (iii). If it is shown that the circumstances do not exist or that they are such that it is impossible for any one to form an opinion therefrom suggestive of the aforesaid things, the opinion is challengeable on the ground of non-application of mind or perversity or on the ground that it was formed on collateral grounds and was beyond the scope of the statute. " [Emphasis supplied] In Income-tax Officer, Calcutta and Ors. Vs Lakhmani Mewal Das AIR 1976 SC 1753, the Supreme Court construed the expression "reason to believe" employed in Section 147 of the Income-Tax Act, 1961 and observed that th....
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....e proviso to Section 17 (1) (a) (ii) of the Act. The expression "is of opinion", that substantial modifications in the draft development plan and regulations, "are necessary", in our considered opinion, does not confer any unlimited discretion on the Government. The discretion, if any, conferred upon the State Government to make substantial modifications in the draft development plan is not unfettered. There is nothing like absolute or unfettered discretion and at any rate in the case of statutory powers. The basic principles in this regard are clearly expressed and explained by Prof. Sir William Wade in Administrative Law (Ninth Edn.) in the chapter entitled 'abuse of discretion' and under the general heading the principle of reasonableness' which read as under: The common theme of all the authorities so far mentioned is that the notion of absolute or unfettered discretion is rejected. Statutory power conferred for public purposes is conferred as it were upon trust, not absolutely - that is to say, it can validly be used only in the right and proper way which Parliament when conferring it is presumed to have intended. Although the Crown's lawyers have argu....
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....ed by authority. Reasons recorded are subject to judicial review and court may look into material which made basis of reasons recorded. 17.2 As per Section 5 of the PMLA, Director or any other Officer authorized by him is duty bound to record reasons on the basis of material in his possession that proceeds of crime are likely to be concealed or transferred or in any other way dealt with which may frustrate any proceedings relating to confiscation. Counsel for the Appellant contended that property in question was admittedly purchased in 1991 and since 2009 is lying mortgaged with bank, thus there was no question of transfer or sale of said property. The alleged offence was committed in 2013 whereas property was attached on 13.12.2017. There was nothing on record to show that if property is not attached, the proceedings of confiscation would be frustrated. The authorities are bound to be specific and cannot simply reiterate words and phrases used in the Section which is source of power. The Respondent in the present case while passing provisional attachment order has simply held that properties are likely to be concealed, transferred or dealt with in any manner which may result....
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....n such a case makes no sense. In the present order however we find that the disjunctive "or" has been used, showing that the order is more or less a copy of Section 3 (2) (15) without any application of the mind of the authority concerned to the grounds which apply in the present case. " [Emphasis supplied] In the present case, concededly property was purchased in 1991 and mortgaged with bank in 2009. The alleged offence was committed in 2013 whereas attachment order was passed in December' 2017. There is nothing on record to show that Appellants after 2009 or 2013 attempted to dispose of property in question which prompted the Respondent to pass attachment order. The Respondent has simply taken wording of Section 5(1) of the PMLA and reiteration of these words would not constitute recording of reasons that if property is not attached, it may result in frustrating any proceedings of confiscation. The Respondent was bound to record the reasons on the basis of material in his possession that property is likely to be concealed or transferred or dealt with in any manner. Use of all the words i.e. concealed, transferred or dealt with in any manner shows that Respondent was n....