TaxTMI 
TaxTMI 
2023 (12) TMI 1289
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....ed Gat No. 446 at Dapoli, Ratnagiri. Mr. Sathe made an application to the Sub-Divisional Officer on 21/07/2017 for conversion of the said land to nonagricultural ('NA' for short) use and for building permission. The NA permission and building permission was granted on 12/09/2017. Shri Sathe sold the said land to Shri Anil Parab on 19/06/2019 under a duly registered sale deed for the consideration paid by cheque/bank transfer. It is alleged that to conceal the identity of Shri Anil Parab, the sale deed was executed in 2019 though the transaction took place in 2017. All permissions were at the behest of Shri Anil Parab. Since 2017, Shri Sathe was only a front. It is alleged that the applicant was organising all this. Shri Anil Parab sold the said land to the applicant under a duly registered sale deed for consideration paid by cheque/bank transfer on 29/12/2020. This was done to avoid public attention as per the allegation. A notice under the Maharashtra Regional and Town Planning Act (MRTP Act) was issued on 22/06/2021 to the construction made on the land which was in the nature of twin bungalows converted into a resort. Suit No. 57 of 2021 was filed before the Civil Judge, Khed whe....
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....fences were levelled against Circle Office and Sub- Divisional Officer for making a fraudulent report based on which NA and building permissions were granted. It is already indicated that the applicant was arrested on 10/03/2023. The ECIR in respect of which complaint (chargesheet) bearing Special Case No. 634 of 2023 has been filed is pending before the Special PMLA Court, Mumbai. SUBMISSIONS OF SHRI DESAI, LEARNED SENIOR ADVOCATE (A) It is the contention of the learned senior advocate Shri Amit Desai that the ECIR was based on RCC No. 12 of 2022 (complaint filed by MoEF for violation of EP Act)and for offences under the IPC. However, without registering an ECIR respondent has also included the offences registered under FIR No. 177 of 2022 as predicated offences while filing the complaint before the Special Court. In the submission of Shri Desai, such a course is impermissible. According to Shri Desai, on the basis of FIR No. 177 of 2022, a separate ECIR ought to have been registered and the inclusion of the offences registered under the FIR No. 177 of 2022 as predicated offences when filing the complaint before the Special Court is illegal, contrary to the provisions of PML....
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....as the offences in relation to FIR No. 177 of 2022 were being added only post March- 2023, when the Sessions Court set aside the order issuing process in the MoEF complaint. Further, there is no material to show how the allegations in the said FIR relate to the applicant and the ECIR for which the applicant is being investigated. (D) The applicant is only named in the chargesheet as a witness in respect of the FIR No. 177 of 2022. Even in the chargesheet, the scheduled offences of IPC i.e. Sections 420, 467, 471, and 478 are invoked essentially for the alleged forgery of Circle Officer's Report. In so far as the present applicant or Shri Anil Parab is concerned, the allegations in the MoEF complaint and FIR No. 177 of 2022 are identical/overlapping and also rely upon the same documents. The comparative chart produced demonstrates how in the MoEF complaint and FIR No. 177 of 2022 the cause of action is the same. The applicant can not be vexed or prosecuted twice for the same cause of action. (E) The allegation of the forgery made by the respondent in the PMLA complaint against the applicant are not borne out in the chargesheet or even in the MoEF complaint. In fact, the report....
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....e is nothing in the chargesheet to show who forged his signature, when, where, etc. nor was his signature sent for any analysis etc. It trite that the evidentiary value of the statement under Section 50 of the PMLA is limited to the offence under PMLA and can not be used to prove the predicate offence itself. (F) Section 2(1)(u) of the PMLA i.e. definition of 'Proceeds of Crime', categorically specifies that the proceeds of crime so alleged should be a result of a criminal activity relatable to the scheduled offence. The scheduled offences in the present case are - (i) Section 7 read with Section 15 of the EP Act which has been set aside by the Revision Court. Even otherwise, this offence has not been proved and it is sufficiently established that the resort has never commenced operations, much less discharge any effluents. (ii) As regards Sections 420, 467, 471, 468 and 120-B of the IPC, no cognizance was taken in relation to the IPC offences in the MoEF complaint. Further, the allegations of forgery made in the PMLA complaint relating to the applicant are not borne out in the material collected during the investigation in the FIR. Furthermore, the proceeds ou....
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....s of Section 45(2) would not be applicable as the proviso to the said clause provides that the rigours of Section 45(2) would not be applicable if the proceeds of crime are less than one crore. The applicant is liable to be released on bail. The entire complaint/chargesheet of ED to the extent that it cites proceeds of crime, cites the same to be the value of land and building. There is no illegality linked to the MoEF complaint or FIR No. 177 of 2022 qua purchase of land. Only qua the construction the ED complaint links it to CRZ violations alone. CRZ violations fall within Sections 5 read with 15 of the EP Act, none of which are a scheduled offence. Therefore, proceeds of crime, if any, are not from criminal activity of scheduled offence under MoEF complaint or FIR No. 177 of 2022. (I) The Delhi High Court in 2023 SCC Online Del 336 Prakash Industries Limited Vs. Union of India and Another by relying upon the observations in Vijay Madanlal Chaudhary vs. Union of India 2022 SCC Online SC 929 held that the offence created in terms of Section 3 of the PMLA is inextricably linked to the commission of the scheduled offence. The expression "derived or obtained" must be understood as....
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....tion and the trial is yet to commence. The ED has already filed the special case and therefore the investigation is complete. There is therefore no purpose served in keeping the Applicant incarcerated any longer. SUBMISSIONS OF SENIOR ADVOCATE SHRI DEVANG VYAS, LEARNED ADDITIONAL SOLICITOR GENERAL:- (A) My attention is invited to the observations of the Special Court rejecting the bail application. It is submitted that the twin conditions for the grant of bail applicable under the PMLA are not satisfied. The PMLA investigations can proceed and lead to prosecution independently of the predicate offence. An individual can be implicated and prosecuted for money laundering under PMLA even without direct involvement in the predicate offence. Sections 44 and 45 of the PMLA establish high thresholds for bail, indicating the severity of money laundering offences. These provisions underscore the prioritization of public interest and the integrity of the financial system over the liberty of those accused of such serious economic offences. The Supreme Court by its order dated 30/10/2023 has directed this Court to decide this matter expeditiously, ensuring all rights and contentions of p....
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....irectly, by any person as a result of criminal activity relating to a scheduled offence. This definition is crucial as it sets the scope for what is considered illegal gain in the context of money laundering. Section 2(1)(v) - "Property": Under PMLA, 'property' means any property or assets of any 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. Section 2(1)(u) - "schedule Offences": This part of the Act provides a detailed list of offenses which, if committed, would result in the initiation of money laundering investigations. These are referred to as 'scheduled offenses' and form the basis for invoking the provisions of the PMLA. Section 3 - Offence of Money Laundering: This section lays down that whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of the offence of money laundering. Section 19 - ....
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.... NO. PARTICULARS PARA NO. 1 Objects and Reasons 235 2 Preamble 242 IMP 243 3 "Independent Offence"/ "Self-Contained 269, 270, 280, SR. NO. PARTICULARS PARA NO. Code" 311, 356, 359, 365, 455, 467 4 Arrest 322, IMP 324, 325, 326 5 Burden of Proof Check : Pg 375 - Whether relevant before filing of chargesheet/framing of charge ? 327 6 Proof : Definitions 335, 336 & 337 IMP 339, 341, 342, 343 7 "Shall Presume/May Presume" 347 8 Special Court 352 9 Bail IMP - NIKESH TARACHAND VIS A VIS AMENDMENT OF 2018 IMP - DEFECT REMOVED BY VALIDATING THE ACT RETROSPECTIVELY. CHALLENGE TO TWIN CONDITIONS POST AMENDMENT OF 2018 371 377-380 386 387 10 "Quantum of punishment cannot be the basis to determine the seriousness and gravity of this offence." 395 11 Relevant Judgments 395-397 IMP 401 12 Twin Conditions vis a vis Companies Act 402 13 Limitations under Section 45 are in addition to limitation under the 1973 404 SR. NO. PART....
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....in reading of Section 3, unless proceeds of crime exist, there cannot be any money laundering offence. Clause (u) of subsection (1) of Section 2 of the PMLA defines "proceeds of crime", which reads thus: "2. Definition (1) In this Act, unless the context otherwise requires,- (u) "proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad; Explanation.-For the removal of doubts, it is hereby clarified that "proceeds of crime" include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence." 12. Clause (v) of sub-section (1) of Section 2 of the PMLA defines "property" to mean any property or assets of every description, whether corporeal or incorporeal, movable or immovable, tangible or intangible. To constitute any property as....
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.... quashing of the criminal case (scheduled offence) against him/her. there can be no action for money- laundering against such a person or person claiming through him in relation to the property linked to the stated scheduled offence. This interpretation alone can be countenanced on the basis of the provisions of the 2002 Act, in particular Section 2(1) (u) read with Section 3. Taking any other view would be rewriting of these provisions and disregarding the express language of definition clause "proceeds of crime", as it obtains as of now." (underline supplied) In paragraphs 269 and 270, this Court held thus: "269. From the bare language of Section 3 of the 2002 Act, it is amply clear that the offence of money- laundering is an independent offence regarding the process or activity connected with the proceeds of crime which had been derived or obtained as a result of criminal activity relating to or in relation to a scheduled offence. The process or activity can be in any form be it one of concealment. possession. acquisition. proceeds of crime use of as much as projecting it as untainted property or claiming it to be so. Thus, Involvement in any one of su....
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....f the proceeds of crime or knowingly assists the use of proceeds of crime. In that case, he can be held guilty of committing an offence under Section 3 of the PMLA. To give a concrete example, the offences under Sections 384 to 389 of the IPC relating to "extortion" are scheduled offences included in Paragraph 1 of the Schedule to the PMLA. An accused may commit a crime of extortion covered by Sections 384 to 389 of IPC and extort money. Subsequently, a person unconnected with the offence of extortion may assist the said accused in the concealment of the proceeds of extortion. In such a case, the person who assists the accused in the scheduled offence for concealing the proceeds of the crime of extortion can be guilty of the offence of money laundering. Therefore, it is not necessary that a person against whom the offence under Section 3 of the PMLA is alleged must have been shown as the accused in the scheduled offence. What is held in paragraph 270 of the decision of this Court in the case of Vijay Madanlal Choudhary' supports the above conclusion. The conditions precedent for attracting the offence under Section 3 of the PMLA are that there must be a scheduled offence and th....
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....ccused. Similarly, he will get the benefit of the quashing the proceedings of the scheduled offence. However, an accused in the PMLA case who comes into the picture after the scheduled offence is committed by assisting in the concealment or use of proceeds of crime need not be an accused in the scheduled offences. Such an accused can still be prosecuted so long as the scheduled offence exists. 12. So far as the procedure of arrest is concerned, the Supreme Court in Pankaj Bansal (supra) in detail analysed the constitutional and statutory mandate of Section 19(1) of the PMLA. In paragraph Nos. 21, 29 to 33 and 39, it is observed thus: "21. This chronology of events speaks volumes and reflects rather poorly, if not negatively, on the ED's style of functioning. Being a premier investigating agency, charged with the onerous responsibility of curbing the debilitating economic offence of money laundering in our country, every action of the ED in the course of such exercise is expected to be transparent, above board and conforming to pristine standards of fair play in action. The ED, mantled with far-reaching powers under the stringent Act of 2002, is not expected to be vi....
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....y (supra), this Court held that non-supply of the ECIR in a given case cannot be found fault with, as the ECIR may contain details of the material in the ED's possession and revealing the same may have a deleterious impact on the final outcome of the investigation or inquiry. Having held so, this Court affirmed that so long as the person is 'informed' of the grounds of his/her arrest, that would be sufficient compliance with the mandate of Article 22(1) of the Constitution. 32. In this regard, we may note that Article 22(1) of the Constitution provides, inter alia, that no person who is arrested shall be detained in custody without being informed, as soon as may be, of the grounds for such arrest. This being the fundamental right guaranteed to the arrested person, the mode of conveying information of the grounds of arrest must necessarily be meaningful so as to serve the intended purpose. It may be noted that Section 45 of the Act of 2002 enables the person arrested under Section 19 thereof to seek release on bail but It postulates that unless the twin conditions prescribed thereunder are satisfied, such a person would not be entitled to grant of bail. The twin....
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....aning and purpose to the constitutional and the statutory mandate of Section 19(1) of the Act of 2002 of informing the arrested person of the grounds of arrest, we hold that it would be necessary, henceforth, that a copy of such written grounds of arrest is furnished to the arrested person as a matter of course and without exception. The decisions of the Delhi High Court in Moin Akhtar Qureshi (supra) and the Bombay High Court in Chhagan Chandrakant Bhujbal (supra), which hold to the contrary, do not lay down the correct law. In the case on hand, the admitted position is that the ED's Investigating Officer merely read out or permitted reading of the grounds of arrest of the appellants and left it at that, which is also disputed by the appellants. As this form of communication is not found to be adequate to fulfil compliance with the mandate of Article 22(1) of the Constitution and Section 19(1) of the Act of 2002, we have no hesitation in holding that their arrest was not in keeping with the provisions of Section 19(1) of the Act of 2002. Further, as already noted supra, the clandestine conduct of the ED in proceeding against the appellants, by recording the second ECIR immedia....
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....able case about the involvement of the accused in the commission of a serious offence of money laundering. Further, as held in Vijay Madanlal (supra), the offence of money laundering under Section 3 of the Act is an independent offence regarding the process or activity connected with the proceeds of crime which had been derived or obtained as a result of criminal activity relating to or in relation to a scheduled offence. The offence of money laundering is not dependent or linked to the date on which the scheduled offence or predicate offence has been committed. The relevant date is the date on which the person indulges in the process or activity connected with the proceeds of crime. Thus, the involvement of the person in any of the criminal activities like concealment, possession, acquisition, use of proceeds of crime as much as projecting it as untainted property or claiming it to be so, would constitute the offence of money laundering under Section 3 of the Act. 17. As well settled by now, the conditions specified under Section 45 are mandatory. They need to be complied with. The Court is required to be satisfied that there are reasonable grounds for believing that the ....
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.... a charge-sheet as envisaged under various statutes. However, in absence thereof, it would be wholly impermissible for the ED to itself become the arbiter of whether a scheduled offence stands committed." 15. Bearing in mind the aforementioned principles laid down, I now proceed to deal with the rival submissions. 16. The complaint filed by the MoEF is regarding violation of the EP Act and cheating. The allegations in brief pertain to the purchase of the land by Shri Anil Parab from Mr. Sathe. The allegations are that by exerting pressure building permissions are illegally obtained. Further, the construction is made in a no-development zone in violation of CRZ rules. Though the transaction between Mr. Sathe and Shri Anil Parab was of the year 2017, it is only in the year 2019 that the sale deed came to be executed. Hence, it is alleged that this is to conceal the identity by Shri Anil Parab. Shri Anil Parab later executed the sale deed in respect of the said land in favour of the present applicant. The applicant was always involved right from the inception in the transaction on behalf of Shri Anil Parab and in respect of all building permissions and other permissions. The sal....
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.... the said Agricultural Land and only after that Revenue Department authorities granted illegal permission for conversion of the said land into nonagricultural and construction therein. Sadanand Kadam on behalf Shri Anil Parab also looked after the construction of unauthorized structure and changed the construction plan to resort viz. Sai Resort NX even though the construction plan approved by Revenue Department was of Twin Bungalow. Further, Sadanand Kadam on behalf of Anil Parab had again used influence of Anil Parab, the then MLC and pressurized Suresh Shankar Tupe, Sarpanch & Anant Koli, Gram Sevak of Murud Gram Panchayat to assess & levy the tax immediately on the said unauthorized and illegal resort and to make entries in Gram Panchayat Form No.S, therefore, tax was levied on the incomplete structure due to pressure and influence of Shri Anil Parab used by Sadanand Kadam. Accused Sadanand Kadam has also manipulated the balance sheets and invoices in order to show expenses made for the construction of Sai Resort NX on his account and further falsified the ledger so that to justify the construction cost and hide the actual expenses made in cash by Shri Anil Par....
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.... Dapoli, Ratnagiri, Maharashtra falls within prohibited CR-IlI area which is "No Development Zone", indulged into purchase of the said land from Shri Vibhas Rajaram Sathe for construction of a twin bungalow/ resort. Further, accused Sadanand Kadam helped Shri Anil Parab to utilize his unaccounted money in cash amounting to Rs.80 Lac for purchase of the said land. 9.2 Accused Sadanand Kadam in connivance with Vinod Depolkar and on the instance of Shri Anil Parab, illegally acquired the permission for conversion of the said land into non-Agricultural and construction of Twin bungalow (Ground+ 1 Floor) and subsequently constructed a resort (Ground+ 2 Floors) inspite of having illegal permission for construction of twin bungalow. Further, in order to legitimize the said illegal resort accused Sadanand Kadam with the help of Shri Anil Parab deceived Gram Panchayat, Murud by stating that he had purchased land and structure from Shri Vibhas Sathe. Further, without completion of the construction, accused Sadanand Kadam pressurized and influenced Sarpanch & Gram Sevak of Murud Gram Panchayat and asked them to asses and levy tax on the illegal structure and transfer the title in the....
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....ayat, Murud, Dapoli for assessment & levying of tax on the said resort. 9.6 Thus, in the instant case, total proceeds of crime in terms of section 2(1)(u) of PMLA, 2002, r/w explanation to Section 2 (1)(v) of the Act, 2002, is land for which illegal permission was acquired for conversion into Non-Agricultural and used in commission of schedule offence and Sai Resort NX which has been generated out of criminal activities i.e. cheating, forgery, misdeclaration. 9.7 During the search proceedings on 26.05.2022 at the premise of "Sai Resort NX" located at Gat No.446, Murud, Tehsil Dapoli, Ratnagiri, Maharashtra, valuation of the said resort was conducted by M/s L B M Valuers & Engineers in the presence of Panchas. The valuation report was submitted on 03.06.2022 by M/s L B M Valuers & Engineers and as per the valuation report value of land is Rs.2,73,91,000 and the Resort was valued at Rs.7,46,47,000/-. 9.8 Thus, in the instant case, total proceeds of crime in terms of section 2(1)(u) of PMLA, 2002, r/w explanation to Section 2 (1)(v) of the Act, 2002, is value of land i.e. Rs. 2,73,91,000 for which illegal permission was acquired for conversion into Non-Agric....
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.... 23. However, so far as FIR No. 177 of 2022 is concerned, it relates to the scheduled offence. Though, the writ petition is pending in this Court for quashing FIR No. 177 of 2022, mere pendency of the Writ Petition is not sufficient to hold that there is no predicate offence. Furthermore, merely because the applicant is not an accused in FIR No. 177 of 2022 cannot afford protection to the applicant from a prosecution under the PMLA in the light of the observations of the Supreme Court in 'Pavana Dibbur' (supra). 24. It is not necessary that a person against whom the offence under Section 3 is alleged must have been shown as an accused in the scheduled offence. The conditions precedent for attracting the offence under Section 3 of the PMLA are that there must be proceeds of crime in relation to the scheduled offence as defined in clause (u) of subsection( 1) of Section 3 of the PMLA. 25. Learned senior advocate Shri Desai submitted that the accusations in FIR No. 177 of 2022 is almost identical with those in RCC No. 12 of 2022 and hence the applicant can not be vexed twice for the same cause of action. I am afraid that this contention can not be accepted for more than one re....
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....dulge or knowingly assisted or is knowingly a party or actually involved in process or activity connected with proceeds of crime and projected it as untainted property. 27. Though learned senior advocate Shri Desai was at pains to rely upon Section 202 of Cr.P.C. report in the private complaint of MoEF, according to me, such a report is specific to the private complaint instituted by the MoEF. This report under Section 202 can not be the sole basis for absolving the applicant if otherwise from the material the accusations regarding offence of money laundering is made out. So far as the statements of Mr. Vibhas Sathe recorded under Section 50 of the PMLA are concerned, at this stage the same can not be discarded only on the ground that more weightage should be given to the statements recorded by the police under Section 161 of the Cr.P.C. The distinction as regards the statement made under Section 161 of Cr.P.C. with the evidentiary value of the statement made under the PMLA has to be kept in mind. 28. As regards the submission of learned senior advocate Shri Desai as to the legitimacy of the transaction in question, the same requires a detailed analysis and examination on the....
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....police station is under an obligation to record the information relating to the commission of a cognizable offence, in terms of Section 154 of the 1973 Code. There is no corresponding provision in the 2002 Act requiring registration of offence of money-laundering. As noticed earlier, the mechanism for proceeding against the property being proceeds of crime predicated in the 2002 Act is a sui generis procedure. No comparison can be drawn between the mechanism regarding prevention, investigation or trial in connection with the scheduled offence governed by the provisions of the 1973 Code. In the scheme of 2002 Act upon identification of existence of property being proceeds of crime, the Authority under this Act is expected to inquire into relevant aspects in relation to such property and take measures as may be necessary and specified in the 2002 Act including to attach the property for being dealt with as per the provisions of the 2002 Act. We have elaborately adverted to the procedure to be followed by the authorities for such attachment of the property being proceeds of crime and the follow-up steps of confiscation upon confirmation of the provisional attachment order by the Adjud....
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....en be governed by the provisions of the 1973 Code - as there are no inconsistent provisions in the 2002 Act in regard to production of the arrested person before the jurisdictional Magistrate within twenty-four hours and also filing of the complaint before the Special Court within the statutory period prescribed in the 1973 Code for filing of police report, if not released on bail before expiry thereof. 457. Suffice it to observe that being a special legislation providing for special mechanism regarding inquiry/investigation of offence of money-laundering, analogy cannot be drawn from the provisions of 1973 Code, in regard to registration of offence of money-laundering and more so being a complaint procedure prescribed under the 2002 Act. Further, the authorities referred to in Section 48 of the 2002 Act alone are competent to file such complaint. It is a different matter that the materials/evidence collected by the same authorities for the purpose of civil action of attachment of proceeds of crime and confiscation thereof may be used to prosecute the person involved in the process or activity connected with the proceeds of crime for offence of money-laundering. Considerin....