TaxTMI 
TaxTMI 
2025 (1) TMI 149
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....Investigation (CBI), New Delhi for the offences under section 120-B read with Sections 409 and 420 of Indian Penal Code, 1860 and Section 13(2) and Section 13(1)(d) of the Prevention of Corruption Act, 1988. The Enforcement Case Information Report (ECIR) was then recorded by the respondent on 14.04.2012. It was followed by an investigation by the Directorate of Enforcement. The respondent then invoked section 5 of the Act of 2022 to attach the following properties of three appellants which are as under : Details of property Owner of Property Valuation of property as on 02.01.2012 (on the date of FIR) H.No. 11/HIG Block-B, Scheme- 38, Kanpur Anoop Kumar Tandon Rs.73,73,120/- H.No. 05/ HIG Block-B, Scheme- 38, Kanpur Rakesh Kumar Tandon Rs.73,69,920/- H.No. 07/HIG Block-B, Scheme- 38, Kanpur Pradeep Kumar Tandon Rs.73,69,920/-   Total amount Rs.2,21,12,960/- The allegations against the accused is for irregularities in utilization of Central Government funds under the National Rural Health Mission Scheme in the State of Uttar Pradesh during the years 2005 - 2011. 3. In the complaint, it was alleged that from the year 2005 to 201....
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..../s Jain Trading and Shyam Industrial Corporation, M/s Anod Pharma, Anod Plasma apart from M/s Sofgel Capsulation under the control of the appellants. Arguments of the Appellant 6. The Ld. Counsel for the appellants raised many legal and factual issues for challenge to the impugned order and for that they have given the relevant facts pertaining to each appellant in the written arguments which are as under: a. Rakesh Kumar Tandon was appointed as Managing Director of M/s Anod Plasma Spray (P) Ltd. On 22.12.1988 and resigned from the company from 09.11.2015. Thereafter was again appointed as Director on 28.09.2018. The Appellant has shareholding of 17.4% in the said company. (Annexure-4 @ Pg. 168 of the Appeal No. 4447 of 2022). b. Pradeep Kumar Tandon was appointed as Director of M/s Anod Plamla (P) Ltd. On 09.02.1995 and resigned from the company from 16.11.2015. The Appellant was reappointed as Director on 28.09.2018. The Appellant has shareholding of 8.81% in the said Company. (Annexure-4 @ Pg. 168 of the Appeal No. 4448 of 2022). c. Anoop Kumar Tandon was an employee working with State Bank of India from November 1977 till 31.05.2007 whe....
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.... while recording the findings. 9. The last argument of the appellant was in reference to the offences under Section 420 of Indian Penal Code, 1860 and 13(1)(d) of the Prevention of Corruption Act, 1988 which were added in the Act of 2002 in the list of scheduled offence by way of amendment in the year 2009 while alleged crime was committed in the year 2006-07. Thus, the properties in reference to the offence committed prior to the amending Act of 2002 could not have been applied for attachment of property. The prayer was accordingly made to set-aside the impugned order. Arguments of the Counsel for the respondent 10. The Counsel for the respondent contested the appeal on all the grounds raised by the appellant. Elaborate arguments on each issue were made and would be discussed while recording the finding to avoid bulkiness of the order by repeating the same facts. Accordingly, we would deal with each issue raised by the appellant for which we have scanned the record carefully and even perused the judgments cited by the Counsel for the parties. Properties acquired prior to commission of crime could not have been attached 11. The Ld. Counsel for the appellant has given....
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....eed against the latter provided it is being attached as equal to the "value of any such property" or "property equivalent in value held within'" the country or abroad". However, both the italicised categories would be liable to be invoked in cases where the actual tainted property cannot be traced or found out. It is only where the respondents are unable to discover the tainted property that they can take the statutory recourse to move against properties which may fall within the ambit of -value of any such property or -property equivalent in value held within the country or abroad]. To the aforesaid limited extent, properties purchased prior to 01 July 2005 may also become vulnerable and subject to action under the Act. However, enforcement action against such properties would have to satisfy the tests and safeguards as propounded in Axis Bank with the learned Judge observing that in such a situation it would have to be established that the person accused of money laundering had an interest in such property at least till the time that he indulged in the proscribed criminal activity. The learned Judge further observed that bona fide rights acquired by third parties prior to the....
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....ers to the property acquired or derived directly or indirectly out of the criminal activities relating to the scheduled offence. In the first part, all those properties which are acquired directly or indirectly out of criminal activities would be termed to be the proceeds of crime. The properties can be acquired directly or indirectly with the use of proceeds of crime. The use of proceeds directly or indirectly would be relevant part to fall in first part of the definition of 'proceeds of crime'. To clarify the definition, it may be illustrated. Assuming in a case of dacoit, the accused secured the money and it has been used for the purchase of property, then such a property would fall in the definition of 'proceeds of crime' having been obtained out of proceeds of crime. In other case where the property was not acquired or derived by the accused himself but he passed on money out of the crime to another person and he acquired the property, then also it would be considered to be the proceeds of crime to acquire the property. In any case, there should be an element for use of the proceeds directly or indirectly obtained out of the crime and thereby the property would....
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....n of constitutional validity. 16. At this stage, we may refer to Para 68 of the judgment in the case of Vijay Madanlal Choudhary (supra) which is quoted hereunder. "68. It was also urged before us that the attachment of property must be equivalent in value of the proceeds of crime only if the proceeds of crime are situated outside India. This argument, in our opinion, is tenuous. For, the definition of "proceeds of crime" is wide enough to not only refer to the property derived or obtained as a result of criminal activity relating to a scheduled offence, but also of the value of any such property. If the property is taken or held outside the country, even in such a case, the property equivalent in value held within the country or abroad can be proceeded with. The definition of "property" as in Section 2(1)(v) is equally wide enough to encompass the value of the property of proceeds of crime. Such interpretation would further the legislative intent in recovery of the proceeds of crime and vesting it in the Central Government for effective prevention of money-laundering." The perusal of the para quoted above shows that the argument of the appellant that "th....
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....be eventually ordered, however, must be restricted to the value of illicit gains from the crime. For the sake of convenience, the properties covered by the second and third categories may be referred to as "the alternative attachable property" or "deemed tainted property". 17. The judgment of the Delhi High Court makes it clear that the definition of "proceeds of crime" has three limbs and in the second limb the properties of equivalent value to the proceeds obtained out of crime can be attached which may have been acquired prior to the commission of crime but it would be when proceeds of crime has been vanished and is not available. It is sought to achieve the object of the Act of 2002. 18. In the light of judgment of the Apex Court in Vijay Madanlal Choudhary (supra), we are unable to apply the judgment of Kerala High Court in the case of Satish Motilal Bidri (supra). The Ld. counsel did not refer the relevant para of the judgment in the case (supra), rather he referred Para 66 of the judgment of the Apex Court in Vijay Madanlal Choudhary (supra) which permits attachment only of the proceeds of crime. There cannot be any dispute that attachment can be only of th....
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.... definition of proceeds of crime. xx xx xx xx xx xx 79. Regard must also be had to the fact that the legislation itself is dealing with contingencies where proceeds of crime are layered and their origins camouflaged and masked enabling the accused to project or claim it to be untainted property. The Act clearly as does Axis Bank take into consideration a situation where a person who has obtained proceeds of crime by commission of a scheduled offence has managed to ensure that a property directly or indirectly connected to criminal activity is rendered untraceable. It is to confer authority upon the Directorate to proceed further in such a situation that Section 2(1)(u) uses the expression or the value of any such property. The safeguard which stands constructed in Section 2(1)(u) in such a contingency is that in case the Directorate does proceed against any other property, it must be equivalent in value to the illegal pecuniary benefit or gain that may have been obtained as a result of criminal activity. 80. In the considered opinion of this Court to tie the Directorate's power to move forward in this direction only in cases where property is taken or....
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....nce. 81. The Court also takes note of the position that although SLP (Crl) No. 28906/2019 is pending before the Supreme Court against the decision rendered in Axis Bank, the judgement of this Court has not been stayed or placed in abeyance. The interim order of 30 August 2019 passed in the aforesaid Special Leave Petition only requires parties to maintain status quo. Insofar as the judgement of the Punjab and Haryana High Court in Seema Garg is concerned, although SLP (C) No.14713-14715/2020 preferred against the same came to be dismissed, while doing so the Supreme Court recorded that the petition was being rejected in the peculiar facts and circumstances of the case. The dismissal of the aforesaid Special Leave Petition cannot in any case be interpreted or understood as being an affirmation of the view as expressed by the Punjab and Haryana High Court. xx xx xx xx xx xx 105. It would be pertinent to recall that properties which were acquired prior to the enforcement of the Act may not be completely immune from action under the Act in light of what this Court had held in Axis Bank. As was explained by the Court in Axis Bank, the expression proceeds of cr....
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....d in that case none of his properties could be attached to secure the interest of the victim till conclusion of the trial. This would not only frustrate the object of the Act of 2002, but would advance the cause of the accused to promote the crime of money laundering. The Judgment in the case of Vijay Madanlal Chaudhary(supra)is of three judges bench while the judgment in the case of Pavana Dibur (supra) is of two judges bench. The issue has otherwise been dealt with by this Tribunal in the case of FPA-PMLA-2909/CHD/2019 M/s. Besco International FZE v. The Deputy Director Directorate of Enforcement, Chandigarh dated 31.07.2024. The relevant para of the said judgment is quoted hereunder: "It is not that only those properties which have been were derived or obtained directly or indirectly out of the crime can be attached rather in case of non-availability of the property derived or obtained directly or indirectly rather when it is vanished or siphoned off, the attachment can be of any property of equivalent value. It is necessary to clarify that the proceeds of crime would not only include the property derived or obtained directly or indirectly out of the criminal a....
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....s, immediately siphon off or vanish so that it may not remain available for attachment and otherwise the contingency aforesaid would satisfy only the first limb of definition of "proceeds of crime" leaving the second. We are thus unable to accept the argument raised by the appellant so as to make the middle part of the definition of "proceeds of crime" to be redundant. 15. The paras quoted above show a detailed discussion to the interpretation to the definition of "proceeds of crime". The judgment of the Apex Court in the case ofSmt. Pavana Dibbur v. The Directorate Of Enforcement reported in 2023 SCC OnLine SC 1586(supra) has also been considered. However, findings given by three judges Bench of the Apex Court in the Vijay Madanlal Choudhary v. Union of India reported in 2022 SCC OnLine SC 929 (supra) has been relied to give interpretation to the definition. In the light of the above, we find no force in the first argument when the proceeds out of crime was not available with the appellant rather vanished and siphoned off,the property of equivalent value has been attached. The proceeds were siphoned off by diverting it to various group companies and by layering the proceeds. In....
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....ing to confiscation of such proceeds of crime under this Chapter, he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and eighty days from the date of the order, in such manner as may be prescribed : Provided that no such order of attachment shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person authorised to investigate toffence mentioned in that Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or a similar report or complaint has been made or filed under the corresponding law of any other country : Provided further that, notwithstanding anything contained in first proviso, any property of any person may be attached under this section if the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section has reason to believe (the reasons for such belief to be recorded in writing), on the basis of material in his possession, that if such prope....
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.... (iii) On the other hand, the ED in both W.P. Nos. 34238 of 2022 and 34627 of 2022 contends that due to Covid-19 pandemic the provisional attachment of properties could not have been confirmed within 180 days. However, in In re: Limitation (supra) the Apex Court extended the period limitation from 15.03.2020 to 28.02.2022. ED contends that the period from 15.03.2020 to 28.02.2022 shall be excluded from the date of provisional attachment till the date of passing of confirmation order to compute the period of 180 days. (iv) It is relevant to note that the Apex Court in In re: Limitation (supra) took suo moto cognizance of the Covid-19 pandemic situation and extended the period of limitation from 15.03.2020 for the purpose of filing petitions/applications/suits/ appeals/all other proceedings under any general or special law before any Court or Tribunal. The object of such extension was in recognition of the difficulties that might be faced by lawyers/litigants to file their applications physically. The relevant paragraphs of In re: Limitation (supra) are extracted below: 1. This Court has taken suo motu cognizance of the situation arising out of the challenge fa....
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.... of limitation remaining, all persons shall have a limitation period of 90 days from 1-3-2022. In the event the actual balance period of limitation remaining, with effect from 1-3-2022 is greater than 90 days, that longer period shall apply. 5.4. It is further clarified that the period from 15-3-2020 till 28-2-2022 shall also stand excluded in computing the periods prescribed under Sections 23(4) and 29-A of the Arbitration and Conciliation Act, 1996, Section 12-A of the Commercial Courts Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe period(s) of limitation for instituting proceedings, outer limits (within which the court or tribunal can condone delay) and termination of proceedings. (vi) For instance, Section 29A of the Arbitration & Conciliation Act, 1996 provides a time limit of 12 months within which an award has to be passed. By virtue of In re: Limitation, 2022 (supra), the period from 15.03.2020 to 28.02.2022 shall be excluded to compute the period of 12 months under Section 29A of the Arbitration & Conciliation Act, 1996. Similarly, Section 12A(3) of the Commercial Courts Act, ....
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....on in instituting a proceeding. **** 18. Section 5(3) is a clear embargo on the order of attachment continuing to have effect after the expiry of 180 days. Section 5(1) designates the authority and the steps to be taken for proceeding against any person who is in possession of any proceeds of crime. The section is hence concerned with the procedure to be undertaken for provisional attachment of a property subject to the fulfillment of the other conditions in Section 5. A prescribed procedure after the same has been initiated cannot be equated to institution of a suit or filing of a petition/application which is a starting point of litigation for a person who seeks relief under a statute. The 180 days window in Section 5 contemplates an endpoint whereas the Supreme Court in the Suo Motu writ petition sought to protect the starting-point, which was at the risk of being defeated by reason of the pandemic. 19. In other words, what was being protected by the orders of the Supreme Court was the right to remedy, not the right to take away a remedy under a given statute. The respondents before this Court seek to do the latter. The only step taken by the ED is the order of....
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.... the Authority does fail to take requisite steps, the right to relief arises immediately after exhaustion of the 180 days window and once such right is given to a litigant, it cannot be taken away. This Court respectfully disagrees with the views expressed in Vikas WSP Ltd. (supra), Gobindo Das (supra) and Hiren Panchal (supra) in relation to applicability of In re: Limitation (supra). (xviii) According to this Court, the decision in S. Kasi (supra) cannot be relied upon by the Petitioners to contend that In re : Limitation (supra) is not applicable in computing 180 days under Section 5(3) of the PMLA. In S. Kasi (supra), In re: Limitation (supra) was held to be inapplicable to proceedings involving personal liberty of a person where the investigating officer failed to file charge sheet within the prescribed time. The decision in S. Kasi (supra) cannot be extended to PMLA proceedings dealing with confirmation of provisional attachment order within 180 days. (xix) It is true that provisional attachment of property has an effect of potentially depriving a person of his property. However, right to personal liberty and right to property stand on a different f....
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.... property changes hands and title vest in some third party, it would result in civil consequences even to third party. That is certainly avoidable unless it is absolutely necessary in the peculiar facts of a particular case so as to invoke the option available under sub-section (4) of Section 8. 305. Indisputably, statutory Rules have been framed by the Central Government in exercise of powers under Section 73 of the 2002 Act regarding the manner of taking possession of attached or frozen properties confirmed by the Adjudicating Authority in 2013, and also regarding restoration of confiscated property in 2019. Suffice it to observe that direction under Section 8(4) for taking possession of the property in question before a formal order of confiscation is passed merely on the basis of confirmation of provisional attachment order, should be an exception and not a rule. That issue will have to be considered on case-to-case basis. Upon such harmonious construction of the relevant provisions, it is not possible to countenance challenge to the validity of subsection (4) of Section 8 of the 2002 Act. (xxi) Therefore, provisions prescribing timelines and which deal with p....
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....dings. Be that as it may, the fresh order in SMWP No. 3 of 2020 need not be elaborated for the present purpose.] **** 32.2. In fact, in S. Kasi case [S. Kasi v. State, (2021) 12 SCC 1 : 2020 SCC OnLine SC 529] , this Court also noticed that a coordinate Bench of the same High Court had already held [Settu v. State , 2020 SCC OnLine Mad 1026] that the said order dated 23-3-2020 [Cognizance for Extension of Limitation, In re, (2020) 19 SCC 10 : (2021) 3 SCC (Cri) 801] did not cover the offences for which Section 167CrPC was applicable but, in the order [S. Kasi v. State, 2020 SCC OnLine Mad 1244] impugned, the other learned Single Judge of the same High Court took a view contrary to the earlier decision of the coordinate Bench; and that was found to be entirely impermissible. In any case, the said decision, concerning the matter of personal liberty referable to Article 21 of the Constitution of India and then, relating to the proceedings to be undertaken by an investigating officer, cannot be applied to the present case relating to the matter of filing written statement by the defendant in a civil suit. (xxiii) Further, a Division Bench of Madras High Court....
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....cation of In re: Limitation (supra). Therefore, where the ED has been diligent in provisionally attaching the property and filing the original complaint within 30 days under Section 5 of the PMLA, prejudice cannot be caused to it by not excluding the period from 15.03.2020 to 28.02.2022. One litigant's interests cannot be protected at the cost of another. This Court would further like to stress that the provisionally attached properties can still be enjoyed under Section 5(4) of the PMLA. (xxvi) The reasoning in Hiren Panchal (supra) that what was protected under In re: Limitation (supra) was institution of proceedings and not proceedings which were already initiated cannot be accepted in light of the decision in Prakash Corporates (supra) which held that In re: Limitation (supra) cannot be narrowly applied. xxvii) Lastly, the decisions in S. Kasi (supra),Vikas WSP Ltd. (supra), Gobindo Das (supra) and Hiren Panchal (supra) cannot be applied for the simple reason that In re: Limitation (supra) was further clarified in In re: Limitation 2022 (supra) wherein the Court at Para 5.4 (extracted supra) held that where time period is prescribed for termination of proc....
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....overnment and order passed by the Apex Court. Thus taking into consideration the aforesaid we are unable to accept the first argument raised by the Ld. Counsel for the Appellant because of the exclusion of the period during COVID-19, the charge-sheet was filed within 365 days as stipulated in Section 8(3) of the Act of 2002". 19. The perusal of the judgment reveals not only an elaborate discussion on the issue raised by the appellant but consideration of the judgments of different High Courts taken a view going contrary to the judgment of the Supreme Court in the Suo Moto petition (supra) and Prakash Corporation (supra). 20. In the light of the detailed judgment of the Telangana High Court in the case (supra), we do not find any substance in the argument to seek lapse of the provisional attachment order when the intervening period was suffered due to Covid-19 and the period from 15.03.2020 till 28.02.2022 has been eliminated by the Apex Court for termination of proceedings. What would prevail, is the judgment of the Supreme Court and accordingly we are unable to accept even second ground for challenge to the order. No connection between properties and proceeds of crime. ....