AI Drafter 
TaxTMI 
TaxTMI 
2025 (4) TMI 633
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....eni, Taluka Choryasi, Dist Surat, total admeasuring 2,05,249 sq.mtrs, together to with all building and structures thereon and plant and machinery attached to earth or permanently fastened to anything attached to earth in the name of Gujarat Enviro Protection and Infrastructure Ltd. to the extent of Rs. 2,70,58,889/- profit earned during 2010-11 and 2011-12. Facts in Brief 2. The relevant facts briefly are that information was received by the respondent directorate (ED) that a Criminal Complaint No. 4241/2012 dated 4/2/2012 was lodged by the Regional Officer, Gujarat Pollution Control Board (GPCB) before the Chief Judicial Magistrate, Chief Court, Surat alleging that M/s Gujarat Enviro Protection and Infrastructure Ltd. (M/s. GEPIL), Village Gabheni, Taluka Chorayasi, Near GIDC Sachin, Surat had violated the Environment Protection Act, 1986. 3. The villagers of Budhiya Village had, on 22.10.2011, complained to M/s. GPCB that there was a sudden death of seven buffaloes under mysterious circumstances near Unn Creek due to hazardous waste illegally cleared/disposed of into the creek. Following the complaint, the GPCB, during the period 17/11/2011 to 04/12/2011, conducted an i....
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....mental pollution. In doing so, they violated the provisions of Sub-rule (4) of Rule 18 of Hazardous Waste (Management / Handling and Trans boundary Movement) Rules, 2008. They have also violated Section 15 and 16 of Environment Protection Act, 1986. 6. Since the offences under Section 15 read with Section 7 of the Environment Protection Act, 1986 (29 of 1986) constitute scheduled offence under the Prevention of Money Laundering Act, 2002 (PMLA, 2002), the ED, on the receipt of the Criminal Complaint No. 4241/2012, registered an ECIR No.05 dt. 12/2/2013 and initiated investigation under the PMLA, 2002. 7. A statement of Shri. Girish R. Luthra, Director of M/s. GEPIL was recorded on 22/4/2013, 8/7/2013 under Section 50. 8. It was revealed during the investigation that M/s. GEPIL at Gabheni has 796 members (industrial houses) and they were sending hazardous waste for co-processing and the said waste has to go through various chemical processes for it to become fuel for cement industries. M/s. GEPIL at Gabheni plant had all the facilities for subjecting hazardous wastes to various chemical processes and received enormous amounts for treating the hazardous wastes. M/s. GEPIL ha....
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....986. The appellant was engaged in co-processing of hazardous waste. The Appellant received waste from various industries, processed same into fuel, the resultant sludge was incinerated and what still remained went into a pit. On 20.10.2011, villagers of Budhiya village complained of death of 7 buffaloes due to drinking poisonous water. it was alleged that the appellant company had connected its pipes with the Gujarat Industrial Development Corporation pipes. The pipes discharged effluents into the creek and the buffaloes drank water from the creek and died. The appellant contended that they had never connected their pipes to the GIDC pipe and there is no evidence whatsoever to this effect. However, a complaint was filed by the Gujarat Pollution Control Board with the learned Magistrate under section 200 of the Cr. P.C. which is still pending. On the basis of the same, an ECIR dated 12.02.2013 was registered by ED. 14. The company had 2 lakh square metres of land of which 3.26% have been attached as proceeds of crime. It is contended that the land was acquired on 28.08.2002 and 22.07.2004 even before the PMLA came into force. A provisional attachment order was passed on 23.07.201....
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.... 19. The Ld. Counsel for the appellant pointed to Page 262 (Part-III) of the appeal paper book and referred to Para-4 thereof. He stated that it is evident that the Registrar has presumed the Adjudicating Authority's satisfaction and, therefore, the proceedings against the appellant were pre-meditated. The satisfaction has also been recorded in a single, bland statement saying that I am satisfied. He relied on the judgement of the Delhi High Court in N.K. Proteins case (para 4) wherein, the Hon'ble High Court found the satisfaction recorded did not meet the legal requirement. It is argued that in the present case even that much has not been recorded which had been recorded in the case before the Hon'ble Delhi High Court. 20. It was also argued that the properties acquired prior to the alleged criminal activity could not have been attached. The decision of the Hon'ble Punjab and Haryana High Court in the case of Seema Garg 2020 SCC OnLine Punjab & Haryana 738 and the Hon'ble Kerala High Court in Satish Motilal Bidri 2024 SCC OnLine Ker 3410 are relied upon wherein, after reviewing all the existing judicial precedent, it has been held that properties acquired....
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....uisitioned by the court were perused by him the proceedings and he argued that notice was issued by the Ld. AA only after perusing the Complaint filed by the Directorate and the material placed before him as has been mentioned in the note recorded by the Ld. Member of the AA. He also mentioned that in Para 16 onwards of the impugned order passed by the Ld. AA, reasons have been explained at least three places. 28. In response to the contention of the counsel for the appellant that the property was attached as direct proceeds of crime and not as value thereof, the Respondent relied on the decision of the Hon'ble Punjab & Haryana High Court in the case of Dilbag Singh vs. Union of India & Ors. 2024: PHHC:143784-DB, wherein, the Hon'ble High Court after reviewing all the existing judicial precedent, including Seema Garg, Axis Bank, Prakash Industries etc., held that the judgement passed in Seema Garg's case is no longer a good law. This Court has taken this view due to the subsequent interpretation by the Supreme Court (in Vijay Madanlal Choudhary), which has superseded the legal principles established in Seema Garg's case(supra). 29. It was also submitted that at this s....
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....Ors [Special Leave Petition (Criminal) No. 4634 of 2014], and further clarified in the case of Ganpati Dealcom Pvt. Ltd. Civil Appeal No. 5783 of 2022 (order dated 23.08.22) that possession of properties attached under the PMLA, 2002 can only be taken under exceptional circumstances, such as crimes involving terrorist activities, drug cartels or organized criminal activities. As such, I do not find any merit in these contentions of the appellant. 32. The next contention of the appellants is that the property was acquired prior to the period of the alleged offence. The same is not denied on facts by the Ld. counsel for the respondent. However, this would not render the attachment of the properties unlawful under the PMLA, 2002. This issue has already been examined at length by this Appellate Tribunal while deciding the case titled as Sadananda Nayak v. Deputy Director, FPA-PMLA-5612/BBS/2023 (order dated 14.10.2024) wherein, Appellate Tribunal held as follows: "12. The reference of the judgment of the Apex Court in the case of Pavana Dibur (supra) and also of Kerala High Court in the case of Satish Motilal Bidri (supra) has been given. To analyze the issue, we may quote ....
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....f property of equivalent value. The second part applies when the property obtained or derived directly or indirectly out of the criminal activities is not available or vanished and, therefore, to secure the proceeds of equivalent value till completion of trial, it would fall under "the value of any such property" which is commonly taken to be the property of equivalent value. The case in hand falls in the second category of the definition of "proceeds of crime" because proceeds are not available and, therefore, the property of equivalent value is attached. 15. The argument has been made in reference to the judgment of Kerala High Court in the case of Satish Motilal Bidri (supra) and the judgment of Apex Court in Pavana Dibur (supra) to hold that the properties acquired prior to commission of crime would not fall in the definition of "proceeds of crime". We are unable to accept the arguments which may otherwise make second part of the definition of "proceeds of crime" to be redundant. It would be for the reason that if the definition is taken only in two parts leaving the middle part, then it would be difficult for the enforcement agencies to protect the property till compl....
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....s given by the Delhi High Court in the case of Axis Bank (supra). The relevant paras are quoted herein. "106. Among the three kinds of attachable properties mentioned above, the first may be referred to, for sake of convenience, as "tainted property" in as much as there would assumable be evidence to prima facie show that the source of (or consideration for) its acquisition is the product of specified crime, the essence of "money laundering" being its projection as "untainted property" (Section 3). This would include such property as may have been obtained or acquired by using the tainted property as the consideration (directly or indirectly). To illustrate, bribe or illegal gratification received by a public servant in form of money (cash) being undue advantage and dishonestly gained, is tainted property acquired "directly" by a scheduled offence and consequently "proceeds of crime". Any other property acquired using such bribe as consideration is also "proceeds of crime", it having been obtained "indirectly" from a prohibited criminal activity within the meaning of first limb of the definition. 107. In contrast, the second and third kinds of properties mentioned....
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....nce to the judgment in the case of Pavana Dibur (supra) has been given where the Ld. Counsel for the parties did not refer Para 68 of the judgment in the case of Vijay Madanlal Choudhary (supra) decided by three judges of the Apex Court. In fact, elaborate arguments to define "proceeds of crime" on the issue were not raised by the parties after referring to the object of the Act of 2002 which was enacted out of the international convention. The Delhi High Court has discussed the issue elaborately and otherwise if we apply the judgement of Kerala High Court in the case of Satish Motilal Bidri (supra,) it would be making the second limb of the definition of "proceeds of crime" to be redundant. The counsel who appeared before the Kerala High Court did not argue that the definition of "proceeds of crime" has three limbs and unfortunately the view expressed by Delhi High Court in Axis Bank (supra) was not discussed elaborately while it was cited by the counsel. 20. The Ld. Single judge of Kerala High Court did not subscribe the judgment aforesaid, rather applied the judgment of Punjab and Haryana High Court in the case of Seema Garg Vs. Deputy Director, Directorate of Enforceme....
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....1)(u) altogether. The Court further notes that in Seema Garg the learned Judges themselves observed that the phrase value of any such property would not mean and include any property which has no link, direct or indirect, with property derived or obtained from commission of a scheduled offence. The Court observes that Section 2(1)(u) clearly and in unambiguous terms includes not only property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence but also the value of any such property. Seema Garg thus seems to gloss over the statutory imperatives underlying the deployment of the phrase―or the value of any such property and the concept of deemed tainted properties enunciated in Axis Bank. On a plain textual interpretation of Section 2(1)(u) as well as in the backdrop of the amendatory history of that provision, this Court finds itself unable to agree with the line of reasoning adopted in Seema Garg. As held herein before, affirmation of Seema Garg would amount to virtually deleting the phrase ―or the value of any such property from Section 2(1)(u). That would not only violate the well settled tenets of statutory const....
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....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 commission of the predicate offense would stand saved." 21. The issue aforesaid was not raised in the case of Pavana Dibur (supra). The counsel appeared....
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.... directly or indirectly obtained out of the crime has been vanished or siphoned off. Here, the significance would be to the property acquired even prior to commission of crime. It is for the reason that any property acquired subsequent to the commission of crime would be directly or indirectly proceeds of crime and then, it would fall in the first limb of the definition of proceeds of crime. In the second limb, which refers to "the value of any such property" would indicate any other property which was acquired prior to the commission of crime and it would be attached only when the proceeds directly or indirectly obtained or derived out of the criminal activity is not available. It may be on account of siphoning off or vanished by the accused. In those circumstances the property of equivalent value can be attached. The word "the value of any such property" signifies without any embargo that it should be the property purchased after the commission of crime or prior to it rather it would apply in both the eventuality in the given circumstance. Thus, we are not in agreement with the counsel for the appellant who has questioned the attachment in reference to the property acquired prior....
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....h has not been recorded by way of reason to believe as had been recorded in the case before the Hon'ble Delhi High Court. 35. It is pointed out that at the appellant's request, the records of the Adjudicating Authority were called for in this case and a copy of the satisfaction recorded has been placed on record. It was also argued that the reasons to believe are not present in the PAO or the impugned order. Therefore, the PAO and the impugned order are bad in law and were passed without following the provisions of section 5 and 8. 36. First, with regard to the reason to believe to be recorded under Section 5, I have perused the Provisional Attachment Order passed by the Deputy Director of Enforcement which records as below: "An information was received that a criminal complaint No. 4241/2012 dt. 4/2/2012 was lodged by the Regional Officer, Gujarat Pollution Control Board (GPCB) before the Chief Judicial Magistrate, Chief Court, Surat alleging that M/s Gujarat Enviro Protection and Infrastructure Ltd., (M/s. GEPIL in short), Village Gabheni, Taluka Chorayasi, Near GIDC Sachin, Surat incorporated as a co-processor having permission for co-processing of hazardou....
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....nything attached to Earth in the name of Gujarat Enviro Protection and Infrastrucutre limited mentioned at Para 16 above of this order for a period of 180 days (One Hundred and eighty days) and further order that the same shall not be transferred, disposed off, alienated or parted with or otherwise dealt with in any manner whatsoever until or unless specifically permitted to do so by the undersigned. If the properties mentioned above of this order is not attached Immediately, the non- attachment of the same is likely to frustrate further proceedings under this Act. 37. Having perused the above, I do not find any merit in the contention that no reason to believe were recorded by the officer concerned before initiating action under section 5. Insofar as the legal position on the subject is concerned, the Hon'ble Madras High Court, in G. Gopalakrishnan Vs. Deputy Director WP (MD)Nos. 11454, 14860 & 14894 to 14899 of 2018 (Order Dt. 03.01.2019), has held that section 5 nowhere stipulates that there should be communication of reasons in the form of show cause notice before ordering provisional attachment under section 5. The validity period of provisional attachment is only for a per....
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....l land and hence no prejudice whatsoever is caused to defendants. Even otherwise the provisions of Section 71 of the PMLA grants overriding effect to the provisions of this Act. 41. The Ld. Counsel for the respondent relied on the decision of this Appellate Tribunal in JM Financial Asset Reconstruction Company Ltd. FPA-PMLA-3223/MUM/2019 (order dated 26.04.2024) in this regard. 42. I have considered rival submissions with regard to the above issue. As is seen from the facts narrated in the impugned order, the loan against which the subject property was offered as collateral security had already been substantially repaid and was in the process of being repaid regularly. Accordingly, there was every chance of the loan being fully discharged and the property being released from mortgage in the foreseeable future. Furthermore, arguably, the same was being repaid out of the profits of the company which themselves have been taken to be proceeds of crime. The word "immediately" occurring in the second Proviso to Section 5 (1) need not be interpreted to mean in the very next moment. A sufficiently senior level of due diligence has been provided for by the said Proviso by way of appli....