TaxTMI 
TaxTMI 
2025 (7) TMI 1826
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the case: 2. It is a case where an FIR was registered based on the complaint of Shri Pankaj Ramnaresh Saraf, Director of M/s Vostok Far East Securities Pvt. Ltd., Mumbai. It was alleged that the company had received payment against trader's contracts offered by M/s National Spot Exchange Limited ( in short "NSEL") for various commodities. The company was cheated by NSEL by giving false impression of being a proper spot exchange with correct risk management systems in order to induce him to trade on the spot exchange. It was, further, alleged that even certified warehouses of NSEL lacked capacity and some of them had no stock. Thus, genuine investors were defrauded for investment by way of serious misappropriation. The NSEL allowed trading on commodities by sellers, without ensuring goods of appropriate quantity and quality stored in the exchange controller warehouses, which resulted in thousands of investors to trade in non-existent goods. The accused persons hatched a criminal conspiracy to defraud the investors, induced them to trade on the platform of NSEL created forged documents like bogus warehouse receipts, falsified the accounts and thereby committed criminal breach of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Aastha Group was made to the companies belonging to the appellant. The company alleged to be belonging to the appellant are M/s Vihang Enterprises and M/s Vihang Infrastructure Limited. It was disclosed in the Prosecution Complaint indicating that Aastha Group of Companies had diverted the proceeds of crime received from NSEL to entities of Vihang group controlled by the appellant. However, while filing the 5th Prosecution Complaint, the appellant was not named as an accused, yet provisional attachment of the property has been confirmed. It is without a Prosecution Complaint against the appellant, which was otherwise required to be filed within 365 days of the date of the order passed by the Adjudicating Authority. It is even without an order for confiscation of property and thus the impugned orders deserves to be set-aside. The properties of the appellant cannot be kept under attachment for an indefinite period without an order of confiscation. Ld. Counsel for the appellant made reference of Section 5 and 8 of the Act of 2002 to make out her case and to hold that attachment of the properties is not sustainable in the light of the facts given above. 8. Ld. Counsel for the appel....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....14.50 Crores was made from the account of M/s Aastha Alloy Steel Private Limited. The payment of Rs.7.24 Crores was made by M/s Aastha Minmet (India) Pvt. Ltd.. The appellant and his family members were controlling Vihang Group of industries and accordingly, to protect the amount of proceeds of crime came to Vihang Group of Company, the properties of the equivalent value of Rs.11.35 Crores have been attached. 11. Ld. Counsel for the respondent then referred to specific role of M/s Vihang Enterprises and M/s Vihang Infrastructure Limited controlled by the appellant and his family members to be beneficiary of the proceeds of crime totaling of Rs.11.35 Crores. It was siphoned off by Aastha Group and therefore there is no illegality in the attachment of the properties belonging to the appellant being the beneficiary on transfer of proceeds of crime to his companies. Ld. Counsel for the respondent even contested the legal issue raised by the appellant which would be dealt with while recording the findings for the sake of brevity and accordingly I may now record my findings in reference to the issues raised by the appellant. Findings of the Tribunal 12. The fact in regard to NS....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er country: Provided further that, notwithstanding anything contained in 1 [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 property involved in money- laundering is not attached immediately under this Chapter, the non-attachment of the property is likely to frustrate any proceeding under this Act.] [Provided also that for the purposes of computing the period of one hundred and eighty days, the period during which the proceedings under this section is stayed by the High Court, shall be excluded and a further period not exceeding thirty days from the date 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, along with the material in his possession, referred to in that sub-section, to the Adjudicatin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a) considering the reply, if any, to the notice issued under sub-section (1); (b) hearing the aggrieved person and the Director or any other officer authorised by him in this behalf; and (c) taking into account all relevant materials placed on record before him, by an order, record a finding whether all or any of the properties referred to in the notice issued under subsection (1) are involved in money-laundering: Provided that if the property is claimed by a person, other than a person to whom the notice had been issued, such person shall also be given an opportunity of being heard to prove that the property is not involved in money- laundering. (3) Where the Adjudicating Authority decides under sub- section (2) that any property is involved in money- laundering, he shall, by an order in writing, confirm the attachment of the property made under subsection (1) of section 5 or retention of property or 3 [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 1 [investigation for a ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pass appropriate orders regarding confiscation or release of the property, as the case may be, involved in the offence of money-laundering after having regard to the material before it.] (8) Where a property stands confiscated to the Central Government under sub-section (5), the Special Court, in such manner as may be prescribed, may also direct the Central Government to restore such confiscated property or part thereof of a claimant with a legitimate interest in the property, who may have suffered a quantifiable loss as a result of the offence of money laundering: Provided that the Special Court shall not consider such claim unless it is satisfied that the claimant has acted in good faith and has suffered the loss despite having taken all reasonable precautions and is not involved in the offence of money laundering:] 1 [Provided further that the Special Court may, if it thinks fit, consider the claim of the claimant for the purposes of restoration of such properties during the trial of the case in such manner as may be prescribed.] 13. The Provision of Section 5(1) of the Act of 2002 would reveal that the Director or any other officer not below the rank of Deputy Direc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aforesaid, in this backdrop the amendment Act 2 of 2013 came into being. Considering the purport of the amended provisions and the experience of implementing/enforcement agencies, further changes became necessary to strengthen the mechanism regarding prevention of money- laundering. It is not right in assuming that the attachment of property (provisional) under the second proviso, as amended, has no link with the scheduled offence. Inasmuch as section 5(1) envisages that such an action can be initiated only on the basis of material in possession of the authorised officer indicative of any person being in possession of proceeds of crime. The precondition for being proceeds of crime is that the property has been derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence. The sweep of section 5(1) is not limited to the accused named in the criminal activity relating to a scheduled offence. It would apply to any person (not necessarily being accused in the scheduled offence), if he is involved in any process or activity connected with the proceeds of crime. Such a person besides facing the consequence of provisional attac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....used. The investigation is conducted against the accused and not against the person even if not implicated, though, property in the hands of such person, not implicated as an accused, is permissible for attachment, if it is falling under the definition of "proceeds of crime". It is, otherwise, settled law that investigation followed by proceedings remains against the accused and not against the third person. 18. Ld. Counsel for the appellant then submitted about confiscation of the property. The argument was made in ignorance of Section 8(5) and (8) of the Act of 2002. The confiscation of the property is made on the conclusion of trial for the offence under the Act of 2002 when the Special Court finds that the offence of money laundering has been committed. It is authorised to pass an order that such property involving in money laundering or which has been used for commission of the offence of money-laundering shall stand confiscated to the Central Government. In the instant case trial has not been completed as admitted by the Counsel, thus, question of any order for confiscation of the property does not arise at this stage. It may, however, be clarified that confiscation of the....