TaxTMI 
TaxTMI 
2025 (8) TMI 806
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.... Act, 1988 against P. Dhanraj, the then Branch Manager, Syndicate Bank, NPT, Pollachi Branch (appellant herein) and many others based on the complaint filed by Shri Sivaraman, Regional Manager, Syndicate Bank, Coimbatore. It was alleged that the appellant along with R.M. Subramanian entered into criminal conspiracy in clearing cash credit proposals of 35 borrowers by accepting fake documents which ultimately caused wrongful loss to the bank to the tune of Rs.6.35 Crores. All the borrowers availed cash credit limits by producing bogus financial statements prepared by R.M. Subramanian, who is said to be an Auditor. The bogus documents were prepared by the said Auditor in the name of three different firms viz. Subbu & Co., Kumar & Co. and V.S. Mohan & Co. Thus, he acted as middleman/agent in securing the credit facilities and submitted proposals with Udyog Adhar Number to the bank. The E-mail ID therein was belonging to R.M. Subramanian himself. 3. It was found that the loan was not utilized for the purpose it was availed for and, in fact, no coir units were available at the address given by those 35 borrowers. The bank was made to believe that the borrowers have availed loan for b....
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....ounsel for the appellant: 6. The learned counsel for the appellant submitted that there is no evidence or material to show involvement of the appellant for commission of the crime. In fact, Syndicate Bank organized camps for the disbursement of loans to entrepreneurs. The camp was conducted by the Regional Office where as many as 620 loan applications were sanctioned for grant of loan. The sanction of the loan was not totally vested with the appellant nor he was conferred with the absolute power to sanction the loan. Out of 620 loans disbursed by the bank, 35 borrowers committed default resulting in initiation of proceedings against them. The appellant has been implicated in the case without any reason and even evidence against him. In view of the above, the impugned order deserves to be set aside 7. The learned counsel for the appellant further submitted that the appellant worked in the Branch concern till 18.06.2016 having been transferred to other place and, therefore, any withdrawal of the amount out of the two leafs of the cheque taken from the borrower subsequent to the transfer of the appellant cannot be attributed to him. The allegation against the accused is that imm....
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....w the loan. They were not even running the Coir Industries and were not the members of the Association. The appellant failed to undertake due diligence before sanctioning the loan to 35 borrowers who remained defaulter. It was found that based on the fake documents, the loan was sanctioned. The investigation revealed that from the borrowers remained in default, two cheque leafs were taken and encashed on the date of disbursement of the loan amount. The appellant being Bank Manager was having duty not only to undertake due diligence and to act as per the norms of the Bank for sanctioning the loan but to keep cheques taken from the borrowers to be safe. He in connivance with S.M. Subramanian and others accepted fake and forged documents for sanction of loan to the firms which were not having any business in the Coir Industry and thereby the loan was sanctioned based on fake documents. That was only one part of the allegation. 12. It is submitted that the appellant remained the instrument to take two cheques from the borrower on the sanction of the loan and with the disbursement, those cheques were encashed on the same date and thereby aforesaid is to be taken nothing but bribe mon....
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....ncashed on the disbursement of the loan amount. The appellant being the Branch Manager of the bank was under an obligation to supervise and have effective monitoring of the process. His failure resulted in loss to the Bank to the tune of Rs.6.35 Crores and as per the evidence, it is revealed that the encashment of the cheques was part of the crime by the appellant and, therefore, he remained beneficiary of Rs.2.3 Crores out of the total sum of Rs. 6.35 Crores. The learned counsel for the appellant submitted that many cheques were encashed subsequent to the transfer of the appellant. It is, however, admitted that order of transfer and relieving of the appellant is not on record but assuming that appellant was not a Branch Manager of the bank concern after June, 2016, the fact remains that the majority of the cheques were encashed in the month of June, 2016 or prior to it. The few cheques were encashed subsequently but appellant cannot seek innocence in regard to it being the Bank Manager and was under obligation for keeping those cheques safe. It may have been encashed subsequent to his transfer but it would not absolve the appellant from the serious allegations against him. The sta....
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....ched by them. 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 the definition of 'proceeds of crime' given under Section 2(1) (u) of the Act of 2002, which is quoted thus.: "(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;" 13. The perusal of the definition aforesaid shows three limbs. In between every limb word "or" has been used to divide the definition into three parts. The first part refers to ....
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....he 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 completion of the crime to save the victim from crime committed by the accused. It would be for the reason that if the property acquired prior to commission of crime would not fall in the definition of "proceeds of crime", then the accused would commit the crime and immediately proceeds would be siphoned off or vanished so that it may not remain available for attachment. In fact, the word "the value of any such property" was inserted by the legislature to attach the property of equivalent value, if the proceeds out of commission of crime is not available or vanished. If the second limb of the definition is made dependent on the first limb, it would be literally re- writing the provision or making it redundant to a great extent and for this, jurisdiction does not lie with any court of law which includes even the Constitutional Court. They can declare any provision to be unconstitutional but till then there remains presumption of constitutional va....
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.... 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 above would ordinarily be "untainted property" that may have been acquired by the suspect legitimately without any connection with criminal activity or its result. The same, however, are intended to fall in the net because their owner is involved in the proscribed criminality and the tainted assets held by him are not traceable, or cannot be reached, or those found are not sufficient to fully account for the pecuniary advantage thereby gained. This is why for such untainted properties (held in India or abroad) to be taken away, the rider put by law insists on equivalence in value. From this perspective, it is essential that, before the order of attachment is confirmed, there must be some assessment (even if tentative one) as to the value of wrongful gain made by the specified criminal activity unless it be not possible to do so by such stage, given the peculiar features or complexities of the case. The confiscation to be eventually ordered....
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.... 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 Enforcement, reported in 2020 SCC OnLine Punjab & Haryana 738. With due respect, we are unable to apply the judgment of Kerala High Court going against Para 68 of the judgment of the Apex Court in the case of Vijay Madanlal Choudhary (supra). The judgment of Seema Garg (Supra) has been dealt with by the Delhi High Court in the case of Prakash Industries Ltd. v. Directorate of Enforcement reported in 2022 SCC OnLine Del 2087. The relevant paras are quoted hereunder: "76. Seema Garg principally holds that the phrase value of any such property and property equivalent in value held within the country or abroad cannot be ascribed the same meaning and effect. The learned Judges comprising the Division Bench then proceeded to hold that even if the intent of the legislature was to include any property in the hands of a person within the ambit of the expression proceeds of crime‖, there would be no need to create three limbs of definition of p....
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.... Seema Garg. As held hereinbefore, 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 construction but would clearly amount to the Court rewriting the provision itself in a manner that it stands deprived of vital and purposive content. The Court further notes that Axis Bank had enunciated important safeguards which would apply in respect of third-party interests in deemed tainted property. Those caveats duly secure and protect bona fide third-party interests created for valid consideration. This Court, thus, reaffirms those defences as were culled out in Axis Bank. The Court thus reiterates the interpretation accorded to Section 2(1)(u) by this Court in the aforesaid decision. Consequently, and for all the aforesaid reasons this Court finds itself unable to agree with the principles as laid down in Seema Garg as well as the subsequent decisions rendered by the Andhra Pradesh High Court in Kumar Pappu Singh Vs. Union of India and the Patna High Court in HDFC Bank Limited Vs Government of India, Ministry of Finance. 81. The Cour....
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....her 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 therein did not elaborately argue the issue by referring to the definition of "proceeds of crime" having three limbs to give meaning to each limb for the interpretation of the definition of the "proceeds of crime". The reference of Para 68 of the judgment of three judges Bench of the Apex Court in the case of Vijay Madanlal Choudhary (supra) was not cited and thus counsel for the respondent submitted that the judgment in the case of Pavana Dibur (supra) does not propound ratio on definition of "proceeds of crime" and, therefore, direction for the property acquired prior to commission crime is to be taken on facts of that case. 22. It has already been clarified by us that if the definition of "proceeds of crime" is given interpretation by dividing it into two parts or by taking only two limbs, then it would be easy for the accused to siphon off or vanish the proceeds immediately after the commission of scheduled offence and in that case none ....
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....rime 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 to commission of crime. We are not going even further that the properties have nexus with the proceeds out of the crime but even in given circumstances and scenario that the property was acquired prior to commission of crime then, also under certain circumstances, it can be attached for "the value of any such property." 23. At this stage, it is reiterated that any other interpretation other than the one taken by Delhi High Court in the cases of Axis Bank (supra) and Prakash Industries (supra) for the definition of "proceeds of crime" would defeat the object of the Act of 2002. It is more especially when the arguments raised by the appellant that the property acquired prior to the commission of crime would not fall in the definition of "proceeds of crime". In that case, the task of the accused would become very easy to first commit the scheduled offence and after obtaining or deriving the property out of the criminal activities, immediately s....