AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 1408
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Scheduled Castes(SC) and Scheduled Tribes (ST) students by self-financing institutes. The FIR aforesaid was registered for offences under Section 420, 120-B and 408 of Indian Penal Code, 1860. A charge-sheet thereupon was filed on 01.06.2019 finding a case against the accused. 3. It was found that Phonics Group of Institutions fraudulently received a significant amount of scholarship funds in the name of SC/ST students from the Government of Uttarakhand for the period between 2011 to 2017. The scholarship amount was disbursed by the Government for the benefit of SC/ST students but it was not distributed to SC/ST students and accordingly could not reach to the intended beneficiaries. It was found that institution had falsely fulfilled all the formalities to obtain scholarship under the SC/ST Scholarship Scheme. The embezzlement and siphoned of funds by Phonics Group of Institutions through its Chairman was to be a sum of Rs. 24,50,17,900/-. It was nothing but a loss to the public exchequer resulting in wrongful gain to the accused making out a case of money-laundering and accordingly ECIR was recorded on 13.03.2020. 4. It was found that Phonics Group of Institutions located i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....de to set-aside the order. 7. Ld. Counsel for the appellant, further, submitted that the properties attached in the hands of the appellant was purchased prior to the proceeds of crime and thus it could not have been considered to be proceeds of crime. Thus, for the aforesaid reason also, the impugned order deserves to be set- aside. 8. It was, further, submitted that the proceeds of crime in the hands of the appellant is considered to be Rs. 5,61,85,590/- whereas the properties under attachment is of the value of Rs. 7,78,55,377/-. The attachment of the properties over and above the proceeds of crime is illegal. Thus, on the aforesaid ground, the impugned order deserves to be set-aside. 9. Ld. Counsel for the appellant at the stage submitted that the matter may not be remanded back to the Adjudication Authority as no such express power exists with this Tribunal. It may, otherwise, result in giving fresh limitation to the Adjudicating Authority to pass an order on the issues raised by the appellant. Since the Ld. Counsel for the appellant has shown reservation on remand of the case and, otherwise, I do find that the Adjudicating Authority has made consideration of the case ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arguments of the appellant to avoid repetition of one and same facts and for sake of brevity. Findings of the Tribunal: 12. The facts pertaining to lodging of FIR against the Phonics Group of Institutions and Seth Bimal Prasad Jain Educational Trust of which the appellant was the Chairman has been given. The scholarship distributed by the Government for SC/ST students was fraudulently withdrawn in cash without its payment to the students. The total amount of proceeds of crime was taken to be Rs. 5,61,85,590/-. 13. Ld. Counsel for the appellant did not raise any argument on the allegation made against the Phonics Group of Institutions and Seth Bimal Prasad Jain Educational Trust and even against the appellant. At the outset, Ld. Counsel for the appellant submitted that the impugned order has been passed in regard to the case of Amrit Group of Colleges and not of the appellant and therefore the issue raised by the appellant before the Adjudicating Authority remain unaddressed. 14. I have perused the order and find that the Adjudicating Authority has made consideration of the case of other educational institutions than of the appellant, though in the opening paras, fact pe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he role of the appellant for commission of crime has been found. The only argument raised was to challenge the attachment of three properties out of four. However, no argument was raised for the property acquired subsequent to the commission of crime i.e., fourth Property. 11. It was submitted that the properties acquired prior to the commission of crime had no nexus with the crime and thus could not have been attached. It was not obtained or derived directly or indirectly out of criminal activities relating to the scheduled offence. The respondent could not show nexus of three properties with the crime out of four attached 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 wher....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h 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 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cie 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 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 no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es 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 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 cave....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 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 c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 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 a....