TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 1274
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....ns 120-B read with section 406 & 420 of the erstwhile Indian Penal Code, 1860 and sections 13(2) read with sections 13(1)(d) of the Prevention of Corruption Act, 1988 against one M/s Associate High Pressure Technologies Pvt. Ltd. (M/s AHPTPL), various individuals associated with the company, unknown public servants and others for cheating the Union Bank of India, Byculla Branch, Mumbai and fraudulently causing wrongful loss to the bank to the tune of approximately Rs. 149.89 crore (including interest). After completing the investigation the CBI, SC-II, New Delhi filed a charge sheet dated 23.01.2023 before the Ld. ACJM (CBI), Ahmedabad, Gujarat against the company and nine others. 3. Since, the FIR disclosed offences under sections 120-B read with 420 of IPC and 13(2) read with 13(1)(d) of the P.C. Act which constitute scheduled offences under the PMLA, an ECIR (ECIR/28/HIU/2021 dated 17.12.2021) was registered and an investigation under the PMLA was conducted by the ED which resulted in the passing of Provisional Attachment Order (PAO) No. 01/2024 dated 05.01.2024. An Original Complaint (OC) having been filed before the Ld. AA as a result of the passing of the PAO, the Ld. AA c....
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....declaration" received in the form of an email dated 10 September 2023 from Mr. Yahya Darvesh, the son of Mohamed Farouk Suleman Darvesh, one of the persons against whom the FIR was filed, and who has since been charge-sheeted by the CBI as well as arrayed as an accused in the prosecution complaint filed by the Respondent Directorate. 8. It is contended that the Respondent has relied on the said unregistered and fabricated "declaration" and has erroneously attached 33% share of the attached property in the names of Mohamed Farouk Suleman Darvesh and Manoharlal Satramdas Agicha, believing it to be co-owned by both of them, and the same has been affirmed by the impugned order prayed by the Ld. AA. In this regard, it is submitted that the said declaration does not confer any title or interest to other individuals mentioned therein. Title can only be transferred by way of a deed of conveyance as per Section 54 of the Transfer of Property Act, 18822. Further, the Impugned Order states that: "Further, the Complainant relied on the declaration of Deceased Mr. Ashok Agicha. The Adjudicating Authority is not appropriate forum to decide the title of the attached property. At this ....
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....ala at Ernakulam in Davy Varghese v. Enforcement Directorate, 2024 SCC OnLine Ker 7343 wherein the Hon'ble High Court clarified the position upheld by the Hon'ble Supreme Court in Pavana Dibbur (supra). The following excerpt from the Hon'ble High Court's judgement in Davy Varghese (supra) is cited: "25. Apart from the above, the decision in Vijay Madanlal Choudhary's case (supra) dealt with, as is observed in the initial part of the said judgment itself, only about the challenge to the relevant provisions of the PML Act, and did not deal with facts and issues. However, in Pavana Dibbur's case (supra), the Supreme Court specifically dealt with the question regarding the attachment of properties acquired prior to the commission of the predicate offence. Thus, on a combined reading of the decisions in Vijay Madanial Choudhary's case, (supra) and Pavana Dibbur's case (supra), it is evident that the immovable property acquired by the petitioners prior to the commission of the predicate offence cannot be attached under section 5 of the PML Act, unless the proceeds of crime were taken out of the country" 13. It is next contended that the Respond....
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....f the money transferred and concealed in successive stages of the transactions, which the Respondent in the present case has failed to perform. The Respondent has miserably failed to draw any connection with the alleged proceeds of crime and acquisition of the attached property. The impugned order has, therefore, incorrectly affirmed the Respondent's reliance on an unregistered and fabricated declaration to attach the Appellant's share in the attached property. 15. It is also contended that the Respondent has not submitted the valuation report upon which it has relied. Although the PAO cites and relies upon a purported valuation report pertaining to the attached property prepared by M/s AR Induru Sainani on June 2012 and submitted to Union Bank of India, the Respondent has failed to produce the said valuation report before the Ld. AA. A plain reading of the list of relied upon documents /material filed by the Respondent before the Ld. AA indicates that the purported valuation report is conspicuously absent. 16. On the above grounds, it is prayed by the appellants that the attachment order concerning the 33% share of the appellants in the subject property be set aside ....
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.... with the proceeds of crime. 23. As regards the reason to believe, reliance is placed on the judgment of the Hon'ble Supreme Court in CIT v. Rajesh Jhaveri Stock Brokers (2008) 14 SCC 208 wherein it was clarified that "reason to believe" means cause or justification, not final ascertainment by legal evidence. The standard is substantially probable cause, not proof beyond reasonable doubt. 24. Based on the above contentions, the respondent asserts that there is no merit in appeal. The appellant has failed to establish any legal infirmity in the attachment orders. The provisional attachment and its confirmation are in strict compliance with PMLA provisions and established legal precedents. It is also submitted that allowing the appeal would defeat the very object of PMLA and encourage economic offenders to use benami arrangements to escape consequences of their criminal activities. Analysis and findings 25. I have given careful consideration to the material on record and the rival contentions of the parties. It is not in dispute in the present case that the appellants herein are neither accused in the scheduled offence nor in the offence of money laundering. It is a f....
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....tribunal when the matter of ownership of the subject property is sub-judice before the appropriate civil court. Furthermore, the legal position is well-settled that mere attachment of property does not alter the position with regard to the ownership or even possession or user of the properties which are the subject matter of such attachment. Attachment of property is merely a balancing arrangement to secure the interest of the person as also ensure that the proceeds of crime remain available to be dealt with in the manner provided by the Act. Thus, at this stage when the right, title and interest of the appellants in the subject property remains to be established before the competent court, the balance of interests also lies in favour of continued attachment of the subject properties. The same by itself would not upset the interest, if any, of the appellants. 30. Another issue raised on behalf of the appellants, relying on the judgment of the Hon'ble Supreme Court in Pavana Dibbur and the Hon'ble Kerala High Court in Davy Varghese is regarding the fact that the property was acquired prior to the period of the alleged scheduled offence. This issue has been discussed at great leng....
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....le dealing with the issue raised by the appellant, rather this Tribunal has given a detailed judgment on the issue after discussing the judgment of the Punjab & Haryana High Court in the case of Seema Garg (supra) and of the Supreme Court in the case of Pavana Dibbur (supra). It was after giving reference of the judgment of the Delhi High Court in the case of Prakash Industries Ltd. (supra) where the judgment of the Punjab and Haryana High Court in the case of Seema Garg (supra) was not accepted for the reason that despite the definition of proceeds of crime having three parts/limbs and even analyzed by the Punjab and Haryana High Court in the case of Seema Garg (supra), the order was passed treating only two limbs/parts of the definition of proceeds of crime. This Tribunal has even discussed the case of Pavana Dibbur (supra) to analyze the issue. The reference of the judgment in the case of Vijay Madanlal Choudhary (supra) was given to indicate that in the said judgment, three parts/limbs of the definition of proceeds of crime have been analyzed and out of which middle part is relevant and discussed by this Tribunal in the case of Sadananda Nayak Vs. Directorate of Enforcement, Bh....
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....nder: "8. We have considered the rival submissions raised by the counsel for both the parties and scanned the record carefully. 9. It is not in dispute that an FIR was registered for commission of the scheduled offence. It was followed by recording of the ECIR. The respondent initially frozen the bank accounts of the appellant and his sons, which was followed by the provisional attachment of the properties vide order dated 27.07.2020. The Provisional Attachment Order has been confirmed by the Adjudicating Authority finding a case of money laundering. 10. The Ld. Counsel for the appellant did not raise argument in reference to registration of the FIR and recording of the ECIR, followed by investigation where the 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....
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....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 have nexus with the crime. 14. In second part "the value of any such property" the definition aforesaid starts with "or" after the first part referred and discussed in the para above. The second part of the definition is commonly considered to be attachment of 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 pr....
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....r effective prevention of money laundering." The perusal of the para quoted above shows that the argument of the appellant that "the value of any such property" would be only when the proceeds have been taken out of India. The argument aforesaid was not accepted and it simplifies that the definition of "proceeds of crime" has three limbs and elaborate judgment to define the "proceeds of crime" was 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 gai....
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....udhary (supra) which permits attachment only of the proceeds of crime. There cannot be any dispute that attachment can be only of the proceeds of crime but what would fall in the definition of "proceeds of crime" and clarified in Para 68 of the same judgment has not been taken into consideration whereas judgement of the Apex Court on the issue is binding on the High Court. 19. The reference 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....
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....Court to tie the Directorate's power to move forward in this direction only in cases where property is taken or held outside the country would not only do violence to the plain language of Section 2(1)(u), it would clearly whittle down the scope and intent of the definition itself. It would essentially amount to erasing the expression value of any such property as appearing in Section 2(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)....
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....Court had held in Axis Bank. As was explained by the Court in Axis Bank, the expression proceeds of crime envisage both ―tainted property as well as ―untainted property with it being permissible to proceed 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 mon....
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.... proceeds of crime would not only include the property derived or obtained directly or indirectly out of the criminal activity relating to the scheduled offence but any other property of equivalent value. The word "or" has been placed before "the value of any such property" and is of great significance. Any property of equivalent value can be attached when the proceeds 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. Th....
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....Supreme Court relevant to the issue, we do not find that even if the proceeds of crime has been vanished and is not available with the person accused, properties of equivalent value cannot be attached. 17. The facts of this case otherwise shows that the respondents have quantified the proceeds of crime to the tune of Rs. 6,13,74,440/- and out of which the appellant remained recipient of Rs. 40,00,000/-. Since the amount aforesaid has vanished and was not available with the appellant, the property worth of Rs. 16,60,000/- was provisionally attached. The property aforesaid was not purchased by the appellant prior to the scheduled offence, rather during the period of scheduled offence itself. Thus, finding no merit in the only issue raised by the appellant, we dismiss the appeal. 31. In light of the above position expounded by this Appellate Tribunal the argument that the property could not have been attached since it was acquired prior to the period of commission of the alleged scheduled offence, is hereby rejected. 32. As regards, the argument that no nexus between the attached property and the alleged proceeds of crime has been established, the same holds no water as....