TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 1029
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....ARI AND SHRI GOPAL CHANDRA MISHRA For the Appellant(s) : Mr. K. M. Suresh Chandran, Advocate For the Respondent(s) : Ms. Nattasha Garg, Advocate, Ms. Shrishty Singh, Advocate ORDER By this batch of appeals under Section 26 of the Prevention of Money Laundering Act, 2002 (in short "the Act of 2002"), a challenge has been made to the order dated 08.04.2024 confirming the Provisional Attachment Order ("PAO") dated 10.11.2023 passed by the Deputy Director, Enforcement of Directorate. Brief facts of the case: 2. The matter pertains to Pulpally Service Cooperative Bank (in short "the Cooperative Bank") situated in Wayanad, registered under the Kerala Cooperative Society Act, 1969. The Cooperative Bank faced allegation of irregularities and misappropriation in sanctioning various loans between the year 2015 and 2017. It was followed by an inspection by the Cooperative Department of the Kerala Government. The FIR was then lodged by the Vigilance and Anti-Corruption Bureau, Wayanad on 05.08.2019. The FIR implicated the President of the Cooperative Bank as well as the Directors. After the investigation in the matter, a charge-sheet was filed by the Deputy Superintendent of ....
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....me time the properties acquired prior to the commission of crime. 6. Ld. Counsel for the appellants did not raise any other argument than referred above despite an opportunity, rather, fairly admitted that trial is pending and finding therein would be recorded after the trial and thereof order would remain subject to final outcome of the Trial. Thus, Ld. Counsel for the appellants concluded his arguments with the aforesaid despite an opportunity to raise any other issue. Arguments of the Ld. Counsel for the respondent: 7. Ld. Counsel for the respondent contested the appeals on factual and legal issues raised by the appellants. Elaborate arguments were made and would be dealt with while recording finding in reference to the arguments of the Ld. Counsel for the appellants. It is to void repetition of one and the same facts and for the sake of brevity. Findings of the Tribunal: 8. [The brief facts about the registration of the FIR has been given in the opening paras involving a sum of Rs. 5.62 Crore towards proceeds of crime. The allegation against the accused is for extension of loans with over valuation. 33 loan amounts were identified for the aforesaid and are as und....
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....nocence of the accused in commission of crime. The only argument was in reference to provisional attachment of the property despite not being directly or indirectly acquired out of proceeds of crime. We may give reference of the properties under attachment in the hands of the different appellants with the description as to whether it was attached taken it to be direct proceeds of crime or for equivalent value to the proceeds. The statement of aforesaid is quoted hereunder for ready reference: S. No. Property details/ reference no in the OC Owner and defendant no. Date of acquisition Whether attachment based on direct proceeds of crime Whether attachment is as equivalent value of proceeds of crime Value of property 1. 10 cents in pulpally Sajeevan K 16/02/2016 Direct PoC 4,20,600/- 38.3 cents in Pulpally 06/04/2016 2. 1 acre 35 cents land and House at Pulpally Tyagarajan, F/o Sajeevan K T 29/9/2004 Direct PoC 2,02,85,000/- 3. 20.02 cents in Pulpally AthulyaSajeevan D/o Sajeevan KT 04/03/2023 Direct PoC 4,96,000/- 15 cents in pu....
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....y at item no. 4 which is 1.46 acres land, Chettappalam, Pulpally and other properties for which detailed argument was made by the respondent showing how they are co-related with the proceeds /accused. 12. The property at item no. 4 was acquired after the commission of crime yet it has been taken towards equivalent value because it was purchased in the name other than the accused. So far as the property at item no. 6 is concerned, it was purchased in the year 2010 by Remadevi K.T., accused but after commission of crime it was transferred to her daughter to save it from provisional attachment. The property aforesaid has been attached for equivalent value finding non-availability of the proceeds of crime in the hands of the appellant having vanished or siphoned off, otherwise, the property aforesaid was purchased by the accused herself. The property at item no. 7 is in the name of the accused and has been attached for the value equivalent to the proceeds of crime finding non- availability of the proceeds in the hands of the appellants having been vanished or laundered. 13. The position of fact is same for the property at item no. 8 to 11. They were attached for equivalent value ....
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.... 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 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 ....
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....d. 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 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 v....
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....en 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 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 insi....
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....rt 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 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 ....
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....perty. 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 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 ....
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....so 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 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 cr....
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....d 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 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....