TaxTMI 
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2025 (7) TMI 1928
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....s company M/s Kanva Fashion Limited or his family members i.e. wife and son. 2. It is a case where an FIR was registered by Basaveshwara Police Station, Vijay Nagar Sub-Division, Bengaluru against the appellant N. Nanjundaiah and M/s Sree Kanva Souhardha Cooperative Credit Limited, Bengaluru for the offence under Section 420 IPC. It was alleged that the Co-operative Bank had collected Rs.650 Crores from the members and the public, assuring high rate of interest. The deposits were collected through the commission agents. It was without maintaining the required liquidity to repay the amount on maturity. The amount so received through the deposits was used to advance loans. It was even out of the working capitals, shares reserves and other funds with the Co-operative Bank without getting any security. The investors/depositors were not paid the principal as well as the interest and, therefore, the offence under Section 420 IPC was alleged against the appellant N. Nanjundaiah and associated with him. The appellant N. Nanjundaiah was arrested on 25.08.2020. 3. In the investigation, the search was conducted in the premises of the appellant N. Nanjundaiah and other Directors of M/s S....
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.... Adjudicating Authority within a period of 180 days of passing the Provisional Attachment Order. Since the impugned order was passed by the Adjudicating Authority beyond a period of 180 days from the date of the Provisional Attachment Order, it should cease to exist and accordingly the impugned orders may be interfered by the Tribunal. 7. The learned counsel for the appellants further submitted that commission of crime is alleged to have taken place subsequent to the year 2014 when appellant was not holding any post in the Co-operative Bank. He was Chairman from the year 2005-2010 when no crime took place. It is said to have been caused subsequently in the year 2014 onwards when appellant N. Nanjundaiah was not holding any post. In view of the above, there was no reason to attach the properties belonging to the appellants. 8. It was further submitted that the statements of the appellant N. Nanjundaiah were recorded under Section 50(2) and (3) of the Act of 2002 while he was in custody. The statements should not be read adverse to him. It was further submitted that the respondents have relied on the statements of co-defendants to prove the case against the appellants. The find....
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....ttachment Order dated 26.02.2021. The period aforesaid was affected by the Covid-19 and in the light of the order of the Apex Court in Suo Motu Writ Petition No.03/2020 dated 10.01.2022, period intervening deserves to be excluded and thereby a case of lapse of attachment order is not made out. 13. The learned counsel made elaborate arguments even in regard to the other issues which would be referred while recording the finding to avoid repetition of one and the same facts and for the sake of brevity. The prayer of the respondents was, however, to dismiss the appeals having no merit. Finding of the Tribunal: 14. The brief facts have been given in the opening para of the order. A reference of the FIR registered against the appellant N. Nanjundaiah and M/s Sree Kanva Souhardha Co-operative Credit Limited, Bengaluru has been given for the offence under Section 420 IPC, 1860. It was alleged that the Co-operative Bank had collected huge amount from the public on assurance of high rate of interest. The deposits were made through the commission agents without maintaining the required liquidity to repay the amount on maturity. The depositors were not returned the principal amount a....
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..... The operative portion of the said judgment is quoted hereunder: "5. Taking into consideration the arguments advanced by learned counsel and the impact of the surge of the virus on public health and adversities faced by litigants in the prevailing conditions, we deem it appropriate to dispose of the M.A. No. 21 of 2022 with the following directions: I. The order dated 23.03.2020 is restored and in continuation of the subsequent orders dated 08.03.2021, 27.04.2021 and 23.09.2021, it is directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purpose of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi-judicial proceedings. II. Consequently, the balance period of limitation remaining as on 03.10.2021, if any, shall become available with effect from 01.03.2022. III. In cases where the limitation would have expired during the period between 15.03.2020 till 28.02.2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01.03.2022. In the event the actual balance period of limitation remaining with....
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....d in SMWP No. 3 of 2020 was only the period of limitation and not the period upto which delay could be condoned in exercise of discretion conferred by the statute. The learned Counsel would also submit with reference to the decision of this Court in SCG Contracts (supra) that where a Defendant fails to file the written statement within permissible time, it is beyond the Court's power to condone the delay. 11. In his rejoinder submissions, the learned Senior Counsel for the Appellant has contended that S. Kasi's case (supra) related to the fundamental right of liberty, referable to Article 21 of the Constitution of India read with Section 167(2) Code of Criminal Procedure; and the observations of this Court in the said case cannot operate in relation to the procedural law concerning civil litigation and more particularly, in relation to the right of filing written statement in a civil suit. The learned Counsel would further submit that the decision in the case of Sagufa Ahmed (supra) is of no application to the present case because the observations therein came to be made in the setup of the facts that time for filing the appeal had expired even prior to the order d....
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....d to Delhi alone but it has engulfed the entire nation. The extraordinary situation caused by the sudden and second outburst of COVID-19 Virus, thus, requires extraordinary measures to minimize the hardship of litigant-public in all the states. We, therefore, restore the order dated 23rd March, 2020 and in continuation of the order dated 8th March, 2021 direct that the period(s) of limitation, as prescribed under any general or special laws in respect of all judicial or quasi-judicial proceedings, whether condonable or not, shall stand extended till further orders. It is further clarified that the period from 14th March, 2021 till further orders shall also stand excluded in computing the periods prescribed Under Sections 23(4) and 29A of the Arbitration and Conciliation Act, 1996, Section 12A of the Commercial Courts Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe period(s) of limitation for instituting proceedings, outer limits (within which the court or tribunal can condone delay) and termination of proceedings. We have passed this order in exercise of our powers Under Article 142 read with Art....
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....urt in the case of Hygro Chemicals Pharmtek Pvt. Limited Vs. Union of India & Ors. reported in MANU/TL/1003/2023. Detail finding on the issue has been given and for that relevant part of Para 15 of the said judgment is quoted thus: "15. Issue No.3: Whether the period from 15.03.2020 to 28.02.2022 which was excluded by the Apex Court in computation of limitation vide In re: Limitation (supra) is applicable to orders confirming provisional attachment within 180 days? i) The Petitioner in W.P. No. 34238 of 2022 contends that the provisional attachment order i.e., PAO No. 04 of 2022 dated 03.02.2022 could not have been confirmed by the Adjudicating Authority vide order dated 22.08.2022 as the same was passed after the lapse of 180 days. Further, the Petitioner contends that Adjudicating Authority cannot rely on In re: Limitation (supra) in calculating the period of 180 days in light of the Apex Court's decision in S. Kasi (supra). ii) In W.P. No. 34627 of 2022, the provisional attachment order therein i.e., PAO No. 01 of 2021 was passed on 01.02.2021. Pursuant to which an original complaint under Section 5(5) of the PMLA was filed on 19.02.2021 and show cause....
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....r(s) to be passed by this Court in present proceedings. v) Subsequently, the limitation period was extended vide In re: Cognizance for Extension of Limitation (hereinafter 'In re: Limitation, 2022') till 28.02.2022. The Apex Court vide the said order clarified that where any statute provides an outer limit of limitation period within which the proceedings are to be completed, the period between 15.03.2020 to 28.02.2022 shall be excluded in computing such period. The relevant paragraphs of In re: Limitation, 2022 (supra) are extracted below: 5.1. The order dated 23-3-2020 [Cognizance for Extension of Limitation, In re, (2020) 19 SCC 10 : (2021) 3 SCC (Cri) 801] is restored and in continuation of the subsequent orders dated 8-32021 [Cognizance for Extension of Limitation, In re, (2021) 5 SCC 452 : (2021) 3 SCC (Civ) 40 : (2021) 2 SCC (Cri) 615 : (2021) 2 SCC (L&S) 50], 27-4-2021 [Cognizance for Extension of Limitation, In re, (2021) 17 SCC 231 : 2021 SCC OnLine SC 373] and 23-9-2021 [Cognizance for Extension of Limitation, In re, 2021 SCC OnLine SC 947], it is directed that the period from 153-2020 till 28-2-2022 shall stand excluded for the purposes of limitation a....
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....acted below: 5. Attachment of property involved in money-laundering.- 29[(1) Where the Director or any other officer not below the rank of Deputy Director authorised by the Director for the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that- (a) any person is in possession of any proceeds of crime; and (b) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter, he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and eighty days from the date of the order, in such manner as may be prescribed: Provided that no such order of attachment shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under Section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person authorised to investigate the offence mentioned in that Schedule, before a Magistrate or court for ta....
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....larly, the Calcutta High Court in Hiren Panchal (supra) held that vide orders in In re: Limitation (supra), the Apex Court extended the period of limitation to safeguard the right of litigants to institute proceedings. The Court held that computation of 180 days to confirm provisional attachment of properties under Section 8(3) of the PMLA cannot be equated to initiation/institution of proceedings. The Court also held that prescription of 180 days is in the form of a protection against deprivation of right to property. The relevant paragraphs are extracted below: 15. It is further relevant to state that the orders passed by the Supreme Court in the Suo Motu writ petition mention specific provisions in specific statutes such as Sections 23(4) and Section 29A of The Arbitration and Conciliation Act, 1996, Section 12A of the Commercial Courts Act, 2015 and Section 138 provisos (b) and (c) of the Negotiable Instrument Act, 1881. On an examination of the specific statutes mentioned by the Supreme Court, it will be seen that all these statutes prescribed provide for specific time frame for instituting a suit, filing a claim/counter claim or an application in furtherance of a rem....
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....he fact that the bank accounts of the writ petitioners have been debited leaving the balance at zero despite the order of attachment. Prakash Corporates dealt with the prescribed statutory time period for filing of the written statement under Order VIII Rule 1 of The Code of Civil Procedure, as amended by the Commercial Courts Act. Prakash Corporates also recognised the fact that the decision in S. Kasi was concerned with filing of the charge sheet under Section 167(2) of The Code of Criminal Procedure (Cr.P.C.) and hence would not apply to filing of written statements beyond the prescribed timelimit. 22. The reasoning in S. Kasi would apply to the present case. The Supreme Court recognised that the 23rd March, 2020 order in the Suo Motu writ petition was for the benefit of those whose remedy may be barred by time because of not being able to physically come to Court to file proceedings. The Supreme Court made a distinction between the benefit given to litigants and extension of time for filing of a chargesheet by the police as contemplated under Section 167(2) of the Cr.P.C. The Court also noted the element of personal liberty of a person which was required to be protecte....
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....ion upon which a person's liberty is dependent has to be strictly construed. On the other hand, where timeline is prescribed for attachment of properties and due to unforeseen circumstances like Covid-19 such attachment was not confirmed, benefit can be granted in favour of the Adjudicating Authority by excluding the period as prescribed under In re: Limitation (supra), a fortiori when the property can still be enjoyed. xxii) It is relevant to note that the Supreme Court in Prakash Corporates v. Dee Vee Projects Ltd. dealt with the application of In re: Limitation (supra) in relation to filing of a written statement. The Court therein held that the scope of In re: Limitation (supra) cannot be unnecessarily narrowed and in relation to S. Kasi (supra) held that the same stands on different footing as it dealt with Article 21 of the Constitution of India. The relevant paragraphs are extracted below: 27.7. We are not elaborating on other directions issued by this Court but, when read as a whole, it is but clear that the anxiety of this Court had been to obviate the hardships likely to be suffered by the litigants during the onslaughts of this pandemic. Hence, the lega....
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....tor, Directorate of Enforcement, Government of India47 held that the decision in S. Kasi (supra) is not applicable to compute the period of 180 days under Section 5(3) of the PMLA. The Court also disagreed with the view adopted in Vikas WSP Ltd. (supra), and Hiren Panchal (supra). The relevant paragraphs are extracted below: 12. Insofar as the judgment of the Calcutta High Court that was brought to our notice, we find that the Calcutta High Court had mainly relied upon the judgment of the Apex Court in S. Kasi case. With utmost respect to the learned Single Judge of the Calcutta High Court, we are not in agreement with the reasoning in the above judgment. The issue that was dealt with by the Apex Court in S. Kasi case pertains to the scope of Section 167(2) of Cr.P.C. which is directly referable to Article 21 of the Constitution of India viz., personal liberty of a person. The same cannot be equated while dealing with a property right under Article 300-A of the Constitution of India and the judgment of the Apex Court in S. Kasi case cannot be applied to a case involving property right of an individual or a corporate. 14. Our reasoning supra is also supported by th....
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....02.2022 shall be excluded. In the present case, Section 5(3) of the PMLA states that provisional attachment of properties will cease to have effect after a lapse of 180 days from the date of provisional attachment. That would mean that attachment proceedings shall terminate if the same are not confirmed within a period of 180 days. Therefore, while calculating/computing the 180 days period, the period from15 .03.2022 to 28.02.2022 shall be excluded. xxviii) To answer Issue No. 3, this Court holds that the decision in In re: Limitation (supra) and subsequent extensions vide In re: Limitation 2022 (supra) are applicable to PMLA proceedings to compute the period of 180 days. While computing such period, the period from15.03.2020 to 28.02.2022 shall be excluded". 18. In the light of the judgments referred to above, the period for termination of proceedings till 28.02.2022 cannot be counted. In the instant case, the Adjudicating Authority passed the order on 06.12.2021 despite adverse situation due to the covid-19. In the light of the findings recorded by Supreme Court and Telangana High Court, we are unable to accept even second ground raised by the appellant company"....
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.... even Directors of M/s Kanva Garments Pvt. Ltd. His statement was further recorded on 29.08.2020 to indicate that certain entries were made in the Zenith software to accommodate/transfer the loan amount to Kanva Group of Entities. It is with the further statement that the Co-operative Society had collected around Rs.24 Crores share capital. It is with the further statement that the Cooperative Bank had collected Rs.640 Crores which was then used to advance the loan. 21. In the statement recorded on 30.08.2020, the appellant N. Nanjundaiah had admitted about the receipt of Rs.400 Crores directly or indirectly by Kanva Group of Companies/Entities. At this stage, it is necessary to indicate that the appellant was Director in 13 Kanva Group of Companies to whom the loan was advanced by the Co-operative Society without security and it remained unpaid. The statement of the appellant was then recorded on 31.08.2020 where he had admitted that Board of Directors of the Co-operative Society were his relatives and some of them were common in the Society and Kanva Group of Companies and Entities. 22. The statement of Harish S, the subsequent President of the Co-operative Society was also....
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....but as per his own admission, the Directors running the Co-operative Society subsequent to the appellant were none else but the relatives of the appellant himself. The statements of few Directors were recorded which endorse the case of the respondents. The appellant was in command to pass on the instructions despite not holding the post of Chairman. It is reflected not only from the statement recorded under Section 50(2) of the Act of 2002 but even the fact that 13 entities were the major beneficiary of loan out of the deposits, capital, share reserves and other amounts lying with the Cooperative Society. The appellant in his statement has admitted about the receipt of Rs.400 Crores towards the loan by his 13 entities and the loan amount was not repaid to the Co-operative Society. He was having deep access in the Co-operative Society and its working and, therefore, he remained the main accused and arrested for that reason. 25. The counsel for the appellants qualified the amount of proceed only to the extent of Rs.10 Crores loan taken by the appellant's wife in the year 2014 and said to have repaid Rs.3 Crores till the Provisional Attachment Order was passed. The allegation again....
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....ng 1 Acre - 28 Guntas, situated at Maralagala Village K. Shettihalli -2 Hobli, Srirangapatana Taluk, Mandya District Area measuring 01 Acre 28 Guntas Sri N. Nanjundaiah Srirangapatana 25,07,50 1,85,13,000 8. 2704/2005-06 M/s. Kanva Public School, Kanva Nagar, Dhanoji Palya, Arshinakute Dhakale, Nelamangala Taluk, Bangalore Rural District Site Nos. 69 to 78 measuring in total 16,000 Sq. ft. The ground, first, second and third floor in total measuring 26776 sq. ft. Smt. Prayeena N GPA Holder Shri N Nanjundaiah Nelaman gala 17,60,000 5,90,73,000 2,50,14,112 84,40,25,500 The total value of the property attached in the hands of the appellant and his associates is only of Rs.84.40 Crores which is much less than the proceeds of crime in his hand. The appellant failed to disclose the source to purchase the property in the name of his wife because she was only a house wife. It is with the further statement that the property was purchased in the year 2005 while the commission of crime in the year 2014 onwards. The properties purchased prior to the commission of crime could not have been attached. 26. We have considered the rival submissi....
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....roperty 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 the property acquired or derived directly or indirectly out of the criminal activities relating to the scheduled offence. In the first part, all those properties which are acquired directly or indirectly out of criminal activities would be termed to be the proceeds of crime. The properties can be acquired directly or indirectly with the use of proceeds of crime. The use of proceeds direct....
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....ission 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 rewriting 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 validity. 16. At this stage, we may refer to Para 68 of the judgment in the case of Vijay Madanlal Choudhary (supra) which is quoted hereunder. "68. It was also urged before us that the attachment of property must be equivalent in value of the proceeds of crime only if the proceeds of crime are situated outside India. This argument, in our opinion, is tenuous. For, the defin....
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....al 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, however, must be restricted to the value of illicit gains from the crime. For the sake of convenience, the properties covered by the second and third categories may be referred to as "the alternative attachable property" or "deemed tainted property". 17. The judgment of the Delhi High Court makes it clear that the definition of "proceeds of crime" has three limbs and in ....
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....inst 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 proceeds of crime. xxxx 79. Regard must also be had to the fact that the legislation itself is dealing with contingencies where proceeds of crime are layered and their origins camouflaged and masked enabling the accused to project or claim it to be untainted property. The Act clearly as does Axis Bank take into consideration a situation where a person who has obtained pr....
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.... 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 Court also takes note of the position that although SLP (Crl) No. 28906/2019 is pending before the Supreme Court against the decision rendered in Axis Bank, the judgement of this Court has not been stayed or placed in abeyance. The interim order of 30 August 2019 passed in the aforesaid Special Leave Petition only requires parties to maintain status quo. Insofar as the judgement of the....
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....mb 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 of his properties could be attached to secure the interest of the victim till conclusion of the trial. This would not only frustrate the object of the Act of 2002, but would advance the cause of the accused to promote the crime of money laundering. The Judgment in the case of Vijay Madanlal Chaudhary (supra) is of three judges bench while the judgment in the case of Pavana Dib....
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....nd 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 siphon off or vanish so that it may not remain available for attachment and otherwise the contingency aforesaid would satisfy only the first limb of definition of "proceeds of crime" leaving the second. We are thus unable to accept the argument raised by the appellant so as to make the middle part of the definition of "proceeds of crime" to be redundant. 24. In view of the above....