TaxTMI 
TaxTMI 
2025 (12) TMI 225
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....facts briefly are that an FIR numbered as RCBD1/2016/E/0004 dated 24.05.2016 was filed by the CBI Banking Security and Bank Fraud Cell, New Delhi, against M/s Rangoli International Pvt. Ltd. (RIPL), Sh. Luv Bhardwaj and Sh. Ravi Bhola under sections 120B read with Section 420 of the Indian Penal Code (IPC)1860, and Section 13(2) read with Section 13(1)(e) of the Prevention of Corruption Act, 1988, (PC Act, 1988). The allegations were that RIPL had availed credit facilities amounting to Rs. 290 crores under a consortium of 11 banks with the Punjab National Bank as the lead bank, and the Canara Bank as a member of the consortium. The Canara Bank, Okhla Industrial Estate Branch, sanctioned packing credit and bill discounting facility (export credit facility) for Rs. 28.75 crores on 26.02.2013 along with additional funding under the Gold Card Scheme. The total liability as on 28.09.2015 was 35.62 crores. The credit facilities were secured against hypothecation of stock, book debts and collateral securities consisting of 8 immovable properties valued at Rs. 26.4 crores as on 03.01.2012. Personal guarantees of Sh. Luv Bhardwaj and Sh. Ravi Bhola, Directors of M/s RIPL were also provided,....
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....d above, were made by the Ld. Counsel for the Appellant, and therefore, these are the only two issues arising for the consideration of this Appellate Tribunal in the present case. 6. The arguments were strongly refuted by the Ld. Counsel for the Respondent, who, at the outset, submitted that the property in question has been attached not as direct proceeds of crime but as 'value of such property' as is clearly evident from the discussions and the table on page 30 of the impugned order. The statement of Shri Luv Bhardwaj as mentioned in para 4 (a) on page 13 of the impugned order is relied upon wherein he had stated that the company, M/s SMC Logistics, has no business activity. Sh. Luv Bhardwaj also admitted that he was the major shareholder of the company and he had made Sh. Shiv Singh Negi, Director in order to complete the quorum of directors in the company and for signing of documents related to the company. Page 11 of the impugned order is also referred, which reveals that the borrower company (M/s RIPL) had diverted an amount of Rs. 99,00,000/- to the two entities, namely, Organic Enterprises and Pingas Enterprises. Out of this amount, an amount of Rs. 97,59,457/- has been ....
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....e been provisionally attached even for the value thereof. The counsel for the appellant made reference to the recent judgment of Kerala High Court in the case of Davy Varghese & Anr. Vs. Deputy Director, Directorate of Enforcement reported in 2024 SCC Online Ker 7343. The other judgment was of the High Court of Andhra Pradesh in the case of Kumar Pappu Singh & Ors. Vs. Union of India & Ors. reported in (2021) 1 High Court Cases (AP) 556. The counsel for the appellant referred to the judgment of Patna High Court in the case of HDFC Bank Ltd. Chotisaraiyaganj Vs. Govt. of India, Deputy Director of Enforcement & Ors. reported in 2021 SCC Online Pat 4222. It is followed by the reference of the judgment of Punjab and Haryana High Court in the case of Seema Garg & Ors. Vs. Deputy Director, Directorate of Enforcement reported in 2020 SCC Online P&H 738. The judgment of the Delhi High Court in the case of Deputy Director, Directorate of Enforcement of Delhi Vs. Axis Bank & Ors. reported in 2019 SCC Online Del 7854 and lastly the judgment of the Supreme Court in the case of Pavana Dibbur Vs. Directorate of Enforcement reported in 2023 (15) SCC 91 was referred. On the strength of the judgmen....
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....nciple laid down by the Kerala High Court in its recent judgment emphasized the attachment only of the "proceeds of crime". There cannot be a debate on the aforesaid. However, what falls in the definition of "proceeds of crime" has not been given which needs to be analyzed. It includes not only the properties obtained or derived directly or indirectly as a result of any criminal activity relating to scheduled offence but if it is not available or vanished, then the property of equivalent value can be attached by invoking second part of the definition which unfortunately was not argued before Kerala High Court and other High Courts where the judgment of the Apex Court in the case of Vijay Madanlal Choudhary (supra) was relied only to the effect that what can be provisionally attached is the "proceeds of crime" and not the other properties of the person/accused. What would fall in the definition of "proceeds of crime" was not elaborately argued before the High Courts and accordingly a finding was not recorded. The judgments of the High Court cited by the appellant hit the judgment of the three Judges Bench of the Apex Court in the case of Vijay Madanlal Choudhary (supra) of which few....
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....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 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 indirectl....
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.... 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 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 a....
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....ond 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, 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 a....
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..... 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 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 camouflage....
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.... 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 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 sta....
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.... 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 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 ....
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....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 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 th....