TaxTMI 
TaxTMI 
2025 (12) TMI 1147
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....ceipts) of the Appellant with total cash balance of Rs. 2,26,41,973.85 and of the immovable properties of the Appellant comprising of land, part of plant and machinery and power plant all valued at Rs. 29,91,08,026/- was also confirmed. Thus, the total value of the movable and immovable properties of which the attachment is confirmed is Rs. 32,17,50,000/-. 2. Ld. Counsel for the Appellant challenged the Impugned Order on the ground that there is absolutely no allegation in either the FIR or in the charge-sheet filed by the CBI (Central Bureau of Investigation) against the Appellant Company about it having cheated any investor or shareholder or having misrepresented facts to the public. Ld. Counsel stated that the substance of the charge against the Appellant is that it misrepresented its net worth and production capacity in the Application submitted to the Ministry of Coal to secure the Thesgora-B/Rudrapuri Coal Block. Ld. Counsel contended that no investor has filed any complaint alleging cheating. Since the investigation under PMLA is founded upon the Scheduled offence, the allegation of the Respondent Directorate to hold share application money as proceeds of crime (PoC), is ....
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....as early as in the Financial Year 2005-06 and subsequently at premium of Rs. 900/- per share. Ld. Counsel stated that while the Appellant had submitted the Application to the Ministry of Coal, Government of India (MoC) on 09.01.2007, the intimation of joint allocation of the Block was made by the Ministry on 05.08.2008 and which thereafter issued the final allocation letter on 21.11.2008. He contended that it is temporal impossibility that the proceeds of crime resulted from an allocation which had not yet been made. 5. Ld. Counsel for the Appellant argued that on elaboration of the position taken by the Respondent Directorate, it is clear that the 'criminal activity' alleged by the CBI was misrepresentation to the MoC. The 'property derived' from that activity would be the Coal Block itself. Since no mining took place and the block was deallocated hence no PoC was generated from the criminal activity for which the CBI specifically charged. Since the share capital and premium are not part of the charge in the Scheduled offence, treating it as PoC violates the strict interpretation of Section 2 (1) (u). 6. Ld. Counsel for the Appellant cited the following paragraphs from the J....
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.... provision (Section 3, as amended until 2013 and were in force till 31-7-2019); and the same has been merely explained and clarified by way of Explanation vide Finance (No. 2) Act, 2019. Thus understood, inclusion of clause (ii) in the Explanation inserted in 2019 is of no consequence as it does not alter or enlarge the scope of Section 3 at all. 136. As mentioned earlier, the rudimentary understanding of "money laundering" is that there are three generally accepted stages to money laundering, they are: 136.1. Placement : which is to move the funds from direct association of the crime. 136.2. Layering : which is disguising the trail to foil pursuit. 136.3. Integration : which is making the money available to the criminal from what seem to be legitimate sources." Ld. Counsel argued that the Respondent Directorate cannot be concerned with the underlying criminal activity i.e. the Scheduled offence. Ld. Counsel stated that paragraph 135 of the Judgment reinforces this by clarifying that the process and activity can only be initiated once the PoC have been derived or obtained from a Scheduled offence. He therefore argued that since the criminal ac....
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....e the Authority which issued the PAO has been mentioned in the Impugned Order and therefore the reasons to believe to issue the PAO cannot be questioned. Ld. Counsel further stated that the Ld. AA has categorically recorded that the Authority which issued the PAO has extensively referred to the material in his possession and well formulated the reasons for the belief. The belief is that of prudent and reasonable person and is honest as based on the material before him. Ld. Counsel further cited the following with respect to Section 8 (1) of PMLA as recorded in the Impugned Order: There is no substance in the contention raised by the Defendants that there is no reason to believe for issuance of show cause notice under section 8(1) of PMLA, or that reasons under section 8(1) of PMLA are not furnished. The records and material filed by the Enforcement Directorate, on the basis of which the reasonable belief is formed by the Adjudicating Authority at the preliminary stage of issuing the show cause notice coupled with the fact that it was in the interest of justice to give the opportunity to the Defendants against whom the Attachment Order was passed without giving sufficient o....
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....minal activity relating to a scheduled offence or the value of any such property. The term property is defined to mean any property or assets of every description, whether corporeal or incorporeal, movable or immovable, tangible or intangible and includes deeds and instruments evidencing title to, or interest in, such property or assets, wherever located. The Explanation thereto clearly signifies that the property means and includes also the property used in the commissions of the scheduled offence and /or in the commissions of the offence u/s 3 of the PMLA. It is thus clear that not only the derivation from the commission of the scheduled offence is to be included in the concept of proceeds of crime: but it also includes the derivations from the criminal activities relating to the scheduled offences. Thus, though as contended by the defendants the coal block never came under production due to the De-allocation by the Govt. Of India, what is required to be examined is whether any proceeds of crime have emerged to the benefit of D-1 and consequently to the other defendants from the criminal activities relating to the Scheduled Offences." 10. Ld. Counsel further argued that the Ld....
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....herein) vide letter dated 07.09.2016 has submitted a list showing details of total share application money amounting to Rs. 86,46,91,261/- received from 05.04.2007 to 31.03.2012 from the different companies/ individuals out of which they refunded Rs. 17,67,00,000/- to two applicants. The company had issued shares of face value of Rs. 100/- per share at par as well as at a premium of Rs. 900/- to the shareholders from whom the share money and premium to the tune of Rs. 32,17,50,000/- was received during the period from 2007-08 to 2010-11. They adopted two set of parameters for issuance of shares (@ Rs. 100/- at par & @ Rs. 100/- with premium of Rs. 900/-. The share application money including very high premium was received because company had very high probability of getting coal block after misrepresenting the net worth and production capacity, which were relevant criteria for allocation of coal Block. Thus, the share application money and share premium money so received, are proceeds of crime generated out of scheduled offence. The issuance of share at premium in past before commitment of offence is not relevant to the matter. Ld. Counsel for the Respondent Directorate cited the J....
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....right to obtain prospecting licence or mining lease of the coal mine admittedly is dependent upon the allocation letter. The allocation letter, therefore, confers a valuable right in favour of the allottee. Obviously, therefore, such allocation has to meet the twin constitutional tests, one, the distribution of natural resources that vest in the State is to subserve the common good and, two, the allocation is not violative of Article 14." We therefore find that irrespective of whether coal was actually mined or not, the letter of allocation issued to the Appellant conferred a valuable right in favour of the Appellant. We further observe that the definition of property under Section 2 (1) (v) of PMLA, 2002 is as follows: "2. Definitions.-(1) In this Act, unless the context otherwise requires,- (v) "property" means any property or assets of every description, whether corporeal or incorporeal, movable or immovable, tangible or intangible and includes deeds and instruments evidencing title to, or interest in, such property or assets, wherever located; [Explanation.-For the removal of doubts, it is hereby clarified that the term "property" includes property....
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....d offences of Section 420 IPC read with Section 120 B IPC and Section 13 (2) read with Section 13 (1) (d) of the Prevention of Corruption Act, 1988 were found proved against the Appellant and other co-accused, for falsely inflating the net worth of the Company and the existing production capacity thereby having committed offences of cheating and criminal conspiracy, which facilitated the allocation of the Thesgora-B/Rudrapuri Coal Block. Thus, it follows that the property vested in the letter dated 21.11.2008 with respect to allocation of coal block is covered under the definition of PoC as given in Section 2 (1) (u) of PMLA, which is as follows: (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 whi....
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....ection 2(1)(u) of the PMLA. Against this backdrop, it was then established that Section 3 of the PMLA criminalises all processes connected with such proceeds, making money laundering a distinct and continuing offence which subsists as long as such illicit gains are possessed or utilized by the accused. 36. Application of the aforesaid principles to the present case becomes relevant to the extent that the definition of proceeds of crime under Section 2(1)(u) of the PMLA, not only includes the property derived directly through a criminal activity related to the scheduled offence, rather it also includes any property derived indirectly by such a criminal activity. xxxxx 38. Additionally, the essence of money laundering lies in the proceeds of crime as defined under Section 2(1)(u) of the PMLA, wherein the usage of words "directly or indirectly" are of crucial importance to demonstrate that the scope of the definition under Section 2(1)(u) extends not only to the immediate consequence of a crime, rather it also includes the subsequent transformation, layers and manifestation of the illicit financial gain. The usage of the word "indirectly" while defining proc....
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....unlisted Company and there was no public declaration about its share prices, the funds were raised through private placement. Hence, his prayer is to distinguish the present case from that of the Prakash Industries. However, the Hon'ble High Court of Delhi in their Judgment dated 03.11.2025 (supra) has said that even if the question of whether such misrepresentation was indeed made before the BSE is yet to be decided by the Trial Court, the argument that the essential ingredients of the Scheduled offence are not fulfilled lacks merit since the matter before it concerned the aspect of PoC for the purpose of the attachment. We may also note that the Ld. Special Judge (Coal Block Cases)-02, Rouse Avenue District Courts, New Delhi in its Order dated 29.04.2024 has held that prima facie case is made out for framing charge in the Prosecution Complaint under PMLA, against the Appellant Company and other co-accused. Moreover, even the private placement could not have been the result of market forces since the shares were issued to few investors without premium, to few others with premium of Rs. 400 per share and still to few others with premium of Rs. 900 per share. 16. Ld. Counsel for ....
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....the Application dated 04.01.2007 on 09.01.2007. There is a finding in the Impugned Order that even though a part of the money may have been received earlier, the actual allotment of the shares took place only after November, 2006 i.e. after the publication of the advertisement. In fact, the Appellant avoided allotting the shares to its sister concerns and later claimed that the receipt were advances for supplies which were never made. We also note that in the Explanation to the definition of property in Section 2(1)(v) of PMLA, it has been clarified that the term property includes property of any kind used in the commission of any offence under the Act of any of the Scheduled offences. In the Explanation to the definition of PoC given in Section 2(1)(u) of PMLA, we find that the PoC includes any property which may directly or indirectly be derived or obtained not only from the Scheduled offence, but also as a result of any criminal activity relatable to the Scheduled offence. Reading the two Explanations together, it is obvious that even though the share money and premium may have been obtained before the date of letter of allocation of coal block, the same were PoC. The fact of mo....