TaxTMI 
TaxTMI 
2026 (1) TMI 901
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....ase: 2. It is a case where an FIR was registered by the Central Bureau of Investigation ('CBI') on 27.05.2020 for commission of offence under Sections 120-B, 420, 467, 468 and 471 of the Indian Penal Code, 1860 ('IPC'). It was on a written complaint by Shri Mukesh Kumar Dhingra, Dy. General Manager of Stressed Assets Management Branch-II of the State Bank of India, New Delhi. The complaint implicated several individuals and entities including M/s Jagat Agro Commodities Pvt. Ltd. ('JACPL'), Shri Sant Lal Aggarwal, Smt. Sudha Pawa along with many other entities and individuals. JACPL received fund- based and non-fund based credit limits from State Bank of India and Punjab National Bank with SBI as the leading bank in the consortium. The total loan amount from the two banks was Rs. 397.67 Crores. The company was defaulted in making payment and therefore became Non-Performing Assets (NPA). It was mainly due to funds diversion, fabricated stock statements and manipulation in the financial records. The date of declaration of the accounts was revised to 29.06.2015 by the Statutory Auditor. The Forensic Audit Report was then conducted by M/s Rajvanshi & Associates on 15.07.2019. The For....
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....Ltd. (VSIPL), a corporate guarantor of the loans from SBI and PNB, under the control of Shri Sant Lal Aggarwal and Shri Satish Pawa. VSIPL then rerouted the illicit funds to M/s BCL Realcon Pvt. Ltd. (BCL Realcon) for investment in real estate in lieu of the loan. However, BCL Realcon didn't utilize the funds as intended. Mr. Vinod Mittal, the beneficial owner of BCL Realcon and M/s Cosmos Infra Engineering (India) Pvt. Ltd., (Cosmos Infra) failed to invest the received "Proceeds of Crime" in any project. Consequently, pressure was exerted by Shri Sant Lal Aggarwal and Shri Satish Pawa on Mr. Vinod Mittal to return the funds. While BCL Realcon did return Rs. 20,39,25,000, it held Rs. 10,50,75,000. It remained part of the generated "Proceeds of Crime" by JACPL. 5. The facts given aforesaid revealed that the appellants, BCL Realcon and Cosmos Infra did not return Rs. 10,50,75,000 while returned a sum of Rs. 20,39,25,000 and accordingly it was taken to be proceeds of crime in the hands of the BCL Realcon and Cosmos Infra. The respondent accordingly attached the immovable properties for the equivalent amount to the proceeds of crime in the hands of BCL Realcon and Cosmos Infra. ....
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....rified by the Apex Court in the case of Vijay Madanlal Choudhary versus Union of India reported in 2022 SCC Online SC 929. The said judgment was referred to pray for quashing of the order because what can be attached is the proceeds of crime connected with the offence and not any other property. The respondent failed to consider the aforesaid aspect of the matter while making provisional attachment of the property purchased much prior to commission of crime, thus, could not have been co-related with the crime so as to provisional attach the property. On the aforesaid ground also, the impugned order deserves to be set-aside. 9. Ld. Counsel for the appellants submitted that VSIPL had invested a sum of Rs. 30.90 Crores. It was not in the knowledge of the appellant and its group companies that JACPL had taken loan and VSIPL stood corporate guarantor of the loans. The appellant company could not have been blamed for proceeds of crime because it was received bona fide consideration and therefore only out of Rs. 30.90 Crores, an amount of Rs. 20 Crores were refunded and leaving Rs. 10,50,75,000 remained unpaid. It was for purchase of shares for which multiple litigations existed which ....
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....the banks and maintain the company's drawing power by presenting fraudulent balance sheets to both SBI and PNB. The amount was diverted even to VSIPL, corporate guarantor of loan from SBI and PNB controlled by Shri Sant Lal Aggarwal and Shri Satish Pawa. VSIPL then routed the illicit funds to BCL Realcon and Cosmos Infra which failed to utilize the funds, as intended by Shri Vinod Mittal, the beneficial owner of BCL Realcon and Cosmo Infra. The amount of Rs. 20,39,25,000 was, however, refunded, leaving an amount of Rs. 10,50,75,000 considered to be proceeds of crime in the hands of the appellants. 13. Ld. Counsel for the appellants alleged for violation of the principles of natural justice. The proper hearing to the appellant was not provided by the Adjudicating Authority. It ignored series of emails sent to the Adjudicating Authority which pronounced the order on 09.01.2024. The argument aforesaid was contested by the Ld. Counsel for the respondent. It was submitted that the Adjudicating Authority has to pass final order within a period of 180 days from the date of the receipt of the Original Complaint (OC). The effort of the appellant was to see the period aforesaid was expiri....
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....h the appellant and considered to be proceeds of crime. It was not used for real estate or any other investment, rather, remained proceeds of crime in the hands of the appellant. Ld. Counsel for the appellant submitted that the property acquired by the appellant has no connection to the amount alleged to have been withheld by the appellant. The argument has been raised in ignorance of the definition of "proceeds of crime" having three limbs out of which the second limb of the definition can be applied when the proceeds of crime acquired or derived directly or indirectly out of the predicate offence is not found available with the person and cannot be otherwise traced out, having been siphoned off. In such case, the respondent can attach the property of equivalent value to the value of the proceeds of crime and in the instant case the second limb of the definition of "proceeds of crime" has been applied. In that case, the property acquired prior to commission of crime can be attached for equivalent value to the proceeds. The issue aforesaid has been settled by this Tribunal in the case of Sadananda Nayak Versus The Deputy Director, Directorate of Enforcement, Bhubaneswar in Appeal N....
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....riminal 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 directly or indirectly would be relevant part to fall in first part of the definition of `proceeds of crime'. To clarify the definition, it may be illustrated. Assuming in a case of dacoit, the accused secured the money and it has been used for the purchase of property, then such a property would fall in the definition of `proceeds of crime' having been obtained out of proceeds of crime. In other case where the property was not acquired or derived by the accused himself but he passed on money out of the crime to another person and he acquired the property, then also it would be considered to be the proceeds of crime to acquire the property. In 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 comm....
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.... 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 definition of "proceeds of crime" is wide enough to not only refer to the property derived or obtained as a result of criminal activity relating to a scheduled offence, but also of the value of any such property. If the property is taken or held outside the country, even in such a case, the property equivalent in value held within the country or abroad can be proceeded with. The definition of "property" as in Section 2(1)(v) is equally wide enough to encompass the value of the property of proceeds of crime. Such interpretation would further the legislative intent in recovery of the proceeds of crime and vesting it in the Central Government for 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 t....
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....e 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 the second limb the properties of equivalent value to the proceeds obtained out of crime can be attached which may have been acquired prior to the commission of crime but it would be when proceeds of crime has been vanished and is not available. It is sought to achieve the object of the Act of 2002. 18. In the light of judgment of the Apex Court in Vijay Madanlal Choudhary (supra), we are unable to apply the judgment of Kerala High Court in the case of Satish Motilal Bidri (supra). The Ld. counsel did not refer the relevant para of the judgment in the case (supra), rather he referred Para 66 of the judgment of the Apex Court in Vijay Madanlal Choudhary (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 ....
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.... 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 proceeds of crime by commission of a scheduled offence has managed to ensure that a property directly or indirectly connected to criminal activity is rendered untraceable. It is to confer authority upon the Directorate to proceed further in such a situation that Section 2(1)(u) uses the expression or the value of any such property. The safeguard which stands constructed in Section 2(1)(u) in such a contingency is that in case the Directorate does proceed against any other property, it must be equivalent in value to the illegal pecuniary benefit or gain that may have been obtained as a result of criminal activity. 80. In the considered opinion of this 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 an....
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....d 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 Punjab and Haryana High Court in Seema Garg is concerned, although SLP (C) No.14713-14715/2020 preferred against the same came to be dismissed, while doing so the Supreme Court recorded that the petition was being rejected in the peculiar facts and circumstances of the case. The dismissal of the aforesaid Special Leave Petition cannot in any case be interpreted or understood as being an affirmation of the view as expressed by the Punjab and Haryana High Court. xx xx xx xx xx xx 105. It would be pertinent to recall that properties which were acquired prior to the enforcement of the Act may not be completely immune from action under the Act in light of what this 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 equivale....
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....use 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 Dibur (supra) is of two judges bench. The issue has otherwise been dealt with by this Tribunal in the case of FPA-PMLA-2909/CHD/2019 M/s. Besco International FZE vs. The Deputy Director Directorate of Enforcement, Chandigarh dated 31.07.2024. The relevant para of the said judgment is quoted hereunder: "It is not that only those properties which have been were derived or obtained directly or indirectly out of the crime can be attached rather in case of non-availability of the property derived or obtained directly or indirectly rather when it is vanished or siphoned off, the attachment can be of any property of equivalent value. It is necessary to clarify that the 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 equ....
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....g 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. 16. The issue aforesaid has been recently considered by the Hon'ble High Court of Punjab and Haryana in the case of Dilbag Singh @ Dilbag Sandhu Vs. Union of India & Ors. in CWP 22688-2024 dated 13.11.2024. In the said judgment, the Division Bench of the Hon'ble High Court of Punjab and Haryana held that its earlier judgement in the Seema Garg did not lay down good law. The reference of the judgments of other High Courts on the ratio propounded in the Seema Garg has also been given and was not approved. The relevant parts of the said judgment are quoted hereunder for ready reference: "3.2. In light of the Division Bench's judgment in Seema Garg's case (supra), this Bench would have been obligated to either follow it or refer the matter to a Larger Bench. However, the Supreme Court in Vijay Madanlal Chaudhary's case (supra) has interpreted the provision in para 298, which is extracted as under: "It was also urged before us that the attachment of property must be equivalent in value of ....
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....ctly or indirectly the proceeds of crime, but were held abroad, to be liable to attachment. In 2019, the explanation has been added so as to give a wider scope to the authorities. From the objects and reasons of the '2002 Act', it becomes evident that the money laundering posed a serious threat not only to the financial system of the countries but also to their integrity and sovereignty. The '2002 Act' was enacted to prevent money laundering and connected activities. The act of money laundering is a multi- layered, complex and complicated diversion of the property, which is required to be prevented. Consequently, the definition of proceeds of crime has undergone transformative changes from time to time so as to include all the complex acts involved in the offence of money laundering. 3.5. In Axis Bank's case (Supra), the Delhi High Court has dissected the definition in three parts while covering tainted property and untainted property held in India; and the 'proceeds of crime' taken out of the country or any other property of equivalent value thereof. However, this Court is of the considered view that the definition can be divided into two broad....
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....give effect to the objective of the Act. This approach of interpretation is based on the idea that the legislature's intent is best reflected in the exact words of the statute. 3.8. Moreover, the reasoning adopted in Seema Garg's case (supra) to the effect that there was no need to insert third part in the definition of the 'proceeds of crime' and that 'value of such property' is superfluous does not appear sound. It appears that transformative journey of the definition of phrase 'proceeds of crime' was not brought to the notice of the Division Bench in Seema Garg's case (supra). In Abdullah Ali Balsharaf's case (supra), Delhi High Court inadvertently overlooked the sub-category (i) of second part of definition of 'proceeds of crime'. Similarly, Andhra Pradesh High Court in Kumar Pappu Singh's case (supra) was not properly assisted. Furthermore, the attention of Patna High Court was not drawn to part 2(i) in HDFC Bank's case (supra). Similar is the position in M/s. Himachal Amta Power Limited's case (supra). In this case, the attention of the Bench was not drawn to the second broader category of the definition. In....