TaxTMI 
TaxTMI 
TaxTMI 
2026 (2) TMI 127
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.... been leaked by a syndicate which was allegedly providing the leaked question paper to the candidates inside a bus having registration number RJ19PB1815. Based on the information aforesaid, Rajasthan Police intercepted the bus near Bekariya Police Station, Udaipur at 4.15 AM. They found the evidence of tutoring activities and the leaked question paper. Consequently, 45 individuals were arrested, including 40 candidates, 2 bus drivers and 3 individuals responsible to leak the paper. 3. The investigation after registration of the FIR led to arrest of 10 more individuals in a hotel room. Out of those, 7 were candidates while the other 3 Mangla Ram, Gopal and Pukharaj Vishnoi were involved to leak the paper. To provide the leaked paper, substantial amount ranging from Rs. 8 to 10 Lakhs per candidate was charged. 4. The respondents accordingly recorded ECIR on 08.02.2023 and caused independent investigation. They recorded the statements of witnesses under Section 50(2) and 50(3) of the Act of 2002. The appellant's son was found to be the main accused for commission of offence and accordingly the property belonging to the appellant being the father of the son involved in the commis....
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....ered to be direct proceeds out of the crime. It has not been taken to be provisional attachment of the property for the equivalent value and accordingly there was no reason for the Adjudicating Authority to confirm the provisional attachment of the property existing in the name of the appellant. The property otherwise purchased prior to the commission of crime would not fall in the definition of "proceeds of crime" thus on the aforesaid ground also, the impugned order deserves to be set aside. 9. The counsel further submitted that initial burden to prove a case of money laundering and involvement of the property in the said offence lies on the respondent ED. They failed to produce any evidence to show that the property under attachment was involved in the commission of crime so as to shift burden of proof on the appellant to disclose the source. Reference of the judgment of the Apex Court in the case of Vijay Madanlal Choudhary Vs. Union of India 2022 SCC Online SC 929 was given. 10. The learned counsel for the appellant lastly submitted that even Ronak Bijoriya had not endorsed property to be belonging to the appellant's son, rather made a statement under Section 50(2) of th....
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.... the parties from whom the appellant alleged to have taken loan which are Panwar Developers, Balaji Trading Co., M/s Dhaka Constructions and Smt. Anma Devi. The respondents accordingly analyzed the issue to find out the source to acquire the property under provisional attachment and caused notice to the appellant under Section 8(1) of the Act of 2002. The appellant disclosed the source for acquisition of the property but has not been believed by the Adjudicating Authority. In any case, the counsel for the appellant has not disputed the fact that allegation exists against Suresh Kumar for his involvement in commission of crime but with a caveat for holding him to be main accused. In any case, the argument was not based to show innocence of the appellant's son in commission of crime. In view of the above, we find a predicate offence and as a consequence, ECIR was recorded by the respondents followed by the investigation. During the course of investigation, the summons were sent to appellant's son and four parties from whom the loan was alleged to have been taken for purchase of the property. None appeared and thereby they evaded their presence to frustrate the investigation. The resp....
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....ellant to prove it coupled with the bank statement. The counsel was otherwise asked whether any material has been produced to show repayment of the loan amount. He fairly conceded that no repayment has been made. Thus, alleged loan amount remained for the sake of it and the appellant failed to prove the source for acquisition of the property in question. Thus, we are unable to accept the argument raised by the counsel for the appellant in that regard. It is no doubt that initial burden may lie on the ED to put forward the facts to make out a case but as per Section 24 of the Act of 2002, burden lies on the appellant to prove its case which he utterly failed. 14. The issue now remains that the property was purchased prior to the registration of the case thus whether it could have been taken to be direct proceeds. We find some error in the action of the respondents to consider purchase of the property out of direct proceeds of crime. In fact, it is to be taken for equivalent value to the proceeds and to that extent, we intend to rectify the order holding that the property in question was not a direct proceeds of crime but for equivalent value. 15. The issue now remains as to wh....
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....ttached. The relevant paras of the judgment in the case of Shri Sadananda Nayak (supra) are reproduced hereunder: "8. We have considered the rival submissions raised by the counsel for both the parties and scanned the record carefully. 9. It is not in dispute that an FIR was registered for commission of the scheduled offence. It was followed by recording of the ECIR. The respondent initially frozen the bank accounts of the appellant and his sons, which was followed by the provisional attachment of the properties vide order dated 27.07.2020. The Provisional Attachment Order has been confirmed by the Adjudicating Authority finding a case of money laundering. 10. The Ld. Counsel for the appellant did not raise argument in reference to registration of the FIR and recording of the ECIR, followed by investigation where the role of the appellant for commission of crime has been found. The only argument raised was to challenge the attachment of three properties out of four. However, no argument was raised for the property acquired subsequent to the commission of crime i.e., fourth Property. 11. It was submitted that the properties acquired prior to the c....
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....erson 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 commonly considered to be attachment of property of equivalent value. The second part applies when the property obtained or derived directly or indirectly out of the criminal activities is not available or vanished and, therefore, to secure the proceeds of equivalent value till completion of trial, it would fall under "the value of any such property" which is commonly taken to be the property of equivalent value. The case in hand falls in the second category of the definition of "proceeds of crime" because proceeds are not available and, therefore, the property of equivalent value is attached. 15. The argument has been made in reference to the judgment of Kerala High Court in the case o....
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....etation 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 to define the "proceeds of crime" was given by the Delhi High Court in the case of Axis Bank (supra). The relevant paras are quoted herein. "106. Among the three kinds of attachable properties mentioned above, the first may be referred to, for sake of convenience, as "tainted property" in as much as there would assumable be evidence to prima facie show that the source of (or consideration for) its acquisition is the product of specified crime, the essence of "money laundering" being its projection as "untainted property" (Section 3). This would include such property as may have been obtained or acquired by using the tainted property as the consideration (directly or indirectly). To illustra....
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....vant 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 High Court. 19. The reference to the judgment in the case of Pavana Dibur (supra) has been given where the Ld. Counsel for the parties did not refer Para 68 of the judgment in the case of Vijay Madanlal Choudhary (supra) decided by three judges of the Apex Court. In fact, elaborate arguments to define "proceeds of crime" on the issue were not raised by the parties after referring to the object of the Act of 2002 which was enacted out of the international convention. The Delhi High Court has discussed the issue elaborately and otherwise if we apply the judgement of Kerala High Court in the case of Satish Motilal Bidri (supra,) it would be making the second limb of the definition of "proceed....
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....uniary 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 any such property as appearing in Section 2(1)(u) altogether. The Court further notes that in Seema Garg the learned Judges themselves observed that the phrase value of any such property would not mean and include any property which has no link, direct or indirect, with property derived or obtained from commission of a scheduled offence. The Court observes that Section 2(1)(u) clearly and in unambiguous terms includes not only property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence but also the value of any such property. Seema Garg thus seems to gloss over the statutory imperatives underlying the deployment of the phrase ―or the value of any such....
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....ies 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 equivalent in value held within the country or abroad". However, both the italicised categories would be liable to be invoked in cases where the actual tainted property cannot be traced or found out. It is only where the respondents are unable to discover the tainted property that they can take the statutory recourse to move against properties which may fall within the ambit of ―value of any such property or ―property equivalent in value held within the country or abroad. To the aforesaid limited extent, properties purchased prior to 01 July 2005 may also become vulnerable and subject to action under the Act. However, enforcement action against such properties would have to satisfy the tests and safeguards as propoun....
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.... 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 equivalent value can be attached when the proceeds directly or indirectly obtained out of the crime has been vanished or siphoned off. Here, the significance would be to the property acquired even prior to commission of crime. It is for the reason that any property acquired subsequent to the commission of crime would be directly or indirectly proceeds of crime and then, it would fall in the first limb of the definition of proceeds of crime. In the second limb, which refers to "the value of any such property" would indicate any other property which was acquired 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 avai....
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....ent 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." 3.3. The aforesaid observations made by the Supreme Court enable this Bench to re- examine the entire issue, as in the considered opinion of this Bench, the judgment passed in Seema Garg's case (supra) is no longer a good law. This Court has taken this view due to the subsequent interpretation by the Supreme Court, which has superseded the le....
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....d into two broader categories namely tainted properties and untainted properties. The first part provides about the tainted properties derived or obtained directly or indirectly by any person as a result of criminal activity relating to a scheduled offence. Thereafter, the untainted properties are further divided into two parts; the first part deals with a situation where the property derived or obtained from 'proceeds of crime' is not traceable. In the aforesaid situation the competent authority is authorized to attach or confiscate any other property of accused, which is of the same value as that of the 'proceeds of crime'. The second sub-category is a result of amendment brought in 2015 and 2019 in the Act. It provides that if the property derived or obtained from the proceeds of crime has already been taken out of the Country then the property equivalent in value held within the Country or abroad can be made liable to be attached. This position has been explained by the Delhi High Court in an elaborate manner in Axis Bank's case (supra) and Prakash Industries case (supra). 3.6. It is not disputed that the Supreme Court in Vijay Madanlal Chaudhary....