TaxTMI 
TaxTMI 
TaxTMI 
2026 (2) TMI 435
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.... in respect of their contentions. BRIEF FACTS 4. We are only recording brief facts, as the issues relating thereto are not required to be examined for deciding the present appeal. 5. A partnership firm, by the name M/s. Nav Nirman Builders (hereinafter referred to as the "firm") was constituted on 01.04.1993 with Dharamveer Bhadoria (since deceased) as its Managing Partner. After more than a decade from its constitution, the appellant company was incorporated with the earlier partners of the firm, including Dharamveer Bhadoria who was made its Managing Director. The firm secured a work order from the Executive Engineer (RCD), Chaibasa, on 23.02.2007. Upon completion of the work, a payment of approximately Rs. 79,11,559/- was made to the firm. 6. Two years thereafter, a First Information Report (FIR) was registered for the offences punishable under Sections 120B, 420, 467, 468, and 471 of the Indian Penal Code, 1860 along with Sections 13(2) read with 13(1)(d) of the Prevention of Corruption Act, 1988 (hereinafter referred to as the "predicate offence"), against the Executive Engineer, the firm, and unknown others. 7. The sum and substance of the allegations in the FI....
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.... Adjudicating Authority had confirmed the PAO. 12. Charges were framed by the Special Court on 17.11.2018, against Dharamveer Bhadoria and the firm. On account of his death, on 02.05.2021, the proceedings against him, in both the predicate offence and the one under PMLA, were dropped. In view of the above, the respondent filed an application invoking Section 8(7) of the PMLA. Nearly two months thereafter, the appellant filed an application invoking Section 8(8) of the PMLA, inter alia, contending that the properties attached are its own. 13. The Special Court considered both the applications together, notwithstanding the pendency of the appeal filed under Section 26 of the PMLA, and allowed the application filed under Section 8(7) of the PMLA, on merits. Consequently, the application filed by the appellant under Section 8(8) of the PMLA was dismissed. Resultantly, the confiscation of the attached properties, as sought by the respondent, was ordered. While doing so, the Special Court was also pleased to hold that the proceedings initiated against the accused firm under the PMLA are liable to be dropped. The challenge made by the appellant before the High Court under Section 48....
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....rector, or Shareholder in the appellant company. The reconstitution of the appellant has been done after the initiation of proceedings under the PMLA and, thus, cannot come to its rescue. The facts make it clear that the appellant is a mere frontal and sham entity created to divert the money obtained by fraudulent means. The subject properties, having been purchased through the proceeds of crime, were attached and, thereafter, confiscated, being the 'value thereof' of the proceeds of crime. Section 2(1)(u) of the PMLA is expansive enough to deal with such a situation, as has been discussed in Vijay Madanlal Chaudhary and Ors. v. Union of India and Ors., (2023) 12 SCC 1. 17. The pendency of the appeal preferred by the appellant before the Appellate Tribunal under Section 26 of the PMLA would not come in the way of deciding the application under Section 8(7) of the PMLA. Reliance is placed on the decision of the Delhi High Court in Deputy Director, Directorate of Enforcement of Delhi v. Axis Bank & Ors. 2019 SCC Online Del 7854 in this regard. In any case, the aforesaid appeal has been dismissed, though subsequently. It is further submitted that the appellant has failed to dischar....
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....dment vide the Finance Act, 2015 and Finance (No. 2) Act, 2019, took within its sweep any property mentioned in Section 2(1)(v) PMLA derived or obtained, directly or indirectly, by any person "as a result of" criminal activity "relating to" a scheduled offence mentioned in Section 2(1)(y) read with Schedule to the Act or the value of any such property. Vide the Finance Act, 2015, it further included such property (being proceeds of crime) which is taken or held outside the country, then the property equivalent in value held within the country and by further amendment vide Act 13 of 2018, it also added property which is abroad. By further amendment vide Finance (No. 2) Act, 2019, Explanation has been added which is obviously a clarificatory amendment. That is evident from the plain language of the inserted Explanation itself. The fact that it also includes any property which may, directly or indirectly, be derived as a result of any criminal activity relatable to scheduled offence does not transcend beyond the original provision. In that, the word "relating to" (associated with/has to do with) used in the main provision is a present participle of word "relate" and the word "relatabl....
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....n must be borne in mind while reckoning any property referred to in the scheduled offence as proceeds of crime for the purpose of the 2002 Act. Dealing with proceeds of crime by way of any process or activity constitutes offence of money laundering under Section 3 PMLA. 107. Be it noted that the definition clause includes any property derived or obtained "indirectly" as well. This would include property derived or obtained from the sale proceeds or in a given case in lieu of or in exchange of the "property" which had been directly derived or obtained as a result of criminal activity relating to a scheduled offence. In the context of the Explanation added in 2019 to the definition of the expression "proceeds of crime", it would inevitably include other property which may not have been derived or obtained as a result of any criminal activity relatable to the scheduled offence. As noticed from the definition, it essentially refers to "any property" including abroad derived or obtained directly or indirectly. The Explanation added in 2019 in no way travels beyond that intent of tracking and reaching up to the property derived or obtained directly or indirectly as a result of c....
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....re kept or by whosoever they are held. To buttress this argument, reliance has been placed on the dictum in Attorney General for India v. Amratlal Prajivandas, (1994) 5 SCC 54 : 1994 SCC (Cri) 1325] and Raman Tech. & Process Engg. Co. v. Solanki Traders (2008) 2 SCC 302 : (2008) 1 SCC (Civ) 539]." (emphasis supplied) 20. Chapter - III of the PMLA deals with attachment, adjudication and confiscation of property, with one following the other. We wish to extract relevant provisions of the said Chapter, for the sake of convenience. Section 8 of the PMLA "8. Adjudication.- (1) On receipt of a complaint under sub-section (5) of Section 5, or applications made under sub-section (4) of Section 17 or under sub-section (10) of Section 18, if the Adjudicating Authority has reason to believe that any person has committed an offence under Section 3 or is in possession of proceeds of crime, it may serve a notice of not less than thirty days on such person calling upon him to indicate the sources of his income, earning or assets, out of which or by means of which he has acquired the property attached under sub-section (1) of Section 5, or, seized or frozen under Section 17....
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....r the purposes of computing the period of three hundred and sixty-five days under clause (a), the period during which the investigation is stayed by any court under any law for the time being in force shall be excluded. (4) Where the provisional order of attachment made under sub-section (1) of Section 5 has been confirmed under sub-section (3), the Director or any other officer authorised by him in this behalf shall forthwith take the possession of the property attached under Section 5 or frozen under subsection (1-A) of Section 17, in such manner as may be prescribed: Provided that if it is not practicable to take possession of a property frozen under sub-section (1-A) of Section 17, the order of confiscation shall have the same effect as if the property had been taken possession of. (5) Where on conclusion of a trial of an offence under this Act, the Special Court finds that the offence of money-laundering has been committed, it shall order that such property involved in the money-laundering or which has been used for commission of the offence of money-laundering shall stand confiscated to the Central Government. (6) Where on conclusion of a trial unde....
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.... V, is of the opinion that any encumbrance on the property or lease-hold interest has been created with a view to defeat the provisions of this Chapter, it may, by order, declare such encumbrances or lease-hold interest to be void and thereupon the aforesaid property shall vest in the Central Government free from such encumbrances or lease-hold interest: Provided further that nothing in this section shall operate to discharge any person from any liability in respect of such encumbrances which may be enforced against such person by a suit for damages." (emphasis supplied) Confirmation of a Provisional Attachment Order 21. Section 8 of the PMLA gets attracted upon filing of a complaint under Section 5(5) of the PMLA after a PAO is passed by the Director or any other officer, or when applications are made under Section 17(4) or Section 18(10) of the PMLA pursuant to the retention of property or record seized or frozen under Section 17 or Section 18 of the PMLA. Under Section 8(1) of the PMLA, the Adjudicating Authority, after satisfying itself that there exist reasons to believe that a person has committed an offence under Section 3 of the PMLA or is in possess....
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....e PMLA gets attracted, leading to the release of the property to the person entitled to receive it. Confiscation/Release of properties due to non-conduct of the trial 27. Section 8(7) of the PMLA allows confiscation of properties in the event of non-conduct of the trial, and is a complete provision by itself. A sine qua non for the Special Court to decide an application under Section 8(7) of the PMLA is an order of confirmation of the PAO by the Adjudicating Authority under Section 8(3) of the PMLA. 28. Section 8(7) of the PMLA can only be pressed into service in case of a contingency, on an application to be moved either by the Director of the prosecuting agency or a person claiming to be entitled to possession of the property. The said contingency would include situations such as when the trial cannot be conducted by reason of the death of the accused, or if the accused is declared as a proclaimed offender, or for any other reason, or the trial having commenced but could not be concluded. The expression "any other reason or having commenced but could not be concluded" must be read in conjunction with either the death of the accused, or the declaration of the accused as a....
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....y the Adjudicating Authority under Section 8(3) of the PMLA, an appeal lies to the Appellate Tribunal under Section 26 of the PMLA. Section 25 of the PMLA states that the Appellate Tribunal under the PMLA shall be the one constituted under Section 12 of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (hereinafter referred to as the "SAFEMA"). Section 25 of the PMLA "25. Appellate Tribunal.-The Appellate Tribunal constituted under sub-section (1) of Section 12 of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (13 of 1976) shall be the Appellate Tribunal for hearing appeals against the orders of the Adjudicating Authority and the other authorities under this Act." (emphasis supplied) Section 12 of the SAFEMA "12. Constitution of Appellate Tribunal.-(1) The Central Government may, by notification in the Official Gazette, constitute an Appellate Tribunal consisting of a Chairman and such number of other members (being officers of the Central Government not below the rank of a Joint Secretary to the Government) as the Central Government thinks fit, to be appointed by the G....
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....as expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within six months from the date of filing of the appeal." (emphasis supplied) Section 35 of the PMLA "35. Procedure and powers of Appellate Tribunal.-(1) The Appellate Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 (5 of 1908), but shall be guided by the principles of natural justice and, subject to the other provisions of this Act, the Appellate Tribunal shall have powers to regulate its own procedure. (2) The Appellate Tribunal shall have, for the purposes of discharging its functions under this Act, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908) while trying a suit, in respect of the following matters, namely:- (a) summoning and enforcing the attendance of any person and examining him on oath; (b) requiring the discovery and production of documents; (c) receiving evidence on affidavits; (d) subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872 (1 of 1872, requisitioning any public record or docum....
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....ndicator that a decision under Section 8(3) of the PMLA is not meant to be brought under the judicial scrutiny of the Special Court. We also take note of the time limit prescribed under Section 26(6) of the PMLA for the Appellate Tribunal to dispose of an appeal filed before it as expeditiously as possible, and make an endeavour to do so within a period of six months. This provision not only indicates the urgency for disposal, but also recognises that the right of a party to invoke Section 8(7) of the PMLA, in a given case, cannot be kept in suspense for a long time. 36. Thus, when an appeal or a further challenge is pending before the Appellate Tribunal or the concerned higher forum against an order passed under Section 8(3) of the PMLA, the Special Court is expected to refrain from dealing with an application filed under Section 8(7) of the PMLA, without awaiting the disposal of such appeal or further challenge. We also say so in view of the doctrine of merger. Doctrine of merger vis-à-vis an order under Section 8(3) of the PMLA 37. When a challenge is made to an order passed by the Adjudicating Authority under Section 8(3) of the PMLA before the Appellate Tribuna....
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....e PMLA, having been introduced by way of a subsequent amendment, is meant to give adequate relief to a claimant. In other words, a claimant need not wait for the conclusion of a trial under the PMLA if he is able to satisfy the requisite parameters as stipulated under the 2016 Rules. Rule 2 of the 2016 Rules "2. Definitions.-In these rules, unless the context otherwise requires,- xxx xxx xxx (b) "claimant" means a person who has acted in good faith and has suffered a quantifiable loss as a result of the offence of Money-laundering despite having taken all reasonable precautions, and is not involved in the offence of money-laundering;" (emphasis supplied) Rule 3A of 2016 Rules "3A. Manner of restoration of property during trial. -(1)The Special Court, after framing of the charge under section 4 of the Act, on the basis of an application moved for restoration of a property attached under sub-section (1) of section 5, or, seized or frozen under section 17 or section 18 of the Act prior to confiscation, if it thinks fit, may, for the purposes of the second proviso to sub-section (8) of section 8 of the Act, cause to be published ....
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.... gets extinguished, since such a vesting becomes absolute. By the operation of law, the Central Government gets ownership of the property, free from any encumbrances. Hence, this provision clearly delineates the final consequence of a confiscation order. 44. To sum up, Chapter - III of the PMLA provides a comprehensive picture of how properties involved in the offence of money-laundering are to be dealt with. With the aforesaid discussion, we shall now proceed to analyse the facts of the instant appeal. ANALYSIS 45. Admittedly, the appellant company, having suffered an order under Section 8(3) of the PMLA, had preferred an appeal under Section 26 of the PMLA which was pending on the file of the Appellate Tribunal even at the time of filing of the applications under Sections 8(7) and 8(8) of the PMLA. The fact that the said appeal was pending before the Appellate Tribunal, for want of coram, is not in dispute. The decision of the Adjudicating Authority under Section 8(3) of the PMLA is subject to the outcome of any further challenge to the same. 46. As discussed, the powers of the Appellate Tribunal are rather wide and exhaustive. What is referred to under Section 8(7) o....
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....l under Section 26 of the PMLA, as having become infructuous. 51. Hence, the interest of justice would require that the order passed by the Appellate Tribunal under Section 26 of the PMLA also be set aside, as merits have not been gone into by the Appellate Tribunal for no fault of the appellant. It would only be fair and just to restore the said appeal for a decision on merits. CONCLUSION 52. On the basis of the interpretation given by us in this judgment, we conclude as follows: * Section 8(7) and Section 8(8) of the PMLA are stand-alone provisions. * Section 8(7) of the PMLA gets attracted only in case of a contingency and an application under the said provision can be decided by the Special Court only once the confirmation order attains finality. * The expression "material before it" occurring in Section 8(7) of the PMLA has a limited import to the extent of showing the contingency and the entitlement to possession as regards the Director or any third party. In case of a party who has suffered an adverse order under Section 8(3) of the PMLA, relief under Section 8(7) of the PMLA can be sought for, provided there is new material that was not p....