TaxTMI 
TaxTMI 
2025 (2) TMI 1596
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....ny entered into a Memorandum of Understanding dated 18.01.2012 ('MoU') with the Oriental Bank of Commerce (OBC) for the purpose of providing timely credit and other assistance to sugar cane farmers in terms of the scheme set out by the Bank in line with other commercial banks. As per the arrangement under the MoU, the farmer would authorize the Bank to disburse the loan amount sanctioned to him, by paying directly to the Company. The Company would then assist the individual farmers with their pre-harvest and post- harvest requirements. Upon the supply of sugar cane by the borrower farmer, the Company would route the cane payment into his/her loan accounts. Under this arrangement, the Bank disbursed a total of Rs. 148.59 crores to the account of the Company. As per the scheme of the MoU, the Company compiled a list of farmers based on data available with Cane Society (farmers' associations) and submitted the list with the requisite documents to OBC. The OBC conducted the final vetting of the loan applications and sanctioned loans to 5762 farmers by opening 5762 individual bank loan accounts. 3. Ld. Counsel for the Appellant stated that the OBC, vide letter dated 27.05....
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....at the OBC had no outstanding issue with respect to the loan under the MoU, and all issues with respect to that loan stood extinguished. Hence, the relationship between the consortium of Banks and the Company would be governed henceforth by the terms of the new loan. 5. Ld. Counsel for the Appellant submitted that owing to continued financial distress relating to sugar industry in general, the new loan was declared a Non-Performing Asset ('NPA') on 29.11.2016. Hence, the allegations in the Complaint filed with CBI were prima facie belated, motivated and mala fide in nature. The CBI registered case FIR No. RCBD1/2018/E/002 on 22.02.2018, and thereafter the ED registered ECIR No. ECIR/02/LKZO/2018 dated 27.02.2018. Respondent Directorate passed the PAO dated 29.06.2019 attaching the Distillery Unit of the Appellant Company valued at Rs. 180,40,82,131/- to the extent of Rs. 109.80 Crores. Ld. Counsel contended that the bare perusal of the reasons to believe set out in paragraph 21 of the PAO show that the present matter had arisen on account of non-payment of loan dues to the Bank and there was no criminal action, which was invocable. Ld. Counsel further contended that the ....
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....y prejudices the interests not only of the Company, but also of other stakeholders. Ld. Counsel contended that all bad debts do not and cannot automatically become subject matter of criminal investigations especially when the Complainant Bank had itself permitted restructuring of the debts arising from loans, under the farmers scheme to simple corporate loan. Ld. Counsel therefore pleaded to allow the Appeal. 8. Ld. Counsel for the Respondent Directorate submitted that the Impugned Order is well reasoned and speaking. He alleged that the Appellant Company cheated and defrauded the OBC on the pretext of financing sugar cane farmers of the regions. Rs. 148.60 crores taken as loan for 5762 farmers was diverted by the Appellant Company to its own needs. The Appellant and its Officials had conducted improper KYC of the farmers. The corporate loan of Rs. 110 crores advanced under multiple banking arrangement led by SBI for restructuring of debt of the Appellant Company was allowed to slip into NPA. He also alleged that disciplinary action was taken against the employees of the OBC. Ld. Counsel stated that the investigation revealed that Rs. 144.07 crores of the loan amount of Rs. 148.....
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.....2018. Rs. 148.60 Crores given as loan by the OBC purportedly for financing 5762 farmers were diverted to other accounts of the Appellant Company, which could not be traced. Such loss of money arose out of the alleged offences of cheating and defrauding the OBC, as well as the farmers. It is also matter of record that the KYC of the identified beneficiary farmers was not done properly, in which the allegation is that the officials of the Appellant Company were complicit. Thus, the loss of the said money is the proceeds which has arisen from the alleged crime. In this regard, the definition and the meaning of the offence of money laundering under Section 3 of PMLA is reproduced below: "Section 3. Offence of money-laundering- Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the 1[proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming] it as untainted property shall be guilty of offence of money-laundering. [Explanation.-For the removal of doubts, it is hereby clarified that,- (i) a person shall be....
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....roceeds of crime under this Chapter, he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and eighty days from the date of the order, in such manner as may be prescribed: Provided that no such order of attachment shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person authorised to investigate the offence mentioned in that Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or a similar report or complaint has been made or filed under the corresponding law of any other country: Provided further that, notwithstanding anything contained in [first proviso], any property of any person may be attached under this section if the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section has reason to believe (the reasons for such belief to be recorded in writing), on the basis of material in his possession, that if such property involved in money- lau....
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....tiated. It is open to examine the question whether the reason for the belief has a rational connection or a relevant bearing to the formation of the belief and is not extraneous or irrelevant to the purpose of the Section. In the present case such rational connection exists. Although the court cannot investigate about the sufficiency of the material the court can certainly examine whether there was any material in possession of the officer concerned and whether the material had any nexus with the formation of the belief. We find that the Deputy Director had adequate material to have the reasonable belief as is obvious from the list of statements recorded under Section 50 of PMLA and documents obtained and scrutinized which are mentioned in paragraph 6 of the PAO. In the present case the reasonable belief formed by the Deputy Director is based on the material available before her. Thus, there is a 'well established link or nexus between the belief formed and the material available. It cannot be said there was no basis for formation of the belief. The submission that the reasonable belief formed by Deputy Director u/s. 5(1) is baseless or ill-founded is not sustainable. The Deput....
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....ide 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" cannot be regarded as proceeds of crime has to be rejected. 13. The definition of "proceeds of crime" has three limbs as also elaborated in the Judgment given by the Hon'ble Delhi High Court in the case of Axis Bank [(2019) SCC OnLine Del 7854]. 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....
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....2010] observed the following in paragraph 6 of the Judgment: "6. It is now well settled that a provision of a statute should have to be read as it is, in a natural manner, plain and straight, without adding, substituting or omitting any words. While doing so, the words used in the provision should be assigned and ascribed their natural, ordinary or popular meaning. Only when such plain and straight reading, or ascribing the natural and normal meaning to the words on such reading, leads to ambiguity, vagueness, uncertainty, or absurdity which were not obviously intended by the Legislature or the Lawmaker, a court should open its interpretation tool kit containing the settled rules of construction and interpretation, to arrive at the true meaning of the provision. While using the tools of interpretation, the court should remember that it is not the author of the Statute who is empowered to amend, substitute or delete, so as to change the structure and contents. A court as an interpreter cannot alter or amend the law. It can only interpret the provision, to make it meaningful and workable so as to achieve the legislative object, when there is vagueness, ambiguity or absurdity....
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....ty" and the product came as a "purposeless piece" of legislation and that the provision had been enacted without any purpose and the entire exercise to enact such a provision was 'most unwarranted besides being uncharitable'." 16. In so far as the Appellant having questioned the reason to believe under Section 8(1) of PMLA is concerned, it is best answered by the Ld. AA in paragraph 2 of the Impugned Order: "I had gone through the Original Complaint, Provisional Attachment Order and the relied upon documents carefully and I found there are reasons to believe that defendant No. 1 & 2 have prima facie appear to have committed an offence of money laundering u/s. 3 of PMLA and is in possession of proceeds of crime. Notices were issued to all defendants asking them to file their written submission which are received and will be discussed later." We find that the written submissions of the Appellant have been duly considered and disposed of by the Ld. AA, while passing the Impugned Order. 17. Ld. Counsel for the Appellant has also challenged the valuation of the attached property. The definition of the 'value' given in Section 2(1)(zb) is as follows: "value mea....