TaxTMI 
TaxTMI 
2026 (3) TMI 916
X X X X Extracts X X X X
X X X X Extracts X X X X
....properties is of Rs. 19,11,98,679/-, while the value of 27 immovable properties as on the date of registration of deed was of Rs. 1,70,64,725/- while current guideline value is of Rs. 5,74,95,619/-. Brief facts of the case: 2. The PAO as well as the order passed by the Adjudicating Authority confirming it, were arising out of an FIR bearing No. 19/2012 registered against Shri K Ponmudi and others for commission of offences under Sections 406, 420 and 379 read with Section 120B of the Indian Penal Code, 1860 ('IPC') along with Section 13(2) read with Section 13(1)(d) of the Prevention of the Corruption Act, 1988. It was even for section 4(1) and 4(1A) read with Section 21 of the Mines and Minerals (Development and Regulation) Act, 1959 apart from Rule 36A of the Tamil Nadu Minor Mineral Concession Rules, 1959. 3. After registration of the FIR, the investigation was caused by the investigating agency and finding evidence for commission of offence, a charge-sheet was filed before the Court on 20.12.2012. It was alleged that Shri K. Ponmudi while serving as a Minster for Mines and Minerals in the State of Tamil Nadu entered into a criminal conspiracy with his son, Shri Gautham....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in an excess of 23,094 lorry loads without payment of fees, thereby causing a revenue loss of Rs. 2,65,58,100. 6. On 02.08.2007, Shri Gautham Sigamani submitted another application for quarrying in his patta land measuring 4.41 hectares in Poonthurai Village under various survey numbers, the land having been acquired vide Document No. 3808/2007 dated 06.06.2007. Licence No. RC A/G&M/1840/2007 dated 04.10.2007 was issued for a period of three years. Under the management of Shri Sathanandam, 1,85,332 lorry loads were quarried as against 34,899 loads permitted under the licence. Thus, 1,50,433 lorry loads were quarried illegally without payment of government fees, causing a revenue loss of Rs. 17,29,97,750. 7. Shri K.S. Rajamahendran, applied for a licence to quarry red sand in his own land at Poonthurai village, totally admeasuring 1.735 Hectares. He obtained Licence No. RC No. A/G& M/2414/2008 dated 13.01.2009 to quarry red sand for 3 years and under the quarry Administration run by Shri Sathanandam, quarried 69,048 lorry load of Red sand against 31,000 lorry loads for which licence fees were paid. Hence, by taking an additional 38,048 loads of red sand illegally, without pay....
X X X X Extracts X X X X
X X X X Extracts X X X X
....required fees, resulting in an aggregate wrongful loss of Rs. 28,37,85,600 to the Government. 9. On 22.09.2012, when Revenue Officials visited the site for inspection, Shri Sathanandam, Shri Kumar and Shri Gopinathan allegedly criminally intimidated and obstructed the Tahsildar and government officials from discharging their official duties. 10. The investigation concluded that Shri K. Ponmudi had committed offences under Sections 406, 420, 379 read with Section 120B IPC, Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988, and Sections 4(1) and 4(1A) read with Section 21 of the Mines and Minerals (Development and Regulation) Act, 1957 and Rule 36A of the Tamil Nadu Minor Mineral Concession Rules, 1959. Shri Gautham Sigamani, Shri Jayachandran and Shri K.S. Rajamahendran were found to have committed offences under Sections 406, 420, 379 read with Section 120B IPC and the corresponding provisions of the Mines and Minerals Act and Rules. Shri Sathanandam was found to have committed offences under Sections 406, 420, 379 read with Section 120B IPC, Sections 353 and 506(1) IPC, and relevant provisions of the Mines and Minerals Act and Rules, while Sh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....with all requisite approvals, thus cannot make out a case of money laundering until it is shown that the funds in question were prima facie a proceed of crime. The respondent has failed to establish the factum as well as the quantum of proceeds of crime. The respondent has maintained that 27 properties were acquired out of proceeds of crime which is nothing but a bald statement and the attachment of these 27 properties is without any valid reasons and therefore, without application of mind. 14. Ld. Counsel further submitted that the appellants disclosed the source for acquisition of each property whether immovable or movable. It has been ignored by the Adjudicating Authority while confirming the PAO. Certain properties were purchased even prior to the alleged commission of crime and thus could not have been co-related with the crime. In fact, lending properties were acquired prior to quarry licence; rather, it was granted subsequent to the purchase of lands followed by the quarry licence. The properties were, otherwise, disclosed in the Income-tax Returns, thus, it was not only the source for acquisition of properties was disclosed but even it was reflected in the Income-tax Ret....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and process the applications for grant of quarry licence to Shri Gautham Sigamani, Shri K.S. Raja Mahendran, brother-in-law of Shri Gautham Sigamani and Shri Jayachandran. It was with specific direction that applications should be processed and accepted without objection. The allegation for misuse of position as Minister for Mines and Minerals was made specifically. 19. Shri Gauthamn Sigamani acquired the patta land in Poonthurai Village under Survey No. 405/ 1B (.52.0), 405/ 12(.35.5), total area 87.5 Hectares, in document no. 1017/2007 dated 16.02.2007 from Mahaveer of Vepery, Chennai, S/o Kawalal Jain. They entered into a three-year lease agreement with Shri Jayachandran who had applied for a licence to quarry red sand. Since the activity was connected with the department under the control of Shri Ponmudi and since the property belonged to his son, by misuse of his official capacity, a licence bearing no. RO No. A/G& M/517/2007 dated. 21/03/2007 was issued permitting to quarry red sand for three years. Accordingly, with the activities managed by Sh. Loganathan and Sh. Sathanandam, 33094 lorry load of Red sand was quarried against 10,000 lorry loads for which permission was g....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted with Shri Ponmudi. Further, it was stated that he had purchased 0.16 hectares of land in S. No. 408/1A1 at Poothurai Village, Vanur Taluk for 1,00,000/ for agricultural purposes during the year 2010; that Sh. Gautham Sigamani had requested for leasing for land for mining of red sand and that accordingly one Notary agreement was entered with Gautham Traders for leasing above said land for a sum of INR 20,000/- per annum. When questioned about his role in the quarrying process, Sh. Sathanandam had stated that he was holding one JCB Excavator and one Proclin EX 100 which were employed by him to Gautham Trader to excavated red sand in the mines of Gautam Traders at Poothurai Village for which his entity Amutha Transport and Earthmovers collected charges @ Rs. 500 per hour per vehicle. It is also submitted that Section 2(v) of PMLA, the term "Property" includes the property of any kind used in the commission of offence under PMLA or any Scheduled Offence. The property of appellant has since been obtained as a result of criminal activity related to the conspiracy under section 120B of IPC in collusion with Gautham Sigamani so as to earn money by illegal mining of red sand beyond the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt, thereby irregularly profiting causing a total revenue loss of Rs. 28,37,85,600/- to Government revenue. 25. On 22.09.2012, when the Revenue Officials, went for inspection to the place where the incident had taken place, S/Shri Sathanandam, Kumar and Gopinathan threatened the Tahsildar and Government officials and thereby stopped the Officials and employees from doing their government work by criminally threatening them. 26. Hence, Shri K. Ponmudi committed punishable offence under Sections 406, 420 and 379 r/w section 120B of Indian Penal Code, 1860, Section 13(2) r/w Section 13(1)(d) of Prevention of Corruption Act, 1988 and Section 4(1), 4(1A) r/w Section 21 of Mines and Minerals( Regulation and Development) Act, 1957 and Rule 36A of Tamil Nadu Minor Mineral Concession Rules, 1959 r/w Section 120-B IPC, while S/Shri Gautham Sigamani, Jayachandran and K.S. Rajamahendran committed punishable offence under Sections 406, 420 and 379 r/w section 120-B of IPC, 4(1), 4(1A) r/w Section 21 of Mines and Minerals( Regulation and Development) Act, 1957 and Rule 36A of the Tamil Nadu Minor Mineral Concession Rules, 1959, Shri Sathanandam committed punishable offences under Sections ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....llants multiplied by the gain on per lorry load of red sand. The income so disclosed exceeded to the legitimate gain out of the quarry licence excavation of minerals. Therefore, the properties have been rightly attached for the value equivalent to the proceeds of crime apart from the properties acquired directly or indirectly out of the proceeds of crime. The disclosure of income not generated by the legitimate source can be considered by the income-tax authorities to charge the tax but it cannot be ignored while determining the proceeds of crime. Thus, for all the reasons and details given about the disclosure of commission of crime and the acquisition of the proceeds of crime by the appellant, the Adjudicating Authority rightly confirmed the PAO. The prayer was caused to dismiss the appeals. Findings of the Tribunal: 30. The elaborate facts pertaining to the case have been mentioned while recording the rival submissions of the parties. It involves allegation for acquisition of quarry licence by the son of then Minister for Mines and Minerals, State of Tamil Nadu and his relatives apart from his close-friends. It is by exaggerating pressure on the Assistant Director, Mines a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s available on record but it would be unnecessarily to repeat the facts otherwise disclosed while recording the arguments raised by the Counsel for the respondent. The respondent have given basis for calculation of proceeds while raising the arguments and have been recorded by us. Those arguments with details are sufficient to prove calculation of the proceeds of crime. 34. The issue now remains about the disclosure of the source for acquisition of properties with further statement that certain properties were purchased even prior to commission of crime. The aforesaid fact has also been clarified by the respondent. It is submitted that the disclosure of the property in the income- tax return does not make it to be legitimate for the purpose of Act of 2002. It is more so when generation of income disclosed in the returns was not from the legitimate source barring the income which was legitimate out of the sale of red sand for 10,000 per lorry load. 35. In the light of the facts given above, if the properties were acquired out of the illegitimate source of income disclosed in the income-tax return, it would not make out it to be untainted property, rather, it would remain taint....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence;" 13. The perusal of the definition aforesaid shows three limbs. In between every limb word "or" has been used to divide the definition into three parts. The first part refers to the property acquired or derived directly or indirectly out of the criminal activities relating to the scheduled offence. In the first part, all those properties which are acquired directly or indirectly out of criminal activities would be termed to be the proceeds of crime. The properties can be acquired directly or indirectly with the use of proceeds of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he property acquired prior to commission of crime would not fall in the definition of "proceeds of crime", then the accused would commit the crime and immediately proceeds would be siphoned off or vanished so that it may not remain available for attachment. In fact, the word "the value of any such property" was inserted by the legislature to attach the property of equivalent value, if the proceeds out of commission of crime is not available or vanished. If the second limb of the definition is made dependent on the first limb, it would be literally re-writing the provision or making it redundant to a great extent and for this, jurisdiction does not lie with any court of law which includes even the Constitutional Court. They can declare any provision to be unconstitutional but till then there remains presumption of constitutional validity. 16. At this stage, we may refer to Para 68 of the judgment in the case of Vijay Madanlal Choudhary (supra) which is quoted hereunder. "68. It was also urged before us that the attachment 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... any connection with criminal activity or its result. The same, however, are intended to fall in the net because their owner is involved in the proscribed criminality and the tainted assets held by him are not traceable, or cannot be reached, or those found are not sufficient to fully account for the pecuniary advantage thereby gained. This is why for such untainted properties (held in India or abroad) to be taken away, the rider put by law insists on equivalence in value. From this perspective, it is essential that, before the order of attachment is confirmed, there must be some assessment (even if tentative one) as to the value of wrongful gain made by the specified criminal activity unless it be not possible to do so by such stage, given the peculiar features or complexities of the case. The confiscation to be eventually ordered, however, must be restricted to the value of illicit gains from the crime. For the sake of convenience, the properties covered by the second and third categories may be referred to as "the alternative attachable property" or "deemed tainted property". 17. The judgment of the Delhi High Court makes it clear that the definition of "proceeds of cri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Kerala High Court going against Para 68 of the judgment of the Apex Court in the case of Vijay Madanlal Choudhary (supra). The judgment of Seema Garg (Supra) has been dealt with by the Delhi High Court in the case of Prakash Industries Ltd. v. Directorate of Enforcement reported in 2022 SCC OnLine Del 2087. The relevant paras are quoted hereunder: "76. Seema Garg principally holds that the phrase value of any such property and property equivalent in value held within the country or abroad cannot be ascribed the same meaning and effect. The learned Judges comprising the Division Bench then proceeded to hold that even if the intent of the legislature was to include any property in the hands of a person within the ambit of the expression proceeds of crime‖, there would be no need to create three limbs of definition of proceeds of crime. xx xx xx xx xx xx 79. Regard must also be had to the fact that the legislation itself is dealing with contingencies where proceeds of crime are layered and their origins camouflaged 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 situ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....deprived of vital and purposive content. The Court further notes that Axis Bank had enunciated important safeguards which would apply in respect of third-party interests in deemed tainted property. Those caveats duly secure and protect bona fide third-party interests created for valid consideration. This Court, thus, reaffirms those defences as were culled out in Axis Bank. The Court thus reiterates the interpretation accorded to Section 2(1)(u) by this Court in the aforesaid decision. Consequently, and for all the aforesaid reasons this Court finds itself unable to agree with the principles as laid down in Seema Garg as well as the subsequent decisions rendered by the Andhra Pradesh High Court in Kumar Pappu Singh Vs. Union of India and the Patna High Court in HDFC Bank Limited Vs Government of India, Ministry of Finance. 81. The Court also takes note of the position that although SLP (Crl) No. 28906/2019 is pending before the Supreme Court against the decision rendered in Axis Bank, the judgement of this Court has not been stayed or placed in abeyance. The interim order of 30 August 2019 passed in the aforesaid Special Leave Petition only requires parties to maintain sta....
X X X X Extracts X X X X
X X X X Extracts X X X X
...." having three limbs to give meaning to each limb for the interpretation of the definition of the "proceeds of crime". The reference of Para 68 of the judgment of three judges Bench of the Apex Court in the case of Vijay Madanlal Choudhary (supra) was not cited and thus counsel for the respondent submitted that the judgment in the case of Pavana Dibur (supra) does not propound ratio on definition of "proceeds of crime" and, therefore, direction for the property acquired prior to commission crime is to be taken on facts of that case. 22. It has already been clarified by us that if the definition of "proceeds of crime" is given interpretation by dividing it into two parts or by taking only two limbs, then it would be easy for the accused to siphon off or vanish the proceeds immediately after the commission of scheduled offence and in that case none of his properties could be attached to secure the interest of the victim till conclusion of the trial. This would not only frustrate the object of the Act of 2002, but would advance the cause of the accused to promote the crime of money laundering. The Judgment in the case of Vijay Madanlal Chaudhary (supra) is of three judges ben....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oceeds out of the crime but even in given circumstances and scenario that the property was acquired prior to commission of crime then, also under certain circumstances, it can be attached for "the value of any such property." 23. At this stage, it is reiterated that any other interpretation other than the one taken by Delhi High Court in the cases of Axis Bank (supra) and Prakash Industries (supra) for the definition of "proceeds of crime" would defeat the object of the Act of 2002. It is more especially when the arguments raised by the appellant that the property acquired prior to the commission of crime would not fall in the definition of "proceeds of crime". In that case, the task of the accused would become very easy to first commit the scheduled offence and after obtaining or deriving the property out of the criminal activities, immediately siphon off or vanish so that it may not remain available for attachment and otherwise the contingency aforesaid would satisfy only the first limb of definition of "proceeds of crime" leaving 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... if the property derived or obtained, directly or indirectly, from the proceeds of a crime of scheduled offence is not traceable, then any property of equivalent value falls within the scope of the expression 'proceeds of crime'. In 2015, the amendment restructured the definition into three parts to cover the property taken or held outside the country. The concept of the property of equivalent value was introduced with respect to the aforementioned properties. The amendment enabled the authorities to go after any other property of a person of equivalent value. In 2019, the scope of the phrase 'proceeds of crime' was further expanded so as to include other properties which were not directly 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. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... equivalent value. 3.7. While interpreting a statutory provision, it is the bounden buty of the Courts to interpret it in manner so that each word used by the statute conveys a meaning it was assigned by the Legislature. The words used in statute are of utmost significance. The Court cannot widen or restrict the provisions on its own whims and fancies. When a statute's language is clear and unambiguous, the general rule of interpretation of statute is to read the provision as a whole and the Court must adhere strictly to the ordinary, plain meaning of the words used. The words in a statute are used precisely, not loosely, and efforts must be made to interpret them in a literal manner to 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 o....