TaxTMI 
TaxTMI 
2026 (3) TMI 1077
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....o. 10/2024 dated 25.09.2024, attaching the properties of the appellants herein. In the present appeals, the attachment of a total of six immovable properties of the five appellants herein valued at total of Rs. 23,85,78,967/- has been challenged. Facts in Brief 2. The relevant facts briefly are that an FIR no. RC 2192022E0003 was registered by the Central Bureau of Investigation (CBI) EO-I, New Delhi on 30.03.2022 under Sections 120 B, 411, 421, 468, 471 & 477-A of the Indian Penal Code 1860 (IPC) and Section 13(2) r/w 13(1)(d) of the Prevention of Corruption Act, 1988 (PC Act) against M/s Allied Strips Ltd. (ASL), a closely-held private limited company, and entities and individuals related to it. It was alleged that the accused company, through its directors, promoters, employees and others, had siphoned and diverted funds, thus committing criminal misappropriation, breach of trust, cheating and other fraudulent acts. This is alleged to have caused a wrongful loss amounting to approximately 1392.86 Crores (including contractual interest) to a consortium of banks led by the Canara Bank. The loans were secured through hypothecation of stocks and book debts, mortgages and perso....
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.... various grounds. Arguments on Behalf of the Appellants 8. On facts, it is firstly pointed out that in the case of M/s Suncity Projects Pvt. Ltd., (the appellant in FPA-PMLA-574/GGM/2025), immovable properties of a total value of Rs.16,66,00,103/- have been attached. In the case of M/s Vareshwar Realtors Pvt. Ltd. (the appellant in FPA-PMLA-575/GGM/2025) immovable properties of a total value of Rs. 77,84,375/- have been attached. It is submitted that the immovable properties in question were purchased in the year 2016 admeasuring 7 Bigha 1 Biswa i.e. 1.846458 acre. In the case of M/s Ratnanidhi Estates Pvt. Ltd., (the appellant in FPA-PMLA-576/GGM/2025), immovable properties of a total value of Rs.61,72,380/- were attached. The properties were purchased by the appellant in the year 2016, admeasuring 8 Bigha 19 Biswa i.e. 1.846458 acre. In the case of M/s Glorious Projects Pvt. Ltd. (the appellant in FPA-PMLA-577/GGM/2025) immovable properties valued at Rs. 2,67,50,000/- comprising land, admeasuring 0.66875 acre purchased in the year 2003 has been attached. In the case of M/s DVOK buildcon LLP (the appellant in FPA-PMLA-579/GGM/2025), immovable properties valued at a total of ....
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....t company to two of the alleged "related companies", i.e., M/s Mercury Digital Service Pvt. Ltd. (M/s MDSPL) M/s Prudential Metallics Pvt. Ltd. (M/s PMPL). Accordingly, attachment equivalent to Rs.23.85 crores spread over to properties of appellant company and other independent entities shown as related entities of appellant company were made even though there was no scheduled crime in respect of any of the transactions with accused company. 12. It is further contended that the concept of "related companies" has been borrowed by the attaching officer from two forensic audit reports considered while admitting the main accused company, M/s ASL, under NCLT resolution. Even though all liabilities and credits of accused company, M/s ASL got extinguished on NCLT resolution, in order to justify the attachments, ED has gone behind the NCLT order and analysed the forensic audit reports, which were never ever supplied to the appellants despite demand, to scrutinize transactions to resort to alleged "outstanding" for attachment). Thus, the necessary relied upon documents have not been supplied, which renders the order nullity in law. 13. It is submitted that ED registered the first ECIR....
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....ies of third-party entities, who have no transactions with accused company. 17. It is further argued that the above facts reveal that there are no "reasons to believe", much less, reason to believe sufficient to justify the attachment under PMLA. There is neither crime nor any property which can be said to be "proceed of crime" in possession of the appellant, nor any element of money-laundering. The attachment is mala fide and deserves to be set aside. 18. In light of the above, it is prayed that Appellate Tribunal may be pleased to set aside the PAO No. 10/24 and O.C. No. 2444/24 and adjudication order of the learned AA. Arguments on Behalf of the Respondent 19. The respondent has opposed the contentions raised on behalf of the appellants and submitted that the impugned order is well-reasoned based on the material gathered, passed after hearing all the parties, and after due consideration of their submissions. 20. A perusal of the written reply to the appeal filed by the respondent directorate reveals that the Directorate has made detailed submissions regarding the wrongdoings of M/s ASL and its related entities, and the modus operandi adopted by them for siphoning ....
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....ies. As already stated, six immovable properties of the five appellants herein valued at total of Rs. 23,85,78,967/- have been attached which are under challenge in these appeals. 27. Upon perusal of the Provisional Attachment Order dated 25.09.2024, it is seen that the relevant paragraphs wherein quantification of the proceeds of crime to be attached in the hands of the appellant companies was made read as follows: "5.3. AND WHEREAS, the details of transactions between related companies of M/s ASL and M/s Suncity Projects Pvt. Ltd. (SPPL): 5.3.1. During the course of investigation, it was revealed that the following companies are the related companies of M/s ASL by virtue of having common Director / Shareholders etc: a) M/s Mercury Digital Services Pvt. Ltd. (MDSPL): Its shareholders include M/s Accentor Infotech Pvt. Ltd. which have Mrs. Ashima Aggarwal w/o Mr. Gaurav Aggarwal as shareholder. Mr. Gaurav Aggarwal is one of the Directors of the company. This company was classified as related entity by the Forensic Audit Report dated 13.06.2018. b) M/s Prudential Metallics Pvt. Ltd. (PMPL): Its shareholders include M/s Accentor Infotech Pvt. Li....
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.... in M/s SPPL from July 2014 to September 2014. This investment was made in ten tranches and the interest on ICD was provided @ 10% p.a. upto 31.03.2015 and @9% p.a. in FY 2015-16.; 5.3.7. It was revealed during the investigation that M/s SPPL sold part of its investment in CCDs of M/s Aradhak Buildcon Pvt. Ltd. to M/s PMPL for a consideration of Rs. 4,56,00,000/- on 02.03.2017. The remaining Rs, 12,301/- was refunded. Later, on 24.02.2021, the CCDs haled by M/s MDSPL were converted into equity shares. Accordingly, the total outstanding of M/s PMPL was Rs. 4,56,00,000/-; 5.3.8. Thus, M/s SPPL had total outstanding of Rs. 23.85 crores During the course of investigation, further related entities of M/s SPPL, viz. M/s Glorius Projects Pvt. Ltd., M/s Ratnanidhi Estates Pvt. Ltd., M/s Vareshwar Realtors Pvt. Ltd. And M/s Dvok Buildcon LLP, the immovable properties of M/s SPPL and its related entities, namely, in which key managerial persons of M/s SPPL are KMPs have been identified during the investigation and mentioned as under: Table No. 19: Details of the properties identified of M/s SPPL and its related entities S. No. Details of Property Owner of the Pr....
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....Ld. Counsel for the appellants. It appears that the sole criterion for linking the appellant companies with the proceeds of crime is that these three companies were "related companies" of M/s ASL on account of having common directors/shareholders. The issue to be considered, therefore, is whether the mere fact of having common directors/shareholders is enough to hold that tainted money flowed from the accused entities to M/s MDSPL/PMPL/MDSWPL and further, through them to the appellant companies who received money from these three companies by way of ICDs/CCDs. The obvious answer in my view would be 'no'. 29. In order to provisionally attach a property under section 5(1), the authority specified thereunder has to have the reason to believe, on the basis of material in his possession, that the person whose property is being proceeded against "is in possession of any proceeds of crime". The term "proceeds of crime" has been defined under section 2(1)(u) to mean property derived or obtained, whether directly or indirectly, by any person, as a result of criminal activity relating to a scheduled offence. No doubt, the 'value' of such proceeds of crime also falls within the ambit of 'p....
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....ence from which the proceeds were derived or obtained. In the landmark judgment of the Apex Court in Vijay Madanlal Choudhary, Special Leave Petition (Criminal) No. 4634 of 2014) it was categorically held that the objective of enacting the PMLA is the attachment and confiscation of proceeds of crime so as to combat the evil of money-laundering, by reaching the proceeds of crime in whosoever's name they are kept or by whosoever they are held. It was also specifically held that sweep of Section 5(1) is not limited to the accused named in the scheduled offence. It would apply to any person (not necessarily being accused in the scheduled offence), if he is involved in any process or activity connected with the proceeds of crime. Such 'process or activity' would include mere possession of tainted property. In sum and substance, therefore, the provisions of the PMLA enable the ED to attach the properties even of an unrelated person if any part of the proceeds of crime flowed to such unrelated person. Conversely, the property of even a "related" person cannot be attached if no part of the proceeds of crime flowed to the said person. The present case is one such. While a relationship based....