TaxTMI 
TaxTMI 
2026 (3) TMI 1206
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....3 dated 12.03.2014) against one Mr. Christian Michel James (hereafter referred to as Christian Michel), owner of M/s Global Trade & Commerce Ltd., having registered office in London, and Consultant of M/s Agusta Westland, S.P.A., and other unknown persons, for investigation of alleged illegal dealings of M/s Finmeccanica, Italy in the matter of procurement of 12 VVIP Helicopters from M/s Agusta Westland U.K., a subsidiary of Finmeccanica, Italy. The offences under sections 120-B read with 420 of IPC and sections 7, 8, 9, 12, 13(2) read with 13(1)(d) of the Prevention of Corruption Act, 1988 (PC Act) were cited in the FIR. 3. As the FIR disclosed offences which constitute scheduled offences under the PMLA, the Enforcement Directorate (ED), on 03.07.2014, registered an Enforcement Case Information Report (ECIR) numbered as DLZO/15/2014/AD(VM), against the suspects/accused persons and undertook investigations under the PMLA. 4. During the course of investigations under the PMLA, the ED perused copies of the various documents which the Ministry of Defence, Govt. of India, had received from Consulate General of India in Italy in connection with the kickbacks paid by M/s AgustaWest....
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.... having a driver in Delhi, namely Mr Narayan whose phone No. is 09643555494; • Statement of Shri Narayan was recorded under PMLA, 2002 wherein he has stated that property bearing A-2/75, Safdarjung Enclave was purchased in the name of M/s Media Exim Pvt. Ltd. which is in the name of Mr R.K. Nanda; • Statement of Shri R.K. Nanda was recorded under. PMLA, wherein he has stated that M/s Media Exim Pvt. Ltd. was incorporated by him, on the instructions of Mr Christian Michel, in which funds were received from Mr Christian Michel, and the funds so received were utilized in the purchase of various immovable/movable properties in the name of M/s Media Exim Pvt. Ltd.; • Statements under Section 50 of the PMLA were also recorded of other persons, including J.B. Subramaniyan and Amrit Pal Singh. Account statement of bank account with HDFC Bank, Janpath was also obtained. 5. Based on the information gathered, a Provisional Attachment Order (PAO No. 04/2015 dated 19.03.2015) was passed, attaching the following properties standing in the name of M/s Media Exim Pvt. Ltd.: 1. Fixed Deposit with HDFC bank, Janpath for an amount of Rs.49.74 lakh ....
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....act Services Agreements dated 01.03.2010 and 26.05.2010, to Mr. Christian Michel through his company, M/s Global Services FZE, Dubai, UAE. Reference is made in this regard to paragraphs 7 and 8 of the Respondent's Reply. 11. It is contended that in stark and irreconcilable contrast to the above, the remittances received by the Appellant company, M/s Media Exim Pvt. Ltd., were during the period 26.10.2005 to 26.04.2007, i.e., nearly five years prior to the alleged scheduled offence and the so-called post-contract agreements. The chronology of events is undisputed, admitted and the same completely demolishes the Respondent's case. It is submitted that proceeds of crime cannot exist prior in time to the commission of the scheduled offence, and any attempt to artificially link pre-existing legitimate receipts with a much later alleged offence is legally impermissible. 12. It is argued that despite this admitted factual position, the Respondent has alleged that remittances aggregating to Rs. 6.33 crore received by the Appellant Company constitute proceeds of crime, while deliberately suppressing material facts, including the dates of receipt of the amounts (26.10.2005 to 2....
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....mounts received were refunded after obtaining due approval from the Reserve Bank of India, vide approval dated 16.08.2012, permitting remittance of Rs. 6,09,73,984/- to M/s Global Services FZE, Dubai, UAE, with the balance having already been refunded earlier. To make such refund, the properties purchased from money kept idle were sold and the proceeds thereof were utilised. 16. The judgement of the Hon'ble Supreme Court in Aslam Mohammad Merchant v. Competent Authority, (2008) 14 SCC 186 is relied upon to argue that existence of a link or nexus between the property sought to be proceeded against and the alleged illegal activity is essential. In the said case, it was held as follows: "18. It is, therefore, evident that the property which is sought to be forfeited must be the one which has a direct nexus with the income etc. derived by way of contravention of any of the provisions of the Act or any property acquired therefrom. What is meant by identification of such property having regard to the definition of 'identifying' is, that the property was derived from or used in the illicit traffic. 19. The property having regard to the said definition would include....
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....;ble Supreme Court has held that the authority to prosecute under the PMLA, 2002 is triggered only upon the existence of proceeds of crime. In the absence of proceeds of crime, the very jurisdiction to prosecute is not attracted. The following para from the judgment is cited: "150. Be it noted that the authority of the authorised officer under the 2002 Act to prosecute any person for offence of money laundering gets triggered only if there exist proceeds of crime within the meaning of Section 2(1)(u) of the 2002 Act and further it is involved in any process or activity. Not even in a case of existence of undisclosed income and irrespective of its volume, the definition of "proceeds of crime" under Section 2(1)(u) will get attracted, unless the property has been derived or obtained as a result of criminal activity relating to scheduled offence." 21. It is argued that in the present case, there is no material whatsoever to demonstrate that the Appellant is in possession of proceeds of crime. Mere receipt of money through legitimate commercial transactions cannot be equated with possession of tainted property. The existence of proceeds of crime is a jurisdictional pre-cond....
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....Defence (MoD), Government of India from 6000 mt. to 4500 mt. as mandatory Operational Requirements (OR), to which it earlier opposed vehemently on the grounds of security constraints and other related reasons. Finally, the contract was awarded to M/s. Agusta Westland in the year 2010. 26. It was revealed that in order to get this contract, 30 million Euros were paid to Mr. Christian Michel through his company, M/s Global Services FZE Dubai, UAE. The kickbacks were paid in guise of two post Contract Services Agreements dated 01.03.2010 and 26 05 2010 between Agusta Westland and Global Services FZE Dubai. The funds remitted from M/s Global Services FZE, Dubai to M/s Media Exim Pvt. Ltd. are a part of the aforesaid proceeds of crime in terms of Section 2(1)(u) of PMLA,2002. In total Rs. 6.33 crores have been remitted from M/s Global Services FZE, Dubai to M/s Media Exim Pvt. Ltd. Therefore, immovable/movable properties acquired by M/s Media Exim Pvt. Ltd, through the funds generated out of the funds received by M/s Media Exim Pvt. Ltd. from M/s Global Services, FZE, Dubai are also a part of the proceeds of crime. Therefore, the competent Authority has rightly provisionally attached....
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.... 17 of PMLA 2002 was taken against the Appellant. The provision of section 26 of the Indian Penal Code, 1960 (IPC) is cited as per which, a person is said to have reason to believe a thing if he has sufficient cause to believe that thing but not otherwise. It is submitted that the respondent had sufficient material in hand and tangible information for the formation of the belief. Based on the tangible materials, evidences and reasons believe, the provisional attachment order was issued. 30. As for the reason to believe under section 8(1), it is submitted that the 'reason to believe' of the Adjudicating Authority under Section 8(1), was based on material in possession submitted by the respondent in PAO OC No 438/2015. 31. Based on the above arguments and contentions, it is argued by the respondent Directorate that the impugned order does not call for any interference and, therefore, the appeal may be dismissed being devoid of merit. Analysis & Findings 32. I have given careful consideration to the material on record and the rival contentions of the parties. The first contention of the appellant is that the contract between the IAF and M/s Agusta-Westland, from which the ....
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....g funds to the said company. In all, INR 6,33,56,871/- were transferred to the said companies account between 26.10.2005 and 26.04.2007. Investigations further revealed that on the instructions of Mr Christian Michel, Shri R K Nanda invested the funds so received in M/s Media Exim Pvt Ltd from M/s Global Services, FZE, Dubai in the purchase of five immovable properties, jewellery, painting, car, etc in the name of M/s Media Exim Pvt Ltd and sold four immovable properties, out of five purchased by him and jewellery, from which a net gain of Rs. 775.38 Lakh was made. These gains from the Rs. 633.00 lakh remittances by the company (Media Exim) from M/s Global Services, FZE, Dubai, was used for acquisition of movable and immovable properties and were subsequently disposed at a profit. 35. It is emphasised by the respondent in their reply that the process of procurement of VVIP Helicopters was initiated as early as in 1999 by issuing a Request for Proposal (RFP) to 11 global vendors with service ceiling of 6000 mt. Therefore, although the contract for procurement of the helicopters was signed only in 2010, the same was in the works for over ten years. As such, there is no merit in th....
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....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 crime. The use of proceeds directly or indirectly would be relevant part to fall in first part of the def....
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...., 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 opinion, is tenuous. For, the definition of "proceeds of crime" is wide enough to not only refer to the p....
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....ecause 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 crime" has three limbs and in the second limb the properties of equivalent value to the proceeds obtained out....
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....houdhary (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. xxxx 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 situation where a person who has obtained proceeds of crime by commission of a scheduled offence has managed to ensure tha....
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....ich 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 status quo. Insofar as the judgement of the Punjab and Haryana High Court in Seema Garg is concerned, although SLP (C) No....
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....ce 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 Dibbur (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 bench while the judgment in the case of Pavana Dibbur (supra) is of two judges bench. The issue has otherwise been dealt with by thi....
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....e 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 crime" to be redundant. 24. In view of the above, we are unable to accept the only argument raised by the appellant an....
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....hings, it is pointed out that the statements were recorded on various dates, in his own handwriting. 41. It is next contended that the appellants herein are not named, arrayed, or even referred to in the said FIR. As regards Mr. Bhanu Nanda, the appellant in Appeal No.1067/2015, it is further contended that he was appointed as a director only with effect from 22.10.2013 and was not associated with the appellant company during the period when the proceeds of crime were allegedly received. 42. The legal position on the above issue is by now very clear that the 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. It has been so held by the Hon'ble Supreme Court in its landmark judgment in the case of Vijay Madanlal Choudhary, Special Leave Petition (Criminal) No. 4634 of 2014). In the said case, it was further held by the Apex Court that the objective of enacting the Act was the attachment and confiscation of proceeds of crime which is the quintessence, so as to combat the evil of ....