TaxTMI 
TaxTMI 
2026 (4) TMI 788
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....etitioner in Writ Petition Nos. 31957 and 31958 of 2022, and Mr. A.R.N. Sundareshan, learned Additional Solicitor General of India appearing for Mr. Anil Prasad Tiwari, learned Standing Counsel for Enforcement Directorate. 2. These are three writ petitions arising out of the same transaction by three different set of people. Since the issue involved and the factual matrix being common, the three writ petitions are being proceeded to be decided by this Common Order. 3. Writ Petition No. 31957 of 2022 has been filed by a group of petitioners namely Mahesh Agarwal, Mayur Agarwal and Pranita Agarwal. Mayur Agarwal is the son of Mahesh Agarwal and Pranita Agarwal is the wife of Mayur Agarwal. The three of them have challenged the order dated 19.04.2022 passed by the adjudicating authority under the Prevention of Money Laundering Act, 2002 (for short the 'PMLA). Vide the said impugned order, the adjudicating authority has allowed an application filed by the Directorate of Enforcement, Calcutta Unit, under Section 17(4) of the PMLA whereby they had prayed for retention of the materials seized in the course of search and seizure for the purpose of further investigation required to be....
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....aid account revealed that during the period of around 2½ years between 19.04.2014 to 30.11.2016, there was a transaction amounting to Rs.1184 crores from this account. Certain transactions from the said account also were found to have been subsequently layered in the personal bank account of the proprietor Radhika Agarwal. The DRI also found another Axis Bank account in the name of Radhika Agarwal, which too, revealed huge transaction amounting to more than Rs.400 crores to have undertaken between 20.05.2015 to 10.06.2018. 8. Likewise, there was another search and seizure proceeding conducted on 09.03.2021 at the residential and business premises of Sanjay Agarwal, Radhika Agarwal, Ajay Kumar Agarwal and Preet Kumar Agarwal. In the course of search, various incriminating documents, properties, and records were seized and an O.A. bearing O.A.No.474 of 2021 was filed seeking permission of the adjudicating authority for retention of the said documents for further investigation purpose. The search also revealed certain immovable properties having been acquired by Sanjay Agarwal. 9. In the course of investigation, certain incriminating materials were seized on 17.08.2021 an....
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....by the adjudicating authority is unsustainable for having not properly appreciated the source and sources from where the funds were generated by the petitioners in purchasing the properties, the documents of which were seized. It was also contended that the findings of the adjudicating authority that the properties purchased by the petitioners are from the proceeds of crime related to alleged smuggling activities in which Sanjay Agarwal and his family members were involved is without any cogent basis or material proof collected in the course of investigation. Hence, the said finding is purely imaginary in nature. 14. Further, the petitioners contended that as per Section 6(2) of the PMLA, an Adjudicating Authority shall consist of a Chairperson and two other Members, with at least one being a judicial member having experience in law, administration, finance or accountancy. Section 6(5)(b) stipulates that a Bench may be constituted by the Chairperson with one or two Members as deemed fit. On conjoint reading of these provisions, an Adjudicating Authority must comprise more than one member, with at least one judicial member, while deciding cases under Section 8(3) of the PMLA. How....
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....the name of Mahesh Agarwal, Pranita Agarwal and Mayur Agarwal. Further strong material against Mayur Agarwal was the regular phone calls that he was making to Sanjay Agarwal. The phone calls that were made by Mayur Agarwal to Sanjay Agarwal was on a mobile phone and the sim card used by Sanjay Agarwal was issued from Bangladesh. This establishes the close proximity that Sanjay Agarwal had with Mayur Agarwal and others. 18. Learned Additional Solicitor General further pointed that upon the Enforcement Directorate calling upon the petitioners to provide proof of the ownership and the sources of funds used for purchase of two villas in the name of Mahesh Agarwal and one villa in the name of Pranita Agarwal at M/s. Shanta Sriram Constructions, the petitioners did not provide for any such material in their support, nor did they provide for any cooperation assisting the Enforcement Directorate in the investigation, which all the more would go against the petitioners. According to the learned Additional Solicitor General, there was enough material in respect of the dubious transaction of three villas which was originally registered in the name of Mahesh Agarwal and Pranita Agarwal. ....
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....rima facie revealed from the proceedings and the materials on record is that from the phone calls made by Mayur Agarwal there appears to be frequent phone calls being made by Mayur Agarwal to Sanjay Agarwal and that on a phone belonging to Sanjay Agarwal which carried a sim-card from Bangladesh. Subsequently, the purchase of two villas in the name of Mahesh Agarwal and one in the name of Mr. Praneetha Agarwal without any substantial proof of the source of income and the mode of payment made to the developers. 22. All these facts go to prima facie establish the link that the petitioners Mahesh Agarwal, Pranita Agarwal and Mayur Agarwal had with one of the main accused Sanjay Agarwal, which further strengthens from the reluctance shown by them to reveal more details to the authorities concerned. All these facts are also strong enough material for the adjudicating authority to pass an order permitting the retention of materials and records seized in the course of search and seizure. 23. It would be trite at this juncture to refer to the provisions of Section 6 of the PMLA. For ready reference, Section 6 of the PMLA is reproduced hereunder, viz., "The Central Government ....
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....ixty-five) years. (9) The salary and allowances payable to and the other terms and conditions of service of the Member shall be such as may be prescribed: Provided that neither the salary and allowances nor the other terms and conditions of service of the Member shall be varied to his disadvantage after appointment. (10) If, for reasons other than temporary absence, any vacancy occurs in the office of the Chairperson or any other Member, then, the Central Government shall appoint another person in accordance with the provisions of this Act to fill the vacancy and the proceedings may be continued before the Adjudicating Authority from the stage at which the vacancy is filled. (11) The Chairperson or any other Member may, by notice in writing under his hand addressed to the Central Government, resign his office: Provided that the Chairperson or any other Member shall, unless he is permitted by the Central Government to relinquish his office sooner, continue to hold office until the expiry of three months from the date of receipt of such notice or until a person duly appointed as his successor enters upon his office or until the expiry of his term o....
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....e of administrative efficiency which enables speedy disposal of cases. 26. It would be relevant at this juncture to refer to a recent decision of the Delhi High Court in Naresh Bansaland Othres vs. Adjudicating Authority and Another 2025 SCC Online Del 8672, wherein in paragraph Nos. 45 to 49, it was held as under, viz., "D. Section 6 of the PMLA: Whether the AA was coram non judice? 45. Since the present issue concerning the validity of the SCN has been argued on two distinct limbs, this Court deems it appropriate to bifurcate the contentions under distinct heads and deal with them separately, the issues are as follows: i. Whether the SCN issued by AA is valid in view of the AA allegedly acting coram non judice under Section 6 of the PMLA; and ii. Whether an SCN can be issued even in the absence of prior attachment of properties by the Directorate. (i) Whether the SCN issued by AA is valid in view of the AA allegedly acting coram non judice under Section 6 of the PMLA? 46. Section 6(2) of the PMLA provides that AA shall comprise of a Chairperson and two other members; whereas, Section 6(5)(b) authorizes the Chairperson to co....
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....a judicial officer. While elaborating further, it was observed by the Court that under PMLA there exist sufficient checks and balances, since the order of the AA is subject to challenge before the AT under Section 26 of the PMLA, which is presided over by a retired Chief Justice. 49. To conclude, applying the aforesaid principles to the present case, this Court is of the view that the SCN issued by a Bench, comprising of a technical member, was valid. Consequently, the contention that the AA was acting coram non judice is founded on a misinterpretation or ignorance of the statutory framework. Thus, in the view of this Court, the issuance of the SCN is well within the contours of the PMLA, and as such, the first limb of argument advanced by the Petitioners, in furtherance of validity of SCN, is devoid of merit." 27. Similarly, the Delhi High Court in the case of J. Sekar vs. Union of India & Ors. 2018 SCC Online Del 6523 held at paragraph Nos.79 and 80, as under, viz., "Composition of the AA and AT 79. The Court next takes up the question of the composition of the AA on which extensive arguments were advanced by the learned counsel for the Petitioners. ....
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....ed by limitation under Section 5(1) of the PMLA?" 31. For ready reference, Section 5(1) of the PMLA is reproduced hereunder, viz., "5. Attachment of property involved in money-laundering.- [(1)Where the Director or any other officer not below the rank of Deputy Director authorised by the Director for the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that- (a) any person is in possession of any proceeds of crime; and (b) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds 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 ....
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....t admitting that there was any delay, the same would be a procedural irregularity which by itself would not vitiate the order passed by the Adjudicating Authority, particularly when the petitioners have been afforded adequate opportunity of being heard and the order is supported by material on record. Therefore, merely because there is some irregularity in the procedure followed, the same would not vitiate the order unless it results in miscarriage of justice or causes prejudice to the party concerned. The petitioners have failed to demonstrate any such prejudice. 35. Therefore, in the present case, far from being prejudiced, the petitioners were granted multiple opportunities to file their replies and explanations. The Adjudicating Authority proceeded only after affording complete opportunity of hearing. Therefore, even if there was any procedural irregularity in computation of limitation, the same would not render the order void or illegal. 36. Another issue before the Bench is "whether the findings recorded by the Adjudicating Authority in the impugned orders dated 19.04.2022 and 25.05.2022 are supported by material on record and whether there exists prima facie evidence t....
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....l detail records (CDR) analysis revealed frequent communications between Mayur Agarwal and Sanjay Agarwal. Significantly, the calls were made to a mobile phone of Sanjay Agarwal which carried a SIM card issued from Bangladesh. This establishes close proximity and coordination between the petitioners and the main accused. d) Despite repeated opportunities, the petitioners failed to provide credible and verifiable proof of the source of funds utilized for purchasing three villas worth substantial amounts. The explanation offered by the petitioners regarding the source of income is vague, unsubstantiated and not supported by any documentary evidence such as income tax returns, bank statements, or other financial records. e) The petitioners have shown lack of cooperation with the investigating agency and have failed to provide necessary documents and information despite specific requests. Whereas, under Section 50 of the PMLA, every person is obligated to furnish information and documents as may be required by the authorities. 40. The Hon'ble Supreme Court in the case of Vijay Madanlal Choudhary vs. Union of India (2023) 12 SCC 1 has comprehensively dealt with the ....
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....ion emerging from the principal provision [i.e. Section 2(1)(u)]. 106. The "proceeds of crime" being the core of the ingredients constituting the offence of money laundering, that expression needs to be construed strictly. In that, all properties recovered or attached by the investigating agency in connection with the criminal activity relating to a scheduled offence under the general law cannot be regarded as proceeds of crime. There may be cases where the property involved in the commission of scheduled offence attached by the investigating agency dealing with that offence, cannot be wholly or partly regarded as proceeds of crime within the meaning of Section 2(1)(u) of the 2002 Act - so long as the whole or some portion of the property has been derived or obtained by any person "as a result of" criminal activity relating to the stated scheduled offence. To be proceeds of crime, therefore, the property must be derived or obtained, directly or indirectly, "as a result of" criminal activity relating to a scheduled offence. To put it differently, the vehicle used in commission of scheduled offence may be attached as property in the case (crime) concerned, it may still not b....
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....y be true. Additionally, some other property if purchased or derived from the proceeds of crime even such subsequently acquired property must be regarded as tainted property and actionable under the Act. For, it would become property for the purpose of taking action under the 2002 Act which is being used in the commission of offence of money laundering. Such purposive interpretation would be necessary to uphold the purposes and objects for enactment of the 2002 Act. 109. Tersely put, it is only such property which is derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence that can be regarded as proceeds of crime. The authorities under the 2002 Act cannot resort to action against any person for money laundering on an assumption that the property recovered by them must be proceeds of crime and that a scheduled offence has been committed, unless the same is registered with the jurisdictional police or pending inquiry by way of complaint before the competent forum. For, the expression "derived or obtained" is indicative of criminal activity relating to a scheduled offence already accomplished. Similarly, in the event the p....