TaxTMI 
TaxTMI 
2026 (4) TMI 1082
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....IVIPL") and its Managing Director, Mr. Boodati Lakshminarayan and other unidentified individuals on 01.08.2022. Apart from many offences, allegation for commission of offence under Section 420 of the Indian Penal Code, 1860 was made. The investigation revealed actions jeopardizing the interest of the numerous individuals wrongly causing wrongly losses amounting to Rs. 72,81,98,000 and corresponding wrongful gain to SIVIPL and its MD apart from others. In the FIR, it was alleged that MD of SIVIPL had promoted "Pre-Launch offer" on social media starting from June, 2019. The offer was for booking of the apartments in residential gated community comprising 32 floors in 10 towers. It was on approximately 23 acres of land in State of Telangana. 241 customers booked the apartments after paying Rs. 72,81,98,000/- but the Company failed to secure the necessary land and required permissions, resulting in its inability to deliver the possession of the flats. The money was neither transferred nor refunded to the investors thereby they were cheated by the Company and its Managing Director. 3. After registration of FIR No. 158/2022, it was discovered that 20 more FIRs had been lodged against ....
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....d of Survey No. 343/13 admeasuring two acres was sold with development rights. The appellant company received Rs. 14 Crore towards its consideration. It could not have been considered to be proceeds of crime for the transaction entered between the parties. In fact, the appellant company purchased 13 acres of land from M/s Phoenix Living Spaces Private Limited from legitimate source of income and out of the aforesaid a parcel of 2 acres of land was sold to SIVIPL with payment of consideration but erroneously taken to be a proceeds of crime. 8. Ld. Counsel for the appellant referred to another sale of land transaction under the Agreement dated 12.06.2020. The appellant had agreed to sell / transfer 9 acres of land in Survey No. 343/8 and 343/9 to SIVIPL for consideration of Rs. 50 Crore. Rs. 32.15 Crore in cash/cheques and the remaining amount to be adjusted against 80,000 sq. ft. of super built-up areas in any of its towers to be constructed by SIVIPL in those survey numbers apart from Survey No. 343/11, 343/12 and 343/13. It was, however, admitted that the agreement stood cancelled between the parties. Pursuant to the cancellation of the agreement dated 12.06.2020, the appellant....
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....he respondent. In fact, the appellant received Rs. 14 Crore under the Agreement to Sale dated 01.03.2019. The SIVIPL agreed to make payment to the appellant within 45 days from the execution of the agreement. However, there was significant delay on the part of the SIVIPL to make the payment. The Sale Deed was, however, executed on 02.07.2019. In the light of the aforesaid, an amount of Rs. 14 Crore could not have been treated towards the proceeds of crime. 13. Ld. Counsel for the appellant elaborating the argument further submitted that Rs. 18.15 Crore was paid by the SIVIPL towards the reimbursement of funds infused by the appellant for development of the project when M/s Phoenix was acting as the developer. The payment aforesaid was in the nature of reimbursement but it has been considered to be proceeds of crime in an erroneous manner. The appellant received legitimate payment of its amount along with additional sums towards the time value of such funds involved with Phoenix and SIVIPL. It was agreed among the appellant, M/s Phoenix and M/s SIVIPL that against the payment of Rs. 14.05 Crore made by the appellant to M/s Phoenix, the appellant would be entitled to receive an ap....
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....action for purchase of property by the appellant company in the year 2017 has been given. Different land parcels were purchased by the appellant company for M/s Phoenix with certain arrangement and its development. It is with the allegation that M/s Phoenix failed to stand on its commitment. The Ld. Counsel for the appellant has further stated that those properties were purchased by the appellant company from its own sources, thus, it could not have been considered to be proceeds of crime. A specific reference to the transaction for land of Survey No. 343/13 was given which said to have been sold to SIVIPL for Rs. 14 Crore and accordingly the amount was received by the appellant. 18. We would first examine the issue in reference to the land parcel of Survey No. 343/13. The appellant has produced the Sale Deed and even Agreement to Sale to support its case. So far Agreement to Sale dated 01.03.2019 relied by the appellant is concerned, the perusal of Agreement to Sale reveals it to be of land of Survey No. 343/13 but the document has been signed by one party other than the first and last pages which contains signatures of the parties and witnesses on 01.04.2023 i.e. much subseque....
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....quired to be returned but retained by the appellant company even after cancellation of the deal and thereby it was taken to be an amount pass on to the appellant company out of the proceeds of crime. 21. The fact in this regard was elaborately mentioned in the notice and the rejoinder filed by the respondent before the Adjudicating Authority. It has been referred that SIVIPL entered into an agreement with the appellant company for purchase of 9 acres of land under the Sale Agreement dated 12.06.2020 for total consideration of Rs. 50 Crore and out of it Rs. 32.15 crores was paid in cash/cheque. The appellant company received the amount, however, MoU was got cancelled, but the consideration amount was not refunded. The amount aforesaid was taken to be an effort of the accused company to park it with the appellant who could not justify the retention of the said amount when the Agreement to Sale was cancelled. The respondent, however, attached the properties of the appellant company to the extent of Rs. 29.15 Crore only. It is for value equivalent to the proceeds of crime. It is permissible and analysis of the issue in reference to the definition of 'proceeds of crime' and elaborate....
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....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 definition of `proceeds of crime'. To clarify the definition, it may be illustrated. Assuming in a case of dacoit, the accused secured the money and it has been used for the purchase of property, then such a property would fall in the definition of `proceeds of crime' having been obtained out of proceeds of crime. In other case where the property was not acquired or derived by the accused himself but he passed on money out of the crime to another person and he acquired the property, then also it would be considered to be the proceeds of crime to acquire the property. In any case, there should be an element for use of the proceeds directly or indirectly obtained out of the crime and thereby the....
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....ains 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 property derived or obtained as a result of criminal activity relating to a scheduled offence, but also of the value of any such property. If the property is taken or held outside the country, even in such a case, the property equivalent in value held within the country or abroad can be proceeded with. The definition of "property" as in Section 2(1)(v) is equally wide 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 app....
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....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 of crime can be attached which may have been acquired prior to the commission of crime but it would be when proceeds of crime has been vanished and is not available. It is sought to achieve the object of the Act of 2002. 18. In the light of judgment of the Apex Court in Vijay Madanlal Choudhary (supra), we are unable to apply the judgment of Kerala High Court in the case of Satish Motilal Bidri (supra). The Ld. counsel did not refer the relevant para of the judgment in the case (supra), rather he referred Para 66 of the judgment of the Apex Court in Vijay Madanlal Choudhary (supra) which permits attachment only of the proceeds of crime. There cannot be any dispute that attachment c....
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....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 situation where a person who has obtained proceeds of crime by commission of a scheduled offence has managed to ensure that a property directly or indirectly connected to criminal activity is rendered untraceable. It is to confer authority upon the Directorate to proceed further in such a situation that Section 2(1)(u) uses the expression or the value of any such property. The safeguard which stands constructed in Section 2(1)(u) in such a contingency is that in case the Directorate does proceed against any other property, it must be equivalent in value to the illegal pecuniary benefit or gain that may have been obtained as a result of criminal activity. 80. In the considered opinion of this Court to tie the Directorate's power to move forward in this direction only in cases where property ....
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.... 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.14713-14715/2020 preferred against the same came to be dismissed, while doing so the Supreme Court recorded that the petition was being rejected in the peculiar facts and circumstances of the case. The dismissal of the aforesaid Special Leave Petition cannot in any case be interpreted or understood as being an affirmation of the view as expressed by the Punjab and Haryana High Court. xx xx xx xx xx xx 105. It would be pertinent to recall that properties which were acquired prior to the enforcement of the Act may not be completely immune from action under the Act in light of what this Court had held in Axis Bank. As was explained by the Court in Axis Bank, the express....
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....ter 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 Dibur (supra) is of two judges bench. The issue has otherwise been dealt with by this Tribunal in the case of FPA-PMLA-2909/CHD/2019 M/s. Besco International FZE vs. The Deputy Director Directorate of Enforcement, Chandigarh dated 31.07.2024. The relevant para of the said judgment is quoted hereunder: "It is not that only those properties which have been were derived or obtained directly or indirectly out of the crime can be attached rather in case of non-availability of the property derived or obtained directly or indirectly rather when it is vanished or siphoned off, the attachment can be of any property of equivalent value. It is necessary to clarify that the proceeds of crime would not only include the property derived or obtained....