TaxTMI 
TaxTMI 
2026 (5) TMI 647
X X X X Extracts X X X X
X X X X Extracts X X X X
.... filed followed by one supplementary charge sheet on the basis of the complaint made by Indian Overseas Bank, Oriental Bank of Commerce and IDBI against M/s Prime Impex Ltd., M/s Prime Pulses Ltd. and others. Three other charge sheets were filed by CBI, EOW, Kolkata on the basis of the complaint made by Indian Overseas Bank, Oriental Bank of Commerce and M/s PEC Ltd. for the same offences. 3. In reference to the complaint aforesaid, ten charge sheets and one supplementary charge sheet were filed finding involvement of a sum of Rs. 4,47,44,08,331/-. 4. M/s Prime Impex Ltd. was the flagship company of Prime Group run by Ranjit Singh Kothari and his son Anand Kothari. They were running many other companies which have been named in the impugned order but not so relevant for the purpose of this case. 5. So far as the appellants are concerned, their properties have been provisionally attached and have been confirmed by the Adjudicating Authority. Aggrieved by the order aforesaid, these two appeals have been preferred. Arguments of counsel for the appellants: 6. The learned counsel for the appellants submitted that the LICs under provisional attachment were taken much prior....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rom public enterprises between October, 2010 to February, 2011. The accused involved therein fraudulently and dishonestly established total 165 Inland Letter of Credits (ILCs) and 12 Foreign Letter of Credits (FLCs) with the financial entities in favour of M/s SAPL, M/s AEIPL and M/s EEPL. The ILCs and FLCs purportedly were got issued for procurement of pulses and got negotiated the LCs with the supplier banks on the strength of false commercial invoices, delivery orders, acceptance letters, etc. without there being any genuine trade transactions and then transferred the proceeds of bills back to bank accounts of the accused companies M/s Prime Impex Ltd. and others through circulatory route from their sister concerns. It was also found that three private companies prepared false bills of exchange, commercial invoices and delivery orders in the name of M/s SSG & Associates for delivery of pulses to the accused companies and presented the bills for discounting before the negotiating bank. Many other serious allegations were levelled and found during the course of investigation. Accordingly, the Provisional Attachment Order was caused by the respondents. The challenge to the aforesai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rg's case (supra) is no longer a good law. This Court has taken this view due to the subsequent interpretation by the Supreme Court, which has superseded the legal principles established in Seema Garg's case (supra). 3.4. It is evident that the original (unamended) definition of phrase 'proceeds of crime' was structured into two distinct parts. The first part relates to the property derived or obtained directly or indirectly by any person as a result of criminal activity relating to a scheduled offence, whereas, the second part relates to the value of any such property where the proceeds of crime are not traceable. This clearly means that 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 ot....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e manner in Axis Bank's case (supra) and Prakash Industries case (supra). 3.6. It is not disputed that the Supreme Court in Vijay Madanlal Chaudhary's case (supra) was examining the scope of the '2002 Act' including definition of phrase 'proceeds of crime'. The submission put forth by the learned counsel that the phrase 'or the value of any such property' is superfluous was rejected by the Court and it was held that the definition of 'proceeds of crime' is wide enough to not only include to the property derived or obtained as a result of criminal activity related to a schedule offence but also any other property of 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 s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oresaid question. Hence, there is no substance in the first argument of learned counsel for petitioner". The issue recently dealt with by the Punjab and Haryana High Court was otherwise decided by this Tribunal in the case of Shri Sadananda Nayak Vs. Directorate of Enforcement, Bhubaneswar (Appeal No. 5612/2023). The relevant paras of the judgment in the case of Shri Sadananda Nayak (supra) are reproduced hereunder: "8. We have considered the rival submissions raised by the counsel for both the parties and scanned the record carefully. 9. It is not in dispute that an FIR was registered for commission of the scheduled offence. It was followed by recording of the ECIR. The respondent initially frozen the bank accounts of the appellant and his sons, which was followed by the provisional attachment of the properties vide order dated 27.07.2020. The Provisional Attachment Order has been confirmed by the Adjudicating Authority finding a case of money laundering. 10. The Ld. Counsel for the appellant did not raise argument in reference to registration of the FIR and recording of the ECIR, followed by investigation where the role of the appellant for commissio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y 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 property would have nexus with the crime. 14. In second part "the value of any such property" the definition aforesaid starts with "or" after the first part referred and discussed in the para above. The second part of the definition is commonly considered to be attachment of property of equivalent value. The second part applies when the property obtained or derived directly or indirectly out of the criminal activities is not available or vanished and, therefore, to secure the proceeds of equivalent value till completion of trial, it would fall under "the value of any such property" which is commonly taken to be the property....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 appellant that "the value of any such property" would be only when the proceeds have been taken out of India. The argument aforesaid was not accepted and it simplifies that the definition of "proceeds of crime" has three limbs and elaborate judgment to define the "proceeds of crime" was given by the Delhi High Court in the case of Axis Bank (supra). The relevant paras are quoted herein. "106. Among the three kinds of attachable properties mentioned above, the first may be referred to, for sake of convenience, as "tainted property" in as much as there would assumable be evidence to prima facie show that the source of (or conside....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hed 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 can be only of the proceeds of crime but what would fall in the definition of "proceeds of crime" and clarified in Para 68 of the same judgment has not been taken into consideration whereas judgement of the Apex Court on the issue is binding on the High Court. 19. The reference to the judgment in the case of Pavana Dibur (supra) has been given where the Ld. Counsel for the parties did not refer Para 68 of the judgment in the case of Vijay Madanlal Choudhary (supra) decided by three judges of the Apex Court. In fact, elaborate arguments to define "proceeds of crime" on the issue were not raised by the parties after referring t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....te 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 is taken or held outside the country would not only do violence to the plain language of Section 2(1)(u), it would clearly whittle down the scope and intent of the definition itself. It would essentially amount to erasing the expression value of any such property as appearing in Section 2(1)(u) altogether. The Court further notes that in Seema Garg the learned Judges themselves observed that the phrase value of any such property would not mean and include any property which has no link, direct or indirect, with property derived or obtained from commission of a scheduled offence. The Court observes that Section 2(1)(u) clearly and in unambig....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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. xxxx 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 expression proceeds of crime envisage both -tainted property as well as -untainted property with it being permissible to proceed against the latter provided it is being attached as equal to the "value of any such property" or "property equivalent in value held within the country or abroad". However, both the italicised categories would be liable to be invoked in cases where the actual tainted property cannot be traced or found out. It is only where the respondents are unable to discover the tainted property that they can take the statutory recourse to move against properties which may fall within the ambit of -value of any such property or -property equivalent in va....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ant 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 directly or indirectly out of the criminal activity relating to the scheduled offence but any other property of equivalent value. The word "or" has been placed before "the value of any such property" and is of great significance. Any property of equivalent value can be attached when the proceeds directly or indirectly obtained out of the crime has been vanished or siphoned off. Here, the significance would be to the property acquired even prior to commission of crime. It is for the reason that any property acquired subsequent to the commission of crime would be directly or indirectly proceeds of crime and then, it would fall in the first limb of the definition of proceeds of crime....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as an alternative, the properties of equivalent value have been attached which may have been purchased prior to the commission of crime but it would fall within the definition of "proceeds of crime" finding it to be for the equivalent value. Thus, the first ground raised by the appellants cannot be accepted. 15. The learned counsel for the appellants submitted that a challenge to the registration of FIR by CBI and its investigation has been challenged and presently the matter is pending before the Apex Court. It is with the further submission that an interim order has been passed on predicate and PMLA offences. The statement is not to the effect that predicate offence or the offence under PMLA have been quashed by any of the court. The interim order on the proceedings pursuant to the predicate offence or the offence under PMLA does not vanish the predicate offence but stays the proceedings. Therefore, till the predicate offence exists, may be proceedings have been stayed, it cannot be taken to be a ground to quash the Provisional Attachment Order in the light of the judgment of the Apex Court in the case of Vijay Madanlal Choudhary Vs. Union of India 2022 SCC Online SC 929. The....