TaxTMI 
TaxTMI 
2026 (5) TMI 1597
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....llhome Marketing Pvt. Ltd. on 07.10.2015. Though the company was incorporated for specific business purposes unrelated to chit fund or investment activities, it was allegedly utilized to operate multiple investment schemes. It is alleged that the said company introduced approximately 16 investment schemes, inviting deposits from the public by promising assured and lucrative returns upon maturity. To induce investor confidence, initial returns, incentives, and profits were disbursed through cheques. 3. In January 2019, a new scheme was introduced wherein investors were assured that their funds would be invested in gold, with the promises of doubling the investment upon appreciation of gold prices, along with additional incentives and commissions. It is further alleged that from November 2019 onwards, delays in payment of profits and incentives commenced, and by December 2019, such payments ceased entirely. The accused attributed such delays to alleged customs-related issues concerning release of gold and assured investors that dues would be cleared by March 2020. In May 2020, investors were informed via text messages that the office would reopen in early June 2020. However, upon ....
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....ppressing ownership of immovable property and, along with his relatives, executed transfers through a Will to evade attachment. It is further alleged that out of 155 investors who invested Rs. 6,83,37,000/-only Rs. 1,43,89,330/-was returned, leaving an outstanding amount of Rs. 5,44,96,670/-. Overall, the accused admitted to collecting Rs. 15,50,47,500/- from 492 investors and returning only Rs. 7,06,91,260/-, resulting in alleged wrongful loss of Rs. 8,43,56,240/- to investors. 6. It is said that neither the accused nor the company possessed any regulatory approval or license to operate such schemes, thereby rendering the collected funds as "proceeds of crime" under Section 2(1)(u) of the PMLA. The respondent issued Provisional Attachment Order No. 03/2024 dated 22.05.2024 under Section 5(1) of the PMLA, attaching immovable properties valued at Rs. 3,80,50,000/-. 7. Shri G. Sandjivi Kumar @ Sanjeev Kumar incorporated a company in the name and style of M/s New Wellhome Marketing Pvt. Ltd. on 07.10.2015. Thereafter, he, along with other associated persons, started operating various chit and investment schemes through the said company, wherein investors were induced to deposit ....
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....bank account statements of M/s New Wellhome Marketing Pvt. Ltd. revealed that the collected funds were transferred from the company's bank accounts to 26 different bank accounts linked to the accused persons and their associates. These accounts, along with the company's accounts (totaling 28 accounts), were utilized for trading activities. 12. Further it was revealed that trading transactions were carried out using PAN details of 21 individuals/entities. In this regard, letters were issued to multiple brokerage firms, including M/s ZEBU Shares and Wealth Management Pvt. Ltd., M/s Goodwill Wealth Management Pvt. Ltd., M/s SKY Commodities India Pvt. Ltd., M/s RK Global Shares & Securities Ltd., M/s Maitra Commodities Pvt. Ltd., M/s Great Ventures, M/s Fortune Capital Services Pvt. Ltd., M/s Enrich Financial Solutions Pvt. Ltd., M/s Capstocks and Securities (India) Pvt. Ltd., and M/s Aliceblue Financial Services. Replies were received from most entities, except M/s Capital Focus, which was found to have vacated its premises approximately four years prior. 13. Considering that the accused persons had utilized and dissipated the proceeds of crime amounting to Rs. 8,43,56,240/-, an....
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....t owner of at least one immovable property along with his brothers. It is alleged that, anticipating coercive action and attachment of properties by investigating agencies, Shri Sanjeev Kumar, in connivance with his brother Shri Perakkash Mall Jain and his father Shri Gowtham Chand Jain, executed a Will Deed transferring the said properties in the name of his father, with a further arrangement for transfer to Shri Perakkash Mall Jain and his son Shri Kailash. This arrangement appears to have been made with the intent to defeat and evade attachment proceedings. Role of Shri Perakkash Mall Jain 17. Shri Perakkash Mall Jain, in his voluntary statement, claimed that he had no role in the functioning of M/s New Wellhome Marketing Pvt. Ltd. However, examination of bank account records revealed multiple financial transactions between his accounts and those of Shri Sanjeev Kumar as well as the company, indicating his active association during the period of the offence. It was found that an amount of Rs. 2,65,27,604/- was deposited in the bank account of Shri Perakkash Mall Jain during the relevant period, for which no supporting documentary evidence has been provided. In addition to ....
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....from the pawn broker business of Late Shri Gowtham Chand Jain, duly reflected in his Income Tax Returns for Assessment Years 2016-17 and 2017-18, wherein the property was also disclosed. It is also submitted that the alleged offence pertains to the period commencing from November 2016, whereas the property in question was acquired independently through legitimate sources. Hence, there exists no nexus between the said property and the alleged criminal activity, and it does not qualify as "proceeds of crime" under Section 2(1)(u) of the Act. It is further submitted that the property at Sl. No. 4 of the impugned PAO, presently owned by the Appellant and Shri Kailash, originally belonged to Smt. Mainabai (mother of the Appellant), who purchased the same in 1980 for Rs. 45,000/- and subsequently settled it in favour of her husband, Late Shri Gowtham Chand Jain, in 2008. The prayer was made to accept the argument and allow the appeal. 21. The appellant did not argue any other issue despite opportunity to raise any legal or factual issue. The counsel for the appellant restricted his arguments to the extent narrated above. The prayer was accordingly made to set aside the impugned order ....
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....o be proceeds of crime. The argument has been raised in ignorance of the definition of "proceeds of crime" defined under Section 2(1)(u) of the Act of 2002. Proceeds of crime are not restricted only to acquisition of property out of the predicate offence but it can be even for equivalent value to the proceeds. In fact, the definition of "proceeds of crime" has three limbs and has been recently dealt with by the Division Bench of Punjab and Haryana High Court in the case Dilbag Singh @ Dilbag Sandhu Vs. Union of India & Ors. (CWP 22688-2024) decided on 13.11.2024. Relevant paras of the judgment of the Punjab and Haryana High Court in the case of Dilbagh Singh (supra) are reproduced hereunder. "3.2. In light of the Division Bench's judgment in Seema Garg's case (supra), this Bench would have been obligated to either follow it or refer the matter to a Larger Bench. However, the Supreme Court in Vijay Madanlal Chaudhary's case (supra) has interpreted the provision in para 298, which is extracted as under: "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 situa....
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....d, to be liable to attachment. In 2019, the explanation has been added so as to give a wider scope to the authorities. From the objects and reasons of the '2002 Act', it becomes evident that the money laundering posed a serious threat not only to the financial system of the countries but also to their integrity and sovereignty. The '2002 Act' was enacted to prevent money laundering and connected activities. The act of money laundering is a multi-layered, complex and complicated diversion of the property, which is required to be prevented. Consequently, the definition of proceeds of crime has undergone transformative changes from time to time so as to include all the complex acts involved in the offence of money laundering. 3.5. In Axis Bank's case (Supra), the Delhi High Court has dissected the definition in three parts while covering tainted property and untainted property held in India; and the 'proceeds of crime' taken out of the country or any other property of equivalent value thereof. However, this Court is of the considered view that the definition can be divided into two broader categories namely tainted properties and untainted properti....
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....rpretation is based on the idea that the legislature's intent is best reflected in the exact words of the statute. 3.8. Moreover, the reasoning adopted in Seema Garg's case (supra) to the effect that there was no need to insert third part in the definition of the 'proceeds of crime' and that 'value of such property' is superfluous does not appear sound. It appears that transformative journey of the definition of phrase 'proceeds of crime' was not brought to the notice of the Division Bench in Seema Garg's case (supra). In Abdullah Ali Balsharaf's case (supra), Delhi High Court inadvertently overlooked the sub-category (i) of second part of definition of 'proceeds of crime'. Similarly, Andhra Pradesh High Court in Kumar Pappu Singh's case (supra) was not properly assisted. Furthermore, the attention of Patna High Court was not drawn to part 2(i) in HDFC Bank's case (supra). Similar is the position in M/s. Himachal Amta Power Limited's case (supra). In this case, the attention of the Bench was not drawn to the second broader category of the definition. In Hemanshu Rajnikant Shah's case (supra) the Court relied u....
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....prior to the commission of crime had no nexus with the crime and thus could not have been attached. It was not obtained or derived directly or indirectly out of criminal activities relating to the scheduled offence. The respondent could not show nexus of three properties with the crime out of four attached by them. 12. The reference of the judgment of the Apex Court in the case of Pavana Dibur (supra) and also of Kerala High Court in the case of Satish Motilal Bidri (supra) has been given. To analyze the issue, we may quote the definition of `proceeds of crime' given under Section 2(1)(u) of the Act of 2002, which is quoted thus.: "(u) "proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a 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 dire....
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.... in the case of Satish Motilal Bidri (supra) and the judgment of Apex Court in Pavana Dibur (supra) to hold that the properties acquired prior to commission of crime would not fall in the definition of "proceeds of crime". We are unable to accept the arguments which may otherwise make second part of the definition of "proceeds of crime" to be redundant. It would be for the reason that if the definition is taken only in two parts leaving the middle part, then it would be difficult for the enforcement agencies to protect the property till completion of the crime to save the victim from crime committed by the accused. It would be for the reason that if the property acquired prior to commission of crime would not fall in the definition of "proceeds of crime", 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 ....
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....ectly). To illustrate, bribe or illegal gratification received by a public servant in form of money (cash) being undue advantage and dishonestly gained, is tainted property acquired "directly" by a scheduled offence and consequently "proceeds of crime". Any other property acquired using such bribe as consideration is also "proceeds of crime", it having been obtained "indirectly" from a prohibited criminal activity within the meaning of first limb of the definition. 107. In contrast, the second and third kinds of properties mentioned above would ordinarily be "untainted property" that may have been acquired by the suspect legitimately without any connection with criminal activity or its result. The same, however, are intended to fall in the net because 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....
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....inition of "proceeds of crime" to be redundant. The counsel who appeared before the Kerala High Court did not argue that the definition of "proceeds of crime" has three limbs and unfortunately the view expressed by Delhi High Court in Axis Bank (supra) was not discussed elaborately while it was cited by the counsel. 20. The Ld. Single judge of Kerala High Court did not subscribe the judgment aforesaid, rather applied the judgment of Punjab and Haryana High Court in the case of Seema Garg Vs. Deputy Director, Directorate of Enforcement, reported in 2020 SCC OnLine Punjab & Haryana 738. With due respect, we are unable to apply the judgment of Kerala High Court going against Para 68 of the judgment of the Apex Court in the case of Vijay Madanlal Choudhary (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....
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....e value of any such property and the concept of deemed tainted properties enunciated in Axis Bank. On a plain textual interpretation of Section 2(1)(u) as well as in the backdrop of the amendatory history of that provision, this Court finds itself unable to agree with the line of reasoning adopted in Seema Garg. As held hereinbefore, affirmation of Seema Garg would amount to virtually deleting the phrase -or the value of any such property from Section 2(1)(u). That would not only violate the well settled tenets of statutory construction but would clearly amount to the Court rewriting the provision itself in a manner that it stands deprived of vital and purposive content. The Court further notes that Axis Bank had enunciated important safeguards which 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 itsel....
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....Axis Bank with the learned Judge observing that in such a situation it would have to be established that the person accused of money laundering had an interest in such property at least till the time that he indulged in the proscribed criminal activity. The learned Judge further observed that bona fide rights acquired by third parties prior to the commission of the predicate offense would stand saved." 21. The issue aforesaid was not raised in the case of Pavana Dibur (supra). The counsel appeared therein did not elaborately argue the issue by referring to the definition of "proceeds of crime" having three limbs to give meaning to each limb for the interpretation of the definition of the "proceeds of crime". The reference 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 Dibur (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....
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....t may be on account of siphoning off or vanished by the accused. In those circumstances the property of equivalent value can be attached. The word "the value of any such property" signifies without any embargo that it should be the property purchased after the commission of crime or prior to it rather it would apply in both the eventuality in the given circumstance. Thus, we are not in agreement with the counsel for the appellant who has questioned the attachment in reference to the property acquired prior to commission of crime. We are not going even further that the properties have nexus with the proceeds out of the crime but even in given circumstances and scenario that the property was acquired prior to commission of crime 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 pri....