TaxTMI 
TaxTMI 
2026 (7) TMI 923
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....(under the PMLA, 2002). 3. Vide the impugned order; the Tribunal dismissed the appeal preferred by the appellant affirming the order dated 22.08.2023, in O.A. No. 757 of 2022, passed by the Adjudicating Authority. Thus, the present becomes Second Appeal on the part of the appellant against the order of the Adjudicating Authority as also against the order of the Appellate Tribunal. 4. The Office of the Assistant Director of Enforcement Directorate, Hyderabad filed an application before the Adjudicating Authority under Section 17(4) of the PMLA, 2002 seeking for retention of the seizure made from the searches conducted during 17.10.2022 to 19.10.2022 at the premises of- (i) M/s. MBS Jewelers Private Limited; (ii) M/s. Musaddilal Gems and Jewels India Private Limited; (iii) Mr. Sukesh Gupta, Director of M/s. MBS Jewelers and (iv) Mr. Anurag Gupta, Director of M/s. Musaddilal Gems and Jewels. In the application, the Assistant Director of Enforcement Directorate had given the details and description of the various documents seized in the course of search from each of the premises. The application revealed the movable properties including cash....
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.... challenge in the instant appeal under Section 42 of PMLA, 2002. 8. The matter originates from an FIR being registered by CBI on the alleged fraud, cheating and wrongful cause caused to one M/s. Minerals and Metal Trading Corporation Limited (for short 'MMTC Ltd.') by Mr. Sukesh Gupta, the Managing Director of M/s. MBS Group. After the FIR was lodged, a charge sheet vide CC. No. 25 of 2014, dated 27.11.2014, was also filed against Mr. Sukesh Gupta for the offences under Section 120(b) read with Section 429, 469, 471, 477-A of IPC and Section 13(2) read with Section 13(1) of the Prevention of Corruption Act, 1988. The estimated loss caused to M/s. MMTC Ltd. was over Rs.226 crores of principal amount. Meanwhile, an ECIR/05/HYZO/2014 was also registered on 25.02.2014 against Mr. Sukesh Gupta, Managing Director of M/s. MBS Group. Meanwhile, however on the basis of the search and seizure conducted, seizures were made of the items those were reflected in the application filed by the Assistant Director, Enforcement Directorate under Section 17(4) of PMLA, 2002. 9. Learned Senior Counsel for the appellant challenged the impugned order on the ground that the two authorities have faile....
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....far as alleged illegal criminal act on the part of the accused in the ECIR case and therefore, the assets belonging to the appellant is not in any manner a part of the proceeds of crime as there is no nexus between ECIR case or the case put forth by the CBI against Mr. Sukesh Gupta. 11. Lastly, it was contended by the learned Senior Counsel for the appellant that the Appellate Tribunal as also the Adjudicating Authority failed to look into the aspect that in order to bring the seized articles within the ambit of proceeds of crime as defined under Section 2(1)(u) of PMLA, 2002 the basic ingredient is that of there being a criminal activity relating to a scheduled offence available so as to establish the seized property to be proceeds of crime. In the instant case, there is no allegation of any criminal activity to have been undertaken by the appellant so as to constitute an offence of money laundering and also in order to make the appellant guilty of an offence of money laundering. Therefore, according to him the entire case of the prosecution is liable to be vitiated only on this aspect. 12. Learned Senior Counsel for the appellant relied upon two judgments, one by the Hon'bl....
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....s and entities under investigation for money laundering. 14. According to the learned Standing Counsel for Enforcement Directorate, investigation into M/s. MBS Jewellers Pvt. Ltd. and its associated entities revealed a large-scale fraud involving the Buyer's Credit Scheme of M/s. MMTC Ltd. resulting in significant losses to the exchequer. The connection between M/s. Musaddilal Gems and Jewels (India) Pvt. Ltd. and the M/s. MBS Group has been established through financial records and the movement of tainted funds and the evidence indicates that the proceeds of crime generated through the fraudulent activities of M/s. MBS Group were layered and integrated into the appellant company. 15. Learned Standing Counsel for Enforcement Directorate would further submit that the investigation revealed that their total declared income, as per their income tax returns, are insufficient to justify the capital contributions made to M/s. Musaddilal Gems and Jewels (India) Pvt. Ltd., and that Mr. Shashank Gupta declared an income of Rs. 3.47 lakhs in the financial year 2012-13 and Rs. 4.30 lakhs in the financial year 2013-14 contradicts the claim that he had sufficient funds to make such in....
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...., file an application, requesting for retention of such record or property seized under sub-section (1) or for continuation of the order of freezing served under sub-section (1A), before the Adjudicating Authority." 19. An application for retention is one which is moved under Section 17(4) of the PMLA, 2002 and an order is passed under Section 20(1) of the PMLA, 2002. For ready reference, Section 20(1) is also reproduced hereunder: "20. Retention of property.- (1) Where any property has been seized under section 17 or section 18 or frozen under sub-section (JA) of section 17 and the officer authorised by the Director in this behalf has, on the basis of material in his possession, reason to believe (the reason for such belief to be recorded by him in writing) that such property is required to be retained for the purposes of adjudication under section 8, such property may, if seized, be retained or if frozen, may continue to remain frozen, for a period not exceeding one hundred and eighty days from the day on which such property was seized or frozen, as the case may be." 20. A plain reading of the aforesaid two provisions would in itself indicate that the power vested ....
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..... Sukesh Gupta, M/s. MBS Jewelliers Pvt. Ltd. and M/s. MBS Impex Private Limited by the CBI, Mr. Anurag Gupta resigned from the directorship of all companies to escape the clutches of investigation. At the same time, Mr. Anurag Gupta incorporated a new company in the name and style of M/s. Musaddilal Gems and Jewels on 12.04.2013. In the said company, Ms. Vandana Gupta, wife of Mr. Anurag Gupta and Mr. Shashank Gupta, son of Mr. Anurag Gupta, were also made as the shareholders and directors. The Enforcement Directorate, in the course of investigation found that the new company established by Mr. Anurag Gupta was started with an initial fund of Rs.38 lakhs, a share capital of Rs. 1 lakh, and an unsecured loan of Rs.37 lakhs from the directors. However, on scrutiny of income tax returns it was observed that the two directors Ms. Vandana Gupta and Mr. Shashank Gupta, both of them together also did not have with them evidence worth Rs.37 lakhs in the year 2013 to invest in the company. Later on also both Ms. Vandana Gupta and Mr. Shashank Gupta further invested Rs.6 lakhs of share capital in the said company, however they were not able to give justification in respect of the source of ....
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....t mean that the ECIR stands restored, rather it is only the effect and operation of the judgment of the High Court in Crl.P. No. 4313 of 2023 which stands stayed. However, technically the ECIR, in terms of the order of the High Court for all practical purposes stands quashed and therefore the generation of income in the said circumstances cannot be said to be from any criminal activity. In that regard also, it cannot be brought within the purview of proceeds of crime as defined under Section 2(1)(u) of the PMLA, 2002. 30. This contention of the learned Senior Counsel for the appellant is hard to accept for the simple reason that admittedly the Hon'ble Supreme Court in SLP (Crl.) No. 7965 of 2023 stayed the operation of the judgment of the High Court quashing the ECIR. As a consequence of staying of the judgment of the High Court, it has to be construed as if the order of the High Court is ineffective as of now. If the judgment of the High Court becomes ineffective, automatically it would lead to a situation where the stage prior to the judgment of the High Court as it stood getting revived. The judgment in the case of Sri Chamudi Mopeds Limited (supra) referred to by the learned....
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....or frozen under section 17 or section 18 and record a finding to that effect, whereupon such attachment or retention or freezing of the seized or frozen property] or record shall- (a) continue during [investigation for a period not exceeding [three hundred and sixty-five days] [Inserted by Finance Act, 2018 (Act No.13 of 2018) dated 29.3.2018.] or] the pendency of the proceedings relating to any [offence under this Act before a court or under the corresponding law of any other country, before the competent court of criminal jurisdiction outside India, as the case may be; and] (b) become final after an order of confiscation is passed under sub-section (5) or sub-section (7) of section 8 or section 5 8 B or sub-section (2A) of section 60 by the [Special Court] [Explanation.- For the purposes of computing the period of three hundred and sixty-five days under clause (a), the period during which the investigation is stayed by any court under any law for the time being in force shall be excluded.]" Reading of the aforementioned explanation makes it explicit that the period during which the investigation is stayed by any Court and any law for the time being s....
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....in Section 8(3)(a) of the 2002 Act does not clearly provide for the consequence of non-filing of the complaint within three hundred and sixty-five days from the date of attachment (provisional). This argument clearly overlooks the obligation on the Director or any other officer who provisionally attaches any property under Section 5(1), to file a complaint stating the fact of such attachment before the adjudicating authority within thirty days in terms of Section 5(5) of the 2002 Act. Concededly, filing of complaint before the adjudicating authority in terms of Section 5(5) within thirty days from the provisional attachment for confirmation of such order of provisional attachment is different than the complaint to be filed before the Special Court under Section 44(1)(b) for initiating criminal action regarding offence of money laundering punishable under Section 4 of the 2002 Act. 178.3. Furthermore, the provisional attachment would operate only for a period of one hundred and eighty days from the date of order passed under Section 5(1) of the 2002 Act in terms of that provision. Whereas, Section 8(3) refers to the period of three hundred and sixty-five days from the passi....