TaxTMI 
TaxTMI 
2026 (9) TMI 200
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....chin Zonal Office. 2. The predicate offence in the aforesaid case was one registered by the Irinjalakkuda Police as Crime No.650/2021 dated 14.07.2021 in respect of the offences under Sections 406, 420, 409 and 465 r/w Section 34 I.P.C. The allegation therein was that the office bearers and managing committee of Karuvannoor Service Co-operative Bank collectively embezzled more than Rupees 100 Crore by indulging in dubious activities related to the loans advanced to various members and non-members of that society. 3. The petitioners in W.P(Crl) No.58/2025 and W.P(Crl) No.88/2025 are persons who availed loans from the above society and did not repay the same, and allegedly dealt with the proceeds of the crime. The petitioners in W.P(Crl) No.170/2025 are the mother-in-law and son of the petitioner in W.P(Crl) No.88/2025, who are alleged to have acquired properties making use of the proceeds of the crime. In the impugned proceedings of the Enforcement Directorate, the landed property of all the petitioners hereinabove were attached and proceeded against. 4. The petitioners challenge the legal sanctity of the proceedings of the Enforcement Directorate on the following counts: ....
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....s the right to property of the citizens under Article 300A of the Constitution of India, cannot be done by a person who has not been trained in law. The learned Senior Counsel further submitted that, in view of the relevant provisions of the PMLA conferring the powers of Civil Court to the Adjudicating Authority, the orders passed by the said authority without the participation of the legal member, would amount to travesty of justice. 8. Per contra, it is argued by the learned ASGI that the Adjudicating Authority constituted under Section 6 of the PMLA is neither a Court nor a Tribunal, and that it is only a mechanism provided for internal review of the proceedings initiated against the persons involved in money laundering. By referring to Section 26 of the PMLA, the learned ASGI pointed out that the orders of the Adjudicating Authority are subject to appeal before the Appellate Tribunal which could look into the legality and propriety of the proceedings of the Adjudicating Authority. Again, by referring to Section 42 of the PMLA, the learned ASGI argued that a person aggrieved by the decision of the Appellate Tribunal could challenge the same before the High Court on any questi....
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....titution of NCLT and NCLAT was not in accordance with the Constitutional Principles. The dictum laid down by the Hon'ble Supreme Court in the aforesaid case has got applicability only in such cases where the existing functions of Courts manned by Judicial Officers, are conferred upon Tribunals. The constitution of Adjudicating Authority under Section 6 of the PMLA for scrutinizing the proceedings of the Deputy Director of Enforcement who initiated the steps under Section 5 of PMLA is in no way affected by the law laid down by the Hon'ble Supreme Court in Madras Bar Association (supra). Going by the Scheme of the PMLA providing for appeal to the Appellate Tribunal under Section 26, and a further appeal to the High Court under Section 42 of the PMLA against the decision of the Adjudicating Authority, it cannot be said that Section 6(5)(b) conferring powers on the Chair Person of the Adjudicating Authority, to constitute coram with a single non-judicial member, would offend the constitutional principles. 11. The challenge against the constitutional sanctity of the aforesaid provision was considered by a Division Bench of the Delhi High Court in J. Sekar v. Union of India and Others....
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....foresaid principles, upholding the legal sanctity of the decision rendered by a non-judicial single member of the Adjudicating Authority. The relevant paragraph of the aforesaid judgment is extracted hereunder: "26. It is important to note that Sub Section (1) of S.6 empowers the Central Government to appoint an adjudicating authority by way of a notification to exercise jurisdiction, powers and authorities conferred by or under the Act and in terms of Sub Section (2) such adjudicating authority shall consist of a Chairperson and two other members. Thus, a combined reading of Sub - Sections (1) and (2) of S.6 shows that in terms of the said provision, the Central Government is empowered to appoint the adjudicating authority which shall consist of a Chairperson and two other members. The Central Government in exercise of the said powers conferred under Sub-Section (1) of S.6 of the PMLA Act by notification in GSR 437(E) dated 01.07.2015 appointed an adjudicating authority to exercise jurisdiction, powers and authority conferred by or under the Act and such adjudicating authority shall consist of a Chairperson and two members and shall function within the department of Reven....
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.....6, a single member bench of the adjudicating authority is competent to adjudicate any matter under the provisions of the Act. Any other interpretation as suggested by the appellant, if acceded to, would make the provisions of the Act unworkable, apart from such interpretation not being in line and in tenor with the provisions of S.6. Therefore, the contention raised by the appellant has to necessarily fail." 13. In fact, the constitutional validity of the relevant provisions of the PMLA for the formation of Adjudicating Authorities, members and Chairperson of Appellate Tribunal etc. was subjected to the judicial scrutiny of the Hon'ble Apex Court in Pareena Swarup v. Union of India [(2008) 14 SCC 107]. It is true that the challenge thereunder was the constitutional sanctity of the selection committee headed by Revenue Secretary for selecting the Chairperson and members of the Appellate Tribunal. It was contended that the constitutional guarantee of a free and independent judiciary, and the constitutional scheme of separation of powers can be easily and seriously undermined, if the legislatures were to divest regular courts of their jurisdiction in all matters and entrust the sa....
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....2025 and Ext P12 in W.P.(Crl.) No.170/2025. It could be seen from the aforesaid order containing the detailed discussions of the entire facts and circumstances of the case that the notice calling upon the petitioners to indicate the sources of income, earning or assets out of which or by means of which they acquired the property attached were issued under Section 8 of PMLA after having been satisfied that there were reasons to believe that the petitioners were in possession of the proceeds of the crime. Ext P7 in W.P.(Crl.) No.58/2025, Ext P6 in W.P.(Crl.) No.88/2025 and Ext P8 in W.P.(Crl.) No.170/2025 would disclose the aforesaid reasons recorded by the Adjudicating Authority. It is not possible to say that the aforesaid reasons are recorded by simply restating the findings of the Deputy Director of Enforcement as argued by the learned counsel for the petitioners. As already stated above, the discussions in the order passed by the Adjudicating Authority would disclose that the reasons are recorded by the said Authority upon its independent assessment of the facts and circumstances of the case. Therefore, the argument advanced by the petitioners challenging the legal sanctity of t....
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....n whatever form mentioned in Section 2(1)(v), is or can be linked to criminal activity relating to or relatable to scheduled offence, must be regarded as proceeds of crime for the purpose of the 2002 Act. It must follow that the Explanation inserted in 2019 is merely clarificatory and restatement of the position 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 procee....
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....clarify that the term property includes property of any kind used in the commission of an offence under the 2002 Act or any of the scheduled offences. 128. To put it differently, the section as it stood prior to 2019 had itself incorporated the expression "including", which is indicative of reference made to the different process or activity connected with the proceeds of crime. Thus, the principal provision (as also the Explanation) predicates that if a person is found to be directly or indirectly involved in any process or activity connected with the proceeds of crime must be held guilty of offence of money laundering. If the interpretation set forth by the petitioners was to be accepted, it would follow that it is only upon projecting or claiming the property in question as untainted property, the offence would be complete. This would undermine the efficacy of the legislative intent behind Section 3 PMLA and also will be in disregard of the view expressed by FATF in connection with the occurrence of the word "and" preceding the expression "projecting or claiming" therein. 125. If the argument of the petitioners is to be accepted, that projecting or claiming the....