TaxTMI 
TaxTMI 
2026 (9) TMI 960
X X X X Extracts X X X X
X X X X Extracts X X X X
....h an FIR was registered for the offence under Section 420, 406, 465, 467, 468, 471 and 304-A of IPC and finding a predicate offence, ECIR was recorded. The facts of the case are quite alarming and are required to be described in detail because apart from many offences, offence under Section 304-A IPC has also been committed. Though I would be concentrating on the predicate offence but it is only to show the seriousness of the case. 3. The present case originated from an FIR dated 24.08.2022 with Azad Maidan Police Station, Mumbai. It was alleged that during Covid-19 pandemic, the Municipal Corporations of Greater Mumbai and Municipalities of Maharashtra awarded contracts for establishing and operating various Jumbo Covid Centres. One of the contracts was given to M/s Lifeline Hospital Management Services, with its partners Dr. Hemant Gupta, Shri Sujit Mukund Patkar, Shri Sanjay Madanlal Shah and Shri Rajeev alias Raju Salunkhe. It was found that despite being a new entity established on 26.06.2020 and lacking experience in medical services, the firm remained successful to secure the tender. The firm obtained the contract for providing medical services at Worli and Dahisar Jumbo ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....period of crime. It has no connection with the crime and thus would not fall in the definition of "proceed of crime". On the aforesaid ground itself, an interference should be made in the impugned order. 7. The learned counsel for the appellant further submitted that apart from purchase of the property prior to the commission of crime, the appellant has disclosed the source for purchase of the property which has no connection whatsoever with the alleged proceeds received out of the commission of crime. Thus, for the aforesaid reason also, the impugned order deserves to be set aside. 8. The learned counsel for the appellant submitted that the property provisionally attached by the respondents is a joint property in the name of the appellant and his wife who contributed equal amount for purchase of the property. The wife is not involved in the commission of crime yet her half share of the property has been attached in ignorance of the fact that the property in question was purchased in the joint name. If at all, the property can be attached, then also it should have been to the extent of the share of the appellant and not of the wife who is not involved in the commission of off....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ocument submitted by the firm was denied. 12. The statements of other persons were recorded which includes the employees, namely, Mr. Prince Mahendra Prasad Vishwakarma and Dr. Arvind Singh deployed at two different Jumbo Covid Centres. In their statements under Section 50(2) of the Act of 2002, they admitted to have prepared fake and forged attendance record for submission of the invoices to the BMC authorities. However, they did it at the instructions of Mr. Surjit Mukund Patkar and other partners of the firm. 13. The statements of other staff members, Doctors, Accounts Officer and Dean were recorded and based on their statements, it was revealed that EOI conditions were not maintained by the partners of M/s Lifeline Hospital Management Services. There were huge under deployment of staff members. However, the invoices were submitted by showing adequate staff attendance as per the EOI conditions through fake and fabricated attendance sheets and records at the Dahisar Jumbo Covid Centre. It is with a further fact that no record or attendance for the staff data was submitted to the Worli Covid Centre by the firm despite the aforesaid partners of M/s Lifeline Hospital Managemen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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." 3.3. The aforesaid observations made by the Supreme Court enable this Bench to re-examine the entire issue, as in the considered opinion of this Bench, the judgment passed in Seema Garg'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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....divided into two broader categories namely tainted properties and untainted properties. The first part provides about the tainted properties derived or obtained directly or indirectly by any person as a result of criminal activity relating to a scheduled offence. Thereafter, the untainted properties are further divided into two parts; the first part deals with a situation where the property derived or obtained from 'proceeds of crime' is not traceable. In the aforesaid situation the competent authority is authorized to attach or confiscate any other property of accused, which is of the same value as that of the 'proceeds of crime'. The second sub-category is a result of amendment brought in 2015 and 2019 in the Act. It provides that if the property derived or obtained from the proceeds of crime has already been taken out of the Country then the property equivalent in value held within the Country or abroad can be made liable to be attached. This position has been explained by the Delhi High Court in an elaborate 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 Chaudh....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the definition. In Hemanshu Rajnikant Shah's case (supra) the Court relied upon Seema Garg's case (supra) and held that the properties acquired before the alleged crime and before the enforcement of the '2002 Act' cannot be attached. 3.9. On the other hand the judgments passed in Vijay Madanlal Chaudhary's case (supra), Axis Bank's case (supra) and Prakash Industries case (supra) completely answer the question in favour of ED. 3.10. The petitioner's counsel has also heavily relied upon Pavana Dibbur's case (supra). This Bench has carefully read the aforesaid judgment. The aforementioned case involved attachment of properly falling under the category of 'direct' or 'indirect' proceeds of crime. The complaint under Section 44-45 of 2002 Act was quashed by the Supreme Court. The Bench was never called upon to analyse the contentions based upon Section 2(i)(u) of 2002 Act, whereas, in Vijay Madanlal Chaudhary's case (supra) the Court directly answered the aforesaid question. Hence, there is no substance in the first argument of learned counsel for petitioner". 17. The same view was earlier taken by this Tribun....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence;" 13. The perusal of the definition aforesaid shows three limbs. In between every limb word "or" has been used to divide the definition into 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 n....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... If the second limb of the definition is made dependent on the first limb, it would be literally re-writing the provision or making it redundant to a great extent and for this, jurisdiction does not lie with any court of law which includes even the Constitutional Court. They can declare any provision to be unconstitutional but till then there remains 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uivalence in value. From this perspective, it is essential that, before the order of attachment is confirmed, there must be some assessment (even if tentative one) as to the value of wrongful gain made by the specified criminal activity unless it be not possible to do so by such stage, given the peculiar features or complexities of the case. The 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 o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t in value held within the country or abroad cannot be ascribed the same meaning and effect. The learned Judges comprising the Division Bench then proceeded to hold that even if the intent of the legislature was to include any property in the hands of a person within the ambit of the expression proceeds of crime‖, there would be no need to create three limbs of definition of proceeds of crime. xxxx 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 ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aid decision. Consequently, and for all the aforesaid reasons this Court finds itself unable to agree with the principles as laid down in Seema Garg as well as the subsequent decisions rendered by the Andhra Pradesh High Court in Kumar Pappu Singh Vs. Union of India and the Patna High Court in HDFC Bank Limited Vs Government of 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 Pu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e taken on facts of that case. 22. It has already been clarified by us that if the definition of "proceeds of crime" is given interpretation by dividing it into two parts or by taking only two limbs, then it would be easy for the accused to siphon off or vanish the proceeds immediately after 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....especially when the arguments raised by the appellant that the property acquired prior to the commission of crime would not fall in the definition of "proceeds of crime". In that case, the task of the accused would become very easy to first commit the scheduled offence and after obtaining or deriving the property out of the criminal activities, immediately siphon off or vanish so that it may not remain available for attachment and otherwise the contingency aforesaid would satisfy only the first limb of definition of "proceeds of crime" leaving the second. We are thus unable to accept the argument raised by the appellant so as to make the middle part of the definition of "proceeds of crime" to be redundant. 18. In the light of the paras quoted above, a challenge to the provisional attachment of the property purchased prior to the commission of crime cannot be accepted when proceeds in the hands of the appellant were not found available and it is for that reason that the property of "equivalent value" or "value thereof" has been attached. 19. The second issue raised by the appellant is disclosure of source for purchase of the property. It may be that the appellant has disclosed....