TaxTMI 
TaxTMI 
2026 (9) TMI 1844
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.... 1. Flat No. 45, 4th Floor, Avillion Green Field CHS Ltd., A6 Building, Jogeshwari (East), Mumbai, Maharashtra - 400093 (532 square feet) (hereinafter "Jogeshwari Flat") 5,05,300/- Rs. 7.69 crore 2. Flat No. 19, 5th Floor, Konark Classic, 85 Waroda Road, Off Hill Road, Bandra, Mumbai, Maharashtra - 400050 2745 square feet) (hereinafter "Bandra Flat") 1,65,33,500/- Rs. 0.89 crore Total 1,70,38,800/- Rs. 8.58 crore Facts in Brief 2. The relevant facts briefly are that a Preliminary Enquiry was undertaken by the MIDC Police Station vide P.E. No. 127/2015 against M/s Geodesic Ltd. pursuant to directions issued by the Hon'ble Bombay High Court vide their order dated 31.08.2015 in a company petition bearing No. 471/2013 filed by Citibank seeking winding up of the said company, and the recommendation of the Securities and Exchange Board of India (SEBI). Subsequent to the same, a FIR (No. 760/2015 dated 15.12.2015) was registered under Sections 409, 420, 477(A), 120-B read with 34 of the Indian Penal Code, 1860 ("IPC") at MIDC Police Station, against Pra....
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....riminal activities related to scheduled offences; iv. That additionally, the company diverted funds amounting to Rs. 250 crore to six shell companies by showing purchase of software through bogus transactions in the books. Thus, the amount of Rs. 250 crore was also generated out of the criminal activities (bogus purchases) related to scheduled offences and the same amounts to proceeds of crime. v. Therefore, the total proceeds of crime amounted to Rs. 743 crore, but the same was unavailable for attachment, as either the same was parked abroad or utilized in business activities to project it as untainted money, resulting in commission of money-laundering. 5. On the basis of the material placed before it, and the reasons to believe formed thereupon that proceeds of crime have been generated as a result of criminal conspiracy and cheating, and to ensure that the properties of equivalent value of the proceeds of crime in terms of Section 2(1)(u) PMLA are not further transferred or dealt with in such a manner as may result in frustrating further proceedings, viz., confiscation as provided under Chapter-III of PMLA, a Provisional Attachment Order (PAO No. 13/2016 dat....
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.... out of love and affection on the occasion of their 20th wedding anniversary. The said bona fide transfer was made prior to registration of FIR and before the allegations of wrongdoing against the company or the appellant Kiran Kulkarni were made. 11. In view of the above, it is stated that both the said properties were in the name of the appellant, Smt. Rajeshwari Kulkarni and could not have been attached for appellant Kiran Kulkarni, merely because the former is the wife of the latter, by invoking the principle of equivalent value. It is further submitted that Rajeshwari Kulkarni is neither an accused in the scheduled offence case nor in the money laundering case and has not been in possession of proceeds of crime at any time. 12. It is also submitted that it is the case of the ED that the entire amount of FCCBs, i.e., $ 125 Million, is proceeds of crime. Therefore, given the fact that the FCCBs were listed and registered in Singapore and raised in London, the same were always abroad and not in India. In fact, all the dealings regarding the FCCBs were dealt by the subsidiaries of the company and through banks such as BSI Bank, Singapore and Clariden Bank (now Credit Suisse ....
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....h 'reason to believe' were not supplied to the appellants, resulting in violation of principles of natural justice. Reliance is placed on the judgments in V.M. Ganesan v. Directorate of Enforcement, 2014 SCC OnLine Mad 10702, Aslam Mohammad Merchant v. Competent Authority, (2008) 14 SCC 186, J. Sekar v. Union of India, 2018 SCC OnLine Del 13481, Partap Singh v. Director of Enforcement, (1985) 3 SCC 72 and Yash Raj Films Pvt. Ltd. v. Directorate of Enforcement, 2019 SCC OnLine ATPMLA 11. 16. It is further contended that the Rajeshwari Kulkarni did not have any knowledge about the alleged transactions as she was not an office-bearer in the company and was not responsible for its business affairs and management. She only had 300 shares of the company being just one among 28,000 shareholders. However, the ED did not take action against any of the shareholders and properties of Rajeshwari Kulkarni were attached solely for the reason that she is the wife of appellant Kiran Kulkarni. Therefore, the findings and allegations of the ED as well as the Ld. AA that Rajeshwari Kulkarni committed the offence of money laundering or dealt with proceeds of crime are baseless and unfounded. 17.....
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....any, therefore, he was not aware of the transactions concerning the utilization of FCCBs. The purchase of software was looked after by Prashant Mulekar and there is no evidence on record to establish the involvement of the appellant Kiran Kulkarni in the alleged transactions or commission of offences. 20. It is argued that the company could not redeem the FCCBs as the company faced liquidity crunch in 2013 and the Hon'ble High Court of Judicature at Bombay appointed Official Liquidator on 07.04.2014 to administer the assets and records of the company. 21. It is also submitted that the possession in relation to the attached properties is not liable to be disturbed as it has been held by the Hon'ble Supreme Court in Vijay Madanlal Choudhary v. Union of India, (2023) 12 SCC 1 that the power to take possession of the attached properties ought to be invoked only in exceptional situation keeping in mind the peculiar facts of the case. The appellants have also relied upon the judgment of this Appellate Tribunal in Alive Hospitality & Foods Pvt. Ltd. v. Deputy Director, Directorate of Enforcement, 2025 SCC OnLine ATSAFEMA 161 wherein it has been held that attachment by itself neither....
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....he beginning as evident from the FIR and the ECIR. 27. It is also submitted on behalf of the Respondent that the Bandra Flat was initially purchased in the name of both the appellants (husband and wife) vide Sale Deed dated 26.10.2000 but the payment of Rs. 1,64,19,377/- for such property was made by appellant Kiran Kulkarni from his bank account number 5155893003 maintained with Citibank. However, the appellant Kiran Kulkarni transferred his undivided 50% share of the said flat to his wife appellant Rajeshwari Kulkarni vide Gift Deed dated 27.12.2012, anticipating the future legal action against the company for the violations and non-compliances. 28. It is further submitted that though the Jogeshwari Flat was purchased in the name of appellant Rajeshwari Kulkarni vide Sale Deed dated 19.08.1994, however, the consideration for the same was paid by the appellant Kiran Kulkarni to the amount of Rs. 1,64,300/- from his bank account number 5155893003 maintained with Citibank. Nonetheless, the appellants have admitted the fact that part consideration for the attached properties was paid by Kiran Kulkarni. Moreover, Rajeshwari Kulkarni is a full-time homemaker, and has no independe....
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....here the property is attached not as property derived or obtained directly or indirectly as a result of criminal activity relating to the scheduled offence, but as "value of such property" or in other words, alternate property of equivalent value, the time of its acquisition of such alternate property would not be a material consideration. This Appellate Tribunal has had the occasion to the consider this issue in several cases. It would be sufficient to refer to just one recent judgment of the Appellate Tribunal wherein the underlying legal position is this regard has been explained succinctly. In its judgment dated 02.07.2026 passed in the case of Smt. R. Booma (FPA-PMLA-1638/CHN/2017) and Shri S.P. Rajendran (FPA-PMLA-1632/CHN/2017), this Appellate Tribunal had held as follows: "16. Even from the legal perspective, the argument put forward on behalf of the appellants that properties acquired prior to the alleged period of crime cannot be attached as proceeds of crime is legally untenable. The underlying legal issue has been discussed in detail in the order dated 14.10.2024 of this Appellate Tribunal passed in the case entitled Sadanand Nayak v. Dy. Director, FPA-PM....
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....ra) 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 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, wher....
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....mitted that Smt. Rajeshwari Kulkarni is neither an accused in the scheduled offence case nor in the money laundering case, and was not in possession of proceeds of crime at any time. Properties belonging to a third person who is not connected with the offences, cannot be brought within the sweep of the provisions of PMLA, as such wide interpretation would have serious repercussions. Smt. Rajeshwari Kulkarni did not have any knowledge about the alleged transactions as she was not an office-bearer in the company, and was not responsible for its business affairs and management. She only had 300 shares of the company being just one among 28,000 shareholders. ED did not take action against any of the shareholders and their properties, but Rajeshwari Kulkarni's properties were attached solely for the reason that she is the wife of appellant Kiran Kulkarni. It is, therefore, contended that the findings and allegations of the ED as well as the Ld. AA that Rajeshwari Kulkarni committed the offence of money laundering or dealt with proceeds of crime are baseless and unfounded. 37. The above submissions made on behalf of the appellants have been considered. At the outset, it may be pointed....
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....ly taken by her, the sources out of which the same were repaid have not been disclosed. 39. So far as the legal position is concerned, the Hon'ble Supreme Court, in their landmark judgment in the case of Vijay Madanlal Choudhary v. Union of India & Ors. 2022 SCC OnLine SC 929, has observed that the objective of enacting the PMLA was the attachment and confiscation of proceeds of crime which is the quintessence, so as to combat the evil of money-laundering, by reaching the proceeds of crime in whosoever's name they are kept or by whosoever they are held. In the present case, funds of Sh. Kiran Kulkarni admittedly found their way into the properties in question. Therefore, the properties could certainly be attached in an investigation against Sh. Kulkarni, regardless of the fact that the properties were acquired/ or transferred in the name of his wife, Rajeshwari Kulkarni. 40. In light of all the facts discussed above, the contention of the appellants, (i) that the properties were from explained sources, and, (ii) that the property standing in the name of Smt. Rajeshwari Kulkarni could not be attached, are found to be without merit and are hereby rejected. 41. It is next ....
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.... PMLA, and not with reference to the time of commission of the scheduled offence. In other words, regardless of whether the scheduled offence was committed before or after the PMLA was amended in order to introduce a new provision, the amended provision will apply if it came into the statute book before any of the actions constituting 'money laundering' under the Act, i.e., concealment/ possession/ acquisition/ use/ projecting or claiming of the proceeds of crime to be untainted property, occur. Reference may also be made at this point to the judgment of the Hon'ble Jharkhand High Court, in Hari Narayan Rai v. Union of India (W.P. (Cr) No. 325/2010) wherein it was held: "The relevant date is not the acquisition of illicit money but the date on which such money is being processed for projecting it untainted" 44. The amendment to the definition of the term "proceeds of crime" under section 2(1)(u) in order to insert the words, "or where such property is taken or held outside the country, then the property equivalent in value held within the country" was admittedly made with effect from 14.05.2015. In the present case, the FCCBs in question were redeemable in 2013. The....
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....urther submitted that the Respondent failed to make tangible efforts to establish that the proceeds of crime were held outside India and that the same were irretrievable despite best efforts being made, before attaching the properties in equivalent value under Section 2(1)(u) PMLA. Also, the ED has failed to establish that the appellants have received any proceeds of crime. 47. This contention of the appellant does not require detailed discussion. It is the appellant's own categorical submission (see para 41 supra) that the alleged proceeds of crime were raised abroad and were always located abroad. Needless to say, such properties located outside the country were not accessible to ED. Moreover, the "value of such properties" is as much a part of the definition of proceeds of crime as the direct or indirect proceeds of crime and ED was well within its rights to attach the same. 48. The next argument raised on behalf of the appellant is that the Respondent failed to record the reasons as per the requirement of Section 5(1) PMLA for formation of the belief that the appellants were in possession of the proceeds of crime and if the properties were not so attached, they would be c....
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.... POC. The said two immovable properties viz. (a) Flat No. 19 on the 5th floor, and one Stilt Parking space and one open parking space in the compound of the building "Konark Classic' situate at 85, Warods Road, Off Hill Road, Bandra Mumbai -400 050 on Plot No.s 4 & 5, C.T.S. Nos. 3-B/27, B/28 and B/29A, Survey No. 92 in the village Bandra, Taluka Andheri -400 050 admeasuring 2505 Sq. Ft. area having agreement value of Rs. 1,65,33,500/-(present market value Rs. 7.69 Crore appx. (based on the Ready Reckoner of Govt. of Maharashtra for Stamp Duty for the year 2016-17 @ Rs. 301500 per sq mtr equivalent to Rs. 28,010/- per sq. ft) & (b) Flat No. 45, Fourth Floor, Avillion Green Field CHS Ltd. A6 Building, Survey No. 42, Hissa No. 3 (part) and Survey No. 34, Hissa No 1 (part) in the village Majas, Jogeshwari (E), Mumbai admeasuring 532 Sq. Ft. carpet area having agreement value of Rs. 5,05,300/- (present market value Rs. 0.89 Crore appx. (based on the Ready Reckoner of Govt. of Maharashtra for Stamp Duty for the year 2016-17 @ Rs. 181100 per sq mtr equivalent to Rs. 16825/-per sq. ft)) though registered in the name of Mrs Rajeshwari Kulkarni, wife of Shri Kiran Kulkarni but ....
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....xports were found to be genuine by Software Technology Parks of India; that there is no allegation of cashback or illegal diversion of funds from the six companies controlled by Shri Mangiram Sharma; that the funds were utilized as per the mandate of offering and necessary letters were sent to the RBI; that the RBI, vide their letter dated 06.11.2015 to the Economic Offences Wing, Mumbai had stated that no FEMA regulations had been contravened by the company qua the FCCBs and the documents filed on record to show proper utilization of the FCCBs and, as such, there was no diversion of funds and same are still available; that no investigation has been conducted by the ED in this regard; that even otherwise at best it was a case of mismanagement of funds which occurred due to the global economic crisis and not of breach of trust or cheating, as essential ingredients of cheating and dishonest intentions are absent. It is also submitted that at the relevant time, i.e., 2008, the appellant Kiran Kulkarni was fully engaged in developing products and defining the technology road-map for the company, therefore, he was not aware of the transactions concerning the utilization of FCCBs. The pu....
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....ll date. In fact, as pointed out by the respondents, a prosecution complaint dated 22.06.2018 stands filed even under the PMLA wherein the appellant Sh. Kiran Kulkarni himself is an accused. As pointed out by the Hon'ble Supreme Court in Vijay Madanlal Choudhary (supra), attachment of property under Section 5 is a balancing arrangement to secure the interest of the person as well as to ensure that the proceeds of crime remain available for being dealt with in the manner provided by the 2002 Act. It is only an interim measure to protect the property during the pendency of the prosecution case. Attachment per se does not deprive the person of ownership or even possession of the property. 54. The last contention of the appellant, which is by way of an alternative contention, is that possession of the attached properties is not liable to be disturbed as it has been held by the Hon'ble Supreme Court in Vijay Madanlal Choudhary v. Union of India, (2023) 12 SCC 1 that the power to take possession of the attached properties ought to be invoked only in exceptional situation keeping in mind the peculiar facts of the case. The appellants have also relied upon the judgment of this Appellate....