TaxTMI 
TaxTMI 
2026 (10) TMI 15
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....red when a special squad under the Superintendent of Police, Nanded found that at around 4.00 PM on 18.07.2018, the police received a confidential information regarding illegal transport of essential commodities - wheat and rice, from the FCI Godown at Jawahar Nagar Tuppa to M/s India Mega Agro Anaj Ltd. 3. The respondent recorded ECIR based on the above information and caused investigation under the Act of 2002. The statements under Section 50(2) and 50(3) of the Act of 2002 were recorded where the modus operandi for generation of proceeds of crime and deployment thereof was retrieved. It was rather found that the appellant Ajay Baheti is a habitual offender. He was found involved in long term diversion of rationing grains from FCI godowns to the accused company M/s India Mega Agro Anaj Ltd. To legitimize the illegal activity, appellant Ajay Baheti orchestrated bogus purchases through 8 shell companies. Funds were transferred to the bank accounts of the companies against fictitious purchases. Subsequently, the proprietors of the shell companies withdrew the funds in cash and handed them over to the appellant Ajay Baheti. These firms were utilized by appellant Ajay Baheti to inf....
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....pressed only one ground to challenge the impugned order. It is referring to the provisional attachment of the properties alleged to be not connected with the crime and otherwise cannot be termed to be "proceeds of crime" as defined under Section 2(1)(u) of the Act of 2002. The counsel for the appellants did not contest the allegations levelled against the accused for commission of scheduled offence and even otherwise the allegation was existing against M/s India Mega Agro Anaj Ltd., but I do not find an appeal in the hands of the aforesaid firm. The fact, however, remains that without challenging the allegation against the appellants, the provisional attachment of the properties has been questioned on the ground that it does not fall within the definition of "proceeds of crime". The properties were acquired much prior to the crime period, thus could not have been connected with the crime. 11. The contest to the aforesaid argument was made by the counsel for the respondent. It was submitted that the appellants are involved in the commission of crime and when the proceeds of crime were not found available with them, the properties for value thereof have been attached, which forms ....
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....s view due to the subsequent interpretation by the Supreme Court, which has superseded the legal principles established in Seema Garg's case (supra). 3.4. It is evident that the original (unamended) definition of phrase 'proceeds of crime' was structured into two distinct parts. The first part relates to the property derived or obtained directly or indirectly by any person as a result of criminal activity relating to a scheduled offence, whereas, the second part relates to the value of any such property where the proceeds of crime are not traceable. This clearly means that if the property derived or obtained, directly or indirectly, from the proceeds of a crime of scheduled offence is not traceable, then any property of equivalent value falls within the scope of the expression 'proceeds of crime'. In 2015, the amendment restructured the definition into three parts to cover the property taken or held outside the country. The concept of the property of equivalent value was introduced with respect to the aforementioned properties. The amendment enabled the authorities to go after any other property of a person of equivalent value. In 2019, the scope of the....
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....upra). 3.6. It is not disputed that the Supreme Court in Vijay Madanlal Chaudhary's case (supra) was examining the scope of the '2002 Act' including definition of phrase 'proceeds of crime'. The submission put forth by the learned counsel that the phrase 'or the value of any such property' is superfluous was rejected by the Court and it was held that the definition of 'proceeds of crime' is wide enough to not only include to the property derived or obtained as a result of criminal activity related to a schedule offence but also any other property of equivalent value. 3.7. While interpreting a statutory provision, it is the bounden buty of the Courts to interpret it in manner so that each word used by the statute conveys a meaning it was assigned by the Legislature. The words used in statute are of utmost significance. The Court cannot widen or restrict the provisions on its own whims and fancies. When a statute's language is clear and unambiguous, the general rule of interpretation of statute is to read the provision as a whole and the Court must adhere strictly to the ordinary, plain meaning of the words used. The words in ....
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.... learned counsel for petitioner". 13. The Hon'ble High Court of Punjab and Haryana in the case of Dilbagh Singh (supra) had considered its earlier judgment in the case of Seema Garg (supra) and held the latter to be not laying down good law. The judgment in the case of Dilbagh Singh (supra) has considered the judgment of the Supreme Court in the case of Vijay Madanlal Choudhary Vs. Union of India 2022 SCC Online SC 929 and Pavana Dibbur Vs. Directorate of Enforcement reported in 2023 SCC Online SC 1586. 14. Similar issue was also taken by this Tribunal in the case of Shri Sadananda Nayak Vs. Directorate of Enforcement, Bhubaneswar (Appeal No. 5612/2023). The relevant paras in the case of Sadananda Nayak (supra) are reproduced hereunder: "8. We have considered the rival submissions raised by the counsel for both the parties and scanned the record carefully. 9. It is not in dispute that an FIR was registered for commission of the scheduled offence. It was followed by recording of the ECIR. The respondent initially frozen the bank accounts of the appellant and his sons, which was followed by the provisional attachment of the properties vide order dated 27.07.20....
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....e. 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 not acquired or derived by the accused himself but he passed on money out of the crime to another person and he acquired the property, then also it would be considered to be the proceeds of crime to acquire the property. In any case, there should be an element for use of the proceeds directly or indirectly obtained out of the crime and thereby the property would have nexus with the crime. 14. In second part "the value of any such property" the definition aforesaid starts with "or" after the first part referred and discussed in the para above. The second part of the definition is commonly considered to be attachment of property of equivalent va....
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....ime 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." The perusal of the para quoted above shows that the argument of the appellant that "the value of any such property" would be only when the proceeds have been taken out of India. The argument aforesaid was not accepted and it simplifies that the definition of "proceeds of crime" has three limbs and elaborate judgment to define the "proceeds of crime" was given by the Delhi High Co....
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....ment 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 of Kerala High Court in the case of Satish Motilal Bidri (supra). The Ld. counsel did not refer the relevant para of the judgment in the case (supra), rather he referred Para 66 of the judgment of the Apex Court in Vijay Madanlal Choudhary (supra) which permits attachment only of the proceeds of crime. There cannot be any dispute that attachment can be only of the proceeds of crime but what would fall in the definition of "proceeds of crime" and clarified in Para 68 of the same judgment has not been taken into consideration whereas judgement of the Apex Court on the issue is binding on the High Court. 19. The reference to the judgment in the c....
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....d 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 case the Directorate does proceed against any other property, it must be equivalent in value to the illegal pecuniary benefit or gain that may have been obtained as a result of criminal activity. 80. In the considered opinion of this Court to tie the Directorate's power to move forward in this direction only in cases where property is taken or held outside the country would not only do violence to the plain language of Section 2(1)(u), it would clearly whittle down the scope and intent of the definition itself. It would essentially amount to erasing the expression value of any such property as appearing in Section 2(1)(u) altogether. The Court ....
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....aid 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 Punjab and Haryana High Court. xxxx 105. It would be pertinent to recall that properties which were acquired prior to the enforcement of the Act may not be completely immune from action under the Act in light of what this Court had held in Axis Bank. As was explained by the Court in Axis Bank, the expression proceeds of crime envisage both -tainted property as well as -untainted property with it being permissible to proceed against the latter provided it is being attached as equal to the "value of any such property" or "property equivalent in value held within the country or abroad". However, both the italicised categories would be lia....
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....ry (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 non-availability of the property derived or obtained directly or indirectly rather when it is vanished or siphoned off, the attachment can be of any property of equivalent value. It is necessary to clarify that the proceeds of crime would not only include the property derived or obtained directly or indirectly out of the criminal activity relating to the scheduled offence but any other property of equivalent value. The word "or" has been placed before "the value of any such property" and is of great significance. Any property of equivalent value can be attached when the proceeds directly or indirectly obtained out of the crime has been vanis....