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2024 (12) TMI 744 - AT - Money LaunderingMoney Laundering - proceeds of crime - scheduled offence - misappropriation of funds as well as abuse of power under Mahatma Gandhi National Rural Guarantee Scheme - whether a property derived or obtained directly or indirectly out of the criminal activity relating to scheduled offence can alone be considered to be the proceeds of crime or in absence of the availability of such property, any other such property of equivalent value would also fall in the definition of proceeds of crime ? HELD THAT - The judgment in SHRI SADANANDA NAYAK VERSUS THE DEPUTY DIRECTOR DIRECTORATE OF ENFORCEMENT, BHUBANESWAR 2024 (10) TMI 1619 - APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI deals with the issue and it is not only after referring to the judgment of Punjab and Haryana High Court in the case of Seema Garg 2021 (4) TMI 1247 - SUPREME COURT but even other judgments of High Courts and Supreme Court. However, reliance has been made on the judgment of the Apex Court in the case of Vijay Madanlal Choudhary 2022 (7) TMI 1316 - SUPREME COURT (LB) apart from the judgment of Delhi High Court in the case of Prakash Industries (supra). In the case of Prakash Industries 2022 (7) TMI 877 - DELHI HIGH COURT , elaborate discussion to define the proceeds of crime has been made where the judgment of the Punjab and Haryana High Court in the case of Seema Garg was also referred but has been distinguished because Punjab and Haryana High Court taken only two limbs of the definition of proceeds of crime while it has three limbs. The specific argument raised before the Apex Court in the case of Vijay Madanlal Choudhary to make second and third limb together was not accepted i.e. other than the property acquired or derived directly or indirectly as a result of criminal activity, the property can be attached only when it is sent outside India. In that case, the property of equivalent value can be attached. The Adjudicating Authority committed grave illegality in taking narrow meaning or giving a different construction to the definition of proceeds of crime than legislated by the legislature. The courts are having no authority to nullify any definition though Constitutional Court declared it to be ultra vires. It is found that the reasons to cause interference in the impugned order of the Adjudicating Authority which is set aside with the remand of the case for a fresh consideration. It would be within the period specified in the statute and for that the parties would remain present before the Adjudicating Authority on 10.12.2024. The appeal is allowed.
Issues Involved:
1. Interpretation of "proceeds of crime" under the Prevention of Money Laundering Act, 2002. 2. Legality of attaching properties not directly or indirectly derived from criminal activity. 3. Reliance on judicial precedents by the Adjudicating Authority. 4. Consideration of equivalent value property in the absence of direct proceeds of crime. Issue-wise Detailed Analysis: 1. Interpretation of "Proceeds of Crime": The central issue is the interpretation of "proceeds of crime" as defined under Section 2(1)(u) of the Prevention of Money Laundering Act, 2002. The definition includes any property derived or obtained directly or indirectly from criminal activity relating to a scheduled offence, or the value of any such property. The Tribunal emphasized that the definition has three distinct limbs: the property directly or indirectly obtained from crime, the value of such property, and property equivalent in value when the original proceeds are not available. The Tribunal referenced the Delhi High Court's interpretation in Axis Bank and Prakash Industries cases, which clarified that the definition encompasses both tainted and untainted properties, the latter being attachable if the tainted property is untraceable. 2. Legality of Attaching Properties Not Directly or Indirectly Derived from Criminal Activity: The Tribunal examined whether properties not directly linked to criminal activity could be attached. It was argued that properties acquired prior to the crime should not be considered proceeds of crime. However, the Tribunal rejected this view, stating that such an interpretation would render the second limb of the definition redundant. The Tribunal held that properties of equivalent value could be attached if the direct proceeds of crime were unavailable, ensuring the legislative intent to prevent money laundering is upheld. 3. Reliance on Judicial Precedents by the Adjudicating Authority: The Adjudicating Authority's reliance on the Punjab and Haryana High Court's judgment in Seema Garg and the Andhra Pradesh High Court's decision in Satyam Computer Services was scrutinized. The Tribunal noted that these judgments interpreted the definition of proceeds of crime narrowly, focusing only on properties directly linked to criminal activities. However, the Tribunal highlighted that the Supreme Court in Vijay Madanlal Choudhary and the Delhi High Court in Prakash Industries provided a broader interpretation, allowing for the attachment of equivalent value properties. The Tribunal found the Adjudicating Authority's approach flawed for not considering the full scope of the definition as clarified by higher courts. 4. Consideration of Equivalent Value Property in the Absence of Direct Proceeds of Crime: The Tribunal addressed the situation where the proceeds of crime are not available, and whether properties of equivalent value can be attached. It reaffirmed that the legislative framework allows for such attachment to prevent the accused from evading justice by dissipating the proceeds. The Tribunal cited the Supreme Court's judgment in Vijay Madanlal Choudhary, which supports the attachment of equivalent value properties to maintain the effectiveness of the anti-money laundering regime. The Tribunal concluded that the Adjudicating Authority erred in not applying this principle, leading to the remand of the case for reconsideration. Conclusion: The Tribunal set aside the Adjudicating Authority's order, emphasizing the need for a broader interpretation of "proceeds of crime" that includes properties of equivalent value when direct proceeds are unavailable. The case was remanded for fresh consideration, instructing the Adjudicating Authority to adhere to the interpretation provided by higher judicial authorities, ensuring the objectives of the Prevention of Money Laundering Act are met.
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