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TMI Blog2025 (1) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... it to various group companies and by layering the proceeds. In the light of the aforesaid, second limb of the definition of proceeds of crime has been applied to attach the property of equivalent value. Thus, the first ground raised by the appellant cannot be accepted. The attachment order would be lapsed after expiry of 180 days - HELD THAT:- There are no substance in the argument to seek lapse of the provisional attachment order when the intervening period was suffered due to Covid-19 and the period from 15.03.2020 till 28.02.2022 has been eliminated by the Apex Court for termination of proceedings - the ground for challenge to the order cannot be accepted. No connection between properties and proceeds of crime - HELD THAT:- The properties were linked to the proceeds of crime through financial transactions and layering - the attachment of properties as connected to the proceeds of crime upheld. Invalidity of scheduled offence - HELD THAT:- The relevant date is a date when the tainted property is projected to be untainted and as a consequence to it, the ECIR is recorded showing offence under Section 3 of the 2002 Act. The relevant date to find out the scheduled offence and the off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies M/s Anod Pharma Pvt. Ltd; M/s Anod Plasma Spray Ltd; and M/s Sofgel Capsulation Pvt. Ltd for commission of crime. 4. The three firms named in the preceding para were awarded contracts for supply of RO Machinery and Civil work in the hospitals across the State of Uttar Pradesh for a sum of Rs.19.93 crores. The contracts were awarded at the rate higher than prevalent market price without adequate inquiry and in violation of the conditions of tender. This led to the misappropriation of the funds in conspiracy with government officials. 5. The CBI filed a charge-sheet on 26.08.2015 before the Special Judge, Anti-Corruption, CBI Ghaziabad. In the investigation it was revealed that the State Health Society was formed under National Rural Health Mission (NRHM) with three key bodies, namely, the Governing Body, the Executive Committee and State Programme Management Unit. Rs. 19.95 crores were allocated for RO water system and Rs. 2.68 crores for improvement of hospital facilities. It was awarded to M/s Anod Pharma Pvt. Ltd; M/s Anod Plasma Spray Ltd.; and M/s Sofgel Capsulation Pvt. Ltd of Kanpur.These contracts were granted at higher price in collusion with the public officials includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td, a company incorporation under the Companies Act on 25.05.2005. (Annexure-4 @ Pg. 169 of the Appeal No. 4449 of 2022). d. The Appellants have been wrongly implicated in an alleged money laundering offence under the provisions of the PMLA, based on the predicate offence registered by the Central Bureau of Investigation [ CBI'0 under sections 120-B, 409, 420 of the IPC and Section 13(2) r/w 13(1)(d) of the Prevention of Corruption Act, 1988. 7. It was submitted that the properties belonging to the appellants have been attached, even though, it was not acquired or derived out of the proceeds of crime rather all the properties were purchased by the appellants much prior to commission of crime rather few properties were purchased before the Act of 2002 was given effect.The property purchased or acquired by the appellants prior to commission of crime could not have been attached treating it to be proceeds of crime. The Ld. Counsel for the appellants made reference of the judgment of High Court and Supreme Court to substantiate his arguments which would be discussed while recording the findings.It was further submitted that the alleged loss to exchequer was to the tune of Rs.6,03,2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of commission of crime alone could have been attached which issue has been seriously contested by the respondent. 12. To analyze the issue, it would be gainful to refer to the definition of proceeds of crime given under Section 2(1) (u) of the Act of 2002 and is quoted thus- 2. Definitions -(1) In this Act, unless the context otherwise requires, - xx xx xx xx xx xx xx xx xx xx xx (u) proceeds of crime means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property' [or where such property is taken or held outside the country, then the property equivalent in value held within the country] [or abroad]; [Explanation. For the removal of doubts, it is hereby clarified that proceeds of crime include property not only 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]. xx xx xx xx xx xx xx xx xx xx xx 13. The perusal of the definition reveals three limbs of the definition out of which first part refers to the property acquired ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the judgments on the issue have been considered. The relevant paras of the said order are quoted here under:- 10. The Ld. Counsel for the appellant did not raise argument in reference to registration of the FIR and recording of the ECIR, followed by investigation where the role of the appellant for commission of crime has been found. The only argument raised was to challenge the attachment of three properties out of four. However, no argument was raised for the property acquired subsequent to the commission of crime i.e., fourth Property. 11. It was submitted that the properties acquired prior to the commission of crime had no nexus with the crime and thus could not have been attached. It was not obtained or derived directly or indirectly out of criminal activities relating to the scheduled offence. The respondent could not show nexus of three properties with the crime out of four attached by them. 12. The reference of the judgment of the Apex Court in the case of Pavana Dibur (supra) and also of Kerala High Court in the case of Satish Motilal Bidri (supra) has been given. To analyze the issue, we may quote the definition of 'proceeds of crime'given under Section 2(1) (u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erived directly or indirectly out of the criminal activities is not available or vanished and, therefore, to secure the proceeds of equivalent value till completion of trial, it would fall under the value of any such property which is commonly taken to be the property of equivalent value. The case in hand falls in the second category of the definition of proceeds of crime because proceeds are not available and, therefore, the property of equivalent value is attached. 15. The argument has been made in reference to the judgment of Kerala High Court in the case of Satish Motilal Bidri (supra) and the judgment of Apex Court in Pavana Dibur (supra) to hold that the properties acquired prior to commission of crime would not fall in the definition of proceeds of crime . We are unable to accept the arguments which may otherwise make second part of the definition of proceeds of crime to be redundant. It would be for the reason that if the definition is taken only in two parts leaving the middle part, then it would be difficult for the enforcement agencies to protect the property till completion of the crime to save the victim from crime committed by the accused. It would be for the reason t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operties mentioned above, the first may be referred to, for sake of convenience, as tainted property in as much as there would assumable be evidence to prima facie show that the source of (or consideration for) its acquisition is the product of specified crime, the essence of money laundering being its projection as untainted property (Section 3). This would include such property as may have been obtained or acquired by using the tainted property as the consideration (directly or indirectly). To illustrate, bribe or illegal gratification received by a public servant in form of money (cash) being undue advantage and dishonestly gained, is tainted property acquired directly by a scheduled offence and consequently proceeds of crime . Any other property acquired using such bribe as consideration is also proceeds of crime , it having been obtained indirectly from a prohibited criminal activity within the meaning of first limb of the definition. 107. In contrast, the second and third kinds of properties mentioned above would ordinarily be untainted property that may have been acquired by the suspect legitimately without any connection with criminal activity or its result. The same, howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dges of the Apex Court. In fact, elaborate arguments to define proceeds of crime on the issue were not raised by the parties after referring to the object of the Act of 2002 which was enacted out of the international convention. The Delhi High Court has discussed the issue elaborately and otherwise if we apply the judgement of Kerala High Court in the case of Satish Motilal Bidri (supra,) it would be making the second limb of the definition of proceeds of crime to be redundant. The counsel who appeared before the Kerala High Court did not argue that the definition of proceeds of crime has three limbs and unfortunately the view expressed by Delhi High Court in Axis Bank(supra) was not discussed elaborately while it was cited by the counsel. 20. The Ld. Single judge of Kerala High Court did not subscribe the judgment aforesaid, rather applied the judgment of Punjab and Haryana High Court in the case of Seema Garg v. Deputy Director, Directorate of Enforcement , reported in 2020 SCC OnLine Punjab Haryana 738. With due respect, we are unable to apply the judgment of Kerala High Court going against Para 68 of the judgment of the Apex Court in the case of Vijay Madanlal Choudhary (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from commission of a scheduled offence. The Court observes that Section 2(1)(u) clearly and in unambiguous terms includes not only property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence but also the value of any such property. Seema Garg thus seems to gloss over the statutory imperatives underlying the deployment of the phrase or the value of any such property and the concept of deemed tainted properties enunciated in Axis Bank. On a plain textual interpretation of Section 2(1)(u) as well as in the backdrop of the amendatory history of that provision, this Court finds itself unable to agree with the line of reasoning adopted in Seema Garg. As held hereinbefore, affirmation of Seema Garg would amount to virtually deleting the phrase or the value of any such property from Section 2(1)(u). That would not only violate the well settled tenets of statutory construction but would clearly amount to the Court rewriting the provision itself in a manner that it stands deprived of vital and purposive content. The Court further notes that Axis Bank had enunciated important safeguards which would apply in respect of third-party intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll within the ambit of value of any such property or property equivalent in value held within the country or abroad. To the aforesaid limited extent, properties purchased prior to 01 July 2005 may also become vulnerable and subject to action under the Act. However, enforcement action against such properties would have to satisfy the tests and safeguards as propounded in Axis Bank with the learned Judge observing that in such a situation it would have to be established that the person accused of money laundering had an interest in such property at least till the time that he indulged in the proscribed criminal activity. The learned Judge further observed that bona fide rights acquired by third parties prior to the commission of the predicate offense would stand saved. 21. The issue aforesaid was not raised in the case of Pavana Dibur (supra). The counsel appeared therein did not elaborately argue the issue by referring to the definition of proceeds of crime having three limbs to give meaning to each limb for the interpretation of the definition of the proceeds of crime . The reference of Para 68 of the judgment of three judges Bench of the Apex Court in the case of Vijay Madanlal Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of proceeds of crime. In the second limb, which refers to the value of any such property would indicate any other property which was acquired prior to the commission of crime and it would be attached only when the proceeds directly or indirectly obtained or derived out of the criminal activity is not available. It may be on account of siphoning off or vanished by the accused. In those circumstances the property of equivalent value can be attached. The word the value of any such property signifies without any embargo that it should be the property purchased after the commission of crime or prior to it rather it would apply in both the eventuality in the given circumstance. Thus, we are not in agreement with the counsel for the appellant who has questioned the attachment in reference to the property acquired prior to commission of crime. We are not going even further that the properties have nexus with the proceeds out of the crime but even in given circumstances and scenario that the property was acquired prior to commission of crime then, also under certain circumstances, it can be attached for the value of any such property. 23. At this stage, it is reiterated that any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he instant case, the impugned order was passed beyond a period of 180 days thus it is to be treated as lapsed as per the provisions of the Act. The argument has been raised in ignorance of the fact that the period was effected by Covid-19 The reference of the judgment of the Apex Court in the case ofVijay Madanlal Choudhary v. Union of India reported in 2022 SCC OnLine SC 929 (supra)and Delhi High Court in the case of Vikas WSP Limited Ors. Versus ED reported in (2020) SCC online Delhi 732 has been given. 17. We find that issue aforesaid has now covered by the judgment of the Apex Court in the case of Suo Moto Petition 03/2020 decided by the order dated 10.01.2022 and also in the case of Prakash Corporates v. Dee Vee Projects Limited reported in (2022) 5 SCC 112. A detailed judgment was then given by the Telangana High Court referring to both the judgments of the Apex Court. It was in the case of Hygro Chemicals Pharmtek Pvt Limited Vs Union of India Ors. reported in MANU/TL/1003/2023 where a similar issue in reference to period of 180 days provided u/s 5(1) was taken into consideration. Section 5(1) is also quoted hereunder for ready reference: 5. Attachment of property involved i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated u/s 5(1) of the Act of 200, a lapse of attachment was sought which was not accepted by Telangana High Court in the case of Hygro Chemicals (supra)as the period intervening was of Covid-19. Relevant part of para 15 of the said judgment is quoted here under : 15. Issue No.3: Whether the period from 15.03.2020 to 28.02.2022 which was excluded by the Apex Court in computation of limitation vide In re: Limitation (supra) is applicable to orders confirming provisional attachment within 180 days? (i) The Petitioner in W.P. No. 34238 of 2022 contends that the provisional attachment order i.e., PAO No. 04 of 2022 dated 03.02.2022 could not have been confirmed by the Adjudicating Authority vide order dated 22.08.2022 as the same was passed after the lapse of 180 days. Further, the Petitioner contends that Adjudicating Authority cannot rely on In re: Limitation (supra) in calculating the period of 180 days in light of the Apex Court's decision in S. Kasi (supra). (ii) In W.P. No. 34627 of 2022, the provisional attachment order therein i.e., PAO No. 01 of 2021 was passed on 01.02.2021. Pursuant to which an original complaint under Section 5(5) of the PMLA was filed on 19.02.2021 and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in present proceedings. (v) Subsequently, the limitation period was extended vide In re: Cognizance for Extension of Limitation (hereinafter In re: Limitation, 2022') till 28.02.2022. The Apex Court vide the said order clarified that where any statute provides an outer limit of limitation period within which the proceedings are to be completed, the period between 15.03.2020 to 28.02.2022 shall be excluded in computing such period. The relevant paragraphs of In re: Limitation, 2022 (supra) are extracted below : 5.1. The order dated 23-3-2020 [Cognizance for Extension of Limitation, In re, (2020) 19 SCC 10 : (2021) 3 SCC (Cri) 801] is restored and in continuation of the subsequent orders dated 8-3-2021 [Cognizance for Extension of Limitation, In re, (2021) 5 SCC 452 : (2021) 3 SCC (Civ) 40 : (2021) 2 SCC (Cri) 615 : (2021) 2 SCC (L S) 50] , 27-4-2021 [Cognizance for Extension of Limitation, In re, (2021) 17 SCC 231 : 2021 SCC OnLine SC 373] and 23-9-2021 [Cognizance for Extension of Limitation, In re, 2021 SCC OnLine SC 947] , it is directed that the period from 15-3-2020 till 28-2-2022 shall stand excluded for the purposes of limitation as may be prescribed under any gener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Apex Court extended the period of limitation to safeguard the right of litigants to institute proceedings. The Court held that computation of 180 days to confirm provisional attachment of properties under Section 8(3) of the PMLA cannot be equated to initiation/institution of proceedings. The Court also held that prescription of 180 days is in the form of a protection against deprivation of right to property. The relevant paragraphs are extracted below: 15. It is further relevant to state that the orders passed by the Supreme Court in the Suo Motu writ petition mention specific provisions in specific statutes such as Sections 23(4) and Section 29A of The Arbitration and Conciliation Act, 1996, Section 12A of the Commercial Courts Act, 2015 and Section 138 provisos (b) and (c) of the Negotiable Instrument Act, 1881. On an examination of the specific statutes mentioned by the Supreme Court, it will be seen that all these statutes prescribed provide for specific time frame for instituting a suit, filing a claim/counter claim or an application in furtherance of a remedy provided under the statute. The intention was hence to preserve the right of a litigant to seek a remedy under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the prescribed statutory time period for filing of the written statement under Order VIII Rule 1 of The Code of Civil Procedure, as amended by the Commercial Courts Act. Prakash Corporates also recognised the fact that the decision in S. Kasi was concerned with filing of the charge sheet under Section 167(2) of The Code of Criminal Procedure (Cr.P.C.) and hence would not apply to filing of written statements beyond the prescribed time-limit. 22. The reasoning in S. Kasi would apply to the present case. The Supreme Court recognised that the 23rd March, 2020 order in the Suo Motu writ petition was for the benefit of those whose remedy may be barred by time because of not being able to physically come to Court to file proceedings. The Supreme Court made a distinction between the benefit given to litigants and extension of time for filing of a chargesheet by the police as contemplated under Section 167(2) of the Cr.P.C. The Court also noted the element of personal liberty of a person which was required to be protected. Although, the right of the petitioners before the Court is more to do with the right not to be deprived of property save by authority of law -Article 300A, the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar facts of the case. In that, merely because the provisional attachment order passed under Section 5(1) is confirmed, it does not follow that the property stands confiscated; and until an order of confiscation is formally passed, there is no reason to hasten the process of taking possession of such property. The principle set out in Section 5(4) of the 2002 Act needs to be extended even after confirmation of provisional attachment order until a formal confiscation order is passed. Section 5(4) clearly states that nothing in Section 5 including the order of provisional attachment shall prevent the person interested in the enjoyment of immovable property attached under sub-section (1) from such enjoyment. The need to take possession of the attached property would arise only for giving effect to the order of confiscation. This is also because sub-section (6) of Section 8 postulates that where on conclusion of a trial under the 2002 Act which is obviously in respect of offence of money-laundering, the Special Court finds that the offence of money-laundering has not taken place or the property is not involved in money-laundering, it shall order release of such property to the person en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when read as a whole, it is but clear that the anxiety of this Court had been to obviate the hardships likely to be suffered by the litigants during the onslaughts of this pandemic. Hence, the legal effect and coverage of the orders passed by this Court in SMWP No. 3 of 2020 cannot be unnecessarily narrowed and rather, having regard to their purpose and object, full effect is required to be given to such orders and directions. [To complete the scenario, we may indicate in the passing that even after we had heard this matter, there had been re-surge of Covid-19 cases with spread of a new variant of the virus. The drastic re-surge in the number of Covid cases has led this Court to again deal with the matter in SMWP No. 3 of 2020 on an application bearing No. 21 of 2022; and by the order dated 10-1-2022 [Cognizance for Extension of Limitation, In re, (2022) 3 SCC 117 : (2022) 2 SCC (Civ) 46 : (2022) 1 SCC (Cri) 580 : (2022) 1 SCC (L S) 501], this Court again restored the principal order dated 23-3-2020 [Cognizance for Extension of Limitation, In re, (2020) 19 SCC 10 : (2021) 3 SCC (Cri) 801] and in continuation of the previous orders, has further directed that the period from 15-3-20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Apex Court in S. Kasi case cannot be applied to a case involving property right of an individual or a corporate. 14. Our reasoning supra is also supported by the judgment of the Apex Court in Prakash Corporates v. Dee Vee Projects Limited [(2022) 5 SCC 112]. The Apex Court has explained the scope of the order passed in S. Kasi case and has categorically held that the same cannot be applied in a matter involving proceedings before a Court. The second respondent was exercising a quasi-judicial function and the ratio in S. Kasi case cannot be applied to such a quasijudicial authority. In any case, we keep this issue open to enable the petitioner to agitate the same before the Appellate Tribunal. (xxiv) This Court also disagrees with the view adopted in Vikas WSP Ltd. (supra), Gobindo Das (supra) and Hiren Panchal (supra). The decision in Vikas WSP Ltd. (supra) was stayed by a Division Bench of the Delhi High Court vide order dated 08.01.2021 in LPA 362/2020. In any case, the question regarding the application of In re: Limitation (supra) was left open. (xxv) As far as Gobindo Das (supra), is concerned, though it is true that Adjudicating Authority is not a litigant, the authoriz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) cannot be accepted. The judgments of other High Courts referred therein counter to the order of the Hon'ble Apex Court in Suo moto petition (supra). 6. At this stage, it needs to be clarified that the situation of COVID-19 was extraordinary and, therefore, the Apex Court had passed a detail order in the Suo moto petition (supra) to avoid effect of the statutory provisions of limitation and even for termination of proceedings. If we apply aforesaid to termination of proceeding of any nature, then only the purpose would be achieved otherwise it would be an interpretation defeating the purpose of the order of the Apex Court. COVID-19 was having an extraordinary emergent situation and, therefore the Government of India imposed lockdown from 23rd March, 2020 when nobody was even permitted to come out of the residence, other than those connected with emergent services. If we ignore the situation aforesaid and analyze that so far as the police officers concerned there should have completed the investigation when during the period of lockdown while they were not even authorized to visit the witnesses or record their statement. It is stated that in such circumstances completion of inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be untainted and as a consequence to it, the ECIR is recorded showing offence under Section 3 of the 2002 Act. The relevant date to find out the scheduled offence and the offence of money laundering is when it is projected tobe untainted property to make out an offence under section 3 of the Act of 2002.The issue aforesaid has been decided in the case ofDyani Antony Paul v. Union Of Indiareported in (WP No. 49642 of 2018) dated on 21 February, 2023.The relevant paras of the judgment quoted hereby: - 77. Article 20 of the Constitution prohibits conviction except for violation of a law in force at the time of commission of an offence. In other words, there cannot be prosecution under the PML Act for laundering of money acquired by committing the schedule offences prior to the introduction of the PML Act. Therefore, the time of commission of scheduled offences would not be relevant in the context of the prosecution under the PML Act. What would be relevant in the context of prosecution is the time of commission of the act of money laundering. The question would be, whether a person involved in money laundering as provided under Section 3 of the PML Act has indulged in the said a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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