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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 ..... er section 120-B read with Sections 409 and 420 of Indian Penal Code, 1860 and Section 13(2) and Section 13(1)(d) of the Prevention of Corruption Act, 1988. The Enforcement Case Information Report (ECIR) was then recorded by the respondent on 14.04.2012. It was followed by an investigation by the Directorate of Enforcement. The respondent then invoked section 5 of the Act of 2022 to attach the following properties of three appellants which are as under : Details of property Owner of Property Valuation of property as on 02.01.2012 (on the date of FIR) H.No. 11/HIG Block-B, Scheme- 38, Kanpur Anoop Kumar Tandon Rs.73,73,120/- H.No. 05/ HIG Block-B, Scheme- 38, Kanpur Rakesh Kumar Tandon Rs.73,69,920/- H.No. 07/HIG Block-B, Scheme- 38, Kanpur Pradeep Kumar Tandon Rs.73,69,920/- Total amount Rs.2,21,12,960/- The allegations against the accused is for irregularities in utilization of Central Government funds under the National Rural Health Mission Scheme in the State of Uttar Pradesh during the years 2005 - 2011. 3. In the complaint, it was alleged that from the year 2005 to 2011 the public officials including Shri Pradeep Kumar Shukla, Shri Abhay Kumar Bajpai a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Sofgel Capsulation under the control of the appellants. Arguments of the Appellant 6. The Ld. Counsel for the appellants raised many legal and factual issues for challenge to the impugned order and for that they have given the relevant facts pertaining to each appellant in the written arguments which are as under: a. Rakesh Kumar Tandon was appointed as Managing Director of M/s Anod Plasma Spray (P) Ltd. On 22.12.1988 and resigned from the company from 09.11.2015. Thereafter was again appointed as Director on 28.09.2018. The Appellant has shareholding of 17.4% in the said company. (Annexure-4 @ Pg. 168 of the Appeal No. 4447 of 2022). b. Pradeep Kumar Tandon was appointed as Director of M/s Anod Plamla (P) Ltd. On 09.02.1995 and resigned from the company from 16.11.2015. The Appellant was reappointed as Director on 28.09.2018. The Appellant has shareholding of 8.81% in the said Company. (Annexure-4 @ Pg. 168 of the Appeal No. 4448 of 2022). c. Anoop Kumar Tandon was an employee working with State Bank of India from November 1977 till 31.05.2007 when the Appellant took voluntary retirement. After nearly 2 years, in June 2009 the Appellant was appointed as Officer on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Penal Code, 1860 and 13(1)(d) of the Prevention of Corruption Act, 1988 which were added in the Act of 2002 in the list of scheduled offence by way of amendment in the year 2009 while alleged crime was committed in the year 2006-07. Thus, the properties in reference to the offence committed prior to the amending Act of 2002 could not have been applied for attachment of property. The prayer was accordingly made to set-aside the impugned order. Arguments of the Counsel for the respondent 10. The Counsel for the respondent contested the appeal on all the grounds raised by the appellant. Elaborate arguments on each issue were made and would be discussed while recording the finding to avoid bulkiness of the order by repeating the same facts. Accordingly, we would deal with each issue raised by the appellant for which we have scanned the record carefully and even perused the judgments cited by the Counsel for the parties. Properties acquired prior to commission of crime could not have been attached 11. The Ld. Counsel for the appellant has given brief facts pertaining to the purchase of properties. It was submitted that the attached properties were purchased prior to commission of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the italicised categories would be liable to be invoked in cases where the actual tainted property cannot be traced or found out. It is only where the respondents are unable to discover the tainted property that they can take the statutory recourse to move against properties which may fall 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." 14. This Tribunal has also given an elaborate judgmenton the issue in the case of Sadananda Nayak Versus The Deputy Director,Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivities 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 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 commo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uivalent 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." 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 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 case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly 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 further notes that in Seem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quires 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. xx xx xx xx xx xx 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 liable to be invoked in cases where th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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 v. 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 vanished or siphoned off. Here, the significance would be to the proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oted above show a detailed discussion to the interpretation to the definition of "proceeds of crime". The judgment of the Apex Court in the case ofSmt. Pavana Dibbur v. The Directorate Of Enforcement reported in 2023 SCC OnLine SC 1586(supra) has also been considered. However, findings given by three judges Bench of the Apex Court in the Vijay Madanlal Choudhary v. Union of India reported in 2022 SCC OnLine SC 929 (supra) has been relied to give interpretation to the definition. In the light of the above, we find no force in the first argument when the proceeds out of crime was not available with the appellant rather vanished and siphoned off,the property of equivalent value has been attached. The proceeds were siphoned off by diverting 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 cannotbe accepted. Issue No. 2 The attachment order would be lapsed after expiry of 180 days. 16. The Ld. Counsel for the appellant submitted that attachment order dated 13.03.2021 was confirmed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ode of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person authorised to investigate toffence mentioned in that Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or a similar report or complaint has been made or filed under the corresponding law of any other country : Provided further that, notwithstanding anything contained in first proviso, any property of any person may be attached under this section if the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section has reason to believe (the reasons for such belief to be recorded in writing), on the basis of material in his possession, that if such property involved in money-laundering is not attached immediately under this Chapter, the nonattachment of the property is likely to frustrate any proceeding under this Act. Provided also that for the purposes of computing the period of one hundred and eighty days, the period during which the proceedings under this section is stayed by the High Court, shall be excluded and a further period not exceeding thirty days from the date of order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmation order to compute the period of 180 days. (iv) It is relevant to note that the Apex Court in In re: Limitation (supra) took suo moto cognizance of the Covid-19 pandemic situation and extended the period of limitation from 15.03.2020 for the purpose of filing petitions/applications/suits/ appeals/all other proceedings under any general or special law before any Court or Tribunal. The object of such extension was in recognition of the difficulties that might be faced by lawyers/litigants to file their applications physically. The relevant paragraphs of In re: Limitation (supra) are extracted below: 1. This Court has taken suo motu cognizance of the situation arising out of the challenge faced by the country on account of Covid-19 virus and resultant difficulties that may be faced by litigants across the country in filing their petitions/applications/suits/appeals/all other proceedings within the period of limitation prescribed under the general law of limitation or under special laws (both Central and/or State). 2. To obviate such difficulties and to ensure that lawyers/litigants do not have to come physically to file such proceedings in respective courts/tribunals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe period(s) of limitation for instituting proceedings, outer limits (within which the court or tribunal can condone delay) and termination of proceedings. (vi) For instance, Section 29A of the Arbitration & Conciliation Act, 1996 provides a time limit of 12 months within which an award has to be passed. By virtue of In re: Limitation, 2022 (supra), the period from 15.03.2020 to 28.02.2022 shall be excluded to compute the period of 12 months under Section 29A of the Arbitration & Conciliation Act, 1996. Similarly, Section 12A(3) of the Commercial Courts Act, 2015 provides an outer time period of three months within which pre - institution mediation shall be completed. However, by virtue of In re: Limitation, 2022 (supra), the period from 15.03.2020 to 28.02.2022 shall be excluded to compute the period of 3 months. Therefore, In re: Limitation, 2022 (supra) states that wherever a statute prescribes a maximum period within which proceedings have to be completed, the period from 15.03.2020 to 28.02.2022 shall be excluded to compute such maximum period. (vii) To decide the applicabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a suit or filing of a petition/application which is a starting point of litigation for a person who seeks relief under a statute. The 180 days window in Section 5 contemplates an endpoint whereas the Supreme Court in the Suo Motu writ petition sought to protect the starting-point, which was at the risk of being defeated by reason of the pandemic. 19. In other words, what was being protected by the orders of the Supreme Court was the right to remedy, not the right to take away a remedy under a given statute. The respondents before this Court seek to do the latter. The only step taken by the ED is the order of the provisional attachment dated 30th September, 2021. No other steps were taken by the ED before the petitioners reply on 3rd January, 2022 or before the expiry of 180 days period on 31st March, 2022. By its inaction and failure to act in terms of Section 5(1)(b) or the other conditions of the said section, the ED has made itself vulnerable to Section 5(3) of the PMLA. The petitioner in turn has been given the breather of exhaustion of the 180 days window from 1st April, 2022 and the ED cannot now revive the proceedings after more than 80 days have passed from the end point o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) of the PMLA. In S. Kasi (supra), In re: Limitation (supra) was held to be inapplicable to proceedings involving personal liberty of a person where the investigating officer failed to file charge sheet within the prescribed time. The decision in S. Kasi (supra) cannot be extended to PMLA proceedings dealing with confirmation of provisional attachment order within 180 days. (xix) It is true that provisional attachment of property has an effect of potentially depriving a person of his property. However, right to personal liberty and right to property stand on a different footing and cannot be equated. This is evident from the fact that the urgency in concluding proceedings dealing with a person in jail is much higher than a person whose property is provisionally attached. Further, under Section 5(4) of the PMLA, the person whose property is provisionally attached can still enjoy such property till the same is confiscated. Even in cases of confirmation of provisional attachment, a person can still enjoy such property till the same is confiscated. (xx) In Vijay Madanlal Choudhary (supra), the Apex Court held that provisionally attached properties which are confirmed can still be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to observe that direction under Section 8(4) for taking possession of the property in question before a formal order of confiscation is passed merely on the basis of confirmation of provisional attachment order, should be an exception and not a rule. That issue will have to be considered on case-to-case basis. Upon such harmonious construction of the relevant provisions, it is not possible to countenance challenge to the validity of subsection (4) of Section 8 of the 2002 Act. (xxi) Therefore, provisions prescribing timelines and which deal with police investigation upon which a person's liberty is dependent has to be strictly construed. On the other hand, where timeline is prescribed for attachment of properties and due to unforeseen circumstances like Covid-19 such attachment was not confirmed, benefit can be granted in favour of the Adjudicating Authority by excluding the period as prescribed under In re: Limitation (supra), a fortiori when the property can still be enjoyed. (xxii) It is relevant to note that the Supreme Court in Prakash Corporates v. Dee Vee Projects Ltd. dealt with the application of In re: Limitation (supra) in relation to filing of a written statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court took a view contrary to the earlier decision of the coordinate Bench; and that was found to be entirely impermissible. In any case, the said decision, concerning the matter of personal liberty referable to Article 21 of the Constitution of India and then, relating to the proceedings to be undertaken by an investigating officer, cannot be applied to the present case relating to the matter of filing written statement by the defendant in a civil suit. (xxiii) Further, a Division Bench of Madras High Court in S. Prasanna v. The Deputy Director, Directorate of Enforcement, Government of India47 held that the decision in S. Kasi (supra) is not applicable to compute the period of 180 days under Section 5(3) of the PMLA. The Court also disagreed with the view adopted in Vikas WSP Ltd. (supra), and Hiren Panchal (supra). The relevant paragraphs are extracted below: 12. Insofar as the judgment of the Calcutta High Court that was brought to our notice, we find that the Calcutta High Court had mainly relied upon the judgment of the Apex Court in S. Kasi case. With utmost respect to the learned Single Judge of the Calcutta High Court, we are not in agreement with the reasoning i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht of the decision in Prakash Corporates (supra) which held that In re: Limitation (supra) cannot be narrowly applied. xxvii) Lastly, the decisions in S. Kasi (supra),Vikas WSP Ltd. (supra), Gobindo Das (supra) and Hiren Panchal (supra) cannot be applied for the simple reason that In re: Limitation (supra) was further clarified in In re: Limitation 2022 (supra) wherein the Court at Para 5.4 (extracted supra) held that where time period is prescribed for termination of proceedings, the period from 15.03.2020 to 28.02.2022 shall be excluded. In the present case, Section 5(3) of the PMLA states that provisional attachment of properties will cease to have effect after a lapse of 180 days from the date of provisional attachment. That would mean that attachment proceedings shall terminate if the same are not confirmed within a period of 180 days. Therefore, while calculating/computing the 180 day period, the period from15 .03.2022 to 28.02.2022 shall be excluded. xxviii) To answer Issue No. 3, this Court holds that the decision in In re: Limitation (supra) and subsequent extensions vide In re: Limitation 2022 (supra) are applicable to PMLA proceedings to compute the period of 180 day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubstance 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. What would prevail, is the judgment of the Supreme Court and accordingly we are unable to accept even second ground for challenge to the order. No connection between properties and proceeds of crime. 21. The Ld. Counsel for the appellant reiterated the arguments which has already been dealt with in reference to the arguments that the properties acquired or derived prior to commission of crime could have been subjected to attachment. In that regard we have considered all the judgments referred by the appellant which includes even the judgment of the Apex Court in the case of Smt. Pavana Dibbur v. The Directorate Of Enforcementreported inreported in 2023 SCC OnLine SC 1586. In view of the above and findings recorded earlier, we find no substance in the argument. Invalidity of scheduled offence 22. The Ld. Counsel for the appellant submits that commission of crime is in the year 2006-07 when offence under Section 420 of Indian Penal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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