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TMI Blog2025 (3) TMI 387X X X X Extracts X X X X X X X X Extracts X X X X ..... , a case vide FIR No. 76 dated 18.01.2015 was registered at P.S. Kavi Nagar, District Ghaziabad. (U.P.) under sections 420, 467, 468, 471 & 469 of the erstwhile Indian Penal Code (IPC) against one Shri Manish Jain and others wherein it was alleged that during a search conducted by the DRI under the Customs Act, 1962, it was found that Shri Manish Jain, R-12/40, Raj Nagar, Ghaziabad, was involved in making illegal foreign remittances to Hong Kong through banking channels by submitting fake import documents to bank authorities. As per the report, Sh. Manish Jain and others operated through various fictitious firms/companies and remitted more than Rs. 380 crores to Hong Kong from India during the period 2007-2011, showing the same as payment for import of computer parts and accessories. On further investigation by the DRI, it was revealed that Manish Jain and others had been remitting foreign exchange to Hong Kong through bogus firms/companies, namely, M/s Suntek Computers and M/s Shyam Trading Company (controlled by Sh. Manish Jain) adopting the same modus operandi and had remitted an amount of over Rs. 100 crores from 2012 till 2014. The DRI searched the residential and business pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , M/s Jai Bharat Impex, M/s Pacific Exim, M/s Pioneer Computers, M/s Shyam Trading Company, M/s Suntech Computers, Sh. Rajeev Wadhwa and others had acquired the proceeds of crime in the form of forex against fake import documents and remitted the same outside India, with a view to launder the said money in the garb of remittance against advance import to conceal fraudulent exports/imports. 5. Investigations led to the formation of reasons to believe that the aforesaid accused persons and entities purchased various movable and immovable properties which are actually proceeds of crime and involved in the offence of money laundering as defined under section 2(1)(u) and section 3 of the PMLA, 2002, generated through their aforesaid criminal activities and laundering thereof as defined under section 3 of the Act. Accordingly, properties worth Rs. 2,19,36,954/- were traced and attached vide PAO dated 11.05.2016. Two Prosecution Complaints were filed before the designated Special Court, which has taken cognizance on the same against the accused persons, Sh. Manish Jain, Sh. Rajeev Wadhwa and others. 6. An Original Complaint (O.C.) dated 09.06.2016 having been filed before the Ld. AA as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpired on 17.11.2008 and his one-fourth undivided share was mutated in the name of his wife Mrs. Swaran Lata Jain in the records of GDA on 17.12.2014. Furthermore, the appellant, in his reply, stated that at a later stage Mr Rakesh Jain and Mr Manish Jain sold their one-fourth share each in the aforesaid property to one Devender Kumar Jain vide regd. sale deed dated 20.3.2013 and possession of one half share in the property was also handed over and transferred to the said buyer, Mr Devender Kumar Jain, and Mr Rakesh Jain and Manish Jain are left with no right, title and interest in the said property. 10. As already mentioned, it is submitted by the appellant that in the (OC No.606/2016) the date of regd. sale deed of the aforesaid property was wrongly mentioned as 13.12.2012, while the correct date of the purchase of the said property is 13.11.2002 which can be duly verified from the regd. sale deed filed before this Appellate Tribunal. Thus, the said property was acquired in the year 2002 while the allegations with respect to the alleged offences made in the Original Complaint relate to period 2006 onwards. It was also pleaded by the appellant before Ld. Adjudicating Authority th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the other rights and contentions, it is submitted by the appellant that in all the FIRs, ECIR, Attachment Order and even the Complaint, the Appellant has been accused of having committed offences U/s. 420, 467, 468, 469 and 471 read with 120-B etc. of the IPC. Importantly, offences under the IPC were included in the schedule with effect form 01.06.2009. Thus, even if the allegations in the FIR, ECIR etc. are admitted to be true, the Appellant cannot be prosecuted for offences alleged to have been committed prior to 01.06.2009. Moreover, Section 2(u) defines Proceeds of Crime as properties acquired by a person as a result of criminal activity related to a scheduled offence. Hence, it is stated that when the alleged offences themselves were not scheduled offences before 01.06.2009, then the actions of the Appellant prior to the said date cannot be termed as scheduled offences and none of the properties acquired before the said date can be termed as proceeds of crime and be attached by the Respondent. However, in complete disregard to the said fact, the Complainant has blindly proceeded to attach even those properties that were acquired prior to 01.06.2009. Hence, it is stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectorate (ED), including seizure of incriminating material such as email communication, fake voter ID cards, PAN Cards, postal wrappers of Hong Kong Post, photographs of several persons, seals of various companies/CA/banks, RSA tokens, details of foreign based companies accounts etc., admissions made in statements of accused persons and witnesses, bank account statements etc. The modus operandi adopted by the group for fraudulently remitting large amounts of money abroad is also described at great length in the written pleadings filed by the respondents. These have already been dwelled upon in paragraphs 2 to 4 of this order and are not reiterated here. 18. The respondents contend that based on the investigation it has been established that the appellant was deeply involved in the offence of money laundering as defined u/s 3 of the PMLA. He, along with the coaccused, not only opened front companies in India through which he made fraudulent forex remittances but also opened companies in Hong Kong wherein he received such fraudulently remitted forex, which is a proceed of crime. He had earned proceeds of crime as defined in the PMLA, 2002 and, therefore, the attachment of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e prayed that no relief may be given on order dated 27.10.2016 of Ld. Adjudicating Authority. Analysis and Findings: 24. I have given careful consideration to the material on record and the rival contentions of the parties. It is firstly contended on behalf of the appellants that the properties were acquired in 2002, (which is wrongly mentioned as 2012 in the impugned order) and, therefore, the property pre-dates the period to which the allegations against the appellant group pertain, i.e., 2006. It is contended that the entire payment to acquire the said property was made in 2002 itself and, therefore, by no stretch of imagination the said property can be the result of proceeds of crime. The above contention of the appellant has been considered. In the case of Sadananda Nayak v Deputy Director, FPA-PMLA-5612/BBS/2023 (order dated 14.10.2024) this Appellate Tribunal has held as follows: "12.......... To analyze the issue, we may quote the definition of Proceeds of crime' given under Section 2(1) (u) of the Act of 2002, which is quoted thus: "(u) "proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a result of criminal activi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 that if the property acquired prior to commission of crime would not fall in the definition of "proceeds of crime", then the accused would commit the cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld 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, however, are intended to fall in the net because their owner is involved in the proscribed criminality and the tain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere 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). The judgment of Seema Garg (supra) has been dealt with by the Delhi High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 interests in deemed tainted property. Those caveats duly secure and protect bona fide third-party ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 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 Choudhary (supra) was not cited and thus counsel for the respondent submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 interpretation other than the one taken by Delhi High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income and he was associated with his brothers, namely, Sh. Manish Jain and Sh. Rakesh Jain during the relevant period. Moreover, the presumptions u/s 23 and 24 are also against the appellant and it was for him to rebut the presumptions by presenting appropriate evidence before the Ld. AA which he failed to do. Moreover, as already discussed, the definition of proceeds of crime under the Act includes the 'value' of proceeds of crime which are equally amenable to attachment where direct proceeds of crime are not available or traceable. In the present case, I find that the respondent Directorate has brought on record a volume of evidence against the Sh. Manish Jain, brother of the appellant and the various individuals and entities belonging to the group. These have been discussed in paragraphs 2 to 4 above and are not repeated here in the interest of brevity. Considering the same as well as the legal position stated above, this contention of the appellant is also rejected. 26. It is next contended that the offences comprising 'Scheduled Offences' in the present case were not part of the Schedule to the PMLA, 2002 at the relevant time when they are alleged to have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng an offence under the IPC which comprised the predicate offences (scheduled offences) in the present case, took place. Accordingly, this contention of the appellant is also rejected. 29. The next argument raised on behalf of the appellant is that reasons to belief u/s 5 (1) and 8 (1) were not made available to the appellant. The decision of the Hon'ble Delhi High Court in J. Sekar v. Union of India W.P. (C) 5320/2017 (pronounced on January 11, 2018) is relied upon. 30. The submission of the appellant has been considered. I find that this legal issue remains to be finally settled. As pointed out, a Single Judge Bench of the Hon'ble Delhi High Court in the case of J. Sekar (supra) has held that reasons have to be communicated to the noticees. However, another single judge bench of the Hon'ble Madras High Court, in G. Gopalakrishnan v. Deputy Director WP (MD)Nos. 11454, 14860 & 14894 to 14899 of 2018 (Order Dt. 03.01.2019), has held that section 5 nowhere stipulates that there should be communication of reasons in the form of show cause notice before ordering provisional attachment. It was held that the validity period of provisional attachment is only for a period of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of competent jurisdiction, even the balance of interests lies in favour of continued attachment of the subject properties. Accordingly, this appeal is hereby dismissed. 33. Pending applications, if any, shall also stand disposed of in light of the above orders. 34. No order as to costs. FPA-PMLA-1558/DLI/2016 35. This appeal has been filed by Smt. Swaran Lata Jain. Out of the attached properties, one, namely, House No. B- 54 HIG Duplex, Sanjay Nagar, Ghaziabad, in the joint names of Neeraj Jain, Rakesh Jain, Manish Jain and the appellant. 36. The only additional contention raised in the present case apart from the arguments already discussed in the case of Neeraj Jain (supra), is that the appellant was complete stranger to the proceedings initiated by the Directorate and is not an accused in the prosecution case filed under PMLA, 2002. 37. The contention of the appellant has been considered. The legal position with regard to the issue raised is by now well settled. The Hon'ble Supreme Court, in the landmark case of Vijay Madanlal Choudhary SPECIAL LEAVE PETITION (CRIMINAL) NO. 4634 OF 2014 has held as below: "The sweep of Section 5(1) is not limited to the accused n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant is concerned, facts on record bring out that Sh. Rakesh Jain was deeply involved in the alleged scheduled offences and also stands accused in the prosecution case filed under PMLA by the respondent Directorate. The allegations against the appellants who is the brother of the main accused Sh. Manish Jain, inter alia include frequently bringing cash during night from Delhi, getting the same deposited the next day in the account of different firms in various bank accounts of Manish Jain, looking after the work of account opening in banks which were used for sending/receiving remittances by illegal means, opening a large number of bank accounts in HDFC, OBC, Axis Bank, Kotak Mahindra, Yes Bank, Punjab National Bank, etc. He is also alleged to have got opened some accounts in Hong Kong which were operated by him and Manish Jain. 48. Consequently, in light of the factual and legal positions discussed above, this appeal is hereby dismissed. 49. Pending applications, if any, shall also stand disposed of in light of the above orders. 50. No order as to costs. FPA-PMLA-1560/DLI/2016 51. This appeal has been filed by M/s Swaran Overseas Pvt. Ltd. Two vehicles, namely, vehicle beari ..... X X X X Extracts X X X X X X X X Extracts X X X X
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