Dismissed

FPA-PMLA-1356/AHD/2016 of M/s. Gujarat Enviro Protection & Infrastructure Ltd. & Anr. v. The Deputy Director Directorate of Enforcement, Ahmedabad & Ors.

ATFP7 Mar 2025FPA-PMLA-1356/AHD/2016

Case brief

AI extract

What is this about?

The Appellate Tribunal dismissed the appeal against a confirmed provisional attachment order. It upheld the attachment of properties acquired before the alleged crime as 'value of proceeds of crime' per Section 2(1)(u) PMLA. The Tribunal found reasons to believe were adequately recorded and refused to set aside the attachment due to the mortgage or alleged document suppression.

What did the court decide?

The appeal filed by the appellants against the confirmed attachment order was dismissed.

FPA-PMLA-1356/AHD/2016 of M/s. Gujarat Enviro Protection… — Money Laundering | ATFP (2025)

¶1

APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI

¶2

MP-PMLA-2976/AHD/2024 (Misc.) MP-PMLA-2637/AHD/2016 (Stay) FPA-PMLA-1356/AHD/2016

¶3

M/s. Gujarat Enviro Protection & Infrastructure Ltd. & Anr. … Appellants

¶4

Versus

¶5

The Deputy Director Directorate of Enforcement, Ahmedabad & Ors. … Respondents

¶6

Advocates/Authorized Representatives who appeared

¶7

For the Appellants : Mr. Suryakant Singla, Adv. Ms. Mayanka Dhawan, Adv. For the Respondents : Mr. N. K. Matta, Adv. Mr. Aditya Raj Sharma, Adv.

¶8

CORAM SHRI V. ANANDARAJAN : MEMBER

¶9

ORDER 07.03.2025

¶10

The present appeal has been filed under section 26 of the PMLA, 2002 against the order of the Ld. Adjudicating Authority (“AA”) dated 16.05.2016, confirming the Provisional Attachment Order (“PAO”) dated 27.03.2015 in Original Complaint (“OC”) No. 453/2015, whereby the following properties of the Appellant herein were attached:

¶11

(i) Balance of Rs. 12,04,611.39 lying in Account No. 304000645759 in Surat People‟s Cooperative Bank Ltd., Pandesara Branch, Surat.

¶12

(ii) Immovable property at Block No. 9,87,88,89,90,94,95,96,97,98,100/A/100/8 and 102 of Village Gabheni, Taluka Choryasi, Dist Surat, total admeasuring 2,05,249 sq.mtrs, together to with all building and structures thereon and plant and machinery attached to earth or permanently fastened to anything attached to earth in the name of Gujarat Enviro

¶13

FPA-PMLA-1356/AHD/2016

¶14

Page 1

¶15

Protection and Infrastructure Ltd. to the extent of Rs. 2,70,58,889/profit earned during 2010-11 and 2011-12.

¶16

Facts in Brief

¶17

2. The relevant facts briefly are that information was received by the respondent directorate (ED) that a Criminal Complaint No. 4241/2012 dated 4/2/2012 was lodged by the Regional Officer, Gujarat Pollution Control Board (GPCB) before the Chief Judicial Magistrate, Chief Court, Surat alleging that M/s Gujarat Enviro Protection and Infrastructure Ltd. (M/s. GEPIL), Village Gabheni, Taluka Chorayasi, Near GIDC Sachin, Surat had violated the Environment Protection Act, 1986.

¶18

3. The villagers of Budhiya Village had, on 22.10.2011, complained to M/s. GPCB that there was a sudden death of seven buffaloes under mysterious circumstances near Unn Creek due to hazardous waste illegally cleared/disposed of into the creek. Following the complaint, the GPCB, during the period 17/11/2011 to 04/12/2011, conducted an investigation which revealed that M/s GEPIL had violated the conditions under which they were granted permission to work as co-processors to clear hazardous waste. They intentionally and illegally joined five pipelines to the GIDC main gutter line used for clearing the hazardous waste. These additional 5 pipelines were illegally joined at various stages to the GIDC gutter line which was being used for waste water discharge line. The samples of the waste lying inside the illegal pipelines has been drawn by M/s. GPCB and so also the samples of the waste lying inside of M/s. GEPIL was drawn for laboratory testing which revealed that M/s. GEPIL has violated the CPCB guidelines, directions of GPCB, the consent order dt. 11/10/2006 and conditions laid down thereunder. It also came

¶19

FPA-PMLA-1356/AHD/2016

¶20

Page 2

¶21

to light that M/s. GEPIL has not stored, disposed and treated the hazardous waste in a scientific manner for which they were granted permission to co-process the hazardous waste collected from industrial houses. Illegal construction of pipelines for such disposal and joining to the main GIDC pipeline and without following the said measures, releasing the hazardous waste in Unn and Gabheni Creeks was in contravention of Section 25(1)(A) Water (Prevention and Control of

¶22

Pollution) Act, 1974.

¶23

4. M/s. GEPIL was permitted to work as co-processor vide order No. GPCB/CCA-SRT-618(9)/73328 dt. 18/02/2011 to collect the hazardous waste and had thus violated the conditions 2, 3, 5 and 13 laid down under the said order. M/s. GEPIL and its directors had contravened the conditions laid down by the GPCB, CPCB guidelines in as much as they failed to collect, store, treat and dispose of hazardous waste in a scientific manner. In the light of all these contraventions, they had violated Section 7 of Environment Protection Act, 1986. They had also contravened the provisions of Rules 4 and 7 of hazardous waste (Management / Handling and Trans boundary Movement) Rules, 2008.

¶24

5. It was the responsibility of M/s. GEPIL to collect, treat, store and dispose of hazardous waste under sub-rule (4) of Rule 18 of hazardous waste (Management, Handing and Trans-Boundary Movement) Rules, 2008. M/s. GEPIL having failed to follow the above provisions, had cleared the hazardous waste in unscientific manner and illegally joined pipelines with the underground pipelines of GIDC, thereby causing damage to water and environmental pollution. In doing so, they violated the provisions of Sub-rule (4) of Rule 18 of Hazardous Waste

¶25

FPA-PMLA-1356/AHD/2016

¶26

Page 3

¶27

(Management / Handling and Trans boundary Movement) Rules, 2008. They have also violated Section 15 and 16 of Environment Protection Act, 1986.

¶28

6. Since the offences under Section 15 read with Section 7 of the Environment Protection Act, 1986 (29 of 1986) constitute scheduled offence under the Prevention of Money Laundering Act, 2002 (PMLA, 2002), the ED, on the receipt of the Criminal Complaint No. 4241/2012, registered an ECIR No.05 dt. 12/2/2013 and initiated investigation under the PMLA, 2002.

¶29

7. A statement of Shri. Girish R. Luthra, Director of M/s. GEPIL was recorded on 22/4/2013, 8/7/2013 under Section 50.

¶30

8. It was revealed during the investigation that M/s. GEPIL at Gabheni has 796 members (industrial houses) and they were sending hazardous waste for co-processing and the said waste has to go through various chemical processes for it to become fuel for cement industries. M/s. GEPIL at Gabheni plant had all the facilities for subjecting hazardous wastes to various chemical processes and received enormous amounts for treating the hazardous wastes. M/s. GEPIL had recovered huge amounts of money for the treatment of hazardous waste for coprocessing at their site at Gabheni Village from various member industrial houses. They also received the transportation cost from their members for transporting the hazardous waste to the cement factories for subsequent use as fuel. Consequently, the Gabheni Plant had earned huge amounts of profits. As per the audited balance sheet for the year 2010-11 and 2011-12, the company had earned profits amounting to Rs.

¶31

FPA-PMLA-1356/AHD/2016

¶32

Page 4

¶33

98,28,915/- and Rs. 1,72,29,974/- respectively, for the co-processing work carried out at their Gabheni Plant.

¶34

9. It was also gathered that M/s. GEPIL had, by way of illegal connections attached to the GIDC pipeline, discharged the hazardous effluents contrary to the conditions specified for receiving the hazardous waste and treating the same for co-processing. The GPCB, after a thorough investigation on 30.11.2011, ordered M/s. GEPIL not to receive any hazardous waste for co-processing.

¶35

10. As a result of the investigations conducted under PMLA, 2002, M/s. GEPIL was found to have committed an offence under Section 15 read with Section 7 of the Environment Protection Act, 1986 (29 of 1986), and their Gabheni Plant was found to have discharged hazardous effluents with the help of illegal connections without scientifically treating the hazardous waste for which the plant was intended and the permission was granted. Based on the findings, the Directorate was of the view that the proceeds realized from various customers for the purpose of treating hazardous waste from the said plant were “proceeds of crime” as defined under the Section 2(1)(u) of PMLA, 2002.

¶36

Accordingly, a Provisional Attachment Order was passed on 27.03.2015 whereby, the properties referred to in para-1 above were attached.

¶37

11. An Original Complaint (O.C) having been filed as per the requirement of Section 5(5) of the Act, the Ld. AA, after holding adjudication proceedings under section 8, confirmed the attachment of the properties mentioned in para 1, vide its order dt. 16.05.2016.

¶38

FPA-PMLA-1356/AHD/2016

¶39

Page 5

¶40

12. Aggrieved by the order of the Ld. AA, the appellant has filed the present appeal before this Appellate Tribunal.

¶41

Arguments on behalf of the Appellant

¶42

13. Setting out the factual context first, it is submitted that the allegation against the appellant is regarding violation of the Environment Protection Act, 1986. The appellant was engaged in co-processing of hazardous waste. The Appellant received waste from various industries, processed same into fuel, the resultant sludge was incinerated and what still remained went into a pit. On 20.10.2011, villagers of Budhiya village complained of death of 7 buffaloes due to drinking poisonous water. it was alleged that the appellant company had connected its pipes with the Gujarat Industrial Development Corporation pipes. The pipes discharged effluents into the creek and the buffaloes drank water from the creek and died. The appellant contended that they had never connected their pipes to the GIDC pipe and there is no evidence whatsoever to this effect. However, a complaint was filed by the Gujarat Pollution Control Board with the learned Magistrate under section 200 of the Cr. P.C. which is still pending. On the basis of the same, an ECIR dated 12.02.2013 was registered by ED.

¶43

14. The company had 2 lakh square metres of land of which 3.26% have been attached as proceeds of crime. It is contended that the land was acquired on 28.08.2002 and 22.07.2004 even before the PMLA came into force. A provisional attachment order was passed on 23.07.2015 attaching 3.26% of the land. At that time, the property attached was not specifically identified or earmarked. However, later, upon an application

¶44

FPA-PMLA-1356/AHD/2016

¶45

Page 6

¶46

being filed by the appellant before this Appellate Tribunal, the same was earmarked.

¶47

15. It is submitted that the appellant was maintaining manifests/way bills for the receipt of waste by the appellant's units from various industrial units and also for the transportation of the fuel prepared from the waste to the end user, which was mostly Gujarat Ambuja Cement unit. The ED seized all these documents from various premises during the search and seizure operation conducted as a part of the investigations against the appellants, though the same were not seized from the appellant's own premises. The appellant was not provided either with the list of documents or the copy of the Panchnama, the same have not also been made relied upon documents and have been concealed in the proceedings.

¶48

16. It was further argued that post-mortem of buffaloes was conducted and viscera analysis was done and no poison was found. The said report of the post-mortem was also not relied upon and, therefore, not supplied to the appellant. The Ld. Counsel referred to the provisional attachment order which is available at page 94 of Part III of the appeal paper book filed by the appellant. As per the order, the properties were generated through proceeds of crime. Accordingly, it is submitted that the properties were attached as direct proceeds of crime and not as value of such property.

¶49

17. It is also contended that no satisfaction was recorded. At the request of the appellant, records of the Adjudicating Authority were called for in this case. Copy of the satisfaction recorded is placed on

¶50

FPA-PMLA-1356/AHD/2016

¶51

Page 7

¶52

record. Nothing has been recorded to the effect that the property is likely to be alienated or dealt with so as to frustrate the proceedings for confiscation. In short, the satisfaction fails on all counts. It was also argued that the reasons to believe are not present in the PAO or the impugned order. Therefore, the PAO and the impugned order are bad in law and were passed without following the provisions of section 5 and 8.

¶53

18. It was also argued that all the documents have to be forwarded to the Adjudicating Authority as per the provisions of law. However, none of the documents which were not relied upon were forwarded to the Ld. AA.

¶54

19. The Ld. Counsel for the appellant pointed to Page 262 (Part-III) of the appeal paper book and referred to Para-4 thereof. He stated that it is evident that the Registrar has presumed the Adjudicating Authority's satisfaction and, therefore, the proceedings against the appellant were pre-meditated. The satisfaction has also been recorded in a single, bland statement saying that I am satisfied. He relied on the judgement of the Delhi High Court in N.K. Proteins case (para 4) wherein, the Hon'ble High Court found the satisfaction recorded did not meet the legal requirement. It is argued that in the present case even that much has not been recorded which had been recorded in the case before the Hon'ble Delhi High Court.

¶55

20. It was also argued that the properties acquired prior to the alleged criminal activity could not have been attached. The decision of the Hon'ble Punjab and Haryana High Court in the case of Seema Garg 2020 SCC OnLine Punjab & Haryana 738 and the Hon'ble Kerala High Court in Satish Motilal Bidri 2024 SCC OnLine Ker 3410 are relied upon wherein,

¶56

FPA-PMLA-1356/AHD/2016

¶57

Page 8

¶58

after reviewing all the existing judicial precedent, it has been held that properties acquired prior to the alleged period of crime cannot be attached.

¶59

21. Finally, it is also argued that when direct proceeds of crime were available, the „value‟ thereof could not have been attached.

¶60

22. Based on the above stated contentions, it is prayed on behalf of the appellant that the present appeal may be allowed and the impugned order may be set aside.

¶61

Arguments on behalf of the Respondents

¶62

23. Ld. Counsel for the respondent opposed the arguments put forward on behalf of the appellant. He firstly referred to the background for inclusion of offences relating to environmental protection as scheduled offences and emphasized that the same was in keeping with India's international commitments.

¶63

24. It was also submitted that prosecution complaint in PMLA case has already been filed and is pending. The case is at the stage of arguments on framing of charge. The properties in question are part of the prosecution complaint. He mentioned that attachment is an intermediate arrangement under PMLA until the disposal of the criminal case by the Special Judge who will also take the final decision regarding confiscation or release of the attached properties. The total proceeds of crime in the hands of the appellant were quantified at approximately 2.70 crore and property equivalent in value, i.e., 3.26 percent of the total property was attached. He stated that the property was attached as

¶64

FPA-PMLA-1356/AHD/2016

¶65

Page 9

¶66

'value' of the proceeds of crime as per the definition of the term u/s 2(u). Property attached was equivalent to profit earned during 2010-11 and 2011-12 period to which the alleged criminal activity pertains has been attached.

¶67

25. He did not contest the contention of the appellant that the said property was acquired in 2002 and 2004.

¶68

26. On the issue of non-forwarding of a part of the material by the Directorate to the Ld. AA as alleged by the appellant, It was submitted that the prescribed procedure as per the Prevention of Money-Laundering (The Manner of Forwarding a Copy of the Order of Provisional Attachment of Property along with Material and Copy of the Reasons Along with the Material in Respect of Survey, to the Adjudicating Authority and its Period of Retention) Rules, 2015 have been followed in this regard.

¶69

27. It was also argued that the reasons to believe recorded by the Ld. AA which were available in the relevant file of the AA requisitioned by the court were perused by him the proceedings and he argued that notice was issued by the Ld. AA only after perusing the Complaint filed by the Directorate and the material placed before him as has been mentioned in the note recorded by the Ld. Member of the AA. He also mentioned that in Para 16 onwards of the impugned order passed by the Ld. AA, reasons have been explained at least three places.

¶70

28. In response to the contention of the counsel for the appellant that the property was attached as direct proceeds of crime and not as value

¶71

FPA-PMLA-1356/AHD/2016

¶72

Page 10

¶73

thereof, the Respondent relied on the decision of the Hon'ble Punjab & Haryana High Court in the case of Dilbag Singh vs. Union of India & Ors. 2024: PHHC:143784-DB , wherein, the Hon'ble High Court after reviewing all the existing judicial precedent, including Seema Garg, Axis Bank, Prakash Industries etc., held that the judgement passed in Seema Garg’s case is no longer a good law. This Court has taken this view due to the subsequent interpretation by the Supreme Court (in Vijay Madanlal Choudhary), which has superseded the legal principles established in Seema Garg‟s case(supra).

¶74

29. It was also submitted that at this stage when the prosecution complaint is pending before the Ld. Spl. Judge, the attachment of property should continue and the decision on either confiscation or release thereof will be taken by the Ld. Spl. Judge based on the outcome of the said case.

¶75

30. Based on the above stated contentions, it is prayed on behalf of the respondent that the present appeal be rejected.

¶76

Analysis and Findings

¶77

31. I have given careful consideration to the material on record and the rival submissions of the parties. In the first set of contentions, the appellants have challenged the allegations made against them in the scheduled offence case. It is contended that the appellant company had never connected its pipes with the GIDC pipes, that the buffaloes did not die of poisoning as revealed by the viscera analysis etc. It is, however, not denied by the appellant that a case stands filed by the Gujarat Pollution Control Board before the Chief Judicial Magistrate which contains

¶78

FPA-PMLA-1356/AHD/2016

¶79

Page 11

¶80

exactly these allegations which are being denied by the appellant before this Appellate Tribunal. It is for that Court to decide, based on evidence led by the prosecution and the defence before it, whether the charges against the appellant have been proved or not. It is not the case of the appellant company that they stand discharged/acquitted of charges in the said case. For the present proceedings which relate only to attachment of properties pending the outcome of the prosecution complaint against the appellants, I am of the view that the requirements of section 8 are sufficiently met on the basis of the material on record, which inter-alia reveals that a complaint stands duly filed against the appellants in the predicate offence case and the proceedings are at the stage of arguments on framing of charges. The legal position is by now well-settled that attachment of property is a balancing arrangement to secure the interests of the person, as also to ensure that the proceeds of crime remain available to be dealt with in the manner provided by the Act. Attachment of property does not amount to its confiscation. Attachment of property under the Act does not alter the position with regard to the ownership or even possession/use of the properties which are the subject matter of such attachment. The Hon‟ble Supreme Court has held in the landmark case titled as Vijay Madanlal Choudhary & Ors. v. UoI & Ors [Special Leave Petition (Criminal) No. 4634 of 2014] , and further clarified in the case of Ganpati Dealcom Pvt. Ltd. Civil Appeal No. 5783 of 2022 (order dated 23.08.22) that possession of properties attached under the PMLA, 2002 can only be taken under exceptional circumstances, such as crimes involving terrorist activities, drug cartels or organized criminal activities. As such, I do not find any merit in these contentions of the appellant.

¶81

FPA-PMLA-1356/AHD/2016

¶82

Page 12

¶83

32. The next contention of the appellants is that the property was acquired prior to the period of the alleged offence. The same is not denied on facts by the Ld. counsel for the respondent. However, this would not render the attachment of the properties unlawful under the PMLA, 2002. This issue has already been examined at length by this Appellate Tribunal while deciding the case titled as Sadananda Nayak v. Deputy Director, FPA-PMLA-5612/BBS/2023 (order dated 14.10.2024) wherein, Appellate Tribunal held as follows:

¶84

“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) 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 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;”

¶85

13. The perusal of the definition aforesaid shows three limbs. In between every limb word “or” has been used to divide the definition into three parts. The first part refers to the property acquired or derived directly or indirectly out of the criminal activities relating to the scheduled offence. In the first part, all those properties which

¶86

FPA-PMLA-1356/AHD/2016

¶87

Page 13

¶88

are acquired directly or indirectly out of criminal activities 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.

¶89

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 value. The second part applies when the property obtained or derived 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

¶90

FPA-PMLA-1356/AHD/2016

¶91

Page 14

¶92

of “proceeds of crime” because proceeds are not available and, therefore, the property of equivalent value is attached.

¶93

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 crime and immediately proceeds would be siphoned off or vanished so that it may not remain available for attachment. In fact, the word “the value of any such property” was inserted by the legislature to attach the property of equivalent value, if the proceeds out of commission of crime is not available or vanished. If the second limb of the definition is made dependent on the first limb, it would be literally re-writing the provision or making it redundant to a great extent and for this, jurisdiction does not lie with any court of law which includes even the Constitutional Court. They can declare any provision to be unconstitutional but till then there remains presumption of constitutional validity.

¶94

FPA-PMLA-1356/AHD/2016

¶95

Page 15

¶96

16. At this stage, we may refer to Para 68 of the judgment in the case of Vijay Madanlal Choudhary (supra) which is quoted hereunder.

¶97

“68. It was also urged before us that the attachment of property must be equivalent 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 moneylaundering.”

¶98

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 Court in the case of Axis Bank (supra). The relevant paras are quoted herein.

¶99

FPA-PMLA-1356/AHD/2016

¶100

Page 16

¶101

“106. Among the three kinds of attachable properties 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.

¶102

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 tainted assets held by him are not traceable, or cannot be reached, or those found are not sufficient to fully account for the pecuniary advantage thereby gained. This is why for such untainted properties (held in India or abroad) to be taken away, the rider put by law insists on equivalence in value.

¶103

FPA-PMLA-1356/AHD/2016

¶104

Page 17

¶105

From this perspective, it is essential that, before the order of attachment is confirmed, there must be some assessment (even if tentative one) as to the value of wrongful gain made by the specified criminal activity unless it be not possible to do so by such stage, given the peculiar features or complexities of the case. The confiscation to be eventually ordered, however, must be restricted to the value of illicit gains from the crime. For the sake of convenience, the properties covered by the second and third categories may be referred to as “the alternative attachable property” or “deemed tainted property”.

¶106

17. 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.

¶107

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

¶108

FPA-PMLA-1356/AHD/2016

¶109

Page 18

¶110

judgement of the Apex Court on the issue is binding on the High Court.

¶111

19. The reference to the judgment in the case of Pavana Dibur (supra) has been given where the Ld. Counsel for the parties did not refer Para 68 of the judgment in the case of Vijay Madanlal Choudhary (supra) decided by three judges 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.

¶112

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 Vs. 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 case of Prakash

¶113

FPA-PMLA-1356/AHD/2016

¶114

Page 19

¶115

Industries Ltd. v. Directorate of Enforcement reported in 2022

¶116

SCC OnLine Del 2087. The relevant paras are quoted hereunder:

¶117

“76. Seema Garg principally holds that the phrase value of any such property and property equivalent in value held within the country or abroad cannot be ascribed the same meaning and effect. The learned Judges comprising the Division Bench then proceeded to hold that even if the intent of the legislature was to include any property in the hands of a person within the ambit of the expression proceeds of crime‖, there would be no need to create three limbs of definition of proceeds of crime.

¶118

xxxx

¶119

79. Regard must also be had to the fact that the legislation itself is dealing with contingencies where proceeds of crime are layered and their origins camouflaged and masked enabling the accused to project or claim it to be untainted 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

¶120

FPA-PMLA-1356/AHD/2016

¶121

Page 20

¶122

in value to the illegal pecuniary benefit or gain that may have been obtained as a result of criminal activity.

¶123

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 Seema Garg the learned Judges themselves observed that the phrase value of any such property would not mean and include any property which has no link, direct or indirect, with property derived or obtained 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

¶124

FPA-PMLA-1356/AHD/2016

¶125

Page 21

¶126

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 interests created for valid consideration. This Court, thus, reaffirms those defences as were culled out in Axis Bank. The Court thus reiterates the interpretation accorded to Section 2(1)(u) by this Court in the aforesaid decision. Consequently, and for all the aforesaid reasons this Court finds itself unable to agree with the principles as laid down in Seema Garg as well as the subsequent decisions rendered by the Andhra Pradesh High Court in Kumar Pappu Singh Vs. Union of India and the Patna High Court in HDFC Bank Limited Vs Government of India, Ministry of Finance.

¶127

81. The Court also takes note of the position that although SLP (Crl) No. 28906/2019 is pending before the Supreme Court against the decision rendered in Axis Bank, the judgement of this Court has not been stayed or placed in abeyance. The interim order of 30 August 2019 passed in the aforesaid 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

¶128

FPA-PMLA-1356/AHD/2016

¶129

Page 22

¶130

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.

¶131

Xxxx

¶132

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 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

¶133

FPA-PMLA-1356/AHD/2016

¶134

Page 23

¶135

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.”

¶136

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 judgment in the case of Pavana Dibur (supra) does not propound ratio on definition of “proceeds of crime” and, therefore, direction for the property acquired prior to commission crime is to be taken on facts of that case.

¶137

22. It has already been clarified by us that if the definition of “proceeds of crime” is given interpretation by dividing it into two parts or by taking only two limbs, then it would be easy for the accused to siphon off or vanish the proceeds immediately after the commission of scheduled offence and in that case none of his properties could be attached to secure the interest of the victim till conclusion of the trial. This would not only frustrate the object of the Act of 2002, but would advance the cause of the accused to

¶138

FPA-PMLA-1356/AHD/2016

¶139

Page 24

¶140

promote the crime of money laundering. The Judgment in the case of Vijay Madanlal Chaudhary (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

¶141

International FZE vs. The Deputy Director Directorate of

¶142

Enforcement, Chandigarh dated 31.07.2024. The relevant para of the said judgment is quoted hereunder:

¶143

“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 property acquired even prior to commission of crime. It is for the reason that any property acquired subsequent to the commission of crime would be directly or indirectly proceeds of crime and then, it would fall in the first limb of the definition 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

¶144

FPA-PMLA-1356/AHD/2016

¶145

Page 25

¶146

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.”

¶147

23. At this stage, it is reiterated that any other interpretation other than the one taken by Delhi High Court in the cases of Axis Bank (supra) and Prakash Industries (supra) for the definition of “proceeds of crime” would defeat the object of the Act of 2002. It is more especially when the arguments raised by the appellant that the property acquired prior to the commission of crime would not fall in the definition of “proceeds of crime”. In that case, the task of the accused would become very easy to first commit the scheduled offence and after obtaining or deriving the property out of the criminal activities, immediately siphon off or vanish so that it may not remain available for attachment and otherwise the contingency aforesaid would satisfy only the first limb of definition of “proceeds of crime” leaving the second. We are thus unable to accept the

¶148

FPA-PMLA-1356/AHD/2016

¶149

Page 26

¶150

argument raised by the appellant so as to make the middle part of the definition of “proceeds of crime” to be redundant.

¶151

24. In view of the above, we are unable to accept the only argument raised by the appellant and for that appeal fails and is dismissed.”

¶152

33. Thus, based on the ratio of the Appellate Tribunal‟s own judgment in the above-mentioned case of Sadananda Nayak , the contention put forward on behalf of the appellants that the subject property could not have been attached as they were acquired prior to the alleged period of crime is hereby rejected.

¶153

34. The next contention put forward on behalf of the appellant is that the conditions prescribed under sections 5 and 8, which provide for recording of satisfaction by the respective authorities, were not met in the present case. The satisfaction has been recorded in a single, bland statement saying that “I am satisfied….” . He relied on the judgment of the Hon‟ble Delhi High Court in N.K. Proteins case wherein, in para 4, the Hon'ble High Court found that the satisfaction recorded did not meet the legal requirement. It is argued that in the present case stands on an even worse footing as even that much has not been recorded by way of reason to believe as had been recorded in the case before the Hon'ble Delhi High Court.

¶154

35. It is pointed out that at the appellant‟s request, the records of the Adjudicating Authority were called for in this case and a copy of the satisfaction recorded has been placed on record. It was also argued that the reasons to believe are not present in the PAO or the impugned order.

¶155

FPA-PMLA-1356/AHD/2016

¶156

Page 27

¶157

Therefore, the PAO and the impugned order are bad in law and were passed without following the provisions of section 5 and 8.

¶158

36. First, with regard to the reason to believe to be recorded under Section 5, I have perused the Provisional Attachment Order passed by the Deputy Director of Enforcement which records as below:

¶159

“An information was received that a criminal complaint No. 4241/2012 dt. 4/2/2012 was lodged by the Regional Officer, Gujarat Pollution Control Board (GPCB) before the Chief Judicial Magistrate, Chief Court, Surat alleging that M/s Gujarat Enviro Protection and Infrastructure Ltd., (M/s. GEPIL in short), Village Gabheni, Taluka Chorayasi, Near GIDC Sachin, Surat incorporated as a co-processor having permission for co-processing of hazardous waste has violated the Environment Protection Act, 1986”

¶160

*****

¶161

“As per the definition of Section 2(1)(y) of PMLA, Section 15 read with Section 7 of the Environment Protection Act, 1986 (29 of 1986) form a scheduled offence under the Prevention of Money Laundering Act, 2002, the Directorate of Enforcement following the receipt of the criminal complaint No. 4241/2012 registered an ECIR/05/AZO/2013 dt. 12/2/2013 for investigations under the Prevention of Money Laundering Act, 2002”

¶162

*****

¶163

“20. AND WHEREAS I have carefully considered the material placed before me including the criminal complaint No. 4241/2012 filed by GPCB, Surat before the District Court and upon a careful consideration of the said material, I have reasons to believe that the afore-mentioned properties (immovable) prima-facie, are part of

¶164

FPA-PMLA-1356/AHD/2016

¶165

Page 28

¶166

'proceeds of crime' generated through criminal activities relating to the said scheduled offences by M/s. GEPIL. The material placed before me prima facie, discloses commission of the offence of money laundering as per Section 3 of the PMLA. The said properties are further likely to be concealed, transferred or dealt with in such a manner, which may result in frustrating further proceedings viz, confiscation as provided under Chapter III of the PMLA, in case no Provisional Attachment Order is passed in respect thereof at this crucial stage.

¶167

21. NOW THEREFORE in exercise of the powers conferred under the sub-section (1) of Section 5 of the Prevention of Money Laundering Act, 2002 (15 of 2003) read with Notification No. GSR 441(E), dated 1st July, 2005 and in terms of the authorization dated 07.02.2007, issued by the Director of Enforcement, Directorate of Enforcement, New Delhi, read with Addendum No. DLA (A) /AUT/S: 8(4) /03/2010 dta. 12.10.2011, HS Jain, Deputy Director, Directorate of Enforcement, Surat with a reasonable belief hereby provisionally attach the movable properties amounting to 12,04,611.39. lying as balance in the Surat People's Co-op Bank Ltd., Pandesara and immovable properties to the extent of Rs. 2,70,58,889/- involved in the Block No. 9,87,88,89,90,94,95,96,97, 98,100/A/100/B8 and 102 of Village Gabheni, Taluka Choryasi, Dist, Surat, Total admeasuring 2,05,249 Sq. Mtrs. together with all building and structures thereon and plant and machinery attached to Earth or permanently fastened to anything attached to Earth in the name of Gujarat Enviro Protection and Infrastrucutre limited mentioned at Para 16 above of this order for a period of 180 days (One Hundred and eighty days) and further order that the same

¶168

FPA-PMLA-1356/AHD/2016

¶169

Page 29

¶170

shall not be transferred, disposed off, alienated or parted with or otherwise dealt with in any manner whatsoever until or unless specifically permitted to do so by the undersigned. If the properties mentioned above of this order is not attached Immediately, the nonattachment of the same is likely to frustrate further proceedings under this Act.

¶171

37. Having perused the above, I do not find any merit in the contention that no reason to believe were recorded by the officer concerned before initiating action under section 5. Insofar as the legal position on the subject is concerned, the Hon‟ble Madras High Court, in G. Gopalakrishnan Vs. 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 under section 5. The validity period of provisional attachment is only for a period of 180 days, and therefore, the initial order has all the characteristics of a show cause notice and no further requirement is contemplated in the statute.

¶172

38. Coming to the reason to believe to be recorded under section 8, I find that a perusal of the impugned order itself provides the detailed reasons, including the facts leading to the registration of ECIR by the Directorate, further investigations conducted by the Directorate and the complaint received by the Ld. AA from the Directorate u/s 5(5). Perusal of the record further reveals that a copy of Original Complaint filed by the Dy. Director of Enforcement, containing detailed reasons for the action taken against the attachment of the appellant‟s property and the

¶173

FPA-PMLA-1356/AHD/2016

¶174

Page 30

¶175

findings of the investigation conducted and also the relied-upon documents, were enclosed with the said notice.

¶176

39 . Coming to the legal position on the requirements of Section 8, the Hon‟ble Madras High Court, in the aforementioned case of G. Gopalakrishnan, has noted that the language used in section 8(1) of the Act is different from the one used in section 5(1). The AA is not required u/s 8(1) to record reasons and on the basis of the complaint filed by the initial authority u/s 5(5), it can proceed with the process on the basis of subjective satisfaction. Therefore, these arguments of the appellant relating to reason to believe under Section 5 & 8 are also hereby rejected.

¶177

40. A contention has also been raised on behalf of the appellant that the property was already mortgaged to SIDBI and therefore there was no reason to believe that it would be alienated or dissipated in any manner. I find that this issue was raised before the Ld. AA also. The Ld. AA, in para ii (page 26 of33) of its order has pointed out that out of a total amount of Rs. 5464.44 lakhs sanctioned to M/s GEPIL, an amount of Rs. 1329.06 only is outstanding to SIDBI as on 24.03.20125 which constitutes only 24.32% of the loan amount against which the entire land admeasuring 2,04,249 sq. mt. have been offered as collateral security. Thus 100% of the land was offered as security to the defendant against the loan of Rs. 546 lakhs and even though the loan amount outstanding is 24.32% of the original sanctioned amount, the entire 100% of the land was still available with them as security. On the other hand, the Enforcement Directorate has attached only 3.26% of the total land and hence no prejudice whatsoever is caused to defendants. Even

¶178

FPA-PMLA-1356/AHD/2016

¶179

Page 31

¶180

otherwise the provisions of Section 71 of the PMLA grants overriding effect to the provisions of this Act.

¶181

41. The Ld. Counsel for the respondent relied on the decision of this Appellate Tribunal in JM Financial Asset Reconstruction Company Ltd. FPA-PMLA-3223/MUM/2019 (order dated 26.04.2024) in this regard.

¶182

42. I have considered rival submissions with regard to the above issue. As is seen from the facts narrated in the impugned order, the loan against which the subject property was offered as collateral security had already been substantially repaid and was in the process of being repaid regularly. Accordingly, there was every chance of the loan being fully discharged and the property being released from mortgage in the foreseeable future. Furthermore, arguably, the same was being repaid out of the profits of the company which themselves have been taken to be proceeds of crime. The word “immediately” occurring in the second Proviso to Section 5 (1) need not be interpreted to mean in the very next moment. A sufficiently senior level of due diligence has been provided for by the said Proviso by way of application of mind by an officer of the level of Deputy Director and above, duly authorized by the Director. Therefore, I am of the view that no fault can be found in attachment of the property and the same did not cause any prejudice to the appellants. There is no reason to think that attachment of property under the PMLA, 2002 cannot co-exist with mortgage thereof to a financial institution. The judgment of this Appellate Tribunal in the aforesaid case of JM Financial which has rightly been relied upon by the respondents.

¶183

FPA-PMLA-1356/AHD/2016

¶184

Page 32

¶185

43. It is next contended that the evidence which would have supported the appellant‟s case such as manifests/way bills for the receipt of waste by the appellant's units from various industrial units and also for transportation of the fuel prepared from the waste to the end user, were seized but have been suppressed by the ED. The ED seized all these documents from various premises during the search and seizure operation conducted as a part of the investigations against the appellants, though the same were not seized from the appellant's own premises. The appellant was not provided either with the list of documents or the copy of the Panchnama, the same have not also been made relied upon documents and have been concealed in the proceedings. In this regard, it is to be noted that the present proceeding arises out of an OC filed by the respondents after provisional attachment of property and not out of an OA against order of retention of seized documents, if any, made by the respondents. Moreover, I do not find any pleadings or grounds to this effect in the appeal filed by the appellants. Accordingly, I do not find any merit in these contentions either.

¶186

44. It has also been argued that all the documents have to be forwarded to the Adjudicating Authority as per the provisions of law. The respondents have submitted that the defendant has sought directions to Department to place on record internal material collected during the investigation however, it is the sole prerogative of investigating Authority which document has to be relied upon to support his case. I have considered the submissions and find that as per the appellants own submission, the documents which have been relied upon have been duly brought on record by the respondent directorate. Even if there is any irregularity in terms of not bringing on record the documents not relied

¶187

FPA-PMLA-1356/AHD/2016

¶188

Page 33

¶189

upon, the same would not in my view vitiate the entire proceedings, particularly in view of the provisions of section 68 which provide that no notice, summons, order, document or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of his Act shall be invalid, or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such notice, summons, order, document or other proceeding if such notice, summons, order, document or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act. It would be open to the appellants to raise the issue before the Ld. Special Court during the prosecution proceedings and seek appropriate directions from that Court to the respondents to bring on record the remaining documents. On this ground, the present attachment proceedings which are of an interim nature, pending a decision on the prosecution complaint cannot be held to be invalid.

¶190

45. In light of the above discussions, the present appeal is hereby dismissed.

¶191

46. Pending applications, if any, shall also stand disposed of.

¶192

47. No. order as to cost.

¶193

(V. Anandarajan) Member

¶194

New Delhi, 07^th March, 2025

¶195

„ST‟