Dismissed

FPA-PMLA-1558/DLI/2016 of Swaran Lata Jain v. The Deputy Director Directorate of Enforcement, New Delhi

ATFP15 Jan 2025FPA-PMLA-1558/DLI/2016

Case brief

AI extract

What is this about?

The Appellate Tribunal dismissed appeals challenging the confirmation of provisional attachment of properties. The court held that untainted properties acquired before the crime can be attached if they represent the value of vanished proceeds. It also clarified that money laundering is a continuing offence, ignoring the date of the predicate crime, and that non-communication of reasons did not inv

What did the court decide?

Provisional attachment of immovable and movable properties of appellants was upheld as the appeal was dismissed.

FPA-PMLA-1558/DLI/2016 of Swaran Lata Jain Vs. The Deputy… — Money Laundering | ATFP (2025)

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APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI

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1. MP-PMLA-6310/DLI/2016 (Review) MP-PMLA-2949/DLI/2016 (Stay) FPA-PMLA-1557/DLI/2016
Neeraj Jain	…	Appellant
Versus
The Deputy Director Directorate of Enforcement, New Delhi	…	Respondent
2. MP-PMLA-2951/DLI/2016 (Stay) FPA-PMLA-1558/DLI/2016
Swaran Lata Jain	…	Appellant
Versus
The Deputy Director
Directorate of Enforcement, New Delhi	…	Respondent
3. MP-PMLA-2953/DLI/2016 (Stay) FPA-PMLA-1559/DLI/2016
Rakesh Jain	…	Appellant
Versus
The Deputy Director Directorate of Enforcement, New Delhi	…	Respondent
4. MP-PMLA-2955/DLI/2016 (Stay) FPA-PMLA-1560/DLI/2016
M/s. Swaran Overseas Pvt. Ltd.	…	Appellant
Versus
The Deputy Director
Directorate of Enforcement, New Delhi	…	Respondent

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Advocates/Authorized Representatives who appeared

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For the Appellants	:	Mr. Mahendra Pratap, Adv.
For the Respondent (ED)	:	Mr. Priyank Khattar, Adv.
CORAM
SHRI V. ANANDARAJAN		: MEMBER

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FPA-PMLA-1557-1560/DLI/2016

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ORDER 15.01.2025

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The present appeals arise from the order dated 27.10.2016 passed by the Ld. Adjudicating Authority (AA) under the Prevention of Money Laundering Act, 2002 (PMLA, 2002) in Original Complaint (O.C) No. 606/2016 confirming the Provisional Attachment Order (PAO) dated 11.05.2016 passed in ECIR/12/DL20/2015.

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Facts in Brief

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2. The relevant facts as recorded in the impugned order briefly are that on the complaint of Deputy Director, Directorate of Revenue Intelligence (DRI), Lucknow Zonal Office, 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)

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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 premises of Sh. Manish Jain and associates on 07.08.2014 and seized incriminating material in the form of a large number of blank postal wrappers of Hong Kong Post, large number of bogus PAN cards (about 150) and Voter ID Cards (about 100) in the names of different fictitious identities. To accomplish this criminal activity of remitting foreign exchange from India, Sh. Manish Kumar Jain had opened a firm, namely, M/s Pacific Technology in Hong Kong, besides other entities.

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3. Since offences under sections 420, 467, 471 of the IPC are the Scheduled Offences under the Prevention of Money Laundering Act, 2002 (PMLA, 2002), an ECIR (ECIR/03/LKZO/2015 dated 10.08.2015) was registered in the Lucknow Zonal Office of the Directorate of Enforcement, Lucknow, which was transferred to Delhi Zonal Office and re-numbered as ECIR No. 21/DLZO/2015 dated 01.12.2015.

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4. Investigation carried out by the Respondent Directorate under PMLA, 2002 revealed that Sh. Manish Jain, in connivance with other coaccused persons, had set up various fake entities in the names of nonexistent persons by forging the IDs and opened accounts in various banks for the purpose of depositing cash and, thereafter, transferred the same to the accounts of other such created entities from where the proceeds of crime were laundered by sending outside India under the garb of import advance by using fake documents. This conclusion was fortified with the recovery of fake voter ID cards where photograph of one person has been reflected on various voter ID cards with different names. The said proceeds of crime were further transferred to the accounts of

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other companies in Hong Kong, China etc. for utilization and facilitating the various importers/exporters who were involved in fraudulent import/export. It was admitted by Sh. Manish Jain, Sh. Rajeev Wadhwa and their other associates in their statements recorded under section 50 of the PMLA, 2002 and under section 108 of the Customs Act, 1962 that the entire business of the above stated entities was created by Manish Jain on the strength of fake IDs, and was being looked after by Manish Jain, Rakesh Jain etc. Thus, it was found that the above said accused persons, namely, Manish Jain, and his entities viz M/s Unique Enterprises, M/s Adinath Exim India, M/s Eagle Enterprises, M/s Sai International, M/s Alaska Trading Company, M/s Apple Computers, M/s Daksh Impex, 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.

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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

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the same against the accused persons, Sh. Manish Jain, Sh. Rajeev Wadhwa and others.

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6. An Original Complaint (O.C.) dated 09.06.2016 having been filed before the Ld. AA as per the requirement of Section 5 (5) of the Act, the Ld. AA confirmed the provisional attachment of the properties vide the impugned order. Aggrieved by the said order of the Ld. AA, the appellants have challenged the same before this Appellate Tribunal.

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7. It may not be out of place to mention here that Appeal No. FPAPMLA-No.2476/DLI/2018 filed by Sh. Rajeev Wadhwa and other connected appeals against the order of the Ld. AA dated 09.07.2018 confirming the Provisional Attachment Order No. 03/2018 dated 18.01.2018 arising out of the same ECIR but a different O.C., namely, OC No. 891/2018, were disposed of by this Appellate Tribunal vide two orders dated 07.05.2024. During oral arguments on the present appeals, the Ld. Counsels from both the sides submitted that the underlying issues in these cases are the same as in appeals arising out of the aforementioned cases arising out of OC No. 891/2018 in respect of which the order dated 07.05.2024 was passed by this Appellate Tribunal.

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FPA-PMLA-1557/DLI/2016

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8. This appeal has been filed by Sh. Neeraj Jain, brother of Sh. Manish Kumar Jain, the alleged kingpin in this group of cases. Out of the attached properties, the present appellant is concerned with two properties, namely, (i) the property at Serial No.1, i.e., House No. B-54, HIG Duplex, Sanjay Nagar, Ghaziabad in the joint names of Neeraj Jain (appellant), Rakesh Jain, Manish Jain and Mrs. Swaran Lata Jain w/o

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late Mr Surinder Nath Jain and (ii) the property at Serial No. 4, i.e., shop No. FF-14, RDC, Raj Nagar, Ghaziabad, in the name of the appellant.

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It is contended that as regards the first property, i.e., House No. B-54, HIG Duplex Sanjay Nagar, Ghaziabad, it was submitted before the Ld. AA that the said property was acquired in the year 2002 in the joint names of Sh. Surender Nath Jain along with his three sons, i.e., Manish Jain, Rakesh Jain and Neeraj Jain in terms of the application of allotment dated 26.7.2002 submitted by the joint purchasers, followed by letter of allotment dated 1.8.2002 issued by the Ghaziabad Development Authority (GDA), Ghaziabad, UP. It is emphasized that the said property was actually acquired in the year 2002 and not 2012 as stated in the table, and, as such, the property predates the period of allegations forming the basis of the ECIR.

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9. It is further submitted that one of the co-owners, i.e., Mr Surender Nath Jain, expired 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.

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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

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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 that the entire payment to acquire the said property was made in the year 2002 itself vide receipts dated 21.9.2002, 01.11.2002 and 13.11.2002 issued by GDA. Therefore, by no stretch of imagination can the said property be the result of crime proceeds.

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11. With respect to the property, i.e., Shop No. FF-14, RDC, Raj Nagar, Ghaziabad in the name of the appellant, it is submitted that the said shop was acquired and purchased by the appellant from his own sources/funds in the year 2005 in terms of the letter of allotment No.254.COM.Dept./05 dated 2.3.2005 issued by GDA in favour of the appellant. The total sale consideration of Rs.6,70,000/- to acquire the said shop was paid by the appellant from his own sources of income and same has nothing to do with the alleged crime proceeds. Later, GDA executed a regd. lease deed dated 8.12.2006 in favour of the appellant with respect to the said shop.

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12. It is contended that the entire sale consideration of Rs.6,70,000/to acquire the said shop was paid by the appellant from his own legitimate sources of income. It is reiterated that it is a matter of records that the said shop was acquired many years back whereas the alleged offences pertain to the case registered by Enforcement Directorate under the, Prevention of Money Laundry Act, 2002 in the year 2013. Nowhere has the Respondent been able to show as to how the funds from which

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the said shop was purchased, have any nexus with the offence or are in any manner the proceeds of crime.

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13. It is also contended that a bare reading of the impugned order under the heading, i.e., “ 4 Nexus of attached properties with the proceeds of crime", would go to show that the impugned order has been passed in a stereotyped manner without considering the reply given by the appellant.

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14. It is strongly contended that there is no nexus / link between the alleged ill-gotten money and the attached properties as the Authority itself admitted and has given its finding that the alleged criminal activities noticed in the present case pertains to the year 2006 onwards. Even after that, the Ld. Adjudicating Authority confirmed the provisional attachment order for attachment with respect to the house property, i.e., House No. B-54, HIG Duplex, Sanjay Nagar, Ghaziabad, UP which was admittedly acquired in the year 2002 in terms of regd. sale deed dated 13.11.2002.

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15. Further, without prejudice 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

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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 the properties which were acquired before 01.06.2009 could not have been attached by the Respondent and on this ground alone, the said Provisional Attachment Order deserves to be set aside. That even otherwise, the allegations and accusations that have been made against the Appellant do not disclose the commission of a Scheduled Offence under the PMLA, 2002 and thus, the present proceedings against the Appellant under the provisions of the PML Act, 2002, ought to be discontinued.

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16. It is next contended that it is a well settled principle of law laid down by the Hon'ble Delhi High Court in its judgment titled as J. Sekar Vs. Union of India & Others wherein the Hon'ble Court has laid down that reasons to believe is a sine qua none for the officer who passed the order under Section 5(1) of the PMLA Act, 2002 and also for the Adjudicating Authority under Section 8(1) of the PMLA, 2002. The Hon'ble High Court has laid down and reiterated the law that these reasons to believe should be made available to the person to whom notice is issued by Ld. Adjudicating Authority under Section 8(1) of PMLA Act, 2002. It was also held by the Hon'ble High Court that in case of failure to disclose right at the beginning the aforesaid reasons to believe, the notices under Section

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8(1) of PMLA Act, 2002 would not be a mere irregularity but an illegality, and a violation thereof would vitiate the entire proceedings and cause the order of Provisional Attachment to be rendered illegal. It is stated that the Ld. Adjudicating Authority has not given any reason to believe while issuing the show cause notice dated 21.02.2018 to the appellant and it is not mentioned by the Hon'ble Adjudicating Authority in the entire show cause notice as to what are the reasons the Hon'ble Adjudicating Authority has to believe that the property of the appellant is a crime proceeds within the meaning of PMLA, 2002.

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Based on the above contentions, it is prayed by the appellant that the present appeal deserves to be allowed and the attachment order is liable to be set aside on this ground alone.

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17. The respondents have strongly opposed the contentions raised on behalf of the appellant. They have, firstly, reiterated at length the facts leading to the initiation of inquiries in this case, the material gathered during the investigations carried out by the DRI and the respondent Directorate (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.

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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 properties was rightly done. It is contended by the respondents that the movable/immovable properties of the appellant were squarely covered under the definition of proceeds of crime as given u/s 2(1)(u) of the PMLA read with section 2(1)(v) of the Act. His role has been discussed in detail in the PAO No. 05/2016 and OC No. 606/2016. He and his brother, Rakesh Jain attempted to frustrate the proceeding under this Act by showing /transferring the said property in the name of his known person intentionally.

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19. Similarly, the investment in purchasing of Shop No. FF-14, RDC, Raj Nagar, Ghaziabad UP by Neeraj Jain in his name, is squarely covered under the definition of proceeds of crime as defined under section 2(1)(u) of the PMLA, 2002. In the PAO and the OC, the role of appellant was discussed in detail wherein it was clearly brought out that the appellant was deeply/actively involved in the offence of money laundering and how he acquired proceeds of crime and how the properties in question were covered in the definition of money laundering.

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20. It is contended that the appellant has no other independent source of income and was associated with his brothers, namely, Manish Jain

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and Rakesh Jain during the alleged period in the criminal activities. He was solely dependent on his above said brothers for his day-to-day life. Thus, no rights of the appellant were violated. It is also asserted that full opportunity was given to the appellant to defend the case, and considering all facts and circumstances, a judicious order has been passed which is a valid in the eyes of law.

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21. It is also stated by the respondent Directorate that ED has filed a prosecution complaint under section 45 of the PMLA wherein it has been prayed that the properties in question may be confiscated under section 8(5) of the PMLA. It was also submitted that as at the time of filing reply by the respondents, Sh. Manish Jain, the principal accused and brother of the appellant, had been in judicial custody since 14.10.2015 and his bail application was also dismissed by Ld. District and Session Lucknow after considering the merits of the case.

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22. It is further pointed out that the instant case has been brought under the supervision of Special Investigation Team (SIT) on Black Money constituted by the Hon'ble Supreme Court of India.

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23. Based on the above contentions, the respondents have prayed that no relief may be given on order dated 27.10.2016 of Ld. Adjudicating Authority.

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Analysis and Findings:

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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

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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:

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“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:

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“(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;

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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;”

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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 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

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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.

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

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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.

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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.

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“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

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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.”

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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.

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“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.

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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. 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

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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”.

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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.

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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.

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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.

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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

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(supra). The judgment of Seema Garg (Supra) has been dealt with by the Delhi High Court in the case of Prakash Industries Ltd. v. Directorate of Enforcement reported in 2022 SCC OnLine Del 2087. The relevant paras are quoted hereunder:

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“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.

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

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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 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

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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.

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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 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.

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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 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.”

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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.

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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 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 International FZE vs. The Deputy Director Directorate of Enforcement, Chandigarh dated 31.07.2024. The relevant para of the said judgment is quoted hereunder:

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“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.

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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

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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.”

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

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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.”

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Following 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 properties could not have been attached as they were acquired prior to the alleged period of crime is hereby rejected. In doing so, it is noted that the subject properties have been attached by the respondents in the present case as ‘value’ of proceeds of crime as has been categorically noted in the last paragraph of page 17 of the Provisional Attachment Order.

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25. The next contention of the appellant is that the properties were acquired by the appellant from his own sources of income and the same has nothing to do with the alleged crime proceeds nor have any nexus with the alleged offence. The contention of the appellant has been considered. In this regard, it is, firstly, noted that the claim of the appellant that the property was acquired out of the appellant’s own legitimate income remains a bland assertion without any substantiating evidence. It is settled law that under section 8(1) of the PMLA, 2002, the burden of proof is upon the appellant to indicate the sources of income, earning or assets, out of which or by means of which he had acquired the property attached u/s 5(1). The contention of the respondents is that the appellant had no independent source of 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.

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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 been committed. The argument is that when the alleged offences themselves were not scheduled offences, the actions of the appellant at that stage cannot be termed as scheduled offences so as to attract PMLA, 2002.

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27. The above contention of the appellant has been considered. It is by now well-settled that the issue of retrospectivity or otherwise in so far as offence of money laundering is concerned has to be examined with reference to the act which constitutes ‘money laundering’ under Act, regardless of the time of occurrence of the scheduled offence. Further, the offence of money laundering is a continuing offence. A continuing offence is one which is susceptible of continuance and is distinguishable from one which is committed once and for all. A continuing offence occurs and reoccurs, and each time, an offence is committed. It was so held by the Hon’ble Supreme Court in State of Bihar Vs. Deokaran Nenshi (1972 SCC 890) . In Dyani Antony Paul and Ors. Vs. Union of India and Ors. Manu/KA/4442/2020, the Hon’ble Karnataka High Court has held that money laundering is a continuing offence and, as such, the issue of retrospective effect does not arise. The decision of the Hon’ble Delhi High Court in Prakash Industries Limited (WP (C) 14999/2021 (Order dated 19.07.2022) may also be referred to in this context, wherein, it was held that it is well settled relating to retroactive application of penal previous that merely because requisite or facet for initiation of action pertains to a period prior to the enforcement of the statute, that would not be sufficient to

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characterize statute as being retrospective. It must be borne in mind that the Act with which we are concerned penalizes acts of money laundering. It does not create a separate punishment for a crime prescribed under the Penal Code. The Act does not penalize the predicate offence. That offence merely constitutes the substratum on which charge of money laundering is being raised.

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28. In view of the above position, regardless of when the predicate offence was committed, the act of money laundering has to be reckoned with reference to the dates on which any of the actions which constitute ‘money laundering’, including its concealment/possession/acquisition/use/ projecting or claiming as untainted property, took place and not with reference to the date on which the act of constituting 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.

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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 Vs. Union of India W.P. (C) 5320/2017 (pronounced on January 11, 2018) is relied upon.

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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

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the noticees. However, another single judge bench of 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. It was held that 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. Further, it was also 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) can proceed with the process on the basis of subjective satisfaction.

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31. In view of the legal position discussed above, I do not find sufficient grounds to hold that the actions taken under sections 5 and 8 were not valid on account of non-communication of the reasons by the relevant authorities acting under the said provision. Accordingly, the contention of the appellant is rejected.

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32. In light of the above discussions, the factual position with regard to the case as discussed in detail in the foregoing paragraphs, the voluminous evidence gathered in the case, and in light of the fact that a prosecution complaint under the PMLA, 2002, stands filed in the present case wherein the properties in question have also been proposed for confiscation under section 8(5) and the said prosecution case remains pending before the Ld. Special Court, I do not find any merit in the appellant’s plea for quashing and setting aside the impugned order.

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As has been pointed out by the Hon’ble Supreme Court in its landmark judgment in the case of Vijay Madanlal Choudhary, attachment of property is a balancing arrangement to secure the interests of the person, as also ensure that the proceeds of crime remain available to be dealt with in the manner provided by the Act. It may be pointed out that mere attachment of property 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 aforesaid case of Vijay Madanlal Choudhary , 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. Therefore, at this stage, when the criminal trial of the appellants herein is still pending before a court of competent jurisdiction, even the balance of interests lies in favour of continued attachment of the subject properties.

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Accordingly, this appeal is hereby dismissed.

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33. Pending applications, if any, shall also stand disposed of in light of the above orders.

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34. No order as to costs.

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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.

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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.

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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:

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“The sweep of Section 5(1) is not limited to the accused named in the criminal activity relating to a scheduled offence. It would apply to any person (not necessarily being accused in the scheduled offence), if he is involved in any process or activity connected with the proceeds of crime.”

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38. Furthermore, the Hon’ble Supreme Court in the cases has also held that the broad objective of PMLA, 2002 is to reach the proceeds of crime in whosoever’s name they are kept or by whosoever they are held. In light of the legal position as above, there is no merit in the contention of the appellant that property relating to the present appellant could not have been attached since she is not accused in the PMLA case. The same is therefore rejected.

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39. As already mentioned, the other arguments raised on behalf of the appellant have already been discussed and disposed of while disposing of the appeal filed by Sh. Neeraj Jain (supra).

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40. Accordingly, this appeal is hereby dismissed.

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41. Pending applications, if any, shall also stand disposed of in light of the above orders.

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42. No order as to costs.

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FPA-PMLA-1559/DLI/2016

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43. This appeal has been filed by Sh. Rakesh Jain. Out of the attached properties, two, namely, (i) House No. B- 54 HIG Duplex, Sanjay Nagar, Ghaziabad, in the joint names of Neeraj Jain, Rakesh Jain, Manish Jain and the appellant, and (ii) Shop No. FF-15 RDC, Raj Nagar, Ghaziabad, UP pertain to the appellant.

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44. With regard to the first property, it is contended that the entire sale consideration in the sum of Rs. 9,86,000/-along with other charges etc. to acquire the said shop was paid by the appellant out of his own legitimate source of income by obtaining loan facility from the Oriental Bank of Commerce, Ghaziabad, UP.

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45. With regard to the second property, i.e, the Shop in Raj Nagar, Ghaziabad UP. It is stated that the same had already been mortgaged by the appellant on 14.01.2016 in favour of Axis Bank, Kasturba Gandhi Marg, New Delhi by availing loan facilities and the original document thereof have also been handed over to the Axis Bank at the time of availing loan.

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46. The above contention of the appellant has been considered. As discussed in paragraph 25 above, the definition of proceeds of crime includes the value of such proceeds which are also equally amenable to attachment. Accordingly, the above contention of the appellant is hereby rejected.

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47. Insofar as the present appellant 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.

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48. Consequently, in light of the factual and legal positions discussed above, this appeal is hereby dismissed.

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49. Pending applications, if any, shall also stand disposed of in light of the above orders.

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50. No order as to costs.

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51. This appeal has been filed by M/s Swaran Overseas Pvt. Ltd. Two vehicles, namely, vehicle bearing No. DL -7CG-4714 Toyota Altis (2008) valued at 11,45,000/- (Ex. Showroom Price) and Vehicle no. DL7CG/5865, Toyota Fortuner valued at Rs. 18,90,000/- (Ex. Showroom Price) relating to the appellant have been attached vide the impugned order.

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52. Ld. counsel for the appellant pointed out that two cars were attached in the case of Swaran Overseas Pvt. Ltd. (FPA-PMLA1560/DLI/2016) he submitted that one of the two cars attached had been destroyed in accident and insurance claim in respect of the same had already been realized by the appellant prior to the attachment. The records have been perused insofar as the present appellant is concerned, the allegations are that the prime accused Sh. Manish Jain and others had used the premises of the appellant company M/s Swaran Overseas Pvt. Ltd. which was managed and controlled by Sh. Manish Jain. In the guise of the said company, and from the office premises of the company, the accused persons had carried out all the illegal activities of money laundering under a well-planned criminal conspiracy. All the transactions of the fictitious company opened by Manish Jain and others were operated or controlled from the office premises of the appellant company. There are many suspicious transactions in the accounts of the said company.

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53. In light of the above factual findings as well as for the detailed reasons discussed while disposing of the appeal of Sh. Neeraj Jain

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(supra), attachment of the properties relating to the appellant are hereby upheld. With regard to the further contention that one of two vehicles attached, namely, Vehicle no. DL-7CG/5865, Toyota Fortuner valued at Rs. 18,90,000/- (Ex. Showroom Price) got burnt in a fire accident in the year 2011 and was declared as total loss by the insurance company and the said car no more in existence, I find that the respondent Directorate has made no specific factual submission. In the event, the facts are as stated by the appellant, the attachment has become infructuous and the order of attachment would not operate in relation to the said property. Subject to the above remarks, this appeal is hereby dismissed.

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54. Pending applications, if any, shall also stand disposed of in

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light of the above orders.

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55. No order as to costs.

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(V. Anandarajan) Member

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New Delhi

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15^th January, 2025