Banks challenging attachment of mortgaged properties sued as substitute for proceeds of crime in a fraud case. The Tribunal held that prior mortgage does not defeat PMLA attachment and banks their claims must be pursued separately under Section 8(8) of PMLA.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI
| 1 MP-PMLA-11950/CHD/2023 Misc. FPA-PMLA-764/CHD/2014 South Indian Bank |
… Appellant |
|---|---|
| 2 MP-PMLA-12615/CHD/2023 Misc. MP-PMLA-1358/CHD/2015 U/S 151 FPA-PMLA-769/CHD/2014 |
|
| UCO Bank | … Appellant |
| 3 MP-PMLA-1441/CHD/2015 Misc. FPA-PMLA-761/CHD/2014 |
|
| Punjab National Bank | … Appellant |
| 4 MP-PMLA-12196/CHD/2023 Misc. FPA-PMLA-766/CHD/2014 |
|
| Bank Of Baroda | … Appellant |
Versus The Deputy Director, Directorate of Enforcement, Chandigarh … Respondent
Advocates/Authorized Representatives who appeared
| For the Appellants |
: | Madhav Khurana, A. Karthik Shaurya Singh, Sugam Agarwal, Rajesh Ratan, Reema Mishra, Advocates |
|---|---|---|
| For the Respondent | : | N.K. Matta, SPP Ishi Chaudhary, Chandra Prakash, Advocates |
| CORAM | ||
| SHRI V. ANANDARAJAN | : MEMBER |
ORDER 16.01.2025
The instant appeal has been preferred under section 26 of the Prevention of Money Laundering Act, 2002 (“PMLA,2002”) against the order dated 07.11.2014 of the Ld. Adjudicating Authority (“AA”), wherein, the attachment of the following properties was confirmed.
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| S.No | Amount of POC parked therein |
Name of the firm/individual |
Name of the proprietor/part ner |
Details of the property | Name of the property owner |
|---|---|---|---|---|---|
| 1. | Rs.13,00,000 | M/s Apoorv Associates |
Sanjay Minocha & Anurag Minocha |
House at Khasra No.1166, Vyomprasth, GMS Road, Dehradun. This property is mortgaged with South India Bank, Rajpur Road, Dehradun against Cash Credit Limit sanctioned to M/s Apoorv Ai |
Sh. Sanjay Minocha |
| 2. | Rs.68,28,000 | Sanjay Minocha Anurag Minocha (Individual) |
ssocates 119, Indira Nagar,Opp. Asian School, Dehradun. This property is mortgaged with South India Bank,Rajpur Road, Dehradun against housing loan sanctioned toSmt. Saroj Minocha, Sanjay Minocha & Anurag Minocha. |
Saroj Minocha, Sanjay Minocha, Anurag Minocha |
|
| 3. | Rs. 5,82,06,469 |
M/s Minocha Furniture, 152, Moti Bazar, Dehradun. (New No. 170/101) Old No.45/11) |
Sanjay Minocha (Proprietor) |
1.99/131, Moti Bazar, Dehradun. This property is mortgaged with UCO Bank, Paltan Bazar,Dehradun(Now shifted to E.C. Road, Dehradun) against cash credit limit sanctioned to the said firm,i.e., M/s Minocha Furniture |
ShriSanjay Minocha |
| Sanjay Minocha (Individual) |
2. 45/11( New No. 101/70 & 152), Moti Bazar, Dehradun. This property is mortgaged with Punjab National Bank, Tilak road, Dehradun against Cash Credit Limit sanctioned to the group firm,i.e., M/s Minocha Furnitures,69, Rajpur Road Dehradun |
-do- | |||
| -do- (being successor of Late Sh. R.A. Minocha) |
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| Rs. 2,51,61,365 Rs.15,00,000 -Rs.1,48,90,000 |
Liability less towards repayment to SIB, D‟dun as detailed below- 50,000- M/s Saroj furniture 50,000- M/s Poonam Furniture(merged with Saroj Furniture) + 9,10,000- M/s Aakriti Furniture =Rs.1,21,10,000 Liability less towards payment made =Rs.1,21,10,000 -Rs.2,70,00,000 =-Rs.1,48,90,000 (balance repayment amount which is subtracted from liabilities of Sanjay Minocha) |
3. 46-B(Palika No. 165), Moti Bazar, Dehradun. This property is mortgaged with UCO Bank, Paltan Bazar, Dehradun (Now shifted to E.C.Road, Dehradun) against Vash Credit Limit sanctioned to its sister concern M/s Saroj Furniture at Devki Shopping Complex,59, Moti Bazar, Dehradun |
-do- | |
|---|---|---|---|---|
| Rs.6,99,77,834 | ||||
| 4. Rs.66,10,000 Rs.10,00,000 |
Minocha Interiors 55/5, Moti Bazar, Dehradun Ruchi Minocha (Individual) |
Ruchi Minocha | Nagar Nigam Property No. 55/5 (New No. 96/72), Moti Bazar, Dehradun.This property is mortgaged with Punjab National Bank, Tilak Road, Dehradun against Cash credit Limit sanctioned to the said firm, i.e., M/s Minocha Interiors |
Ruchi Minocha w/o Anurag Minocha |
| Rs. 76,10,000 |
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| 5. | Rs.1,14,75,000 | M/s Ruchika Interiors 119/48, Moti Bazar, Dehradun |
Ruchika Minocha |
E/M of land and building situated at 102/170, Moti Bazar, Dehradun. This property is mortgaged with Bank of Baroda, Rajpur Road, Dehradun against Cash credit Limit sanctioned to the said firm, i.e., M/s Minocha Interiors |
Sanjay Minocha |
|---|---|---|---|---|---|
| 6. | Rs.25,50,000 | Ruchika Minocha | 99/131, Moti Bazar, Dehradun. This property is mortgaged with UCO Bank, Rajpur Road, Dehradun against Cash credit Limit sanctioned to the said firm, i.e., M/s Aakriti Furniture |
Ruchika Mincoha w/o Sanjay Minocha |
|
| 7. | Rs. 28,50,000 | Anurag iture 46-B,Moti Bazar, Dehradun |
Anurag Minocha | E/M of land and building situated at 48( New No.119/48), Moti Bazar, Dehradun. This property is mortgaged with Bank of Baroda, Rajpur Road, Dehradun against Cash credit Limit sanctioned to the said firm, ieM/sAnuragFurniture |
Ruchika Minocha w/o Sanjay Minocha |
| 8. | Rs. 90,88,000 | urag cha dividual) |
.., 130/102, Moti Bazar, Dehradun. This property is mortgaged with UCO Bank, Paltan Bazar , Dehradun ( Now shifted to E.C.Road, Dehradun) against Cash Credit Limit sanctioned to its sister concern M/s Saroj Furniture at Devki Shopping Complex,59, Moti Bazar, Dehradun |
Anurag Minocha |
|
| 9. | Rs. 28,10,000 | chaFurnitures Rajpur , adun |
Smt. Praveen Arora |
45/11( New No. 101/70 & 152), Moti Bazar, Dehradun. This property is mortgaged with Punjab National, Tilak Road, Dehradun against Cash Credit Limit sanctioned to the said firm,i.e, M/s Minocha Furnitures |
Sanjay Minocha |
| 10. Rs. 11 |
Rs.16,00,000 ,60,88,834.00 |
Ruchika Minocha Anurag Minocha (Individual |
119, Indira Nagar, Opp. Asian School, Dehradun. This property is mortgaged with South India Bank, Rajpur Road, Dehradun against housing loan sanctioned to Smt. Saroj Minocha, Sanjay Minocha& Anurag Minocha |
Saroj Minocha Sanjay Minocha & Anurag Minocha |
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Facts in brief
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investigation, sections 120-B,409,467,468 and 471 of IPC were also incorporated in the said case on 03.01.2013.
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practices and in the guise of normal/genuine transactions. The modus operandi, in brief, used for this purpose was as below:
(i) By crediting a customer's account without presenting any genuine instrument in outward clearing;
(ii) By issuing Pay Orders fraudulently;
(iii) By honouring cheques issued from various accounts of firms/ individuals controlled by/related to Sh. Sanjay Minocha and others in inward clearing without making due debits to their respective accounts; (iv) By creating fake loans against Fixed Deposits without consent/demand of original depositors like Uttaranchal State CoOperative Bank Ltd etc.
(v) By routing transactions through Overdraft Account of District Cooperative Bank maintained with South Indian Bank, Dehradun;
(vi) By not crediting an account even though instrument is presented in outward clearing;
(vii) By debiting an account without receiving any instrument in inward clearing: 6. As per the internal Investigation report of the bank dt. 10.01.2013, prima facie loss identified by the bank was Rs. 33,97,55,319/-. However, vide letter dated 09.01.2014, the internal investigator of SIB, Sh. Ranjith J., stated that the loss suffered by the bank was calculated to be Rs.68,38,618.00. The difference in the total amount of the fraud is said to have arisen due to exclusion of interest portion from the loss amount, since it cannot be recovered from any party as this interest was charged against the loans which were fake and also due to identification of some more fraudulent debit & credit transactions which were not reported in
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the earlier report of the bank dated 10.01.2013. The total amount siphoned off from the bank is approximately Rs. 30,68,38,618.00, which has been made available into the accounts of Shri Sanjay Minocha & Shri Vijay Kushwaha as well as their family firms/ individuals related to them, by Shri Manoj Kumar R., the then Branch Manager and Shri Jacob Kovoor, Ex. Additional Manager of SIB using fraudulent means and without any loan facility/availability of adequate funds in their respective accounts. Out of the total proceeds of crime, an amount of Rs. 14,30,88,834.00 was found in the possession of Shri Sanjay Minocha and his family firms/individuals.
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accounts of the firms/individuals controlled by Sh. Sanjay Minocha and his family members.The said proceeds of crime were invested/utilized to pay off liabilities of the groups‟ firms/individuals, viz., to pay off the loans/cash credit limits for de-mortgage of properties, to pay off the interest amountsof various loans/cash credit limits of the group and to meet their personal expenditures, etc., so as to integrate the proceeds of crime with legal economy and to project the same as untainted.
Arguments on behalf of the South Indian Bank
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Kotwali Dehradun u/s 420 of the IPC against Vijay Kushwaha, Sanjay Minocha and others for receipt of proceeds of fraudulent transactions. Thereafter, on 03.01.2013, additional sections, namely, sections120B, 409, 467, 468, and 471 of the IPC were also added to the FIR No. 389/2012.
It is on the basis of the FIR which had been registered on the complaint of the Appellant Bank, that the Enforcement Directorate registered ECIR/08/PMLA/DNSZO/2013 on 26.06.2013.
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money siphoned off from the Appellant Bank. Mr. Sanjay Minocha, while acknowledging the receipt of INR 23 crores from the Appellant Bank, undertook to repay the same and executed the following documents dated 27.07.2012 with the Appellant Bank:
(a) Letter acknowledging the liability owed to the Appellant Bank
(b) Letter of Undertaking
(c) Demand Promissory Note for INR 23 crores.
(e) Letter of acknowledgement of debt and security to the tune of INR 23 Crores.
Mr. Sanjay Minocha had deposited the copies of the title deeds of property No. 2 with the Appellant Bank on 27.07.2012 and provided the Appellant Bank with an acknowledgement letter dated 27.07.2012 for the same.
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Appellant Bank is not an accused in the scheduled offence and in no manner has it colluded in the fraud. Appellant Bank has a bonafide claim over the attached properties mortgaged with the appellant bank and attached by the Respondent as "funds in token of the Proceeds of Crime".
"162. But, in case an otherwise untainted asset (i.e. deemed tainted property) is targeted by the enforcement authority for attachment under the second or third part of the definition of "proceeds of crime", for the reason that such asset is equivalent in value to the tainted asset that was derived or obtained by criminal activity but which cannot be traced, the third party having a legitimate interest may approach the adjudicating authority to seek its release by showing that the interest in such property was acquired bona fide and for lawful (and adequate) consideration, there being no intent, while acquiring such interest or charge, to defeat or frustrate the law, neither the said property nor the person claiming such interest having any connection with or being privy to the offence of moneylaundering.
163. Having regard to the above scheme of the law in PMLA, it is clear that if a bonafide third party claimant had acquired interest in the property which is being subjected to attachment at a time anterior to the commission of the criminal activity, the product whereof is suspected as proceeds of crime, the acquisition of such interest in such property (otherwise
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assumably untainted) by such third party cannot conceivably be on account of intent to defeat or frustrate this law. In this view, it can be concluded that the date or period of the commission of criminal activity which is the basis of such action under PMLA can be safely treated as the cut-off. From this, it naturally follows that an interest in the property of an accused, vesting in a third party acting bona fide, for lawful and adequate consideration, acquired prior to the commission of the proscribed offence evincing illicit pecuniary benefit to the former, cannot be defeated or frustrated by attachment of such property to such extent by the enforcement authority in exercise of its power under Section 8 PMLA
165. Situation may also arise, as seems to be the factual matrix of some of the cases at hand, wherein a secured creditor, it being a bonafide third party claimant vis-a-vis the alternative attachable property (or deemed tainted property) has initiated action in accordance with law for enforcement of such interest prior to the order of attachment under PMLA, the initiation of the latter action unwittingly having the effect of frustrating the former. Since both actions are in accord with law, in order to coexist and be in harmony with each other, following the preceding prescription, it would be appropriate that the PMLA attachment, though remaining valid and operative, takes a back-seat allowing the secured creditor bonafide third party claimant to enforce its claim by disposal of the subject property, the remainder of its value, if any, thereafter to be made available for purposes of PMLA".
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Madanlal Choudhary v. Union of India, 2022 SCC OnLine SC 929 is relied upon:
“295... The precondition for being proceeds of crime is that the property has been derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence...
296. Be it noted that the attachment must be only in respect of property which appears to be proceeds of crime and not all the properties belonging to concerned person who would eventually face the action of confiscation of proceeds of crime, including prosecution for offence of money-laundering. As mentioned earlier, the relevant date for initiating action under the 2002 Act -be it of attachment and confiscation or prosecution, is linked to the inclusion of the offence as scheduled offence and of carrying on the process or activity in connection with the proceeds of crime after such date. The pivot moves around the date of carrying on the process and activity connected with the proceeds of crime; and not the date on which the property has been derived or obtained by the person concerned as a result of any criminal activity relating to or relatable to the scheduled offence”
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ex-facie, ultra vires the powers of the statute and totally illegal and arbitrary to the extent of the attachment of the said properties.
Arguments on behalf of Punjab National Bank
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mtr., of which total covered area is 330.08 sq. mtr. (Property No.2) collectively referred as attached properties.
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the attendance of any person, discovery and production of documents, issuing commission for examination of witness/document, receiving evidence on affidavit etc. Hence, the adjudication process adopted by the DRT is purely judicial unlike the Adjudicating Authority which confirms the POA while exercising its power under section 8 of PMLA,2002 based only on the finding of investigation officer. Hence the order/mortgage decree passed by the DRT under section 19(22) of RDB Act will prevail over confirmation order passed Ld. Adjudicating Authority.
Arguments on behalf of Bank of Baroda
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etc., which have already been created on attached properties prior to attachment. In this regard, reliance is placed on SC judgments in the matters of Canbank Financial services Ltd vs Custodian & Ors. (2004)8 SCC 355, and Kabidi Venku Sah Vs. Syed Abdul Hai & Another1983 (4) SCC 570.
Submissions on behalf of the UCO Bank
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opened. It is also submitted that all due diligence as per the banking requirements and RBI guidelines had been duly conducted before advancing the loans.
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Arguments of the Respondent
" 58. "Mortgage", "mortgagor", "mortgagee", "mortgage-money" and
"mortgage-deed" defined.-
(a) A mortgage is the transfer of an interest in specific immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability."
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Minocha & his members named as above in their firm/individual's bank accounts from SIB by various methods. The attached properties of the applicant have nexus with the proceeds of crime.
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and duly confirmed by the Adjudicating Authority have thereby become the case properties to be examined and adjudicated upon only by the Special Court (PMLA), Dehradun in consonance of judgment dated 02.04.2019 delivered by the Hon'ble High Court of Delhi in the case of Deputy Director, Directorate of Enforcement, Delhi v. Axis Bank & others (2019) 259 DLT 500)/Crl. A.No.143/2018.
"169.In view of above-noted legislative scheme, it must be clarified that if the order confirming the attachment has attained finality, or if the order of confiscation has been passed or, further if the trial of a case for the offence under Section 4 PMLA has commenced, the claim of a party asserting to have acted bonafide or having legitimate interest will have to be inquired into and adjudicated upon only by the special court."
"This court finds it difficult to accept the proposition that the jurisdiction conferred on the State by PMLA to confiscate the proceeds of crime" concerns a property the value whereof is "debt" due or payable to the Government (Central or State) or
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local authority. The Government, when it exercises its power under PMLA to seek attachment leading to confiscation of proceeds of crime, does not stand as a creditor, the person alleged to be complicit in the offence of money-laundering similarly not acquiring the status of a debtor. The State is not claiming the prerogative to deprive such offender of ill-gotten assets so as to be perceived to be sharing the loot, not the least so as to levy tax thereupon such as to give it a colour of legitimacy or lawful earning, the idea being to take away what has been illegitimately secured by proscribed criminal activity."
"147. To sum up on the issue, the objective of the legislation in PMLA being distinct from the purposes of the three other enactments viz. RDBA, SARFAESI Act and Insolvency Code, the latter cannot prevail over the former. There is no inconsistency. The purpose, the text and context are different. This court thus rejects the argument of prevalence of the said laws over PMLA." "148. In view of the conclusions reached as above, rejecting the argument of prevalence of RDBA, SARFAESI Act and Insolvency Code over PMLA, the said laws (or similar other laws, some referred to above) must co-exist, each to be construed and enforced in harmony, without one being in derogation of the other, with regard to assets respecting which there is material available to show the same to have been derived or obtained" as
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a result of "criminal activity relating to a scheduled offence" rendering the same "proceeds of crime", within the mischief of PMLA. The PMLA, declares, by virtue of Section 71, that it has over-riding effect over other existing laws, such provision containing non-obstante clause with regard to inconsistency apparently to be construed as referable to the dealings in "money-laundering" and "proceeds of crime" relating thereto."
"149. An order of attachment under PMLA, if it meets with the statutory pre- requisites, is as lawful as an action initiated by a bank or financial institution, or a secured creditor, for recovery of dues legitimately claimed or for enforcement of secured interest in accordance with RDBA or SARFAESI Act. An order of attachment under PMLA is not rendered illegal only because a secured creditor has a prior secured interest (charge) in the subject property…..”
" if the order confirming the attachment has attained finality, or if the order of confiscation has been passed or, further if the trial of a case for the offence under Section 4 PMLA has commenced, the claim of a party asserting to have acted bonafide or having legitimate interest will have to be inquired into and adjudicated upon only by the special court ".
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"50. The Ld. Counsel appearing for the Enforcement Directorate has also referred to the order dated 2nd of May, 2019 passed by the National Company Law Appellate Tribunal in Company Appeal (AT) (Insolvency) No. 493 of 2019 titled Varrsana Ispat Limited Vs. Deputy Director of Enforcement passed on 2nd of May, 2019 wherein it was held that "it is clear that the 'Prevention of Money-Laundering Act, 2002' relates to 'proceeds of crime' and the offence relates to 'money laundering' resulting in confiscation of property derived from, or involved in, moneylaundering and for matters connected therewith or incidental thereto. Thus, as the 'Prevention of Money Laundering Act, 2002' or provisions therein relate to 'proceeds of crime', we hold
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that Section 14 of the IBC is not applicable to such proceedings."
52. We have heard the Ld. Counsel for both the parties and perused the record available before this Adjudicating Authority We are of the view that this Adjudicating Authority, with utmost regard to the order relied upon by the Applicant, is bound by the order dated 3rd of January, 2022 passed by Hon'ble 3 Member Bench of NCLAT Comp. App. (AT) (Ins.) No. 411 of 202 which took the view that NCLT is not empowered to deal with the matters falling under PMLA. In the present case since notice impugned has been issued under the Prevention of Money Laundering Act, 2002 therefore, this application is not maintainable and the same is hereby rejected."
"6.2 The submission on behalf of the appellants was acceptable that Section 71 of the PML Act gives an overriding effect to the provisions of the Act over any other law. The whole object of the
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law of money laundering is to prevent the money laundering and to confiscate the properties derived from and involved in the money laundering or which are those held incidental thereto. The powers exercised for attachment of the properties by the appellants herein have to be justified in that view. If the attachment is released while the appeal is pending, it would render the appeal virtually meaningless from the backdoor, which cannot be permitted."
"22. It has also been held by the supreme Court in a number of judgments that the conflict of non-obstante clause arising in respect of two enactments has to be resolved on consideration of policy underlying the enactments and the language used in them Sarvan Singh. V. Kasturilal (AIR 1977 SC 265); Kamayu Motor Association v. State of Uttar Pradesh (AIR 1956 Sc 785). The Prevention of Money Laundering Act has been enacted provide for forfeiture of proceeds of crime involved in money laundering which was considered necessary of deprive persons engaged in serious illegal activities and have thereby been increasing their resources for operating in clandestine manner. The Act was created to forfeit illegal properties and to prevent the money-laundering activities which are threat to financial system of the county and its integrity and sovereignty. Further
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the question of prevalence of a subsequent legislation will only come into picture when there is a conflict between the two statutes. The Securitisation Act has been enacted for the purpose of establishing an expeditious system for recovery of debts due to banks and for matters connected therewith or incidental thereto. It only lays down a procedure for recovery of debts due to banks. The Prevention of Money Laundering Act vests the statutory authorities with a power to forfeit proceeds of crime involved in money laundering to the State. There is thus no apparent conflict between the two statutes. The two statutes operate in their exclusive fields. The question is only who will have his claim on any property where the claim of the State concurs with the claim of any person. Halsbury explaining the Crown's rights, in relation to property states that the Crown's right and that of a subject under it meet at one end and at the same time the Crown in general is preferred".
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crime are liable to be attached upon fulfilment of the conditions specified in Section 5(1) being existing and upon entertainment of the requisite satisfaction. With a view to achieve the object of the legislation, it is provided as aforesaid that the Provisions of PMLA shall have effect notwithstanding anything inconsistent therewith contained in any other Law for the time being in force. Thus, in accordance with the law the laundered proceeds of crime which is defined as specified above, are attached by virtue of the PAO.
"8(8). Where a property stands confiscated to the Central Government under sub-section (5), the Special Court, in such manner as may be prescribed may also direct the Central Government to restore such confiscated property or part thereof of a claimant with a legitimate interest in the property, who may have suffered a quantifiable loss as result of the offence of money laundering.
Provided that the Special Court shall not consider such claim unless it is satisfied that the claimant has acted in good faith and has suffered the loss despite having taken all reasonable precautions and is not involved in the offence of money laundering.
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[Ins. By the Finance Act, 2015 (20 of 2015), sec. 147 (ii) (w.e.f. 14-5-2015)]
Provided further that the Special Court may, if it thinks fit, consider the claim of the claimant for the purposes of restoration of such properties during the trial of the case in such manner as may be prescribed.
[Ins. By Act 13 of 2018, sec. 208(c)(ii) (w.e.f. 19-04-2018)]
"Para 35. Section 71 of PMLA gives overriding effect to the provisions of PMLA. Section 71 of PMLA states that the provisions of the Act would have overriding effect on the provisions of all other Acts applicable. The provisions of PMLA shall prevail over the contrary provisions of the other Acts. Section 65 of PMLA states that the provisions of Code of Criminal Procedure, 1973 shall apply to the provisions under the Act insofar as they are not inconsistent with the provisions of PMLA.”
Analysis and Findings
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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:
“(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;”
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 any case, there should be an element for use of the proceeds
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directly or indirectly obtained out of the crime and thereby the property would have nexus with the crime.
14. In second part “the value of any such property” the definition aforesaid starts with “or” after the first part referred and discussed in the para above. The second part of the definition is 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.
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
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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.
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.
“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
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case, the property equivalent in value held within the country or abroad can be proceeded with. The definition of “property” as in Section 2(1)(v) is equally wide enough to encompass the value of the property of proceeds of crime. Such interpretation would further the legislative intent in recovery of the proceeds of crime and vesting it in the Central Government for effective prevention of money-laundering.”
The perusal of the para quoted above shows that the argument of the appellant that “the value of any such property” would be only when the proceeds have been taken out of India. The argument aforesaid was not accepted and it simplifies that the definition of “proceeds of crime” has three limbs and elaborate judgment to define the “proceeds of crime” was given by the Delhi High Court in the case of Axis Bank (supra). The relevant paras are quoted herein.
“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
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(cash) being undue advantage and dishonestly gained, is tainted property acquired “directly” by a scheduled offence and consequently “proceeds of crime”. Any other property acquired using such bribe as consideration is also “proceeds of crime”, it having been obtained “indirectly” from a prohibited criminal activity within the meaning of first limb of the definition.
107. In contrast, the second and third kinds of properties mentioned above would ordinarily be “untainted property” that may have been acquired by the suspect legitimately without any connection with criminal activity or its result. The same, however, are intended to fall in the net because their owner is involved in the proscribed criminality and the 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 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
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“the alternative attachable property” or “deemed tainted property”.
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.
18. In the light of judgment of the Apex Court in Vijay Madanlal Choudhary (supra), we are unable to apply the judgment of Kerala High Court in the case of Satish Motilal Bidri (supra). The Ld. counsel did not refer the relevant para of the judgment in the case (supra), rather he referred Para 66 of the judgment of the Apex Court in Vijay Madanlal Choudhary (supra) which permits attachment only of the proceeds of crime. There cannot be any dispute that attachment can be only of the proceeds of crime but what would fall in the definition of “proceeds of crime” and clarified in Para 68 of the same judgment has not been taken into consideration whereas judgement of the Apex Court on the issue is binding on the High Court.
19. The reference to the judgment in the case of Pavana Dibur (supra) has been given where the Ld. Counsel for the
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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.
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 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.
xxxx
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 manner that it
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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.
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.1471314715/2020 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
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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
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in the proscribed criminal activity. The learned Judge further observed that bona fide rights acquired by third parties prior to the commission of the predicate offense would stand saved.”
21. The issue aforesaid was not raised in the case of Pavana Dibur (supra). The counsel appeared therein did not elaborately argue the issue by referring to the definition of “proceeds of crime” having three limbs to give meaning to each limb for the interpretation of the definition of the “proceeds of crime”. The reference of Para 68 of the judgment of three judges Bench of the Apex Court in the case of Vijay Madanlal Choudhary (supra) was not cited and thus counsel for the respondent submitted that the 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.
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
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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-PMLA2909/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:
“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
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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 indirectly obtained or derived out of the criminal activity is not available. It may be on account of siphoning off or vanished by the accused. In those circumstances the property of equivalent value can be attached. The word “the value of any such property” signifies without any embargo that it should be the property purchased after the commission of crime or prior to it rather it would apply in both the eventuality in the given circumstance. Thus, we are not in agreement with the counsel for the appellant who has questioned the attachment in reference to the property acquired prior to commission of crime. We are not going even further that the properties have nexus with the proceeds out of the crime but even in given circumstances and scenario that the property was acquired prior to commission of crime then, also under certain circumstances, it can be attached for “the value of any such property.”
23. At this stage, it is reiterated that any other interpretation other than the one taken by Delhi High Court 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
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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.
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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even holding decree in their favour from the jurisdictional bench of the Debt Recovery Tribunal.
21. We have already recorded finding that the attachment of the property does not effect or transfer the title unless the property is confiscated and it can be when the accused is convicted.The settlement of the property, if confiscated is provided under section 8 (8) of the Act of 2002. If the prayer of the financial institution for protection of their right and for that to lift the attachment or quash it is accepted that it may be in ignorance of section 8 (8) of the Act of 2002.
22. It may be that mortgage of the property is to secure the loan amount, but there may be cases where the property so mortgaged was acquired out of the proceeds of crime. The observation aforesaid has been made because we have come across the cases where an accused mortgaged the property to a bank and acquired the loan amount and subsequently committed default in making
the payment. When the bank pursued the matter for recovery of the amount and for that even to auction the property by invoking the SARFAESI Act, 2002, it was found that the same property was earlier mortgaged to another bank and therein also the same accused committed default in making the payment. In fact, subsequent loan with mortgage of property was by creation of
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forged documents. In that case, claim for the property was made by two different financial institutions based on the mortgage of the property with them to secure the loan. If it is interfered at the instance of one financial institution leaving the other, it would be nothing but to affect the rights of other institution.
23. To save the situation aforesaid, the safeguard is available under section 8(8) of the Act of 2002 on the confiscation of the property. The property would be settled in favour of the rightful claimant in case of claim by two financial institutions. The Special Court and Central Government can take appropriate decision to secure both the financial institution appropriately and proportionately.
24. The above illustration has been given only to show significance and relevance of section 8(8). It was brought by the legislature for the purpose sought to be achieved.
25. In the light of the aforesaid, the interference in the order of the attachment order, on a challenge by the financial institution, should not be persuaded by the sentiments and only on the ground that once there is a mortgage of the property, it should go to the financial institution.
26. In case, it is taken up on the sentiments of the institution, it may result in anarchy and explained further by following illustration:- If property is proceeds of crime or attached for the value thereof but was under mortgage with the financial institution and thereby to be released addressing the interests of the financial institution leaving and even affecting the claim of the victim who lodged the criminal case against the accused.
In case of release of the property from attachment at the instance of financial institution, it can be auctioned where it may achieve the amount greater than what is due to the financial institution. In that case, the financial institution can retain the amount to the extent it is due to them and remaining has to be given to the
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person who mortgaged the property which would be none but can be the accused and thereby the accused would be benefited on release of
the property in a given case by getting the amount over and above secured, out of the auction to settle the dues of financial institutions. In that case again victim would suffer whereas if the mechanism given under section 8 (8) is applied, safeguard would exist to settle the amount in favour of the rightful claimant”.
27. We don’t wish to comment as to what happens in the auction conducted by the bank, that is as to whether the real value of the property is achieved or not. The proposition above may have exception in case of a clean claim having no consequence to others. It can be in a case of rightful claimant.
28. The aforesaid illustration has been given to analyze the consequence of the release of the property at the instance of financial institutions. Though invariably pleas raised that the property was mortgaged much prior to the commission of crime and is not alleged to be the proceeds of crime. That may be a favourable aspect for the financial institution but then Tribunal needs to propound a ratio which may take care of all the legitimate claims,
leaving no anarchy.
29. We have already a point that in general there remains appreciation of the properties and in that case, the delay in auction of the property may not severely affect the institution, though the financial institution always needs to get realization of the amount at the earliest. But, there can be an exception, as given above.
30. In the light of the aforesaid, we do not find reason to allow the appeal at the instance of the assignee.
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31. For all the reasons given above, the appeal is dismissed.
32. It is however clarified that the outcome of the appeal would not affect the right of the appellant ultimately if the subject property is taken under section 8 (8) of the Act of 2002, rather they would be at liberty to make rightful claim under section 8 (8) of the Act of 2002. In case of acquittal of the accused, resulting in release of property from attachment, again the appellants can pursue their
rights for which this order would not come in their way.”
which inter alia refers to registration of FIR at Police Station at City Kotwali, Dehradun on 23.11.2012 under section 420 of IPC against Sh. Sanjay Minocha, Sh. Vijay Kushwaha and other unknown persons, internal investigation reports of the vigilance department of the South Indian Bank and other information received by the Deputy Director,
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Directorate of Enforcement, registration of ECIR and findings of the enquiries caused by the Directorate. These facts have already been discussed at some length in paragraphs 2 to 8 (supra) and are not repeated here in the interest of brevity.
(V. Anandarajan) Member
New Delhi, 16th January, 2025
„ASH‟
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3 issues framed by the court
Whether properties of accused persons acquired prior to the commission of the scheduled offence can be attached as 'value of proceeds of crime' under PMLA.
Whether a stay on provisional attachment of mortgaged properties is required due to prior valid mortgages held by banks.
Whether the claim of banks for realization of dues from attached properties overrides the attachment proceedings under PMLA.
Colour shows how this judgement treated each authority
Deputy Director, Directorate of Enforcement, Delhi v. Axis Bank & Ors.Referred¶69
Deputy Director, Directorate of Enforcement, Delhi v. Axis Bank & Ors. 2019 SCC Online Del 7854 · Who else cites this
Vijay Madanlal Choudhary v. Union of IndiaRelied on¶80
Vijay Madanlal Choudhary v. Union of India, 2022 SCC OnLine SC 929 · Who else cites this
Satish Motilal Bidri v Union of IndiaReferred¶86
Satish Motilal Bidri v Union of India, 2024 SCC OnLine Ker 3410 · Who else cites this
Pavana Dibbur vs. Directorate of EnforcementReferred¶86
Pavana Dibbur vs. Directorate of Enforcement, 2023 SCC Online SC 1586 · Who else cites this
Opto Circuit India Ltd. v. Axis Bank & Ors.Referred¶87
Opto Circuit India Ltd. v. Axis Bank & Ors., (2021) 6 SCC 707 · Who else cites this
Sadananda Nayak v Deputy DirectorRelied on¶59
Sadananda Nayak v Deputy Director, FPA-PMLA-5612/BBS/2023
JM Financial Asset Reconstruction Company Ltd.Relied on¶62
JM Financial Asset Reconstruction Company Ltd. FPA-PMLA3223/MUM/2019
Bank of India v. Ketan Parekh & OrsDistinguished¶52
Bank of India v. Ketan Parekh & Ors 2008 8 SCC 148 · Who else cites this
2 provisions across 1 enactments
South Indian Bank
UCO Bank
Punjab National Bank
Bank Of Baroda
The Deputy Director, Directorate of Enforcement, Chandigarh
V. ANANDARAJAN
As recorded by the court registry
23 orders share this CNR
Judgements on the same questions, provisions and authorities, from every court
