Equivalent Value Doctrine Affirmed: Tribunal Upholds Attachment Even for Pre-Offence Properties under PMLA

Smt. Reshma Biswas Das Vs Deputy Director (Appellate Tribunal Under SAFEMA Delhi)

The Appellate Tribunal under SAFEMA dismissed the appeal and upheld the provisional attachment under PMLA, rejecting the core contention that properties unconnected with criminal activity (and acquired prior to the offence) cannot be attached. The case arose from a bank fraud involving diversion of loan funds, where proceeds of crime were siphoned off and became untraceable.

The Tribunal held that the definition of “proceeds of crime” under Section 2(1)(u) has multiple limbs and clearly includes not only tainted property, but also the “value of such property”, thereby permitting attachment of equivalent value properties when actual proceeds are not available. Relying on Vijay Madanlal Choudhary (SC) and subsequent High Court rulings, it clarified that attachment of equivalent property is not restricted to cases where assets are held abroad, and can extend to untainted properties of equivalent value.

The argument that properties were acquired prior to the commission of offence was rejected, with the Tribunal holding that timing of acquisition is irrelevant in cases of equivalent value attachment. It further emphasized that under PMLA, there is a reverse burden of proof, and the assessee must establish that the properties are not linked to proceeds of crime.

On facts, the Tribunal noted that properties were transferred within family members through gift deeds to shield assets, and sufficient material existed to form “reason to believe” under Sections 5 and 8. Accordingly, finding no legal or factual infirmity, the Tribunal upheld the attachment and dismissed the appeal.

FULL TEXT OF THE JUDGMENT APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI

These appeals arise from the order dated 10.12.2024 passed by the Adjudicating Authority (AA) constituted under the Prevention of Money Laundering Act, 2002 (PMLA), in Original Complaint (OC) No. 2371/2024 confirming the Provisional Attachment Order No. 10/2024 dated 03.07.2024 passed in Enforcement Case Information Report No. ECIR/KLZO/08/2018. Vide the said order, the Ld. AA has confirmed the provisional attachment of following properties relating to the appellants herein:

Facts in Brief

2. The relevant facts briefly are that a case was registered against one Shri Purnendu Kumar Das, Proprietor of M/s K.P.S Enterprise, P.O. Banipur, Habra, 24th Parganas (North), West Bengal under sections 120B read with sections 420, 468 and 471 of the erstwhile Indian Penal Code, 1860 (IPC) in the office of Supdt. of Police, CBI/BS&FC/ Kolkata on 19.07.2013 on the basis of the written complaint dated 19.07.2013 filed by the Branch Manager, Allahabad Bank, SME Finance INDV Branch, Kolkata (now Indian Bank, Corporate Finance Branch, 7, Red Cross Place, Kolkata).

3. After conducting investigations, the CBI filed a chargesheet (Chargesheet No. 06/2014 on 30.08.2014) before the Ld. Metropolitan Magistrate, CBI Cases, Bichar Bhawan, Bankshall Court Complex, Kolkata against Sh. Purnendu Kumar Das, Sh. Prasenjit Das and seven others under section 120B read with sections 420, 468, 471 r/w 468 of IPC.

CBI investigation revealed that Allahabad Bank, SME Finance Branch, had suffered wrongful loss due to the fraudulent acts of accused Purnendu Kumar Das, proprietor of M/s K.P.S. Enterprise. As on 22.08.2011, the debit balance of packing credit account, current accounts, FBN account were to the tune of Rs. 836.96 lakh, 38.77 lakh and Rs. 2619.12 lakh, respectively. The total wrongful loss to the Bank was worked out to Rs.2672.43 lakh.

4. CBI investigation further revealed that the said Shri Purnendu Kumar Das, entered into a criminal conspiracy with his son, Shri Prasenjit Das, proprietor of M/s P.K. Enterprises, and with dishonest and fraudulent intention, diverted the proceeds of the loan amounts through the account of M/s P.K. Enterprises.

5. As sections 120B, 420 & 471 of Indian Penal Code, 1860 are the ‘scheduled offences’ under PMLA, 2002, an ECIR bearing No. ECIR/KLZO/08/2018 dated 11.12.2018 was registered by the Directorate of Enforcement (ED) against Sh. Purnendu Das and others with a view to investigate the offence of money-laundering as specified under section 3 of PMLA, 2002 and to identify, locate and attach the properties/assets, which constitute ‘proceeds of crime’ as defined under section 2(1)(u) of the said Act which were acquired by the accused persons as a result of the criminal activities relating to commission of aforesaid scheduled offences.

6. During the course of investigations conducted by the ED under the PMLA, statements of various persons were recorded and various documents from the CBI, Banks, Sub-Registrars etc., were called for and examined.

7. It was found that the proceeds derived from the criminal activity had been diverted and siphoned off dissipated/consumed or expended by Shri Purnendu Das and Shri Prasenjit Das for their personal gains and the same were not available for attachment. Therefore, the properties which could be identified and traced were attached vide Provisional Attachment Order (PAO) No. 10/2024 dated 03.07.2024.

8. Consequent to the passing of the PAO, an Original Complaint (O.C.) No. 2371 of 2024 dated 26.07.2024, was filed before the Ld. Adjudicating Authority as per the provisions of section 5(5) of PMLA. The Ld. AA initiated adjudication proceedings thereon and, vide its order dated 10.12.2024, confirmed the attachment of the properties. Aggrieved by the said order of the Ld. AA, the appellant has filed the present appeal before this Appellate Tribunal under Section 26 of the Act challenging the said order on the grounds discussed in greater detail below.

Contentions of Parties

9. At the outset, it is contended on behalf of the Appellant that the impugned order is ex facie illegal, and contrary to Sections 2(1)(u), 3, 5 and 8 of the PMLA in view of the admitted finding that, the attached properties are not directly derived from criminal activity, and the same are attached merely because the alleged “proceeds of crime” are not traceable. It is contended that such attachment is without jurisdiction and contrary to settled law. It is submitted that in the present case, the properties which have been attached were, admittedly, purchased prior to the alleged scheduled offence; acquired from independent and legitimate sources; and have not been shown to be derived or obtained from criminal activity. Such properties cannot be attached merely because the ED could not trace the alleged proceeds of crime.

10. It is further contended that the definition of “proceeds of crime” section 2(1)(u) requires linkage/nexus to criminal activity as the definition itself provides that “proceeds of crime” means any property derived or obtained, directly or indirectly as a result of criminal activity relating to a scheduled offence. “Proceeds of crime”, as the name itself suggests, has to be derived from a criminal activity. The entire definition of “proceeds of crime” would be rendered nugatory if it is interpreted to mean that any property, even though unconnected with any criminal activity, can be attached. The definition of “proceeds of crime” uses the expression “derived or obtained” and “as a result of” which indicates that there has to be nexus with criminal activity relating to scheduled offence. In a case where the proceeds of crime are untraceable, the un-traceability of property does not empower the ED to forego the direct requirement of law. It is sought to be pointed out that section 2(1)(u) is followed by an explanation which further clarifies that “proceeds of crime” include not only property derived or obtained from the scheduled offense, 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. The explanation further expands the definition of “proceeds of crime” to include properties derived from any act relatable to the scheduled offence. The definition of Proceeds of Crime in Section 2(1)(u) of the PMLA Act, read with the explanation provided therewith, constitutes a boundary within which the ED has to identify the property derived from criminal activity.

11. It is contended that the said provision does not provide any blanket power to the ED to attach any property in the event it is unconnected with any criminal activity on the pretext of non-traceability of proceeds of crime. The provision does not provide for any threshold to be satisfied so far as the so-called un-traceability is concerned and only one aspect is provided in the definitive terms of proceeds of crime as far as un-traceability is concerned, i.e., the power regarding properties held abroad. Only in situations of properties held abroad the equivalent value of such a property can be attached in India., Barring this exception, the ED is not accorded with any power regarding attachment of properties unconnected with criminal activity.

12. It is next contended that section 5(1) provides for attachment of proceeds of crime when the officer empowered under the said provision has reason to believe, based on the material in his possession, that any person is in possession of the proceeds of crime and such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime. The requirement of having reasons to believe also shows that the authority has to apply its mind and connect the dots between the criminal activity mentioned in the schedule and the property concerned.

13. It is further pointed out that similarly, section 8(1) of the PMLA, provides that the adjudicating authority, upon receipt of a complaint under subsection of section 5, has to first come to a conclusion that he has reasons to believe that an offence under section 3 is committed or the person concerned is in possession of proceeds of crime. Thereafter, the adjudicating authority has to serve a notice calling upon such person to indicate the sources of his income, earning or assets out of which or by means of which he has acquired the property attached under subsection 1 of section 5. This requirement shows that upon showing the legitimate sources of income by which the property has been derived, a person can request for detachment of the properties. It is submitted that the entire functioning of PMLA would be jeopardized if proceeds of crime is given an expansive definition.

14. It is next submitted that Section 8(2) and 8(3) require the AA to decide whether the property is involved in money laundering as defined in Section 3. Consequently, the AA has to determine the nexus of the property with the criminal activity by evaluation of the evidence or materials and independently apply the mind. It is submitted that if proceeds meant any property of the accused, then this adjudicatory exercise would be meaningless.

15. Next, it is contended that under Section 3, a person is guilty of money laundering when he knowingly indulges in proceeds of crime, including its concealment, possession, acquisition or use, and projecting or claiming it as untainted property. The ingredients of the section are to be satisfied for it to be held as money laundering. If the said provision is interpreted to mean that any person who directly or indirectly indulges in a property which is unconnected with criminal activity, then the entire edifice of the PMLA would be demolished. The basis of criminalizing the offence of money laundering is to stop persons from indulging and benefiting from proceeds emanating out of criminal activity. The Act does not bar indulging in proceeds emanating out of legitimate activity which is not criminal in nature and not provided in the schedule appended to the PMLA Act.

16. It is submitted that in the instant case, it is an admitted position, as that ED could not find any proceeds of crime and, therefore, it has gone for attachment of property involving value of the proceeds of crime merely because the said properties were ‘available’. Attention of the Bench is invited in this regard to page 35 of the impugned order wherein it is stated:

“B. It is evident from the perusal of records including the reasons recorded u/s 8(1) by the undersigned that in this case the alleged criminal activity falling under scheduled offence as enumerated under the PMLA, 2022, resulted in generation of proceeds of crime. Out of this generation of proceeds of crime the ED could not lay hands on the entire direct deployment of proceeds of crime and hence it has gone for attachment of property involving value thereof.”

17. In support of the arguments, the appellant has sought to rely on the following judgments:

i. Pavana Dibbur v. Directorate of Enforcement, 2023 SCC OnLine SC 1586

ii. Vijay Madanlal Choudhary v. Union of India, (2023) 12 SCC 1

iii. Seema Garg v. Deputy Director, 2020 SCC OnLine P&H 738

iv. Davy Varghese v. Enforcement Directorate, 2024 SCC OnLine Ker 7343

v. Kumar Pappu Singh v. Union of India, (2021) 1 HCC (AP) 556

vi. HDFC Bank Ltd. v. Union of India, 2021 SCC OnLine Pat 4222

18. It is emphasized that the properties involved in the present case do not have any nexus with the any alleged criminal activity. The same are either ancestral or independently acquired, and pre-date the alleged criminal activity. Moreover, the ED itself concedes that the said property is not derived from proceeds of crime and has been attached solely because ED could not trace alleged proceeds of crime. Accordingly. the statutory requirement of nexus under Sections 2(1)(u), 3, 5 and 8 PMLA is not satisfied. In this regard it is pointed out as follows:

“(a) Property at Sl. No.1 was purchased on 04.02.1987 by Late Shri Purnendu Kumar Das and gifted to Appellant in 2012 by gift deed. The properties were acquired much prior to the alleged crime of 2010-11. There is no trail or material suggesting any nexus. [Ref: Deeds at Page 1, 7 and 13 of English Translation of Deed filed on 05.12.2025]

(b) Property at S1.2 was purchased by late Shri Purnendu Kumar Das on 17th May 1994 and subsequently gifted to the appellant. The said property was purchased prior to the commencement of business by Messrs KPS Enterprise, and there is no evidence of any financial linkage to the alleged proceeds. The said property is an independent ancestral acquisition. [Ref: Deeds at Page 19 of English Translation of Deed filed on 05.12.2025]

(c) Property at serial no. 3 was purchased on 9th January 2008 by the husband of the appellant and gifted to the appellant in 2012. The said property was purchased prior to the alleged crime. There is no material showing that any proceeds of crime were utilized in purchasing the said property.

(d) The property at Sl. no. 5 is a residential property purchased on 11th June 2013 by way of e-auction and was gifted to the appellant on 12th December 2013. The said purchase is by way of public e-auction and was acquired after declaration of the account as NPA. This transaction is also an independent transaction, and it is not shown that any proceeds of crime were utilised in the purchase of the said property.”

19. In light of the above, it is contended that the properties have no nexus with the alleged crime and there is, admittedly, nothing on record to demonstrate that the said properties were part of money laundering. The impugned order does not indicate any reason to believe as to whether the instant properties are proceeds of crime or there is commission of crime under Section 3 of the PMLA. The attachment of properties acquired prior to the commission of crime is violative of principle of non-retroactivity of penal provisions.

20. Based on the above submissions, it is prayed that the impugned order of the Ld. AA may be set-aside and the appeal be allowed.

21. The Respondent (ED) has made detailed submissions contesting the arguments raised on behalf of the appellant. In the interest of brevity and to avoid repetition, the same would be referred to at the appropriate places while considering the merits of arguments raised from the side of the appellant.

Consideration

22. I have given careful consideration to the material on record and the rival contentions of the parties. I find that the underlying argument put forward on behalf of the appellant in this case is a single one, namely, that the properties which have been attached were not properties derived or obtained out of the alleged scheduled offence and properties untainted by criminality cannot be attached under the Act merely because properties derived or obtained from criminal activity relating to the scheduled offence are untraceable/not available. In furtherance of this broader underlying contention, the following arguments have been advanced:

• That the definition of ‘proceeds of crime’ under section 2(1)(u) of the Act does not include property with no link or nexus with criminal activity;
• That ‘equivalent property’ can be attached only in a case where the tainted property is held abroad and not otherwise;
• That the properties attached in this case were indisputably acquired prior to the period of the alleged scheduled offence;
• That the offence of money laundering under section 3 of the Act necessitates that a person knowingly deals with proceeds of crime, by way of concealment, possession, acquisition or use, and projects or claims it as untainted property. The requirement would not be satisfied if the person deals with property which is unconnected with criminal activity;
• That for above reasons, the authority acting under Section 5(1) and the AA acting under section 8(1) could not have the ‘reason to believe’ necessary for them to act under the respective provisions;
• That the properties were acquired out of independent and legal sources and it has not been established by ED that the properties were acquired form criminal activity.

23. As noted, the appellant has sought to rely on a number of case laws in support of the above contentions.

24. Having given careful consideration to the above arguments, I find myself unable to agree with any of them. Rather I find them to be in direct conflict with the settled legal position on the subject. On the other hand, the respondent, in their detailed para-wise written reply to the appeal have highlighted the correct legal position. They have, firstly referred to the plain language of the statute, namely, the definition of ‘proceeds of crime’ under section 2(1)(u) which reads as below:

(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; [Emphasis supplied]

25. From a bare perusal of the said definition it is amply evident that the “value” of property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence is a part and parcel of the definition of ‘proceeds of crime’. It may further be pointed out that the term “value” has also been defined by the Act under section 2(1)(zb) as follows:

“(zb) “value” means the fair market value of any property on the date of its acquisition by any person, or if such date cannot be determined, the date on which such property is possessed by such person.”

26. From the above definition of “value” too, it is clearly evident that the definition of ‘proceeds of crime’ under section 2(1)(u) covers not only the property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence, but also fair market value of any property, which could only mean alternate property of equivalent value. Therefore, the fair market value equivalent to the property directly or indirectly derived from the scheduled offence is also open to attachment as ‘proceeds of crime’.

27. Further, the respondents have rightly placed reliance on the judgment of the Hon’ble Punjab & Haryana High Court in Dilbag Singh @ Dilbag Sandhu v. Union of India & Others CWP-22688-2024 (Order dated 13.11.2024) vide which, the earlier judgment delivered by the same Hon’ble High Court in the case of Seema Garg on which the appellants have placed reliance, has been overturned, and it has held as follows:

“3.2 In light of the Division Bench’s judgment in Seema Garg’s case (supra), this Bench would have been obligated to either follow it or refer the matter to a Larger Bench. However, the Supreme Court in Vijay Madanlal Chaudhary’s case (supra) has interpreted the provision in para 298, which is extracted as under. –

“It was also urged before us that the attachment of property must be equivalent in value of the proceeds of crime only if the proceeds of crime are situated outside India. This argument, in our opinion, is tenuous. For, the definition of “proceeds of crime is wide enough to not only refer to the property derived or obtained as a result of criminal activity relating to a scheduled offence, but also of the value of any such property. If the property is taken or held outside the country, even in such a case, the property equivalent in value held within the country or abroad can be proceeded with. The definition of “property” as in Section 2(1)(v) is equally wide enough to encompass the value of the property of proceeds of crime. Such terpretation 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.”

3.3 The aforesaid observations made by the Supreme Court enable this Bench to re-examine the entire issue, as in the considered opinion of this Bench, the judgment passed in Seema Garg’s case (supra) is no longer a good law. This Court has taken this view due to the subsequent interpretation by the Supreme Court, which has superseded the legal principles established in Seema Garg’s case (supra).”

28. The respondent Directorate has further pointed out that in the same judgment, the Hon’ble Punjab & Haryana High Court has further observed:

“3.5 In Axis Bank’s case (Supra), the Delhi High Court has dissected the definition in three parts while covering tainted property and untainted property held in India; and the ‘proceeds of crime’ taken out of the country or any other property of equivalent value thereof. However, this Court is of the considered view that the definition can be divided into two broader categories namely tainted properties and untainted properties. The first part provides about the tainted properties derived or obtained directly or indirectly by any person as a result of criminal activity relating to a scheduled offence. Thereafter, the untainted properties are further divided into two parts; the first part deals with a situation where the property derived or obtained from ‘proceeds of crime’ is not traceable. In the aforesaid situation the competent authority is authorized to attach or confiscate any other property of accused, which is of the same value as that of the ‘proceeds of crime’. The second sub-category is a result of amendment brought in 2015 and 2019 in the Act. It provides that if the property derived or obtained from the proceeds of crime has already been taken out of the Country then the property equivalent in value held within the Country or abroad can be made liable to be attached. This position has been explained by the Delhi High Court in an elaborate manner in Axis Bank’s case (supra) and Prakash Industries case (supra).

3.6 It is not disputed that the Supreme Court in Vijay Madanlal Chaudhary’s case (supra) was examining the scope of the ‘2002 Act’ including definition of phrase ‘proceeds of crime’. The submission put forth by the learned counsei that the phrase ‘or the value of any such property is superfluous was rejected by the Court and it was held that the definition of ‘proceeds of crime’ is wide enough to not only include to the property derived or obtained as a result of criminal activity related to a schedule offence but also any other property of equivalent value.” [Emphasis added]

29. At the risk of repetition, the relevant para from the landmark judgment of the Hon’ble Supreme Court in the case of Vijay Madanlal and Ors vs Union of India and Ors, SLP (Crl.) 4634 of 2014, may also be reiterated, wherein, the Apex Court has observed as follows:

“68. It was also urged before us that the attachment of property must be equivalent in value of the proceeds of crime only if the proceeds of crime are situated outside India. This argument, in our opinion, is tenuous. For, the definition of “proceeds of crime is wide enough to not only refer to the property derived or obtained as a result of criminal activity relating to a scheduled offence, but also of the value of any such property. If the property is taken or held outside the country, even in such a case, the property equivalent in value held within the country or abroad can be proceeded with. The definition of “property” as in Section 2(1)(v) is equally wide enough to encompass the value of the property of proceeds of crime. Such interpretation would further the legislative intent in recovery of the proceeds of crime and vesting it in the Central Government for effective prevention of money-laundering.”

30. In light of the above unambiguous position emerging from the authoritative judgments of higher judicial authorities, there is no merit in the arguments advanced on behalf of the appellant in support of the contention that the definition of ‘proceeds of crime’ under section 2(1)(u) of the Act does not include untainted property, i.e., property with no link or nexus with criminal activity, or that ‘equivalent property’ can be attached only in a case where the tainted property is held abroad and not otherwise.

31. The argument that the attached properties in the present case were acquired prior to the period of the scheduled offence and therefore the same could not have been attached, also does not hold any merit for the same reasons as have been discussed above. When the property has been attached invoking the “value of such property” part of the definition of ‘proceeds of crime’, the time of its acquisition would be of no consequence. However, since an argument in this regard has been advanced placing reliance on the judgment of the Hon’ble Supreme Court in the case of Pavana Dibbur (supra) and other cases, it may be pointed out that this Appellate Tribunal, in its judgment dated 14.10.2024 in the case of Sadananda Nayak (FPA-PMLA-5612/BBS/2023) has analysed threadbare the entire issue, considered the impact of Pavana Dibbur among other cases, and held as follows:

“12. The reference of the judgment of the Apex Court in the case of Pavana Dibur (supra) and also of Kerala High Court in the case of Satish Motilal Bidri (supra) has been given. To analyze the issue, we may quote the definition of `proceeds of crime’ given under Section 2(1) (u) of the Act of 2002, which is quoted thus:

“(u) “proceeds of crime” means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property [or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad;

Explanation. For the removal of doubts, it is hereby clarified that “proceeds of crime” include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence;”

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 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 Dibbur (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.

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 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 (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 “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 Dibbur (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.

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:

“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.

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 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.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.”

21. The issue aforesaid was not raised in the case of Pavana Dibbur (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 Dibbur (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 three judges bench while the judgment in the case of Pavana Dibbur (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:

“It is not that only those properties which have been were derived or obtained directly or indirectly out of the crime can be attached rather in case of non-availability of the property derived or obtained directly or indirectly rather when it is vanished or siphoned off, the attachment can be of any property of equivalent value.

It is necessary to clarify that the proceeds of crime would not only include the property derived or obtained directly or indirectly out of the criminal activity relating to the scheduled offence but any other property of equivalent value. The word “or” has been placed before “the value of any such property” and is of great significance. Any property of equivalent value can be attached when the proceeds directly or indirectly obtained out of the crime has been vanished or siphoned off. Here, the significance would be to the property acquired even prior to commission of crime. It is for the reason that any property acquired subsequent to the commission of crime would be directly or indirectly proceeds of crime and then, it would fall in the first limb of the definition of proceeds of crime. In the second limb, which refers to “the value of any such property” would indicate any other property which was acquired prior to the commission of crime and it would be attached only when the proceeds directly or 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 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.”

32. In light of the ratio of the above judgment of the Appellate Tribunal in the case of Sadananda Nayak, the argument that the subject properties could not have been attached as they were acquired prior to the alleged period of crime also holds no merit and is hereby rejected.

There is also no substance in the argument with regard to absence of ‘reason to believe’ under section 5(1) and 8(1). The facts of case highlighted above in my view provided sufficient reason to believe both to the authority acting under section 5(1) and he Ld. AA acting under section 8(1), to pass the orders which have been passed by them under the respective provisions. Ld. Deputy Director who passed the PAO has specified detailed reason to believe as follows:

“REASON TO BELIEVE

11. That having perused and taken into consideration the record placed beforse me, including statements of various persons recorded under Section 50 of PMLA, 2002, along with other evidences on record collected during course of investigation in the instant PMLA ECIR No. ECIR/KLZO/08/2018 datech 11.12.2018, the following facts have been revealed:

12. That, Shri Purnendu Das, the proprietor of M/s K.PS Enterprise with the connivance of his family members and others, by committing offence under Sections 1208 r/w 420 & 471 of Indian P’enal Code (IPC), 1860, has launderect the proceeds of crime acquired out of commissions of scheduled offences under PMLA, 2002. Shri Purnendu Kumar Das, Proprietor of M/s KPS Enterprise entered into a criminal conspiracy with his son Shri Prasenjit Das, proprietor of M/s P.K. Enterprises and with dishonest and fraudulent intention diverted the proceeds of the loan amount through the account of M/s P.K. Enterprises of his son Shri Prasenjit Das.

13. That, all the properties identified during the course of investigation have been transferred in the name of Smt. Reshma Biswas Das and Shri Subhas Chandra Das only in order to secure the same from the any precipitate action from any government agency in order to recover the outstanding loan funds of M/s K.P.S Enterprise and the same is evident from their statements recorded under sectin 50 of the PMLA, 2002. All the below mentioned properties are currently under use and control of his whole family ie. Smt. Reshma Biswas Das, Shri Prasenjit Das and Shri Purnendu Das and the same have admitted in their statement dated 28.09.2021 and 05.11.2021 respectively.

14. That, the following immovable properties as tabulated below in SCHEDULE-A of the IMMOVABLE PROPERTIES are nothing but the proceeds of crime in terms of section 2(1)(u) of Prevention of Money Laundering Act, 2002 and are liable for attachment in terms of section 5(1) of the PML Act, 2002as they are proceeds of crime as defined under Section 2(1)(u) of PMLA, which is Inclusive of value thereof.

33. The Ld. AA also has discussed detailed reasons to believe under section 8(1) on pages 2 to 8 of the impugned order and also sent a copy of the reasons recorded to the defendants along with the notice. As such, there is no merit in the submission challenging the reasons to believe either under Section 5(1) or under Section 8 (1).

34. A submission has also been made on behalf of the appellant that it has not been shown by the ED that the properties were acquired form criminal activity. In this regard, it is firstly to be noted that under the PMLA the burden of proof was upon the appellant and not upon the Directorate. It is too well-known to need any further emphasis that under the provisions of Section 8(1), 23 & 24, there is a reverse burden upon the person in receipt of notice under the Act to establish that he or she is not in receipt of proceeds of crime as defined under the Act.

35. There is also no merit in the contention that property cannot be attached unless the holder of the property knowingly deals with the proceeds of crime. The Hon’ble Supreme Court in the case of Vijay Madanlal Choudhary (supra) has held that the objective of enacting the Act was the attachment and confiscation of proceeds of crime which is the quintessence, so as to combat the evil of money-laundering, by reaching the proceeds of crime in whosoever’s name they are kept or by whosoever they are held. In the present case, the respondents in their reply have brought out the following facts with regard to the attached properties:

• Shri Purnendu Das gifted properties vide gift deed no. 1-2078/2012 dated 27.03.2012, vide deed no. 1-IND/5079/2012(Gift deed) dated 03.04.2012 to his daughter in law Smt. Reshma Biswas Das (the appellant herein). He deliberately dissociated the properties from himself by transferring the same to his daughter-in-law (the appellant in the present appeal) in order to pre-empt any precipitate action by the bank or any other agency;
• Shri Prasenjit Das, S/o Shri Purnendu Das, gifted two landed properties, one having measurement 1.65 DEC with three-storied building (800-3-2400 square feet) as mentioned in Schedule-II, and plot marked as “A” in gift deed no. 1-1265/2012, and another one having measurement 4.54 DEC as mentioned in Schedule-1 and plot marked as “C” in gift deed no. 1-1265/2012 to his wife Smt. Reshma Biswas Das (the appellant herein);
• Smt. Reshma Biswas Das further sold one part admeasuring 4.54 DEC as mentioned in Schedule-I and plot marked as “C” in gift deed no. 1-1265/2012 in 2012. Another part admeasuring 1.65 DEC with three storied building (800*3-2400 square Feet) as mentioned in Schedule-II and Plot Marked as “A” in gift deed no. 1-1265/2012 remains in the name of the appellant herein in which her grocery shop namely Maa Manasha Bhander is operating. The said properties were gifted by him to his wife deliberately in order to distance them from himself to pre-empt any action of any government agency or the bank;
• That the property mentioned at serial no. 05 of the schedule “A” of the property in PAO 10/2024 is held in the name of Smt. Reshma Biswas Das was actually purchased by her father Sh. Narayan Biswas for the entire sale considerations of Rs. 58 lakhs from Allahabad Bank. Subsequently, this property was gifted to her to the appellant by her father Narayan Biswas vide gift deed 1-07097/2013 and the same was registered on 12.12.2013. That, Narayan Biswas in his statement dated 22.02.2024 recorded u/s 50 of the PMLA, 2002 categorically admitted that his daughter and her family were going through some legal problem and when Allahabad Bank decided to auction the mortgaged property of his daughter’s family in the name of M/s K.P.S Enterprise, he purchased this property for Rs. 58 lakhs on the request of his daughter (the appellant herein) for which his daughter and her family had arranged Rs. 38 lakhs. He subsequently gifted that property to his daughter Reshma (Biswas) Das on 12.12.2013 vide gift deed 1-07097/2013 as per daughter and her family’s request.

36. In light of the factual position stated above, no merit is found in this appeal either on facts or on the legal grounds on which the appeal has been filed and argued before this Appellate Tribunal. Consequently, this appeal is hereby dismissed.

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

38. No order as to costs.