Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2025 Supreme(Online)(ATFP) 13030

APPELLATE TRIBUNAL FOR FORFEITED PROPERTY
V. Anandarajan, Member
Renu Constructions Pvt. Ltd. Shivali Constructions Pvt. Ltd. B.A. Properties Pvt. Ltd. – Appellant
Versus
The Deputy Director Directorate of Enforcement Lucknow – Respondent
FPA-PMLA-1284/LKW/2016

Advocates:
For the Appellants/Petitioners: Arvind Mohan, Sajal Sinha
For the Respondents: Ritesh Agarwal, A.B. Sharma

Under PMLA, proceeds of crime includes property of equivalent value (second limb) even if acquired prior to scheduled offence, allowing attachment when tainted proceeds are unavailable. Attachment continues if prosecution complaint filed before amendment.

Headnote:(A) Prevention of Money Laundering Act, 2002 - Sections 2(1)(u), 3, 5, 8, 24, 26 - Definition of proceeds of crime - Three limbs: property derived directly or indirectly from criminal activity, value of such property, and property equivalent in value held within or outside country - Second limb allows attachment of property of equivalent value even if acquired prior to commission of scheduled offence, when tainted proceeds are not available. (Paras 46-49)

(B) Prevention of Money Laundering Act, 2002 - Section 5(1) - Attachment of property - Property can be attached against any person involved in money laundering, not necessarily an accused in the scheduled offence - It is sufficient if a complaint under Section 44 is pending. (Paras 50-52)

(C) Prevention of Money Laundering Act, 2002 - Section 8(3)(a) - Continuation of attachment - If a prosecution complaint is filed before the amendment introducing a time limit (19.04.2018), attachment continues during pendency of proceedings - No requirement that the person affected be shown as accused. (Paras 53-56)

(D) Limited Liability Partnership Act, 2008 - Section 56, Third Schedule - Conversion of a private company into an LLP does not affect pending proceedings - The LLP succeeds the company for continuation of appeals. (Paras 36-40)

Facts of the case:
Three appellant companies owned immovable properties since 2002. The Enforcement Directorate alleged that proceeds of crime (approximately Rs.5.87 crores) from a scheduled offence relating to misappropriation of funds under a national health scheme were used to acquire shares of these companies via a shell company. The shares were purchased in 2010, contemporaneous with the alleged crime period. A provisional attachment order was passed in 2015, confirmed by the Adjudicating Authority in 2016. The appellants challenged the attachment on grounds that the shares were purchased prior to the crime period, the properties were acquired in 2002, and that the companies were not accused in the prosecution complaint.

Findings of Court:
The shell company's funds were found to be tainted, sourced from other shell entities without genuine business. The properties were attached as “proceeds of crime/value thereof” under the second limb of the definition. Even if the properties were acquired before the scheduled offence, they could be attached as equivalent value when the direct proceeds are unavailable. The attachment does not require the company to be an accused. The prosecution complaint was filed before the amendment, so the attachment continues. No final acquittal of accused in the scheduled offence existed.

Issues: The main issues were whether properties acquired prior to the scheduled offence can be attached under PMLA; whether a shell company's acquisition of shares constitutes proceeds of crime; whether attachment against non-accused entities is permissible; and whether the attachment lapsed due to non-filing of prosecution complaint within the amended time limit.

Ratio Decidendi: The definition of “proceeds of crime” has three limbs; the second limb (value of any such property) allows attachment of property of equivalent value even if acquired before the scheduled offence, to prevent siphoning of tainted proceeds. Attachment can be against any person involved, not only accused. The time limit for filing prosecution complaint applies only after the amendment, and if a complaint is already filed, attachment continues. Result : Appeals dismissed. Pending applications disposed of. No order as to costs.

FINAL ORDER

22.12.2025

These three appeals have been preferred under section 26 of the Prevention of Money Laundering Act, 2002 against the order passed by the Adjudicating Authority in Original Complaint No.525/2015 dated 24.02.2016, whereby Provisional Attachment Order No. 03/2015 dated 23.09.2015 passed in ECIRs No. 02/PMLA/LZO/2012, 03/PMLA/ LZO/2012 and 08/PMLA/LZO/2012 (all dated 14.04.2012) was confirmed by the said Authority.

Facts in Brief

2. The factual context of these cases is the same as in the cases of Sh. Sourabh Jain and Smt. Rajni Jain (FPA-PMLA-1283/LKW/2016 and FPA- PMLA-1282/LKW/2016, respectively) which were disposed of by this Appellate Tribunal vide a common order dated 21.11.2024. The relevant facts, briefly, are that three FIRs, namely, FIR No. RC-02(A)/2012-CBI/SC- II/NDLS dated 02.01.2012, FIR No. RC-03(A)/2012/CBI/SC-II/NDLS dated 02.01.2012, and FIR No. RC2202012E0003 dated 18.01.2012, were registered by CBI, New Delhi in compliance with order dated 15.11.2011 passed by the Hon’ble Allahabad High Court (Lucknow Bench) in Writ Petition No. 3611(MB) of 2011(PIL) and connected Writ Petition No. 2647(MB) of 2011(PIL). The allegations in the said FIRs were in relation to alleged misuse of funds allocated under National Rural Health Mission (NRHM) Scheme in the State of Uttar Pradesh (U.P.) during the period 2010-11. It was alleged that the accused persons had entered into a conspiracy to defraud government funds allocated under NRHM Scheme so as to derive illegal gains.

3. Since the alleged offences mentioned in the FIRs, namely, Section120-B read with Sections 420, 465, 468, 471 of the IPC, and section 13(2) read with 13(1)(d) of the Prevention of Corruption Act, 1988 (P.C. Act, 1988) constituted “scheduled offences” under the Prevention of Money Laundering Act, 2002 (PMLA), and “proceeds of crime” as defined under the said Act appeared to have been utilised by the accused persons for acquisition of various movable/immovable properties and projected as untainted, investigations under the provisions of PMLA, 2002 were initiated by the Directorate of Enforcement (ED) vide ECIR No. 02/PMLA/LZO/2012, ECIR/03/PMLA/LZO/2012 and ECIR/08/PMLA/LZO/ 2012, all dated 14.04.2012.

4. Investigations carried out, inter alia, revealed gross irregularities in award of contracts for the supply of IUD Kits, MVA Syringe, surgical bathroom scales, salt testing kits, infection prevention consumables for IUD services, NSV kits and Glutaraldehyde solutions (2%) etc. Contracts were illegally rigged to favour of various business entities belonging to Sh. Saurabh Jain and his close relatives, including his wife Smt. Rajni Jain and his cousin Sh. Vivek Jain. Sub-standard and mis-branded materials were supplied by the said entities at exorbitant rates, thereby, causing undue gain to them and corresponding loss to the Govt. It also emerged that Sh. Saurabh Jain was a close confidant of Sh. Babu Singh Kushwaha, a Minister in the then Government of U.P., and was acting on his behest for generation and parking of proceeds of crime in connivance with Dr. S.P. Ram, the then DG, Family Welfare, Govt. of UP, and Sh. Sanjiv Kumar, the then Area Manager, UP Small-Scale Industries Corporation, Kanpur.

5. So far as the three appellant companies herein are concerned, namely, M/s Shivali Constructions Pvt. Ltd., M/s Renu Constructions Pvt. Ltd., and M/s BA Properties Pvt. Ltd., the allegation is that substantial proceeds of crime were invested to acquire shareholding and management control of three companies in the names of Sh. Saurabh Jain and Smt. Rajni Jain. It is alleged that proceeds of crime to the tune of Rs. 74 lakh was withdrawn and received in cash by Sh. Saurabh Jain out of the bank account of M/s Kapil Medical Agencies (proprietorship concern of Sh. Vivek Jain, cousin of Sh. Saurabh Jain). Further, proceeds of crime to the tune of Rs. 513.75 lakh parked in the bank account of M/s Siddhi Traders (proprietorship concern of Smt. Rajni Jain w/o

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2025 Supreme(Online)(ATFP) 13030

APPELLATE TRIBUNAL FOR FORFEITED PROPERTYV. Anandarajan, MemberRenu Constructions Pvt. Ltd. Shivali Constructions Pvt. Ltd. B.A. Properties Pvt. Ltd. – AppellantVersusThe Deputy Director Directorate of Enforcement Lucknow – RespondentFPA-PMLA-1284/LKW/2016

Under PMLA, proceeds of crime includes property of equivalent value (second limb) even if acquired prior to scheduled offence, allowing attachment when tainted proceeds are unavailable. Attachment continues if prosecution complaint filed before amendment.

APPELLATE TRIBUNAL FOR FORFEITED PROPERTY
V. Anandarajan, Member
Renu Constructions Pvt. Ltd. Shivali Constructions Pvt. Ltd. B.A. Properties Pvt. Ltd. – Appellant
Versus
The Deputy Director Directorate of Enforcement Lucknow – Respondent
FPA-PMLA-1284/LKW/2016