Appellate Tribunal rules investment in Bharathi Cements not proceeds of crime, while profits from mining remain contentious.
In a significant development, the Appellate Tribunal in New Delhi has delivered a pivotal judgment on March 9, 2026, in the case involving M/s Dalmia Cement (Bharat) Limited and the Directorate of Enforcement, Hyderabad. The Tribunal, under the chairmanship of Shri V. Anandarajan, ruled that the investment made by Dalmia Cement in the shares of M/s Bharathi Cements Pvt. Ltd. does not constitute proceeds of crime under the Prevention of Money Laundering Act (PMLA). However, the Tribunal upheld the classification of profits from limestone extraction as proceeds of crime.
The case revolved around allegations that Dalmia Cement's investment in Bharathi Cements was a quid pro quo arrangement, a bribe to secure mining leases. The Tribunal found that the investment was legitimate, citing that the shares were later sold to a third-party company at a higher price, demonstrating the genuineness of the transaction. The Tribunal emphasized that the investment was not "derived or obtained" in a manner that would classify it as proceeds of crime under Section 2(1)(u) of the PMLA.
Conversely, the Tribunal upheld the Directorate's assertion that profits from the illegal acquisition and extraction activities in the Kadapa Mines, valued initially at Rs. 709.34 crore, constituted proceeds of crime. The Enforcement Directorate had revised the computation of these proceeds to Rs. 92.52 crore after deducting extraction costs.
The Tribunal also addressed procedural aspects under Section 5 of the PMLA, holding that a "reason to believe" for attachment does not require conclusive proof, referencing judgments from the Bombay and Delhi High Courts. Furthermore, the Tribunal acknowledged the absence of specific provisions in the PMLA for the substitution of attached properties but suggested a pragmatic approach for substitution against alternate security, contingent upon statutory limits.
The judgment has stirred significant attention, highlighting the complexities involved in distinguishing genuine investments from proceeds of crime in financial transactions.
Bottom Line:
Prevention of Money Laundering Act (PMLA) - Attachment of properties under Section 5 - Tribunal holds that investment made by appellant company in shares of M/s Bharathi Cements Pvt. Ltd. does not constitute proceeds of crime as per Section 2(1)(u) of PMLA.
Statutory provision(s): Prevention of Money Laundering Act, 2002 Sections 2(1)(u), 5, and 8.
