Issues: Whether the challenge to the attachment order could be conclusively decided at the appellate stage when the predicate offences and the money-laundering complaint were still pending trial, and whether the quantification of proceeds of crime based on alleged excess production should be adjudicated in the appeal.

Analysis: The appeal arose from confirmation of provisional attachment made in a matter linked to alleged environmental violations and the corresponding money-laundering complaint. The disputed questions concerned the period of alleged offence, the basis on which proceeds of crime had been computed, and whether such computation should rest on excess production or on environmental loss and restoration cost. The Tribunal noted that the predicate complaints were still to be tried, that the related PMLA prosecution was pending before the Special Judge, and that the issues raised by the appellants involved contentious factual and legal questions better examined in the trial proceedings. The Tribunal also noticed that the attached property was stated to be mortgaged with the bank and that the property could, if so chosen, be substituted by continuation of fixed deposit receipts in terms of the earlier order.

Conclusion: The Tribunal declined to finally adjudicate the disputed issues in the appeal, left the parties free to raise all material contentions before the Special Judge, and maintained the attachment subject to the appellant's option to seek substitution, with the bank's rights kept unaffected.

Issues: (i) Whether the appellants had subsisting cultivation rights and locus standi to challenge the attachment and confirmation of the attached properties. (ii) Whether the dispute regarding cultivation rights could be adjudicated by the Tribunal or fell within the exclusive domain of the revenue authorities under the governing tenancy legislation.

Issue (i): Whether the appellants had subsisting cultivation rights and locus standi to challenge the attachment and confirmation of the attached properties.

Analysis: The applicable tenancy provisions define a cultivating tenant as a person cultivating land under a tenancy arrangement and also include a sub-tenant in lawful possession. The material placed before the Tribunal showed that the appellants had themselves transferred cultivation rights through a chain of sub-lessees in favour of the persons from whom the properties were attached. The appellants were also not shown to be recorded owners in the revenue records. On that basis, their claim to a present enforceable right in the attached lands was not accepted.

Conclusion: The appellants did not have subsisting cultivation rights and therefore lacked locus standi to assail the impugned orders.

Issue (ii): Whether the dispute regarding cultivation rights could be adjudicated by the Tribunal or fell within the exclusive domain of the revenue authorities under the governing tenancy legislation.

Analysis: The tenancy statutes relied upon by the Tribunal contain a specific scheme defining cultivating tenant, cultivation, and eviction protection, and also impose a bar on civil court jurisdiction in matters which the revenue authority is empowered to determine. On that statutory framework, the Tribunal held that determination of cultivation rights and allied tenancy disputes is not within its province and that the appellants could not seek eviction or restoration of cultivation rights through these proceedings.

Conclusion: The dispute over cultivation rights was treated as one for the revenue authorities, and not as a matter for adjudication in the present appeals.

Final Conclusion: The appeals failed both on merits and on the threshold objection of locus standi, and the attachment-related orders were left undisturbed.

Ratio Decidendi: A person who has no subsisting recorded or legally enforceable tenancy interest, and whose claimed cultivation rights stand transferred through sub-lessees, cannot maintain a challenge to attachment orders in proceedings where tenancy title disputes are reserved to the revenue authorities.

The Appellate Tribunal considered the following core legal questions:

i) Whether FIRs registered before 01.07.2005, the date of enforcement of the Prevention of Money Laundering Act, 2002 (PMLA), can be considered for calculating the quantum of proceeds of crime under the PMLARs.

ii) Whether properties owned by appellants, who are not named as accused in any FIR or charge-sheet under Section 173 Cr.P.C., can be attached under the PMLARs.

iii) Whether the attached properties were legitimately acquired by the appellants from lawful sources and not from proceeds of crimeRs.

iv) Whether the police have the authority to take physical possession of vehicles attached by the Enforcement Directorate (ED) under the PMLARs.

v) Whether the possession of attached properties was taken in violation of Rule 4(1) of The Prevention of Money Laundering (Taking Possession of Attached or Frozen Properties Confirmed by The Adjudicating Authority) Rules, 2013Rs.

vi) Whether freezing of bank accounts can continue beyond 30 days without an application under Section 17(4) of the PMLARs.

vii) Whether freezing of accounts can be effected only under Section 17(1A) of the PMLA and not under Section 5(1)Rs.

viii) Whether there was any violation of Rules 8 and 9 of The Prevention of Money Laundering (Forms, Search and Seizure or Freezing and the Manner of forwarding the Reasons and Material to the Adjudicating Authority, Impounding and Custody of Records and the Period of Retention) Rules, 2005Rs.

ix) Whether an order confirming attachment under Section 8(3) of the PMLA can be passed without a prior order under Section 8(2)Rs.

2. ISSUE-WISE DETAILED ANALYSIS

Issue i: Consideration of FIRs registered before 01.07.2005 for calculating proceeds of crime

The appellants contended that since five out of six FIRs identified by the ED pertained to offences committed before the PMLA came into force on 01.07.2005, the provisions of the PMLA should not apply to them. They argued that offences committed prior to the Act's enforcement cannot be the basis for attachment under PMLA.

The Tribunal referred to authoritative precedents, including Dyani Antony Paul v. Union of India and Vem Krishna Keerthan v. Directorate of Enforcement, which clarified that the offence of money laundering is a continuing offence and is independent of the date of commission of the predicate scheduled offence. The relevant date for determining money laundering is when the proceeds of crime are projected as untainted property or are dealt with in a manner connected to proceeds of crime.

The Tribunal also relied on the Supreme Court judgment in Vijay Madanlal Chaudhary v. Union of India, which stated that the offence under Section 3 of PMLA concerns the process or activity connected with proceeds of crime, irrespective of when the predicate offence was committed. The offence of money laundering can be committed even after the scheduled offence if the accused continues to possess or deal with proceeds of crime.

Applying this legal framework, the Tribunal held that the date of commission of the scheduled offences is not determinative; rather, the relevant date is when the accused indulges in activities connected with the proceeds of crime. Therefore, FIRs registered before 01.07.2005 can be considered for calculating proceeds of crime if the money laundering activities occurred after the Act's enforcement.

This issue was decided against the appellants and in favor of the respondent ED.

Issue ii: Attachment of properties of persons not named as accused in FIR or charge-sheet

The appellants argued that since they were neither named as accused in any FIR nor in charge-sheets, their properties should not be attached under the PMLA.

The Tribunal referred to the Supreme Court's ruling in Vijay Madanlal Chaudhary, which clarified that Section 5(1) of the PMLA is not limited to accused persons named in predicate offences. The section applies to any person involved in any process or activity connected with proceeds of crime, regardless of whether they are named in the FIR or charge-sheet.

The Court emphasized the broad objective of the PMLA to attach and confiscate proceeds of crime, irrespective of the person holding the property. Hence, properties held by persons not named as accused can be attached if they are involved with proceeds of crime.

The Tribunal accordingly rejected the appellants' contention and upheld the attachment.

Issue iii: Whether attached properties were acquired from legitimate sources

The appellants claimed that the attached properties were purchased from legitimate sources such as agricultural income, transport business earnings, and loans from banks and friends. They contended that no incriminating evidence was produced against them.

The Tribunal noted the absence of any documentary evidence such as income tax returns, bank statements, or loan documents to substantiate the appellants' claim of legitimate acquisition. In the absence of such proof, the Tribunal was not inclined to accept the appellants' contentions.

The Court observed that the appellants remain free to lead their defence during the criminal trials but that the material on record justified the attachment.

This issue was decided against the appellants and in favor of the ED.

Issues iv and v: Authority of police to take physical possession and compliance with Rule 4(1) of 2013 Rules

The appellants contended that the police had no authority to take physical possession of the vehicles attached by the ED and that such possession was taken in violation of Rule 4(1) of The Prevention of Money Laundering (Taking Possession of Attached or Frozen Properties Confirmed by The Adjudicating Authority) Rules, 2013, which mandates that the authorized officer shall take physical possession and deposit the property in a warehouse or storage place.

The Tribunal examined Rule 4(1) and found no explicit prohibition against the ED directing local police to take physical possession of movable attached property. The appellants failed to demonstrate how the Rule was violated.

The Tribunal concluded that the police taking possession at the ED's instance was lawful and did not contravene the Rules.

These issues were decided against the appellants and in favor of the ED.

Issues vi and vii: Continuation of freezing of accounts beyond 30 days and applicable provisions for freezing

The appellants argued that freezing of accounts could only be done under Section 17(1A) of the PMLA and not under Section 5(1), and that freezing could not continue beyond 30 days without an application under Section 17(4).

The Tribunal analyzed Section 17(4), which requires that an application for retention or continuation of freezing be filed within 30 days. However, the Tribunal noted that Sections 20 and 21 of the PMLA permit retention of seized or frozen property and records for up to 180 days if the authorized officer has reason to believe such retention is necessary for adjudication.

Therefore, filing an application under Section 17(4) is not the sole method to retain frozen property; the ED can retain property under Sections 20 and 21 for adjudication purposes.

In the present case, the ED passed the Provisional Attachment Order (PAO) and filed the Original Complaint for confirmation within the prescribed period, complying with the procedural requirements.

Accordingly, the Tribunal held that the freezing and retention of accounts and properties were lawful and in conformity with the PMLA.

These issues were decided against the appellants and in favor of the ED.

Issue viii: Alleged violation of Rules 8 and 9 of the 2005 Rules

The appellants alleged violations of Rules 8 and 9 of The Prevention of Money Laundering (Forms, Search and Seizure or Freezing and the Manner of forwarding the Reasons and Material to the Adjudicating Authority, Impounding and Custody of Records and the Period of Retention) Rules, 2005.

The Tribunal observed that the appellants failed to specify how these Rules were violated. In the absence of any contrary proof, the Court invoked the presumption under Section 114(e) of the Indian Evidence Act, 1872, that official acts have been regularly performed.

The Tribunal thus rejected the contention of violation of these Rules.

This issue was decided against the appellants and in favor of the ED.

Issue ix: Whether confirmation order under Section 8(3) can be passed without an order under Section 8(2)

The appellants contended that the Adjudicating Authority erred in confirming the PAO under Section 8(3) without passing an order under Section 8(2).

The Tribunal examined Section 8(2), which requires the Adjudicating Authority to consider replies, hear parties, and record a finding whether any of the properties are involved in money laundering. The proviso mandates giving an opportunity to persons claiming the property.

The Tribunal found that the ED had complied with the procedural requirements by issuing the PAO on reasonable belief, filing the Original Complaint, and recording statements of the appellants under Section 50 of the PMLA. The proviso to Section 8(2) was duly complied with.

Therefore, the confirmation order under Section 8(3) was validly passed following the procedure under Section 8(2).

This issue was decided against the appellants and in favor of the ED.

3. SIGNIFICANT HOLDINGS

The Tribunal established several core principles and made key determinations as follows:

"The relevant date to find out the offence of money laundering is when the proceeds is projected to be untainted property. The offence of money laundering is a continuous offence. The date of commission of the scheduled offence may not be relevant to prosecute a person for the offence of money laundering at a later point of time."

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

"In absence of any documentary evidence tendered by the appellant to prove legitimate acquisition, the claim that properties were purchased from legal sources cannot be accepted."

"Rule 4(1) of the 2013 Rules does not prohibit the ED from directing local police to take physical possession of attached movable property."

"Sections 20 and 21 of the PMLA allow retention of seized or frozen properties for up to 180 days for adjudication purposes, and filing an application under Section 17(4) is not the only course for continuation of freezing."

"In absence of any proof to the contrary, official acts including compliance with Rules 8 and 9 of the 2005 Rules are presumed to be regularly performed."

"The Adjudicating Authority's confirmation order under Section 8(3) is valid where procedural requirements under Section 8(2) have been complied with, including opportunity to the person claiming the property."

Based on these principles, the Tribunal dismissed the appeals, affirming the attachment and confirming the orders of the Adjudicating Authority. The appellants were granted liberty to apply for release of vehicles subject to deposit of fixed deposit receipts equivalent to their insured values or for the ED to notify financiers for auction and deposit of excess amounts, safeguarding financiers' interests.

1. Whether there exists an underlying predicate offence under the Prevention of Money Laundering Act, 2002 ("PMLA") to justify attachment of properties under Section 5(1) of the Act.

2. Whether the Respondent Directorate of Enforcement ("ED") has discharged its burden to establish a money trail linking the appellants to proceeds of crime.

3. Whether the properties attached were acquired out of clean, untainted money or proceeds of crime.

4. Whether the statutory requirements under PMLA, including communication of reasons to believe, were complied with before passing the provisional attachment orders.

5. Whether the properties attached have a direct, proximate, and intricate link to the commission of scheduled offences as required under Sections 2(1)(u) and 2(1)(v) of the PMLA.

6. Whether the application for substitution of attached property is maintainable under the relevant Rules framed under the PMLA.

Issue 1: Existence of Underlying Predicate Offence

The relevant legal framework is Section 5(1) of the PMLA, which allows attachment of property involved in money laundering linked to scheduled offences. The scheduled offences here include offences under Sections 409, 420, 468, 471, 477A, and 120-B of the Indian Penal Code ("IPC"). The FIR and charge sheets filed by the Economic Offences Wing ("EOW") against the principal accused, including M/s BFOPL and its directors, form the predicate offence for the PMLA proceedings.

The Court referred to the Supreme Court's judgment in Vijay Madanlal Choudhary, which clarified that Section 5(1) of PMLA is not limited to accused named in the scheduled offence but extends to any person involved in activities connected with proceeds of crime. The objective is to attach and confiscate proceeds of crime regardless of whose name they are held in.

The Court found that the predicate offences were clearly established by the FIR and charge sheets, and the appellants were linked to the proceeds of crime generated by the principal accused. Thus, the contention that no predicate offence exists was rejected.

Issue 2: Burden to Establish Money Trail

The appellants argued that the Respondent failed to establish a money trail linking the attached properties to proceeds of crime. The Court examined the investigation records, including statements, bank ledgers, and international cooperation documents.

Key evidence included:

• Summons to the Managing Director of the builder company and ledger showing payments for the property without creditors mentioned.
• Bank records revealing a payment of Rs. 89,00,000/- from M/s Harin Ventures Limited, Dubai, for the property purchase.
• Documents proving Sai Chandrasekhar's association with M/s Harin Ventures Ltd., despite his denial.
• Funds transferred from the main accused Virkaran Awasty to M/s Harin Ventures Ltd. accounts in Dubai, which were then routed to Sai Chandrasekhar's personal accounts and further to the builder.

The Court observed inconsistencies and false statements by the appellants regarding sources of funds, including a fabricated claim of loan from a relative that was disproved by bank records indicating layering of funds.

Applying the law to these facts, the Court held that the Respondent had successfully demonstrated a credible and direct link between the proceeds of crime and the attached properties, thereby discharging the burden of establishing the money trail.

Issue 3: Acquisition of Property from Clean Money

The appellants claimed the properties were acquired from legitimate sources, including commissions from trading, salary from employment, and housing loans. However, the Court found these claims contradicted by the evidence of fund transfers from the accused's accounts to the Dubai company and then to the appellants.

The Court noted that the appellants' explanations were false and deliberately misleading, reinforcing the conclusion that the properties were acquired from proceeds of crime.

Issue 4: Compliance with Statutory Requirements and Communication of Reasons

The appellants contended that the "reasons to believe" recorded by the ED were not communicated to them, citing a judgment of the Delhi High Court. The Court observed that the Supreme Court had stayed the operation of that judgment and that the Madras High Court had held that Section 5 of the PMLA does not mandate communication of reasons before provisional attachment.

The Court distinguished between the requirements under Section 5(1) and Section 8(1) of the PMLA, noting that the Adjudicating Authority need not record reasons at the stage of confirmation of attachment. The provisional attachment order itself serves as a show cause notice. Hence, the statutory requirements were held to be complied with.

Issue 5: Link Between Property and Scheduled Offence

The appellants argued that the property must have a direct, proximate, and intricate link to the scheduled offence to be attachable. The Court analyzed Sections 2(1)(u) and 2(1)(v) of the PMLA and relied on the Supreme Court's ruling in Vijay Madanlal Choudhary, which interpreted "proceeds of crime" broadly to include the value of such property, not only the property directly obtained from the offence.

The Court cited the Delhi High Court's detailed judgment explaining three categories of attachable property:

• Tainted property directly derived from crime.
• Value of such property.
• Equivalent value property held abroad or in India when tainted property is untraceable.

The Court emphasized the legislative intent to enable attachment of property to prevent dissipation during investigation and trial, even if the property is not directly the tainted asset but of equivalent value.

Applying these principles, the Court found that the attached properties had a sufficient causal link to the scheduled offences through the money trail and were rightly attached as proceeds of crime.

Issue 6: Application for Substitution of Attached Property

The appellants sought substitution of the attached immovable property with other property or security. The Court referred to Rule 4 of the Prevention of Money Laundering (Attachment and Adjudication) Rules, 2013, which governs the manner of taking possession of attached property.

The Court noted that Rule 4 allows substitution only in limited cases such as movable property liable to speedy decay or conveyances, where fixed deposit receipts may be accepted as security. However, bullion, jewellery, or immovable property are required to be physically attached or kept in custody without provision for substitution.

The Court relied on a recent ruling of the Appellate Tribunal holding that substitution of attached property is not permissible except as per the specific provisions of the Rules, which do not cover immovable property.

Accordingly, the application for substitution was dismissed.

Additional Findings and Observations

The Court noted that a prosecution complaint under Sections 44 and 45 of the PMLA had been filed against the accused Sai Chandrasekhar, and cognizance had been taken by the Special Court. The attached properties had become case property, and their confiscation would be decided by the trial court.

The Court underscored that attachment is a balancing measure to protect the interests of the parties and to prevent dissipation of proceeds of crime pending trial. Given the ongoing criminal proceedings, the balance favored continued attachment.

Significant Holdings:

"The sweep of Section 5(1) of PMLA, 2002 is not limited to the accused named in the scheduled offence. It would apply to any person (not necessarily being accused in the scheduled offence), if he is involved in any process or activity connected with the proceeds of crime."

"The objective of enacting the PMLA 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."

"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."

"The legislature has made provision for 'provisional attachment' bearing in mind the possibility of circumstances of urgency that might necessitate such power to be resorted to... The authority for 'provisional' attachment of suspect assets is to ensure that the same remain within the reach of the law."

"Rule 4 of the Rules of 2013 allows substitution of attached property only in limited cases such as movable property liable to speedy decay or conveyances. It does not permit substitution of immovable property or bullion."

"Attachment of property is a balancing arrangement to secure the interests of the person, as also ensure that the proceeds of crime remain available to be dealt with in the manner provided by the Act."

Final determinations include dismissal of all appeals challenging the attachment orders, rejection of the contention that no predicate offence existed, affirmation that the Respondent established the money trail linking the appellants to proceeds of crime, holding that statutory requirements were met, and denial of the application for substitution of attached property.

- Whether the Provisional Attachment Orders (PAOs) issued against the appellant and his companies in connection with the Syndicate Bank scam were justified and lawful.

- Whether the properties and amounts attached in the hands of the appellant and his companies constitute proceeds of crime under the Prevention of Money Laundering Act, 2002 (PMLA).

- Whether the amounts received by the appellant and his companies from entities controlled by the main accused in the Syndicate Bank scam were legitimate business transactions or proceeds of crime.

- Whether the amounts paid towards maintenance charges (CAM and HVAC) by the appellant's companies can be treated as proceeds of crime.

- Whether the loans independently taken by the appellant and his associate from Syndicate Bank were connected to the scam and can be treated as proceeds of crime.

- Whether the respondent (Enforcement Directorate) exceeded its jurisdiction by investigating and attaching properties based on loans and charges involving financial institutions (IDBI, DHFL, UCO Bank) that were not complainants and had issued No Objection Certificates (NOCs).

- Whether there was double attachment of properties in respect of amounts already attached in the hands of the main accused and his entities.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legality and justification of Provisional Attachment Orders (PAOs)

Legal framework and precedents: The PMLA empowers the Enforcement Directorate (ED) to provisionally attach properties suspected to be proceeds of crime under Section 5(1) and Section 68 of the Act. The attachment must be based on the satisfaction that such property is involved in money laundering.

Court's interpretation and reasoning: The Tribunal noted that the PAOs were issued against the appellant and his companies in relation to alleged proceeds of crime arising out of the Syndicate Bank scam. However, the investigation and attachment must be confined to the allegations and scope of the FIR and predicate offence. The respondent cannot exceed its jurisdiction by investigating matters beyond the FIR or attaching properties without sufficient basis.

Key evidence and findings: The appellant's companies constructed commercial properties and sold them to various buyers, including entities controlled by the main accused, Shri Bharat Bomb. The appellant's companies received amounts from these entities, some of which were refunded upon change of registration names. The appellant also took independent loans from Syndicate Bank, which were repaid with NOCs issued by the banks.

Application of law to facts: The Tribunal found that the respondent failed to justify attachment of properties and amounts that were either refunded or related to legitimate transactions. The loans taken independently by the appellant were not connected to the scam and had been repaid with NOCs. The respondent's investigation went beyond the FIR and included parties not complainants.

Treatment of competing arguments: The respondent argued that the appellant benefited from proceeds of crime and that the amounts received were proceeds of crime. The appellant countered by showing bona fide business transactions, repayment of loans, issuance of NOCs, and that amounts paid for maintenance charges were legitimate. The Tribunal accepted the appellant's submissions and rejected the respondent's arguments.

Conclusion: The PAOs were not justified to the extent they attached properties and amounts that were not proceeds of crime or were already attached in the hands of the main accused. The respondent exceeded its jurisdiction and failed to establish that the properties/amounts were proceeds of crime.

Issue 2: Whether the amounts received from entities controlled by the main accused constitute proceeds of crime

Legal framework and precedents: Under PMLA, proceeds of crime include property derived or obtained directly or indirectly by any person as a result of criminal activity. The burden is on the respondent to establish the link between the property and the crime.

Court's interpretation and reasoning: The Tribunal noted that the appellant's companies received amounts from entities controlled by the main accused, but these amounts were consideration for sale of commercial properties. The appellant refunded amounts initially received from some entities when registration was sought in the name of other entities. The properties were registered in the names of the purchasers, including the main accused and his entities, who have themselves had their properties attached.

Key evidence and findings: Correspondence between the parties, sale deeds, registration documents, and bank statements showed that the appellant acted in good faith and conducted bona fide business transactions. The respondent's own prosecution complaint acknowledged that the properties were purchased by the main accused and his entities and attached accordingly.

Application of law to facts: The amounts received by the appellant were part of legitimate sale consideration for commercial units. The refund of amounts to original entities and registration in new entities' names demonstrated bona fide business practices. The respondent's attachment of the same amounts in the hands of the appellant amounted to double attachment.

Treatment of competing arguments: The respondent contended that the amounts were proceeds of crime as they originated from fraudulent loans. The appellant rebutted by showing the transactional chain and registration in the names of the main accused and entities, with corresponding attachments. The Tribunal accepted the appellant's position.

Conclusion: Amounts received by the appellant from entities controlled by the main accused were legitimate sale proceeds and not proceeds of crime. Attachment in the hands of the appellant for these amounts was unjustified and amounted to double attachment.

Issue 3: Treatment of amounts paid towards maintenance charges (CAM and HVAC) and their characterization as proceeds of crime

Legal framework and precedents: Maintenance charges payable under the terms of sale and agreements for upkeep of common areas are legitimate payments and do not constitute proceeds of crime. The Apex Court's judgment in Rasila S. Mehta vs. Custodian (2011) 6 SCC 220 was cited to clarify that maintenance charges on attached properties remain payable and cannot be treated as proceeds of crime.

Court's interpretation and reasoning: The Tribunal observed that amounts paid by the appellant's company Sincere Infrastructure Pvt. Ltd. towards CAM and HVAC charges were contractual obligations under the sale deed. These payments were for maintenance and management of common areas and were payable by all purchasers.

Key evidence and findings: The sale deed clause detailed the obligation to pay maintenance charges monthly, including insurance, municipal taxes, and other common expenses. The appellant claimed outstanding maintenance charges due from the main accused and associates, showing the legitimacy of the charges.

Application of law to facts: Since the maintenance charges were payable under contract and for upkeep of the property, they could not be treated as proceeds of crime. Attachment of properties on account of such payments was unjustified.

Treatment of competing arguments: The respondent failed to clarify the basis for treating these payments as proceeds of crime. The appellant's reliance on the Apex Court precedent was accepted.

Conclusion: Payments towards maintenance charges are legitimate and cannot be treated as proceeds of crime. Attachment of properties on this ground was illegal.

Issue 4: Whether loans taken independently by the appellant and his associate from Syndicate Bank were connected to the scam and proceeds of crime

Legal framework and precedents: Loans taken independently and repaid with issuance of NOCs by banks cannot be treated as proceeds of crime unless linked to predicate offences.

Court's interpretation and reasoning: The Tribunal found that the appellant and his associate took loans from Syndicate Bank for purchase of office units and repaid the loans fully. NOCs were issued by the banks, and the loans were independent of the Syndicate Bank scam.

Key evidence and findings: The Syndicate Bank itself filed an appeal before the Tribunal stating that valid charges were created in its favour and the properties were not purchased from proceeds of crime. The FIR alleging non-creation of charge was stayed by the Rajasthan High Court. The appellant produced NOCs and repayment evidence.

Application of law to facts: The loans taken by the appellant and associate were unrelated to the scam and were repaid. Therefore, these amounts could not be included as proceeds of crime for attachment.

Treatment of competing arguments: The respondent argued the loans were part of proceeds of crime. The appellant rebutted with documentary evidence and bank's stand. The Tribunal accepted the appellant's submissions.

Conclusion: Loans independently taken and repaid by the appellant and associate cannot be treated as proceeds of crime. Attachment on this basis was erroneous.

Issue 5: Jurisdictional limits of investigation and attachment beyond FIR allegations and parties

Legal framework and precedents: Investigation and attachment under PMLA must be confined to allegations in the FIR and predicate offences. Parties not named in the FIR or complainants cannot be subjected to attachment without proper cause.

Court's interpretation and reasoning: The Tribunal noted that the respondent extended investigation to loans and charges involving IDBI, DHFL, and UCO Bank, which were not complainants and had issued NOCs. The respondent failed to justify this extension of scope.

Key evidence and findings: The appellant produced NOCs from these banks and showed repayment of loans. The respondent did not produce any FIR or complaint from these banks against the appellant.

Application of law to facts: The respondent's jurisdiction did not extend to investigate or attach properties based on loans from banks that had not complained and had issued NOCs. The respondent's arguments on these issues were rejected.

Treatment of competing arguments: The respondent argued the loans were connected to the scam and justified attachment. The appellant disproved this by showing NOCs and repayment. The Tribunal sided with the appellant.

Conclusion: The respondent exceeded jurisdiction by investigating and attaching properties beyond FIR allegations and parties. Such attachment was invalid.

Issue 6: Double attachment of properties

Legal framework and precedents: Under PMLA, attachment of property must be singular and not duplicated in the hands of different persons for the same proceeds of crime.

Court's interpretation and reasoning: The Tribunal observed that properties and amounts corresponding to proceeds of crime were already attached in the hands of the main accused and his entities. The respondent also attached properties in the hands of the appellant for the same amounts, resulting in double attachment.

Key evidence and findings: The respondent's prosecution complaint and correspondence acknowledged registration and attachment of properties in the names of the main accused and his entities for amounts overlapping with those attached in the hands of the appellant.

Application of law to facts: Attachment of properties in the hands of the appellant for amounts already attached in the hands of the main accused was unjustified and unlawful.

Treatment of competing arguments: The respondent did not adequately address the issue of double attachment. The appellant highlighted this as a fundamental error.

Conclusion: Double attachment of properties for the same proceeds of crime is impermissible. The attachment against the appellant was accordingly set aside.

3. SIGNIFICANT HOLDINGS

"The respondent failed to explain as to how they can enlarge the scope of the case beyond the allegation in the FIR and can introduce the parties who are not even the complainant and otherwise documents on record show that IDBI, DHFL and UCO bank never made an allegation against the appellant for commission of offence, rather issued NOC on repayment of loan and even for creation of second charge." (Para 47)

"The amount received from M/s Omnia was included in the total consideration towards the purchase of property and recorded in the sale deed and the property therein has been attached by the respondents in the hands of the main accused. Thus, with no stretch of imagination, it could have taken the amount of Rs. 4.10 Crores to be the proceeds of crime, rather, it was part of the consideration amount for sale of the properties." (Para 56)

"The payment of Rs. 5.37 crores has also been alleged to be proceeds of crime apart from a sum of Rs. 50 lakhs received from M/s BK Builders ignoring the fact that the aforesaid amount were included in the total sum received from the entities of Shri Bharat Bomb for purchase of commercial and office units in World Trade Park and was registered in the name of the entities of Shri Bharat Bomb and have been attached. Attachment of the property in the hands of the appellant would be nothing but the double attachment in reference to proceeds of crime." (Para 62)

"The loans taken independently by Shri Anoop Bartaria and Shri Kamal Sharma were repaid and NOC of the bank is on record. The respondent erroneously taken it to be proceeds of crime knowing it well that the loan was obtained independently and had no connection with the scam." (Para 63)

"The Syndicate Bank itself took a categorical stand that valid charge had been created in its favour and properties were not purchased by Shri Anoop Bartaria and Shri Kamal Sharma out of the proceeds of crime." (Para 65)

"The appellant was in the business of selling the commercial space after commencement of the construction. It agreed to sell the commercial space and office units to Shri Bharat Bomb. It was with the admission that the appellant was otherwise in pressing requirement to pay the loan amount to the financial institutions, thus a very competitive rates was given." (Para 50)

"The payment towards maintenance charges are payable by all the purchaser as per the terms of the sale deed, thus could not have been considered to be the proceeds of crime." (Para 61)

"The respondent failed to clarify the aforesaid aspect while making allegation for commission of crime by Shri Anoop Bartaria while fact on record shows otherwise." (Para 67)

"The entire transaction was duly reflected in his service tax and income tax returns." (Para 18)

"The appeals are allowed." (Para 70)

The core legal questions considered by the Appellate Tribunal under SAFEMA in the appeal filed by the Enforcement Directorate (ED) against the Adjudicating Authority's order declining confirmation of the Provisional Attachment Order (PAO) No. 05/2017 are as follows:

• Whether the Joint Director of ED is empowered to issue a provisional attachment of properties in the absence of the Deputy Director, and whether the subsequent filing of the Original Complaint (OC) by the Deputy Director affects the validity of the attachment.
• Whether the material and documents placed before the Joint Director at the time of issuing the PAO were sufficient to form a 'reasonable belief' under Section 5 of the Prevention of Money Laundering Act, 2002 (PMLA) to justify provisional attachment.
• Whether documents and evidence gathered after issuance of the PAO but before filing the OC can be considered by the Adjudicating Authority, or whether only documents placed before the Joint Director at the time of PAO issuance are relevant.
• Whether the PAO was rightly set aside on the ground that no chargesheet had been filed against the respondents in the FIR No. 12/2010 at the time of attachment, considering the provisions of the PMLA prior to its 2013 amendment.
• Whether a delay of over seven years between the registration of the ECIR and issuance of the PAO negates the 'reason to believe' that the respondents would alienate the properties and frustrate proceedings.
• Whether the respondents were denied an opportunity to rebut the presumption under Section 24 of PMLA before passing the PAO.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Authority of Joint Director to issue PAO in absence of Deputy Director

Legal framework and precedents: Section 5 of PMLA, 2002 empowers the Director or any officer not below the rank of Deputy Director authorized by the Director to provisionally attach properties. Both Joint Director and Deputy Director are recognized ranks within ED.

Court's interpretation and reasoning: The Tribunal held that the Joint Director, being a higher rank than Deputy Director, is competent to issue a PAO, especially when the Deputy Director is unavailable due to training or other reasons. The subsequent filing of the OC by the Deputy Director, who was the investigating officer, does not invalidate the attachment. The Tribunal rejected the Adjudicating Authority's hyper-technical interpretation that the same officer must issue the PAO and file the OC, emphasizing that such technicalities should not defeat substantive justice.

Key evidence and findings: The Joint Director issued PAO No. 05/2017 dated 28.07.2017 while the Deputy Director was on training. The Deputy Director filed the OC within 30 days of PAO issuance after resuming duties.

Application of law to facts: The Tribunal applied a purposive interpretation of Section 5, recognizing administrative realities and the need to avoid procedural impediments that could frustrate enforcement actions.

Treatment of competing arguments: The respondents argued that only the officer who issues the PAO can file the OC, but the Tribunal found this to be an incorrect and overly technical reading.

Conclusion: The Joint Director was validly empowered to issue the PAO, and the subsequent OC filed by the Deputy Director did not vitiate the proceedings.

Issue 2: Sufficiency of documents before Joint Director to form reasonable belief

Legal framework and precedents: Section 5(1) of PMLA requires the authorized officer to have 'reason to believe' that the property is proceeds of crime. The standard for 'reason to believe' is lower than proof beyond reasonable doubt. Precedents such as BK Shrestha v. Union of India emphasize that sufficiency of reasons to believe is not subject to detailed judicial scrutiny.

Court's interpretation and reasoning: The Tribunal found that the FIR, ECIR, bank statements, statements of witnesses recorded under Section 50 PMLA, and other material placed before the Joint Director were sufficient to form a reasonable belief. The Tribunal noted that the allegations in the FIR and corroborative evidence prima facie showed involvement of respondents in scheduled offences generating proceeds of crime.

Key evidence and findings: Evidence included FIR No. 12/2010, statements of employees and accomplices, bank account cash deposits exceeding Rs. 503 crore, and charge sheets filed by CBI and other agencies.

Application of law to facts: The Tribunal applied the 'reason to believe' standard, which requires a prudent and reasonable person to form such belief on the material before him, not requiring proof beyond doubt.

Treatment of competing arguments: Respondents contended that the documents were insufficient and the PAO should be set aside. The Tribunal rejected this, holding that the material was sufficient to justify attachment.

Conclusion: The documents before the Joint Director were sufficient to form reasonable belief for issuing the PAO.

Issue 3: Reliance on documents not placed before Joint Director at PAO issuance

Legal framework and precedents: Investigation is a continuing process under PMLA and evidence may be gathered after PAO issuance but before filing the OC. There is no statutory bar on relying on such additional evidence to strengthen the prosecution's case.

Court's interpretation and reasoning: The Tribunal held that the Adjudicating Authority erred in disregarding documents not placed before the Joint Director at the time of PAO issuance. The additional documents in the OC were to update the Authority on the progress of investigation and establishment of mens rea. The Tribunal emphasized that excluding such evidence would hinder fair investigation and justice.

Key evidence and findings: Additional documents included statements under Section 50 PMLA and correspondence clarifying license details.

Application of law to facts: The Tribunal applied the principle that the investigation and evidence collection are ongoing and not limited to a snapshot at the time of PAO.

Treatment of competing arguments: The respondents argued that only documents before the Joint Director at PAO issuance are relevant. The Tribunal rejected this narrow approach.

Conclusion: Documents gathered after PAO issuance but before filing OC can be relied upon by the Adjudicating Authority.

Issue 4: Validity of PAO in absence of chargesheet at time of attachment (pre-2013 amendment)

Legal framework and precedents: Prior to the 2013 amendment, Section 5(1)(b) of PMLA required that the person whose property is sought to be attached must be charged with a scheduled offence. However, the second proviso to Section 5(1) allows attachment if the officer has reason to believe that non-attachment would frustrate proceedings.

Court's interpretation and reasoning: The Tribunal held that the proviso is an exception to the main clause and authorizes attachment even before chargesheet filing, provided reasons are recorded. The charge sheets dated 02.06.2010 and 18.07.2010 filed by the LEA included the respondents as accused. The Tribunal rejected the respondents' argument that no chargesheet was filed against them.

Key evidence and findings: Copies of charge sheets and their English translations were provided to the respondents. The FIR and charge sheets implicated the respondents in scheduled offences.

Application of law to facts: The Tribunal applied the proviso to uphold the attachment despite delay in chargesheet filing and the timing of PAO issuance.

Treatment of competing arguments: Respondents relied on a judgment limiting the proviso's application and argued violation of Article 20 protections. The Tribunal found these arguments unpersuasive given the charge sheets and ongoing investigation.

Conclusion: The PAO was validly issued despite delay in chargesheet filing, under the proviso to Section 5(1) of PMLA.

Issue 5: Effect of delay of over seven years between ECIR registration and PAO issuance

Legal framework and precedents: PMLA does not prescribe any time limit for issuance of PAO after ECIR registration. Delay alone is not a ground to set aside attachment if there is reason to believe alienation of property may occur.

Court's interpretation and reasoning: The Tribunal observed that the delay was due to non-cooperation and non-appearance of respondents before the Investigating Officer. The Tribunal held that a person cannot benefit from his own default. The apprehension that respondents might alienate properties justified attachment even after delay.

Key evidence and findings: Respondents' non-cooperation and failure to appear during investigation documented. The complexity of money laundering investigations acknowledged.

Application of law to facts: The Tribunal applied the principle that delay does not negate the reason to believe when non-cooperation and risk of property alienation exist.

Treatment of competing arguments: Respondents argued delay vitiated reason to believe. The Tribunal rejected this argument.

Conclusion: Delay of over seven years did not invalidate the PAO.

Issue 6: Opportunity to respondents to rebut presumption before PAO

Legal framework and precedents: Section 24 of PMLA creates a presumption that property involved in money laundering is proceeds of crime, which the person can rebut. However, the Act does not mandate a prior hearing before provisional attachment.

Court's interpretation and reasoning: The Tribunal held that no prior opportunity to rebut the presumption is required before passing PAO. The respondents were given opportunity during adjudication proceedings and could contest the attachment.

Key evidence and findings: No evidence that respondents were denied opportunity during adjudication. The PAO is a provisional measure to prevent alienation.

Application of law to facts: The Tribunal applied the statutory scheme balancing the need for prompt attachment with procedural fairness.

Treatment of competing arguments: Respondents argued violation of natural justice. The Tribunal rejected this as inconsistent with PMLA provisions.

Conclusion: No prior opportunity to rebut presumption is required before PAO issuance.

3. SIGNIFICANT HOLDINGS

"The view taken by Ld. Adjudicating Authority with respect to the interpretation of Sub-Section 5 of Section 5 of PMLA, 2002 that the officer who attaches the properties has to file the OC, is a wrong interpretation of the law. Such technicalities should not be the basis for dismissing the OC, which is otherwise based on proper investigation and sufficient evidences."

"The 'reason to believe' is apparent on record from the said allegations, in the mind of the authorized officer/ Joint Director for passing the Provisional Attachment Order. The standard to form 'reason to believe' for provisional attachment cannot be equated with standard for conviction of the culprits."

"Investigation is a continuing process and it cannot be compartmentalized in the before or after the PAO, therefore, evidences gathered after the PAO cannot be discarded by the Ld. Adjudicating Authority."

"There is no time limit for passing the PAO after recording the ECIR. Thus, delay of seven year is no ground to set aside the PAO. Moreover, the delay has occurred on account of non- cooperation and non-appearance of the Respondents before the Investigating Officer of the ED."

"No doubt filing of chargesheet is one of the conditions for provisionally attaching the property as per Clause 5(1)(b) of PMLA, 2002. However, the second proviso to Section 5(1) of PMLA is an exception to clause 5(1)(b), which clearly provides that any property of any person may be attached if the authorized person has reason to believe that if such property is not attached immediately, the non-attachment of the property is likely to frustrate any proceeding under PMLA."

"The ends of justice should not be allowed to be sacrificed at the altar of mere technicalities even when the case is proved to the hilt and the accused is found otherwise guilty."

Final determinations:

• The Joint Director was competent to issue the PAO in absence of Deputy Director, and the subsequent filing of OC by the Deputy Director is valid.
• The material before the Joint Director sufficed to form reasonable belief under Section 5 of PMLA for provisional attachment.
• Documents gathered after PAO issuance but before filing OC can be relied upon by the Adjudicating Authority.
• The PAO was validly issued despite delay and absence of chargesheet at the time of attachment, under the proviso to Section 5(1) of PMLA.
• The delay of over seven years did not invalidate the PAO, especially due to respondents' non-cooperation.
• No prior opportunity is required before PAO issuance to rebut presumption under Section 24 of PMLA.
• The impugned order declining confirmation of PAO was set aside, and the attachment of properties was confirmed, subject to the final outcome of related writ petitions and criminal trials.

Issues: Whether immovable properties acquired from funds diverted from bank loans, and the rent derived from such properties, could be treated as proceeds of crime and provisionally attached even where the purchase preceded the alleged crime period.

Analysis: The Tribunal found that the properties were acquired from funds transferred by the parent company after diversion of bank finance, and that the appellant had no independent source for the acquisition. The sanctioned loan was not used for its intended purpose, remained unpaid, and the assets, along with rental receipts generated from them, were linked to the diverted funds. The Tribunal also accepted that property acquired prior to the crime period may still be attached where it represents equivalent value traceable to the proceeds of crime and the direct proceeds are not available.

Conclusion: The attachment of the properties and rental proceeds was upheld, and the challenge to the provisional attachment failed.

Final Conclusion: The Tribunal affirmed the impugned attachment order on the footing that assets purchased from diverted loan funds can be subjected to attachment as proceeds of crime or as equivalent value assets.

Ratio Decidendi: Property acquired from diverted criminally tainted funds, including as equivalent value where direct proceeds are unavailable, can be provisionally attached under the money-laundering framework.

Issues: (i) Whether the attachment was liable to be set aside for want of an independent investigation by the Enforcement Directorate into the predicate offence; (ii) Whether properties acquired before the commencement of the Prevention of Money Laundering Act, 2002 and before the amendment bringing the scheduled offence within the Act could still be attached; (iii) Whether the provisions relating to disproportionate assets under the Prevention of Corruption Act, 1988 operated retrospectively for the purposes of attachment under the Prevention of Money Laundering Act, 2002; (iv) Whether the conditions for provisional attachment under the second proviso to Section 5(1) of the Prevention of Money Laundering Act, 2002 were satisfied; (v) Whether the requirements of Section 5(1)(a) and (b) of the Prevention of Money Laundering Act, 2002 were fulfilled.

Issue (i): Whether the attachment was liable to be set aside for want of an independent investigation by the Enforcement Directorate into the predicate offence?

Analysis: The predicate offence is to be investigated by the police or the investigating agency competent for that offence, while the Enforcement Directorate is confined to examining the existence of proceeds of crime, the laundering process, the trail of such proceeds, and whether attached properties represent the proceeds or their equivalent value. The Enforcement Directorate is not required to re-investigate the predicate offence or reach a contrary conclusion on the basis of the same allegations already investigated by the competent agency.

Conclusion: The issue was decided against the appellants and in favour of the Revenue.

Issue (ii): Whether properties acquired before the commencement of the Prevention of Money Laundering Act, 2002 and before the amendment bringing the scheduled offence within the Act could still be attached?

Analysis: The relevant consideration is the date on which the property is projected as untainted and dealt with as proceeds of crime, not merely the date of acquisition of the property or the date of the scheduled offence. The offence of money laundering is treated as an independent and continuing offence, and properties acquired earlier are not immune where the property or its equivalent value is traceable to criminal activity and is later dealt with as proceeds of crime.

Conclusion: The issue was decided against the appellants and in favour of the Revenue.

Issue (iii): Whether the provisions relating to disproportionate assets under the Prevention of Corruption Act, 1988 operated retrospectively for the purposes of attachment under the Prevention of Money Laundering Act, 2002?

Analysis: The Tribunal held that the decisive date for money-laundering liability is the date of the laundering activity and continued possession, concealment, or projection of proceeds of crime, not the date of the predicate offence alone. Since the value of property derived from criminal activity may also be proceeded against where the actual tainted property is unavailable, the argument based on non-retrospectivity did not defeat attachment.

Conclusion: The issue was decided against the appellants and in favour of the Revenue.

Issue (iv): Whether the conditions for provisional attachment under the second proviso to Section 5(1) of the Prevention of Money Laundering Act, 2002 were satisfied?

Analysis: The record disclosed material supporting the belief that the appellants were in possession of proceeds of crime and that non-attachment could frustrate proceedings for confiscation. The existence of the FIR, the ECIR, and the surrounding material was treated as sufficient to satisfy the statutory threshold for invoking the second proviso.

Conclusion: The issue was decided against the appellants and in favour of the Revenue.

Issue (v): Whether the requirements of Section 5(1)(a) and (b) of the Prevention of Money Laundering Act, 2002 were fulfilled?

Analysis: The Tribunal found that the appellants were persons in possession of alleged proceeds of crime and that there was a likelihood of concealment, transfer, or dealing with the properties in a manner frustrating confiscation. The statutory conditions under clauses (a) and (b) were therefore treated as satisfied.

Conclusion: The issue was decided against the appellants and in favour of the Revenue.

Final Conclusion: The provisional attachment and its confirmation were upheld, and the appeals failed on all substantive grounds.

Ratio Decidendi: Money-laundering is an independent and continuing offence, and properties may be provisionally attached not only when they represent direct proceeds of crime but also when they constitute equivalent value, provided the statutory conditions for belief and potential frustration of confiscation are met.

(i) Whether the attachment of properties under PMLA can be confirmed or must be set aside in the absence of any prosecution complaint filed under the Act at the time of confirmation;

(ii) Whether the attachment should be set aside for non-filing of the prosecution complaint within 90 days from the date of the order confirming the attachment;

(iii) Whether the attachment should be set aside on the ground that the appellants are not named as accused in the predicate offence under which the money laundering investigation is based.

Issues (i) and (ii) are interrelated and pertain to the procedural requirements and timelines for confirming attachment orders and filing prosecution complaints under Section 8(3)(a) of the PMLA, as well as the effect of amendments to this provision. Issue (iii) concerns the scope of attachment powers vis-`a-vis the identity of the person holding the property and their status as accused in the predicate offence.

Issue-wise detailed analysis:

Issue (i) & (ii): Attachment in absence of prosecution complaint and timeline for filing complaint

The Tribunal examined the provisions of Section 8(3)(a) of the PMLA, both prior to and after the amendment effective from 19.04.2018. The pre-amendment provision did not prescribe any time limit for filing the prosecution complaint after confirmation of attachment by the Adjudicating Authority. The 2018 amendment introduced a requirement to file the prosecution complaint within 90 days, subsequently extended to 365 days by a later amendment effective 20.03.2019.

The appellants argued that since no prosecution complaint was pending at the time of confirmation of the attachment order dated 12.03.2018, the attachment was invalid under the pre-amended law. They contended that the absence of a prosecution complaint meant the attachment could not be sustained.

The Tribunal rejected this contention, reasoning that the absence of a time limit for filing the prosecution complaint prior to the amendment cannot be interpreted as a requirement that the complaint must be pending before confirmation of attachment. Such an interpretation would defeat the object of the PMLA, which is to prevent transfer or alienation of properties suspected to be proceeds of crime during investigation. The Tribunal emphasized that immediate attachment is necessary to preserve the properties for eventual confiscation if conviction occurs.

Further, the Tribunal noted that the 90-day timeline for filing prosecution complaints commenced only from the date of the amendment (19.04.2018). In the present case, the prosecution complaint was filed on 13.06.2019, well within the extended timeline. Therefore, the attachment did not lapse.

The Tribunal also observed that once the prosecution complaint is filed, the properties attached become case properties under the control of the Special Judge, who can dispose of them as per law after trial conclusion.

Thus, the Tribunal concluded that the attachment was valid despite the absence of a prosecution complaint at the time of confirmation, and that the complaint was filed within the statutory timeline post-amendment. Accordingly, issues (i) and (ii) were decided against the appellants and in favor of the Enforcement Directorate (ED).

Issue (iii): Attachment of property held by persons not named as accused in the predicate offence

The appellants contended that since they were not named as accused in the predicate offence charge sheet filed by the Central Bureau of Investigation (CBI) on 29.08.2014, the attachment of properties held by them was impermissible.

The Tribunal referred to the authoritative Supreme Court judgment in Vijay Madanlal Choudhary and Ors. v. Union of India and Ors., which clarified the scope of attachment under PMLA. The Court held that Section 5(1) of the PMLA is not limited to accused persons named in the predicate offence. It applies broadly to any person involved in any process or activity connected with the proceeds of crime. The Court emphasized that the objective of the PMLA is to attach and confiscate proceeds of crime regardless of who holds them.

The Tribunal quoted the Supreme Court's reasoning: "The sweep of Section 5(1) is not limited to the Accused named in the criminal activity relating to a scheduled offence. It would apply to any person (not necessarily being Accused in the scheduled offence), if he is involved in any process or activity connected with the proceeds of crime." Further, "The objectives of enacting the 2002 Act was the attachment and confiscation of proceeds of crime which is the quintessence so as to combat the evil of money-laundering."

Applying this legal principle, the Tribunal held that attachment of property in the hands of any person possessing proceeds of crime is permissible even if that person is not an accused in the predicate offence. Therefore, the appellants' argument on this ground was rejected.

Significant holdings include the following verbatim excerpts of crucial legal reasoning:

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

"The objectives of enacting the 2002 Act was the attachment and confiscation of proceeds of crime which is the quintessence so as to combat the evil of money-laundering. The second proviso, therefore, addresses the broad objectives of the 2002 Act to reach the proceeds of crime in whosoever's name they are kept or by whosoever they are held."

Core principles established:

• Attachment under PMLA can be confirmed even if no prosecution complaint is pending at the time of confirmation, particularly under the pre-amended law.
• The time limit for filing prosecution complaints introduced by amendment applies prospectively and does not invalidate prior attachments.
• The scope of attachment is not confined to accused persons in the predicate offence; it extends to any person holding proceeds of crime.
• The purpose of PMLA is to prevent dissipation of proceeds of crime and ensure their availability for confiscation upon conviction.

Final determinations on each issue:

• Issue (i): The attachment was valid despite no prosecution complaint pending at the time of confirmation. The appeal on this ground was dismissed.
• Issue (ii): The prosecution complaint was filed within the statutory timeline post-amendment; hence, attachment did not lapse. The appeal was dismissed.
• Issue (iii): Attachment of properties held by persons not named as accused in the predicate offence is permissible under PMLA. The appeal was dismissed.

The appeals were dismissed as devoid of merit, with a clarification that the decision does not prejudice the rights of any party during the criminal trial. The Tribunal's order preserves the integrity of attachment proceedings under PMLA, reinforcing the legislative intent to effectively combat money laundering by securing proceeds of crime irrespective of procedural stages or the identity of the property holder vis-`a-vis the predicate offence.

(i) Whether the properties attached by the Enforcement Directorate (ED) should be released on the ground that they were acquired by the appellants prior to the alleged predicate offence and thus do not constitute "proceeds of crime" under Section 2(1)(u) of PMLA;

(ii) Whether the appellants have discharged their burden of proof under Section 24 of PMLA by demonstrating that the properties were acquired through legitimate sources of income;

(iii) Whether the respondent ED had the power to provisionally attach the appellants' properties before conviction, despite the appellants' contention that no offence under Section 3 of PMLA was made out.

Issue (i): Whether the attached properties were acquired prior to the predicate offence and thus not "proceeds of crime" under Section 2(1)(u) of PMLA

The Tribunal examined the definition of "proceeds of crime" under Section 2(1)(u) of PMLA, which includes any property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence, as well as the value of any such property. The definition explicitly covers situations where the actual tainted property cannot be traced, allowing attachment of property equivalent in value.

The Tribunal relied heavily on authoritative precedents, including a detailed judgment of the Delhi High Court, which clarified that properties acquired prior to the enforcement of the Act are not entirely immune from attachment if the tainted property cannot be traced. The Court in that case explained that the Act envisages attachment of both tainted and untainted property, provided the latter corresponds to the value of the proceeds of crime. It was further held that bona fide rights of third parties acquired prior to the commission of the predicate offence are protected.

The Tribunal also referred to the Supreme Court's decision in Vijay Madanlal Chaudhary v. Union of India, which emphasized the wide scope of the definition, allowing attachment of property equivalent in value even if the proceeds of crime are situated outside India. This interpretation furthers the legislative intent to recover proceeds of crime effectively.

Applying these principles, the Tribunal found that although the appellants claimed the properties were acquired prior to the alleged offences, the actual proceeds of crime were not available with them but had been siphoned off. Therefore, the ED was justified in attaching properties of equivalent value. The appellants' argument that the properties were acquired before the predicate offence and thus not proceeds of crime was rejected.

Issue (ii): Whether the appellants discharged their burden of proof under Section 24 of PMLA to show acquisition of properties by legal means

The appellants contended that the properties were acquired through legitimate sources. For example, appellant no.1 claimed ownership through a gift deed from his mother, with the house constructed from accumulated savings between 1985 and 2005. However, the Tribunal noted the absence of documentary evidence such as bank statements or valuation reports to substantiate these claims. Contradictions were also highlighted, including the appellant's own statement that construction was completed in 2005, not 1990 as claimed.

Moreover, the appellant admitted in his statement under Section 50 of PMLA that he arranged funds to finance procurement of fake Indian currency notes (FICN) on multiple occasions, corroborated by statements of co-accused and seizure of FICN consignments. This demonstrated habitual involvement in the predicate offence, undermining his claim of legitimate acquisition.

Regarding the other properties jointly held by appellants no.2 and no.3, the Tribunal observed unexplained cash deposits in bank accounts and lack of documentary proof for payments made towards acquisition. The appellant no.3's claim of ignorance about the source of funds was not accepted, and the possibility that the funds originated from her husband, an accused, was considered.

Consequently, the Tribunal concluded that the appellants failed to discharge their burden under Section 24 to prove lawful acquisition of the attached properties. The properties were rightly considered proceeds of crime and attached accordingly.

Issue (iii): Whether the ED had power to provisionally attach properties before conviction despite no offence being made out under Section 3 of PMLA

The Tribunal emphasized that PMLA is a special legislation aimed at curbing money laundering and enabling confiscation of property derived from such offences. Attachment prior to trial completion is a necessary procedural step to preserve properties for confiscation if conviction ensues.

The appellants' contention that properties cannot be attached before conviction was rejected as "vague and untenable." The Tribunal clarified that the trial of the money laundering offence need not be completed before provisional attachment, as attachment is a preventive measure to safeguard the properties involved.

Significant holdings and core principles established include:

"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."

"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'."

"The trial of offence of money laundering need not be completed before attachment of property; attachment is to preserve the property for confiscation in case of conviction."

"The burden under Section 24 of PMLA lies on the accused/appellant to prove that the property was acquired from legitimate sources, failing which the property is liable to be treated as proceeds of crime."

Final determinations:

The Tribunal dismissed the appeals, holding that:

• The properties attached by ED are rightly considered proceeds of crime or equivalent value thereof, even if acquired prior to the predicate offence, due to the inability to trace the actual tainted property and the habitual involvement of the appellants in the scheduled offences;
• The appellants failed to discharge their burden under Section 24 of PMLA to prove lawful acquisition of the properties;
• The ED had the power to provisionally attach the properties before conviction to prevent dissipation of assets involved in money laundering;
• Therefore, the impugned order confirming the attachment was upheld.

i) Whether properties can be attached despite the appellants not being named in the FIR, ECIR, or charge sheet related to the predicate offence;

ii) Whether properties of appellant companies, as non-corporeal juristic persons, can be attached for offences allegedly committed by their shareholders or directors;

iii) Whether the Enforcement Directorate (ED) has produced tangible material and valid reasons to believe that the appellants possess proceeds of crime liable for attachment under Section 5 of the PMLA;

iv) Whether the impugned properties were acquired from legitimate income sources and thus do not constitute proceeds of crime;

v) Whether the provision for attachment of properties equivalent in value to proceeds of crime, inserted in 2015, applies retrospectively;

vi) Whether properties can be attached as equivalent in value held within the country under the third limb of the definition of proceeds of crime, despite the appellants not being accused and considering the retrospective application of this provision.

Issue-wise Detailed Analysis:

i) Attachment despite appellants not named in FIR/ECIR/charge sheet:

The appellants contended that they were not named in the FIRs registered by CBI or in the ECIR and charge sheet filed under PMLA, hence their properties should not be attached. The Tribunal referred to the authoritative Supreme Court judgment which clarified that Section 5(1) of the PMLA is not confined to accused persons in the predicate offence. The provision extends to any person involved in activities connected with the proceeds of crime. The Court emphasized the legislative intent to combat money laundering by targeting proceeds regardless of the holder's status as an accused in the underlying offence. Thus, the mere absence of appellants' names in FIR or charge sheet does not preclude attachment of their properties if they are found in possession of proceeds of crime. This issue was decided against the appellants.

ii) Attachment of properties of appellant companies for acts of shareholders/directors:

The appellants argued that as companies are separate legal entities (non-corporeal juristic persons), their properties cannot be attached for offences committed by shareholders or directors. The Tribunal noted that the accused persons were major shareholders and managed the companies' affairs; hence, their acts cannot be segregated to exempt the companies. The companies could pursue remedies against errant shareholders but cannot claim immunity from attachment. The appellants retain the right to raise defenses in trial courts. This issue was accordingly disposed of with the conclusion that properties can be attached notwithstanding the corporate veil.

iii) Tangible material and reasons to believe under Section 5:

The appellants challenged the ED's attachment for lack of tangible material and reasons to believe that proceeds of crime were in their possession and likely to be concealed or transferred. The Tribunal analyzed the extensive investigation details including multiple FIRs, charge sheets, evidence of layering proceeds of crime through group companies, foreign remittances, and property transactions. The material established a nexus between the appellants and proceeds of crime. The Tribunal found the reasons to believe were honest, based on direct evidence, and fulfilled statutory requirements. Thus, the attachment was justified and confirmed by the Adjudicating Authority. This issue was decided against the appellants.

iv), v), and vi) Legitimacy of property acquisition, retrospective application of value equivalent provision, and attachment under third limb of proceeds of crime definition:

The appellants contended that properties were acquired from legitimate income, supported by cash flow statements and purchase documents predating offences. They also argued that the provision for attachment of properties equivalent in value, inserted in 2015, cannot apply retrospectively. Further, they claimed that as non-accused, properties cannot be attached under the third limb of proceeds of crime definition.

The Tribunal examined the definition of "proceeds of crime" under Section 2(1)(u) of PMLA, which comprises three limbs: (1) property derived or obtained directly or indirectly from criminal activity; (2) the value of such property; and (3) property equivalent in value held within the country or abroad if the proceeds are held outside India. The third limb was inserted to address situations where proceeds are outside India and unavailable for attachment.

The Tribunal relied on authoritative judgments, including a detailed Delhi High Court decision and the Supreme Court's ruling in Vijay Madanlal Choudhary, which clarified that:

• Properties acquired prior to the offence may be attached if the accused had an interest in them at the time of the offence;
• Attachment of "untainted" property equivalent in value to proceeds of crime is permissible when actual tainted property is untraceable;
• The definition of proceeds of crime is broad and includes value equivalent properties to further legislative intent;
• The retrospective application of the 2015 amendment is limited but valid where the accused had interest in the property during the offence.

In the present case, the proceeds of crime amounting to over USD 1.26 billion were siphoned abroad in the form of gold and diamond-studded jewelry, layered through foreign companies controlled by the accused and their families. The impugned properties were acquired through complex shareholding patterns and transfers designed to camouflage real ownership and divert investigation. The Tribunal found that the properties were rightly attached as equivalent in value to proceeds of crime under the third limb of the definition.

The appellants' arguments regarding legitimate source of income and absence of direct remittance were rejected, given the overwhelming evidence of layering and control by accused persons. The Tribunal also rejected the contention that non-accused status exempts attachment under the third limb, as group companies and front persons were used to shield assets.

Significant Holdings:

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

"The objectives of enacting the 2002 Act was the attachment and confiscation of proceeds of crime which is the quintessence so as to combat the evil of money-laundering. The second proviso, therefore, addresses the broad objectives of the 2002 Act to reach the proceeds of crime in whosoever's name they are kept or by whosoever they are held."

"Properties which were acquired prior to the enforcement of the Act may not be completely immune from action under the Act... 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'."

"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 Tribunal concluded that the properties attached were rightly considered proceeds of crime or equivalent in value thereof, acquired through layering and concealment of criminal proceeds. The appellants failed to establish legitimate source or break the nexus with the predicate offence. The retrospective application of the 2015 amendment was upheld in the limited context of tracing proceeds. The attachment was lawful even though appellants were not named accused in the predicate offences.

Accordingly, the appeals were dismissed as devoid of merit while preserving the parties' rights to contest issues in trial proceedings.

i) Whether the Enforcement Directorate (ED) has brought on record tangible material and has a bona fide reason to believe that the appellants are in possession of proceeds of crime, and that such proceeds are likely to be concealed, transferred, or otherwise dealt with so as to frustrate proceedings under the Act, thereby satisfying the requirements of Section 5 of the PMLA;

ii) Whether the impugned properties were acquired by the appellants using legitimate sources of income and thus do not constitute 'proceeds of crime';

iii) Whether the provision relating to attachment of properties equivalent in value held within the country, as inserted in the PMLA in 2015, applies with retrospective effect;

iv) Whether properties can be attached as 'equivalent in value held within the country' under the third limb of the definition of proceeds of crime, even if the appellant is not an accused, particularly in light of the retrospective application of this provision.

Issue-wise Detailed Analysis

Issue (i): Whether ED has brought tangible material and bona fide reasons to believe possession of proceeds of crime and risk of concealment or transfer under Section 5Rs.

The Tribunal examined the extensive investigation conducted by the Central Bureau of Investigation (CBI) and ED, which revealed a massive fraud involving multiple banks and companies linked to the appellants. The investigation uncovered that the appellants and their associates had orchestrated a criminal conspiracy involving fraudulent enhancement of sales turnover, manipulation of export-import transactions through UAE-based shell companies, and siphoning off proceeds amounting to approximately USD 1.26 billion in the form of gold and diamond-studded jewelry. The proceeds were layered through various overseas entities and ultimately routed into accounts controlled by family members of the appellants.

The investigation also traced immovable properties in Mumbai registered in the names of the appellants' family members, acquired through funds traced back to the proceeds of crime. The ED provisionally attached these properties under Section 5(1) of the PMLA, supported by documents, statements of witnesses, and charge sheets filed by the CBI.

The Tribunal found the material on record sufficient to constitute tangible evidence and a bona fide reason to believe that the appellants possessed proceeds of crime and that there was a risk of concealment or transfer of such property, justifying attachment under Section 5. The Tribunal held that the attachment was rightly confirmed by the Adjudicating Authority.

Issues (ii), (iii), and (iv): Legitimacy of acquisition, retrospective application of 'value thereof' provision, and attachment of properties equivalent in value held within the country

These interconnected issues were analyzed with reference to the definition of "proceeds of crime" under Section 2(1)(u) of the PMLA. The definition comprises three limbs:

• The first limb refers to property directly or indirectly derived from criminal activity relating to a scheduled offence;
• The second limb refers to the value of any such property;
• The third limb, inserted by amendment in 2015, provides that where such property is taken or held outside India, the property equivalent in value held within the country or abroad may be treated as proceeds of crime.

The Tribunal observed that the third limb is explanatory and designed to address situations where the actual proceeds of crime are not available in India, allowing attachment of equivalent value properties within the country or abroad. This interpretation aligns with legislative intent to enable effective recovery of proceeds of crime.

The Tribunal referred extensively to authoritative precedents, including a recent decision of the Delhi High Court, which clarified that properties acquired prior to the commission of the offence may be subject to attachment as 'value thereof' if the actual tainted property cannot be traced. The Apex Court's ruling in Vijay Madanlal Chaudhary v. Union of India was also cited, emphasizing the wide scope of the definition of proceeds of crime, including value of property and equivalent property held within or outside India, to further legislative intent in recovery efforts.

Applying these principles, the Tribunal noted that the impugned properties were initially purchased by the appellants' mother and sons prior to the commission of the predicate offences but were subsequently transferred to the appellants. The investigation revealed that the appellants and their family members had absconded and were involved in layering and diversion of proceeds of crime through complex transactions and front companies. The Tribunal found that the properties were rightly attached as 'value thereof' under the PMLA, even if acquired prior to the offence, given the absence of actual proceeds of crime within India and the appellants' involvement in the predicate offences.

The Tribunal rejected the appellants' contention that the properties were acquired from legitimate sources, as the investigation and charge sheets established a nexus between the properties and proceeds of crime. The Tribunal also held that the retrospective application of the 2015 amendment was valid for the purpose of attachment, consistent with judicial precedents.

Further, the Tribunal addressed the appellants' argument that they were not accused persons and thus properties could not be attached under the third limb. The Tribunal observed that the appellants were named in criminal proceedings and that the PMLA proceedings are independent of predicate offences. The properties, therefore, could be attached as equivalent value properties to prevent frustration of the recovery process.

Significant Holdings

The Tribunal's crucial legal reasoning includes the following verbatim excerpt from the Delhi High Court judgment relied upon:

"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 envisages 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."

Further, the Apex Court's observation in Vijay Madanlal Chaudhary v. Union of India was quoted:

"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 Tribunal concluded that the ED had fulfilled the statutory requirements under Section 5 of the PMLA and that the impugned properties were rightly attached as proceeds of crime or equivalent property under the PMLA. The Tribunal dismissed the appeals as devoid of merit.

Issues: (i) Whether the attachment had to be set aside because the enforcement authority had not conducted an independent investigation into the predicate offence; (ii) Whether the cash of Rs. 30 lakhs could not be attached as case property in the CBI trial; (iii) Whether the appellant could challenge the attachment of Rs. 30 lakhs on the basis of his denial of having tendered the money.

Issue (i): Whether the attachment had to be set aside because the enforcement authority had not conducted an independent investigation into the predicate offence.

Analysis: The predicate offence is to be investigated by the police or CBI, while the enforcement authority is concerned with whether there is prima facie material of a scheduled offence, whether proceeds of crime exist, and whether such proceeds are laundered or likely to be laundered. The record disclosed prima facie material in the FIR and chargesheet, and the remaining aspects were within the domain of the money-laundering investigation. Mere reliance on the predicate-offence material did not make the attachment unlawful.

Conclusion: The issue was decided against the appellant and in favour of the respondent.

Issue (ii): Whether the cash of Rs. 30 lakhs could not be attached as case property in the CBI trial.

Analysis: The attachment was held not to interfere with the criminal trial, because the fate of the attached amount would be determined by the Special Judge under the PMLA after conclusion of the trial and after inviting claims or objections, if any. The pendency of the predicate-offence trial did not by itself bar attachment under the PMLA.

Conclusion: The issue was decided against the appellant and in favour of the respondent.

Issue (iii): Whether the appellant could challenge the attachment of Rs. 30 lakhs on the basis of his denial of having tendered the money.

Analysis: The question of the appellant's entitlement and locus standi depended on the pleadings and defence to be examined in the prosecution complaint proceedings. A bare denial of tendering the money did not, at this stage, dislodge the attachment or establish a right to immediate release of the cash.

Conclusion: The issue was decided against the appellant and in favour of the respondent.

Final Conclusion: The appeal failed, and the attachment was maintained without prejudice to the parties' rights being worked out in the appropriate proceedings.

Ratio Decidendi: In proceedings under the PMLA, the enforcement authority need not re-investigate the predicate offence, and an attachment based on prima facie material relating to proceeds of crime is not displaced merely because the underlying criminal trial is pending or the claimant disputes ownership at the threshold.

The core legal questions considered by the Tribunal in this appeal under Section 26 of the Prevention of Money Laundering Act, 2002 (PMLA) include:

• Whether the Adjudicating Authority applied its mind appropriately in confirming the provisional attachment order under Section 5(1) of the PMLA, or merely reproduced pleadings without reasoning.
• Whether the property attached, including immovable assets of the appellant company, constitutes "proceeds of crime" as defined under the PMLA, i.e., property derived directly or indirectly from criminal activity relating to scheduled offences.
• Whether the appellant company has nexus with the predicate/scheduled offences committed by the members of the banned organization (PFI and its associates), especially in relation to money laundering activities.
• Whether the invocation of Section 5(1) of the PMLA for provisional attachment was justified, including the existence of a "likelihood" of concealment or transfer of property.
• Whether the attachment of common areas of the real estate project was legally sustainable, particularly in light of the Kerala Real Estate (Regulation and Development) Rules.
• Whether discrepancies in cash books and alleged unaccounted cash expenses in the appellant company's accounts amount to proceeds of crime or merely accounting irregularities.
• Whether the foreign remittances and transactions involving the appellant company were legitimate business transactions or were part of a criminal conspiracy to launder money for PFI's unlawful activities.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Application of Mind by Adjudicating Authority in Confirming Provisional Attachment

Legal Framework and Precedents: Under Section 5(1) of the PMLA, provisional attachment of property can be ordered if the property is "likely" to be involved in money laundering. The Adjudicating Authority must apply its mind and give reasoned orders while confirming such attachment.

Court's Interpretation and Reasoning: The appellant contended that the Adjudicating Authority merely reproduced pleadings without independent reasoning, rendering the order liable to be set aside. The Tribunal rejected this contention, finding that the order was supported by sufficient material and reasoning, and that the statutory requirement of "likely" concealment or transfer was rightly invoked.

Key Evidence and Findings: The Tribunal noted that the apprehension of concealment or transfer does not require actual concealment or transfer but only a reasonable likelihood. The appellant's challenge to the attachment itself indicated an intention to alienate or conceal property.

Conclusion: The Tribunal upheld the confirmation order, holding that the Adjudicating Authority applied its mind properly and the invocation of Section 5(1) was justified.

Issue 2: Whether the Attached Property Constitutes Proceeds of Crime

Legal Framework and Precedents: "Proceeds of crime" under PMLA means any property derived or obtained directly or indirectly from criminal activity relating to scheduled offences. The burden lies on the authorities to establish a prima facie link between the property and the offence.

Court's Interpretation and Reasoning: The Tribunal examined documentary evidence, statements under Section 50 of PMLA, and investigation reports showing that the appellant company's project was used as a front to launder funds collected abroad and domestically by PFI members. The company had unaccounted cash expenses of approximately Rs. 90 lakhs unexplained by management, suspicious foreign remittances, and share transactions with no consideration indicating benami dealings.

Key Evidence and Findings: - Statements of PFI members and directors of the appellant company revealed involvement in fund collection and transfer through illegal channels.
- Discrepancies between petty cash books and official cash books suggested concealment of proceeds.
- Foreign remittances received by company officials could not be satisfactorily explained.
- Share transfers without consideration pointed to layering of proceeds.
- FIRs and chargesheets under IPC, UAPA, Explosives Act, and Arms Act against PFI members corroborated criminal conspiracy and predicate offences.

Application of Law to Facts: The Tribunal held that the unexplained cash discrepancies, suspicious share transactions, and nexus with PFI's unlawful activities established a prima facie case that the property was proceeds of crime.

Treatment of Competing Arguments: The appellant argued that the company was engaged in legitimate real estate business, and cash payments were normal in construction. The Tribunal rejected this, emphasizing that accounting irregularities of such magnitude and failure to explain sources of funds, especially in the context of criminal conspiracy, could not be ignored.

Conclusion: The property attached was rightly held to be proceeds of crime under the PMLA.

Issue 3: Nexus of Appellant Company with Scheduled Offences

Legal Framework and Precedents: For attachment under PMLA, a link between the property and scheduled offences must be established. Mere association with accused persons is insufficient unless there is evidence of involvement in money laundering.

Court's Interpretation and Reasoning: The Tribunal found that the appellant company was not merely associated with PFI members but was actively used as a conduit to launder funds raised by PFI for terrorist and unlawful activities. The company's directors and shareholders included PFI members and associates who failed to explain suspicious transactions.

Key Evidence and Findings: Statements of directors and shareholders under Section 50 showed involvement in fund collection and transfer. The company's financial irregularities and foreign remittances were linked to PFI's activities, including funding anti-CAA protests and inciting communal riots.

Application of Law to Facts: The Tribunal held that the appellant company was part of the criminal conspiracy and its property was used to facilitate money laundering for scheduled offences.

Treatment of Competing Arguments: The appellant contended that majority shareholders had no link with PFI and that the company was registered under the Companies Act conducting legitimate business. The Tribunal rejected this, noting that the presence of PFI members in key positions and failure to explain irregularities established nexus.

Conclusion: The appellant company had sufficient nexus with scheduled offences to justify attachment under PMLA.

Issue 4: Justification for Invocation of Section 5(1) PMLA and Provisional Attachment

Legal Framework and Precedents: Section 5(1) allows provisional attachment if the property is likely to be involved in money laundering and there is risk of concealment or transfer.

Court's Interpretation and Reasoning: The Tribunal emphasized that the word "likely" does not require actual concealment but only a reasonable apprehension. The appellant's challenge to attachment itself suggested possible intention to alienate property.

Key Evidence and Findings: Given the serious allegations, unexplained cash discrepancies, and involvement in criminal conspiracy, the apprehension of concealment or transfer was reasonable.

Conclusion: The invocation of Section 5(1) for provisional attachment was justified and properly exercised.

Issue 5: Legality of Attachment of Common Areas in the Real Estate Project

Legal Framework and Precedents: The appellant argued that common areas like roads, swimming pool, etc., are indivisible and jointly held by allottees under Kerala Real Estate (Regulation and Development) Rules, and thus could not be attached individually.

Court's Interpretation and Reasoning: The Tribunal held that the appellant failed to demonstrate that all villas were sold and that common areas were exclusively held by individual allottees. No appeal was filed by any allottee claiming prejudice. Hence, attachment of common areas was sustainable.

Conclusion: The attachment of common areas was not illegal or improper.

Issue 6: Whether Discrepancies in Cash Books Amount to Proceeds of Crime

Legal Framework and Precedents: Mere accounting irregularities do not constitute money laundering unless linked to proceeds of crime.

Court's Interpretation and Reasoning: The Tribunal found that the discrepancies in cash books totaling over Rs. 90 lakhs were unexplained by the appellant despite repeated opportunities. The large scale of discrepancies combined with the nexus to PFI's unlawful activities indicated that the cash was tainted money.

Key Evidence and Findings: Statements of company officials admitted discrepancies but failed to explain sources. The cash was used for purposes other than project expenses and was not accounted in official books.

Conclusion: The discrepancies amounted to concealment of proceeds of crime and supported the attachment.

Issue 7: Legitimacy of Foreign Remittances and Business Transactions

Legal Framework and Precedents: Legitimate foreign remittances and business transactions are not proceeds of crime.

Court's Interpretation and Reasoning: The appellant claimed that foreign funds were invested by NRIs through proper channels and payments to related companies were for business purposes. The Tribunal found that the foreign remittances were routed through underground and illegal channels, as admitted by PFI members and corroborated by seized documents. The transactions with related companies lacked commercial justification and were part of layering proceeds of crime.

Key Evidence and Findings: Statements under Section 50, seized documents, and investigation reports showed concealment of foreign funds, use of hawala channels, and suspicious share transfers without consideration.

Conclusion: The foreign remittances and business transactions were part of the money laundering scheme and not legitimate business dealings.

3. SIGNIFICANT HOLDINGS

"The word 'likely' under section 5(1) of the Act of 2002 to form basis for attachment of property means apprehension of the concealment or transfer of the property and actual concealment or transfer is not necessary."

"The unexplained discrepancy of Rs. 90 lakhs in cash expenses in the appellant company's books of account, coupled with the nexus to a banned organization involved in scheduled offences, constitutes a prima facie case of proceeds of crime."

"Mere association of shareholders with an unlawful organization does not automatically implicate the company; however, when the company is used as a front to launder money and there is evidence of involvement of its officials in the criminal conspiracy, the company's property can be attached under PMLA."

"Attachment of common areas in a real estate project is sustainable where the appellant fails to prove that all villas are sold and the common areas are indivisible and jointly held by allottees."

"Foreign funds collected by the banned organization through illegal channels and routed through the appellant company for unlawful activities constitute proceeds of crime and are liable to attachment."

"Discrepancies in cash books and failure to account for large cash amounts in a company engaged in construction business, within the context of criminal conspiracy, amount to concealment of proceeds of crime."

"The Adjudicating Authority's order confirming provisional attachment, supported by material and reasoned findings, cannot be faulted for lack of application of mind."

Final determinations:

• The appeal challenging the confirmation of provisional attachment order under Section 5(1) of the PMLA was dismissed.
• The attached immovable properties of the appellant company were held to be proceeds of crime involved in money laundering activities linked to scheduled offences committed by PFI and its associates.
• The nexus between the appellant company and the predicate offences was established on the basis of investigation evidence, statements, and financial irregularities.
• The invocation of Section 5(1) for provisional attachment was justified due to reasonable apprehension of concealment or transfer.
• The attachment of common areas in the real estate project was upheld.
• Foreign remittances and suspicious transactions were held to be part of the criminal conspiracy to launder money.

- Whether the jewellery seized from the appellant's residential premises constitutes proceeds of crime under the Prevention of Money Laundering Act, 2002 (PMLA), thereby justifying its retention by the authorities.

- Whether the appellant's disclosure of the jewellery in Income Tax Returns (ITR) and Wealth Tax Returns prior to the registration of the FIR negates the presumption that the jewellery is proceeds of crime.

- Whether the seizure and retention of jewellery belonging to the appellant, who is not named in the FIR or prosecution complaint, is legally sustainable.

- The evidentiary burden on the parties concerning the status of the jewellery as proceeds of crime and the obligation on authorities to verify the declared assets before retention.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Whether the seized jewellery constitutes proceeds of crime under PMLA

The relevant legal framework is Section 17(4) of the Prevention of Money Laundering Act, 2002, which governs the retention of seized property alleged to be proceeds of crime. The Act mandates that the Adjudicating Authority must be satisfied that the property in question is indeed proceeds of crime before permitting its retention.

The Court noted that the jewellery was seized on 13.11.2019 and an application under Section 17(4) was made on 11.12.2019. The seizure was premised on the assertion that the jewellery was gifted by the grandmother to the accused Rakesh Wadhawan and then passed on to the appellant. However, the appellant was not named in the FIR, nor was the jewellery made part of the prosecution complaint.

The Court emphasized that the respondents failed to produce any material evidence to establish that the jewellery seized was proceeds of crime. The mere fact that the jewellery was gifted to the accused and then passed on to the appellant does not ipso facto render it proceeds of crime without corroborative evidence.

The Court applied the principle that the burden of proof lies on the appellant to show legitimate ownership, but the respondents must produce rebuttal evidence to controvert such claims. Here, the respondents did not discharge this burden.

Issue 2: Effect of disclosure of jewellery in Income Tax and Wealth Tax Returns

The appellant had disclosed the jewellery in Income Tax Returns filed since 2010, well before the FIR registration in 2019. The jewellery was also declared in Wealth Tax Returns. The Court found that the Adjudicating Authority and respondents did not dispute this disclosure.

While the respondents argued that the Income Tax Returns do not detail jewellery, the Court observed that the Wealth Tax Returns provided adequate description and valuation. The respondents were under an obligation to verify whether the seized jewellery matched the declared assets but failed to do so.

The Court reasoned that such prior disclosure negates the presumption that the jewellery is proceeds of crime, especially when the appellant is not implicated in the FIR or prosecution complaint. The Court held that the retention of jewellery without establishing it as proceeds of crime, despite its declared status, was unjustified.

Issue 3: Retention of jewellery when appellant is not named in FIR or prosecution complaint

The appellant's relationship with the accused was examined. She was married 20 years prior to the FIR registration and lived separately with no business connection to the accused. The Court noted that the jewellery was seized solely because of familial association, not due to any direct involvement in the alleged crime.

The Court found no material to implicate the appellant or to justify retention of her jewellery under the PMLA. The prosecution complaint did not include the jewellery as part of the charge sheet against the appellant.

Therefore, the Court concluded that retention of the jewellery was not sustainable in law and ordered its release subject to verification.

Issue 4: Evidentiary burden and verification obligations

The Court underscored the procedural obligation of the respondents to verify the seized jewellery against the declared assets in Income Tax and Wealth Tax Returns before permitting retention. The failure to conduct such verification undermined the basis for retention.

It was held that the respondents must produce cogent evidence to rebut the appellant's claim of legitimate ownership. Mere assumptions or familial links are insufficient to establish proceeds of crime.

The Court stressed that retention beyond the statutory period of six years requires strong justification, which was absent here.

3. SIGNIFICANT HOLDINGS

"The jewellery declared in the ITR from 2010 onwards has not been disputed by the Adjudicating Authority and even in the seizure order."

"The respondents were otherwise under an obligation to find out as to whether the jewellery disclosed in the Income-Tax Return and Wealth Tax Return for the last many years i.e. starting from 2010 is matching to the jewellery seized by the respondents."

"It is otherwise said to be the proceeds of crime which the respondents have failed to establish."

"Though the burden of proof lies on the appellant, the rebuttal evidence has to be produced by the respondents."

"In view of the above, the respondents could not supply reasons to retain the seized jewellery even after expiry of period of six years when the appellant has not been named in the FIR and even ECIR."

Core principles established include:

- Mere familial association with an accused does not justify seizure and retention of property under PMLA without evidence that the property is proceeds of crime.

- Prior disclosure of assets in Income Tax and Wealth Tax Returns is a significant factor negating the characterization of such assets as proceeds of crime.

- The authorities bear an obligation to verify seized property against declared assets before retention.

- The burden of proof for legitimate ownership lies with the appellant, but the authorities must produce rebuttal evidence to justify seizure and retention.

- Retention of property beyond the statutory period requires cogent justification, especially when the appellant is not named in the FIR or prosecution complaint.

Final determinations:

- The jewellery seized from the appellant does not constitute proceeds of crime under the PMLA.

- The seizure and retention were unjustified and contrary to the appellant's legitimate ownership evidenced by prior tax disclosures.

- The jewellery must be released after due verification within three months from the date of the order.

Issues: Whether the provisional attachment confirmed by the Adjudicating Authority was liable to be set aside on the ground that the appellant's involvement in the alleged money laundering activity was not established and that the attachment rested only on statements recorded under section 50 of the Act.

Analysis: The record disclosed material showing illegal coal excavation, theft and transportation, together with recovery and seizure of coal and supporting investigative material. The statements recorded under section 50 of the Act, including the statement of the principal accused and the appellant, indicated the appellant's participation in the illegal activity, receipt of proceeds of crime, and use of shell companies and accommodation entries to layer the funds. The statement of the chartered accountant admitting receipt of substantial amounts for creating dummy entities, together with the seized documents and other corroborative material, supported the finding that the properties were acquired out of proceeds of crime. The Tribunal also found no credible explanation for the source of funds used for the acquisitions.

Conclusion: The attachment was held to be justified and no illegality was found in the confirmation of the provisional attachment.

Final Conclusion: The challenge to the attachment failed, and the orders under appeal were sustained.

Ratio Decidendi: Statements recorded under section 50 of the Act, when corroborated by investigative material and surrounding circumstances, can furnish a prima facie basis for confirming attachment of properties believed to be derived from proceeds of crime.

Issues: (i) Whether the provisional attachment of properties alleged to represent Rs. 2.84 crores could be sustained when the amount was received through banking channels against transfer of shares in a company; (ii) Whether the attachment relating to the alleged Rs. 11 crores required interference, and if not, what protective directions were appropriate.

Issue (i): Whether the provisional attachment of properties alleged to represent Rs. 2.84 crores could be sustained when the amount was received through banking channels against transfer of shares in a company.

Analysis: The amount was received by the appellants and their entities through banking channels in consideration of transfer of shares of the company in favour of another shareholder. The material on record showed a disclosed commercial settlement and consideration for transfer of interests. On that footing, the attachment was made on a mistaken premise that the received consideration itself could be treated as proceeds of crime, without first examining the transactional source and the correct property capable of attachment. The proper subject of attachment, if at all, would have been the shares received by the other side and not the consideration lawfully received for transfer of shares.

Conclusion: The attachment to the extent of Rs. 2.84 crores was unsustainable and was set aside in favour of the appellants.

Issue (ii): Whether the attachment relating to the alleged Rs. 11 crores required interference, and if not, what protective directions were appropriate.

Analysis: The challenge to the alleged Rs. 11 crores was not accepted for release of the attached properties. At the same time, the parties agreed to maintain the existing possession and the appellant undertook not to alienate or transfer the property till conclusion of the trial. The arrangement was treated as innocuous and without prejudice to the trial court, while preserving the respondents' liberty to seek possession in an exceptional case.

Conclusion: The attachment concerning the alleged Rs. 11 crores was not interfered with, and the status quo arrangement regarding possession was directed to continue.

Final Conclusion: The appeals succeeded only to the limited extent of setting aside the attachment based on Rs. 2.84 crores, while the remaining attachment issue was maintained with protective directions preserving possession and the trial court's consideration.

Ratio Decidendi: Where money is received through banking channels as consideration for a genuine share transfer, attachment cannot be sustained merely by assuming the receipt itself to be proceeds of crime without identifying the correct property traceable to such proceeds.

Issues: Whether the provisional attachment of two immovable properties could be lawfully confirmed where (i) no allegation of sale at undervalue with respect to those purchasers appears in the FIR or ECIR and (ii) civil litigation between the vendor and purchasers over the sale is pending.

Analysis: The appeals concern provisional attachment of two office units alleged to have been sold at undervalued consideration and treated as proceeds of crime. The record shows the criminal investigation and prosecution relate to alleged offending conduct of certain promoters and their entities; no specific allegation in the FIR or ECIR asserts that the two purchasers committed the predicate offence by purchasing at undervalue. Evidence regarding payments, escrow receipts and release deeds for the units was before the adjudicating authority. The civil suit filed by the vendor to challenge the sale remains pending. The confirmation of attachment requires a connection between the property and proceeds of the predicate offence as alleged in the criminal proceedings; where no such specific allegation is made against the purchasers and parallel civil remedies are pending, converting the civil dispute into a basis for criminal attachment is not supported. The statements relied upon and the valuations adduced were examined in light of these legal constraints.

Conclusion: The provisional attachment of the two immovable properties is set aside and the appeals by the purchasers are allowed; the appeal by the Enforcement Directorate challenging that result is dismissed.

Ratio Decidendi: Provisional attachment under the Prevention of Money Laundering Act, 2002 cannot be sustained as proceeds of crime in respect of property where the FIR/ECIR does not allege the purchasers' commission of the predicate offence and where the dispute over the sale is a subject of pending civil litigation.

Issues: (i) Whether immovable properties acquired before the alleged commission of the scheduled offence could still be attached as proceeds of crime or equivalent-value property. (ii) Whether a property acquired after the period of the alleged scheduled offence could be attached on the basis of the appellant's receipt of proceeds of crime. (iii) Whether the provisional attachment satisfied the statutory requirements under the second proviso to Section 5(1) of the Prevention of Money Laundering Act, 2002.

Issue (i): Whether immovable properties acquired before the alleged commission of the scheduled offence could still be attached as proceeds of crime or equivalent-value property.

Analysis: The definition of proceeds of crime was treated as wide enough to cover not only the tainted property derived from criminal activity but also property of equivalent value where the tainted proceeds were no longer traceable. The reasoning accepted that, once the proceeds generated from the scheduled offence had been dissipated or siphoned off, attachment could extend to equivalent-value property even if acquired earlier, so long as the statutory nexus with the laundering activity was established. The appellant's plea that the properties were purchased before the offence period was therefore not decisive.

Conclusion: The issue was decided against the appellant and in favour of the respondent.

Issue (ii): Whether a property acquired after the period of the alleged scheduled offence could be attached on the basis of the appellant's receipt of proceeds of crime.

Analysis: The material showed that the appellant had received a share of the proceeds of crime, and that the total proceeds were distributed among the conspirators. The later-acquired property was therefore not insulated from attachment merely because its purchase post-dated the scheduled offence period, since the attachment was supported by the appellant's involvement in laundering and receipt of criminal proceeds. The Tribunal accepted the attachment as a consequence of the established laundering trail and the quantified benefit received by the appellant.

Conclusion: The issue was decided against the appellant and in favour of the respondent.

Issue (iii): Whether the provisional attachment satisfied the statutory requirements under the second proviso to Section 5(1) of the Prevention of Money Laundering Act, 2002.

Analysis: The Tribunal found that the statutory preconditions for provisional attachment were met on the material collected during investigation. It held that there was sufficient basis to believe that the appellant was in possession of proceeds of crime and that non-attachment could frustrate proceedings. The existence of the scheduled offence complaint and the apprehension of alienation of the properties were treated as satisfying the statutory safeguards invoked by the appellant.

Conclusion: The issue was decided against the appellant and in favour of the respondent.

Final Conclusion: The attachment was upheld and the appeal failed in entirety, with the Tribunal leaving the criminal trial unaffected and directing restraint against coercive steps except in exceptional circumstances.

Ratio Decidendi: Where proceeds of crime have been traced to laundering activity but are no longer available in their original form, property of equivalent value may be provisionally attached if the statutory conditions under Section 5 are satisfied, even if the property was acquired before or after the scheduled offence period.

1. Whether the attachment of properties mortgaged with a bank by the Enforcement Directorate (ED) under PMLA is valid and sustainable, especially when the properties are subject to prior mortgage and sale by the mortgagee bank.

2. Whether the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) and related recovery proceedings initiated by the mortgagee bank have precedence over the attachment proceedings under PMLA.

3. The rights of bona fide auction purchasers of mortgaged properties when such properties are attached by the ED under PMLA.

4. The entitlement of the liquidator or secured creditors of a company under liquidation to stake claims on attached properties during the pendency of criminal trial under PMLA.

5. The scope and applicability of Section 8(7) of PMLA, 2002, concerning disposal or release of attached properties before the conclusion of trial.

Issue-wise Detailed Analysis:

1. Validity of Attachment of Mortgaged Properties by ED under PMLA

The legal framework governing attachment of properties under PMLA is primarily found in Sections 5 and 8 of the Act. Section 5 permits the ED to provisionally attach properties involved in money laundering offences, and Section 8(7) provides for disposal or release of such properties by the Special Judge during trial.

Precedents have established that PMLA is a special statute with overriding effect over other laws, as per Section 71 of PMLA, which states that the provisions of PMLA shall have effect notwithstanding anything inconsistent in any other law.

The Court noted that the properties in question were mortgaged with the appellant bank before the alleged commission of fraud and money laundering offences. The bank had initiated SARFAESI proceedings and auctioned three flats (Sl. Nos. 2 to 4), with sale certificates issued and physical possession delivered to bona fide auction purchasers in 2015, prior to the ED's attachment order dated 28.02.2019.

The ED contended that attachment under PMLA is permissible notwithstanding prior mortgage or sale, relying on the special status of PMLA and the ongoing criminal prosecution for money laundering. The bank argued that attachment of already auctioned properties violates the rights of bona fide purchasers and that attachment of mortgaged property interferes with the bank's right to realize its dues.

The Court interpreted Section 71 of PMLA to mean that PMLA proceedings have precedence; however, it also recognized the rights of bona fide auction purchasers and mortgagees. The Court held that attachment of properties already sold and delivered to auction purchasers was improper and set aside the attachment in respect of flats at Sl. Nos. 2 to 4.

Regarding the remaining mortgaged property (Sl. No.1), the Court held that the bank's rights as secured creditor are preserved and that the bank or liquidator can seek disposal of the property under Section 8(7) of PMLA before the Special Judge, with an undertaking to deposit any excess proceeds with ED.

2. Precedence of SARFAESI and Recovery Proceedings vis-`a-vis PMLA Attachment

The bank contended that its recovery proceedings under SARFAESI and the DRT Recovery Certificate dated 28.06.2018 entitle it to realize dues by selling mortgaged properties, and that ED's attachment interferes with this right.

The ED argued that PMLA is a special law and overrides other statutes, including SARFAESI, thus attachment under PMLA is valid despite prior mortgage or recovery actions.

The Court acknowledged the special status of PMLA but clarified that Section 8(7) allows the Special Judge to dispose of attached properties after inviting claims of creditors. The bank, as a secured creditor, can approach the Special Judge for auction of mortgaged properties even before trial conclusion, subject to depositing excess proceeds with ED.

This balances the competing interests of the State's interest in preventing money laundering and the secured creditor's right to recover dues.

3. Rights of Bona Fide Auction Purchasers

The bank submitted that the flats at Sl. Nos. 2 to 4 were auctioned and sale certificates issued in 2015, with physical possession delivered to purchasers, prior to ED's attachment in 2019.

The ED's attachment of these flats was challenged as infringing on the rights of bona fide purchasers.

The Court held that bona fide auction purchasers have the right to retain ownership and possession and that attachment of these properties by ED was improper. Consequently, attachment orders in respect of these flats were set aside.

4. Rights of Liquidator and Secured Creditors in Liquidation Proceedings

The company, being under liquidation, raised issues regarding the effect of attachment on liquidation proceedings.

The Court held that the liquidator has the right to stake claims on attached properties before the Special Judge under Section 8(7) of PMLA, with an undertaking to deposit excess amounts with ED. In absence of action by the liquidator, secured creditors may also approach the Special Judge similarly.

This preserves the rights of creditors and liquidators to realize assets despite attachment under PMLA.

5. Application of Section 8(7) of PMLA

Section 8(7) provides the Special Judge with discretion to release or dispose of attached properties during trial, after hearing claims of interested parties.

The Court emphasized that this section enables creditors and liquidators to apply for disposal of attached properties, balancing the interests of investigation and recovery.

Key Evidence and Findings:

The investigation revealed that the accused officials floated shell companies and created fictitious invoices to obtain loans fraudulently from multiple banks, including Dena Bank, Andhra Bank, and Union Bank of India. The loans were diverted and laundered through these entities.

Loan amounts defaulted significantly, and the properties attached were mortgaged assets or auctioned flats.

Documents and statements from bank officials, company employees, and auction purchasers established the timeline and ownership of properties, as well as the fraudulent scheme.

Treatment of Competing Arguments:

The bank's argument that attachment interfered with its rights as secured creditor and bona fide purchasers' rights was accepted in part, leading to setting aside attachment of auctioned flats.

ED's contention of PMLA's overriding effect was accepted concerning the mortgaged property, subject to claims under Section 8(7).

The Court balanced the competing rights by allowing secured creditors and liquidators to seek disposal of attached properties under judicial supervision, preserving the integrity of money laundering proceedings while protecting legitimate creditor interests.

Significant Holdings:

"After the filing of prosecution complaint it is the prerogative of the Ld. Special Judge, PMLA Court, to release/dispose of the attached mortgaged properties at the time of conclusion of trial, after inviting claim of the creditors."

"Being a secured mortgagee of the aforementioned properties, the appellant bank is at liberty to stake its claim before learned Special Judge, PMLA Court, even before the conclusion of trial for auction of mortgaged properties, as per u/s 8(7) of the PMLA, 2002, with an undertaking to deposit the excess amount with ED by way of FDRs, if any."

"All the auction purchasers, who already purchased the flats have right to retain the ownership and possession of the properties, sold by mortgagee bank. The properties of the said auction purchasers are wrongly attached by ED, without appreciating the fact that they are bona-fide auction purchasers and sale certificates are already issued in their favour."

"The liquidator will also have right to stake the claim for other secured & unsecured creditors, before learned Special Judge, PMLA Court, even before the conclusion of trial for auction of properties, as per u/s 8(7) of the PMLA, 2002, with an undertaking to deposit the excess amount (if any) with ED by way of FDRs."

"It is made clear that nothing expressed herein will affect the right of any party in the criminal trials."

These holdings establish the principle that while PMLA has overriding effect, the rights of bona fide purchasers and secured creditors are protected by judicial mechanisms under the Act, particularly Section 8(7). The Court upheld the balance between anti-money laundering objectives and legitimate proprietary and creditor rights.