Issues: (i) Whether the properties attached were proceeds of crime having a sufficient nexus with the alleged scheduled offences and the money-laundering allegations; (ii) Whether the appellant discharged the burden under the Act to show that the attached properties were acquired from legitimate sources; (iii) Whether the provisional attachment lacked the statutory basis of reason to believe under the Act.

Issue (i): Whether the properties attached were proceeds of crime having a sufficient nexus with the alleged scheduled offences and the money-laundering allegations.

Analysis: The allegations disclosed a classic Ponzi-type operation in which funds were collected from the public on promises of unusually high returns, initial payouts were made to build confidence, and thereafter defaults followed. The collected money was diverted and reinvested through group entities and used to acquire immovable assets. On these facts, the attached properties were treated as having been acquired from the very funds generated through the criminal activity and as being traceable to the scheduled offences.

Conclusion: The attached properties were held to be connected with proceeds of crime and were not shown to be untainted assets.

Issue (ii): Whether the appellant discharged the burden under the Act to show that the attached properties were acquired from legitimate sources.

Analysis: Once the enforcement case established the statutory foundation, the burden shifted to the appellant to explain the legitimate source of acquisition. The plea that the amounts were personal loans and not investments was not supported by documentary material. In the absence of proof of lawful source, the explanation was found insufficient to displace the presumption operating under the Act.

Conclusion: The appellant failed to discharge the burden of proving legitimate acquisition.

Issue (iii): Whether the provisional attachment lacked the statutory basis of reason to believe under the Act.

Analysis: The fact that the appellant was in custody did not eliminate the possibility of dealing with the properties through associates or other intermediaries. The material showed an operating network of collaborators and the real risk that the property could be dealt with in a manner frustrating confiscation proceedings. The statutory satisfaction for provisional attachment was therefore held to exist.

Conclusion: The attachment was not vitiated for want of reason to believe.

Final Conclusion: The confirmation of provisional attachment was sustained because the seized properties were found to be linked to the alleged laundering activity, the appellant failed to rebut the statutory burden, and the attachment was supported by the requisite statutory satisfaction.

Ratio Decidendi: Where public funds collected through a fraudulent investment scheme are traced into assets, and the person in control fails to prove lawful acquisition, the properties may be confirmed as proceeds of crime and attached if the statutory satisfaction for preventive action exists.

(i) Whether the Provisional Attachment Order (PAO) lapsed due to the expiry of the statutory period under Section 5(1) and 5(3) of the PMLA, and if so, whether the confirmation order passed by the Adjudicating Authority is ineffective;

(ii) Whether the impugned property can be attached even though the appellant was never charged with any predicate offence, and the chargesheet was filed only against her husband and others;

(iii) Whether the property in question was legitimately purchased by the appellant through financial assistance from her daughter, thereby excluding it from being proceeds of crime;

(iv) Whether the property purchased after the alleged period of offence (2004-2008) can be attached under the PMLA.

Issue (i): Validity and Lapse of Provisional Attachment Order

The relevant legal framework under Section 5 of the PMLA prescribes that a provisional attachment order is provisional in nature, valid for 180 days (150 days before amendment), and must be confirmed by the Adjudicating Authority within this period. The officer issuing the PAO must forward it to the Adjudicating Authority, which then adjudicates the matter. If the order is not confirmed within the prescribed period, it lapses.

The appellant contended that the PAO dated 14.02.2013 lapsed as the confirmation order was passed on 18.01.2019, well beyond the 150-day period applicable before amendment. The appellant also argued that the period during which the proceedings were stayed by the High Court should be excluded, but even after exclusion, the confirmation was delayed.

The Tribunal analyzed the timeline and procedural history and noted several points:

• There was no record of when the High Court's order lifting the stay (04.10.2018) was communicated to the Adjudicating Authority;
• The statutory 30-day period to challenge the High Court order before the Supreme Court must be excluded;
• Counting from the resumption of proceedings, the confirmation order was passed within 134 days, i.e., within the 180-day limit;
• The appellants did not seek resumption of proceedings or submit defense documents promptly after the stay was vacated;
• The amended 180-day period applies in the absence of any saving clause, and procedural law amendments do not confer substantive rights retroactively;
• The purpose of attachment proceedings is to protect the property pending investigation and trial to avoid rendering the confiscation process nugatory.

The Tribunal emphasized the legislative intent behind the PMLA to safeguard properties suspected to be proceeds of crime until trial conclusion, noting that releasing the property prematurely would frustrate the entire prosecution process.

Therefore, the Tribunal concluded that the PAO did not lapse and the confirmation order is valid and effective.

Issue (ii): Attachment of Property Without Charges Against the Owner

The appellant argued that since she was never charged with any predicate offence and only her husband was charged, the property in her name could not be attached.

The Tribunal referred to binding Supreme Court precedent which clarified that the scope of Section 5(1) PMLA is not limited to persons charged with the predicate offence. It extends to any person involved in activities connected with proceeds of crime, regardless of whether they are formally accused of the scheduled offence. The objective of the PMLA is to target proceeds of crime wherever held.

The Court quoted the Supreme Court's reasoning that "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," and that the Act reaches "the proceeds of crime in whosoever's name they are kept or by whosoever they are held."

Accordingly, the Tribunal held that the property could be attached even if the appellant was not charged with the predicate offence.

Issue (iii): Claim of Legitimate Source of Funds from Daughter

The appellant claimed the property was purchased using financial assistance from her daughter, and thus was not proceeds of crime.

The Tribunal examined the evidence, including prior Income Tax proceedings where the appellant's claim was rejected and the property cost was added to her income. The Tribunal noted that the Income Tax Appellate Tribunal (ITAT) had allowed the appeal on the basis of a gift from the daughter, but the ED was not bound by this decision and had to form an independent view.

Documentary evidence showed that the daughter's funds were transferred into her NRE account and cheques were issued to unrelated third parties rather than directly to the sellers. The sellers denied receiving payments from these intermediaries, and bank statements did not show transfers to the sellers from the daughter's account.

The appellant failed to provide bank statements evidencing regular income of the daughter or legitimate transfer of funds. The burden under Section 24 of the PMLA to prove the legitimate source of property was not discharged.

The Tribunal found the appellant's explanation doubtful and held that the property was likely purchased from proceeds of crime generated by her husband.

Issue (iv): Attachment of Property Purchased After the Alleged Period of Offence

The appellant contended that since the property was purchased on 27.04.2009, after the alleged offence period of 2004-2008, it could not be attached.

The Tribunal held that money laundering is a continuing offence and proceeds of crime can be traced and attached even if the property is acquired after the period of the predicate offence. The fruits of crime cannot be allowed to be enjoyed beyond the offence period.

Since the appellant failed to prove a legitimate source for the property, and it was apparently purchased from proceeds of crime, the property was rightly attached.

Significant Holdings

The Tribunal's crucial legal reasoning includes:

"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."

"The purpose of the attachment proceedings is to protect the property, till the conclusion of the investigation of the offence of money laundering and after filing of prosecution complaint, till the conclusion of trial."

"Money laundering being a continued offence and property can be attached, as & when it comes to the knowledge of the investigation agency."

In conclusion, the Tribunal dismissed the appeal, affirming the validity of the provisional attachment and confirmation orders, holding that properties can be attached even if the owner is not charged with predicate offences, rejecting the claim of legitimate source of funds from the daughter, and upholding attachment of property purchased after the offence period due to the continuing nature of money laundering offences. The decision preserves the legislative intent of the PMLA to effectively combat money laundering by preventing dissipation of proceeds of crime pending trial.

The core legal questions considered by the Appellate Tribunal under PMLA in this matter include:

• Whether the provisional attachment of the flat owned by the accused, which was mortgaged to the appellant financial institution, is valid under the Prevention of Money Laundering Act, 2002 (PMLA), given that the loan was sanctioned prior to the alleged criminal activity and the property was purchased before the predicate offence.
• Whether the property mortgaged to the appellant, a cooperative housing finance corporation, can be treated as proceeds of crime solely on the basis that the loan EMIs were paid from proceeds of crime.
• The interplay and overriding effect of PMLA vis-`a-vis the provisions of the Delhi Cooperative Societies Act (DCS Act) and the rights of a secured creditor under the latter.
• The applicability and interpretation of the definition of "proceeds of crime" under Section 2(1)(u) of PMLA, especially regarding "untainted property" or "property equivalent in value" and the extent to which properties acquired prior to the commission of the scheduled offence can be attached.
• The protection of bona fide third-party interests, particularly those of secured creditors who have acted in good faith and extended loans for the acquisition of the property.
• The scope and applicability of Sections 8(7) and 8(8) of PMLA for restoration or release of property to legitimate claimants after attachment or confiscation orders.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Attachment of Property Mortgaged to Appellant under PMLA

Legal Framework and Precedents: The PMLA empowers authorities to provisionally attach properties which are proceeds of crime or equivalent in value under Section 5 and confirm attachment under Section 8. The definition of "proceeds of crime" under Section 2(1)(u) includes (i) property derived or obtained directly or indirectly from criminal activity, (ii) untainted property equivalent in value where tainted property is untraceable, and (iii) property held abroad equivalent in value. The Delhi High Court's judgment in Axis Bank (2019) elaborates on these limbs and safeguards for bona fide third parties. Section 140 of the DCS Act provides overriding effect to its provisions in respect of cooperative societies.

Court's Interpretation and Reasoning: The Tribunal acknowledged that the appellant cooperative housing finance corporation (DCHFC) is not involved in the predicate offence or money laundering offence. The loan was sanctioned in 2012, prior to the alleged criminal activity commencing in 2015. The loan amount was paid directly to DDA for the flat purchase. The provisional attachment was made in December 2015 and confirmed in June 2016. The Impugned Order treated the property as proceeds of crime because EMIs were paid from proceeds of crime.

The Tribunal referred to the Axis Bank judgment, which balances the sovereign prerogative to confiscate proceeds of crime against the protection of bona fide third-party interests. The Court emphasized that a secured creditor's legitimate interest, if acquired bona fide and for lawful consideration, cannot be defeated merely because the property is attached under PMLA. The legislative scheme itself, including Section 8(8) PMLA, allows restoration of property to legitimate claimants even after confiscation.

Key Evidence and Findings: The appellant had extended a loan of Rs. 50 lakhs in 2012, paid directly to the DDA. The accused admitted that EMIs were partly paid from proceeds of crime. The respondents accepted the loan details and claimed that 50% of EMIs were paid through lawful means. The investigation revealed that the accused was involved in complex forex remittances abroad through fake companies and fraudulent documents, generating proceeds of crime used for loan repayment.

Application of Law to Facts: The Tribunal held that although the property was acquired prior to the predicate offence, the fact that EMIs were paid from proceeds of crime taints the property under the first limb of Section 2(1)(u). However, the appellant's bona fide interest as a secured creditor cannot be defeated at this stage. The property is subject to attachment, but the appellant is entitled to seek protection of its interest under Sections 8(7) and 8(8) of PMLA.

Treatment of Competing Arguments: The appellant argued that the loan was sanctioned and the property acquired before the offence, and the DCS Act provides overriding effect to its security interest. The respondent contended that the property is proceeds of crime as the loan EMIs were paid from tainted funds, and PMLA overrides the DCS Act under Section 71. The Tribunal reconciled these by recognizing the overriding effect of PMLA but preserving the appellant's right to approach the Special Court for restoration or release of the property.

Conclusion: The attachment is valid under PMLA as the property is deemed tainted due to repayment through proceeds of crime. However, the appellant's bona fide secured interest is protected by allowing it to invoke the jurisdiction of the Special Court under Sections 8(7) and 8(8) for restoration or release of the property.

Issue 2: Interpretation of "Proceeds of Crime" and Attachment of Properties Acquired Prior to Predicate Offence

Legal Framework and Precedents: Section 2(1)(u) PMLA defines "proceeds of crime" broadly to include property directly or indirectly derived from criminal activity, as well as untainted property equivalent in value where tainted property cannot be traced. The Delhi High Court in Axis Bank elaborated that the definition covers "tainted property" and "deemed tainted property" (untainted property equivalent in value). The Prakash Industries judgment reaffirmed this interpretation and criticized narrower readings such as in Seema Garg. The Supreme Court in Vijay Madanlal Choudhary also upheld the wide definition, emphasizing legislative intent to recover proceeds of crime effectively.

Court's Interpretation and Reasoning: The Tribunal relied on these authoritative pronouncements to hold that properties acquired prior to the commission of the scheduled offence are not immune from attachment if they are "deemed tainted property" under the second or third limb of the definition. The property can be attached if it is equivalent in value to the proceeds of crime which cannot be traced. The safeguards for bona fide third parties remain applicable.

Key Evidence and Findings: The property in question was purchased in 2012, before the alleged money laundering activities commenced in 2015. However, the accused repaid the loan EMIs from proceeds of crime generated through fraudulent forex remittances. This fact brings the property within the ambit of "proceeds of crime" as per the second limb of the definition.

Application of Law to Facts: The Tribunal applied the broad definition of proceeds of crime to include the property since it was acquired with loan repayments made from tainted funds. The property is thus "deemed tainted" and liable for attachment under PMLA.

Treatment of Competing Arguments: The appellant relied on the timing of acquisition and loan sanction to argue immunity from attachment. The respondent emphasized the broad definition and the fact that the property is indirectly tainted through repayment. The Tribunal aligned with the broader interpretation and the legislative intent to cover such situations.

Conclusion: The property is rightly attached under PMLA as "proceeds of crime" including "deemed tainted property" under Section 2(1)(u), notwithstanding its acquisition prior to the predicate offence.

Issue 3: Protection of Bona Fide Third Party Interests and Remedies under Sections 8(7) and 8(8) of PMLA

Legal Framework and Precedents: Section 8(7) and 8(8) of PMLA provide for restoration of property to claimants with legitimate interest who have acted in good faith and taken all reasonable precautions, even after attachment or confiscation orders. The Axis Bank judgment emphasized the balance between State's prerogative and protection of bona fide third parties. The legislative scheme contemplates protection for secured creditors acting bona fide.

Court's Interpretation and Reasoning: The Tribunal recognized that the appellant is a bona fide secured creditor who extended the loan in good faith without involvement in criminal activity. The appellant's inability to recover dues due to attachment causes prejudice. The Tribunal granted liberty to the appellant to file applications under Sections 8(7) and 8(8) before the Special Court to protect its interest and seek restoration or release of the property.

Key Evidence and Findings: The appellant is not an accused and has no nexus with the predicate offence. The loan was sanctioned and disbursed lawfully. The appellant's claim is for recovery of dues secured by mortgage on the property.

Application of Law to Facts: The Tribunal applied the safeguard provisions under PMLA to preserve the appellant's rights and provide a forum for adjudication of its claims without defeating the attachment order.

Treatment of Competing Arguments: The respondent argued that the attachment should not be disturbed. The appellant sought protection of its interest. The Tribunal balanced these by upholding attachment but allowing the appellant to seek relief under the statutory provisions.

Conclusion: The appellant's bona fide secured interest is protected by permitting invocation of Sections 8(7) and 8(8) of PMLA before the Special Court, ensuring procedural safeguards and fairness.

Issue 4: Overriding Effect of PMLA vis-`a-vis DCS Act and Other Recovery Laws

Legal Framework and Precedents: Section 71 of PMLA provides that the provisions of PMLA shall have effect notwithstanding anything inconsistent in any other law. The Axis Bank judgment clarified that the objects of various legislations such as RDBA, SARFAESI Act, Insolvency Code, and PMLA are distinct with no overlap, but PMLA has overriding effect in cases of proceeds of crime.

Court's Interpretation and Reasoning: The Tribunal held that while the DCS Act provides security interest to the appellant, PMLA's overriding effect applies in cases of proceeds of crime. Thus, the attachment order under PMLA prevails over the security interest under DCS Act. However, this does not extinguish the appellant's rights to seek restoration or release of the property under PMLA's procedural safeguards.

Key Evidence and Findings: The appellant's contention on the overriding effect of DCS Act was considered but found subordinate to PMLA's provisions in cases involving proceeds of crime.

Application of Law to Facts: The attachment under PMLA stands valid notwithstanding the appellant's mortgage rights under DCS Act.

Treatment of Competing Arguments: The appellant argued for primacy of DCS Act; the respondent relied on PMLA's overriding effect. The Tribunal applied the statutory scheme to uphold PMLA's primacy while preserving the appellant's procedural remedies.

Conclusion: PMLA's provisions override the DCS Act in attachment of proceeds of crime, but bona fide secured interests are protected through PMLA's procedural safeguards.

3. SIGNIFICANT HOLDINGS

"An order of attachment under PMLA, if it meets with the statutory pre-requisites, is as lawful as an action initiated by a bank or financial institution, or a secured creditor, for recovery of dues legitimately claimed or for enforcement of secured interest in accordance with RDBA or SARFAESI Act. An order of attachment under PMLA is not rendered illegal only because a secured creditor has a prior secured interest (charge) in the subject property. Conversely, mere Issuance of an order of attachment under PMLA cannot, by itself, render illegal the prior charge or encumbrance of a secured creditor, this subject to such claim of the third party (secured creditor) being bonafide." (Paragraph 149, Axis Bank judgment)

"The legislation on money-laundering, as is the case of similarly placed other legislations providing for forfeiture or confiscation of Illegally acquired assets, contains sufficient safeguards to protect the interest of such third parties as may have acted bonafide. Such safeguards and rights to secure their lawful interest in the property subjected to attachment (with intent to take it to confiscation) have already been noticed at length with reference to the statutory provisions." (Paragraph 150, Axis Bank judgment)

"Properties which were acquired prior to the enforcement of the Act may not be completely immune from action under the Act... properties purchased prior to 01 July 2005 may also become vulnerable and subject to action under the Act... bona fide rights acquired by third parties prior to the commission of the predicate offense would stand saved." (Paragraph 105, Prakash Industries judgment)

"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." (Paragraph 68, Vijay Madanlal Choudhary, Supreme Court)

"Among the three kinds of attachable properties mentioned above, the first may be referred to as 'tainted property'... The second and third kinds... would ordinarily be 'untainted property'... but are intended to fall in the net because their owner is involved in the proscribed criminality and the tainted assets held by him are not traceable... the confiscation to be eventually ordered must be restricted to the value of illicit gains from the crime." (Paragraphs 106-107, Axis Bank judgment)

"While the DCS Act provides security interest to the appellant, PMLA's overriding effect applies in cases of proceeds of crime... the attachment order under PMLA prevails over the security interest under DCS Act." (Paragraph 14, present judgment)

Final determinations:

• The provisional attachment and confirmation of the flat under PMLA is valid as the property is deemed tainted due to repayment of loan EMIs from proceeds of crime.
• The appellant, a bona fide secured creditor, is not involved in criminal activity and its interest cannot be defeated by the attachment order.
• The appellant is granted liberty to invoke Sections 8(7) and 8(8) of PMLA before the Special Court to seek restoration or release of the property.
• The PMLA provisions override the DCS Act in attachment of proceeds of crime but preserve bona fide third-party rights through procedural safeguards.

Issues: (i) Whether the confirmation of attachment of the jointly held flat could stand when no notice under section 8(1) of the Prevention of Money Laundering Act, 2002 was served on the joint holder; (ii) Whether the provisional attachment and its confirmation in respect of the properties standing in the name of the other appellant were sustainable, including on the grounds of proceeds of crime, reasons to believe, retraction of statement, cross-examination and retrospectivity.

Issue (i): Whether the confirmation of attachment of the jointly held flat could stand when no notice under section 8(1) of the Prevention of Money Laundering Act, 2002 was served on the joint holder.

Analysis: The property was found to be held jointly. The statutory scheme of section 8(1) requires notice to all persons holding the property where it is jointly held. The record did not show service of notice on the deceased joint holder, and no contrary material was produced. In the absence of compliance with the mandatory notice requirement, the confirmation order could not be sustained for that property.

Conclusion: The issue is answered in favour of the assessee, and the attachment of the jointly held flat is set aside.

Issue (ii): Whether the provisional attachment and its confirmation in respect of the properties standing in the name of the other appellant were sustainable, including on the grounds of proceeds of crime, reasons to believe, retraction of statement, cross-examination and retrospectivity.

Analysis: The attachment was supported by material showing that the properties were traceable to tainted funds and that the appellants had not established lawful sources for the acquisitions. The recorded material and bank enquiries were treated as corroborative of the earlier statement made before the income-tax authorities. The later retraction was not accepted as sufficient to displace the earlier inculpatory material. The Tribunal also held that the requirement under section 5(1) was satisfied by recording reasons to believe, that non-communication of those reasons did not vitiate the action, that cross-examination was not required at the provisional attachment stage, and that the attachment was not hit by retrospectivity.

Conclusion: The issue is answered against the assessee, and the confirmation of attachment of the properties in the name of the other appellant is upheld.

Final Conclusion: The appeal succeeds only to the limited extent of the jointly held flat, while the remaining attachment and confirmation order are sustained.

Ratio Decidendi: In proceedings under the Prevention of Money Laundering Act, 2002, a jointly held property cannot be confirmed for attachment without notice to all joint holders, while attachment of properties may be sustained where the material establishes proceeds of crime and the statutory preconditions for provisional attachment are met.

Issues: (i) Whether immovable properties acquired before the commencement of the Prevention of Money Laundering Act, 2002 and before the alleged scheduled offence could be attached; (ii) Whether the attached properties lacked nexus with the alleged proceeds of crime; (iii) Whether the provisional attachment was invalid for want of compliance with the second proviso to Section 5(1); (iv) Whether the requirements of Section 5(1)(a) and (b) were not satisfied; (v) Whether the appellant proved a lawful source of income for acquiring the properties; (vi) Whether the settlement deeds in favour of the appellant and her sister required the attachment to be set aside; (vii) Whether the attachment was unsustainable for want of an independent investigation by the Enforcement Directorate.

Issue (i): Whether immovable properties acquired before the commencement of the Prevention of Money Laundering Act, 2002 and before the alleged scheduled offence could be attached.

Analysis: The definition of proceeds of crime in Section 2(1)(u) of the Prevention of Money Laundering Act, 2002 was read to include not only tainted property but also property attached as equivalent value where the actual tainted property is unavailable. The attachment of pre-enactment properties was therefore treated as permissible when they represent equivalent value after diversion or siphoning of proceeds of crime.

Conclusion: The issue was answered against the appellant.

Issue (ii): Whether the attached properties lacked nexus with the alleged proceeds of crime.

Analysis: Once the attachment was sustained as equivalent value property in the absence of traceable direct proceeds of crime, a separate direct nexus between the specific attached property and the original proceeds of crime was held not to be necessary. The reasoning proceeded on the basis that the proceeds had been diverted and layered, and the attached assets represented their equivalent value.

Conclusion: The issue was answered against the appellant.

Issue (iii): Whether the provisional attachment was invalid for want of compliance with the second proviso to Section 5(1).

Analysis: The record was held to contain sufficient material and statements indicating illegal acquisition, attempted transfer of the properties through settlement deeds, and a likelihood that the properties could be concealed, transferred, or otherwise dealt with so as to frustrate proceedings. On that basis, the emergency attachment under the second proviso to Section 5(1) was treated as justified.

Conclusion: The issue was answered against the appellant.

Issue (iv): Whether the requirements of Section 5(1)(a) and (b) were not satisfied.

Analysis: The Tribunal held that the appellant was in possession of property linked to proceeds of crime and that the material on record showed a real likelihood of concealment or diversion, especially in view of the prior transfer of the properties by settlement deeds. The conditions for provisional attachment were therefore found to be fulfilled.

Conclusion: The issue was answered against the appellant.

Issue (v): Whether the appellant proved a lawful source of income for acquiring the properties.

Analysis: The appellant was found not to have produced convincing documentary evidence such as bank statements or other records establishing regular lawful income sufficient to acquire the attached assets. The explanation based on later settlement deeds was treated as insufficient to displace the material showing that the properties were acquired from illicitly generated funds.

Conclusion: The issue was answered against the appellant.

Issue (vi): Whether the settlement deeds in favour of the appellant and her sister required the attachment to be set aside.

Analysis: The settlement deeds were viewed as post-fraud transactions intended to give an appearance of legality to property already traced to unlawful acquisition. They did not break the connection between the assets and the laundering process, and were not accepted as a ground to undo the attachment.

Conclusion: The issue was answered against the appellant.

Issue (vii): Whether the attachment was unsustainable for want of an independent investigation by the Enforcement Directorate.

Analysis: It was held that the Enforcement Directorate is not required to re-investigate the predicate offence and may rely on the investigation by the police or CBI for that purpose. Its role is confined to examining whether proceeds of crime were generated, laundered, layered, or are likely to be dissipated, and whether the claimants of attached assets are genuine.

Conclusion: The issue was answered against the appellant.

Final Conclusion: The provisional attachment orders were upheld and the appeals failed on all substantial grounds, while preserving the parties' rights in the criminal trials and restraining coercive action in the manner indicated by the Tribunal.

Ratio Decidendi: Under the Prevention of Money Laundering Act, 2002, property may be provisionally attached as equivalent value property where direct proceeds of crime are unavailable, and such attachment can be sustained on recorded reasons to believe that the property is likely to be concealed, transferred, or otherwise dealt with so as to frustrate confiscation proceedings.

Issues: Whether the appeals against confirmation of provisional attachment under the Prevention of Money Laundering Act, 2002 could be disposed of as not pressed, and whether interim restraint against coercive action concerning the attached properties could be granted pending finality of the trial.

Outcome: The appeals were disposed of as not pressed, liberty was granted as prayed, and the Enforcement Directorate was directed to refrain from taking coercive steps till the PMLA trial attains finality.

Issues: Whether the provisional attachment of the properties was justified on the ground that they were involved in money-laundering and represented diverted funds traceable to the alleged proceeds of crime.

Analysis: The Tribunal found that multiple FIRs had been registered against the principal company and its directors for cheating, breach of trust, forgery and conspiracy, and that the enforcement investigation had traced a money trail showing diversion of customer advances through group entities for acquisition of land. It noted that the attached properties were linked to a structured chain of transactions, including transfers to land-holding entities and subsequent acquisition of assets, while the appellants failed to explain the source and commercial purpose of the transactions satisfactorily. The Tribunal also accepted the forensic audit material and investigative findings indicating large-scale irregularities, misutilisation of funds and laundering of the amounts collected from homebuyers.

Conclusion: The attachment was held to be justified, and the challenge to the impugned order failed.

Ratio Decidendi: Properties traceable to diverted funds forming part of proceeds of crime may be provisionally attached where the record discloses a prima facie case of money-laundering and a sufficient nexus between the assets and the alleged offence.

ISSUES PRESENTED AND CONSIDERED

1. Whether the immovable property of the company confirmed for attachment by the Adjudicating Authority under the Prevention of Money Laundering Act, 2002 (PMLA) constitutes "proceeds of crime" within the meaning of Section 2(1)(u) of the PMLA.

2. Whether the Insolvency and Bankruptcy Code, 2016 (IBC) (specifically Section 238) has overriding effect over the PMLA (specifically Section 71) such that liquidation proceedings and the liquidator's powers to realise assets prevail over PMLA attachment and restraint.

3. Whether, and on what terms, the liquidator may be permitted to realise/auction attached property to satisfy the claims of secured and unsecured creditors while preserving the ED's (Enforcement Directorate's) rights under PMLA and the criminal trial.

4. Whether the material placed before the Adjudicating Authority (including statements recorded under Section 50 and documentary material) was sufficient to form a "reasonable belief" for confirmation of the Provisional Attachment Order (PAO), and what issues remain for determination by the Special Judge in the criminal trial (including alleged collusion of bank officials).

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Whether the attached property is "proceeds of crime" under PMLA

Legal framework: PMLA defines "proceeds of crime" in Section 2(1)(u) and allows provisional attachment under Section 17 and confirmation by Adjudicating Authority where reasonable belief exists that property represents proceeds of crime; Adjudicating Authority must be satisfied on material produced.

Precedent Treatment: The judgment relies on the Adjudicating Authority's exercise of forming reasonable belief on the basis of investigation material and recorded statements; no earlier binding authority is expressly relied upon to alter the standard of proof for confirmation.

Interpretation and reasoning: The Court notes that investigation by competent agencies produced documentary material, searches and recovered incriminating documents at several premises; statements under Section 50 were recorded; and an extensive finance trail and modus operandi (false stock statements, diversion of CC limits to group companies, bogus invoices to avail CENVAT etc.) were alleged pointing to diversion/misuse of bank funds and fictitious transactions. The Adjudicating Authority's confirmation was based on such material leading to a reasonable belief that identified assets were value-equivalent to proceeds of crime.

Ratio vs. Obiter: Ratio - where credible investigative material, including statements and documentary records, indicate diversion of bank funds and fictitious transactions causing large bank losses, an Adjudicating Authority may form a reasonable belief to confirm provisional attachment; the sufficiency is a matter for the Authority and ultimately for the criminal court to decide on merits. Obiter - detailed evaluation of whether each identified property individually constitutes proceeds of crime is reserved for trial.

Conclusions: The Court accepts that the Adjudicating Authority was entitled to form a reasonable belief on the material before it and to confirm the PAO; however, ultimate determination of guilt, pinpointing of proceeds and issues such as collusion remain for the Special Judge in criminal proceedings.

Issue 2 - Conflict of laws: supremacy of IBC (Section 238) vis-à-vis PMLA (Section 71)

Legal framework: PMLA contains Section 71 providing non-obstante clause giving PMLA effect notwithstanding inconsistency with other laws; IBC contains Section 238 providing similar non-obstante effect for the Code. General principle invoked: where two later-enacted statutes contain similar overriding clauses and are otherwise inconsistent, the provisions of the later Act prevail to the extent of inconsistency.

Precedent Treatment (followed/distinguished): The Tribunal refers to a Supreme Court direction in Sterling Biotech context (sale in liquidation on a clean-slate basis) to conclude the position that the IBC framework may, in appropriate circumstances, supersede inconsistent earlier provisions; the Tribunal treats that decision as supporting the proposition that later enactments prevail in absence of express saving clauses.

Interpretation and reasoning: Both statutes contain identical non-obstante language; the Tribunal reasons that where an inconsistency exists and there is no saving clause, the later-enacted statute (IBC) will prevail. The practical effect, in the Tribunal's view, is that the liquidator's statutory duty to realise assets for distribution under the IBC cannot be completely frustrated by PMLA attachment; instead, a mechanism compatible with PMLA rights must be adopted to protect victims/creditors while preserving ED's interest and criminal process.

Ratio vs. Obiter: Ratio - where the IBC (a later Act) contains a general overriding provision and there is inconsistency with an earlier special Act's non-obstante clause, the later provision will prevail to the extent of conflict, permitting the liquidator to take steps under the IBC subject to protective measures for the PMLA authority. Obiter - the Tribunal's remarks as to broader precedence of IBC in all circumstances are qualified by requirement of reconciliation and by the absence of a final criminal determination.

Conclusions: The Tribunal holds that IBC's provisions have effect notwithstanding inconsistency and that this legal position permits the liquidator to seek to realise assets under IBC processes, subject to appropriate safeguards to protect the PMLA authority's claim (deposit of excess with ED in FDR and adjudication by Special Judge thereafter).

Issue 3 - Whether liquidator may auction attached property and the terms/conditions

Legal framework: IBC provides the liquidator powers to realise assets to satisfy creditor claims; PMLA allows attachment and confiscation processes and preservation of assets pending adjudication. Section 8(7) of PMLA (application to Special Judge) and the Court's power to permit steps subject to protective undertakings are invoked.

Precedent Treatment: The Tribunal relies on the interplay between statutes and the principle permitting limited relief to liquidator where later act prevails; the Tribunal treats the Sterling Biotech outcome as supportive of sale in liquidation subject to the criminal proceedings.

Interpretation and reasoning: Balancing creditors' rights under IBC and enforcement interest under PMLA, the Tribunal permits the liquidator to move the Special Judge under Section 8(7) of PMLA for auction sale of the attached property, subject to an undertaking to deposit any excess sale proceeds (if any) with ED in the form of an FDR. The Tribunal reasons this mechanism protects the ED's claim (value equivalent of proceeds) while enabling satisfaction of secured and unsecured creditors and is consistent with the later-enacted IBC.

Ratio vs. Obiter: Ratio - the liquidator may be permitted to seek auction of attached assets under the IBC mechanism, provided a judicially supervised undertaking is given to secure excess proceeds with the enforcement authority pending trial, and the Special Judge can dispose of the FDR after conclusion of trial as per law. Obiter - procedural specifics of auction conduct and distribution priorities are left to the IBC framework and the Special Judge's directions.

Conclusions: The Tribunal authorises the liquidator to apply to the Special Judge under Section 8(7) PMLA for auction sale, on condition of depositing any excess with ED as FDR, which will be disposed by the Special Judge after trial - thereby reconciling creditor-realisation with preservation of PMLA rights.

Issue 4 - Sufficiency of material for confirmation of PAO and matters reserved for trial (including alleged bank collusion)

Legal framework: Adjudicating Authority under PMLA may confirm PAO on reasonable belief supported by material; criminal court (Special Judge) determines guilt and issues like collusion and detailed tracing of proceeds; accused has right to contest in trial.

Precedent Treatment: The Tribunal accepts the Adjudicating Authority's role in forming reasonable belief on available material; simultaneous or subsequent criminal adjudication remains separate.

Interpretation and reasoning: The Tribunal records that the Adjudicating Authority was satisfied by the investigative material (statements, recovered documents, show-cause notices, CENVAT irregularities, diversion of funds, bogus invoices) to confirm the PAO. However, whether bank officials colluded or were complicit in sanctioning/releasing loans and taking title deeds is a factual and legal issue appropriate for trial before the Special Judge, not for resolution on the present appeal.

Ratio vs. Obiter: Ratio - confirmation of PAO requires only reasonable belief based on material; ultimate issues such as collusion and whether specific properties are proceeds of crime are matters for trial. Obiter - the Tribunal's observation that collusion "is not ruled out" and must be decided at trial is prospective guidance, not a final finding.

Conclusions: The Tribunal upholds that the Adjudicating Authority's confirmation of PAO was supportable on the material produced, but leaves all contested factual and legal determinations (including alleged collusion and tracing of proceeds) to the Special Judge in the criminal proceedings.

Disposition and Ancillary Directions (consequential to the above conclusions)

1. The liquidator is permitted to approach the Special Judge, PMLA Court, under Section 8(7) for auction of the attached property to satisfy creditor claims under IBC, subject to an undertaking to deposit any excess sale proceeds with ED in the form of an FDR.

2. The deposited FDR (if any) will be dealt with by the Special Judge after conclusion of the PMLA trial as per law; nothing in this order affects either party's rights in the criminal trials.

3. Final adjudication on guilt, tracing of proceeds, and issues such as bank collusion remain for the Special Judge and are not determined by the present appellate order.

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

• Whether the immovable property (a flat) purchased by the appellant is proceeds of crime and liable to be attached under the PMLA;
• Whether the appellant's acquisition of the flat was through known and legitimate sources or out of proceeds of crime;
• Whether the Adjudicating Authority committed any error or illegality in confirming the provisional attachment order without independently verifying the source of funds or evidence beyond the appellant's statements under section 50 of the PMLA;
• Whether the appellant was obligated to disclose the sources of funds under section 8(1) of the PMLA and whether failure to do so justifies the attachment;
• Whether the valuation and sale price of the flat, being lower than its previous market value, impacts the genuineness of the transaction;
• Whether the appellant's role as an empaneled lawyer who submitted false verification and valuation reports for properties mortgaged to obtain loans from the financial institution connects him to the predicate offence and money laundering.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Whether the flat purchased by the appellant is proceeds of crime and liable to attachment under the PMLA

Relevant legal framework and precedents: Under the PMLA, property involved in money laundering, i.e., proceeds of crime, can be provisionally attached and subsequently confiscated. The Adjudicating Authority must have reason to believe that the property is proceeds of crime, and the person in possession must be called upon to disclose the source of acquisition under section 8(1).

Court's interpretation and reasoning: The Tribunal found that the appellant, as an empaneled lawyer for SBI, submitted false title investigation and valuation reports for two properties that were mortgaged as collateral security to obtain a loan for M/s Mahavir Impex Pvt. Ltd. The properties were not in the name of the mortgagor, rendering the loan acquisition fraudulent. This established a predicate offence under sections 120B, 420, 471 IPC and Prevention of Corruption Act.

Further, the appellant purchased a flat from Mrs. Manisha Nath, wife of one of the main accused, Kaushik Kumar Nath, at a price significantly lower than its earlier purchase value. The flat was found to be proceeds of crime, given the nexus of the appellant with the accused involved in the fraudulent loan transaction and money laundering.

Key evidence and findings: The charge sheet and FIR against the accused for fraudulently obtaining loans, the false verification reports submitted by the appellant, and the chain of transactions involving the flat, including loans extended by the appellant to relatives of the accused and payments made in cash and through banking channels, were critical evidence.

Application of law to facts: The Tribunal applied section 8(1) of the PMLA, which requires the person in possession of attached property to disclose the source of acquisition. The appellant failed to satisfactorily disclose the source of funds used to acquire the flat, particularly the cash payments and loans extended to relatives of the accused. The transaction's undervaluation and connection to the predicate offence led to the conclusion that the flat was proceeds of crime.

Treatment of competing arguments: The appellant argued that the purchase was from known sources, the flat was bought at a fair market value as per circle rates, and no independent evidence linked him to the crime. The Tribunal rejected these contentions, noting absence of documentary proof of circle rates, failure to disclose sources despite statutory obligation, and the appellant's involvement in the fraudulent loan scheme.

Conclusions: The Tribunal held that the flat is proceeds of crime and liable to attachment under the PMLA.

Issue 2: Whether the Adjudicating Authority erred in confirming the attachment without independent evidence beyond appellant's statements under section 50 of the PMLA

Relevant legal framework and precedents: Section 50 of the PMLA allows recording of statements of persons involved. However, confirmation of attachment requires the Adjudicating Authority to consider all evidence and not rely solely on statements.

Court's interpretation and reasoning: The Tribunal noted that the Adjudicating Authority considered the entire factual matrix, including the charge sheet, FIR, and the appellant's role in submitting false reports. The appellant's statements under section 50 were part of the evidence but not the sole basis for attachment.

Key evidence and findings: The Adjudicating Authority's order reflected consideration of documentary evidence, financial transactions, and the appellant's failure to disclose legitimate sources of funds.

Application of law to facts: The Tribunal found no error or illegality in the Adjudicating Authority's approach and confirmed the attachment.

Treatment of competing arguments: The appellant contended that independent evidence was lacking and that reliance on his statement was improper. The Tribunal rejected this, emphasizing the cumulative evidence and statutory framework.

Conclusions: No error was found in confirmation of attachment by the Adjudicating Authority.

Issue 3: Obligation of the appellant to disclose source of funds under section 8(1) of the PMLA and consequences of failure

Relevant legal framework and precedents: Section 8(1) mandates that the Adjudicating Authority serve notice on persons in possession of attached property to disclose sources of income or assets and show cause against confiscation.

Court's interpretation and reasoning: The Tribunal held that the appellant was under a statutory obligation to disclose the source of funds used to acquire the flat. The appellant's argument that he was not called upon to disclose the source was rejected, as the show cause notice itself served that purpose.

Key evidence and findings: The appellant failed to produce bank statements or other documentary evidence to verify the source of funds, particularly for cash payments.

Application of law to facts: The absence of disclosure and documentary proof, coupled with the appellant's involvement in the predicate offence, justified the attachment.

Treatment of competing arguments: The appellant's contention that he was not asked to disclose sources was found to be without merit.

Conclusions: The failure to disclose sources under section 8(1) supports the attachment of the property.

Issue 4: Impact of undervaluation of the flat and previous market value on genuineness of transaction

Relevant legal framework and precedents: Genuine market transactions must reflect fair consideration; significant undervaluation may indicate a sham transaction or transfer of proceeds of crime.

Court's interpretation and reasoning: The flat was purchased for Rs. 24 lakhs in 2022, whereas it was registered at Rs. 40 lakhs in 2010. The Tribunal rejected the appellant's claim of depreciation or circle rate justification, noting absence of documentary proof and the suspicious nature of the undervaluation.

Key evidence and findings: Registration documents, absence of credible valuation evidence, and the context of the transaction being linked to proceeds of crime.

Application of law to facts: The Tribunal considered the undervaluation as an indicator of the transaction being part of money laundering.

Treatment of competing arguments: The appellant's argument on fluctuating property values was dismissed due to lack of evidence.

Conclusions: The undervaluation supports the finding that the transaction was not genuine and involved proceeds of crime.

Issue 5: Appellant's role as empaneled lawyer submitting false reports and its connection to predicate offence and money laundering

Relevant legal framework and precedents: Participation in the commission of predicate offences, such as fraud and corruption, can establish involvement in money laundering under the PMLA.

Court's interpretation and reasoning: The appellant's false verification reports facilitated the fraudulent loan from SBI, which was a predicate offence. This established a link between the appellant and the proceeds of crime.

Key evidence and findings: The false title investigation and valuation reports, charge sheet against the accused, and the appellant's involvement were crucial.

Application of law to facts: The Tribunal applied the principle that persons facilitating predicate offences can be considered involved in money laundering.

Treatment of competing arguments: The appellant did not contest this role beyond purchase of the flat.

Conclusions: The appellant's role in the predicate offence strengthens the case for attachment of property as proceeds of crime.

3. SIGNIFICANT HOLDINGS

"Section 8(1) provides for notice to the person in possession of the property or holding it to disclose the source for acquisition of such a property and that it is not proceeds of crime."

"The appellant was under obligation to know the provision of section 8(1) of the Act of 2002 and thereby to disclose the source. He was not required to be invited rather it was given in the show cause notice by the Adjudicating Authority itself."

"If the Registrar has registered the document on a lower value, it would not endorse or hold the transaction to be genuine in the background of the case."

"Without existence of the two properties in the name of Mr. Subal Halder for mortgage, the appellant as a lawyer certified the properties and accordingly bank advanced the loan and later on, it was found that verification of the property was false in the hands of the appellant. He bestowed favour to Kaushik Nath who remained successful in generation of the proceeds of crime by obtaining the loan in fraudulent manner and thereafter laundering it. The benefit was passed on to the appellant also and accordingly the respondents have taken it to be the proceeds of crime."

The Tribunal established the principle that failure to disclose source of funds under section 8(1) of the PMLA, combined with involvement in predicate offences, justifies attachment of property as proceeds of crime. Mere reliance on circle rates or registration value does not validate a transaction tainted by fraud and money laundering. The Adjudicating Authority's confirmation of provisional attachment without independent evidence beyond statements under section 50 is not erroneous when considered with the entire factual matrix.

Final determination: The appeal is dismissed, confirming the attachment of the flat in the hands of the appellant as proceeds of crime under the PMLA.

- Whether the mortgaged properties assigned to the appellant, being secured assets under an Assignment Deed from a consortium bank, can be attached as proceeds of crime under the Prevention of Money Laundering Act, 2002 (PMLA) in the context of alleged money laundering linked to bogus commodity trades on the National Spot Exchange Limited (NSEL) platform.

- Whether the attachment of such mortgaged properties by the Enforcement Directorate (ED) is justified without direct evidence that these properties were purchased or created from the proceeds of crime.

- Whether the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), which empower secured creditors to enforce their security interests, have precedence over the provisions of PMLA in respect of the mortgaged properties.

- The scope and manner in which a secured creditor, after assignment of loan assets, can enforce its claim against mortgaged properties attached under PMLA proceedings.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legitimacy of Attachment of Mortgaged Properties as Proceeds of Crime under PMLA

Relevant legal framework and precedents: PMLA, 2002 empowers the ED to provisionally attach properties believed to be proceeds of crime and subsequently seek confirmation of such attachment from the Adjudicating Authority. The Adjudicating Authority must form a reasonable belief based on material and statements recorded under Section 50 of PMLA that the property is involved in money laundering activities.

Court's interpretation and reasoning: The Court noted that the properties in question were mortgaged to Andhra Bank as security for loans sanctioned from 2003 onwards, well before the registration of the FIR in 2013 and the commission of the scheduled offence. However, the ED contended that the loans were diverted and laundered through bogus commodity trades on the NSEL platform, making the properties tainted proceeds of crime.

Key evidence and findings: Investigation revealed that NSEL allowed trading on commodities without ensuring actual stocks in warehouses, resulting in bogus trades worth approximately Rs. 5600 crores. M/s NCS Sugars Ltd., one of the defaulters, admitted to selling sugar through paper transactions without corresponding physical stock, and diverted funds received from NSEL to repay loans and meet business expenses. Income Tax verification also showed gross discrepancies between stocks recorded and actual physical stocks in warehouses.

Application of law to facts: The Adjudicating Authority, relying on statements recorded under Section 50 and documentary evidence, formed a reasonable belief that the properties assigned to the appellant were involved in laundering proceeds of crime. The Court affirmed that the attachment was legally sustainable under PMLA.

Treatment of competing arguments: The appellant argued that the properties were mortgaged prior to the offence and thus could not be proceeds of crime. The ED countered that the loans themselves were misused in the laundering scheme, rendering the properties tainted. The Court observed that mere timing of mortgage creation is not conclusive; actual use of funds and involvement of assets in laundering are determinative.

Conclusions: The attachment of mortgaged properties under PMLA was justified given the material indicating their involvement in laundering proceeds derived from bogus trades and criminal conspiracy.

Issue 2: Precedence of SARFAESI Act over PMLA in Enforcement of Security Interest

Relevant legal framework and precedents: The SARFAESI Act enables secured creditors to enforce security interests, including sale of mortgaged properties, to recover dues. PMLA, as a special statute, contains Section 71 which provides that its provisions shall have overriding effect over other laws.

Court's interpretation and reasoning: The Court rejected the appellant's contention that SARFAESI provisions prevail over PMLA. It held that PMLA being a special law dealing with money laundering offences and confiscation of proceeds of crime, supersedes other laws including SARFAESI in cases involving proceeds of crime.

Key evidence and findings: The Court noted that the attachment of properties under PMLA is a statutory measure to prevent dissipation of tainted assets pending trial and adjudication. The SARFAESI Act does not confer any right to dispose of properties attached under PMLA without permission of the Special Court.

Application of law to facts: Since the properties were provisionally attached under PMLA, the appellant cannot enforce its security interest independently under SARFAESI without following the procedure prescribed under PMLA.

Treatment of competing arguments: The appellant's reliance on SARFAESI was countered by the ED's submission on the overriding effect of PMLA and the need to protect proceeds of crime from premature disposal.

Conclusions: PMLA provisions override SARFAESI in matters involving attachment of proceeds of crime; hence, SARFAESI cannot be invoked to defeat PMLA attachment.

Issue 3: Rights and Remedies of the Secured Creditor (Appellant) in Respect of Attached Mortgaged Properties

Relevant legal framework and precedents: Section 8(7) of PMLA allows a secured creditor to stake claim to attached properties and seek auction sale subject to conditions including depositing excess sale proceeds with the ED.

Court's interpretation and reasoning: The Court observed that the ED's approach was to attach the mortgaged properties without tracing the actual diverted loan funds. The appellant, as an assignee of the secured creditor, is entitled to stake claim before the Special Judge, PMLA Court, for auction sale of the mortgaged properties even before the trial concludes.

Key evidence and findings: The appellant holds an Assignment Deed transferring loan claims and prior charge on the properties. The Court recognized the appellant's right to recover dues through auction sale under PMLA safeguards.

Application of law to facts: The Court granted liberty to the appellant to apply for auction sale before the Special Court, subject to furnishing an affidavit/undertaking to deposit any excess amount realized beyond the claim with the ED. The Special Court may invite objections from other parties before permitting sale.

Treatment of competing arguments: While the ED opposed release of properties, the Court balanced interests by allowing secured creditor's remedy with safeguards to protect proceeds of crime and other claimants.

Conclusions: The appellant is permitted to enforce its security interest through auction sale under PMLA procedures, ensuring protection of all parties' rights pending trial.

3. SIGNIFICANT HOLDINGS

- "PMLA being a special Act and proceedings under PMLA get precedence over other Acts in terms of Section 71 of the Act."

- "The appellant AARC is at liberty to stake its claim before learned Special Judge, PMLA Court, even before the conclusion of trial under section 8(7) of PMLA, 2002, for auction sale of the mortgaged immovable property, being a secured creditor, alongwith an affidavit/ undertaking that in case of excess amount realised during the auction sale, the same will be deposited with ED by way of FDRs."

- "Before permitting auction sale Ld. Special Judge, PMLA Court, may invite the objection of the other interested parties, if so required. The said FDRs be disposed of as per law amongst the other claimants, after conclusion of trial."

- The Court confirmed the Adjudicating Authority's reasonable belief formed on material and statements recorded under Section 50 of PMLA that the properties assigned to the appellant were involved in laundering proceeds of crime.

- The Court clarified that mere prior mortgage of properties does not exclude them from attachment if the funds secured by such mortgage were diverted or used in money laundering activities.

1. Whether the Enforcement Directorate (ED) was justified in retaining the seized properties, documents, digital records, and bank accounts of the appellants beyond 365 days, especially given the delay in filing the prosecution complaint (PC) after the impugned order.

2. Whether the appellants were involved in the commission of the scheduled offence of money laundering and whether there was sufficient evidence to establish a direct link between the appellants and the proceeds of crime.

3. Whether the Adjudicating Authority validly recorded the "reason to believe" required under the PMLA for confirmation of the provisional attachment order (PAO) and retention of the seized properties.

Issue 1: Validity of Retention of Seized Properties Beyond 365 Days and Delay in Filing Prosecution Complaint

The relevant legal framework includes Section 8(3) of the PMLA, which permits the provisional attachment of property involved in money laundering for a maximum period of 365 days, subject to confirmation by the Adjudicating Authority. The appellants contended that the ED failed to file the prosecution complaint within 365 days from the order dated 13.02.2024, as the PC was filed only on 28.03.2025, thus rendering the retention of the seized properties illegal.

The Court noted that the purpose of attachment proceedings under the PMLA is to protect the property involved in the offence until the conclusion of investigation and trial. The Court emphasized that the seized properties were included in the list of properties for confiscation in the prosecution complaint. Therefore, the filing of the prosecution complaint, even if delayed, does not invalidate the retention of the properties. The Court further observed that allowing release of the properties at this stage would render the investigation and trial infructuous, as the government would be unable to confiscate the properties if the accused are convicted.

The Court distinguished this from previous limited provisions under the Criminal Amendment Ordinance, 1944, and Sections 451 and 452 of the CrPC, highlighting the broader scope and intent of the PMLA to protect proceeds of crime through attachment until trial conclusion.

Thus, the Court rejected the appellants' contention that delay in filing the prosecution complaint invalidated the retention of the seized properties.

Issue 2: Involvement of Appellants in the Scheduled Offence and Link to Proceeds of Crime

The appellants argued that they were not involved in the alleged offences, were not named in the predicate offence chargesheets, and that no direct link was established between them and the proceeds of crime. They also submitted that they had cooperated by furnishing financial details and tax records.

The Court analyzed the evidence collected by the ED and CBI, including statements recorded under Section 17 of the PMLA, which revealed admissions by the appellants regarding receipt of funds from the proceeds of the fraudulent scholarship scheme. Specifically:

• Appellant 1 admitted that money received in his bank account originated from withdrawals from M/s ITFT Consultancy Pvt. Ltd., which ran the implicated institute.
• Appellant 3 admitted receiving Rs. 1.92 crore from ITFT Consultancy Pvt. Ltd. for services but failed to provide documentary evidence.
• Appellant 4 admitted receiving remuneration from ITFT Consultancy Pvt. Ltd. without formal appointment.

Further, the investigation revealed that scholarship funds disbursed to students were diverted fraudulently to private institutes' accounts and subsequently to the appellants' accounts, without students' knowledge or consent. The Court held that possession of proceeds of crime by any person, even if not named in the predicate offence or prosecution complaint, falls within the scope of Section 5(1) of the PMLA.

The Court relied on binding Supreme Court precedents, including:

• Union of India v. J.P. Singh, which clarified that the complaint under Section 44 of the PMLA relates to the offence and not necessarily to the accused named, and that attachment can be made even if the person is not shown as accused in the complaint.
• Vijay Madanlal Choudhary and Ors. vs. Union of India, which established that the PMLA's objective is to attach and confiscate proceeds of crime irrespective of whether the person is an accused in the predicate offence, thereby extending the attachment to any person involved in the proceeds of crime.

The Court concluded that the attachment of property in possession of the appellants was not arbitrary and was justified based on the incriminating material and admissions.

Issue 3: Recording of "Reason to Believe" by the Adjudicating Authority for Confirmation of PAO

The appellants contended that the Adjudicating Authority failed to record any reasonable grounds or "reason to believe" for confirming the provisional attachment order and retention of properties.

The Court examined the role of the Adjudicating Authority, which is to form an initial opinion on the existence of "reason to believe" that the property is involved in money laundering offences, based on the material submitted by the investigating agency.

The Court referred to the judgment in Pay Perform India Private Limited vs. Union of India, which held that the Adjudicating Authority's primary function is to form a "proper and fair opinion" on the existence of reason to believe, and thereafter confirm the attachment until disposal of the case by the Special Court.

The Court found that the Adjudicating Authority had validly recorded a prima facie case against the appellants and had sufficient incriminating material to justify the retention of the properties. Therefore, the contention of the appellants was rejected.

Significant Holdings and Core Principles

"The purpose of the attachment proceedings is to protect the property, till the conclusion of the investigation of the offence of money laundering and after filing of prosecution complaint, till the conclusion of trial."

"There is no dispute that the complaint is based on ECIR dated 17th March, 2017 in which the respondent was shown as one of the accused. Moreover, clause (a) will apply during the continuation of the proceedings relating to an offence under the PMLA in a Court. ... It is not necessary for the applicability of clause (a) that the person affected by the order under Section 8(3) must be shown as an accused in the complaint."

"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 primary function of the Adjudicating Authority is to form an initial opinion as to existence of the 'reason to believe' that an offence that whether the property is involved in the offence of money laundering and thereafter to make the order of attachment absolute, until the disposal of the case by the Special Court."

The Tribunal dismissed the appeals, holding that:

• The delay in filing the prosecution complaint beyond 365 days did not invalidate the retention of seized properties, as the purpose of attachment is to protect the property until trial conclusion.
• The appellants were found to be in possession of proceeds of crime and the attachment was justified even though they were not named in the predicate offence chargesheets or prior prosecution complaints.
• The Adjudicating Authority properly recorded the reason to believe for confirming the provisional attachment order.
• No coercive action shall be taken against the appellants' frozen accounts without the Trial Court's permission or trial conclusion.

(i) Whether the properties mortgaged with the appellant bank, which were attached by the Enforcement Directorate (ED) under PMLA, can be released or disposed of by the bank in light of the ongoing proceedings under PMLA and the existence of a resolution plan approved under the Insolvency and Bankruptcy Code (IBC), 2016;

(ii) The interplay between the provisions of PMLA and the IBC, specifically the application and scope of Section 32A(2) of the IBC regarding protection of property of a corporate debtor during the Corporate Insolvency Resolution Process (CIRP) against attachment or other actions for offences committed prior to the CIRP;

(iii) The rights and entitlements of a secured creditor (appellant bank) whose mortgage properties have been attached by ED in a money laundering investigation;

(iv) The procedural and substantive requirements for disposal or auction of mortgaged properties attached under PMLA, including the role of the Special Judge, PMLA Court, and whether the existence of an approved resolution plan before the National Company Law Tribunal (NCLT) affects the attachment and disposal of such properties;

(v) The extent to which the ED can attach mortgaged properties purchased during the period of alleged commission of offences and subsequently mortgaged to banks for availing credit facilities.

Issue-wise Detailed Analysis:

Issue (i) & (ii): Whether properties mortgaged with the appellant bank and attached by ED can be released or disposed of in light of PMLA proceedings and an approved resolution plan under IBC; Interaction between PMLA and IBC provisions

The relevant legal framework includes the Prevention of Money Laundering Act, 2002, the Insolvency and Bankruptcy Code, 2016, and particularly Section 32A(2) of the IBC. Section 32A(2) states that no action shall be taken against the property of the corporate debtor in relation to an offence committed prior to the commencement of the CIRP, where such property is covered under a resolution plan approved by the Adjudicating Authority under Section 31 of the IBC. However, this protection is subject to two exceptions: the person taking control or acquiring liquidation assets should not be (i) a promoter or related party of the corporate debtor, or (ii) a person against whom the investigating authority has reason to believe had abetted or conspired in the commission of the offence.

The Court interpreted this provision as a clear safeguard to protect the property of the corporate debtor during CIRP, preventing any action against such property in relation to prior offences, provided the above conditions are met. The Tribunal noted that determination of whether these conditions are satisfied is within the jurisdiction of the NCLT or higher appellate forums, not the Appellate Tribunal under PMLA.

Accordingly, the Tribunal held that it cannot stay or interfere with the execution of the resolution plan merely because the properties are attached by ED under PMLA. The resolution plan approved by the Committee of Creditors for M/s D S Kulkarni Developers Ltd. allows for disposal of the properties as per its terms before the NCLT. Thus, the IBC provisions take precedence in protecting the resolution process and the property involved therein.

Issue (iii): Rights of the secured creditor (appellant bank) whose mortgaged properties are attached by ED

The appellant bank contended that it had granted credit facilities secured by mortgage over the properties in question. The bank's loan accounts became Non-Performing Assets (NPA), and the debtors failed to repay the outstanding dues. The bank argued it is a victim of the fraud and should not be deprived of its security by the attachment of properties by ED.

The Tribunal acknowledged the bank's status as a secured creditor and its right to realize dues from mortgaged properties through auction. However, it emphasized that the attachment by ED is lawful under PMLA, particularly since the properties were purchased during the period of the alleged offences and subsequently mortgaged. The Tribunal clarified that if the resolution plan fails or cannot be executed, the bank may apply to the Special Judge, PMLA Court, under Section 8(7) of PMLA for auction of the properties, subject to depositing any excess proceeds with ED for disposal after trial conclusion.

Issue (iv): Procedural and substantive requirements for disposal or auction of mortgaged properties attached under PMLA and effect of resolution plan approval by NCLT

The Respondent ED argued that mortgaged properties cannot be auctioned without prior approval of the Special Judge, PMLA Court, even if a resolution plan is approved by NCLT. The ED contended that PMLA is a special law and its proceedings have precedence over other laws, per Section 71 of PMLA. Therefore, any resolution plan involving disposal of attached properties must be presented before the PMLA Court to protect unsecured creditors' interests.

The Tribunal agreed that the Special Judge, PMLA Court, has jurisdiction to dispose of mortgaged properties after trial conclusion, but clarified that the resolution plan approved by the Committee of Creditors and NCLT can proceed as per IBC terms. The Tribunal granted liberty to the appellant to move the Special Judge for auction if the resolution plan fails, with an undertaking to deposit excess sale proceeds with ED. This balances the interests of secured creditors and the enforcement of PMLA proceedings.

Issue (v): Validity of ED attachment of mortgaged properties purchased during the offence period and mortgaged to banks

The ED's investigation revealed that the accused committed frauds involving approximately Rs. 1100 crores during 2006-2016. The properties in question were purchased during this period and later mortgaged to banks. The Tribunal accepted the ED's contention that such properties are liable to attachment under PMLA as proceeds of crime or involved in money laundering, notwithstanding their mortgage to banks.

The Court reasoned that the attachment is valid and lawful, as the properties were acquired during the offence period and are connected to the proceeds of crime. The mortgage to banks does not confer immunity from attachment under PMLA, but the rights of secured creditors are protected through the mechanisms discussed above.

Conclusions:

The Tribunal concluded that the attachment of mortgaged properties by ED under PMLA is valid and cannot be set aside merely because the properties are mortgaged to a bank or a resolution plan under IBC exists. The execution of the resolution plan approved by the Committee of Creditors and NCLT may proceed, with the proviso that if the plan fails, the secured creditor may seek auction of the properties through the Special Judge, PMLA Court, subject to depositing excess proceeds with ED. The Tribunal held that the PMLA proceedings and the criminal trials remain unaffected by this order.

Significant Holdings:

"No action shall be taken against the property of the corporate debtor in relation to an offence committed prior to the commencement of the corporate insolvency resolution process of the corporate debtor, where such property is covered under a resolution plan approved by the Adjudicating Authority under Section 31..." (Section 32A(2) IBC)

"The only two safeguards provided under this sub-section state that the person taking control of the corporate debtor, or participating in the sale of liquidation assets should not be, (i) a promoter or in the management or control of the corporate debtor or a related party of such a person; or, (ii) a person with regard to whom the relevant investigating authority has, on the basis of material in its possession reason to believe that he had abetted or conspired for the commission of the offence..."

"This Appellate Tribunal cannot stop the proceedings for execution of resolution plan, just because the mortgaged properties are attached by ED."

"In case, the said resolution plan fails or could not be executed, then appellant is at liberty to move application before Ld. Special Judge, PMLA Court under Section 8(7) of PMLA, 2002 for auction sale of the properties, as per law, with an undertaking to deposit the excess amount (if any) with ED..."

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

Issues: (i) Whether the absence of a predicate offence or scheduled offence vitiated the ECIR and the consequent seizure proceedings; (ii) Whether the alleged non-supply of reasons to believe and relied upon documents under section 8(1) vitiated the impugned order; (iii) Whether the statements recorded under section 50 and the material relied upon were sufficient to sustain the finding against the appellant and explain the seized cash and gold.

Issue (i): Whether the absence of a predicate offence or scheduled offence vitiated the ECIR and the consequent seizure proceedings.

Analysis: The material on record showed that the initial FIR was later supplemented by the offence under section 384 IPC and, in the transferred Chhattisgarh investigation, also included offences under the Prevention of Corruption Act, 1988 and Section 420/120-B IPC. The Tribunal relied on the earlier determination that the existence of a scheduled offence is to be assessed with reference to the predicate case as it stood and that absence of discharge, acquittal, or quashing by a competent court does not erase the predicate character of the offence. On that basis, the challenge that no predicate offence survived was rejected.

Conclusion: The challenge failed; the ECIR and seizure were not vitiated for want of a predicate offence.

Issue (ii): Whether the alleged non-supply of reasons to believe and relied upon documents under section 8(1) vitiated the impugned order.

Analysis: The appellant did not place the show-cause notice and related material on record, and therefore the alleged non-disclosure could not be verified. In the absence of the foundational documents necessary to establish the alleged procedural breach, the Tribunal declined to accept the contention of non-compliance with section 8(1).

Conclusion: The procedural objection was rejected.

Issue (iii): Whether the statements recorded under section 50 and the material relied upon were sufficient to sustain the finding against the appellant and explain the seized cash and gold.

Analysis: The Tribunal accepted the statement of the associate of the main accused, which implicated the appellant in receipt of money from the syndicate, and also relied on the appellant's own statement recorded under section 50. The plea of coercion and retraction was disbelieved because no retraction letter was produced. The explanation that the seized cash represented temple donations was treated as an afterthought, unsupported by documents establishing the appellant's role or authority. The Tribunal therefore held that the appellant failed to account for the source of the seized assets.

Conclusion: The reliance on the statements and the rejection of the source-of-funds explanation were sustained against the appellant.

Final Conclusion: The order confirming seizure was upheld and the appeal was dismissed.

Ratio Decidendi: In money-laundering proceedings, where the predicate offence remains in existence and the alleged procedural lapse is not established from the record, statements recorded under section 50 and other reliable material may be used to sustain seizure or attachment if the person concerned fails to prove a lawful source of the property.

Issues: (i) Whether appellants secured by mortgage of the attached properties are entitled to be permitted to realise their dues by auction or otherwise, despite attachment by Enforcement Directorate under the Prevention of Money Laundering Act, 2002?

Analysis: The appeals challenge confirmation of attachment of properties mortgaged to secured creditors. The legal framework includes the Prevention of Money Laundering Act, 2002 which permits attachment and confers precedence as a special Act; and the procedure for claim and disposal of attached property including applications under the Act. The Tribunal examined competing contentions: that secured creditors may enforce SARFAESI remedies and realise securities, and that PMLA proceedings and attachment may limit or regulate such enforcement. The Tribunal sanctioned a route for secured creditors to stake claim before the Special Judge under the PMLA by filing an application under the Act, subject to an affidavit/undertaking regarding deposit of any excess realisation and allowing the Special Judge to invite objections and dispose of any excess funds as per law after trial.

Conclusion: Permission is granted to the secured creditors to move an application before the Special Judge under the Prevention of Money Laundering Act, 2002 to stake their claim and seek auction of the mortgaged properties; such application must be accompanied by an affidavit/undertaking to deposit any excess realisation (by way of fixed deposit receipt) with the Enforcement Directorate, and the Special Judge may invite objections and dispose of excess funds among claimants as per law.

Issues: Whether the appellant had a sustainable grievance against attachment of the building constructed on leased land, and whether the lease terms and absence of termination of lease justified interference with the attachment order.

Analysis: The attachment was directed against the building and superstructure built on land leased to the accused for a long period, not against the land title as such. The lease deed showed that the lessee was authorised to construct the industrial unit, that the ownership of the leased premises remained with the State during the lease period, and that no notice of termination or rescission of the lease had been issued by the appellant. The appellant had accepted premium and annual rent, and the challenge was found to lack a real grievance of its own because releasing the attached structure would benefit the accused. In these circumstances, the appeal was viewed as lacking merit and as supporting the accused's interest rather than protecting any enforceable right of the appellant.

Conclusion: The challenge to the attachment order was rejected and the appeal was dismissed.

Issues: Whether the provisional attachment could be sustained in respect of a property already mortgaged, taken into possession, and auctioned by the secured creditor before the attachment order, and whether the secured creditor's rights would prevail over the enforcement attachment.

Analysis: The property in question had been mortgaged in favour of the appellant before the impugned attachment. The secured creditor had initiated measures under the SARFAESI framework, taken possession, and conducted auction proceedings prior to the provisional attachment. On these facts, the property had already been brought within the secured creditor's enforcement process and was stated to have been sold in auction before the attachment was ordered. In such a situation, the attachment could not displace the prior rights of the secured creditor and the completed auction process. At the same time, any surplus realised over and above the secured debt was required to be preserved for claim before the appropriate forum.

Conclusion: The attachment was not sustained against the auctioned secured asset, and the appellant's auction sale was maintained. The appellant was, however, directed to deposit any excess amount realised in the form of FDR for possible claim by the unsecured creditors before the Special Judge, PMLA Court.

Final Conclusion: The appeal succeeded to the extent of protecting the appellant's prior secured enforcement and auction rights, while leaving the surplus sale proceeds to be dealt with in accordance with the direction issued.

Ratio Decidendi: A prior secured creditor who has already enforced its security and completed auction of the mortgaged property before a provisional attachment cannot have that auction displaced by the attachment, though any surplus realised may be preserved for distribution according to law.

The core legal questions considered by the Appellate Tribunal were:

• Whether the impugned order permitting retention and freezing of bank amounts, mutual funds, shares, securities, and seized records including digital devices was valid under the applicable legal framework.
• Whether the appellants were denied the principles of natural justice by not being served with the complaint filed by the Income Tax Department, and whether non-supply of the complaint and relied-upon documents (RUD) prejudiced the appellants' ability to defend themselves effectively.
• Whether the Enforcement Directorate was obliged to supply documents relied upon by the Income Tax Department in the prosecution, or only those documents in its possession and reliance.
• The correctness of the findings regarding the appellants' connection to the offshore company and the alleged undisclosed foreign assets.
• Whether the appellants' application for supply of documents and other procedural requests were bona fide or intended to delay or frustrate proceedings.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the order permitting retention and freezing of assets and seizure of records

The legal framework relevant to this issue includes Section 51 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 ("the Act of 2015") and the Prevention of Money Laundering Act, 2002 ("the Act of 2002"), particularly Section 17(1) regarding search and seizure.

The appellants were alleged beneficial owners of an offshore company, Blue Bell Express Limited, registered in the British Virgin Islands, with bank accounts in Singapore. The Income Tax Department had initiated prosecution and passed an assessment order under Section 10(3) of the Act of 2015 for the Assessment Year 2018-19, quantifying undisclosed foreign assets worth Rs. 13,09,09,804/- and imposing tax accordingly.

The Enforcement Directorate conducted searches under Section 17(1) of the Act of 2002 at various premises of the appellants, seizing incriminating documents, electronic devices, and freezing bank and Demat accounts. The Adjudicating Authority allowed retention of these seized records and frozen assets.

The Tribunal noted that the appellants did not dispute their connection with the offshore entity or the bank accounts, and no argument was advanced denying involvement or ownership. The factual matrix showed substantial documentary and electronic evidence linking the appellants to the offshore company and its bank accounts, including nominee agreements, KYC documents, passports, and bank statements obtained from foreign authorities.

Applying the law to these facts, the Tribunal found no infirmity in the order permitting retention and freezing of assets, as the seizure was in accordance with the provisions of the Act of 2002 and supported by the predicate offence under the Act of 2015.

Issue 2: Alleged violation of principles of natural justice due to non-service of complaint and non-supply of relied-upon documents

The appellants contended that they were not served with the Income Tax Department's complaint, which formed the basis of the Enforcement Directorate's reasons to believe under Section 8(1) of the Act of 2002. They argued that non-supply of the complaint and relied-upon documents prevented effective defense and violated natural justice.

The Tribunal examined the procedural history and correspondence. It was established that the appellants were facing prosecution before the Chief Metropolitan Magistrate on the complaint filed by the Income Tax Department, and therefore had access to the complaint and related documents in that forum.

The Enforcement Directorate, as the respondent, was obligated only to supply documents in its possession and relied upon, not those held by the Income Tax Department. The Tribunal observed that some of the relied-upon documents were supplied to the appellants after their written requests, and the appellants failed to specify which documents remained undisclosed.

The Tribunal held that the appellants' plea of non-service of complaint was misplaced because the complaint was available to them in the prosecution proceedings. The request for documents held by the Income Tax Department was beyond the Enforcement Directorate's obligation. Hence, no violation of natural justice occurred in this regard.

Issue 3: Whether the appellants' application for documents was bona fide or a delaying tactic

The appellants sought copies of the application under Section 17(4) of the Act of 2002, reasons to believe, and official correspondence with the Income Tax Department. The Tribunal noted that the reasons to believe were served along with the notice, and some documents were supplied after the appellants' requests.

The Tribunal found that the appellants had full knowledge of the material facts, including their beneficial ownership of the offshore company and bank accounts, and the assessment order imposing tax. The appellants did not deny or rebut these facts.

Accordingly, the Tribunal concluded that the appellants' repeated requests for documents and complaints of non-supply were designed to delay or frustrate the proceedings rather than to mount a genuine defense.

Issue 4: Connection of appellants with offshore company and undisclosed foreign assets

The Tribunal reviewed the certified information received from foreign authorities, including the British Virgin Islands and Singapore, which established the appellants' beneficial ownership of Blue Bell Express Limited, nominee agreements, bank account details, KYC documents, and bank statements showing credit entries.

The appellants did not dispute these facts or provide evidence to negate their connection. The Income Tax Department had already passed an assessment order under Section 13 of the Act of 2015 quantifying undisclosed foreign assets and imposing tax.

The Tribunal applied the law to these undisputed facts and found the appellants were rightly held liable under the Act of 2015 and the Enforcement Directorate's actions under the Act of 2002 were justified.

3. SIGNIFICANT HOLDINGS

The Tribunal held, inter alia:

"We do not find that the appellant was not served documents relied upon by the respondent... The appellant is, otherwise, facing the prosecution lodged by the Income Tax Department and thus Counsel for the appellant could not show that the relevant material and documents apart from the information was not given to him in the prosecution lodged against the appellant."

"The appellant had no defence against the complaint sent by the Income Tax Department to which even the appellant is facing the prosecution and otherwise Assessment Order has been passed against him."

"The application by the appellant for service of documents was designed only to delay or otherwise frustrate the proceedings in view of the fact that the appellant had no defence against the complaint."

"We don't find a case to cause interference in the impugned order of seizure of documents and freezing of bank accounts and also of the cash. However, the order would remain subject to final outcome of the prosecution case against the appellants. If they are discharged therein, the documents and the movable assets can be released in their favour."

The core principles established include:

• The Enforcement Directorate's obligation to supply relied-upon documents is limited to those in its possession, not documents held by other agencies such as the Income Tax Department.
• Facing prosecution on the same subject matter before a competent court implies availability of the complaint and related documents, negating claims of non-service.
• Retention and freezing of assets and seizure of documents under the Act of 2002 are justified when supported by predicate offences under the Act of 2015 and corroborated by evidence.
• Procedural requests for documents must be bona fide and not used as tactics to delay or frustrate proceedings.

Final determinations on each issue were that the impugned order of retention, freezing, and seizure was upheld; no violation of natural justice was found; the appellants' claims of non-service were rejected; and the appeals were disposed of without interference, subject to the outcome of the prosecution.

Issues: (i) whether the attachment and confirmation of attachment of the two office units could be sustained when the appellants had settled the civil dispute and returned the units to the complainants, and the criminal case against them had been closed; (ii) whether the seizure and retention of cash, documents and digital devices could be sustained in the absence of a surviving predicate offence and in light of the settlement and closure report.

Issue (i): Whether the attachment and confirmation of attachment of the two office units could be sustained when the appellants had settled the civil dispute and returned the units to the complainants, and the criminal case against them had been closed.

Analysis: The attachment related to two office units which, on the facts found, no longer remained with the appellants. The dispute concerning those units had been settled in civil proceedings and the criminal case against the appellants had been closed. In those circumstances, there was no basis to continue treating the units as property liable to attachment against the appellants.

Conclusion: The attachment of the two office units was not sustainable and was interfered with in favour of the appellants.

Issue (ii): Whether the seizure and retention of cash, documents and digital devices could be sustained in the absence of a surviving predicate offence and in light of the settlement and closure report.

Analysis: The seized items included cash, documents and digital devices recovered from the appellants and their offices. The Tribunal found that the respondent could not justify continued retention once the predicate proceedings had ended in closure and the related civil dispute had been settled. On those facts, the seized material could not be retained as proceeds of crime against the appellants.

Conclusion: The seizure and retention of the cash, documents and digital devices were not justified and the impugned orders were set aside in favour of the appellants.

Final Conclusion: The connected appeals were allowed and the impugned attachment, seizure and retention orders were set aside, with no basis left to sustain the action against the appellants on the facts recorded.

ISSUES PRESENTED AND CONSIDERED

1. Whether a property acquired prior to the sanction/disbursement of the alleged tainted funds or prior to registration of the FIR can be attached under the Prevention of Money Laundering Act, 2002 as "proceeds of crime" or as property of equivalent value when the actual tainted proceeds are not traceable.

2. Whether the noticee discharged the statutory obligation under Section 8(1) of the Act of 2002 to disclose the source of acquisition of the attached property and the legal consequences of failure to do so.

3. Whether, on the materials of the investigation (cash deposits in a joint account, transfers to the noticee's account, non-production of bank statements/ITRs and failure to appear for questioning), the provisional attachment and its confirmation are justified as attachment of property equivalent in value to proceeds of crime.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Attachment of property acquired prior to commission/sanction: legal framework

The Tribunal construes Section 2(1)(u) (definition of "proceeds of crime") as comprising three distinct limbs: (i) property derived or obtained, directly or indirectly, by a person as a result of criminal activity relating to a scheduled offence; (ii) the value of any such property (i.e. property of equivalent value); and (iii) where property is taken or held outside the country, the property equivalent in value held within the country or abroad. The second limb permits attachment of "untainted" property as deemed tainted insofar as it is equivalent in value when the actual tainted property is not available.

Issue 1 - Precedent treatment (followed/distinguished)

The Tribunal follows and relies on the three-limb interpretation as expounded in Vijay Madanlal Choudhary and elaborated by the Delhi High Court (Axis Bank), rejecting narrower readings (e.g., Kerala High Court in Satish Motilal Bidri and other decisions that would make the second limb redundant). The Tribunal cites subsequent High Court decisions (Prakash Industries, Seema Garg) that uphold the Axis Bank approach and treats contrary precedents as either inapposite or overridden by higher/binding statements.

Issue 1 - Interpretation and reasoning

The Tribunal reasons that construing Section 2(1)(u) to exclude properties acquired prior to the scheduled offence would frustrate the legislative purpose by enabling siphoning/vanishing of tainted proceeds; the second limb was inserted to permit attachment of property of equivalent value where tainted property cannot be traced. The Tribunal emphasizes statutory text ("or the value of any such property"), purposive interpretation, and safeguards articulated in Axis Bank (including tentative assessment of illicit gain and protection of bona fide third-party rights).

Issue 1 - Ratio vs. Obiter

Ratio: The Tribunal's binding conclusion is that properties acquired prior to the commission of the scheduled offence are amenable to attachment under the second limb of Section 2(1)(u) as property of equivalent value when the proceeds are not traceable, subject to the safeguards and tests laid down in Axis Bank and related authorities.

Issue 1 - Conclusion

The Tribunal holds that attachment of a property purchased before sanction/disbursement of the alleged tainted loan is not per se impermissible; in cases where proceeds have been siphoned off or are not available, attachment of property of equivalent value is authorized and appropriate if the statutory safeguards are met.

Issue 2 - Duty to disclose source under Section 8(1): legal framework

Section 8(1) affords the noticee an opportunity to disclose the source of acquisition of property alleged to be proceeds of crime. The onus to provide documents and reasonable explanation compatible with the acquisition rests on the noticee; failure to furnish bank statements, income-tax returns or other proof undermines the explanatory case.

Issue 2 - Precedent treatment (followed)

The Tribunal applies the statutory scheme and the established practice of requiring the noticee to place relevant financial evidence before the Adjudicating Authority/Tribunal. No special or novel precedent is invoked to alter this obligation.

Issue 2 - Interpretation and reasoning

On the facts, payments towards consideration were effected by multiple cheques and cash deposits into a joint account of the noticee and her father, followed by transfers to the noticee's account. The noticee admitted employment but failed to produce bank statements or income-tax returns for 2008-09 and 2009-10 to show legitimate sources/savings. Summons to the father and other family members were not complied with for full explanation. The Tribunal finds that, given these omissions and the cash-deposit trail, the noticee did not discharge the statutory burden to explain the source.

Issue 2 - Ratio vs. Obiter

Ratio: Failure to disclose/document the source under Section 8(1), when evidence points to suspicious cash flows and transfers, supports confirmation of provisional attachment. Obiter: Observations on what specific documents could have been produced (bank statements, IT returns) are illustrative of expected compliance but not novel legal principles.

Issue 2 - Conclusion

The Tribunal concludes the noticee failed to discharge the statutory obligation to disclose source of acquisition; this failure weighs in favor of confirming attachment.

Issue 3 - Sufficiency of investigative material to justify attachment as equivalent value: legal framework

Where the actual tainted proceeds are not traceable, attachment of property of equivalent value is permissible, provided there is at least prima facie material indicating illicit gain and a nexus between the accused's criminal activity and the untraced proceeds; tentative assessment of wrongful gain and preservation of third-party bona fide rights are required safeguards.

Issue 3 - Precedent treatment (followed/distinguished)

The Tribunal relies on the principles in Vijay Madanlal Choudhary and Axis Bank for (i) the permissibility of attaching equivalent-value property and (ii) the need for assessment of wrongful gain. It distinguishes decisions holding otherwise by reference to the higher-bench authority and purposive statutory reading.

Issue 3 - Interpretation and reasoning

Factually, the investigation revealed a large CC loan misappropriated and cash withdrawals of Rs. 9,81,15,000/-, with funds routed through multiple accounts. The appellant's father was implicated in the conspiracy and made repeated cash deposits into a joint account with the appellant which were then transferred to the appellant's account and used for vendor payments for the flat. Given disappearance/vanishing of proceeds and these cash-movement indicators, the respondents had material to connect the source of the flat's consideration with the accused's funds or to treat the flat as property equivalent in value to proceeds of crime. The appellant's non-production of bank/IT records and non-cooperation strengthened that inference.

Issue 3 - Ratio vs. Obiter

Ratio: On the presented facts, the investigative material (cash deposits in joint account, transfers, failure to explain source) constituted sufficient prima facie basis to treat the property as amenable to attachment as property of equivalent value and to confirm the provisional attachment. Obiter: Detailed hypotheticals about alternative documentary proofs the appellant might have produced are illustrative recommendations, not binding findings.

Issue 3 - Conclusion

The Tribunal finds the provisional attachment properly confirmed: the property was attached not necessarily as direct proceeds of crime but effectively as property of equivalent value in light of vanished/untraceable proceeds and the unexplained cash-deposit trail involving the accused's father and transfers to the noticee.

Cross-references and final disposition

The Tribunal cross-references its reasoning on the three-limb definition of "proceeds of crime" (Issue 1) with the noticee's statutory duty to disclose (Issue 2) and the factual matrix of unexplained cash flows (Issue 3) to reach the net conclusion that confirmation of attachment was justified. The appeal is dismissed for failure to establish a legally sufficient or factually credible source of funds and for conformity with the interpretative framework and safeguards prescribed in the cited authorities.

1. Whether the mandatory procedural requirements under Sections 17(2), 20, and 21 of the PMLA, 2002, and the corresponding Rules 8 and 3 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 were complied with by the Enforcement Directorate (ED) in respect of the seizure and retention of properties and documents.

2. Whether the failure to forward the reasons recorded along with the material to the Adjudicating Authority (AA) constituted a fatal procedural lapse invalidating the retention of seized properties.

3. Whether the retention of seized cash and documents without passing retention orders under Sections 20 and 21 of the PMLA was legally sustainable.

4. Whether the seized cash and documents constituted "proceeds of crime" under Section 2(1)(u) of the PMLA, 2002, and whether the ED had established a nexus between the seized properties and the scheduled offences.

5. Whether the ED's reliance on the COVID-19 pandemic as a reason for non-compliance with procedural requirements was justified.

6. Whether the applications filed by the ED under Section 17(4) of the PMLA for retention of seized properties were maintainable in the absence of prior retention orders under Sections 20 and 21.

7. Whether the seized properties and documents should be released to the respondents given the procedural lapses and lack of evidence linking them to the scheduled offences.

Issue-wise Detailed Analysis

Issue 1 & 2: Compliance with procedural requirements under Sections 17(2), 20, and 21 of PMLA and Rules 8 and 3 of the 2005 Rules

The legal framework mandates that immediately after search and seizure under Section 17(1), the authorized officer must forward a copy of the reasons recorded along with the material in possession to the Adjudicating Authority in a sealed envelope (Section 17(2)). Further, retention of seized property beyond the seizure requires passing of retention orders under Sections 20 and 21, which must also be forwarded to the AA along with relevant material as per the prescribed procedure (Section 20(2) and 21(1)). Rule 8 of the 2005 Rules prescribes detailed procedural safeguards for forwarding reasons and material, including preparation of an index, sealing of envelopes, marking as confidential, and maintenance of registers.

The Court noted that the ED admitted non-compliance with these mandatory procedural requirements. The ED contended that the failure to forward the reasons and material was due to the postal authorities not accepting posts during the COVID-19 pandemic. The respondents countered this by producing evidence from RTI queries and postal records showing that the post office was operational during the relevant period, supported by government lockdown and unlock guidelines. The Court emphasized the settled legal principle that where a statute prescribes a particular manner of doing a thing, it must be done in that manner alone, citing the Supreme Court decision in OPTO Circuit India Ltd. v. Axis Bank & Ors.

The Court further referred to the Supreme Court's observations in Vijay Madanlal Choudhary & Ors. v. Union of India & Ors. underscoring the constitutional validity of Section 17 and the in-built safeguards requiring strict adherence to forwarding reasons and material to the AA to ensure fairness and accountability.

Given the admitted failure to comply with the procedural mandates and the lack of credible justification for such failure, the Court held that the ED's action of retaining the seized properties without following the prescribed procedure was invalid.

Issue 3: Validity of retention of seized property without passing retention orders under Sections 20 and 21

The Court analyzed the statutory scheme, noting that retention of seized property for up to 180 days requires an order under Section 20(1) (for properties) and Section 21(1) (for documents), which must be forwarded to the AA. Without such retention orders, the property must be returned after seizure. The ED conceded that no retention orders were passed and no material was forwarded to the AA as mandated. The AA had rightly rejected the OA filed by the ED under Section 17(4) on this ground.

The Court held that the failure to pass retention orders and forward them to the AA was a fatal procedural lapse, rendering the retention of seized properties and documents legally unsustainable.

Issue 4: Whether seized cash and documents constitute proceeds of crime and nexus with scheduled offences

The respondents argued that the seized cash was cash-on-hand, duly recorded in audited books and declared in Income Tax Returns, and that the documents seized were not incriminating or related to the scheduled offences. The ED failed to produce any evidence linking the seized cash or documents to the criminal activities of the Ardor group companies or their directors as defined under Section 2(1)(u) of the PMLA.

The Court referred to the Supreme Court's observations in Vijay Madanlal Choudhary & Ors., emphasizing that only property derived directly or indirectly as a result of criminal activity relating to scheduled offences can be regarded as proceeds of crime. Mere possession of unaccounted property or cash shown in books and tax returns does not automatically qualify as proceeds of crime.

Given the absence of any nexus established by the ED, the Court found no merit in the claim that the seized cash and documents constituted proceeds of crime.

Issue 5: Justification of non-compliance due to COVID-19 pandemic

The ED contended that postal restrictions due to the pandemic prevented forwarding of reasons and material to the AA. The respondents disproved this by showing that postal services were operational and that official communications were exchanged through India Post during the relevant period. The Court examined government orders and found that post offices were exempted from closure and were functioning during the period of the search and subsequent proceedings.

The Court rejected the ED's pandemic-related justification as an afterthought and held that it did not excuse the statutory non-compliance.

Issue 6: Maintainability of OA under Section 17(4) in absence of retention orders under Sections 20 and 21

The ED argued that filing an OA under Section 17(4) before the AA for retention of seized property was permissible even without prior retention orders under Sections 20 and 21. The respondents and the AA took the contrary view, holding that Section 17(4) applications are not independent of Sections 20 and 21 and that retention orders must precede such applications.

The Court agreed with the respondents and the AA, observing that the statutory scheme envisages a sequential process: seizure under Section 17(1), retention order under Sections 20/21, and then application under Section 17(4) for further retention. The absence of retention orders rendered the Section 17(4) application premature and invalid.

Issue 7: Direction for release of seized properties and documents

Given the procedural lapses, absence of retention orders, lack of nexus between seized properties and scheduled offences, and expiry of the statutory retention period (180 days), the Court held that the retention of seized properties and documents was without legal sanction. The AA's order rejecting the OA and directing release was upheld.

The Court also noted that the investigation had been completed and prosecution complaint filed wherein none of the respondents were named as accused, further weakening the ED's claim for retention. The maximum permissible period for attachment during investigation under Section 8(3) of the PMLA had expired.

Additional Observations

The Court observed that the ED's attempt to link the respondents to the criminal activities of the Ardor group companies was unsubstantiated. The respondents had explained the source and nature of the seized cash and documents, which were found to be legitimate and unrelated to the scheduled offences. The Court found the ED's reliance on the Supreme Court decision in OPTO Circuit India Ltd. misplaced in the factual context of this case, but accepted the principle of strict compliance with statutory procedure emphasized therein.

Significant Holdings

"The provisions of the PMLA, 2002, are couched in mandatory language, as indicated by repeated use of the word 'shall'. As such, it is not left to the authorities acting under the provisions of the Act to choose a different course of action as per their desire."

"Where a statute provides for a thing to be done in a particular manner, then it has to be done in that manner alone and in no other manner."

"The failure on the part of the Directorate in forwarding the reasons and materials is an admitted fact... The submission of the Appellant Directorate, however, that the failure to forward copy of reasons to believe recorded along with the relevant material/order of retention to the Ld. AA as required u/s 17(2) of PMLA, 2002 was that the postal authorities had stopped accepting any posts on account of Covid-19 pandemic, is not supported by the evidence."

"The retention of the seized properties and records in the present case, therefore, lacked legal sanctity."

"The Ld. AA has rightly rejected the OA filed by the appellant Directorate and refused to grant permission for further retention of the seized property and records."

"Only such property which is derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence can be regarded as proceeds of crime."

The Court dismissed the appeal, affirming the Adjudicating Authority's order rejecting the application for retention of seized properties and directing their release, with no order as to costs.