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2024 (3) TMI 1534 - APPELLATE TRIBUNAL UNDER SAFEMA, NEW DELHI Money Laundering

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Money-laundering liability can attach to later dealings with proceeds of crime even if assets were acquired before a Schedule amendment.
Liability for money laundering under the PMLA depends on a person's later involvement with proceeds of crime, including possession, acquisition, concealment or projection as untainted, and is not defeated merely because the underlying assets were acquired before the 2009 amendment adding the predicate offence to the Schedule. In a disproportionate assets matter, the tribunal noted that the FIR, ECIR and charge-sheet post-dated the amendment and that the alleged disproportionate assets exceeded the value of the attached properties. On that basis, prior acquisition of the property did not bar its treatment as proceeds of crime, and the provisional attachment was confirmed.

Provisional attachment - possession and acquisition - Relevance of the date of predicate offence - proceeds of crime - disproportionate properties in the hands of a Government employee - purchase of moveable and immoveable properties disproportionate to his known sources of income - sufficiency of attachment relative to proceeds - schedule offence - Offence of money laundering under Section 3 of the Prevention of Money Laundering Act, 2002. Relevance of the date of predicate offence - HELD THAT: - The Court applied the principle that the offence of money laundering under Section 3 is not linked to the date when the predicate offence was committed but to the date on which the person indulges in any process or activity connected with the proceeds of crime. Relying on the ratio in Tarun Kumar [2023 (11) TMI 904 - SUPREME COURT], and on the statutory scope of Section 3, the Court held that assets acquired prior to the 2009 amendment bringing the predicate offence into the schedule can be taken into account if, on the relevant date (registration of FIR/recording of ECIR), the person is found to be in possession of or projecting those assets as untainted and thus engaged in activity connected with proceeds of crime. [Paras 13, 14, 15, 16] Properties acquired prior to the 2009 amendment may be considered when the relevant activity connected with proceeds of crime occurs after the amendment and the FIR/ECIR has been recorded. Disproportionate assets as proceeds of crime - HELD THAT:- The Court held that once assets are found disproportionate to known sources of income, they constitute proceeds of crime for the purposes of the Act of 2002. The Court referred to Section 3 and its elements (possession, acquisition, concealment, projection as untainted property) and accepted that the determination of disproportionateness on the relevant check period renders such assets as proceeds of crime in the hands of the accused. [Paras 13, 16] Disproportionate assets are to be treated as proceeds of crime under the Act of 2002. Sufficiency of attachment relative to proceeds - HELD THAT:- The Court noted the factual comparison between the value of attached properties and the quantified disproportionate assets. It recorded that the total value of property attached by the respondent was lower than the sum assessed as proceeds of crime in the charge sheet. [Paras 18] The value of the properties attached by the respondent was less than the proceeds of crime quantified in the charge sheet. Final Conclusion: The appeals fail. The Court upheld the Adjudicating Authority's confirmation of provisional attachment, holding that assets acquired before the 2009 amendment may be considered if, on the relevant date, they are found to be connected with proceeds of crime and that disproportionate assets constitute proceeds; the attached properties' value was noted to be less than the quantified proceeds.

2023 (12) TMI 1355 - APPELLATE TRIBUNAL SAFEMA, NEW DELHI Money Laundering

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Tribunal upholds provisional attachment order under PMLA 2002, rejects challenges on mis-joinder and section 8(1) non-compliance
The Appellate Tribunal SAFEMA upheld the provisional attachment order under PMLA 2002, rejecting challenges based on mis-joinder of parties and non-compliance with section 8(1). The tribunal found no mis-joinder as the accused were in possession of proceeds of crime when attachment was ordered, and the Official Liquidator's appointment was unknown to the Competent Authority. Section 8(1) compliance was satisfied as all accused persons alleged to have committed offences under section 3 were given hearing opportunities. The tribunal clarified that the Adjudicating Authority properly recorded prima facie findings about money laundering without making conclusive determinations about offence commission, which remains within Special Court jurisdiction.

Provisional attachment - proceeds of crime - attachment of property of equivalent value - mis-joinder of parties - possession and control by Official Liquidator - notice under section 8(1) of the Prevention of Money Laundering Act, 2002 - adjudicating authority's power to record a prima facie opinion on commission of scheduled offence - limited evidentiary weight of adjudicating authority's prima facie opinion before the Special CourtMis-joinder of parties - possession and control by Official Liquidator - proceeds of crime - Whether the provisional attachment was vitiated by mis-joinder because the Official Liquidator, alleged to be in possession and control of proceeds, was not impleaded or heard. - HELD THAT: - The Adjudicating Authority made the provisional attachment under the belief recorded under section 5(1) that certain persons were in possession of proceeds of crime or that property of equivalent value should be attached. At the stage of attachment M/s Birla Surya Limited was a defendant and the material before the Competent Authority did not indicate that an Official Liquidator had been appointed; the appointment and attendant possession/control came to light later before the Adjudicating Authority. The court held that section 5(1) does not mandate prior hearing of an Official Liquidator before provisional attachment; the provision permits attachment of property (or its equivalent) where the Authority has reason to believe the statutory conditions are met. On the facts recorded, the allegation that investments were solicited and funds transferred to group entities supported the Authority's reasons to believe, and mis-joinder was not made out. [Paras 16, 17, 18, 19]The contention of mis-joinder based on non-impleadment or non-hearing of the Official Liquidator is rejected and does not vitiate the provisional attachment.Notice under section 8(1) of the Prevention of Money Laundering Act, 2002 - opportunity of hearing - possession of proceeds of crime - Whether the Adjudicating Authority failed to comply with the requirement of section 8(1) by not serving notice on the Official Liquidator or other persons in control of the attached properties. - HELD THAT: - Section 8(1) requires the Adjudicating Authority, upon having reason to believe that a person has committed an offence under section 3 or is in possession of proceeds of crime, to serve a notice of not less than thirty days on such person and give opportunity to indicate sources and show cause. The court observed that the notice obligation applies to persons alleged to have committed the offence or to persons in possession of proceeds; the defendants before the Authority were alleged to have committed offences under the Act and were afforded hearings. The Official Liquidator did not seek an opportunity to be heard; M/s Birla Surya Limited, who remained unrepresented, could and should have informed the Authority about the Liquidator's appointment. On these facts there was no failure of section 8(1) compliance by the Adjudicating Authority. [Paras 20, 21, 22, 23]No violation of section 8(1) is found; the Adjudicating Authority's notice and hearing obligations were satisfied in relation to the defendants alleged to have committed the offence.Adjudicating authority's power to record a prima facie opinion on commission of scheduled offence - limited evidentiary weight of adjudicating authority's prima facie opinion before the Special Court - confirmation of attachment under adjudication - Whether the Adjudicating Authority erred in recording a finding that the defendants had committed the scheduled offence and laundered proceeds, and whether such a prima facie finding is impermissible or binding on the Special Court. - HELD THAT: - The Adjudicating Authority recorded a prima facie conclusion that the defendants committed the scheduled offence, generated proceeds of crime and laundered them. The Tribunal distinguished a prima facie opinion from a conclusive adjudication of guilt: the Authority is obliged to record whether properties are involved in money laundering, which necessarily requires forming a prima facie view about the commission of the offence. Such an opinion is permissible at the attachment/confirmation stage to justify continuing attachment. However, the Tribunal clarified that this prima facie opinion is not conclusive and does not bind the Special Court, which must independently decide guilt on evidence in the criminal trial. [Paras 25, 26, 27, 28, 30]Recording of a prima facie opinion by the Adjudicating Authority is lawful for the purposes of adjudication under the Act; but that opinion is not binding on the Special Court, which will reach its own conclusions on evidence.Final Conclusion: The appeals are dismissed on merits: (i) mis-joinder and non-impleadment of the Official Liquidator did not vitiate the provisional attachment; (ii) the Adjudicating Authority complied with its notice and hearing obligations under section 8(1); and (iii) the Authority was entitled to record a prima facie opinion on commission of the scheduled offence, subject to the Special Court's independent adjudication. The order of attachment is upheld with the clarification that the Authority's prima facie opinion does not bind the Special Court.

2023 (12) TMI 1388 - APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI Money Laundering

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1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the provisional attachment of properties under the Prevention of Money Laundering Act (PMLA) was justified given the alleged involvement of the appellants in money laundering activities.
Whether there is a sufficient nexus between the alleged scheduled offences and the attached properties to warrant the confirmation of the attachment order.
Whether the appellants, Sarvottam Fincap Limited and M/s VPoint IT Solutions Pvt. Ltd., were involved in money laundering activities through the misuse of borrower data and coercive loan recovery practices.
Whether the appellants' operations were in violation of the Reserve Bank of India (RBI) guidelines and involved proceeds of crime as defined under PMLA.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification of Provisional Attachment under PMLA

Relevant Legal Framework and Precedents: The PMLA provides for the attachment of properties involved in money laundering. Section 5(1) of PMLA allows for provisional attachment if there is a reason to believe that the property is involved in money laundering.
Court's Interpretation and Reasoning: The court found that the provisional attachment was justified as there was sufficient evidence of proceeds of crime being generated through the appellants' operations.
Key Evidence and Findings: The investigation revealed that the appellants were involved in sanctioning loans through mobile apps, charging exorbitant interest rates, and using coercive recovery methods.
Application of Law to Facts: The court applied the provisions of PMLA to the facts, concluding that the appellants' operations involved proceeds of crime.
Treatment of Competing Arguments: The appellants argued that there was no nexus between the alleged offences and the attached properties, but the court found this argument unconvincing.
Conclusions: The court upheld the provisional attachment as the appellants' activities were found to be linked to money laundering.

Issue 2: Nexus Between Scheduled Offences and Attached Properties

Relevant Legal Framework and Precedents: Under PMLA, a direct link between the scheduled offence and the property is necessary for attachment.
Court's Interpretation and Reasoning: The court found that there was a clear link between the scheduled offences and the attached properties, as the properties were acquired through proceeds of crime.
Key Evidence and Findings: The investigation showed that the appellants used funds from foreign sources to finance their lending operations, which involved coercive recovery practices.
Application of Law to Facts: The court determined that the funds used in the appellants' operations were proceeds of crime, thus justifying the attachment.
Treatment of Competing Arguments: The appellants claimed that there was no evidence of scheduled offences, but the court found that the ongoing investigations and FIRs provided sufficient grounds.
Conclusions: The court concluded that the nexus was established, and the attachment was valid.

Issue 3: Involvement in Money Laundering Activities

Relevant Legal Framework and Precedents: Money laundering involves the concealment of proceeds of crime. The PMLA targets such activities.
Court's Interpretation and Reasoning: The court interpreted the appellants' activities as constituting money laundering due to their use of coercive methods and misuse of borrower data.
Key Evidence and Findings: Evidence showed that the appellants deducted high processing fees and charged exorbitant interest rates, using borrower data for coercion.
Application of Law to Facts: The court applied the definition of money laundering to the appellants' practices, concluding that they were involved in such activities.
Treatment of Competing Arguments: The appellants argued that their operations were legitimate, but the court found that their methods were unlawful and constituted money laundering.
Conclusions: The court held that the appellants were involved in money laundering through their lending operations.

Issue 4: Violation of RBI Guidelines and Involvement of Proceeds of Crime

Relevant Legal Framework and Precedents: RBI guidelines regulate NBFC operations, and violations can indicate unlawful activities.
Court's Interpretation and Reasoning: The court found that the appellants violated RBI guidelines by accepting deposits beyond prescribed limits and engaging in coercive recovery practices.
Key Evidence and Findings: The appellants' operations involved unauthorized deposits and coercive recovery methods, indicating proceeds of crime.
Application of Law to Facts: The court applied RBI guidelines and PMLA provisions to the appellants' operations, concluding that they involved proceeds of crime.
Treatment of Competing Arguments: The appellants argued that there was no RBI action against them, but the court found that their activities violated guidelines and involved proceeds of crime.
Conclusions: The court concluded that the appellants' operations violated RBI guidelines and involved proceeds of crime.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The modus operandi of this fraud reflects that about 365 mobile applications are involved in sanctioning instant micro loans and then its recovery via tele-callers."
Core Principles Established: The judgment reinforces the principle that operations involving coercive recovery methods and misuse of borrower data constitute money laundering under PMLA.
Final Determinations on Each Issue: The court dismissed the appeals, upholding the provisional attachment of properties as justified under PMLA due to the appellants' involvement in money laundering activities.

SAFEMA tribunal upholds provisional attachment of properties in money laundering case involving instant loan apps
The Appellate Tribunal under SAFEMA dismissed appeals challenging provisional attachment of properties under PMLA. The tribunal found that appellant companies operated a money laundering scheme through instant loan apps charging exorbitant interest rates and processing fees. One NBFC took inter-corporate deposits from its sister company, which received overseas loans from foreign fintech companies, establishing a conspiracy. The companies disbursed loans totaling Rs. 90 crores while deducting Rs. 17 crores as processing fees upfront, with total proceeds of crime exceeding the attached amount of Rs. 5 crores. The tribunal rejected arguments that reasons to believe were inadequately recorded, finding sufficient nexus between scheduled offences and attached properties to justify provisional attachment.

Provisional attachment under the Prevention of Money Laundering Act (PMLA) - Identification of proceeds of crime and nexus with scheduled offences - Reason to believe / satisfaction for attachment - Use of third party fintech arrangements and conduit accounts as indicia of money laundering - Regulatory domain of RBI vis a vis investigative powers of Enforcement DirectorateProvisional attachment under the Prevention of Money Laundering Act (PMLA) - Identification of proceeds of crime and nexus with scheduled offences - Reason to believe / satisfaction for attachment - Validity of the Provisional Attachment Order (PAO) and confirmation of attachment of bank/virtual accounts of the appellants under PMLA on the basis that proceeds of scheduled offences were identified and a sufficient reason to believe existed - HELD THAT: - The Tribunal found that the ECIR and FIRs disclosed a consistent modus operandi - large numbers of instant loan mobile applications, access to borrowers' contact/data, excessive upfront deductions, coercive recovery through tele callers and routing of receipts through merchant/virtual accounts - which together supported identification of proceeds of crime and a nexus to scheduled offences. The Tribunal accepted the Enforcement Directorate's material showing rotation of funds, receipt of overseas monies through a newly incorporated entity, inter company transfers (ICD) to the NBFC, and substantial upfront deductions and recovery which, in aggregate, exceeded the amounts attached. The existence of pending FIRs, chargesheets in limited FIRs and continuing investigation did not render the reasons to believe invalid; the recorded reasons were not mere verbatim repetition but were founded on the ECIR/FIR material and investigative findings. On that basis the Adjudicating Authority's confirmation of the PAO was upheld and the attachments were held to be justified. [Paras 7, 8, 9]Tribunal dismissed the appeals and upheld confirmation of the provisional attachment on the ground that there was sufficient material to identify proceeds of crime and form a reason to believe for attachment under the PMLA.Regulatory domain of RBI vis a vis investigative powers of Enforcement Directorate - Absence of RBI sanction or adverse regulatory action - Whether absence of any RBI sanction or adverse regulatory action against the NBFCs precluded ED from proceeding with attachment under PMLA - HELD THAT: - The Tribunal held that lack of any RBI action or sanction is not a bar to ED's investigative powers or to provisional attachment under the PMLA. Regulatory action by RBI is a separate prerogative of the regulator and does not preclude criminal/money laundering investigation or the formation of a reason to believe by ED where investigative material (FIRs, ECIR, transactional linkages, inter company movements, overseas funding) indicates generation and possession of proceeds of crime. Consequently, absence of RBI proceedings did not vitiate the PAO or its confirmation. [Paras 7, 9]Tribunal rejected the contention that absence of RBI proceedings or sanction required release of the attached properties; ED's action under PMLA was not ousted by lack of RBI action.Allegation of lack of mens rea / absence of direct culpability - Reliance on FIRs and ongoing investigation as basis for attachment - Whether absence of specific chargesheet, absence of mens rea allegations against the appellants in some FIRs, or quantification of proceeds in individual FIRs mandated release of attachments - HELD THAT: - The Tribunal observed that criminal prosecution status (absence of chargesheet or pending chargesheets) or narrower quantification in particular FIRs does not negate the wider investigative material demonstrating large scale generation of proceeds from a common modus operandi across multiple apps and entities. The Tribunal noted that aggregate proceeds shown by ED exceeded the attached sums and that partial or pending prosecution in relation to individual complainants does not foreclose provisional action under the PMLA where reasons to believe are otherwise established from the record. [Paras 7, 9]Tribunal held that the absence of filed chargesheets in several FIRs or narrower quantification in particular FIRs did not invalidate the attachments; thus the appeals on these grounds were dismissed.Attachment of specific bank and payment gateway accounts as proceeds of crime - Use of inter company transfers and virtual/merchant accounts to trace proceeds - Legitimacy of attaching the specific bank/payment gateway accounts of the appellants as being directly involved in proceeds of crime - HELD THAT: - The Tribunal accepted the Adjudicating Authority's tabulation and reasoning that certain bank and virtual accounts were used in the flow of funds (including receipt of overseas funds into a newly incorporated related entity, transfer as ICD to the NBFC, routing through MIDs/payment gateways and rotation to generate lending volume). Given the transactional linkages, significant upfront deductions and recoveries, and the fact that total proceeds identified exceeded the attached amounts, the attachments of the listed accounts were sustained. [Paras 3, 7, 9]Tribunal upheld confirmation of attachment of the specified accounts as being involved in proceeds of crime.Final Conclusion: Both appeals are dismissed. The Adjudicating Authority's confirmation of the Provisional Attachment Order is upheld and the attachments of the stated bank/virtual accounts stand confirmed.

2023 (12) TMI 1354 - APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI Money Laundering

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Appeal dismissed for money laundering case involving loan fraud and fund siphoning under Section 17
The Appellate Tribunal under SAFEMA dismissed an appeal challenging search and seizure operations under Section 17 of the Prevention of Money Laundering Act, 2002. The case involved allegations of obtaining substantial loans from financial institutions and siphoning funds. The appellant argued non-service of written reasons for search and seizure caused prejudice. The Tribunal held that since the ECIR was recorded in 2019, search conducted in 2023, and relevant documents were included in the show cause notice, no prejudice was caused to the appellant. The Tribunal distinguished the case from J. Sekar v. Union of India, noting different purposes under various Act provisions. The appeal was dismissed as the Tribunal found no grounds for interference with the lower authority's order.

Supply of reasons recorded under Section 17(1) of the Prevention of Money Laundering Act, 2002 - Administrative character of pre-adjudicatory recording of reasons - Requirement of disclosure of reasons and material at adjudication stage under Section 8(1) - Distinction between obligations under Section 17 and Section 19 of the PMLA - Prejudice and right to effective defence from non-supply of pre-search reasonsSupply of reasons recorded under Section 17(1) of the Prevention of Money Laundering Act, 2002 - Administrative character of pre-adjudicatory recording of reasons - Requirement of disclosure of reasons and material at adjudication stage under Section 8(1) - Distinction between obligations under Section 17 and Section 19 of the PMLA - Copy of the 'reason to believe' recorded under Section 17(1) of the PMLA is not mandatorily required to be supplied to the person searched prior to or at the time of search; disclosure at the adjudication stage under Section 8(1) suffices where reasons and material are furnished with the show-cause notice for retention. - HELD THAT: - Section 17(1) mandates that an authorised officer record reasons in writing before conducting search and seizure and Section 17(2) requires forwarding those recorded reasons with material in a sealed envelope to the Adjudicating Authority. The court held that the stage prior to initiation of proceedings under Section 8(1) is administrative in character and not quasi judicial; therefore non-disclosure of the administrative reasons recorded under Section 17(1) at the search stage does not automatically render the search or subsequent proceedings illegal. The Adjudicating Authority, when seeking confirmation of retention under Section 8(1), must serve a show cause notice accompanied by the reasons to believe and the relevant material so that the affected person can effectively respond. Reliance was placed on the ratio in Oriental Rubber Works, Narayanappa and Biswanath Bhattacharya to the extent that reasons for extended retention must be communicated when retention beyond the statutory period is sought; in the present case the Adjudicating Authority supplied the reasons and material with the show cause notice. The decision in J. Sekar was distinguished as dealing with a different provision (Section 5(1)) and noted to be under challenge before the Supreme Court. The appellant's reliance on authorities interpreting the obligation under Section 19 (arrest) was held inapposite because Section 19 imposes a specific statutory duty to communicate grounds of arrest which does not exist under Section 17. Having found that the reasons and material necessary to contest retention were furnished at the adjudication stage and no prejudice resulted from non supply of the administrative record of reasons under Section 17(1), interference with the Adjudicating Authority's order denying a separate copy of the Section 17(1) reasons was not warranted.Application for a separate copy of the reasons recorded under Section 17(1) was not required to be granted; impugned order refusing supply of that copy is lawful.Final Conclusion: The appeal is dismissed; denial of a separate copy of the reasons recorded under Section 17(1) does not vitiate the proceedings where the Adjudicating Authority furnished reasons and material with the Section 8(1) show cause notice and the administrative recording of reasons under Section 17(1) is not a stage requiring mandatory prior disclosure.

2023 (11) TMI 1295 - APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI Money Laundering

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Issues Involved:
1. Extension of time for filing a reply after inspection of records.
2. Stay of proceedings due to the constitution of the Adjudicating Authority.
3. Request for cross-examination of witnesses.
4. Supply of the copy of reasons to believe recorded under section 17 of the Act of 2002.

Issue-wise Detailed Analysis:

1. Extension of Time for Filing Reply After Inspection of Records
The appellant's counsel argued that although the Adjudicating Authority permitted inspection of records under Regulations 16 to 18 of the Adjudicating Authority (Procedure) Regulation, 2013, it did not extend the time for filing the reply. The Tribunal found no error in the Adjudicating Authority's decision, stating that the request for inspection was made after the reply to the show cause notice had already been filed. The Tribunal emphasized that the proceedings must be completed within 180 days from the issuance of the provisional attachment order. The Tribunal concluded that there was no reason to extend the period for filing a reply once it had already been submitted. Therefore, the first issue was decided against the appellant, confirming the Adjudicating Authority's order.

2. Stay of Proceedings Due to Constitution of the Adjudicating Authority
The appellant challenged the coram of the Adjudicating Authority, arguing that it should consist of a Chairman and two other Members as per Section 6 of the Act of 2002. The Tribunal referred to several judgments, including those from the Delhi High Court and Karnataka High Court, which held that even one Member is competent to pass orders. The Tribunal found no illegality in the Adjudicating Authority's order to deny the stay of proceedings, concluding that one member constitutes the coram of the Authority.

3. Request for Cross-Examination of Witnesses
The appellant sought to cross-examine several officials and witnesses. The Tribunal noted that the proceedings under Section 8 of the Act of 2002 are summary in nature and must be completed within 180 days. The Tribunal highlighted that cross-examination is generally sought to delay proceedings and that it is part of the principle of natural justice only when the testimony of the witness is relied upon. Since no statements of the persons named for cross-examination were recorded, the Tribunal concluded that the request for cross-examination was made to gain time and was not warranted. The Tribunal cited various judgments, including those from the Supreme Court and Delhi High Court, to support its decision. The Tribunal found no illegality in the Adjudicating Authority's order to deny cross-examination.

4. Supply of the Copy of Reasons to Believe Recorded Under Section 17 of the Act of 2002
The appellant requested a copy of the reasons to believe recorded under Section 17 of the Act of 2002. The Tribunal noted that the appellant was already served with reasons to believe while issuing the show cause notice under Section 8 (1) of the Act of 2002. The Tribunal decided to keep this issue open for the appellant to raise in an appeal against the final order of the Adjudicating Authority. The Tribunal acknowledged that the issue is pending consideration before the Supreme Court and that the final decision would be in conformity with the Supreme Court's ruling. The Tribunal concluded that the interim orders merge into the final order and disposed of all the appeals accordingly.

SAFEMA Appellate Tribunal upholds interim order denying time extension and cross-examination rights in attachment proceedings
The Appellate Tribunal under SAFEMA dismissed the appellant's challenge to the Adjudicating Authority's interim order. The Tribunal held that extension of time for filing reply after inspection of record was properly denied since the reply was already filed before seeking inspection. The proceedings must be completed within 180 days of provisional attachment order, and the Authority correctly refused to extend time to prevent deliberate delays. The Tribunal confirmed that a single member constitutes valid coram for the Adjudicating Authority, citing Delhi HC precedents. Cross-examination of persons was properly denied as their statements were not recorded during investigation and regulations don't provide for such examination. The appeal was disposed of with various reliefs denied.

Inspection of records and extension of time for filing reply - Time-bound disposal within 180 days under section 8/section 5 of the Prevention of Money Laundering Act - Validity of proceedings by a single Member of the Adjudicating Authority (coram) - Right to cross examination in summary proceedings under the Prevention of Money Laundering Act - Supply of the reasons to believe recorded under section 17 and its treatmentInspection of records and extension of time for filing reply - Time-bound disposal within 180 days under section 8/section 5 of the Prevention of Money Laundering Act - Whether extension of time for filing reply should have been granted after the appellant had already filed a reply but sought inspection of records thereafter - HELD THAT: - The Adjudicating Authority permitted inspection in Form 7 under Regulations 16-18 but refused an extension because the appellant had already filed its reply prior to seeking inspection. The Tribunal held that if inspection was required before filing a reply the request should have been made earlier; once a reply has been filed there is no entitlement to an extension merely because inspection is subsequently sought. The Tribunal further emphasised the statutory scheme requiring disposal within the 180 day period for confirmation of provisional attachment and that parties cannot use belated procedural applications to frustrate timely adjudication. Applying those principles, the Adjudicating Authority did not err in refusing extension of time. [Paras 11, 12, 13, 14, 15]Order refusing extension of time for filing reply after inspection was sought post reply is confirmed.Validity of proceedings by a single Member of the Adjudicating Authority (coram) - Whether the Adjudicating Authority was vitiated for want of proper constitution because only one Member was functioning - HELD THAT: - The Tribunal examined precedent and concluded that a single Member of the Adjudicating Authority is competent to hear and decide matters; it relied on precedents of High Courts holding that a single Member can constitute the Authority and that the Member need not necessarily be from the judicial side. In view of those authoritative decisions, the contention that the proceedings were coram non judice for want of full constitution was rejected and no illegality was found in refusing to stay proceedings pending reconstitution. [Paras 19, 20, 21, 22, 23]Challenge to the constitution of the Adjudicating Authority was rejected and the order refusing stay was upheld.Right to cross examination in summary proceedings under the Prevention of Money Laundering Act - Principles of natural justice in summary adjudication - Whether the appellant was entitled to cross examine ED officers and pancha witnesses when no statements of those persons had been recorded - HELD THAT: - The Tribunal recognised that cross examination is part of natural justice but must presuppose an examinable statement or testimony; in these summary proceedings under section 8 the persons sought to be cross examined had no statements on record and therefore there was nothing to cross examine. The Tribunal noted the summary and time bound character of the Adjudicating Authority's proceedings, observed that applications for cross examination made without recorded testimony are frequently used to delay adjudication, and relied on Supreme Court and High Court authorities holding that natural justice does not mandate cross examination of third party informants in such circumstances. Consequently, denial of the application for cross examination did not occasion prejudice. [Paras 33, 34, 36, 37, 38]Refusal to permit cross examination of the named officers and pancha witnesses was upheld.Supply of the reasons to believe recorded under section 17 and its treatment - Whether the appellant was entitled at this interlocutory stage to a copy of the reasons to believe recorded under section 17 (referred to as the reasons recorded at the time of search) in addition to the reasons supplied with the show cause notice under section 8(1) - HELD THAT: - The Tribunal recorded that the appellant had been furnished with the reasons to believe incorporated in the show cause notice issued under section 8(1). As to the separate reasons recorded under section 17 at the time of search, the Tribunal declined to decide the question at the interlocutory stage because the Adjudicating Authority had already passed the final order and the legal position is pending consideration before the Supreme Court in the J. Sekar matter. The Tribunal therefore kept the issue open for consideration in any appeal against the final order and directed that if the Apex Court holds that section 17 reasons must be supplied, appropriate relief will be given in conformity with that decision. [Paras 39, 40, 41, 42]Issue left open for consideration in appeal against the final order; no interim relief granted.Final Conclusion: The Tribunal dismissed the appellant's challenges to (i) refusal to extend time for filing a reply after inspection was sought post reply, (ii) alleged invalidity of proceedings for want of full coram, and (iii) refusal to permit cross examination of named persons; the appellant's claim for supply of the separate section 17 reasons to believe was left open to be pursued in appeal against the final Adjudicating Authority order, and all appeals were disposed accordingly.

2023 (11) TMI 1296 - APPELLATE TRIBUNAL SAFEMA, NEW DELHI Money Laundering

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Appellate Tribunal allows appeal against document retention order in money laundering case under sections 17(1), 20(4), 8(1)
The Appellate Tribunal SAFEMA, New Delhi allowed the appeal challenging the Adjudicating Authority's order under PMLA 2002 permitting retention of seized documents and digital evidence in a money laundering case involving bank fraud conspiracy. The appellant argued non-recording of reasons under sections 17(1), 20(4), and 8(1), but later chose not to press these contentions. The Tribunal found that the Adjudicating Authority failed to consider relevant developments and pertinent facts in reaching its conclusion, noting that investigations were not at a preliminary stage as claimed. The seized documents constituted records under the Act, while mobile phone data qualified as both property and records. The appeal was disposed of along with pending applications.

Retention of seized records under section 8(3) of PMLA - recording of findings under section 8(2) and (3) - reasons to believe / reasoned satisfaction for adjudication under section 8 - relevance of explanations for acquisition of property at adjudication stage - provisional attachment and confirmation proceedings affecting retention - continuance of retention only where records relate to properties involved in money launderingRetention of seized records under section 8(3) of PMLA - recording of findings under section 8(2) and (3) - continuance of retention only where records relate to properties involved in money laundering - Validity of the Adjudicating Authority's order permitting retention of seized documents and electronic evidence - HELD THAT: - The Tribunal found that although the Adjudicating Authority recorded a one line conclusion that the seized documents/digital evidence were involved in money laundering, that conclusion was not supported by any reasoned consideration of the material as required by sub sections (2) and (3) of section 8. The impugned order's paragraphs relied on investigatory convenience and assertions of ongoing inquiry but did not address or weigh the material before the authority to record that the properties to which the documents pertained were involved in money laundering. Having regard to subsequent proceedings (provisional attachment orders, supplementary complaint and pending confirmation), the Tribunal held that only the seized records connected to those properties subject to provisional attachment/confirmation could be validly retained; other seized records and the electronic device could not be retained indefinitely simply on the basis of speculative further investigation. Accordingly, the Tribunal confirmed retention only in respect of the records relating to the properties already provisionally attached/confirmed and set aside the order insofar as it permitted retention of the remaining seized records and the mobile phone, subject to the Directorate keeping authenticated copies and backups if desired. [Paras 20, 21, 24, 25, 26]Retention order confirmed in respect of seized records listed as Annexures 'B' and 'F'; order set aside and release ordered for records listed as 'A', 'C', 'D' and 'E' and the mobile phone, with liberty to the Directorate to keep authenticated copies/backups.Relevance of explanations for acquisition of property at adjudication stage - reasons to believe / reasoned satisfaction for adjudication under section 8 - Whether the Adjudicating Authority was entitled to reject the appellant's explanation of acquisition as irrelevant at the stage of deciding the application for retention - HELD THAT: - The Tribunal held that the Adjudicating Authority erred in treating the appellant's explanations regarding acquisition of the assets (title deeds seized) as irrelevant for the application for retention. The statutory scheme requires the Adjudicating Authority to consider the reply, hear the aggrieved person and take into account all relevant materials before recording a finding under section 8(2). The impugned order rejected the explanation without due consideration and thus failed to discharge the duty to record a reasoned satisfaction that the properties were involved in money laundering. [Paras 21, 23]The Adjudicating Authority's outright rejection of the appellant's explanation as irrelevant was held to be erroneous and inconsistent with the requirement to consider replies and materials under section 8.Provisional attachment and confirmation proceedings affecting retention - continuance of retention only where records relate to properties involved in money laundering - Effect of subsequent provisional attachment, supplementary complaint and pending confirmation on the scope of permissible retention - HELD THAT: - The Tribunal observed that by the time the Adjudicating Authority passed the impugned order there were already provisional attachment orders and a pending Original Complaint seeking confirmation in respect of two properties; a supplementary prosecution complaint alleged four properties but the material table in that complaint identified only the two properties subject to the PAO/OC. Given these developments, the Tribunal found it was not open to the Directorate to claim indefinite retention of all seized records on the basis that further evidence might be discovered years later. The proper course was to confine retention to records relating to properties for which provisional attachment/confirmation proceedings were in place, and to release other seized originals while permitting the Directorate to retain authenticated copies/backups. [Paras 22, 23, 24, 25, 26]Retention limited to records connected to the properties under provisional attachment/confirmation; other original documents and the mobile phone ordered to be released within sixty days, subject to the Directorate's right to retain authenticated copies/backups.Final Conclusion: The appeal is partly allowed: the Adjudicating Authority's order retaining seized material is confirmed only insofar as it relates to the two properties already provisionally attached/confirmed; the order is set aside in respect of the other seized original documents and the mobile phone, which are to be released to the appellant within sixty days while the Directorate may keep authenticated copies and backups. Nothing in this order affects criminal proceedings or other appellate matters pending.

2023 (8) TMI 1599 - APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI Money Laundering

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Cross-examination in PMLA summary proceedings is not automatic and requires a proper evidentiary basis before the Adjudicating Authority.
Cross-examination in summary proceedings under the Prevention of Money Laundering Act, 2002 is not an automatic right and may be allowed only on a proper showing. The Adjudicating Authority acts under a statutory procedure and the Adjudicating Authority (Procedure) Regulations, 2013, so the request must be supported by an actual witness examination or deposition. Where no statement of the proposed Enforcement Directorate witness had been recorded before the Adjudicating Authority or in the search and seizure process, the foundation for cross-examination was absent. The reverse-burden framework under section 24 also meant cross-examination could not be used to shift the statutory burden of proof, so the refusal of the prayer was upheld.

Right to cross-examination as part of principles of natural justice - summary proceedings for attachment under PMLA - requirement of examination-in-chief for cross-examination - reverse burden of proof under Section 24 of the Prevention of Money Laundering Act, 2002 - Adjudicating Authority to regulate procedure guided by principles of natural justice - Regulation 21 of the Adjudicating Authority (Procedure) Regulations, 2013Right to cross-examination as part of principles of natural justice - requirement of examination-in-chief for cross-examination - summary proceedings for attachment under PMLA - reverse burden of proof under Section 24 of the Prevention of Money Laundering Act, 2002 - Regulation 21 of the Adjudicating Authority (Procedure) Regulations, 2013 - Cross-examination of Kumari Purnima, Assistant Director, Directorate of Enforcement, in proceedings before the Adjudicating Authority under the PMLA. - HELD THAT: - The Tribunal recognised that while the right of cross-examination is an aspect of natural justice, it is not an absolute rule to be afforded in every summary proceeding for attachment under the PMLA. Proceedings for provisional attachment and confirmation before the Adjudicating Authority are summary in character and are to be completed within prescribed time-frames; therefore cross-examination cannot be claimed as a matter of course. Regulation 21 permits issuance of commissions for examination of witnesses and documents but does not itself prescribe an automatic right to cross-examination. The Tribunal held that cross-examination presupposes an examination-in-chief; in the present case no examination-in-chief of Ms. Kumari Purnima had been recorded before the Adjudicating Authority or in the course of search and seizure, and therefore there was no basis for permitting cross-examination. Further, permitting cross-examination in the circumstances sought by the appellant would, in effect, be sought to shift the burden of proof; the PMLA places a reverse burden under Section 24 in proceedings relating to proceeds of crime, a feature recognised as constitutionally valid by the Apex Court. Having regard to these considerations and the need to prevent undue delay of summary attachment proceedings, the Tribunal refused to interfere with the Adjudicating Authority's dismissal of the application for cross-examination, while clarifying that the decision does not endorse or depart from any facts relating to the respondent's actions and that the appellant retains liberty to raise relevant objections and points before the Adjudicating Authority.Prayer for cross-examination of the Enforcement officer dismissed; the Tribunal declined to interfere with the Adjudicating Authority's order refusing cross-examination.Final Conclusion: Appeal dismissed insofar as it sought permission to cross-examine the Enforcement officer; the Adjudicating Authority's order denying cross-examination is sustained, subject to the appellant's liberty to raise all relevant issues before the Adjudicating Authority.

2023 (8) TMI 1539 - APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI Money Laundering

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Issues: (i) Whether the insertion of offences under the Prevention of Corruption Act, 1988 in the schedule to the Prevention of Money-laundering Act, 2002 could be applied to the facts of the case despite the check period predating the amendments. (ii) Whether the record disclosed a prima facie case of disproportionate assets so as to sustain the attachment proceedings. (iii) Whether the requirements of Section 5(1) of the Prevention of Money-laundering Act, 2002 were satisfied for provisional attachment when the property had already been attached by the Special Court.

Issue (i): Whether the insertion of offences under the Prevention of Corruption Act, 1988 in the schedule to the Prevention of Money-laundering Act, 2002 could be applied to the facts of the case despite the check period predating the amendments.

Analysis: The relevant date for determining the applicability of the scheduled offence is the date when the person projects tainted property as untainted or otherwise engages in money-laundering, not the date of the original predicate offence. The FIR and ECIR were much later than the amendments that brought the offence within the schedule, and the amendment was not being applied retrospectively on the facts found.

Conclusion: The challenge on the ground of retrospective application failed.

Issue (ii): Whether the record disclosed a prima facie case of disproportionate assets so as to sustain the attachment proceedings.

Analysis: The material on record prima facie indicated possession of property disproportionate to known sources of income. The Tribunal declined to record any final finding on the merits because that would be determined by the Special Court in the criminal trial.

Conclusion: The objection to the attachment on this factual ground was rejected.

Issue (iii): Whether the requirements of Section 5(1) of the Prevention of Money-laundering Act, 2002 were satisfied for provisional attachment when the property had already been attached by the Special Court.

Analysis: Provisional attachment under Section 5(1) requires recorded reasons based on material showing possession of proceeds of crime and a likelihood that the property may be concealed, transferred or dealt with so as to frustrate confiscation. As the property was already attached by the Special Court, the material necessary to show such likelihood was missing, and the reasons to believe were recorded without application of mind.

Conclusion: The provisional attachment order, and the order confirming it, could not be sustained and were set aside.

Final Conclusion: The appeal succeeded on the absence of the statutory preconditions for provisional attachment, and the impugned attachment orders were annulled, leaving the authority free to act again in accordance with law if the factual basis later so permits.

Ratio Decidendi: Provisional attachment under Section 5(1) of the Prevention of Money-laundering Act, 2002 can be sustained only when the authority records reasons based on material showing a real likelihood that the property may be concealed, transferred or otherwise dealt with so as to frustrate confiscation.

Provisional attachment under PMLA fails without material showing real risk of concealment or transfer of property.
The applicable PMLA schedule is assessed by the date of the alleged money-laundering conduct, not the date of the original predicate offence, so the challenge based on retrospective application failed. Prima facie material showing disproportionate assets was sufficient to support attachment, without any final finding on the merits. Provisional attachment under Section 5(1) requires recorded reasons supported by material showing proceeds of crime and a real likelihood of concealment, transfer or other dealing to frustrate confiscation; where the property had already been attached by the Special Court, those preconditions were not met, and the attachment orders were set aside.

Relevant date for scheduled offence is date when money laundering is found / when tainted property is projected as untainted - retrospective application of amendment adding predicate offence to the schedule - provisional attachment under Section 5(1) of the PMLA requires recorded reasons to believe, based on material, that proceeds are likely to be concealed/transferred so as to frustrate confiscation - overriding effect of the PMLA provisions over other enactments - prima facie finding of disproportionate assets is a matter for the Special Court at trialRelevant date for scheduled offence is date when money laundering is found / when tainted property is projected as untainted - retrospective application of amendment adding predicate offence to the schedule - Applicability of the PMLA (as amended in 2009 and 2013) to proceeds arising from predicate offences committed during the check period. - HELD THAT: - The Tribunal held that the determinative date for treating an offence as a scheduled offence under the PMLA is the date when money laundering is found to have occurred or when tainted property is projected as untainted, and not the date of commission of the predicate offence. The ECIR and FIR were recorded subsequent to the notifications of 2009 and 2013; therefore the amendments making offences under the Prevention of Corruption Act scheduled offences were not being given retrospective effect so as to render the PMLA inapplicable. The appellants' contention that the check period predates the amendment and thus the PMLA could not be invoked was rejected. [Paras 10]The PMLA (as amended) applied in the case; the argument based on non retrospectivity of the 2009/2013 amendments is without substance.Prima facie finding of disproportionate assets - trial court / Special Court to determine substantive guilt and final disproportionality - Whether, on the facts, no offence under Section 13(1)(d)/13(2) of the Prevention of Corruption Act was made out because the assets were not disproportionate. - HELD THAT: - The Tribunal recorded that the material on record prima facie points to disproportionate assets in the hands of the appellant. However, it declined to undertake a final adjudication on the factual question of disproportionality since that is to be determined by the Special Court at trial. The Tribunal therefore refused to decide the substantive guilt or detailed factual disproportionality at the appellate stage. [Paras 11]There exists a prima facie case of disproportionate assets but the question of ultimate guilt/disproportionality is left to the Special Court's trial.Provisional attachment under Section 5(1) of the PMLA requires recorded reasons to believe, based on material, that proceeds are likely to be concealed/transferred so as to frustrate confiscation - overriding effect of the PMLA provisions - Validity of the provisional attachment order where the properties had already been attached by the Special Court and whether the requisite reasons to believe under Section 5(1) were recorded with application of mind. - HELD THAT: - Section 5(1) permits provisional attachment only where an authorised officer has reasons to believe, recorded in writing and based on material, that a person is in possession of proceeds of crime, has been charged with a scheduled offence and such proceeds are likely to be concealed or transferred so as to frustrate confiscation. The Tribunal found that in the present case the properties had been attached earlier by the Special Court (order dated 19.03.2015), and therefore the material necessary to show a likelihood of concealment or transfer (Clause (c) of Section 5(1)) was missing. The reasons to believe were held to have been recorded without application of mind. While recognising the PMLA's overriding effect, the Tribunal concluded that there was no conflict that justified a fresh provisional attachment in the absence of material demonstrating the risk of frustration of confiscation. [Paras 13, 14]The provisional attachment and the Adjudicating Authority's confirmation were set aside for lack of proper reasons to believe; respondents remain free to act under Section 5(1) if the Special Court withdraws its attachment or if circumstances later demonstrate a real risk of concealment or transfer.Final Conclusion: The appeal is allowed insofar as the provisional attachment dated 18.01.2019 and the Adjudicating Authority's confirmation are set aside for want of proper reasons to believe under Section 5(1) of the PMLA. The applicability of the PMLA (as amended) was upheld and a prima facie case of disproportionate assets was left for determination by the Special Court; the respondent may re invoke Section 5(1) if the Special Court withdraws its attachment or if fresh material demonstrates a likelihood of concealment or transfer.

2023 (7) TMI 1530 - APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI Money Laundering

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1. ISSUES PRESENTED and CONSIDERED

The legal judgment revolves around the following core issues:

Whether the notice for possession issued under Section 8(4) of the Prevention of Money Laundering Act, 2002 (PMLA) was valid without exceptional reasons being disclosed.
Whether the property in question, Flat No. 4-C, was acquired out of the proceeds of crime.
Whether the procedural requirements under PMLA and relevant judgments were adhered to in the issuance of the notice for possession.
Whether the appellant's arguments against the possession notice, including the humanitarian grounds and alleged procedural lapses, hold merit.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Notice for Possession Without Exceptional Reasons

Relevant Legal Framework and Precedents: Section 8(4) of PMLA allows for possession of property post-confirmation of provisional attachment. The Apex Court in Vijay Madanlal Choudhary's case emphasized that possession should be an exception, not a rule.
Court's Interpretation and Reasoning: The Tribunal noted that the statutory provision does not mandate reasons in the notice itself. The Apex Court's judgment allows for possession post-confirmation as an exception, not a rule.
Key Evidence and Findings: The Tribunal found that the respondents provided exceptional reasons post-challenge, aligning with the statutory framework.
Application of Law to Facts: The Tribunal held that the absence of reasons in the notice did not invalidate it, as reasons were provided during the challenge.
Treatment of Competing Arguments: The appellant's reliance on OPTO Circuits case was distinguished as it involved administrative orders requiring reasons, unlike a statutory notice.
Conclusions: The notice was deemed valid as exceptional reasons were provided during the challenge, satisfying the legal requirements.

Issue 2: Acquisition of Property Out of Proceeds of Crime

Relevant Legal Framework and Precedents: Section 2(1)(u) of PMLA defines proceeds of crime. The Tribunal considered the money trail and the nature of transactions.
Court's Interpretation and Reasoning: The Tribunal found that the funds used to purchase the property were linked to the proceeds of crime, as established by the money trail.
Key Evidence and Findings: The money trail indicated that funds from ABG Shipyard Ltd., obtained through fraudulent means, were used to purchase the property.
Application of Law to Facts: The Tribunal concluded that the property was acquired using proceeds of crime, justifying the attachment and possession.
Treatment of Competing Arguments: The appellant's claim of repayment through an assignment deed was rejected due to lack of substantiation and evidence of manipulation.
Conclusions: The Tribunal upheld the finding that the property was acquired from proceeds of crime, supporting the possession notice.

Issue 3: Adherence to Procedural Requirements

Relevant Legal Framework and Precedents: The Tribunal referred to procedural requirements under PMLA and relevant judgments, including the Apex Court's guidance on possession as an exception.
Court's Interpretation and Reasoning: The Tribunal found that the procedural requirements were met, as the notice was issued post-confirmation of attachment.
Key Evidence and Findings: The respondents demonstrated adherence to statutory provisions and provided exceptional reasons during the challenge.
Application of Law to Facts: The Tribunal held that the statutory framework was followed, and the notice was procedurally sound.
Treatment of Competing Arguments: The appellant's procedural challenges were dismissed as the notice complied with statutory requirements.
Conclusions: The Tribunal concluded that procedural requirements were adhered to, validating the possession notice.

Issue 4: Merit of Appellant's Arguments Against Possession Notice

Relevant Legal Framework and Precedents: The appellant's arguments were assessed against the backdrop of PMLA provisions and relevant case law.
Court's Interpretation and Reasoning: The Tribunal found no merit in the appellant's arguments, including humanitarian grounds and alleged procedural lapses.
Key Evidence and Findings: The Tribunal noted the appellant's failure to substantiate claims and the respondents' reasonable actions.
Application of Law to Facts: The Tribunal applied legal principles to dismiss the appellant's arguments, finding them unsubstantiated.
Treatment of Competing Arguments: The appellant's reliance on humanitarian grounds was insufficient to counter the legal justification for possession.
Conclusions: The Tribunal dismissed the appellant's arguments, upholding the validity of the possession notice.

3. SIGNIFICANT HOLDINGS

The Tribunal emphasized that "the possession of the attached property should not be taken by invoking Section 8(4) of the Act of 2002 as a rule but can be as an exception."
The core principle established is that possession post-confirmation of provisional attachment is permissible as an exception, provided exceptional reasons are demonstrated.
The Tribunal concluded that the property was acquired from proceeds of crime, justifying the possession notice.
Final determinations included the dismissal of the appellant's application for an interim order and the upholding of the notice for possession.

SAFEMA Tribunal upholds Section 8(4) possession notice after provisional attachment confirmation despite natural justice challenge
The Appellate Tribunal under SAFEMA upheld a possession notice issued under Section 8(4) of PMLA 2002 following confirmation of provisional attachment order. The appellant challenged the notice claiming lack of reasons and violation of natural justice principles. The Tribunal held that Section 8(4) permits possession as an exception, not as a rule, and does not mandate reasons in the notice itself. The case involved organized crime where property was purchased using proceeds of crime through fund diversion from associated companies. The Tribunal found sufficient money trail evidence showing criminal proceeds were used for property purchase. The appellant's application for interim relief was dismissed and the possession notice was upheld.

Taking possession under Section 8(4) of the Prevention of Money Laundering Act, 2002 - exceptional nature test for invocation of Section 8(4) - requirement of reasons in administrative notices - possession after confirmation of provisional attachment vs. possession only on confiscation - prima facie organised diversion of proceeds of crimeRequirement of reasons in administrative notices - taking possession under Section 8(4) of the Prevention of Money Laundering Act, 2002 - Validity of challenge to the notice under Section 8(4) on the ground that the notice does not set out exceptional reasons - HELD THAT: - The Tribunal held that Section 8(4) creates a statutory right to take possession forthwith upon confirmation of a provisional attachment order and the provision does not mandate that exceptional reasons must be recorded in the notice itself. While administrative orders generally should disclose reasons, a statutory notice under Section 8(4) does not by its terms require reasons to be recited; reasons may be furnished when the notice is challenged. The Tribunal distinguished the position from cases where an impugned order contains reasons that are subsequently supplemented before a court, noting that the present challenge was to a statutory notice which does not require a written statement of exceptional reasons at the stage of issue. Consequently, absence of reasons in the notice did not, by itself, invalidate the notice.Ground of challenge that the possession notice is invalid for omission of exceptional reasons is rejected.Possession after confirmation of provisional attachment vs. possession only on confiscation - exceptional nature test for invocation of Section 8(4) - Whether possession under Section 8(4) can be taken only upon formal confiscation or also upon confirmation of provisional attachment and whether Section 8(4) is constitutionally valid as interpreted - HELD THAT: - The Tribunal applied the statutory text and the Apex Court's pronouncements in Vijay Madanlal Choudhary, observing that Section 8(4) vests a right to take possession on confirmation of provisional attachment but that its exercise should be exceptional and not routine. The Tribunal rejected the submission that possession is permissible only after formal confiscation, observing that the statute contemplates taking possession earlier and that the provision has been upheld as constitutionally valid. The correct approach is that possession on confirmation of provisional attachment is permissible in exceptional cases, determined on a case-by-case basis; the statutory scheme cannot be rewritten to confine possession strictly to the confiscation stage.Possession on confirmation of provisional attachment is permissible in exceptional cases; Section 8(4) is to be applied as an exception and not as a rule.Prima facie organised diversion of proceeds of crime - exceptional nature test for invocation of Section 8(4) - Whether the facts in the present matter constitute an exceptional case (organised diversion of public funds / proceeds of crime) justifying possession of the specific flat (Flat No. 4-C) - HELD THAT: - On the material placed before it (ECIR, provisional attachment order, forensic audit findings and the money trail), the Tribunal found a prima facie case of organised diversion of funds by ABG Shipyard and related entities, resulting in large-scale loss to consortium banks. The respondents had identified reasons showing the complaint of organised fraud, diversion of funds to group entities and to overseas accounts, and alleged that properties were acquired from diverted funds. The Tribunal also accepted the respondents' explanation that Flat No. 4-C was vacant at the time of search and that possession was sought of that flat (leaving occupied Flat No. 06). Given the gravity, organised nature of the alleged offence and the risk of dissipation, the Tribunal concluded the matter falls within the category of exceptional cases permitting possession under Section 8(4).The facts prima facie establish an organised diversion of proceeds of crime and therefore constitute an exceptional case justifying possession of the attached flat; the interim stay application is refused.Final Conclusion: The application for interim relief challenging the notice under Section 8(4) is dismissed. The Tribunal held that Section 8(4) permits possession upon confirmation of provisional attachment in exceptional cases, that the notice need not itself recite exceptional reasons which can be supplied when challenged, and that on the material before it a prima facie case of organised diversion of proceeds of crime justified seeking possession of Flat No. 4 C; the request for stay of the possession notice is refused.

2023 (7) TMI 1476 - APPELLATE TRIBUNAL SAFEMA, NEW DELHI Money Laundering

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Issues: (i) Whether an offence under section 51 of the Black Money Act, 2015 can be treated as a scheduled offence without applying the separate requirement of cross-border implications under section 2(1)(ra) of the PMLA; (ii) Whether provisional attachment under section 5(1) of the PMLA could be sustained in the absence of a prior complaint or report for prosecution under the Black Money Act, 2015; (iii) Whether undisclosed foreign assets and income existing before the commencement of the Black Money Act, 2015 could still attract tax evasion and money-laundering consequences after the Act came into force.

Issue (i): Whether an offence under section 51 of the Black Money Act, 2015 can be treated as a scheduled offence without applying the separate requirement of cross-border implications under section 2(1)(ra) of the PMLA.

Analysis: Section 51 of the Black Money Act, 2015 criminalises wilful attempt to evade tax on undisclosed foreign income and assets. The scheduled offence was placed in Part C of the PMLA Schedule by a distinct insertion, and the reasoning treated this entry as independent of the earlier Part C entries that are conditioned by the phrase "offence of cross border implications." The definition in section 2(1)(ra) of the PMLA was held inapplicable to this particular scheduled offence because evasion of tax is not dependent on a transfer of proceeds out of India. Reading the entry otherwise would render the specific scheduled offence ineffective and redundant.

Conclusion: The offence under section 51 of the Black Money Act, 2015 is a scheduled offence in its own right and does not require proof of cross-border implications.

Issue (ii): Whether provisional attachment under section 5(1) of the PMLA could be sustained in the absence of a prior complaint or report for prosecution under the Black Money Act, 2015.

Analysis: Section 5(1) of the PMLA permits provisional attachment on the basis of material in possession and recorded reasons to believe. The first proviso generally refers to a report under section 173 of the Code of Criminal Procedure, 1973 or a complaint before a Magistrate, but the second proviso operates as an exception where immediate attachment is necessary to prevent frustration of proceedings. The decision applied the later proviso and held that provisional attachment could be made even without prior prosecution complaint, particularly where the material showed a continuing attempt to alienate foreign assets and frustrate enforcement action. The reliance on absence of a prosecution complaint was therefore held to be legally erroneous.

Conclusion: The provisional attachment was validly issued under the second proviso to section 5(1) of the PMLA notwithstanding the absence of a prior complaint or report.

Issue (iii): Whether undisclosed foreign assets and income existing before the commencement of the Black Money Act, 2015 could still attract tax evasion and money-laundering consequences after the Act came into force.

Analysis: Sections 3 and 4 of the Black Money Act, 2015 impose tax on undisclosed foreign income and assets for assessment years commencing on or after 1 April 2016 and define the scope of such undisclosed income and assets. The reasoning held that the statutory regime applied to non-disclosure after commencement even if the underlying assets or entities were created earlier. The focus was on the continuing failure to disclose taxable foreign income and assets in the relevant assessment year, not merely on the date of acquisition. Accordingly, the earlier existence of the assets did not defeat the statutory charge or the consequences under the PMLA framework.

Conclusion: The pre-existing nature of the foreign assets did not bar action under the Black Money Act, 2015 or the PMLA.

Final Conclusion: The impugned order was set aside and the provisional attachment order was confirmed, as the material on record established a prima facie case of wilful tax evasion involving undisclosed foreign assets and justified immediate attachment to prevent frustration of proceedings.

Ratio Decidendi: An offence of wilful tax evasion under the Black Money Act, 2015 is independently scheduled under the PMLA, and provisional attachment may be ordered on recorded reasons and material in hand under the second proviso to section 5(1) without awaiting prior prosecution, where immediate action is needed to prevent frustration of proceedings.

Undisclosed foreign assets and PMLA attachment: wilful tax evasion is a scheduled offence, and immediate attachment may proceed without prior complaint.
Wilful tax evasion relating to undisclosed foreign income and assets under the Black Money Act, 2015 was treated as a scheduled offence under the PMLA in its own right, without needing proof of cross-border implications under the general Part C definition. Provisional attachment under section 5(1) was held sustainable on recorded reasons and material in hand under the second proviso, even without a prior prosecution complaint or report, where immediate action was needed to prevent frustration of proceedings. The pre-existing origin of foreign assets did not bar action, because the operative focus remained the continuing non-disclosure after commencement of the Act.

Willful attempt to evade tax under Section 51 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 - scheduled offence under Part C of the Schedule to the Prevention of Money Laundering Act, 2002 - offence of cross border implication - provisional attachment under Section 5(1) of the Prevention of Money Laundering Act, 2002 - operation of first proviso and second proviso - proceeds of crime and money laundering - when evaded tax constitutes proceeds - scope of total undisclosed foreign income and asset and chargeability of tax from assessment year commencing on or after 1st April, 2016Willful attempt to evade tax under Section 51 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 - scheduled offence under Part C of the Schedule to the Prevention of Money Laundering Act, 2002 - offence of cross border implication - Whether an offence under Section 51 of the Black Money Act, 2015 (item (4) of Part C of the Schedule to the PMLA, 2002) is required to be an 'offence of cross border implication' involving transfer of proceeds outside India. - HELD THAT: - The Tribunal held that item (4) of Part C was inserted as an independent scheduled offence and is not to be read as subject to the 'offence of cross border implication' test in section 2(1)(ra). The punctuation and structure of Part C show that the first three items are linked by 'or' and a semicolon, whereas item (4) follows after a full stop and must be read separately. Applying section 2(1) definitions in context, an evasion of tax under Section 51 (which concerns non payment/non disclosure of tax chargeable under the Black Money Act) does not require an element of transfer abroad; evaded tax represents an unpaid liability and can constitute proceeds of crime for the purposes of PMLA. The Adjudicating Authority's interpretation that item (4) must meet the cross border transfer requirement was therefore a misreading and unsustainable. [Paras 30, 31, 32, 34, 35]Item (4) of Part C of the Schedule (offence under Section 51) is a scheduled offence independent of the 'cross border implication' requirement; it need not satisfy the transfer/ cross border element to attract Part C.Provisional attachment under Section 5(1) of the Prevention of Money Laundering Act, 2002 - operation of first proviso and second proviso - requirement of prior report/complaint under first proviso to Section 5(1) - exception for immediate attachment when non-attachment would frustrate proceedings - Whether provisional attachment under Section 5(1) of PMLA can be ordered in absence of a report to Magistrate or complaint (first proviso), by invoking the second proviso when non attachment would frustrate proceedings. - HELD THAT: - The Tribunal applied Section 5(1) and held that the first proviso requires forwarding a report to a Magistrate or filing a complaint before attachment in ordinary cases. However, the second proviso is an express exception permitting immediate attachment where the authorised officer records reasons of belief (to be recorded in writing) that non attachment would frustrate proceedings. The authorised officer may validly act under the second proviso on the basis of material in possession without waiting for formal registration/complaint. Reliance was placed on the reasoning in the Apex Court (Vijay Madanlal Choudhary) that registration of a scheduled offence is prerequisite to prosecute but not to provisionally attach; swift action under Section 5 is permissible to secure proceeds and prevent frustration of confiscation proceedings. The Adjudicating Authority's insistence that attachment was impermissible in absence of a prior complaint was therefore erroneous. [Paras 41, 42, 43, 49, 50]Provisional attachment under Section 5(1) may be made under the second proviso without a prior report to a Magistrate or complaint where the authorised officer, on material in possession, records reasons to believe that non attachment would frustrate proceedings; the Adjudicating Authority's contrary finding was set aside.Scope of total undisclosed foreign income and asset and chargeability of tax from assessment year commencing on or after 1st April, 2016 - whether non disclosure of assets acquired prior to enactment is covered - Whether the Black Money Act, 2015 applies to undisclosed foreign assets and income which were acquired prior to the Act but remain undisclosed for assessment years commencing on or after 1 April 2016. - HELD THAT: - The Tribunal observed that Sections 3 and 4 impose charge of tax on total undisclosed foreign income and assets 'for every assessment year commencing on or after the 1st day of April, 2016.' Accordingly, where foreign assets/income (even if acquired earlier) are undisclosed in returns for assessment years from that date, tax is chargeable under the Act and non disclosure may constitute evasion under Section 51. The Adjudicating Authority's conclusion that the Black Money Act could not apply because the assets were obtained before the Act was misplaced: the statutory charge applies from the specified assessment years and non disclosure in those years suffices to invoke the Act's penal provisions. [Paras 23, 60, 61, 62, 63]The Act applies to undisclosed foreign income/assets for assessment years commencing on or after 1 April 2016; prior acquisition does not preclude applicability where non disclosure continues into those assessment years.Proceeds of crime and money laundering - when evaded tax constitutes proceeds - confirmation of provisional attachment by Adjudicating Authority - Whether the provisional attachment issued by the Enforcement Directorate should be confirmed in the facts of the case. - HELD THAT: - Having held that Section 51 is a scheduled offence independent of cross border transfer, that the authorised officer validly invoked the second proviso to Section 5(1) on material showing attempts to alienate assets, and that evaded tax constitutes proceeds of crime under PMLA, the Tribunal found the Adjudicating Authority erred in refusing confirmation. The record (searches, seized documents, statements and the JCIT notice) demonstrated possession of undisclosed foreign assets, admissions of non disclosure, and active attempts to transfer/alienate overseas assets (including evidence of trust structure and back dating) which justified immediate provisional attachment to prevent frustration of proceedings. The Tribunal therefore set aside the impugned order and confirmed the provisional attachment. [Paras 47, 54, 55, 56, 64]Impugned order of the Adjudicating Authority is set aside; the Provisional Attachment Order is confirmed.Final Conclusion: The Adjudicating Authority's order refusing to confirm the provisional attachment was set aside. The Tribunal held that an offence under Section 51 of the Black Money Act, 2015 is a scheduled offence under Part C of PMLA without requiring a 'cross border implication' element; provisional attachment under Section 5(1) PMLA may be ordered under the second proviso on recorded reasons without prior report/complaint where non attachment would frustrate proceedings; the Black Money Act's charge applies to undisclosed foreign assets/income for assessment years commencing on or after 1 April 2016; on the facts, the provisional attachment was properly made and is accordingly confirmed.

2023 (6) TMI 1436 - APPELLATE TRIBUNAL SAFEMA, NEW DELHI Money Laundering

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Appellants cannot claim copies of seized records before replying to show cause notice under PMLA Section 8(1)
The Appellate Tribunal SAFEMA dismissed an appeal challenging refusal to provide copies of seized records before filing reply to show cause notice under PMLA Section 8(1). The Tribunal held that seized records can be retained for maximum 365 days during investigation or until proceedings conclude. Section 8(1) provisions do not refer to seized records, and the Adjudicating Authority need not rely on seized records for determining their retention beyond 180 days. No natural justice violation occurred as the Authority provided copies of all documents it intended to rely upon for adjudication. The appellants' contention that effective reply required copies of seized records was unsustainable.

Entitlement under section 21(2) of PMLA to obtain copies of seized records - temporal scope and flexibility in supply of seized-record copies - prejudice from non-supply of seized records prior to reply to show cause notice - meaning of "material" under section 17(2) and Rules-exclusion of seized records - relevance of seized records to adjudication under section 8(1)/8(3) - principles of natural justice vis-a -vis supply of documents relied uponEntitlement under section 21(2) of PMLA to obtain copies of seized records - temporal scope and flexibility in supply of seized-record copies - Right under section 21(2) to obtain copies of seized records is recognized but not time bound or absolute. - HELD THAT: - Section 21(2) vests in the person from whom records are seized a right to obtain copies of those records; however, the provision, as amended, contains no explicit timeline. The pre amendment linkage of subsection (2) to records "retained under" subsection (1) no longer exists after the amendment, and that change removes the earlier inference that copies must be provided immediately prior to any application for further retention. Consequently, an interpretation treating the entitlement as immediate and unconditional is incorrect; the right must be exercised consistent with the statutory scheme and other provisions governing retention and adjudication, and copies are to be provided before any prejudice is caused to the person but not necessarily at the instant of demand. (paras 6-9, 23) [Paras 6, 8, 9, 23]The Court held that while section 21(2) confers a right to obtain copies, that right is not per se immediate and unqualified; timing is to be governed by the statute read as a whole and by avoidance of prejudice.Prejudice from non-supply of seized records prior to reply to show cause notice - principles of natural justice vis-a -vis supply of documents relied upon - relevance of seized records to adjudication under section 8(1)/8(3) - Refusal to supply seized records at the present stage did not necessarily cause prejudice where the Adjudicating Authority was not relying on those seized records for the retention adjudication and relevant material had been supplied. - HELD THAT: - Section 8(1) requires notice indicating sources and evidence relied upon in relation to attached or seized property; it does not mandate supply of seized records themselves. The Adjudicating Authority had received and supplied the reasons and the material on which it intended to rely for adjudication under section 8(3). Because the Adjudicating Authority had not indicated reliance upon the seized records (and in fact had not received them), there was no breach of natural justice in declining to order their immediate supply. The appellants' contention that absence of seized records would prevent an effective reply was therefore not sustainable; the question of supplying copies remains open until the adjudication is concluded and any prejudice must be demonstrated in light of what the Adjudicating Authority intends to rely upon. (paras 16-21, 23) [Paras 16, 20, 21, 23]The Court found no prejudice in withholding copies at this stage where the Adjudicating Authority was not relying on seized records and had been supplied the material it considered necessary.Meaning of "material" under section 17(2) and Rules-exclusion of seized records - obligations under section 17(2) and Rule framework for forwarding reasons and material - The word "material" in section 17(2) (as informed by the Rules) does not include the seized records; immediate forwarding in a sealed envelope relates to reasons and material, not the seized records themselves. - HELD THAT: - Section 17(2) mandates that the authorized officer forward the reasons recorded and the material in his possession to the Adjudicating Authority in a sealed envelope immediately after search and seizure. The Rules define "material" for this purpose and distinguish it from "record"; "record" (which includes seized records) is defined separately. Sending seized records immediately would undermine the statutory retention scheme (including the Investigating Officer's period of retention under section 21(1)) and the separate procedures for applying for continued retention under section 17(4). Therefore, the statutory text and Rules indicate that "material" furnished under section 17(2) does not encompass all seized records. (paras 14-15) [Paras 14, 15]The Court held that seized records are not included within the "material" required to be forwarded under section 17(2) and the Rules; immediate transmission of reasons and material does not compel immediate transmission of all seized records.Final Conclusion: Appeals dismissed: entitlement to copies under section 21(2) exists but is not absolute or immediate; seized records need not be supplied at this stage where the Adjudicating Authority is not relying upon them and required material has been furnished, and the statutory scheme (including section 17 and section 21 and accompanying Rules) separates "material" from seized records.

2023 (5) TMI 1382 - APPELLATE TRIBUNAL SAFEMA, NEW DELHI Money Laundering

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Issues Involved:
1. Determination of the "value" of attached property under the Prevention of Money Laundering Act, 2002.
2. Right to cross-examination as part of the principle of natural justice.

Issue-Wise Detailed Analysis:

1. Determination of the "Value" of Attached Property:

The primary issue in this case revolves around the interpretation of the term "value" as defined under the Prevention of Money Laundering Act, 2002 (the Act of 2002). The Appellant challenged the interim order of the Adjudicating Authority which denied the cross-examination of two officers from the Enforcement Directorate. The Appellant argued that the value of the attached properties should be assessed at their current market value on the date of attachment, rather than their value on the date of acquisition, as stipulated in section 2(1)(zb) of the Act. This was contested on the grounds that the attached properties' value significantly exceeded the value of the proceeds of crime, which was Rs. 78,39,82,343/-, while the attached properties were valued at Rs. 216,84,36,000/-.

The Tribunal examined the statutory definitions under section 2(1)(u) and 2(1)(zb) of the Act, which define "proceeds of crime" and "value" respectively. The Tribunal concluded that the definition of "value" is unambiguous and refers to the fair market value on the date of acquisition or possession, not the current market value. The Tribunal emphasized that neither it nor any court has the jurisdiction to reinterpret statutory definitions unless challenged and struck down by a Constitutional Court. Thus, the Tribunal rejected the Appellant's request to interpret "value" as the current market price.

2. Right to Cross-Examination as Part of the Principle of Natural Justice:

The Appellant sought cross-examination of the officers to ascertain the valuation method used by the Enforcement Directorate. The Appellant argued that denying cross-examination violated the principles of natural justice, as the Adjudicating Authority is bound to follow these principles. The Tribunal, however, held that cross-examination cannot be sought merely for its sake, especially when the issue for cross-examination is not substantiated. The Tribunal noted that the proceedings before the Adjudicating Authority must be completed within 180 days as per the Act, and the request for cross-examination was not justified given the statutory definition of "value."

The Tribunal also addressed the Appellant's reference to various judgments to support their argument for a broader interpretation of "value." However, it found these references either irrelevant or repetitive of issues already discussed. The Tribunal concluded that the Appellant's argument for a different interpretation of "value" was unsustainable, and thus, there was no basis to allow cross-examination of the officers.

In conclusion, the Tribunal dismissed the appeal, upholding the Adjudicating Authority's interim order and reiterating the statutory interpretation of "value" as per the Act of 2002. The Tribunal also clarified that any deviation from this interpretation would require a constitutional challenge, which was not pursued by the Appellant.

Property attachment upheld with valuation at acquisition date under money laundering provisions sections 2(1)(u) and 2(1)(zb)
The Appellate Tribunal SAFEMA, New Delhi dismissed an appeal challenging property attachment under money laundering provisions. The Tribunal held that property value should be assessed at fair market value on the date of acquisition, not current market price at attachment date, interpreting sections 2(1)(u) and 2(1)(zb) together. The appellant's request for cross-examination of valuation officers was denied as no grounds were established, noting cross-examination cannot be sought arbitrarily despite being part of natural justice principles. The Tribunal upheld the Adjudicating Authority's interim order while emphasizing proceedings must be completed within the statutory 180-day timeframe.

Definition of "value" under section 2(1)(zb) - "proceeds of crime" and its valuation context - statutory interpretation - defined term controls meaning - principle of natural justice - cross-examinationDefinition of "value" under section 2(1)(zb) - "proceeds of crime" and its valuation context - statutory interpretation - defined term controls meaning - Meaning of the word "value" for assessing property in relation to proceeds of crime under the Act. - HELD THAT: - The Tribunal held that the statutory definition of "value" in section 2(1)(zb) - i.e., the fair market value of any property on the date of its acquisition by a person, or if such date cannot be determined, the date on which such property is possessed by such person - governs valuation for purposes of the Act. A different meaning (namely, fair market value as on date of attachment) cannot be read into the same enactment by the Tribunal or a Court; to do so would amount to re-writing the statute. The Tribunal applied established principles of interpretation that a defined term in the statute must be given its clear meaning and that one cannot carve out exceptions by judicial interpretation where the legislature has prescribed a definition. Absent a successful challenge to the constitutional validity of the statutory definition, the Tribunal found no basis to adopt the market-value-on-attachment approach urged by the appellant and rejected the contention that "value" for attachment should be assessed at current market rates on the date of attachment. [Paras 21, 22, 23, 27, 30]The statutory definition in section 2(1)(zb) governs and value is to be taken as at acquisition or possession, not as on the date of attachment.Principle of natural justice - cross-examination - "proceeds of crime" and its valuation context - Whether denial of the appellant's application to cross-examine two Enforcement Directorate officers on valuation grounds warranted interference. - HELD THAT: - Having determined that the valuation issue relied on by the appellant (market value as on date of attachment) was inconsistent with the statutory definition of "value," the Tribunal concluded that the foundation for the requested cross-examination was absent. While acknowledging that cross-examination is a component of natural justice, the Tribunal held it cannot be sought merely for the sake of it or where no proper issue for such examination is made out. The Adjudicating Authority had kept the legal issue open and granted parties liberty to adduce material; nevertheless, because the appellant's legal premise for cross-examination failed, there was no ground to interfere with the interim order denying the application for cross-examination. [Paras 2, 32, 33]Refusal to allow the requested cross-examination was justified and the interim order denying it is not interfered with.Final Conclusion: The appeal is dismissed; the Tribunal affirms that "value" for purposes of the Act is to be determined as per the statutory definition and finds no merit in the challenge to the denial of cross-examination, accordingly upholding the interim order.

2023 (4) TMI 1407 - APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI Money Laundering

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1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered by the Tribunal include:

Whether the appellant is entitled to interim relief to stay the execution and operation of the letter dated 15.12.2021 and the undated notice from the Enforcement Directorate regarding the collection of lease payments from tenants of Empress Mall.
Whether the appellant can claim immunity under Section 32A of the Insolvency and Bankruptcy Code, 2016, from the attachment of property under the Prevention of Money Laundering Act, 2002 (PMLA).
The impact of the appellant's non-disclosure of prior judgments and possession status on the application for interim relief.
The relevance of the appellant's conduct, particularly the procurement and presentation of internal departmental correspondence, in determining entitlement to interim relief.

2. ISSUE-WISE DETAILED ANALYSIS

Interim Relief and Property Possession

The Tribunal considered whether interim relief should be granted to stay the execution of the Enforcement Directorate's directives. The appellant argued that without collecting lease payments, the maintenance of the Empress Mall would be compromised, affecting its value and the insolvency process. However, the Tribunal noted that the appellant had previously approached the NCLT and NCLAT with similar applications, which were dismissed. The Tribunal emphasized that the appellant had not disclosed these prior decisions, nor the fact that the Enforcement Directorate had taken possession of the property on 10.11.2021, to the High Court of Bombay or the Tribunal. This non-disclosure and the misleading of courts were significant factors in denying interim relief.

Legal Framework and Immunity under Section 32A

The appellant sought immunity under Section 32A of the Insolvency and Bankruptcy Code, 2016, which provides protection from attachment under the PMLA once a resolution plan is approved. However, the Tribunal found that the resolution plan had not been approved by the Adjudicating Authority under Section 31 of the Code, rendering Section 32A inapplicable. The Tribunal referenced the NCLAT's findings that without an approved resolution plan, the appellant could not invoke Section 32A to prevent attachment of the property under the PMLA.

Competing Arguments and Tribunal's Reasoning

The respondents argued that the appellant had approached the Tribunal with unclean hands, having failed to disclose material facts and prior adverse rulings. They emphasized that the Enforcement Directorate had possession of the property, and the appellant's conduct, including the unauthorized procurement of internal correspondence, further undermined their position. The Tribunal agreed, highlighting the appellant's failure to challenge the NCLAT's findings at the Apex Court, which had attained finality. The Tribunal also noted the distinct purposes of the Insolvency and Bankruptcy Code and the PMLA, with the latter taking precedence in matters of proceeds of crime.

Conclusions

The Tribunal concluded that the appellant was not entitled to interim relief due to the lack of an approved resolution plan, the non-disclosure of material facts, and the misleading of courts. The Tribunal also took a serious view of the appellant's conduct in obtaining and presenting internal departmental correspondence without proper disclosure.

3. SIGNIFICANT HOLDINGS

The Tribunal's significant holdings include:

The appellant's failure to disclose prior judgments and possession status constituted a lack of clean hands, precluding the grant of interim relief.
Section 32A of the Insolvency and Bankruptcy Code, 2016, was inapplicable as the resolution plan had not been approved by the Adjudicating Authority.
The Prevention of Money Laundering Act, 2002, takes precedence over the Insolvency and Bankruptcy Code in matters involving proceeds of crime.
The Tribunal emphasized the importance of full disclosure and transparency in legal proceedings, criticizing the appellant's conduct in obtaining internal correspondence.

The Tribunal dismissed the application for interim relief and directed that the Mall property be maintained by the respondents. The appeal was scheduled for further proceedings on 16.10.2023.

Appellate Tribunal rejects interim relief application against ED's notice to Empress Mall tenants for lease deposits
The Appellate Tribunal under SAFEMA dismissed the application for interim relief seeking stay of execution of ED's notice to tenants of Empress Mall for lease payment deposits. The appellant had previously approached NCLT and NCLAT with similar prayers, which were dismissed as the resolution plan was not approved under Section 31 of the Insolvency and Bankruptcy Code, 2016, making Section 32A inapplicable. The Tribunal found the appellant failed to maintain clean hands by suppressing prior adverse orders and not disclosing ED's possession of the property since November 2021. The application was dismissed with directions for respondents to maintain the mall property.

Application for grant of interim relief - seeking stay execution and operation of the letterof Deputy Director Enforcement Directorate, Nagpur and undated notice sent by Assistant Director to the tenants of Empress Mall, Nagpur for payment of lease amount to Deputy Director, Enforcement, Kolkata - Entitlement to the benefit under Section 32 A of the Code. Application for grant of interim relief - HELD THAT:- The notice was sent to the shopkeepers for deposit of lease amount to the respondents. An application was earlier moved by the appellant before the NCLT, which was dismissed by a detailed order. The appeal thereupon was filed but has been dismissed by NCLAT by its order dated 3rd January, 2022. Therein similar prayer was made by the appellant. The application was dismissed after recording finding that Resolution Plan has not been approved by the Adjudicating Authority, under Section 31 of the Code of 2016. In view of the above, the claim of the appellant was not found tenable in reference to Section 32A of the Code of 2016. The appellant suppressed aforesaid fact while moving application before this Tribunal in reference to the same property and almost for similar relief. The appellant has thus not approached this Tribunal with clean hands while maintaining the application. It is when the orders of NCLT and NCLAT are prior in time to the application for interim relief. The conduct of the appellant itself is sufficient to deny interim relief in reference to it. Entitlement to the benefit under Section 32 A of the Code - HELD THAT:- The prayer in reference to Section 31 and 32 A of the Code of 2016 was made even before the NCLT and NCLAT. It was not accepted finding that Insolvency Resolution has not been approved as yet by the Adjudicating Authority under Section 31 of the Code of 2016 rather same is still pending. The appellant was thus not found entitled to the benefit under Section 32 A of the Code of 2016. While pursuing the case before the High Court of Bombay at Nagpur, the fact regarding possession of the property by the ED on 10.11.2021 was not disclosed and brought to the notice of the Court which is reflected from the order. The information about the possession could not have been furnished by the learned ASG on the first date of hearing in absence of necessary instructions at that stage - the prayer of the appellant for grant of interim order ignoring the possession of the property with the ED cannot be accepted and no interim order against it. Conclusion - i) The appellant's failure to disclose prior judgments and possession status constituted a lack of clean hands, precluding the grant of interim relief. ii) Section 32A of the Insolvency and Bankruptcy Code, 2016, was inapplicable as the resolution plan had not been approved by the Adjudicating Authority. The application for interim relief dismissed and it is directed that the Mall property be maintained by the respondents - Let the appeal be posted now on16.10.2023 for further proceedings.

2023 (4) TMI 1359 - APPELLATE TRIBUNAL SAFEMA, NEW DELHI Money Laundering

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Company's appeal against provisional asset attachment dismissed despite banking channel transactions under section 2(u)
The Appellate Tribunal SAFEMA, New Delhi dismissed the appeal challenging provisional attachment of assets under money laundering provisions. The appellant company argued transactions were legitimate as conducted through banking channels, but the tribunal held that entry-providing businesses typically maintain legal procedural compliance while facilitating illegal activities. The tribunal noted that proceeds of crime under section 2(u) includes property derived both directly and indirectly from scheduled offences. Despite the initial FIR quantifying proceeds at Rs. 1,40,10,333/-, investigation revealed exponentially higher amounts. The tribunal upheld that provisional attachment based on "reason to believe" serves as interim measure to prevent asset alienation pending final determination of culpability.

Proceeds of crime - provisional attachment under section 5(1) of the PMLA - reason to believe - presumption in inter connected transactions - genuineness of share transfers / paper companies - attachment not limited to charge sheet quantumProvisional attachment under section 5(1) of the PMLA - reason to believe - Validity of provisional attachment of the appellant's fixed assets under the PMLA - HELD THAT: - The Tribunal upheld the Adjudicating Authority's confirmation of the provisional attachment. It held that the material placed before the Director/Deputy Director constituted sufficient 'material in possession' to generate the requisite 'reason to believe' that the appellant was in possession of proceeds of crime and that such proceeds were likely to be concealed or dealt with so as to frustrate confiscation proceedings. The Tribunal rejected the appellant's contention that absence of an accusation against the company's directors or the fact that payments passed through banking channels negatived the reason to believe; noting that entry providing operations commonly comply with on paper formalities and use banking channels, and that section 5(1) is not confined to persons formally charged in the predicate offence. The Tribunal concluded that provisional attachment is an interim protective measure and, on the material considered, the Adjudicating Authority had acted within jurisdiction in confirming the attachment. [Paras 27, 41, 42]The confirmation of provisional attachment of the appellant's fixed assets under the PMLA is valid and sustainable.Genuineness of share transfers / paper companies - presumption in inter connected transactions - Whether the alleged sale/transfer of shares by Creative Fiscal to four companies was bona fide or sham - HELD THAT: - The Tribunal endorsed the Adjudicating Authority's factual evaluation that the transactions exhibited multiple suspicious features (common tiny office addresses, identical letterheads, same authorised signatories, similar handwriting on cheques, use of newly opened bank accounts and structuring of cheques) which cast grave doubt on the genuineness of the share transfers. The Tribunal rejected the appellant's reliance on bank channel payments and statutory book entries as sufficient to establish bonafides, observing that entry providers often adhere to formal legal procedures while facilitating laundering. The Tribunal further held that the Adjudicating Authority did not exceed its brief in probing these matters; raising and answering such questions was integral to determining whether properties were 'involved in money laundering'. [Paras 28, 31, 33, 34]The share transfer transactions could not be accepted as bona fide on the material before the Authority; the findings of sham/contrived transactions are affirmed.Attachment not limited to charge sheet quantum - proceeds of crime - Whether the quantum of provisional attachment is required to be limited to the disproportionate assets quantified in the predicate charge sheet - HELD THAT: - The Tribunal agreed with the Adjudicating Authority that there is no provision in the PMLA which confines attachment to the quantum reflected in the charge sheet of the scheduled offence. The charge sheet is only the starting point; a specialized financial investigation under PMLA may reveal a larger corpus of proceeds. Paragraphs 101-104 of the impugned order (reproduced and accepted by the Tribunal) explain that once the condition for provisional attachment under section 5(1)(b) is satisfied, the charge sheet quantification does not limit the Director's powers to attach properties reasonably believed to be proceeds of crime. The Tribunal therefore rejected the appellant's alternative plea seeking limitation of attachment to the quantum shown in the charge sheet. [Paras 35, 37, 38, 39]Attachment is not confined to the quantum recorded in the predicate offence charge sheet; the Adjudicating Authority rightly refused to limit attachment to that figure.Final Conclusion: The appeal is dismissed. The Adjudicating Authority's confirmation of provisional attachment of the appellant's assets is sustained: the Tribunal found sufficient material to form the requisite reason to believe, upheld the Authority's adverse findings on the genuineness of the challenged share transactions, and held that attachment need not be confined to the quantum stated in the predicate charge sheet.

2023 (1) TMI 1420 - APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI Money Laundering

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Cross-examination in provisional attachment proceedings is not automatic; it depends on facts, prejudice, and natural justice.
Cross-examination in provisional attachment proceedings under the Prevention of Money Laundering Act is not an absolute entitlement. The Adjudicating Authority is guided by natural justice and may regulate its own procedure, but Regulation 21 does not create a blanket right to cross-examine every witness whose statements are relied upon. Because such proceedings are summary in nature, cross-examination depends on the facts, the nature of the proceeding, and whether denial causes prejudice. Where relied-upon material is supplied and the affected party has an opportunity to respond, refusal of cross-examination may be justified.

Principles of natural justice - right of cross-examination - summary attachment proceedings - power of Adjudicating Authority to regulate procedure - Regulation 21 - issuing of commissions and summoning witnesses - inadmissibility of cross-examination as a rule in attachment proceedings - prejudice requirement for relief for breach of natural justicePrinciples of natural justice - right of cross-examination - summary attachment proceedings - Whether the Adjudicating Authority was obliged as a matter of right to allow cross-examination of witnesses relied upon in the Provisional Attachment Order made under the PMLA. - HELD THAT: - The Tribunal held that while the right of cross-examination is an element of the principles of natural justice, it is not an absolute right in every proceeding. Attachment proceedings under Chapter III of the PMLA are summary in nature and are primarily intended to protect property until trial by the Special Court concludes. Whether cross-examination should be permitted depends on the facts, the nature of the proceeding and whether denial would cause prejudice. The Tribunal applied established authorities emphasising flexibility in natural justice and that cross-examination is required where credibility is in dispute or prejudice would otherwise ensue, but is not to be granted as a rule in every attachment proceeding.Cross-examination is not a matter of right in attachment proceedings under the PMLA; it may be allowed in appropriate cases but cannot be claimed as a rule.Power of Adjudicating Authority to regulate procedure - Regulation 21 - issuing of commissions and summoning witnesses - Whether Regulation 21 and Section 6(15) of the PMLA required the Adjudicating Authority to summon and allow cross-examination of persons whose statements were recorded during investigation before other authorities. - HELD THAT: - Section 6(15) permits the Adjudicating Authority to be guided by natural justice and to regulate its procedure; Regulation 21 makes provisions relating to issuance of commissions and summoning witnesses as far as CPC provisions are applicable. The Tribunal observed that Regulation 21 confers power to summon and issue commissions but does not by itself create a blanket right to cross-examine persons who were not examined before the Adjudicating Authority. Cross-examination may be permitted where witnesses are called to give evidence before the Authority, but statements made before other authorities do not automatically entitle the party to cross-examine those deponents in attachment proceedings.Regulation 21 and Section 6(15) do not mandate automatic summoning or cross-examination of persons whose statements were recorded in other proceedings; the Adjudicating Authority may allow it only when appropriate on the facts.Prejudice requirement for relief for breach of natural justice - inadmissibility of cross-examination as a rule in attachment proceedings - Whether the Adjudicating Authority erred in dismissing the appellant's application to cross-examine three named persons, and whether the appellant suffered prejudice warranting interference. - HELD THAT: - The Tribunal examined the material and found that the appellant had been supplied copies of the statements and documents prior to giving his own statements and had opportunities to explain but did not challenge or furnish explanations then. The application sought cross-examination of persons who were not examined before the Adjudicating Authority and included a co-accused whose retracted statement could prejudice the criminal defence if prematurely tested. The Tribunal found no demonstration of serious prejudice resulting from refusal to permit cross-examination; the appellant failed to provide cogent reasons necessitating cross-examination in the attachment proceedings.No interference with the Adjudicating Authority's order refusing the application for cross-examination; dismissal of the application does not violate natural justice on the facts and no prejudicial breach was shown.Reliance on investigative statements - weight of documentary evidence in attachment proceedings - Whether statements relied upon in the Provisional Attachment Order were shown to be untrustworthy by an affidavit of the Enforcement Directorate such that cross-examination should have been allowed. - HELD THAT: - The Tribunal reviewed the affidavit relied on by the appellant and observed that it did not declare the named deponent wholly untrustworthy but stated he had not disclosed full facts and had given selective disclosures. The Tribunal held that the affidavit did not establish that the statement was unreliable in the sense that would require cross-examination in the attachment proceeding. Further, documentary evidence relied upon by the Authority was available to the appellant and formed the basis for the provisional attachment. The Tribunal therefore rejected the submission that an asserted finding of untrustworthiness in the affidavit compelled allowing cross-examination.The affidavit relied upon does not render the statements so untrustworthy as to require cross-examination in the attachment proceeding; no such error was made by the Adjudicating Authority.Final Conclusion: The appeal is dismissed. The Tribunal held that cross-examination is not an absolute right in summary attachment proceedings under the PMLA, Regulation 21 and Section 6(15) do not mandate automatic cross-examination of persons whose statements were recorded in other proceedings, and on the facts no prejudicial breach of natural justice or misreliance on untrustworthy statements was shown to warrant interference with the Adjudicating Authority's order refusing the application to cross-examine.

2022 (12) TMI 1603 - APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI Money Laundering

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Issues: (i) Whether non-supply of the ECIR and FIR caused a violation of natural justice; (ii) whether the seized records and frozen properties could continue to remain under retention and freezing beyond the statutory period in the absence of pending prosecution or completed investigation.

Issue (i): Whether non-supply of the ECIR and FIR caused a violation of natural justice.

Analysis: The Tribunal held that ECIR is an internal document and its non-supply does not, by itself, vitiate the proceedings. The contents of the FIR were stated to have been reflected in the original application, and on that basis no separate prejudice was found from non-supply of the FIR. However, the Tribunal also found that the relied upon documents forming the basis of the reason to believe were not supplied, and that omission deprived the appellant of a meaningful opportunity to defend himself.

Conclusion: The objection based on non-supply of the ECIR and FIR was rejected, but the non-supply of relied upon documents was held to be a violation of natural justice.

Issue (ii): Whether the seized records and frozen properties could continue to remain under retention and freezing beyond the statutory period in the absence of pending prosecution or completed investigation.

Analysis: The Tribunal construed the scheme of adjudication and continuation of retention/freezing under the Act to mean that such restraint cannot subsist indefinitely. It noted that the statutory period had expired, no material was produced to show completion of investigation or pendency of prosecution, and the record did not establish any continuing legal basis for retention or freezing of the appellant's assets and documents.

Conclusion: The continuation of retention and freezing was held impermissible and the seized records and frozen properties were directed to be released.

Final Conclusion: The appeal succeeded on the statutory continuation point, resulting in quashing of the adjudication order and release of the seized and frozen assets, while the challenge based on ECIR and FIR non-supply did not succeed in full.

Ratio Decidendi: Retention or freezing under the Act cannot continue beyond the statutory period unless supported by completed investigation or pending prosecution, and denial of relied upon documents that form the basis of the adverse action violates natural justice.

Natural justice and statutory limits on freezing orders: non-supply of relied upon documents and expiry of the retention period required release.
Non-supply of an ECIR does not, by itself, vitiate proceedings because it is an internal document, and no separate prejudice was found from non-supply of the FIR where its contents were already reflected in the original application. However, failure to supply the relied upon documents forming the basis of the reason to believe was held to deny a meaningful opportunity of defence and amount to a violation of natural justice. The Tribunal further held that retention of seized records and freezing of properties cannot continue indefinitely: where the statutory period has expired and no completed investigation or pending prosecution is shown, continuation of restraint is impermissible and the assets and documents must be released.

Supply of relied upon documents - Principles of natural justice - Continuation of retention or freezing of seized propertyECIR - Natural justice - Non-supply of the ECIR and separate copy of the FIR did not vitiate the proceedings. - HELD THAT: - The Tribunal held that, in light of the law declared by the Supreme Court, supply of the ECIR is not mandatory, as it is an internal document of the Enforcement Directorate. As regards the FIR, since the respondent stated that its contents had been reflected in the original application, the Tribunal held that the purpose of furnishing the FIR stood served and no violation of natural justice was made out on that count. [Paras 12]The appellant's challenge based on non-supply of the ECIR and FIR was rejected.Relied upon documents - Principles of natural justice - Failure to furnish the relied upon documents forming the basis of the action amounted to violation of natural justice. - HELD THAT: - The Tribunal found that the only material supplied to the appellant was a CD containing seizure lists and panchnamas, and that the respondent could not clarify or produce the details of the relied upon documents. Since the documents forming the basis of the reason to believe were not supplied, the appellant was deprived of an effective opportunity to defend himself against the allegations. The proceedings were therefore held to suffer from clear violation of natural justice. [Paras 14, 15]The order was held unsustainable on account of non-supply of the relied upon documents.Section 8(3)(a) - Retention or freezing of seized property - Pendency of proceedings - Retention and freezing of the records, documents and properties could not continue in the absence of completion of investigation or pendency of criminal proceedings within the period contemplated by Section 8(3)(a) of the PMLA. - HELD THAT: - The Tribunal construed Section 8(3)(a) to mean that confirmed retention or freezing can continue only during investigation for the statutory period, or during pendency of proceedings relating to an offence under the Act before a competent court. It recorded that no material was produced by the respondent to show completion of investigation or pendency of any prosecution either under the PMLA or the predicate offence against the appellant, even long after the impugned order. On that basis, the statutory condition for continued retention or freezing was held not to survive, and the seized or frozen records, documents and properties were liable to be released. [Paras 20, 21, 22, 23, 25]The continued retention and freezing were held impermissible, the impugned order was quashed, and the seized or frozen records, documents and properties were directed to be released.Final Conclusion: The Tribunal allowed the appeal and quashed the order of the Adjudicating Authority. It held that, although non-supply of the ECIR or separate FIR copy did not vitiate the proceedings, the failure to furnish the relied upon documents violated natural justice, and in any event the continued retention and freezing could not be sustained in the absence of any pending prosecution or completed investigation within the statutory framework of Section 8(3)(a) of the PMLA.

2022 (12) TMI 976 - APPELLATE TRIBUNAL UNDER SAFEMA, NEW DELHI Money Laundering

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Tribunal upholds Authority's orders, denies cross-examination request, stresses efficiency
The Tribunal dismissed both appeals, upholding the Adjudicating Authority's orders. It determined that a single-Member Bench is valid under the Prevention of Money Laundering Act, 2002, and denied the appellant's request for cross-examination of witnesses. The Tribunal emphasized that cross-examination should not be allowed to delay proceedings and should be permitted only exceptionally, not routinely.

Constitution of Bench under Section 6(5)(b) of PMLA - coram non-judice - scope of natural justice in summary attachment proceedings - discretion to regulate procedure by Adjudicating Authority - permissibility of cross-examination in provisional attachment proceedings - time-bound nature of provisional attachment (180 days)Constitution of Bench under Section 6(5)(b) of PMLA - coram non-judice - discretion to regulate procedure by Adjudicating Authority - Validity of hearing by a single Member Bench of the Adjudicating Authority and whether proceedings are vitiated for want of a three Member constitution - HELD THAT: - The Adjudicating Authority is constituted by a Chairperson and two other Members under Section 6(2) but Section 6(5)(b) expressly empowers the Chairperson to constitute Benches with one or two Members. Section 6(5)(a) permits jurisdiction to be exercised by Benches. Reading these provisions together, the Bench need not always comprise all three members of the Adjudicating Authority; single Member Benches are permissible unless the Chairperson deems a larger Bench necessary under Section 6(7). Prior High Court decisions on the point (reproduced in the order) support this construction. Consequently, the Adjudicating Authority's decision refusing stay of proceedings on the ground that only a single Member heard the matter was correct and the contention of coram non-judice is without merit.Single Member Bench was competent to hear the matter; no coram non-judice and the prayer to stay proceedings until three Members were appointed is rejected.Scope of natural justice in summary attachment proceedings - permissibility of cross-examination in provisional attachment proceedings - time-bound nature of provisional attachment (180 days) - Whether the Adjudicating Authority erred in refusing permission to cross examine specified witnesses in confirmation proceedings of a Provisional Attachment Order - HELD THAT: - Proceedings under Section 5 for confirmation of a provisional attachment are summary and time bound (to 180 days). Although the Adjudicating Authority is to be guided by principles of natural justice and may regulate procedure, those principles are not to be applied rigidly where their application would frustrate the statutory scheme. The appellant sought cross examination largely to challenge documentary material and to assert lack of connection with the scheduled offence, but had not contested the documentary evidence by filing a reply. Many of the proposed witnesses had not made incriminating statements or were accused in the criminal proceedings; permitting cross examination in such circumstances would risk premature disclosure of defence and cause delay that could permit the provisional attachment to lapse. The Adjudicating Authority legitimately exercised its discretion to refuse cross examination where the application appeared to be a tactic to delay confirmation proceedings rather than to address specific prejudice that would be remedied by oral testing of witnesses.Refusal to allow the cross examination sought was justified; no interference with the Adjudicating Authority's order.Final Conclusion: Both appeals are dismissed: the Adjudicating Authority validly proceeded before a single Member Bench and correctly exercised its discretion to refuse the cross examination applications in the summary, time bound provisional attachment proceedings under the PMLA.

2022 (11) TMI 1524 - APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI (LB) Money Laundering

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Issues:
Challenge to order passed by Adjudicating Authority without oral hearing, Opportunity of cross-examination of witnesses, Request for copy of order with reasons to believe, Remand of case for fresh order after oral arguments.

Analysis:

The Appellate Tribunal heard two appeals challenging an order passed by the Adjudicating Authority without providing an opportunity of oral arguments to the parties. The appellant had filed two separate applications: one to cross-examine witnesses and the other to obtain a copy of the order where reasons to believe were recorded. The Adjudicating Authority disposed of both applications through a common order without oral hearings, after considering replies from the respondent. The Tribunal found that the order lacked oral arguments and remanded the case for a fresh order after oral hearings, emphasizing the importance of providing such opportunities before passing orders.

The respondent's counsel acknowledged that replies were filed contesting the applications but admitted that oral hearings were not conducted by the Adjudicating Authority before passing the order. The Tribunal considered the submissions and noted that the appellant had requested cross-examination of witnesses and a copy of the order with reasons to believe, both of which were addressed in the impugned order without oral arguments. The Tribunal agreed that the matter should be remanded for fresh orders with oral hearings, as it is essential for the Adjudicating Authority to provide such opportunities before making decisions.

The Tribunal highlighted the obligation of the Adjudicating Authority to allow oral hearings for parties before making decisions on applications or provisional attachment orders. It emphasized that orders should not be passed without oral hearings unless a party defaults in appearing. Therefore, the Tribunal set aside the impugned order and directed the parties to appear before the Authority on a specified date for fresh orders after oral arguments. Both appeals were disposed of accordingly, with the case to be remanded for further proceedings before the Adjudicating Authority.

Tribunal Overturns Order Issued Without Hearings, Case Sent Back for Fresh Proceedings with Oral Arguments.
The Appellate Tribunal set aside the Adjudicating Authority's order, which was issued without oral hearings, and remanded the case for fresh proceedings. The Tribunal emphasized the necessity of oral arguments, particularly when addressing requests for cross-examination and obtaining copies of orders with reasons. Both appeals were disposed of, directing the parties to appear before the Authority for new orders following oral arguments.

Opportunity of oral hearing - remand for fresh consideration - right to cross-examination - adjudicating authority's duty to hear parties before deciding applications - decision on pleadings without oral hearing not permissible unless party in defaultOpportunity of oral hearing - decision on pleadings without oral hearing not permissible unless party in default - Validity of the common order dated 18.10.2022 which disposed two applications without providing an opportunity of oral hearing - HELD THAT: - The Tribunal found on record that both applications filed by the appellant were decided by the Adjudicating Authority by a common order after considering the rival pleadings and the reply filed by the Department, but without calling the parties for oral arguments. The Department did not dispute this factual position before the Tribunal and did not oppose remand. The Tribunal held that when the Adjudicating Authority is to decide an application (or matters arising from a provisional attachment order), it is obligatory to afford the parties an opportunity of oral hearing; an order should not be passed on the basis of pleadings alone unless a party is in default in appearing. Applying this principle, the Tribunal concluded that the impugned order was rendered without affording the requisite oral hearing and therefore could not stand.The common order dated 18.10.2022 was set aside and the matter remanded for fresh disposal after affording the parties an opportunity of oral hearing.Right to cross-examination - remand for fresh consideration - Treatment of the appellant's application seeking an opportunity to cross-examine witnesses and the application seeking a copy of the order recording reasons to believe - HELD THAT: - Both specific applications were considered by the Adjudicating Authority in the impugned common order without oral hearing. The Tribunal did not decide the merits of those applications on substance; instead, it remanded the matters to the Adjudicating Authority to pass orders afresh on both applications after providing oral hearing to the parties. The remand was directed because the procedure followed-deciding on pleadings without hearing-was inconsistent with the obligation to hear parties, and the Department did not contest the need for remand.Both applications are to be decided afresh by the Adjudicating Authority after giving the parties an opportunity of oral hearing; the matter was remitted for that purpose.Final Conclusion: The impugned common order of 18.10.2022 is set aside and the appeals are disposed by remitting the matter to the Adjudicating Authority to decide both applications afresh after affording the parties an opportunity of oral hearing; parties are directed to appear before the Authority on the date fixed.

2021 (2) TMI 1384 - APPELLATE TRIBUNAL, PREVENTION OF MONEY LAUNDERING ACT, NEW DELHI Money Laundering

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Tribunal Orders Status Quo on Disputed Property Acquired Pre-PMLA 2002; Parties to Maintain Current Conditions.
The Tribunal granted an ad-interim order of 'status quo' regarding the disputed property, finding a prima facie case that the property was acquired before the enactment of the PMLA, 2002. Both parties were directed to maintain the status quo, with specific conditions, including the continuation of attachments and prohibition on creating encumbrances. The Respondent was given time to file a reply to the stay application, including rent details, and the matter was scheduled for further hearing on a specified date.

Ad-interim status quo - stay of operation - continuation of provisional attachments - legal and constructive possession - prohibition on creating third-party rights and encumbrances - notice under section 8(4) of the PMLA, 2002Ad-interim status quo - continuation of provisional attachments - legal and constructive possession - prohibition on creating third-party rights and encumbrances - Grant of ad-interim 'status quo' in respect of the immovable property specified in the eviction notice pending disposal of the appeal - HELD THAT: - The Tribunal examined the material on record and noted that the property in question was purchased in 2004 and that the purchase was conveyed to the Government of India on 20-12-2004. Considering that acquisition preceded the coming into force of the PMLA, 2002 and having regard to the appellant's contentions and the record, the Tribunal found that the appellant had made out a prima facie case for interim relief. The Tribunal observed that contentions of the Respondent concerning the check period (1998 to 2014) and the deposit of rent would be considered at the hearing on the stay application. Balancing the parties' contentions, the Tribunal directed maintenance of status quo subject to specified conditions, while expressly providing that attachments shall continue and that legal and constructive possession remain with the Enforcement Directorate. [Paras 8, 9]Ad-interim status quo granted in respect of the specified property until the next date of hearing, subject to conditions: (i) attachments shall continue; (ii) legal and constructive possession shall remain with the Enforcement Directorate; (iii) appellant prohibited from creating any third-party right or disposing of the property; (iv) no encumbrance to be created; and (v) appellant not to change the nature or character of the property.Stay of operation - notice under section 8(4) of the PMLA, 2002 - Procedural directions as to pleadings and discovery of rent details - HELD THAT: - The Tribunal issued procedural directions allowing the Respondent time to file its reply to the appeal and to the stay application, and granted liberty to the Respondent to ascertain and include details of rent in its reply with supporting documents. The appellant was directed to serve an advance copy and to cooperate in providing information regarding rent. Timelines for filing the reply and rejoinder were fixed to secure orderly adjudication of the appeal and stay application. [Paras 4, 10, 11]Respondent granted six weeks to file its reply to the appeal and to the stay application with an advance copy to the appellant; appellant permitted three weeks thereafter to file rejoinder; Respondent granted liberty to investigate and incorporate rent details in its reply and appellant directed to cooperate.Final Conclusion: Application for urgent hearing allowed; appeal admitted and notice issued; ad-interim status quo in respect of the specified property granted subject to conditions while attachments continue and possession remains with the Enforcement Directorate; Respondent to file reply within six weeks including rent particulars; matter listed for further hearing on 19 May 2021.

2021 (1) TMI 1331 - APPELLATE TRIBUNAL, PREVENTION OF MONEY LAUNDERING ACT, NEW DELHI Money Laundering

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Issues:
- Urgent listing and hearing of the appeal
- Maintainability of the appeal under section 26 of the Prevention of Money Laundering Act, 2002
- Consideration of applications dated 6-1-2021 and 18-1-2021 by the Adjudicating Authority
- Legality of the order dated 19-1-2021
- Jurisdiction of the Appellate Tribunal to entertain the appeal

Analysis:
The matter involved an urgent application for listing and hearing of an appeal filed by the appellant under section 26 of the Prevention of Money Laundering Act, 2002 against an order passed by the Adjudicating Authority. The appellant sought various reliefs, including setting aside the impugned order and directing the Adjudicating Authority to dispose of pending applications. The main contention was that the order dated 19-1-2021 did not address the applications dated 6-1-2021 and 18-1-2021, leading to the appeal challenging the legality of the order.

The appellant argued that the order dated 19-1-2021 was not a concrete order deciding the applications and, therefore, the appeal was maintainable. On the other hand, the respondent contended that the appeal was not maintainable as the impugned order was not an order but a proceeding recorded. The respondent highlighted that the Adjudicating Authority had assured that pending applications would be decided in the final order.

The Appellate Tribunal analyzed the provisions of section 26(1) of the PMLA, 2002, which require an order from the Adjudicating Authority for an appeal to be preferred. It was observed that the order dated 19-1-2021 did not address the pending applications and, therefore, was not appealable. The Tribunal concluded that it lacked jurisdiction to entertain the appeal based on a non-appealable order.

Furthermore, the Tribunal reviewed judgments cited by the appellant, including those from different High Courts and the Appellate Tribunal. It was noted that the facts and circumstances of those cases were distinguishable from the present appeal, rendering them inapplicable. The Tribunal dismissed the appeal on the grounds that no order existed on the applications, making the appeal not maintainable under section 26(1) of the PMLA, 2002.

In summary, the Appellate Tribunal held that the appeal challenging the order dated 19-1-2021 was not maintainable as the order did not address the pending applications. The Tribunal emphasized the necessity of a concrete order from the Adjudicating Authority for an appeal to be entertained, ultimately dismissing the appeal due to lack of jurisdiction.

PMLA Section 26(1) appeal dismissed for lack of maintainability without actual Adjudicating Authority order
The Appellate Tribunal under PMLA dismissed an appeal filed under Section 26(1) for lack of maintainability. The appellant sought directions for the Adjudicating Authority to decide pending applications dated 6-1-2021 and 18-1-2021, relying on an order dated 19-1-2021 which merely fixed arguments for a different matter. The Tribunal held that Section 26(1) requires an actual order from the Adjudicating Authority to maintain an appeal, and since the applications remained undecided, no appealable order existed. The Tribunal distinguished the Delhi HC decision in Hamilton Houseware case and concluded it lacked jurisdiction to entertain the appeal.

Maintainability of appeal against non-existent or non-written order - Appellate Tribunal jurisdiction to entertain appeal under the PMLA - requirement of a written order as condition precedent to preferring an appeal - power to direct Adjudicating Authority to decide pending applications before proceedingMaintainability of appeal against non-existent or non-written order - Appellate Tribunal jurisdiction to entertain appeal under the PMLA - Whether the appeal under section 26(1) of the PMLA is maintainable against the order dated 19-1-2021 which merely fixed/adjourned the OA and did not decide the appellant's applications of 6-1-2021 and 18-1-2021. - HELD THAT: - The Tribunal examined the impugned order dated 19-1-2021 and found that it only fixed the hearing/adjourned O.A. No. 404/2020 and did not allow or reject the applications filed by the appellant on 6-1-2021 and 18-1-2021. Section 26(1) permits appeal only from an order of the Adjudicating Authority. On a plain reading, an appeal lies only from an order; an interlocutory or administrative proceeding which does not decide the applications cannot be treated as an appealable order. The appellant cannot use the adjournment order as a vehicle to compel the Tribunal to pass orders on applications which remain undecided. Consequently, the Tribunal has no jurisdiction to entertain an appeal against the impugned order which is not an appealable written order. [Paras 12, 13, 21]The appeal is not maintainable and is dismissed as the impugned order dated 19-1-2021 is not an appealable order and the Appellate Tribunal lacks jurisdiction to entertain the appeal.Requirement of a written order as condition precedent to preferring an appeal - power to direct Adjudicating Authority to decide pending applications before proceeding - Whether the authorities and precedents relied upon by the appellant (including judgments of various High Courts and this Tribunal) render the present appeal maintainable or require a direction to the Adjudicating Authority to decide the pending applications forthwith. - HELD THAT: - The Tribunal considered the precedents cited by the appellant. The Hyderabad High Court decision referred to the entertaining of appeals against non-existent orders and held that without a written order no appeal lies; that case arose in writ jurisdiction and is factually distinguishable. The Delhi High Court decision cited concerned a challenge to a final order and complaints of non-disposal after conclusion of proceedings, which is not the factual matrix here. Other cited authorities were similarly found inapplicable on their facts. The Adjudicating Authority had stated that pending applications would be decided with reasons in the final order, and the Tribunal observed that the present appeal cannot be sustained on the basis of the authorities relied on. [Paras 16, 17, 18, 19, 20]The precedents relied upon are distinguishable and do not render the present appeal maintainable; no direction by this Tribunal to decide the pending applications was issued in the appeal, which is dismissed for want of maintainability.Final Conclusion: The appeal is dismissed as not maintainable because the impugned order dated 19-1-2021 is an order fixing/adjournment and not a written, appealable decision disposing of the applications relied upon by the appellant; the Appellate Tribunal has no jurisdiction to entertain the appeal.

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