Retrospective money-laundering liability and unsupported provisional attachment cannot stand where the predicate case and evidence fail

Money-laundering liability under the Prevention of Money Laundering Act, 2002 could not be applied to transactions that occurred before the predicate offences were included in the Schedule, because penal liability cannot operate retrospectively; the retrospective invocation against the petitioner was therefore unsustainable. Provisional attachment also failed because the underlying criminal proceedings had been closed or quashed, the petitioner was not charged in the related case, the properties were shown in income-tax returns, and no legally admissible evidence linked them to proceeds of crime; the attachment orders were consequently set aside and release of the properties directed.

---

---

Issues: (i) Whether the provisions of the Prevention of Money Laundering Act, 2002 could be applied retrospectively to alleged transactions occurring before the relevant offences were included in the Schedule. (ii) Whether the provisional attachment of the petitioner's properties could be sustained after the underlying criminal proceedings had been closed or quashed and in the absence of legally admissible evidence linking the petitioner to proceeds of crime.

Issue (i): Whether the provisions of the Prevention of Money Laundering Act, 2002 could be applied retrospectively to alleged transactions occurring before the relevant offences were included in the Schedule.

Analysis: The alleged transactions were stated to have occurred during November 2005 to December 2006, while the offences under the Prevention of Corruption Act, 1988 relied upon for the money-laundering case were inserted in the Schedule only with effect from 01.06.2009. Money-laundering under Section 3 is intentional and must be traced to the time of the actual transaction. The constitutional bar against ex post facto penal liability was treated as controlling, so a person could not be prosecuted by applying a penal provision to conduct which took place before that liability existed in law.

Conclusion: The retrospective invocation of the Prevention of Money Laundering Act, 2002 against the petitioner was not sustainable.

Issue (ii): Whether the provisional attachment of the petitioner's properties could be sustained after the underlying criminal proceedings had been closed or quashed and in the absence of legally admissible evidence linking the petitioner to proceeds of crime.

Analysis: The closure report in relation to the remaining accounts had been accepted, and the proceedings against the principal accused had been quashed by the High Court of Uttarakhand. The Court also noted that the petitioner was not charged in the CBI case, that the properties were purchased in 2007 and reflected in income-tax returns, and that the respondent had no other legally admissible evidence against the petitioner. On that material, the attachment was found to lack a sustainable foundation.

Conclusion: The provisional attachment orders could not be sustained and the attached properties were liable to be released to the petitioner.

Final Conclusion: The petition succeeded, the attachment was set aside, and the respondent was directed to release possession of the properties to the petitioner.

Ratio Decidendi: Penal provisions under the money-laundering law cannot be applied to pre-inclusion conduct in the Schedule, and a provisional attachment under the Act cannot survive where the foundational criminal basis has failed and no admissible evidence connects the attached property to proceeds of crime.

---