2011 (4) TMI 1490 - AT - Money Laundering

Tribunal Upholds Order on Property Attachment under PMLA, Clarifies Retrospective Amendment

The Tribunal upheld the Adjudicating Authority's order confirming the provisional attachment of properties under the Prevention of Money Laundering Act ... Offence under PMLA - Whether the order of the Adjudicating Authority confirming the provisional attachment order is valid - In present case, During investigation, it was found that the fake and forged documents of export were prepared with the help of his two employees and two customs broker and no actual export was ever done by Shri Gopinath Das or his company against the export invoices/documents submitted to banks for discounting and obtaining funds from SBI and OBC. The funds so fraudulently obtained through acts of forgery u/s 467 of IPC are proceeds of crime and it was found that out of these proceeds of crime, immovable properties were acquired and mortgaged with the appellant as security to obtain loan. Statement of Sh. Gopinath Das was recorded by the respondent u/s 50 of the Act, in the statement, he inter-alia stated that he has purchased various properties out of funds consisting of proceeds of crime and these properties were mortgaged with the Syndicate Bank. The properties owned by M/s. Himalayan Projects Pvt. Ltd. of which Shri Gopinath Das is the Managing Director were attached and complaint was filed with the Adjudicating Authority u/s 5(5) of the Act. The matter was placed before the Adjudicating Authority and the order of provisional attachment was confirmed by detailed order which is now being assailed before us in the present proceedings. HELD THAT:- The appellant is not owner of the properties attached. The properties are in the name of Gopinath Das and M/s. Himalayan Projects Pvt. Ltd. Sh. Gopinath Das has been charged for commission of a schedule offence. Further, any person who is in possession of proceeds of crime and even if not charged for commission of a schedule offence is covered by the provisions of section 5(1) of the Act in view of the findings of this Tribunal in its Judgment in the case of Radha Mohan J. Lakhotia & Others vs. Dy. Director, [2010 (8) TMI 947 - BOMBAY HIGH COURT] where it has been held that the property which is proceeds of crime and is in possession of any person, even though he is not charged of having committed a scheduled offence, can be attached. Thus, we are in full agreement with the reasoning of the Adjudicating Authority given in its order in Original Complaint. Thus, the appellants are covered under the Act and attachment proceedings commenced by the authorities under the Act were valid proceedings. question of prevalence of a subsequent legislation - The Securitisation Act has been enacted for the purpose of establishing a expeditious system for recovery of debts due to Banks and for matters connected therewith or incidental thereto. It only lays down a procedure for recovery of debts due to Banks. The Prevention of Money Laundering Act vests the statutory authorities with a power to forfeit proceeds of crime involved in money laundering to the State. There is thus no apparent conflict between the two statutes. The two statutes operate in their exclusive fields. The question is only who will have his first claim on any property where the claim of the State concur with the claim of any other person. Issues Involved:1. Legality of the provisional attachment order under the Prevention of Money Laundering Act (PMLA), 2002.2. Applicability of Section 5(1) of the PMLA.3. Retrospective effect of the 2009 amendment to the PMLA.4. Conflict between the PMLA and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Securitisation Act), 2002.5. Validity of the attachment order in light of prior actions under the Securitisation Act.Issue-Wise Detailed Analysis:1. Legality of the Provisional Attachment Order:The appeal challenged the order of the Adjudicating Authority dated 2nd March 2009, which confirmed the provisional attachment of properties owned by M/s. Himalayan Projects Pvt. Ltd. and Shri Gopinath Das under Section 5 of the PMLA. The properties were attached due to allegations of money laundering involving fake and forged documents for export, leading to fraudulent gains from banks. The appellant argued that the attachment order was illegal as the appellant was not charged with a scheduled offense.2. Applicability of Section 5(1) of the PMLA:The appellant contended that the conditions laid down in Section 5(1) of the PMLA were not satisfied, arguing that the person in possession of the proceeds of crime must be charged with a scheduled offense for the attachment to be valid. The Tribunal, however, referred to its previous judgment in Radha Mohan J. Lakhotia & Others vs. Dy. Director, PMLA, asserting that properties constituting proceeds of crime can be attached even if the person in possession is not charged with a scheduled offense. The Tribunal held that the attachment was valid as the properties were proceeds of crime and involved in money laundering.3. Retrospective Effect of the 2009 Amendment to the PMLA:The appellant argued that the second proviso to Section 5(1) of the PMLA, inserted by the 2009 amendment, was not retrospective and not clarificatory in nature. The Tribunal, however, found that the proviso was clarificatory and had retrospective effect, as it was intended to remedy unintended consequences and supply an obvious omission in the original statute. The Tribunal cited various Supreme Court judgments to support the view that clarificatory amendments are retrospective.4. Conflict Between the PMLA and the Securitisation Act:The appellant argued that the Securitisation Act, being a later special law with an overriding clause, should prevail over the PMLA. The Tribunal examined the legislative history and dates of enactment, concluding that the PMLA, despite being enacted later, was intended to address a different mischief-money laundering and forfeiture of proceeds of crime. The Tribunal found no conflict between the two statutes, as they operate in exclusive fields. The Tribunal emphasized that the PMLA's purpose is to prevent money laundering and forfeit illegal properties, while the Securitisation Act deals with the recovery of debts due to banks.5. Validity of the Attachment Order in Light of Prior Actions Under the Securitisation Act:The appellant argued that the properties were already under possession and proceedings of the Securitisation Act before the provisional attachment under the PMLA, and thus, the attachment should be annulled. The Tribunal rejected this argument, stating that the PMLA's provisions for attaching proceeds of crime take precedence, and the properties would vest in the Central Government if found to be proceeds of crime. The Tribunal noted that the attachment order is interlocutory, and the appellant would have an opportunity to prove its case during the final confiscation proceedings.Conclusion:The Tribunal upheld the order of the Adjudicating Authority confirming the provisional attachment of properties, dismissing the appeal. The Tribunal emphasized the broad scope of the PMLA in addressing money laundering and the necessity of interpreting the statute to achieve its legislative purpose.