2017 (6) TMI 1289 - AT - Money Laundering

Enforcement Directorate appeal dismissed, no money laundering evidence found, civil remedies suggested

The appeal by the Enforcement Directorate was dismissed, and the provisional attachment order was not confirmed. The Adjudicating Authority found no ... Prevention of Money Laundering - attachment orders -'proceeds of crime” - bank balance available in the bank a/c‟s of M/s PPL as liable for attachment as “value thereof of proceeds of crime” - HELD THAT:- In the absence of the vital missing links between the alleged crime and the amount in possession of the Respondents, the Complainant proceeded to issue the Provisional Attachment Order contrary to the statutory mandate. The said order suffered from many infirmities as the money sought to be attached have been generated through legal commercial transactions entered into by the Respondent. The same were not generated through the commission of any scheduled offence. The assets, as thus, are not liable for attachment under the terms of the PMLA itself. There is no nexus whatsoever between the alleged crime and the Respondents herein, and thus no case of money laundering is made out at all. The Complainant seeks to attach property which has not been generated through proceeds of crime. Merely retaining money legally obtained is not the same as deriving or obtaining the same through a criminal activity. Any other interpretation would render the ED liable to mandatorily prosecute every case of cheating where one party fails to pay another like in recovery of money cases and the lakhs of cases pending under section -138 of Negotiable Instrument Act where the cheques issued by the borrowers are dishonored. Balances of the credit of PPL in the provisionally attached bank accounts are other proceeds from its legitimate licensing activities, and represent licence fees to be distributed to PPL‟s owner-members, after recouping PPL‟s operating and administrative costs. This has been upheld by the finding of the AA in para 10 of its Order dated 27.11.2016. 38. No allegation of criminal activity against the Respondents at any stage can be considered appropriate as the respondents have been ready to pay the royalty after due compliance of law in view of amendment of Copyright Act. The complainant was reminded several times to receive the royalty subject to execution of relevant documents as per law. The proceedings before the Adjudicating Authority are for confirmation of the provisional attachment order. If in a particular case, as is the situation in the present matter, the very basis of the respondent‟s case that the property attached is proceeds of crime or that involved in money laundering is found to be unsustainable, no fault can be found with the subject decision of the adjudicating authority not to confirm the adjudication order We may add that it is settled law that the allegations in the FIR and the Charge-Sheet have to be specific, clearly stating the role of the accused persons. However, in the present case, there has been no allegation whatsoever against the Respondents in the FIR or the Charge-Sheet. Issues Involved:1. Non-payment of royalties to the complainant by IPRS.2. Alleged cheating and criminal conspiracy by IPRS and its directors.3. Attachment of bank accounts of PPL by the Enforcement Directorate.4. Determination of 'proceeds of crime' under PMLA.5. Jurisdictional and procedural aspects of the provisional attachment order.Detailed Analysis:1. Non-payment of Royalties to the Complainant by IPRS:The complainant, a lyricist, alleged that IPRS failed to pay royalties for his work included in Hindi films despite repeated demands. He also claimed that his membership was unilaterally terminated by IPRS to avoid payment. The complaint suggested that other members might have faced similar issues.2. Alleged Cheating and Criminal Conspiracy by IPRS and Its Directors:The complaint led to the registration of an FIR under sections 120B, 406, 420, 468, 471, 506, and 34 of the IPC against IPRS directors and others. The Agra Police filed a charge sheet, and the Enforcement Directorate initiated an investigation under PMLA, linking the alleged offenses to money laundering.3. Attachment of Bank Accounts of PPL by the Enforcement Directorate:Based on the investigation, the Deputy Director of the Enforcement Directorate attached the bank accounts of PPL, suspecting the funds as 'proceeds of crime.' The attachment order was challenged, and the Adjudicating Authority rejected the attachment, leading to the appeal.4. Determination of 'Proceeds of Crime' Under PMLA:The Adjudicating Authority concluded that there was no material evidence showing that PPL derived any property from the alleged criminal activities of IPRS. The Authority emphasized that the proceeds of crime must be directly linked to the criminal activity, which was not established in this case. The funds in PPL's accounts were from legitimate licensing activities, not from any criminal activity.5. Jurisdictional and Procedural Aspects of the Provisional Attachment Order:The Adjudicating Authority noted that the FIR and charge sheet did not specifically mention PPL. The complaint and subsequent proceedings were primarily against IPRS. The Authority also highlighted procedural lapses, such as the lack of specific amounts due to the complainant and the absence of a direct link between the alleged crime and the funds in PPL's accounts.Conclusion:The appeal by the Enforcement Directorate was dismissed, and the provisional attachment order was not confirmed. The Adjudicating Authority found no evidence that PPL was involved in money laundering or that the funds in its accounts were proceeds of crime. The Authority also noted that the disputes were of a civil nature and could be resolved through appropriate civil remedies. The judgment emphasized the need for a clear and direct link between the alleged criminal activity and the funds in question to justify attachment under PMLA.