Attachment order quashed: Lack of nexus to crime property under PMLA Section 5(1)

The court quashed the provisional order of attachment by the Enforcement Directorate due to the lack of a causal connection between the petitioners and the proceeds of crime. The court found that the order did not meet the requirements of Section 5(1) of the Prevention of Money Laundering Act, as there was no factual nexus establishing the immovable property as "proceeds of crime." The court emphasized the necessity for specific terms linking the property to criminal activity. Consequently, the court ruled in favor of the petitioners and ordered the quashing of the attachment order under the PMLA.

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Issues Involved:
1. Quashing of the provisional order of attachment by the Enforcement Directorate.
2. Compliance with the requirements of Section 5(1) of the Prevention of Money Laundering Act, 2002 (PMLA).
3. Establishment of a causal connection between the petitioners and the proceeds of crime.
4. Adequacy of the "reasons to believe" recorded by the designated authority.

Detailed Analysis:

1. Quashing of the provisional order of attachment by the Enforcement Directorate:
The petitioners sought the quashing of a provisional order of attachment dated 29.03.2022, issued by the Enforcement Directorate (ED), which included immovable and movable properties. The properties listed in Schedule-II of the order and five bank accounts were provisionally attached. The petitioners argued that they were ancillary parties with no connection to the alleged charges against I-Core Group, and that the requirements of Section 5(1) of the PMLA were not satisfied.

2. Compliance with the requirements of Section 5(1) of the Prevention of Money Laundering Act, 2002 (PMLA):
The court examined whether the ED's provisional attachment order met the criteria under Section 5(1) of the PMLA. This section mandates that the designated officer must have "reasons to believe" that the person is in possession of "proceeds of crime" and that such property is likely to be concealed, transferred, or dealt with in a manner that may frustrate any proceedings related to confiscation. The court found that the impugned order lacked a factual nexus between the acquisition of the immovable property and its identification as "proceeds of crime." There was no reference to the property being derived from any direct or indirect criminal activity related to a scheduled offense.

3. Establishment of a causal connection between the petitioners and the proceeds of crime:
The court noted a significant absence of a causal connection between the petitioners and the "proceeds of crime." The findings under each head of immovable property (except for Flat Nos. 9F and 9G) indicated that the petitioners acquired "proceeds of crime" from their association with the I-Core Group. However, the court found that the general conclusion that the petitioners would frustrate further proceedings did not fulfill the mandate of Section 5(1)(b) and the 2nd proviso. The court emphasized that the chain of "reasons to believe" must indicate specific terms and that the property in question was derived directly or indirectly from criminal activity related to a scheduled offense.

4. Adequacy of the "reasons to believe" recorded by the designated authority:
The court highlighted that the "reasons to believe" must be recorded in writing and must indicate that the property in possession of a person meets the criteria of the definition of "proceeds of crime." The court found that the impugned order fell short on several counts, including the lack of a factual nexus and the absence of any apprehension of risk that the property might be wasted or dealt with in a manner that would render the proceedings infructuous. The court referred to precedents like Opto Circuit India Limited vs Axis Bank and Tofan Singh vs State of Tamil Nadu, which emphasized the importance of the "reason to believe" requirement.

Conclusion:
The court concluded that the impugned order of attachment failed to fulfill the requirements of the relevant provisions of the PMLA and should hence be quashed. The writ petition was disposed of accordingly.

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