Provisional attachment under money-laundering law upheld where material supported reason to believe, despite bona fide purchaser claims.

Provisional attachment under Section 5(1) of the Prevention of Money-Laundering Act, 2002 is valid where the authorised officer has reason to believe, based on material in possession, that the property is involved in money-laundering; the court will not reappraise that assessment if the record shows sufficient supporting material. The tainted character of proceeds of crime is not lost on transfer to third parties, so a claim of bona fide purchase does not by itself defeat attachment and may instead be pursued before the adjudicating authority. Objections founded on Section 27 were rejected because that provision concerns the Appellate Tribunal, not the Adjudicating Authority, and the statutory notice and complaint procedure was held to be properly followed.

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Issues: (i) Whether the provisional attachment under Section 5(1) of the Prevention of Money-Laundering Act, 2002 was unsupported by material or lacked the requisite reason to believe; (ii) whether the petitioners, as alleged bona fide purchasers for value, could resist attachment on the ground that the property was not proceeds of crime; (iii) whether the objections to the show cause notice and the reliance on Section 27 of the Prevention of Money-Laundering Act, 2002 had merit.

Issue (i): Whether the provisional attachment under Section 5(1) of the Prevention of Money-Laundering Act, 2002 was unsupported by material or lacked the requisite reason to believe.

Analysis: Section 5(1) permits provisional attachment where the authorised officer has reason to believe, on the basis of material in his possession, that property is involved in money-laundering. The expression requires sufficient cause, not multiple reasons, and the Court does not sit in appeal over the officer's assessment of the material. Here, summons were issued, statements were recorded, income-tax and land particulars were collected, and only thereafter was attachment ordered. The record disclosed sufficient material to sustain the formation of belief.

Conclusion: The challenge to the provisional attachment on the ground of absence of material or lack of reason to believe was rejected.

Issue (ii): Whether the petitioners, as alleged bona fide purchasers for value, could resist attachment on the ground that the property was not proceeds of crime.

Analysis: The Act defines proceeds of crime broadly as property derived or obtained, directly or indirectly, from criminal activity relating to a scheduled offence. The character of such property is not lost merely because it is transferred to another person or converted into another form. A purchaser may raise a defence of lawful acquisition before the adjudicating authority, but that contention does not by itself nullify provisional action under Section 5(1). The Court held that properties traced to criminal proceeds can remain liable to action in rem notwithstanding the purchasers' claimed bona fides.

Conclusion: The plea that the petitioners were bona fide purchasers and therefore immune from attachment was rejected.

Issue (iii): Whether the objections to the show cause notice and the reliance on Section 27 of the Prevention of Money-Laundering Act, 2002 had merit.

Analysis: The objections based on Section 27 were misplaced because that provision concerns the Appellate Tribunal and not the Adjudicating Authority. The show cause notice was issued after the provisional attachment and the complaint, with supporting documents, had been furnished to the petitioners, who were required to place their defence before the Adjudicating Authority. The statutory scheme was therefore not violated.

Conclusion: The challenge to the show cause notice and the Section 27-based objection were rejected.

Final Conclusion: The petition failed in its entirety, and the provisional attachment and consequential proceedings were left undisturbed.

Ratio Decidendi: Under Section 5(1) of the Prevention of Money-Laundering Act, 2002, provisional attachment is valid if the authorised officer has reason to believe, on material in possession, that the property is involved in money-laundering; the tainted character of proceeds of crime is not lost by transfer to a third party, and such action is in rem.

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