2017 (8) TMI 753 - AT - Money Laundering

Tribunal overturns order on money laundering attachment, stresses detailed justifications and addressing key contentions

Shobha Karandlaje Versus The Joint Director Directorate of Enforcement, Bangalore

The Tribunal allowed the appellant's appeal against the order confirming provisional attachment under the Prevention of Money Laundering Act, 2002. It set ... Provisional attachment - PMLA - Adjudicating Authority has not given any reasons as to why he arrived at the conclusion that ₹ 70 lakhs has not come from clean and legitimate source and has come from the alleged proceed of ₹ 85,28,63,700 crores and has failed to appreciate the fact that Sh. B.L. Venkataiah @ Venkaiah in his statement dated 09.06.2014 has stated that ₹ 70 lakhs went to the appellant from ₹ 104,18,55,950 crores in the account of M/s Indu Builders Held that:- We have gone through the findings and conclusion of the Adjudicating Authority available at internal page 14 to 17 of the impugned order. It is not discussed as to which of the documents supports the finding of the Adjudicating Authority that ₹ 70 lakhs was out of ₹ 85,28,68,700/- crores and not out of the 19 crores which is claimed as the legitimate money in the account of M/s Indu Builders. Since the defendant /appellant has been consistently raising the aforesaid issue that ₹ 70 crores is not from the proceeds of crime i.e. 85,28,68,700 crores but from other 19 crores, out of the total 104,18,55,950 crores in the account of M/s Indu Builders, it was necessary on the part of Adjudicating Authority to pass a speaking order on merit on this issue. Since the aforesaid issue was a contentious issue of fact before the Adjudicating Authority, it should have been decided primarily alongwith all other pleas raised by the appellant in her pleadings by the Adjudicating Authority for the better appreciation of the case in its entirety. Therefore, it is felt by this Tribunal that this case is a fit case to be remanded back to the Adjudicating Authority with direction to specifically give a clear finding as to “whether ₹ 70 lakhs is the money out of the 19 crores, claimed to be the legitimate money in the account of M/s Indu Builders or from ₹ 85,28,68,700 crore alleged to be proceeds of crime in the account of M/s Indu Builders out of the total amount of ₹ 104,18,55,950 crore. The Adjudicating Authority shall also decide all other pleas raised by the appellant in her pleadings. In the light of the above, the impugned order is set aside and the matter is remanded back to the Adjudicating Authority for deciding the matter afresh by way of a speaking order which shall disclose findings on all the issues raised by the appellant including the one mentioned in para above. Issues:1. Appeal against the order confirming provisional attachment under Prevention of Money Laundering Act, 2002.2. Relief sought by the appellant.3. Facts and grounds presented by the appellant.4. Compliance with legal requirements and violation of constitutional principles.5. Source of funds and legitimacy of transactions.6. Lack of reasons in the decision-making process.7. Adjudicating Authority's failure to address key contentions.8. Remand of the case for a fresh decision.Analysis:1. The appellant filed an appeal against the order confirming the provisional attachment under the Prevention of Money Laundering Act, 2002. The impugned order dated 31.07.2014 was passed by the Adjudicating Authority, which the appellant sought to quash.2. The appellant prayed for various reliefs in the appeal memo, including quashing the order, setting aside the show cause notice, refund of funds, and other suitable orders as deemed fit by the Tribunal.3. The appellant, a former Director of a company, presented facts regarding transactions involving a cheque of Rs. 70 lakhs received from a third party, subsequent repayments, and interactions with enforcement authorities. The appellant challenged the legality of the provisional attachment order based on these facts.4. Grounds for appeal included non-compliance with legal provisions, violation of constitutional principles, and lack of justification for the decisions made by the Adjudicating Authority, raising concerns about due process and fairness.5. The appellant argued that the funds in question were sourced legitimately and not derived from criminal activities, emphasizing the need for a thorough examination of the origin of the Rs. 70 lakhs subject to attachment.6. The Tribunal noted the absence of detailed reasoning in the Adjudicating Authority's decision-making process, highlighting the importance of providing clear justifications for conclusions reached in cases involving financial transactions and allegations of money laundering.7. The Tribunal observed that key contentions raised by the appellant were not adequately addressed by the Adjudicating Authority, necessitating a remand of the case for a fresh decision with explicit findings on all issues raised by the appellant.8. Consequently, the Tribunal set aside the impugned order and directed the matter to be reconsidered by the Adjudicating Authority, emphasizing the need for a comprehensive and well-reasoned decision, with a specific focus on determining the source of the funds in question. The case was remanded for further proceedings, ensuring a fair and thorough examination of all relevant issues.