2017 (8) TMI 965 - AT - Money Laundering

Court Overturns Attachment Order, Emphasizes Victim Rights

The court set aside the Adjudicating Authority's Order confirming the Provisional Attachment Order, finding it unjustified and a violation of law. The ... Prevention of Money-Laundering - Provisional Attachment - Held that:- In the present case, the Adjudicating Authority did not understand the implication of the Order dated 04.02.2012 passed by the Ld. Ist Additional Judicial First Class Magistrate, Kadapa whereby the Ld. Court handed over custody of the money to the Appellant. The Ld. Adjudicating Authority erred in holding that 'The temporary custody of cash given to the Bank does not entitle them to any right unless it is finally proved that the amount relates to the fraud committed by the first defendant.'. The Respondent failed to understand that the Ld. Magistrate has granted custody to the Appellant only after prima facie satisfaction of the Appellant's ownership of the money. Adjudicating Authority erred in holding that 'Defendant counsel has not submitted any such proof which would determine that cash money is entirely out of the cash siphoned off by defendant No. 1'. The said finding is totally contrary to the record because it is the finding of the investigating agency in FIR No. 291/2011 that the sum of ₹ 57,00,000/-(Rupees fifty seven lacs only) is part of the sum of ₹ 1,30,00,000/-(Rupees one crore thirty lacs only) siphoned by Mr. Arun Kumar Kajjayam. The investigation agency has never disputed the said fact. The order passed by the Special Court has not been challenged. The trial in the matter is pending. The request of the respondent to release the moveable and immoveable properties was not allowed by the Special Court even upon filing of an application. It is also a matter of fact that Mr. Arun Kumar Kajjayam in his statements recorded U/s. 50 of PMLA does not in any manner state that the Appellant was involved in the commission of the offence. On the contrary he admits to his wrong doing. He never denied that said money does not belong to the appellant rather he has confirmed that the money in question belonged to the Appellant. A mere perusal of the charge sheet filed by the police in FIR No. 291/2011 and the statements of Mr. Arun Kumar Kajjayam recorded U/s. 50 of PMLA shows that neither he nor his immediate family members had the means to purchase the immoveable property or the gold jewellery or have the capacity to be in possession of ₹ 57,00,000/-(Rupees fifty seven lacs only). The Adjudicating Authority has simply passed the mechanical order without applied its mind that the money so embezzled is public money being held by the Bank on behalf of the account-holders in the Bank.It is rightly argued on behalf of the appellant that if the duty of the bank to safeguard such money. Therefore, we are of the view that attachment of the same by the Respondent and confirmation by the Ld. Adjudicating Authority would amount to gross violation of law. Issues Involved:1. Confirmation of Provisional Attachment Order under Section 5 of the Prevention of Money-Laundering Act, 2002 (PMLA).2. Ownership and custody of the attached properties.3. Compliance with legal requirements for provisional attachment under PMLA.4. Victim's rights versus perpetrator's liabilities under PMLA.Detailed Analysis:Issue 1: Confirmation of Provisional Attachment Order under Section 5 of PMLAThe Appellant challenged the confirmation of Provisional Attachment Order No. 01/2016 dated 26.02.2016 by the Adjudicating Authority. The Order confirmed the attachment of:- 242 Square Yards plot at Survey No. 601/1 at Chemmumiapet Village, Kadapa.- Rs. 57,00,000/- in cash lying with ICICI Bank, Cuddapah Branch.- Gold ornaments worth Rs. 1,25,000/- in custody of the police.The Appellant contended that the Impugned Order was passed arbitrarily without considering the facts and circumstances of the case. The court found that the Adjudicating Authority failed to appreciate that the cash was in the custody of the Appellant by a Judicial Order, and thus, there was no basis for confirming the provisional attachment.Issue 2: Ownership and Custody of the Attached PropertiesThe Appellant argued that the cash in question was not in the possession of Mr. Arun Kumar Kajjayam but was handed over to the Appellant by a Judicial Order. The court noted that the Ld. Ist Additional Judicial First Class Magistrate, Kadapa, had handed over the custody of Rs. 57,00,000/- to the Appellant after satisfying the Appellant's ownership of the money. The Adjudicating Authority's failure to understand this aspect led to an erroneous confirmation of the provisional attachment.Issue 3: Compliance with Legal Requirements for Provisional Attachment under PMLAThe Appellant argued that the provisional attachment did not meet the requirements of Section 5(1)(a) and (b) of PMLA, which necessitate that the person against whom the order is passed must be in possession of proceeds of crime and that such proceeds are likely to be concealed or transferred. The court found that these conditions were not satisfied as the money was in the custody of the Appellant, not Mr. Arun Kumar Kajjayam. Therefore, the provisional attachment and its confirmation were deemed legally unsound.Issue 4: Victim's Rights versus Perpetrator's Liabilities under PMLAThe Appellant, being the victim of the crime, argued that it could not be treated as an offender under PMLA. The court agreed, stating that the Appellant was not involved in any process or activity connected with the proceeds of crime. The court emphasized that a victim cannot be held liable for money laundering if they have not been involved in the offence. The Adjudicating Authority's order was found to be flawed as it did not distinguish between the victim and the perpetrator.Conclusion:The court set aside the Order dated 08.07.2016 bearing OC No. 555/2016 passed by the Adjudicating Authority, which confirmed the Provisional Attachment Order No. 01/2016. The court concluded that the attachment of the properties was unjustified and amounted to a gross violation of law, given that the Appellant was a victim of the crime and not the perpetrator.