2019 (1) TMI 832 - AT - Money Laundering

Tribunal sets aside Provisional Attachment Order in Money Laundering case

The Tribunal allowed the appeals, setting aside the Provisional Attachment Order (PAO) against the appellants under the Prevention of Money Laundering ... Offence under PMLA - provisional attachment order - criminal proceedings already pending against accused parties - Held that:- Appellants are bona-fide purchasers and they have not done anything against law. Furthermore, the Appellants are not involved in any crime or money laundering and the Appellants are law abiding citizens running an organization in the field of textile business, with the family business being there for more than 85 years. No case of money laundering against the appellants is made out. The prosecution complaint under PML Act, 2002 was filed by the respondent against Ramesh Pothy with mala-fide intention and after thought on the date of passing the provisional attachment order. It is of the opinion that complaint filed against Ramesh Pothy is not sustainable and is filed after-thought as the IO has failed to trace the amount paid by the appellant to the family members of Late Sridhar. In order to save its skin, the complaint against the Ramesh Pothy has been filed. This is because of the reasons that the appellants are not directly or indirectly involved in the money laundering. They have no direct link or nexus with deceased who has now passed away. The appellants have no objection if criminal proceedings already pending against accused parties may continue as per law. The appellants despite of above are agreeable to deposit a sum of ₹ 6,47,25,000/- as value assessed by the ED in the Investigation Report with the respondent (without prejudice) in order to secure the entire value of the property filed by the ED in the reason to believe. The figure mentioned by the hearing officer in the impugned order is fanciful and accepted as per the case of ED in subsequent pleadings. The real figures are mentioned in the reason-to-believe on the basis of which the provisional attachment order was passed. The said figures could not have been changed. The appellant is directed to deposit a sum of ₹ 6,47,25,000/- with the respondent without prejudice within the period of six weeks from today as security amount. In case the final orders are passed against the accused, the said amount shall be kept by the ED. In case, the prosecution complaint filed by the ED under PMLAS is dismissed, the entire amount shall be returned to the appellant with interest accrued thereon. Once the said amount is deposited, the property shall be released forthwith. In the light of above, all the appeals filed by the Appellants are allowed and the impugned order dated 29.12.2016 is set aside qua against the Appellants so as the provisional attachment order. Issues Involved:1. Legality of the Provisional Attachment Order (PAO) under the Prevention of Money Laundering Act (PMLA).2. Bona fide nature of the property purchase by the appellants.3. Knowledge of the appellants regarding the criminal background of the seller's family.4. Validity of the prosecution complaint against the appellants.Detailed Analysis:Legality of the Provisional Attachment Order (PAO) under PMLA:The appeals challenged the PAO issued by the Enforcement Directorate (ED) and confirmed by the Adjudicating Authority. The PAO attached properties purchased by the appellants, alleging involvement in money laundering. The Tribunal noted that the PAO was based on FIRs against the seller's father, who was accused of various crimes. However, the Tribunal found no direct link or nexus between the appellants and the accused. It was highlighted that the appellants were not named in any FIR or charge-sheet and that the property was not purchased from the accused directly. The Tribunal criticized the Adjudicating Authority for failing to consider the appellants' evidence showing legitimate sources of funds and for not providing a detailed analysis of the issues raised by the appellants.Bona fide Nature of the Property Purchase by the Appellants:The appellants argued that they were bona fide purchasers who paid a fair market value for the property using legitimate funds. They provided bank statements, income tax returns, and certificates from banks and auditors to prove the sources of funds. The Tribunal found that the appellants had demonstrated their innocence and that the property was purchased bona fide. It was noted that the appellants had no knowledge of any criminal background of the seller's family and that there was no mechanism under the Transfer of Property Act or the Registration Act to disclose such information.Knowledge of the Appellants Regarding the Criminal Background of the Seller's Family:The Tribunal emphasized that there was no evidence to show that the appellants had any knowledge of the criminal background of the seller's family. The respondent failed to provide any material or circumstantial evidence to prove that the appellants were aware of the FIRs against the seller's father. The Tribunal noted that due diligence while purchasing the property does not lead to knowledge about the registration of FIRs against the vendor's family members. It was also highlighted that the No Encumbrance Certificate issued in Tamil Nadu does not reflect FIRs against relatives of vendors.Validity of the Prosecution Complaint Against the Appellants:The Tribunal found that the prosecution complaint against the appellants was filed with mala fide intention and as an afterthought. It was noted that the complaint was filed to cover up the failure of the Investigation Officer (IO) to trace the amount paid by the appellants to the seller's family. The Tribunal held that the appellants were not directly or indirectly involved in money laundering and had no link or nexus with the deceased accused. The Tribunal directed the appellants to deposit a sum of Rs. 6,47,25,000/- with the respondent as security, without prejudice, and ordered the release of the attached property upon such deposit.Conclusion:The Tribunal allowed the appeals, set aside the impugned order dated 29.12.2016, and the PAO against the appellants. It directed the appellants to deposit Rs. 6,47,25,000/- with the respondent within six weeks as security. Upon deposit, the property was to be released forthwith. The Tribunal also disposed of all miscellaneous petitions.