Provisional attachment under PMLA needs a proven nexus to proceeds of crime, supported by material and proper notice.
PMLA provisional attachment requires a clear nexus between the property and proceeds of crime, supported by legally sustainable reasons to believe. The text notes that share application money was received for independent commercial reasons, much of it before the alleged triggering events, and no material showed that the funds themselves were criminally derived. It also states that the recorded material did not justify a risk of concealment or transfer, and that the show-cause notice and confirmation order relied on broad, unsupported presumptions and grounds not set out in the notice. On that basis, the attachment and confirmation were set aside.
Issues: (i) whether the properties provisionally attached were shown to be proceeds of crime generated from the scheduled offence; (ii) whether the statutory preconditions for provisional attachment and confirmation, including formation of reason to believe, were satisfied; (iii) whether the show-cause notice and the impugned order were sustainable on the material relied upon.
Issue (i): Whether the properties provisionally attached were shown to be proceeds of crime generated from the scheduled offence.
Analysis: The attachment rested on the premise that share application money received by the appellant company represented tainted funds because investors were allegedly induced by the coal block allotment. The record showed that a substantial part of the investment had been received before the alleged causal events relied upon by the enforcement authority, and the statements recorded from investors consistently indicated independent commercial reasons for investment, such as growth potential, production, profitability, and land value. The company was a running concern before the coal allocation, no coal mining or extraction had taken place, and no material established that the investment money itself was derived from criminal activity.
Conclusion: The attached properties were not established as proceeds of crime, and the finding to that effect could not be sustained.
Issue (ii): Whether the statutory preconditions for provisional attachment and confirmation, including formation of reason to believe, were satisfied.
Analysis: Provisional attachment under the PMLA required a legally supportable belief that the property was involved in money-laundering and was likely to be concealed, transferred, or dealt with in a manner frustrating proceedings. The material on record did not show any conduct or omission by the appellant creating such risk. The authority had gone beyond the documents and statements before it by drawing new presumptions, and the reasons recorded did not disclose a sufficient nexus between the property and the alleged laundering activity. The confirmation order therefore lacked the statutory foundation required for interference to be upheld.
Conclusion: The requirements for provisional attachment and its confirmation were not satisfied.
Issue (iii): Whether the show-cause notice and the impugned order were sustainable on the material relied upon.
Analysis: The show-cause notice was framed in a broad and uncertain manner, using alternative formulations without a clear and definite basis. The adjudicating authority also relied on a case not set out in the notice by treating the investor companies as related entities and by adopting reasoning not found in the enforcement record. Such a course deprived the appellant of proper notice and introduced grounds not supported by the stated material.
Conclusion: The notice and the impugned order were not sustainable.
Final Conclusion: The appeals succeeded and the provisional attachment as well as the confirmation order were set aside because the enforcement case did not establish the requisite laundering nexus or the statutory basis for attachment.
Ratio Decidendi: In proceedings under the PMLA, provisional attachment can stand only where the authority establishes a clear nexus between the property and proceeds of crime and records a legally sustainable belief on the basis of material disclosed to the affected party; unsupported presumptions and reasons beyond the record are insufficient.
TaxTMI 
AI Drafter ✕
TaxTMI 
