Appeal allowed, provisional attachment order quashed for property purchased with legitimate funds, no money laundering offense found under Section 8(2) PMLA.

The Appellate Tribunal, Prevention of Money Laundering Act, New Delhi allowed the appeal and quashed the provisional attachment order. The tribunal held that the appellant purchased property using legitimate personal funds from documented sources, not proceeds of crime. The Enforcement Directorate failed to provide mandatory notice to the appellant as a claimant under Section 8(2) PMLA. The appellant's rights were established through an arms-length transaction completed before winding-up proceedings, with full payment made from legitimate sources. The tribunal found no money laundering offense or criminal nexus, ruling the attachment order unsustainable in law.

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Issues Involved:

1. Whether the Appellant has committed any offence under Section 3 of the Prevention of Money Laundering Act, 2002Rs.
2. Whether the subject property is proceeds of crime and the Appellant is in possession of proceeds of crimeRs.

Issue-wise Detailed Analysis:

Issue 1: Offence under Section 3 of PMLA

The Appellant contends that there is no allegation against them of committing any offence under Section 3 of the Prevention of Money Laundering Act, 2002. It is highlighted that the Appellant is not involved in any scheduled offence, nor is there any prosecution complaint filed against them. The Appellant asserts that they are an innocent bona fide purchaser of the property in question, having paid the complete consideration through legal banking channels before the registration of any FIR or ECIR. The Tribunal recognizes that the Appellant is not named in the FIR or ECIR and finds no evidence linking the Appellant to any criminal activities or money laundering offences.

Issue 2: Subject Property as Proceeds of Crime

The Appellant argues that the subject property, Apartment No. 7A in Kingfisher Towers, should not be considered as 'proceeds of crime.' The Appellant claims to have acquired the property through legitimate means, with the purchase consideration paid by 22.09.2011, well before the initiation of any legal proceedings against the alleged offenders. The Tribunal notes that the Appellant was not made a defendant in the Provisional Attachment Order or the Confirmation Order, and no notice was issued to them, which is a breach of the mandatory provisions under Section 8(2) of the PMLA. The Tribunal finds that the Appellant's purchase was an arm's length transaction, funded from legitimate and documented sources, and thus, the property cannot be deemed as proceeds of crime.

Locus Standi and Procedural Lapses

The Tribunal acknowledges the Appellant's locus standi, as they are a bona fide purchaser who paid the entire purchase consideration legally. The Tribunal criticizes the procedural lapses by the Enforcement Directorate and the Adjudicating Authority for failing to issue a notice or provide a hearing to the Appellant, despite being aware of their claim to the property. The Tribunal emphasizes that the non-issuance of notice constitutes a breach of the Act, rendering the Adjudicating Authority's order liable to be quashed.

Conclusion and Tribunal's Decision

The Tribunal concludes that the Appellant was a legitimate claimant to the property and not involved in money laundering. The Tribunal sets aside the impugned order dated 1.12.2016 concerning the attachment of the flat, quashing the provisional order as well. However, it clarifies that this decision does not affect other proceedings against the accused parties, including extradition proceedings. The Tribunal also instructs that no third-party interest should be created in the property until a final order is passed in favor of the Appellant. No costs are awarded.

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