Appellate Tribunal modifies Rs. 212 crore property attachment order in bank fraud case under PML Act

The Appellate Tribunal under PML Act partially allowed the appeal challenging provisional attachment of property worth Rs. 212 crores in a forgery case involving bank fraud. While the Tribunal found the Adjudicating Authority failed to properly consider evidence showing appellants purchased property from legitimate income without connection to alleged offenders, it noted appellants were aware of pending litigation when making payments. The attachment order was modified rather than lifted unconditionally, allowing appellants to retain possession upon depositing Rs. 25,000 monthly until final disposal by Special Court, recognizing they had already paid Rs. 1.89 crores for the property.

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Issues Involved:

1. Legality of the provisional attachment order under the Prevention of Money Laundering Act, 2002.
2. Validity of the sale deed and registration process.
3. Authority of the Enforcement Directorate to issue prohibitory orders.
4. Interpretation of "proceeds of crime" under the Prevention of Money Laundering Act.
5. Retrospective application of scheduled offences under the PMLA.
6. Rights of bona fide purchasers in the context of money laundering investigations.

Detailed Analysis:

1. Legality of the Provisional Attachment Order:

The appellants challenged the provisional attachment order dated 15.03.2012, confirmed by the Adjudicating Authority on 10.07.2012, arguing that the money paid by them was not tainted and they were bona fide purchasers. The tribunal noted that the Enforcement Directorate had issued the order based on "reasons to believe" that the property was involved in money laundering, supported by CBI charge sheets and other materials. The tribunal upheld the attachment, emphasizing that the appellants were aware of pending litigations against the property's previous owners and that the order was issued within the legal framework of the PMLA.

2. Validity of the Sale Deed and Registration Process:

The appellants contended that the sale deed was executed following all legal procedures, including public notices and payment of requisite fees, and should have been registered by the Sub-Registrar. They cited precedents emphasizing the registrar's duty to register documents meeting statutory requirements. However, the tribunal found that the sale deed's execution did not negate the property's tainted nature, especially given the notice from the Enforcement Directorate prohibiting registration due to ongoing investigations. The tribunal concluded that the registrar's refusal to register was justified under the circumstances.

3. Authority of the Enforcement Directorate to Issue Prohibitory Orders:

The appellants argued that the Enforcement Directorate overstepped its authority by directing the Sub-Registrar not to register the sale deed. The tribunal, referencing judgments from the Gujarat High Court and other cases, affirmed that the Enforcement Directorate had the power to issue such orders to prevent the transfer of properties under investigation for money laundering. The tribunal held that such actions were within the scope of the PMLA to ensure proceeds of crime were not concealed or transferred.

4. Interpretation of "Proceeds of Crime":

The appellants claimed that the property could not be considered "proceeds of crime" as they purchased it with legitimate funds. The tribunal clarified that under Section 2(u) of the PMLA, "proceeds of crime" include the property derived from criminal activity or its value. The tribunal noted that the appellants' legitimate purchase did not alter the property's status as proceeds of crime if it was initially acquired through illicit means. The tribunal emphasized that the focus was on the property's origin, not the appellants' intent or financial sources.

5. Retrospective Application of Scheduled Offences:

The appellants argued against the application of PMLA provisions to offences committed before the inclusion of certain IPC sections in the Act's schedule. The tribunal rejected this argument, noting that the relevant transactions and payments occurred after the offences were scheduled under the PMLA. The tribunal held that the provisions applied prospectively from the date of their inclusion in the schedule, aligning with the legislative intent and judicial precedents.

6. Rights of Bona Fide Purchasers:

The tribunal acknowledged the appellants' position as bona fide purchasers but maintained that this status did not exempt them from the implications of the PMLA if the property was involved in money laundering. The tribunal allowed the appellants to retain possession of the property, subject to a monthly deposit of Rs. 25,000 with the respondent, pending the final outcome of proceedings under the PMLA. This arrangement aimed to balance the appellants' rights with the need to secure potential proceeds of crime.

Conclusion:

The tribunal upheld the provisional attachment order and the Enforcement Directorate's actions, affirming the legal framework's application to prevent money laundering. The decision highlighted the importance of due diligence in property transactions and the broad powers of authorities under the PMLA to ensure proceeds of crime are not transferred or concealed. The tribunal's directive for conditional possession underscores the complexity of balancing property rights with anti-money laundering objectives.

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