2024 (6) TMI 1568 - AT - Money Laundering

Money laundering restraint on immovable property upheld where claimants failed to prove lawful acquisition and rebut statutory presumptions.

Under the Prevention of Money Laundering Act, 2002, restraint over immovable property was maintained where the claimants could not rebut the statutory ... Offence of Money Laundering - Proceeds of Crime - freezing and retention of the immovable property - Burden of proof under PMLA - Concealment of ownership in adjudication proceedings - failed to discharge burden to indicate the sources, produce the required evidence, show cause why the property should not be declared to be property involved in money- laundering. Property involved in money-laundering - Concealment of ownership in adjudication proceedings - HELD THAT: - The Tribunal found that, in the earlier adjudication, Alka Pahwa had stated only that the proposed sale in her favour had not materialised, but had remained silent about the fact that the property had already been purchased by Utkarsh Pahwa and his company. This active concealment led to freezing of the property on the basis of the agreement to sell in her favour. The Tribunal held that, had this fact been clearly disclosed, the Directorate could have sought amendment of the original application to implead the present appellants. In these circumstances, the appellants could not derive any advantage from such concealment, and the objection founded on absence of impleadment or opportunity in the earlier proceedings was not accepted. [Paras 5] The challenge to continuation of freezing on the basis of non-impleadment in the original application failed. Burden of proof under PMLA - Property involved in money-laundering - HELD THAT: - The Tribunal recorded that the movement of funds from one company to another, as pointed out by the Directorate, stood admitted by the appellants, though they described the transactions as genuine business dealings. It held that the appellants had failed to discharge their burden to indicate the sources, produce the required evidence, and show cause why the property should not be treated as property involved in money-laundering. The Tribunal also noted that the presumptions under sections 23 and 24 operated against them, and observed that, although legitimacy of the transactions would be examined in the pending criminal trials, the purchase of the property from proceeds of crime was apparent on record. In view of the pending trial and framing of charges, the Tribunal declined release of the property, including on the alternative offer of security. [Paras 5, 6] The property was held not fit for release at this stage, and the appeals were dismissed. Final Conclusion: The Tribunal dismissed the appeals and upheld continuation of the freezing of the property. It held that the appellants could not benefit from the earlier concealment regarding ownership and had failed to rebut the case that the property was involved in money-laundering, while clarifying that its observations would not affect the merits of the trial. Issues: Whether the freezing and retention of the immovable property was liable to be set aside on the ground that the appellants were not parties to the original proceedings and had not been issued the initial notice; and whether the appellants had shown that the property was acquired from untainted funds rather than proceeds of crime.Analysis: The Tribunal noted that the property had been frozen in proceedings under the Prevention of Money Laundering Act, 2002 arising from a large banking fraud and that the appellants' ownership claim was linked to transactions traced through entities connected with the alleged laundering trail. It held that the earlier assertion made in proceedings by another claimant had resulted in the property being treated as belonging to that claimant, while the present appellants' purchase was not disclosed at that stage. The Tribunal further found that the appellants failed to discharge the statutory burden to establish legitimate sources for the property, and that the presumptions under the Act operated against them. It also observed that the question whether the underlying transactions were genuine was a matter for the trial courts, and that the existence of pending criminal trial and framed charges weighed against release of the property at that stage.Conclusion: The challenge to the freezing and retention of the property failed, and the property was not directed to be released.Final Conclusion: The appeals were dismissed, and the impugned restraint on the property was maintained without affecting the merits of the ongoing trial.Ratio Decidendi: In proceedings under the Prevention of Money Laundering Act, 2002, property may continue to remain under restraint where the claimant fails to prove a lawful source of acquisition and the statutory presumptions as to proceeds of crime are not rebutted.