2025 (5) TMI 2258 - AT - Money Laundering

Attachment and seizure cannot continue after settlement and closure of the underlying proceedings; impugned orders were set aside.

Where attached office units had already been returned after settlement of the civil dispute and the criminal case had been closed, continued attachment ... Attachment and confirmation of attachment of the two office units - Retention of seized cash, documents and digital devices - Absence of subsisting predicate offence - Proceeds of Crime - Closure Report - Civil Settlement - Commission of offence in the hands of Wadhawans Brothers and its entities to siphon the money of loan obtained for fictitious purpose in the name of M/s Mack Star and used to clear their dues of Yes Bank. Attachment of alleged proceeds of crime - Settlement restoring property to complainant - HELD THAT: - The Tribunal held that, once the appellant no longer owned the two office units and had already restored them to the complainant under a consent settlement, there was no reason to continue the appeal against attachment as if the appellant still held the property. The Tribunal further noted that the criminal case against the appellant stood closed. On these facts, the continued attachment of those units did not survive. [Paras 15] The attachment of the two office units was interfered with and could not continue against the appellant. Retention of seized cash, documents and digital devices - Absence of subsisting predicate offence - HELD THAT: - The Tribunal found no justification to withhold the seized cash from the office of the appellant and held that, in the facts of the case, it could not be treated as proceeds of crime. It further held that the respondent could not justify continued retention of the documents, digital devices and cash when no predicate offence remained against the appellants in view of the closure report accepted by the court and the settlement reached in the civil suit. In the absence of any subsisting predicate offence, retention of the seized material was unwarranted. [Paras 16, 19] The orders permitting seizure and retention of the cash, documents and digital devices were set aside. Final Conclusion: All four appeals were disposed of by interfering with the attachment of the office units and by setting aside the orders for seizure and retention of the cash, documents and digital devices. The Tribunal held that, in the light of the settlement and closure of the criminal case against the appellants, the impugned action could not be sustained. Issues: (i) whether the attachment and confirmation of attachment of the two office units could be sustained when the appellants had settled the civil dispute and returned the units to the complainants, and the criminal case against them had been closed; (ii) whether the seizure and retention of cash, documents and digital devices could be sustained in the absence of a surviving predicate offence and in light of the settlement and closure report.Issue (i): Whether the attachment and confirmation of attachment of the two office units could be sustained when the appellants had settled the civil dispute and returned the units to the complainants, and the criminal case against them had been closed.Analysis: The attachment related to two office units which, on the facts found, no longer remained with the appellants. The dispute concerning those units had been settled in civil proceedings and the criminal case against the appellants had been closed. In those circumstances, there was no basis to continue treating the units as property liable to attachment against the appellants.Conclusion: The attachment of the two office units was not sustainable and was interfered with in favour of the appellants.Issue (ii): Whether the seizure and retention of cash, documents and digital devices could be sustained in the absence of a surviving predicate offence and in light of the settlement and closure report.Analysis: The seized items included cash, documents and digital devices recovered from the appellants and their offices. The Tribunal found that the respondent could not justify continued retention once the predicate proceedings had ended in closure and the related civil dispute had been settled. On those facts, the seized material could not be retained as proceeds of crime against the appellants.Conclusion: The seizure and retention of the cash, documents and digital devices were not justified and the impugned orders were set aside in favour of the appellants.Final Conclusion: The connected appeals were allowed and the impugned attachment, seizure and retention orders were set aside, with no basis left to sustain the action against the appellants on the facts recorded.