Provisional attachment under PMLA can stand where property traces to proceeds of crime and the sale is found sham.
Provisional attachment under PMLA can be sustained where the Enforcement Directorate has material to form reason to believe that property may be concealed, transferred or dealt with to frustrate confiscation. The pendency of a money-laundering prosecution complaint is not a precondition at the attachment stage if the predicate offence complaint or charge sheet has already been filed. Attachment is not limited to persons named in the scheduled offence or ECIR when the property itself is traced to proceeds of crime. A transaction found to be sham, unsupported by real consideration, and intended to keep assets beyond reach does not confer bona fide purchaser protection.
Issues: (i) Whether the Enforcement Directorate had reason to believe that the property was likely to be concealed, transferred or dealt with so as to frustrate confiscation; (ii) whether a prosecution complaint under the Prevention of Money Laundering Act, 2002 had to be pending when the provisional attachment order was passed; (iii) whether the property could be attached despite the appellant not being charge-sheeted in the predicate offence or named in the ECIR; (iv) whether the appellant was a bona fide purchaser and whether the sale deed and related arrangements were genuine.
Issue (i): Whether the Enforcement Directorate had reason to believe that the property was likely to be concealed, transferred or dealt with so as to frustrate confiscation.
Analysis: The sale deed was executed within a very short time after the judicial order directing investigation into the NRHM scam, and the surrounding circumstances showed an attempt to place the property beyond the reach of the investigating agency. The execution of the transfer, followed by subsequent dealings, supported the inference that further concealment or transfer was likely. The statutory requirement under Section 5(1) was therefore satisfied on the material available to the Authority.
Conclusion: The issue was decided in favour of the Revenue and against the appellant.
Issue (ii): Whether a prosecution complaint under the Prevention of Money Laundering Act, 2002 had to be pending when the provisional attachment order was passed.
Analysis: The first proviso to Section 5(1) requires that a police report or complaint for the predicate offence be filed before the court. The record showed that charge sheets had already been filed in the scheduled offences before the provisional attachment order. Pendency of a prosecution complaint under the money laundering proceedings was not a prerequisite for attachment at that stage.
Conclusion: The issue was decided against the appellant and in favour of the Revenue.
Issue (iii): Whether the property could be attached despite the appellant not being charge-sheeted in the predicate offence or named in the ECIR.
Analysis: The power of provisional attachment extends to any property involved in money laundering and is not confined to persons arraigned in the scheduled offence. The decisive question was whether the property represented proceeds of crime. Since the property was found to have been acquired through funds traced to the tainted transactions and the ownership structure itself was doubtful, absence of the appellant's name in the predicate case or ECIR did not protect the asset from attachment.
Conclusion: The issue was decided against the appellant and in favour of the Revenue.
Issue (iv): Whether the appellant was a bona fide purchaser and whether the sale deed and related arrangements were genuine.
Analysis: The transaction documents, non-encashment of the cheque consideration, inconsistencies in the accounts, and the continuing possession with the vendor pointed to a sham arrangement. The claimed adjustment against dues of a sister concern did not establish a genuine sale free from taint. The materials supported the finding that the transaction was engineered to conceal the property and evade attachment rather than transfer clean title for lawful consideration.
Conclusion: The issue was decided against the appellant.
Final Conclusion: The attachment of the property was sustained, and the appeal failed on all substantive grounds.
Ratio Decidendi: Provisional attachment under the Prevention of Money Laundering Act, 2002 may be sustained where the property is traced to proceeds of crime and the statutory satisfaction under Section 5(1) is met, even if the appellant is not accused in the predicate offence, and a transaction found to be sham or intended to conceal the asset does not confer bona fide title.
TaxTMI 
AI Drafter ✕
TaxTMI 
