Provisional money-laundering attachments require statutory adjudication where disputed property provenance and criminal nexus cannot be resolved in writ review.
Provisional attachment under the Prevention of Money Laundering Act, 2002, founded on relevant material and followed by the statutory adjudication process, is not ordinarily amenable to writ review of disputed evidence. Judicial review may examine the existence of material and legality of the decision-making process, but does not determine the truth or probative value of competing evidence on property provenance or its nexus with proceeds of crime. Acceptance of a cash explanation in income-tax proceedings does not establish lawful criminal provenance or bar a money-laundering inquiry. An alleged defect in the subsequent Adjudicating Authority's composition is severable and does not retrospectively invalidate an independent provisional attachment.
Issues: (i) Whether a provisional attachment under Section 5(1) of the Prevention of Money Laundering Act, 2002 could be quashed in writ jurisdiction despite the statutory adjudicatory process under Section 8; (ii) Whether income-tax findings accepting the explanation for cash used in acquiring the property precluded an inquiry or attachment under the Prevention of Money Laundering Act, 2002; (iii) Whether the alleged defective composition of the Adjudicating Authority rendered the prior provisional attachment void.
Issue (i): Whether a provisional attachment under Section 5(1) of the Prevention of Money Laundering Act, 2002 could be quashed in writ jurisdiction despite the statutory adjudicatory process under Section 8.
Analysis: Section 5(1) permits provisional attachment on recorded reasons to believe founded on material in the authorised officer's possession. Section 8 provides for notice, reply, hearing and adjudication on whether the property is involved in money-laundering, followed by appellate remedies. Judicial review may test the existence of relevant material and the legality of the decision-making process, but not undertake a mini-trial on the sufficiency, truth or probative value of disputed evidence. The material referred to in the attachment order, including statements concerning cash payments and the acquisition of the property, was sufficient to negate a contention that there was no material or jurisdictional foundation at all.
Conclusion: The provisional attachment was not liable to be quashed in writ jurisdiction, and the issue was decided against the petitioners.
Issue (ii): Whether income-tax findings accepting the explanation for cash used in acquiring the property precluded an inquiry or attachment under the Prevention of Money Laundering Act, 2002.
Analysis: Income-tax proceedings determine whether an investment, expenditure or cash component is unexplained for taxation purposes, whereas proceedings under the Prevention of Money Laundering Act, 2002 determine whether property was directly or indirectly derived from criminal activity relating to a scheduled offence. Acceptance of a cash explanation in income-tax proceedings does not establish its criminal provenance or grant immunity from an inquiry under the Prevention of Money Laundering Act, 2002. The material relied upon for the attachment, including statements recorded after the income-tax orders, had not been adjudicated in those proceedings. The absence of a banking trail was not conclusive where the alleged transactions were stated to have been conducted in cash; the competing explanations of source and nexus required evidentiary adjudication under Section 8.
Conclusion: The income-tax findings did not bar the money-laundering inquiry or provisional attachment, and the issue was decided against the petitioners.
Issue (iii): Whether the alleged defective composition of the Adjudicating Authority rendered the prior provisional attachment void.
Analysis: The provisional attachment was made by an authorised officer under Section 5(1), while proceedings before the Adjudicating Authority under Section 8 are subsequent and distinct. Section 6(5) contemplates exercise of jurisdiction through Benches constituted with the Chairperson and one or two Members. In any event, a challenge concerning the constitution of the Adjudicating Authority is severable from the validity of the prior attachment; a defect in the subsequent adjudicatory forum cannot retrospectively invalidate an independent attachment order. Interim orders in pending proceedings concerning the Authority's composition did not furnish a final contrary declaration of law.
Conclusion: The objection concerning the composition of the Adjudicating Authority did not invalidate the provisional attachment, and the issue was decided against the petitioners.
Final Conclusion: The statutory adjudicatory mechanism remains the forum for determination of the provenance of the cash, the alleged nexus with proceeds of crime, and the ultimate character of the attached property.
Ratio Decidendi: Where a provisional attachment under Section 5(1) of the Prevention of Money Laundering Act, 2002 is founded on relevant material and statutory adjudication under Section 8 is available, writ jurisdiction cannot be used to resolve disputed questions concerning the criminal provenance and nexus of the property; a subsequent objection to the Adjudicating Authority's composition does not retrospectively invalidate the attachment.