Gift of Rs.164.99 crores after fraud allegations deemed proceeds of crime under Section 8(3)(a)

The Appellate Tribunal under SAFEMA dismissed an appeal challenging seizure of documents under Section 17(1) of the Prevention of Money Laundering Act, 2002. The appellant received property worth Rs.164.99 crores as gift from grandfather in 2020, after FIR registration in 2017 and ECIR in 2019. The Tribunal held the gift was not bonafide but designed to circumvent law and save property from seizure following fraud allegations against grandfather. The Tribunal ruled that Section 8(3)(a) does not mandate filing prosecution complaint against person whose property is seized within 365 days, only requires completion of investigation. Property qualified as proceeds of crime despite appellant not being accused in FIR/ECIR, as gift was made to defeat legislative intention.

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Issues Involved:
1. Validity of seizure of documents u/s 17(1) of the Act of 2002.
2. Non-filing of Prosecution Complaint (PC) within 365 days.
3. Appellant not being an accused in FIR or ECIR.

Summary:

Validity of Seizure of Documents u/s 17(1) of the Act of 2002:

The appellant challenged the seizure of documents u/s 17(1) of the Prevention of Money Laundering Act, 2002 (the Act of 2002), arguing that no FIR or ECIR was lodged against him and the seized documents related to a property acquired by his grandfather in 1988, thus not connected to the proceeds of crime. The respondent contended that the seized documents were equivalent in value to the proceeds of crime, as defined u/s 2(1)(u) of the Act, and could be subjected to seizure even if the property was not directly derived from the crime. The Tribunal upheld the seizure, citing the broad definition of "proceeds of crime" and the necessity to prevent money laundering by attaching properties of equivalent value.

Non-filing of Prosecution Complaint (PC) within 365 days:

The appellant argued that the seizure should lapse as no PC was filed against him within 365 days, referencing Section 8(3)(a) of the Act of 2002. The Tribunal clarified that the provision mandates the completion of the investigation within 365 days and the pendency of proceedings relating to any offence under the Act, not necessarily against the person whose property was seized. The Tribunal emphasized that interpreting the provision otherwise would allow offenders to evade the law by parking proceeds of crime with third parties.

Appellant not being an accused in FIR or ECIR:

The appellant claimed that since he was not named in the FIR or ECIR, the documents belonging to him could not be seized. The Tribunal rejected this argument, referencing the Supreme Court's interpretation in Vijay Madanlal Choudhary v. Union of India, which held that the Act's objective is to reach proceeds of crime regardless of whose name they are in. The Tribunal noted that the property was gifted to the appellant after the FIR and ECIR were registered, indicating an attempt to circumvent the law. Thus, the seizure was deemed valid even if the appellant was not an accused.

Conclusion:

The Tribunal dismissed the appeal, holding that the seizure of documents was valid under the Act of 2002, the non-filing of PC within 365 days did not invalidate the seizure, and the appellant's non-accused status in FIR or ECIR did not preclude the seizure of property deemed as proceeds of crime.

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