Provisional Attachment Orders under PMLA quashed for lack of scheduled offence registration and investigation

Madras HC quashed Provisional Attachment Orders under PMLA in money laundering case involving illegal sand mining proceeds. Court held respondents lacked jurisdiction as no scheduled offence was registered or investigated by any agency, and proceeds of crime were not determined. Despite evidence of illegal sand mining generating proceeds, attachment cannot proceed without prior registration and investigation of scheduled offence. Court emphasized attachment has serious consequences and cannot be based on assumptions. Respondents failed to specify exact scheduled offence or connect petitioners to any FIRs. Properties cannot be attached merely on premise of ill-gotten gains without established scheduled offence generating proceeds of crime.

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Issues Involved:
1. Challenge to ECIR No. ECIR/CEZO-II/22/2023.
2. Challenge to Provisional Attachment Order No. 1/2024.
3. Challenge to proceedings in Original Applications seeking confirmation of the Attachment Order.

Issue-wise Detailed Analysis:

1. Challenge to ECIR No. ECIR/CEZO-II/22/2023:
The petitioners challenged the ECIR recorded on 11.09.2023, based on four FIRs, arguing that the FIRs do not reveal proceeds of crime generated by any accused. The petitioners contended that the respondents assumed the role of investigating illegal sand mining without any FIR for a scheduled offence indicating the generation of proceeds of crime. The respondents argued that the ECIR is an internal document and not equivalent to an FIR. They claimed that other FIRs suggest illicit sand mining in Tamil Nadu, generating proceeds of crime, and that the ECIR need not record all FIRs.

The court noted that the respondents conceded the four FIRs do not indicate proceeds of crime, although they are registered for scheduled offences. The court emphasized that the existence of proceeds of crime is quintessential for initiating action under the Prevention of Money Laundering Act, 2002 (PMLA). The court found that neither the FIRs relied upon nor the reasons given by the respondents warranted emergent action, as there was no FIR registered for the scheduled offences generating proceeds of crime.

2. Challenge to Provisional Attachment Order No. 1/2024:
The petitioners challenged the Provisional Attachment Order, arguing that the respondents lacked jurisdiction to initiate action under PMLA based on the four FIRs. The court analyzed the materials relied upon by the respondents, including a report by M/s. Terraqua UAV Solutions Private Limited and statements from various officials, which suggested illegal sand mining and proceeds of crime. However, the court found that the respondents did not establish the exact scheduled offence committed by the petitioners or determine the exact proceeds of crime.

The court reiterated that the definition of "proceeds of crime" must be construed strictly and that possession of unaccounted property or illegal money cannot be considered proceeds of crime unless associated with a scheduled offence. The court emphasized that the respondents cannot assume jurisdiction to attach properties based on assumptions and that the attachment of property must be based on tangible and credible evidence.

3. Challenge to Proceedings in Original Applications Seeking Confirmation of the Attachment Order:
The petitioners challenged the proceedings in the Original Applications seeking confirmation of the Attachment Order. The court noted that the respondents proceeded on the premise that a scheduled offence had been committed, generating proceeds of crime. However, the respondents did not spell out the exact scheduled offence committed by the petitioners or determine the exact proceeds of crime. The court found that the respondents' actions were based on assumptions and lacked jurisdiction.

The court emphasized that the authorities under PMLA cannot initiate action on the assumption that the property acquired must be proceeds of crime and that a scheduled offence has been committed unless the same is registered by the jurisdictional police or pending enquiry by way of a complaint before the competent forum. The court concluded that the impugned actions were without jurisdiction and quashed the Provisional Attachment Orders and the Original Applications.

Conclusion:
The court quashed the ECIR, Provisional Attachment Orders, and Original Applications, stating that the respondents lacked jurisdiction to initiate action under PMLA without establishing the exact scheduled offence and determining the exact proceeds of crime. The court emphasized that the procedure prescribed under the law cannot be violated and that the respondents cannot assume jurisdiction based on assumptions. The court ordered that the respondents shall not continue further action pursuant to the ECIR until the statutory and legal requirements are complied with.

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