2024 (8) TMI 662 - AT - Money Laundering

SAFEMA Tribunal upholds property attachment as crime proceeds of equivalent value despite appellant's income disclosure arguments

Shamshad Versus The Deputy Director Directorate of Enforcement, Chandigarh

Shamshad Versus The Deputy Director Directorate of Enforcement, Chandigarh - TMI Issues Involved:1. Legitimacy of the attachment of properties under Section 26 of the Prevention of Money Laundering Act, 2002.2. Whether the properties attached were the proceeds of crime.3. Adequacy and specificity of the Adjudicating Authority's order.4. Appellant's involvement in the alleged crime and receipt of funds.5. Interpretation of 'proceeds of crime' under the Prevention of Money Laundering Act, 2002.Detailed Analysis:1. Legitimacy of the Attachment of Properties:The appeal challenges the order dated 07.09.2022 by the Adjudicating Authority under Section 26 of the Prevention of Money Laundering Act, 2002 (PMLA), which confirmed the attachment of properties alleged to be proceeds of crime. The appellant contended that the properties attached were not the proceeds of crime and were acquired prior to the commission of the alleged crime. The appellant relied on the Apex Court's judgment in Vijay Madanlal Choudhary Vs. Union of India and the Punjab & Haryana High Court's judgment in Seema Garg Vs. Deputy Director of Enforcement Directorate to support his argument.2. Whether the Properties Attached Were the Proceeds of Crime:The appellant argued that the properties attached had no nexus with the crime and were acquired before the alleged criminal activities. However, the respondent maintained that the appellant received Rs. 1,33,92,000/- from compensation meant for land acquisition victims, which was diverted to the appellant's account and others similarly placed. The Adjudicating Authority found that the appellant received the funds through a banking channel and used them for various purposes, including property acquisition and business transactions.3. Adequacy and Specificity of the Adjudicating Authority's Order:The appellant claimed that the Adjudicating Authority's order was cryptic and did not specify which properties were attached for the equivalent value to the proceeds of crime. However, the respondent argued that the Adjudicating Authority provided a detailed discussion of the issues and clarified the attachment of properties for the equivalent value. The Tribunal found that the Adjudicating Authority meticulously considered each aspect of the matter and provided a detailed explanation in its order.4. Appellant's Involvement in the Alleged Crime and Receipt of Funds:The appellant admitted to having monetary transactions with Chandra Shekhar, who borrowed money as a soft loan from the appellant. The appellant claimed ignorance of the large sums deposited in his account by Chandra Shekhar, citing his limited education. However, the investigation revealed that the appellant received Rs. 1,33,92,000/- and used it for various purposes, including cash withdrawals, transfers to businesses, and property acquisitions. The Tribunal noted that the appellant failed to substantiate his claims regarding the source and use of the funds.5. Interpretation of 'Proceeds of Crime' under the Prevention of Money Laundering Act, 2002:The Tribunal referred to the interpretation of 'proceeds of crime' as provided in the judgments of Axis Bank and Prakash Industries. The definition includes any property derived or obtained directly or indirectly from criminal activity or property of equivalent value if the original proceeds are not traceable. The Tribunal emphasized that even properties acquired before the commission of the crime could be attached if they are equivalent in value to the proceeds of crime. The Tribunal also cited its previous judgment in Ayush Kejriwal Vs. Deputy Director, Directorate of Enforcement, Kolkata, which elaborated on the interpretation of 'proceeds of crime.'Conclusion:The Tribunal concluded that the appellant failed to disclose the source of acquisition of the attached properties and provided vague statements without detailed descriptions. The Adjudicating Authority's order was found to be thorough and well-reasoned. The appeal was dismissed, and the attachment of properties was upheld.