2024 (10) TMI 459 - AT - Money Laundering

Trust appeal dismissed as property attachment under PMLA Section 5(1) upheld with established nexus

The Appellate Tribunal SAFEMA, New Delhi dismissed the appeal challenging property attachment under PMLA. The appellant trust argued non-joinder of ... Money Laundering - scheduled offence - proceeds of crime - whether appeal is bad for non-joinder of Government of Odisha as a necessary party as the land belongs to Government of Odisha which is given on lease to the Appellant Trust? - essential ingredients of attachment of property u/s 5(1) of PMLA satisfied or not - no reason to believe that the said properties are involved in money laundering - Appellant Trust is a bona fide receiver and had no knowledge of the alleged offence - no prosecution complaint has been filed against the Appellant Trust within 365 days as stipulated u/s 8(3)(a) of PMLA - Appellant Trust was neither named in FIR or in ECIR and not an accused in the scheduled offence or in the prosecution complaint - no nexus or link between the attached property and the criminal activity relating to the alleged scheduled offence. HELD THAT:- It is an admitted fact that the land has been transferred to the Appellant Trust by the Government of Odisha under a lease deed with certain rights and liabilities but the title of the land has not been passed over to the Appellant Trust. The lease is for 99 years with effect from 11-1-2007 for a premium of Rs. 20 Lakhs at the rate of Rs. 1 lakh per acre with yearly rent of Rs. 20 thousand and cess of Rs. 15 thousand at the rate of 75 percent of the annual rent or as admissible from time to time besides the cost of trees standing on the demised land. The Appellant Trust has taken a plea that the Government of Odisha was neither made a party to the proceedings initiated before the Ld. Adjudicating Authority nor a show cause notice was served upon it by the Ld. Adjudicating Authority u/s 8(1) of the PMLA, 2002. There is no necessity of making Government of Odisha as a party by the Respondent ED as the title of the government land cannot be transferred in favor of the Central Government as absolute owner in the event of confiscation of the land, if the Respondent ED succeeds in the criminal trial of prosecution complaint under the PMLA. Whatever rights and liabilities are transferred to the Appellant Trust under the lease deed can only be passed on to the Respondent ED, as the Central Government and the subsequent lessee will step into the shoes of the Appellant Trust for the remaining lease period. The right, title and interest of Government of Odisha over the land in question is not any way effected - the confirmation of the PAO by the Ld. Adjudicating Authority sans Government of Odisha is not bad in law. This issue is accordingly answered against the Appellant Trust. Whether essential ingredients of attachment of property as provided in section 5(1) PMLA, 2002 read with the second proviso to section 5(1)(b) PMLA, 2002, has not been satisfied? - HELD THAT:- As it appears from the PAO that there is a subjective satisfaction of the Respondent ED that the property in question is liable to be attached, the essential ingredients of section 5(1) read with second proviso to section 5(1)(b) of PMLA, 2002 are satisfied on the plain reading of the PAO. There is reason to believe which is recorded in writing in the PAO, so there is due compliance of the aforesaid section and proviso thereto in issuing the PAO. The very intention of issuing the attachment order and confirmation of the same are only to protect the property in question, till the conclusion of trial. It also appears that the Respondent ED has not taken possession of the property, nor ousted the Appellant Trust from the property - the answer to this issue is decided against the Appellant Trust. Whether there is no reason to believe that the questioned properties are involved in money laundering? - HELD THAT:-There is no dispute that the Appellant Trust is a registered trust and covered by the definition of 'Person' u/s 2(1)(s) of PMLA, 2002. Secondly, the prosecution complaint was filed on 31-3-2016 with the prayer to pass orders confiscating the attached property. In other words, the property attached in the present proceedings are already part of the prosecution complaint. In the present appeal, the property has already been a part of the prosecution complaint in the year 2016, when there was no limitation provided u/s 8(3)(a) for continuation of the conformation of attached property either during the investigation or the pendency of the proceedings in related to any offence under this Act before a court. For the first time the limitation of 90 days was inserted in the PMLA, 2002 on dated 19-4-2018 and subsequently 90 days was substituted by 365 days on dated 20-3-2019. In other words, when the prosecution complaint was filed on 31-3-2016 there was no such limitation. The aforesaid provision of law does not speak about continuation of any investigation or criminal proceedings in any court of law against any person, but it states about the property. The Trust is neither named in the FIR nor in the ECIR and not an accused in the scheduled offence or in the prosecution complaint - HELD THAT:- The proceeding before this tribunal is with regards to attachment of the tainted property derived/obtained directly or indirectly by any person as a result of criminal activity. In the present case, it is Shri Prashant Kumar Dash who is allegedly indulged in criminal activity and generated proceeds of crime and thereafter the said proceeds of crime was utilized for the development of the building of the Appellant Trust, payment of salary to the staff etc. while he was the Managing Trustee of Appellant Trust. In the aforesaid fact and circumstances, we do not find any merit in the contention of the Appellant Trust that the attachment is bad in law on the ground that the Appellant Trust has not been proceeded against either in scheduled offence or in the prosecution complaint. Therefore, this issue is answered against the Appellant Trust. Whether the Ld. Adjudicating Authority has followed the statutory requirements as required u/s 8(1) & 8(2) of PMLA, 2002? - HELD THAT:- The impugned order passed by the Ld. Adjudicating Authority is examined. The Ld. Adjudicating Authority has clearly examined factual as well as legal issues in the present case. The facts have been discussed in the impugned order. In the said order, the submissions made by the Appellant Trust admitting the receipt of the aforesaid amount. It is also observed in the impugned order that no bank has approached the authority claiming the property and also held that there is no requirement of supplying the recorded reasons to the defendants and that the PAO/OC sufficiently conveys what they have to meet as observed by the Hon'ble High Court, Bombay in the case of Brizo Reality Co. (P.) Ltd. [2014 (6) TMI 993 - BOMBAY HIGH COURT] - the Appellant Trust has no merit so far as this issue is concerned. No nexus or link between the attached property and the criminal activity relating to the alleged scheduled offence - HELD THAT:- It has been admitted that a sum of Rs. 9,01,66,000/- which was generated allegedly from the criminal activity by Shri Dash has been infused into the Trust and that the same amount was utilized by the Appellant Trust in various construction work as well as payment of salary to staff, return of amount to the existing trustees invested by them etc. this was done when the Appellant Trust was managed by Shri Dash during the period 2009-2012 and that the said amount was not returned to him after his vacation from the Trust. These facts go to the root of the case that there is a nexus between the alleged proceeds of crime with the property in question attached herein - this issue is also answered against the Appellant Trust. The appeal has no merit. There is no illegality or irregularity in the impugned order - Hence, the appeal is dismissed. Issues Involved:1. Non-joinder of Government of Odisha as a necessary party.2. Satisfaction of essential ingredients for attachment under Section 5(1) of PMLA.3. Existence of 'reason to believe' for involvement in money laundering.4. Bona fide receiver status of the Appellant Trust.5. Filing of prosecution complaint within the stipulated time under Section 8(3)(a) of PMLA.6. Naming of the Appellant Trust in FIR, ECIR, or prosecution complaint.7. Compliance with statutory requirements under Sections 8(1) & 8(2) of PMLA.8. Nexus between the attached property and the alleged criminal activity.Detailed Analysis:1. Non-joinder of Government of Odisha as a Necessary Party:The Appellant Trust argued that the Government of Odisha, from whom the land was leased, was not made a party to the proceedings. The Tribunal found no merit in this argument, stating that the definition of 'property' under Section 2(1)(v) of PMLA includes leased property. The title of the land remains with the Government of Odisha, and only the rights under the lease can be transferred. Therefore, non-joinder of the Government of Odisha does not affect the proceedings.2. Satisfaction of Essential Ingredients for Attachment under Section 5(1) of PMLA:The Tribunal noted that Shri Dash infused Rs. 9,01,66,000 into the Appellant Trust, allegedly from criminal activities. This amount was used for various purposes, including construction and staff salaries. The Tribunal found that the essential ingredients for attachment under Section 5(1) of PMLA were satisfied, as there was a subjective satisfaction of the Respondent ED that the property was liable to be attached.3. Existence of 'Reason to Believe' for Involvement in Money Laundering:The Tribunal observed that the infusion of funds by Shri Dash, allegedly from criminal activities, and their utilization by the Trust provided sufficient 'reason to believe' for the attachment of the property. The Tribunal found no merit in the Appellant Trust's claim that there was no reason to believe the properties were involved in money laundering.4. Bona Fide Receiver Status of the Appellant Trust:The Tribunal rejected the claim of the Appellant Trust being a bona fide receiver. It was noted that Shri Dash, aware of the criminal origin of funds, was in control of the Trust when the funds were utilized. The Trust's claim of bona fide receiver status was not supported by the facts.5. Filing of Prosecution Complaint within the Stipulated Time under Section 8(3)(a) of PMLA:The Appellant Trust argued that no prosecution complaint was filed within 365 days as required under Section 8(3)(a) of PMLA. The Tribunal noted that the prosecution complaint was filed on 31-3-2016, before the introduction of the 365-day limitation, and the attached property was part of this complaint. Therefore, the Tribunal found no merit in this argument.6. Naming of the Appellant Trust in FIR, ECIR, or Prosecution Complaint:The Tribunal acknowledged that the Appellant Trust was not named in the FIR, ECIR, or prosecution complaint. However, the focus was on the attachment of tainted property, not the involvement of the Trust as an accused. The Tribunal found no merit in the argument that the attachment was invalid due to the Trust not being named.7. Compliance with Statutory Requirements under Sections 8(1) & 8(2) of PMLA:The Tribunal examined the order of the Adjudicating Authority and found that it had followed the statutory requirements under Sections 8(1) & 8(2) of PMLA. The Authority had considered both factual and legal issues, and the Tribunal found no merit in the Appellant Trust's claim of non-compliance.8. Nexus between the Attached Property and the Alleged Criminal Activity:The Tribunal found a clear nexus between the alleged proceeds of crime and the attached property. The funds infused by Shri Dash, allegedly from criminal activities, were used for construction and other purposes during his tenure as trustee. The Tribunal rejected the argument that there was no link between the attached property and the criminal activity.Conclusion:The Tribunal dismissed the appeal, finding no merit in the arguments presented by the Appellant Trust. The attachment of the property was upheld, and the Tribunal concluded that there was no illegality or irregularity in the impugned order.