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 ... Provisional attachment of property - proceeds of crime - essential ingredients of provisional attachment under section 5(1) PMLA - reason to believe - nexus between attached property and proceeds of crime - status of bona fide receiver - continuation of attachment under section 8(3)(a) PMLA and temporal limitation - inclusion of leased property within definition of property - requirement of statutory procedure under sections 8(1) and 8(2) PMLAInclusion of leased property within definition of property - Non-joinder of the lessor (Government of Odisha) did not vitiate the attachment or its confirmation. - HELD THAT: - The Tribunal held that the statutory definition of 'property' under the PMLA is inclusive and covers leased interests; the lease conveyed rights and liabilities for the lease period to the lessee (the trust) and those rights could be stepped into by the Central Government/ED if confiscation followed. Consequently, there was no legal necessity to implead the Government of Odisha as a party, and the appellant had not taken steps to implead the Government or shown that it had been notified. The contention that non-joinder rendered the order void was therefore rejected. [Paras 18]Claim of invalidity for non-joinder of Government of Odisha rejected.Essential ingredients of provisional attachment under section 5(1) PMLA - reason to believe - The Adjudicating Authority lawfully formed the requisite reason to believe and complied with the requirements to issue and confirm the Provisional Attachment Order under section 5(1). - HELD THAT: - On the record the Tribunal found admitted infusions by Shri Dash totaling the alleged proceeds which remained with the trust and had been applied to construction, salaries and payments to trustees; the PAO recorded subjective satisfaction in writing. Given these admitted facts and the PAO's recorded reasons, the essential ingredients of section 5(1) (and the proviso to section 5(1)(b)) were satisfied and the attachment's protective object until trial was justified. The ED had not ousted the trust from possession, and there was prima facie material to form the statutory satisfaction. [Paras 19]Confirmation of the PAO upheld as meeting section 5(1) requirements.Nexus between attached property and proceeds of crime - There existed a sufficient nexus between the attached land/building and the alleged proceeds of crime. - HELD THAT: - The Tribunal relied on the appellant's own admissions that substantial sums allegedly derived from criminal activity were infused into the trust while the donor was managing trustee and that those sums were used for construction and other institute purposes and were not returned. Those facts, recorded in the PAO and impugned order, were held to be prima facie sufficient to establish a link between the proceeds and the property, justifying attachment. [Paras 20, 25]Nexus/link established; challenge rejected.Status of bona fide receiver - The Appellant Trust's plea of being a bona fide receiver was rejected. - HELD THAT: - Because the donor (Shri Dash) was the managing trustee who infused the allegedly tainted funds and those funds were applied to the trust's activities during his control, and were not returned after his removal, the Tribunal found the trust could not be treated as an innocent bona fide receiver. The factual admissions regarding utilization of the funds undermined the trust's claim. [Paras 21]Bona fide receiver defence not accepted.Continuation of attachment under section 8(3)(a) PMLA and temporal limitation - The appellant's objection under section 8(3)(a) based on non-filing of prosecution within a prescribed limitation was negatived on the facts. - HELD THAT: - The Tribunal noted that the prosecution complaint including the attached property was filed on 31-3-2016, at a time when the statutory limitation now reflected in section 8(3)(a) (firstly 90 days, later 365 days) was not in force. Thus, the property was already part of the prosecution complaint before the later temporal limits were introduced; accordingly the appellant's plea for release on that ground was held inapplicable to these facts and rejected. [Paras 22]Challenge based on section 8(3)(a) limitation dismissed.Provisional attachment of property - Absence of the trust's name in FIR/ECIR or in initial charge-sheet did not by itself invalidate attachment of the property. - HELD THAT: - The Tribunal observed that proceedings before it concern attachment of tainted property derived or obtained by any person; even though the trust was not named in the FIR/ECIR, the attached property was included in the prosecution complaint. Given the admitted facts of infusion and use of alleged proceeds by the managing trustee, non-naming of the trust in earlier records did not disentitle the ED from attaching property demonstrably traceable to alleged proceeds. [Paras 23]Non-naming in FIR/ECIR insufficient to set aside attachment.Requirement of statutory procedure under sections 8(1) and 8(2) PMLA - The Adjudicating Authority complied with the statutory requirements under sections 8(1) and 8(2) while adjudicating the Original Complaint. - HELD THAT: - On review of the impugned order the Tribunal found that factual and legal issues were examined, appellant's submissions (including admissions) were considered, and reasons in the PAO/OC conveyed sufficiently what the appellant had to meet. The authority's analysis and findings (as recorded) met the statutory adjudicatory obligations and thus the challenge to procedural infirmity failed. [Paras 24]Statutory procedure under sections 8(1) and 8(2) held to have been followed.Final Conclusion: The Appellate Tribunal dismissed the appeal, upholding confirmation of the Provisional Attachment Order; the challenges based on non-joinder, lack of reason to believe, absence of nexus, bona fide receiver status, procedural non-compliance and limitation under section 8(3)(a) were all rejected on the facts and law set out in the impugned order. 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.