2024 (12) TMI 161 - AT - Money Laundering

SAFEMA Tribunal upholds provisional attachment orders in money laundering cases involving forged documents and unexplained cash seizures

Sourabh Jain and Smt. Rajni Jain Versus The Joint Director Directorate of Enforcement, Lucknow

The Appellate Tribunal under SAFEMA dismissed appeals challenging provisional attachment orders in money laundering cases. In the first matter involving ... Money Laundering - proceeds of crime - challenge to Provisional Attachment Order - manipulating and forging the records and supplied sub-standard and mis-branded quality materials to DG, Family Welfare at exorbitant rates - HELD THAT:- The consideration (in cash) was not paid as a lumpsum at the time of execution of the sale deed, but “on different dates”. As such, there are no merit in the submission of the appellant that the consideration paid was out of the cash withdrawn from the separate account of the appellant maintained in respect of Sommya Prakashan. Notably, the time when property was purchased falls squarely within the time-period of the alleged scheduled offence. Consequently, on the pre-ponderance of probabilities, the appellant has failed to prove the source of acquisition of the subject property for which the burden was upon him under sections 8(1), 23 and 24 the Act. On the contrary, there is every reason to believe that the amount was sourced from the proceeds of crime derived from NRHM funds. In the present case, the impugned order was passed on 24.02.2016 when there was no time limit for filing the prosecution complaint. The prosecution complaint in this case was filed on 27.03.2018, prior to the date when the amendment made by the Finance Act, 2018 setting a 90- day time period for filing the prosecution complaint came into force. As such the attachment order shall continue till the final disposal of the prosecution case against the accused. Accordingly, there are no merit in the appellant’s challenge to the impugned order on account of prosecution complaint not being pending when the same was passed. It is also to be borne in mind that at this stage of the proceedings, the subject property has only been attached. As per the definition of the term “attachment” provided u/s 2(1)(d), “attachment” means prohibition of transfer, conversion, disposition or movement of property. Attachment of property per se does not alter the ownership status of the property. It does not even alter the status of possession and user of the property, unless in a given case, owing to exceptional circumstances, the provisions of section 8(4) are invoked by the Directorate in order to take possession of the property - as and when the prosecution case is decided by the Special Court, it is required to either order the confiscation of the same under section 8(5) where it finds that the property was involved in money-laundering, or the release thereof in the event the Court finds that the property is not involved in money-laundering. Therefore, at this interim stage when the prosecution case against the accused is pending, both the legal position as well as the balance of interests lies favour of continuance of the attachment of the subject properties. The present appeal fails, and is hereby dismissed. Seizure of amount of Rs. 9.50 lakh and attachment by the Respondents, treating it to be proceeds of crime - HELD THAT:- The Ld. Adjudicating Authority has pointed out that the Appellant has submitted before it unsigned receipts and payment account, unsigned cash receipts, quotation forms etc. which could not constitute authentic evidence of transactions and were in all likelihood false and fabricated. The claim of having paid tax in respect of some of the transactions also cannot be considered to be authentic proof of the entries made in the books of account and availability of cash balance as per books. The findings of the Ld. Adjudicating Authority were justified given the facts and circumstances stated above, including the fact the cash was seized from the residence and not the premises of M/s Midtown Hotel and Banquets, and that no satisfactory explanation could be provided by the appellant at the time of seizure. Accordingly, there are no merit in the contentions of the Appellant in this regard. Appeal dismissed. Issues Involved:1. Whether the attachment of Flat No. 701-C, Kasmanda Regent Apartment, Lucknow, as proceeds of crime, was justified.2. Whether the seized cash amounting to Rs. 9.50 lakh was proceeds of crime.3. Whether the procedural requirements under sections 5 and 8 of the PMLA were satisfied.4. Whether the absence of a prosecution complaint at the time of confirming the provisional attachment order affects its validity.Issue-wise Detailed Analysis:1. Attachment of Flat No. 701-C, Kasmanda Regent Apartment:The appellant, Sh. Saurabh Jain, contested the attachment of Flat No. 701-C, arguing that it was purchased from the funds of M/s Sommya Prakashan, a proprietorship concern unrelated to NRHM funds. The appellant provided evidence of cash withdrawal from the bank account of M/s Sommya Prakashan to support this claim. However, the Tribunal noted that the sale deed indicated the payment was made on different dates, not as a lump sum, and the timing of the property purchase coincided with the period of alleged scheduled offences. The Tribunal concluded that the appellant failed to prove the legitimate source of funds used for the property acquisition, thus supporting the attachment as proceeds of crime.2. Seized Cash Amounting to Rs. 9.50 lakh:Smt. Rajni Jain claimed the seized cash was from M/s Midtown Hotel and Banquet, unrelated to M/s Siddhi Traders involved in the NRHM scheme. However, the cash was seized from the residence of Sh. Saurabh Jain, and at the time of seizure, no satisfactory explanation was provided. The Tribunal found the appellant's explanation, supported by internal documents and accounts, unconvincing and potentially fabricated. Given the lack of credible evidence linking the cash to legitimate business activities, the Tribunal upheld the attachment, considering it proceeds of crime.3. Procedural Requirements under Sections 5 and 8 of PMLA:The appellants argued that the provisional attachment order lacked a prosecution complaint at the time of confirmation, violating procedural requirements. The Tribunal clarified that at the time of the impugned order, there was no statutory time limit for filing a prosecution complaint. The Tribunal referenced its previous decision in M/s Nirved Traders, which established that amendments setting time limits for filing prosecution complaints were prospective and not applicable retroactively. Thus, the procedural requirements were deemed satisfied.4. Absence of Prosecution Complaint:The Tribunal addressed the contention regarding the absence of a prosecution complaint during the confirmation of the provisional attachment order. It reiterated that the relevant legal framework at the time did not mandate a prosecution complaint before confirming an attachment order. The Tribunal emphasized that the attachment serves as a preventive measure to ensure proceeds of crime remain available for legal proceedings. Therefore, the absence of a prosecution complaint did not invalidate the attachment order.Conclusion:The Tribunal dismissed both appeals, upholding the attachment of the flat and the seizure of cash as proceeds of crime. It found the appellants' explanations and evidence insufficient to rebut the presumption of proceeds of crime under the PMLA. The procedural arguments raised by the appellants were also rejected based on the legal framework applicable at the time of the orders.