2025 (1) TMI 149 - AT - Money Laundering

SAFEMA Tribunal upholds property attachment in money laundering case despite pre-crime acquisition timing

Rakesh Kumar Tandon, Pradeep Kumar Tandon, Anoop Kumar Tandon Versus The Deputy Director, Directorate of Enforcement, Lucknow

The Appellate Tribunal under SAFEMA upheld the attachment of properties in a money laundering case involving misappropriation of funds through conspiracy ... Money Laundering - attachment of the properties acquired prior to the commission of the alleged crime - misappropriation of the funds in conspiracy with government officials - lapse of attachment order after expiry of 180 days - No connection between properties and proceeds of crime - Invalidity of scheduled offence. Properties acquired prior to commission of crime could not have been attached - HELD THAT:- There are no force in the first argument when the proceeds out of crime was not available with the appellant rather vanished and siphoned off,the property of equivalent value has been attached. The proceeds were siphoned off by diverting it to various group companies and by layering the proceeds. In the light of the aforesaid, second limb of the definition of 'proceeds of crime' has been applied to attach the property of equivalent value. Thus, the first ground raised by the appellant cannot be accepted. The attachment order would be lapsed after expiry of 180 days - HELD THAT:- There are no substance in the argument to seek lapse of the provisional attachment order when the intervening period was suffered due to Covid-19 and the period from 15.03.2020 till 28.02.2022 has been eliminated by the Apex Court for termination of proceedings - the ground for challenge to the order cannot be accepted. No connection between properties and proceeds of crime - HELD THAT:- The properties were linked to the proceeds of crime through financial transactions and layering - the attachment of properties as connected to the proceeds of crime upheld. Invalidity of scheduled offence - HELD THAT:- The relevant date is a date when the tainted property is projected to be untainted and as a consequence to it, the ECIR is recorded showing offence under Section 3 of the 2002 Act. The relevant date to find out the scheduled offence and the offence of money laundering is when it is projected tobe untainted property to make out an offence under section 3 of the Act of 2002 - the relevant date is of the year 2012 when after registration of FIR other discovery of the offence, an ECIR was recorded in the same year finding an offence of moneylaundering. Conclusion - The attachment of properties was upheld. The provisional attachment order did not lapse. The properties were connected to the proceeds of crime. There are no merit in the appeals and they are accordingly dismissed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are:Whether the properties acquired prior to the commission of the alleged crime can be attached under the Prevention of Money Laundering Act, 2002 (PMLA).Whether the provisional attachment order lapses after the expiry of 180 days if not confirmed by the Adjudicating Authority within that period.Whether there is a connection between the properties attached and the proceeds of crime.Whether the scheduled offences under the PMLA can be applied retrospectively to crimes committed before their inclusion in the schedule.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Attachment of Properties Acquired Prior to CrimeRelevant Legal Framework and Precedents: The definition of 'proceeds of crime' under Section 2(1)(u) of the PMLA includes property derived or obtained directly or indirectly from criminal activity. The court referred to precedents such as Prakash Industries Ltd. v. Directorate of Enforcement and Axis Bank to interpret this definition.Court's Interpretation and Reasoning: The court held that the definition of 'proceeds of crime' has three limbs, allowing for the attachment of properties equivalent in value to the proceeds of crime if the actual tainted property is not traceable.Key Evidence and Findings: The properties in question were acquired before the alleged crime, but the proceeds of crime were siphoned off, justifying attachment of equivalent value properties.Application of Law to Facts: The court applied the second limb of the definition, allowing attachment of properties acquired prior to the crime when the proceeds are not available.Treatment of Competing Arguments: The appellants argued that properties acquired before the crime should not be attached, but the court rejected this, emphasizing the legislative intent to prevent money laundering.Conclusions: The attachment of properties equivalent in value to the proceeds of crime is valid even if acquired before the crime.Issue 2: Lapse of Provisional Attachment OrderRelevant Legal Framework and Precedents: Section 5(1) of the PMLA provides for provisional attachment for 180 days unless confirmed. The court considered the impact of COVID-19 on legal timelines, referencing the Supreme Court's orders in Suo Moto Petition 03/2020.Court's Interpretation and Reasoning: The court held that the COVID-19 pandemic justified the exclusion of certain periods from the 180-day timeline, as per the Supreme Court's directions.Key Evidence and Findings: The provisional attachment order was confirmed beyond 180 days due to COVID-19-related delays.Application of Law to Facts: The court applied the Supreme Court's orders to exclude the COVID-19 period from the computation of the 180 days.Treatment of Competing Arguments: The appellants argued for lapse of the order, but the court upheld the extension due to the pandemic.Conclusions: The provisional attachment order did not lapse due to the exclusion of the COVID-19 period.Issue 3: Connection Between Properties and Proceeds of CrimeRelevant Legal Framework and Precedents: The court examined whether the properties were connected to the proceeds of crime, considering the definition under the PMLA.Court's Interpretation and Reasoning: The court found that the proceeds of crime were siphoned off, justifying the attachment of properties of equivalent value.Key Evidence and Findings: The properties were linked to the proceeds of crime through financial transactions and layering.Application of Law to Facts: The court applied the law to find a connection between the properties and the proceeds of crime.Treatment of Competing Arguments: The appellants' arguments of no connection were dismissed based on evidence.Conclusions: The court upheld the attachment of properties as connected to the proceeds of crime.Issue 4: Retrospective Application of Scheduled OffencesRelevant Legal Framework and Precedents: The court considered whether offences added to the schedule after the alleged crime could apply, referencing Dyani Antony Paul v. Union Of India.Court's Interpretation and Reasoning: The court held that the relevant date is when the property is projected as untainted, not when the crime occurred.Key Evidence and Findings: The ECIR was recorded in 2012, after the offences were included in the schedule.Application of Law to Facts: The court found that the offences were applicable as the projection of untainted property occurred after their inclusion.Treatment of Competing Arguments: The appellants' arguments against retrospective application were rejected.Conclusions: The court concluded that the scheduled offences were applicable.3. SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal Reasoning: 'The definition of 'proceeds of crime' has three limbs and in the second limb the properties of equivalent value to the proceeds obtained out of crime can be attached.'Core Principles Established: Properties of equivalent value can be attached if actual proceeds are not traceable; COVID-19 extensions apply to legal timelines; relevant date for scheduled offences is when property is projected as untainted.Final Determinations on Each Issue: The attachment of properties was upheld; the provisional attachment order did not lapse; the properties were connected to the proceeds of crime; the scheduled offences were applicable.