2025 (1) TMI 992 - AT - Money Laundering

SAFEMA Tribunal upholds provisional attachment order under PMLA Section 5(3) excluding COVID-19 period from limitation calculations

Sanjay Singhal, Atmaram House Investment Pvt. Ltd., IFCI Limited, Standard Chartered Bank, Jersey Branch Versus The Deputy Director Directorate of Enforcement, Delhi

Sanjay Singhal, Atmaram House Investment Pvt. Ltd., IFCI Limited, Standard Chartered Bank, Jersey Branch Versus The Deputy Director Directorate of ... 1. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment include:Whether the provisional attachment order (PAO) dated 16.01.2020, confirmed on 12.07.2021, is valid given the lapse of 180 days as stipulated under Section 5(3) of the Prevention of Money Laundering Act, 2002 (PMLA).Whether properties not directly borrowed from financial institutions but acquired through alleged proceeds of crime can be attached under the PMLA.Whether properties acquired before the commission of the alleged crime can be attached under the PMLA.Whether the absence of a prosecution complaint within 365 days affects the validity of the attachment order under Section 8(3) of the PMLA.Whether the attachment of properties of entities or individuals not named as accused in the FIR or ECIR is permissible under the PMLA.Whether the failure to supply 'reason to believe' under Section 5(1) of the PMLA affects the legality of the attachment order.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Validity of the PAO beyond 180 daysLegal Framework: Section 5(3) of the PMLA mandates that a PAO ceases to have effect after 180 days unless confirmed.Court's Interpretation: The Tribunal considered the impact of the COVID-19 pandemic, referencing the Supreme Court's order excluding the period from 15.03.2020 to 28.02.2022 from statutory timelines.Conclusion: The PAO was deemed valid as the intervening period affected by COVID-19 was excluded from the 180-day calculation.Issue 2: Attachment of properties not directly borrowed from financial institutionsLegal Framework: The PMLA allows for the attachment of properties deemed 'proceeds of crime,' irrespective of direct borrowing.Court's Interpretation: The Tribunal found that the funds were diverted from M/s BPSL to shell companies, which then acquired properties.Conclusion: The properties were rightly attached as they were acquired using diverted funds from M/s BPSL, implicating the appellants.Issue 3: Attachment of properties acquired before the commission of the crimeLegal Framework: The PMLA allows attachment of properties equivalent to the value of proceeds of crime if the original proceeds are unavailable.Court's Interpretation: The Tribunal noted that properties acquired during the check period (2007-2014) were subject to attachment.Conclusion: The attachment was upheld as properties were acquired during the period of alleged criminal activity.Issue 4: Absence of a prosecution complaint within 365 daysLegal Framework: Section 8(3) of the PMLA requires a prosecution complaint to be filed within 365 days.Court's Interpretation: The Tribunal clarified that attachment can occur even if the individual is not named as an accused, and the absence of a prosecution complaint does not invalidate the attachment.Conclusion: The argument was dismissed as the attachment was based on possession of proceeds of crime, not on the status of prosecution.Issue 5: Attachment of properties of non-accused entitiesLegal Framework: Section 5(1) of the PMLA allows attachment of properties held by any person in possession of proceeds of crime.Court's Interpretation: The Tribunal emphasized that attachment can extend to individuals not named as accused if they hold proceeds of crime.Conclusion: The attachment was deemed valid as the properties were linked to diverted funds from M/s BPSL.Issue 6: Non-supply of 'reason to believe'Legal Framework: Section 5(1) of the PMLA requires recording of 'reason to believe' for attachment.Court's Interpretation: The Tribunal found no merit in the argument due to the absence of a statutory requirement to serve 'reason to believe' to the appellant.Conclusion: The argument was dismissed, and the attachment order was upheld.3. SIGNIFICANT HOLDINGSValidity of PAO: 'The period from 15.03.2020 till 28.02.2022 is eliminated for termination of proceedings, thus we do not find that the impugned order can be interfered on the first ground.'Attachment of Properties: 'The attachment of property can be if any person is in possession of the property as given under Section 5(1)(a) and as per Section 8(3)(a), the continuation of the attachment during the period of investigation for a period of 365 days or pendency of the proceedings relating to any offence under the Act.'Attachment of Non-Accused Entities: 'The sweep of section 5(1) is not limited to the accused named in the criminal activity relating to a scheduled offence. It would apply to any person (not necessarily being accused in the scheduled offence), if he is involved in any process or activity connected with the proceeds of crime.'Final Determination: The appeals were dismissed, and the attachment orders were upheld.