2025 (2) TMI 746 - AT - Money Laundering

SAFEMA Tribunal upholds property attachment under PMLA despite purchase before alleged offense

Shri Charanjit Singh Gandhi and Shri Ranbir Singh Gandhi Versus The Joint Director Directorate of Enforcement, Guwahati

Shri Charanjit Singh Gandhi and Shri Ranbir Singh Gandhi Versus The Joint Director Directorate of Enforcement, Guwahati - TMI ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in the judgment include:Whether the conditions prescribed under sections 5 and 8 of the Prevention of Money Laundering Act (PMLA), 2002, for recording satisfaction by the respective authorities, were met in the present case.Whether the properties attached were acquired prior to the alleged predicate offence, and if so, whether they could still be attached as 'proceeds of crime' under the PMLA, 2002.Whether the retrospective application of the PMLA, 2002, is constitutionally valid, particularly when the alleged offences were not part of the Schedule to the PMLA at the time of their commission.Whether the appellants' contention that the funds received were part of a legitimate compensation award holds merit, and how this impacts the attachment of properties.ISSUE-WISE DETAILED ANALYSIS1. Compliance with Sections 5 and 8 of PMLA, 2002Legal Framework and Precedents: Sections 5 and 8 of the PMLA, 2002, require that the authorities record reasons to believe that an offence of money laundering has been committed. The appellants cited precedents such as Seema Garg v. Deputy Director, Directorate of Enforcement, and J. Sekar v. Union of India, arguing that mere repetition of statutory language does not suffice.Court's Interpretation and Reasoning: The Tribunal found that detailed reasons were recorded by the authorities, satisfying the conditions under section 5(1). Section 8 does not specifically require recording reasons in writing, and the Tribunal found the actions under sections 5 and 8 valid.Conclusion: The Tribunal concluded that the procedural requirements under sections 5 and 8 were met, and the appellants' contention was rejected.2. Attachment of Properties Acquired Prior to Predicate OffenceLegal Framework and Precedents: The appellants argued that properties acquired before the alleged crime cannot be considered proceeds of crime. They relied on Pavana Dibbur Vs. Directorate of Enforcement, which held that such properties cannot be attached.Court's Interpretation and Reasoning: The Tribunal referred to its own judgment in Sadananda Nayak v Deputy Director, which held that properties can be attached as 'value thereof' if the actual proceeds of crime are not available. The Tribunal emphasized the three limbs of the definition of 'proceeds of crime' under Section 2(1)(u) of the PMLA.Conclusion: The Tribunal rejected the appellants' argument, holding that the properties were attached as the equivalent value of the proceeds of crime.3. Retrospective Application of PMLA, 2002Legal Framework and Precedents: The appellants contended that the retrospective application of the PMLA is unconstitutional, as the offences were not part of the Schedule at the time of their commission.Court's Interpretation and Reasoning: The Tribunal cited the Supreme Court's decision in Vijay Madanlal Choudhary vs. Union of India, which held that attachment under the PMLA is a civil action, not criminal, and thus not barred by Article 20 of the Constitution.Conclusion: The Tribunal found that the attachment of properties under the PMLA is valid, even if the offences were not scheduled at the time of their commission.4. Legitimacy of Compensation AwardKey Evidence and Findings: The appellants argued that the funds received were part of a legitimate compensation award from the NC Hills Autonomous Council. The Tribunal noted that a prosecution complaint is pending, and the criminality of the appellants' actions is yet to be established.Court's Interpretation and Reasoning: The Tribunal emphasized that the PMLA allows for attachment of proceeds of crime regardless of the accused's involvement in the scheduled offence. The Tribunal found that the appellants' properties could be attached as the proceeds of crime.Conclusion: The Tribunal dismissed the appellants' contention, allowing the attachment to stand.SIGNIFICANT HOLDINGSThe Tribunal affirmed that the procedural requirements under sections 5 and 8 of the PMLA, 2002, were met, and the attachment of properties was valid.The Tribunal held that properties acquired before the alleged crime can be attached if they represent the value of the proceeds of crime, following the three-limb definition of 'proceeds of crime.'The Tribunal found that the retrospective application of the PMLA, 2002, is constitutionally valid, as the attachment is a civil action.The Tribunal dismissed the appeals, maintaining the attachment of the appellants' properties as 'value thereof' of the proceeds of crime.