2025 (3) TMI 387 - AT - Money Laundering

SAFEMA tribunal upholds property attachment orders for illegal foreign remittances using fake import documents under PMLA section 8(1)

NEERAJ JAIN, SWARAN LATA JAIN, RAKESH JAIN, M/s. SWARAN OVERSEAS PVT. LTD. Versus THE DEPUTY DIRECTOR DIRECTORATE OF ENFORCEMENT, NEW DELHI

The Appellate Tribunal under SAFEMA upheld provisional attachment orders against properties allegedly acquired through illegal foreign remittances to Hong ... Money Laundering - proceeds of crime - predicate offence - Provisional Attachment Order - illegal foreign remittances to Hong Kong through banking channels by submitting fake import documents to bank authorities - HELD THAT:- It is, firstly, noted that the claim of the appellant that the property was acquired out of the appellant's own legitimate income remains a bland assertion without any substantiating evidence. It is settled law that under section 8(1) of the PMLA, 2002, the burden of proof is upon the appellant to indicate the sources of income, earning or assets, out of which or by means of which he had acquired the property attached u/s 5(1). The contention of the respondents is that the appellant had no independent source of income and he was associated with his brothers, namely, Sh. Manish Jain and Sh. Rakesh Jain during the relevant period. Moreover, the presumptions u/s 23 and 24 are also against the appellant and it was for him to rebut the presumptions by presenting appropriate evidence before the Ld. AA which he failed to do. It is by now well-settled that the issue of retrospectivity or otherwise in so far as offence of money laundering is concerned has to be examined with reference to the act which constitutes 'money laundering' under Act, regardless of the time of occurrence of the scheduled offence. Further, the offence of money laundering is a continuing offence. A continuing offence is one which is susceptible of continuance and is distinguishable from one which is committed once and for all. A continuing offence occurs and reoccurs, and each time, an offence is committed. The decision of the Hon'ble Delhi High Court in Prakash Industries Limited [2022 (7) TMI 877 - DELHI HIGH COURT] may also be referred to in this context, wherein, it was held that it is well settled relating to retroactive application of penal previous that merely because requisite or facet for initiation of action pertains to a period prior to the enforcement of the statute, that would not be sufficient to characterize statute as being retrospective. It must be borne in mind that the Act with which we are concerned penalizes acts of money laundering. It does not create a separate punishment for a crime prescribed under the Penal Code. The Act does not penalize the predicate offence. That offence merely constitutes the substratum on which charge of money laundering is being raised. There are no sufficient grounds to hold that the actions taken under sections 5 and 8 were not valid on account of non-communication of the reasons by the relevant authorities acting under the said provision. Accordingly, the contention of the appellant is rejected. Conclusion - The attached properties were rightfully considered proceeds of crime or their equivalent value. The attachment orders upheld. Appeal dismissed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment include:Whether the properties attached under the Provisional Attachment Order (PAO) are proceeds of crime as defined under the Prevention of Money Laundering Act, 2002 (PMLA).Whether properties acquired before the alleged period of criminal activity can be considered proceeds of crime.The applicability of the PMLA to actions taken prior to certain offences being included in the schedule of the Act.Whether the reasons to believe, as required under sections 5(1) and 8(1) of the PMLA, were adequately communicated to the appellants.Whether the attachment of properties violates the rights of individuals not accused in the scheduled offences.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Proceeds of Crime under PMLAThe legal framework under the PMLA defines 'proceeds of crime' as any property derived or obtained, directly or indirectly, as a result of criminal activity related to a scheduled offence. The Court interpreted this definition to include properties of equivalent value when the direct proceeds are not available. The Tribunal emphasized that the definition has three limbs, allowing for attachment of properties acquired prior to the crime if they are equivalent in value to the proceeds of crime. This interpretation aligns with the legislative intent to prevent money laundering by securing assets equivalent to the illicit gains.Issue 2: Properties Acquired Before the Alleged Criminal ActivityThe appellants argued that properties acquired before the alleged criminal activities cannot be considered proceeds of crime. However, the Tribunal rejected this argument, citing precedents that allow for the attachment of properties of equivalent value when direct proceeds are unavailable. The Tribunal referenced the judgment in Sadananda Nayak, which clarified that properties acquired prior to the crime can be attached if they serve as equivalent value to the vanished proceeds of crime.Issue 3: Retrospective Application of PMLAThe appellants contended that the PMLA should not apply to actions taken before certain offences were included in its schedule. The Tribunal dismissed this contention, noting that money laundering is a continuing offence. The act of money laundering is distinct from the predicate offence and is considered ongoing until the proceeds are no longer concealed or used. The Tribunal referenced decisions from higher courts, affirming that the PMLA applies to continuing offences irrespective of when the predicate offence occurred.Issue 4: Communication of Reasons to BelieveThe appellants argued that the reasons to believe, as required under sections 5(1) and 8(1), were not communicated. The Tribunal acknowledged differing views from various high courts on this issue. However, it concluded that the absence of communicated reasons does not invalidate the proceedings, as the statute does not explicitly require such communication. The Tribunal leaned towards the interpretation that provisional attachment serves as a notice, and further communication is not mandated by the statute.Issue 5: Attachment of Properties of Non-Accused IndividualsThe appellants argued against the attachment of properties belonging to individuals not accused in the PMLA case. The Tribunal referred to the Supreme Court's interpretation that the PMLA's reach extends to any person involved in the process or activity connected with the proceeds of crime, not just those named in the scheduled offence. The objective of the PMLA is to trace and secure proceeds of crime, regardless of whose name they are held in.3. SIGNIFICANT HOLDINGSThe Tribunal upheld the attachment orders, reinforcing the broad scope of the PMLA in securing proceeds of crime. It emphasized the legislative intent to prevent money laundering by allowing attachment of properties of equivalent value. The Tribunal dismissed the appeals, affirming that the attached properties were rightfully considered proceeds of crime or their equivalent value. The Tribunal's interpretation aligns with higher court rulings, emphasizing the PMLA's objective to combat money laundering effectively.The Tribunal's decision underscores the importance of the PMLA's provisions in addressing the complexities of money laundering. It clarifies the application of the Act to continuing offences and the attachment of properties, providing a comprehensive legal framework to combat financial crimes.