ED's bank account attachment worth Rs. 2.31 crore upheld against disproportionate assets under Section 5 PMLA

The Appellate Tribunal under SAFEMA dismissed the appeal challenging ED's attachment of bank accounts worth Rs. 2,31,04,618.13 against disproportionate assets of Rs. 6,79,59,678 under PMLA. The Tribunal held that ED need not conduct independent investigation for predicate offences; reliance on FIR, police investigation and related materials suffices to form "reason to believe" under Section 5 PMLA. Properties seized by police can be subsequently attached by ED under PMLA as seizure and attachment serve different purposes and do not constitute double attachment. The Tribunal confirmed attachment validity despite prior police seizure.

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The core legal questions considered by the Tribunal in the present appeals under Section 26 of the Prevention of Money Laundering Act, 2002 (PMLA) are as follows:

i) Whether the Enforcement Directorate (ED) is required or bound to conduct an independent investigation into the commission of the predicate offence to form a "reason to believe" for attachment under Section 5 of PMLARs.

ii) Whether properties already seized by police or CBI can be attached under PMLA, or whether such attachment would amount to double attachmentRs.

iii) Whether the intent and legal effect of seizure under the Prevention of Corruption Act, 1988 (PC Act) is similar to that of attachment under PMLARs.

iv) Whether the ED is empowered to make an attachment based on a second FIR and related proceedings, and whether such attachment overlaps with previous attachments, potentially leading to double attachmentRs.

Issue-wise Detailed Analysis

i) Requirement of Independent Investigation by ED to Form "Reason to Believe" under Section 5 of PMLA

The appellants contended that the ED had not conducted any independent investigation and merely relied on the FIR and chargesheet filed by the Anti-Corruption Bureau (ACB), thus failing to satisfy the mandatory requirement of forming a "reason to believe" based on independent material as mandated by Section 5 of PMLA. They relied on precedents emphasizing that the power of attachment is not arbitrary and must be exercised on reasonable grounds supported by evidence beyond mere allegations.

The Tribunal rejected this contention, clarifying that the ED is not required to conduct a separate investigation into the predicate offence. The predicate offence investigation is the domain of police or CBI, and ED's role is limited to investigating the laundering of proceeds of crime. The "reason to believe" under Section 5 is to be formed based on the material collected from the predicate offence investigation (FIR, chargesheet), statements recorded under Section 50 of PMLA, scrutiny of bank accounts, and other relevant documents. The Tribunal enumerated the scope of ED's investigation under PMLA, which includes:

• Establishing prima facie incriminating evidence for the scheduled offence;
• Determining whether proceeds of crime were generated;
• Tracing laundering or layering of proceeds;
• Identifying other attachable properties if proceeds are dissipated;
• Examining genuineness of claimants.

In the present case, the disproportionate assets of the appellants and family members were established by the ACB investigation, amounting to Rs. 6,79,59,678/-, and the ED attached bank accounts and Demat accounts totaling Rs. 2,31,04,618.13 accordingly. The Tribunal held that the ED's reliance on the FIR and chargesheet, and the material collected, sufficed to form the requisite "reason to believe." The ED is not empowered to re-investigate the predicate offence but may suggest remedial action if errors are apparent. This interpretation aligns with the statutory scheme and avoids contradictory parallel investigations.

ii) & iii) Whether Seizure under PC Act is Equivalent to Attachment under PMLA and Whether Double Attachment is Permissible

The appellants argued that since the properties were already seized by the ACB under the PC Act, the ED's attachment under PMLA amounts to double attachment, which is impermissible. They further contended that the intent and effect of seizure under PC Act are similar to attachment under PMLA, thus precluding a second action.

The Tribunal distinguished between seizure under the PC Act and attachment under PMLA, noting that the two are conceptually and procedurally distinct. The PC Act does not provide for attachment; seizure under it is a temporary custodial measure during investigation, governed under criminal procedure rules (Cr.P.C.), with the right of the accused to seek release of seized property on undertaking. In contrast, PMLA provides for attachment, adjudication, and confiscation procedures, with attachment being a protective measure to preserve proceeds of crime pending trial and possible confiscation.

The Tribunal observed that the PMLA's Chapter V (Sections 16 to 24) deals with search and seizure, while Chapter III (Sections 5 to 11) deals with attachment, adjudication, and confiscation, underscoring their distinct legal import. Therefore, attachment by ED after police seizure does not amount to double attachment. The Tribunal further noted that the PC Act is silent on attachment and that the PMLA specifically empowers ED to attach properties during investigation, even before conviction, to prevent dissipation of proceeds of crime.

This reasoning was supported by statutory interpretation and the procedural framework, and the Tribunal held that the intent of seizure under the PC Act is not similar to attachment under PMLA. Hence, the contention of double attachment was rejected.

iv) Whether Attachment Based on Second FIR and Related Proceedings Overlaps with Present Attachment

The appellants argued that the ED had already attached properties worth Rs. 1,60,85,107/- based on a second FIR and filed an Original Complaint for confirmation of that attachment. They contended that the present attachment order (PAO No. 04/2014) overlaps with the earlier attachment, thus being invalid.

The Tribunal examined the timeline and records, noting that the earlier attachment and its confirmation order were passed after the present impugned order. Moreover, there was no evidence on record to show any overlap of properties attached under the two orders. The appellants had not preferred any appeal against the later confirmation order. Therefore, the Tribunal held that the ED was empowered to make the attachment under the second FIR and that there was no double attachment or overlap in the present case.

Treatment of Competing Arguments

The appellants relied heavily on judicial pronouncements emphasizing the need for independent investigation by ED, mandatory recording of reasons to believe based on material evidence, and prohibition of double attachment. They cited decisions of this Tribunal and various High Courts, including the Supreme Court, underscoring safeguards against mechanical or arbitrary attachment orders.

The Tribunal acknowledged these precedents but distinguished the facts and statutory context of the present case. It emphasized the complementary roles of police and ED, the procedural distinctions between seizure and attachment, and the sufficiency of the material relied upon by ED to form a reasoned belief. The Tribunal found no procedural or substantive infirmity in the impugned order and rejected the appellants' contentions accordingly.

Conclusions

The Tribunal concluded that:

• The ED is not required to conduct an independent investigation into the predicate offence to form a reason to believe under Section 5 of PMLA; reliance on FIR, chargesheet, and related materials suffices.
• Seizure under the PC Act is distinct from attachment under PMLA; attachment by ED after police seizure does not amount to double attachment.
• The intent and legal effect of seizure under the PC Act differ from attachment under PMLA, which is a protective measure pending adjudication and possible confiscation.
• The attachment based on the second FIR and related proceedings is valid and does not overlap with or invalidate the present attachment.

Significant Holdings

The Tribunal's crucial legal reasoning includes the following verbatim excerpts:

"The police/CBI has to conduct the investigation for the commission of the predicate/scheduled offence, but ED is not empowered to re-investigate the same. However, if there is any apparent error in CBI/police investigation in the predicate offence, it can certainly suggest to the concerned investigation agency for remedial action, without transgressing into the field of investigation for the predicate offence by doing any parallel/independent investigation, which may lead to many contradictions."

"The properties seized by police/CBI cannot be equated with the attachment as defined u/s 2(1)(d) of PMLA, 2002. Even otherwise, in PMLA the procedure for search and seizure is mentioned in Chapter V from Section 16 to 24 of PMLA, 2002, whereas procedure for attachment, adjudication and confiscation is mentioned in Chapter III from Section 5 to 11 of PMLA, 2002. This points to the direction that concept of search & seizure and attachment are different aspects during investigation of a case. Thus, the attachment made by ED after the seizure by the police does not amount to double attachment."

"The Prevention of Corruption Act is silent on the aspect and procedure of attachment. Previously, the investigation agencies used to apply for attachment and confiscation of the proceeds of crime under Criminal Law Amendment Ordinance, 1944, after the conviction of the accused under Prevention of Corruption Act, 1988. But after the coming into force of the Prevention of Money Laundering Act, 2002, and the inclusion of the offences under Prevention of Corruption Act, 1988 in the list of predicate offence annexed with the Schedule, the ED is empowered to attach and preserve the property during investigation of the case i.e. even before waiting for the conviction of the accused."

The Tribunal dismissed the appeals as devoid of merit and clarified that the order does not affect the rights of any party in the criminal trial, and the properties shall be disposed of by the Special Judge, PMLA Court after conclusion of trial, as per law.

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