2025 (5) TMI 1920 - AT - Money Laundering

SAFEMA Tribunal sets aside PMLA provisional attachment orders for agricultural land already attached by Sessions Judge

Oli Jagadeesha, Dodda Sidappa and Smt. Oli Nirmala Versus The Deputy Director Directorate of Enforcement, Bengaluru

The Appellate Tribunal under SAFEMA set aside provisional attachment orders under PMLA for agricultural land belonging to two appellants. The Tribunal ... Provisional attachment of Agriculture land - money laundering - Offences alleged to have been committed under Section 13(2) read with Section 13(1)(e) of the Prevention of Corruption Act, 1988 - proceeds of crime - failed to establish beyond doubt - retrospective application of the provisions of PMLA - commission of the Scheduled offence - requirement of “reasons to believe” - HELD THAT:- On consideration of the Order dated 13.09.2011 alongwith Table, I find that the property listed at Sr. No. 06 of the Table held in the name of Oli Jagdeesha comprising of Plot No. 224 measuring 30*40 Ft. bearing document no. 139/07-08 is the same property as described in the Impugned Order, which is in the name of Sh. Oli Jagdeesha son of Sh. Oli Eshappa. While the property in the name of Sh. Oli Jagdeesha is valued at Rs. 20,000/- in the Order dated 13.09.2011, its valued in the Impugned Order is reflected at Rs. 15,000/-. However, in view of the matching particulars of this property in all other respects this difference is being ignored so as to infer that this property listed in the Table is the same as that mentioned in the Impugned Order. Similarly, on consideration of the aforementioned Order dated 13.09.2011 alongwith Table, I find that the properties listed at Sr. No. 4, 5 & 6 of the Table are the same properties as have been described in the Impugned Order which are also in the name of Smt. Oli Nirmala wife of Sh. Oli Eshappa. The property at Sr. No. 4 of the Table is 4.68 Acres of Land in Koylargatta (Koilaragatte) bearing Survey No. 119 C. The property at Sr. No. 5 of the Table is 12.08 Acres and 1.99 Acres of Land in Koylargatta (Koilaragatte) bearing Survey No. 42 & 43 respectively. The property at Sr. No. 9 of the Table is JCB Vehicle valued at Rs. 19,30,000/- in the name of Smt. Oli Nirmala. For the properties, both moveable and immovable mentioned afore in the name of Smt. Oli Nirmala the details including the value match those given in the Impugned Order for the said properties. On consideration of the factual position with respect to the aforementioned four properties the subject matter of the Appeals filed by Smt. Oli Nirmali and Sh. Oli Jagdeesha read with the provisions of Section 5(1) of PMLA, I find that the ingredients of Section 5(1)(b) cannot be read into the PAO dated 11.08.2014 in view of the prior attachment Order dated 13.09.2011 of the Ld. Principal District and Sessions Judge, Bellary. Section 5(1) of PMLA besides requiring the Deputy Director issuing the PAO to have reason to believe to be recorded in writing on the basis of material in his possession that any person is in possession of any proceeds of crime should also have reason to believe that such proceeds of crime are likely to be concealed, transfer or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime. I find that since the four aforementioned properties were already attached by the Ld. Principal District and Sessions Judge, Bellary there could not have been any reason to believe for such a likelihood. To argue that the Order dated 13.09.2011 of the Ld. Principal District and Sessions Judge, Bellary was not brought to the notice of the Respondent Directorate is fallacious. It was as much an onus on the part of the Respondent Directorate to obtain copy of such Order which was issued in 2011 during the course of its enquiry and investigation. In Judgment cited by the Ld. Counsel for the Respondent, O.P. Nagoja [2011 (9) TMI 1143 - BOMBAY HIGH COURT] the question relating to reason to believe as provided under Section 5(1) of PMLA was not put forth for consideration and hence not discussed. It is reiterated that the use of the conjunction and between clauses (a) and (b) of Section 5(1) of PMLA makes it mandatory that the reasons to believe should not only be with regard to the possession of proceeds of crime but also about its likelihood to be concealed, transferred or dealt with. Thus, I set aside the Impugned Order with respect to the immovable property in the name of Sh. Oli Jagdeesha and the two immovable properties and a movable property in the name of Smt. Oli Nirmala. I do not interfere with the Impugned Order with respect to the two immovable properties in the name of Sh. Dodda Siddappa. I, therefore, dismiss the Appeal No. FPA-PMLA-893/BNG/2015 filed by Sh. Dodda Siddappa. I allow the Appeals No. FPA-PMLA-892/BNG/2015 and FPA-PMLA-894/BNG/2015 filed by Sh. Oli Jagdeesha and Smt. Oli Nirmala respectively. In case the Ld. Principal District and Sessions Judge withdraws the attachment Order dated 13.09.2011, the Respondent would have liberty to exercise its authority under Section 5(1) of PMLA, provided likelihood of concealment, transfer or dealing with the aforesaid four properties exists. The pending Applications are accordingly disposed of. 1. ISSUES PRESENTED and CONSIDERED- Whether the provisional attachment of properties under the Prevention of Money Laundering Act, 2002 (PMLA) is valid when the properties were acquired prior to the registration of the FIR and prior to the inclusion of the predicate offence under the Prevention of Corruption Act, 1988 in the Schedule to the PMLA.- Whether the provisions of PMLA can be applied retrospectively to properties acquired before the offence was scheduled under PMLA, in light of Article 20(1) of the Constitution of India.- Whether the requirement of 'reasons to believe' under Section 5(1) of PMLA was fulfilled by the authority issuing the Provisional Attachment Order (PAO).- Whether the prior attachment order passed by the Principal District & Sessions Judge, Bellary, precludes the issuance of the PAO under PMLA for the same properties.- Whether the Show Cause Notice issued under Section 8(1) of PMLA complied with statutory requirements.- Whether the appellants have satisfactorily explained the source of funds for acquisition of the attached properties.- Whether the properties attached are 'proceeds of crime' as defined under Section 2(1)(u) of PMLA.2. ISSUE-WISE DETAILED ANALYSISRetrospective Application of PMLA and Article 20(1) of the ConstitutionThe appellants contended that the properties were ancestral or acquired before the FIR dated 22.09.2009 and before the inclusion of offences under the Prevention of Corruption Act, 1988 in the Schedule to PMLA (effective from 01.06.2009), thus PMLA provisions cannot be applied retrospectively. They argued that retrospective application violates Article 20(1) of the Constitution, which prohibits ex post facto criminal laws.The Court referred to the judgment of the Andhra Pradesh High Court which clarified that Article 20(1) applies only to ex post facto laws resulting in conviction or greater penalties than those enforceable at the time of the offence. Attachment and confiscation proceedings under PMLA fall outside this prohibition. The relevant date for attachment is not the date of commission of the predicate offence but the date on which the property is projected or claimed as untainted.The Court further relied on the Supreme Court's ruling in Vijay Madanlal Choudhary & Ors. vs Union of India & Ors. (2022), which held that the offence of money laundering is a continuing offence. Even if the predicate offence predates its notification as a scheduled offence under PMLA, dealing with proceeds of crime after such notification attracts PMLA liability. Thus, the attachment order dated 11.08.2014 was issued after the relevant amendments and is not barred by retrospectivity.Compliance with Section 8(1) of PMLA Regarding Show Cause NoticeThe appellants argued that the Show Cause Notice (SCN) issued by the Adjudicating Authority violated Section 8(1) of PMLA and the relevant adjudication regulations. The SCN was issued on 29.08.2014, and the appellants claimed procedural irregularities.The Court noted that the SCN complied with the Adjudicating Authority Regulations, 2013, which were applicable at the time. The Court also observed that the relevant date for considering attachment is the date of projection of proceeds of crime, not the date of acquisition. The Court relied on the Jharkhand High Court judgment in Hari Narayan Rai vs Union of India and the Supreme Court judgment in Vijay Madanlal Choudhary to uphold the validity of the SCN and the attachment proceedings. The case laws cited by appellants related to criminal proceedings and were not applicable to attachment proceedings under PMLA.Whether the Attached Properties Constitute Proceeds of Crime and Source of FundsThe appellants contended that the attached properties were ancestral or purchased from legitimate income sources such as agriculture, dairy farming, salary, and use of JCB machinery. They challenged the valuation methodology and alleged that the Directorate failed to establish a nexus between the proceeds of crime and the properties.The Respondent Directorate presented evidence including bank account analyses showing high-value cash deposits unexplained by declared income. The appellants' claimed agricultural and dairy incomes were significantly higher than estimates by the Assistant Agricultural Director. The admitted lack of Income Tax Returns and inconsistencies in income and expenditure further supported the Directorate's case.The Court found that the appellants failed to satisfactorily explain the source of funding for the properties. The large cash deposits and discrepancies in income versus asset acquisition indicated the properties were proceeds of crime derived from disproportionate assets acquired by the main accused, Sh. Oli Eshappa.Effect of Prior Attachment Order by Principal District & Sessions JudgeThe appellants argued that since the Principal District & Sessions Judge, Bellary, had already attached certain properties by order dated 13.09.2011, the subsequent PAO dated 11.08.2014 under PMLA was impermissible.The Court examined the order dated 13.09.2011, which had attached several properties including land and movable assets in the names of the appellants. It was observed that the properties attached under PMLA for appellants Sh. Oli Jagadeesha and Smt. Oli Nirmala were the same as those attached earlier by the Sessions Judge.The Court held that Section 5(1) of PMLA requires that the authority issuing a PAO must have reasons to believe not only that a person is in possession of proceeds of crime but also that such proceeds are likely to be concealed, transferred, or dealt with so as to frustrate confiscation proceedings. Since the properties were already attached by the Sessions Judge, there was no likelihood of concealment or transfer. Hence, the requirement under Section 5(1)(b) was not satisfied for these properties.The Court further noted that the appellants failed to bring the prior attachment order to the notice of the Directorate during investigation or adjudication, which was a lapse. However, the Directorate also had the onus to ascertain such orders during investigation.Reliance was placed on the Tribunal's earlier decision in FPA-PMLA-3182-3186/Cochin/2019, which held that when properties are already attached by a competent court, the requirement of 'likelihood of concealment or transfer' for provisional attachment under PMLA is not fulfilled, rendering such attachment orders liable to be set aside.Validity of Provisional Attachment of Properties in the Name of Sh. Dodda SidappaThe properties in the name of Sh. Dodda Sidappa, elder brother of the main accused, included land measuring 0.4 acres and constructions thereon. These properties were not part of the prior attachment order by the Sessions Judge. The PAO under PMLA was issued based on FIR, charge sheet, statements under Section 50 of PMLA, and bank account analyses.The Court found sufficient material on record to constitute 'reasons to believe' for provisional attachment under Section 5(1) of PMLA in respect of these properties. The relationship between the accused and Sh. Dodda Sidappa, the inadequacy of his income to explain the property acquisition, and corroborative valuation by Lokayukta authorities supported the attachment.The Court rejected the contention that the PAO was passed without application of mind and upheld the attachment of these properties.3. SIGNIFICANT HOLDINGS'Article 20 of the Constitution enacts an injunction only in respect of ex-post facto laws resulting in conviction for offences or imposition of penalties greater than which might have been inflicted under the law enforceable at the time of commission of the offence. No provision of the Constitution has been brought to our notice which prohibits a legislative measure which targets for attachment and confiscation of proceeds of crime.''The offence of money-laundering is not dependent on or linked to the date on which the scheduled offence or if we may say so the predicate offence has been committed. The relevant date is the date on which the person indulges in the process or activity connected with such proceeds of crime.''An order of attachment requires reasons to believe in writing and it should be on the basis of the material in possession that a person is in possession of proceeds of crime and such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may frustrate the confiscation of the property.''When the property was already attached by the Special Court, how it could have been transferred or concealedRs. We, therefore, find that reasons to believe were recorded without application of mind. The material to attract Clause (b) of Sub Section (1) of Section 5 of the Act of 2002 is missing.'Final determinations:The provisional attachment of properties in the names of Sh. Oli Jagadeesha and Smt. Oli Nirmala is set aside due to prior attachment by the Sessions Judge and failure to satisfy the 'likelihood of concealment or transfer' requirement under Section 5(1)(b) of PMLA.The provisional attachment of properties in the name of Sh. Dodda Sidappa is upheld as valid under PMLA, with sufficient reasons to believe and material on record.The retrospective application of PMLA to attachment proceedings is valid and does not violate Article 20(1) of the Constitution.The Show Cause Notice and adjudication proceedings comply with statutory requirements.The appellants failed to satisfactorily explain the source of funds for acquisition of attached properties, supporting the conclusion that these are proceeds of crime.