2025 (5) TMI 2102 - AT - Money Laundering

Former MD's property attachment upheld after tender manipulation caused Rs. 10 crore government loss

Sri Abhai Kumar Bajpai Versus The Joint Director, Directorate of Enforcement, Lucknow

Sri Abhai Kumar Bajpai Versus The Joint Director, Directorate of Enforcement, Lucknow - TMI The core legal questions considered in this judgment include:1. Whether the attachment of the property belonging to the appellant under the Prevention of Money Laundering Act, 2002 (PMLA) was justified based on the available evidence and investigation findings.2. Whether the appellant's defense regarding the source and ownership of the attached property, including claims of loans and sale agreements, was credible and sufficient to disprove the property as 'proceeds of crime.'3. Whether the adjudicating authority correctly confirmed the attachment order passed by the Enforcement Directorate (ED) under the PMLA.4. The extent to which the Appellate Tribunal under SAFEMA can reassess the quality of evidence collected by investigative agencies such as the CBI and ED, especially when charges have already been framed by the trial court.Issue 1: Justification of Attachment of Property under PMLAThe legal framework governing this issue is the Prevention of Money Laundering Act, 2002, which empowers the ED to provisionally attach properties believed to be proceeds of crime. The attachment must be confirmed by the Adjudicating Authority after hearing the parties and considering the evidence.Precedents establish that attachment orders can be confirmed if there is prima facie material indicating that the property is derived from or involved in money laundering activities.The Court examined the investigation conducted by the CBI and ED concerning financial irregularities in the National Rural Health Mission (NRHM) scheme funds allocated to the Uttar Pradesh Small Scale Industries Corporation (UPSIC). The appellant, as the then Managing Director of UPSIC, was implicated in awarding tenders at inflated rates and receiving kickbacks, resulting in a loss of approximately Rs. 10 crores to the government.Key evidence included statements under Section 164 Cr.P.C. by representatives of the supplier company, admissions recorded under Section 50 of the PMLA, and incriminating documents seized during searches. These established a pattern of corrupt practices and misappropriation of funds.The attached property, an apartment valued at Rs. 93 lakhs, was found to be purchased without proper disclosure and without requisite departmental permission, raising suspicion of its acquisition from illicit gains.The Court applied the law to the facts by concluding that the property was rightly attached as it represented proceeds of crime. The Adjudicating Authority's confirmation of the attachment was upheld on the basis of the prima facie evidence and the ongoing criminal proceedings.Competing arguments by the appellant, including claims of legitimate loans and sale agreements, were scrutinized and found to lack credible documentary support or compliance with statutory requirements, such as prior permission under Civil Services Conduct Rules.The Court concluded that the attachment was justified and consistent with the objectives of the PMLA.Issue 2: Credibility of Appellant's Defense Regarding Property Ownership and Source of FundsThe appellant contended that the property was acquired through a loan of Rs. 46 lakhs from Rahul Sharma, who allegedly sold ancestral property to finance this loan, and that the property was subsequently sold to Aditya Goel for Rs. 55 lakhs, with Rs. 30 lakhs received as part payment. The appellant argued that these transactions were recorded through banking channels and that possession remained with the buyer, who had filed a suit for specific performance.The Court evaluated these claims against the investigation record. It found no formal loan agreement or documentation evidencing the loan transaction between the appellant and Rahul Sharma. Additionally, no departmental intimation was made regarding the loan, violating applicable service conduct rules.The purported sale agreement with Aditya Goel was unregistered, and no suit for recovery of the advance had been initiated by Goel for over three years, undermining the genuineness of the transaction.The Court also noted inconsistencies and contradictions in the appellant's statements and the absence of corroborative documentary evidence. The defense appeared to be a post hoc attempt to camouflage the true nature of the property as proceeds of crime.Competing arguments about the appellant's role being supervisory and the tender allocation process being transparent were rejected based on the detailed investigation findings and statements implicating the appellant in demanding bribes.The Court concluded that the appellant's defense lacked credibility and did not negate the attachment's validity.Issue 3: Confirmation of Attachment by Adjudicating AuthorityThe Adjudicating Authority, after hearing the parties and considering the evidence, confirmed the attachment order passed by ED. The Court reviewed this confirmation in light of the facts and legal standards.The Court found that the Adjudicating Authority had appropriately applied the provisions of the PMLA and had examined the material on record, including statements, seized documents, and investigation reports.The confirmation was deemed lawful and justified, as the authority had acted within its jurisdiction and followed due process.Issue 4: Scope of Appellate Tribunal's Review PowersThe respondent ED argued that the Appellate Tribunal is not empowered to reassess the quality of evidence collected by investigative agencies once charges have been framed by the trial court. The Court affirmed this position, emphasizing that the Tribunal's role is limited to examining the legality and propriety of the attachment and confirmation orders under the PMLA.The Court held that reappraisal of the evidence underlying predicate offences falls within the domain of the trial court and not the Appellate Tribunal under SAFEMA.This principle preserves the separation of functions between investigative, adjudicatory, and trial processes, ensuring procedural fairness and efficiency.Significant Holdings and Core Principles EstablishedThe Court held: 'In view of the above incriminating material, I am of the considered view that ED rightly attached the property... The Adjudicating Authority also rightly confirmed the PAO... Therefore, there is no merit in the contention of Ld. Counsel for appellant.'The judgment establishes the principle that attachment of property under the PMLA can be confirmed on the basis of prima facie evidence of proceeds of crime, even if the accused disputes ownership or source of funds, provided the defense lacks credible documentary support.It affirms that the Appellate Tribunal's jurisdiction does not extend to re-evaluating the evidence for predicate offences once charges have been framed by the trial court.The Court's final determination was to dismiss the appeal, upholding the attachment and confirming the order of the Adjudicating Authority, while clarifying that the ultimate disposal of the attached property will depend on the outcome of the criminal trial.