2025 (6) TMI 521 - AT - Money Laundering

ED Cannot Re-investigate Predicate Offences Already Under CBI Investigation in Money Laundering Case

Shri Rajesh Aggarwal Versus The Assistant Director Directorate of Enforcement, Delhi

The Appellate Tribunal under SAFEMA dismissed an appeal challenging property attachment in a money laundering case involving illegal gratification for ... Money Laundering - attachment of property - demanding and accepting the huge illegal gratification from the private persons for permitting the unauthorized building constructions - regularization of properties by corrupt and illegal means in violations of the provisions of building bylaws - independent investigation conducted by ED qua the predicate offence or not - cash of Rs.30 Lakhs can be attached, being case property in CBI case trial or not - entitlement to challenge the attachment of Rs. 30 lakhs on account of his specific denial for tendering the money. HELD THAT:- The police/CBI has to conduct the investigation for the commission of the predicate/schedule offence and ED is not empowered to re-investigate the same. The attachment is not going to affect the trial of the predicate offence, as the said amount will be disposed of by the Ld. Special Judge, PMLA Court, after the conclusion of trial, as per law, after inviting the claims/objections, if any. Moreover, whether the appellant will be the rightful claimant, or has no locus standi can be ascertained after going through the pleadings and defence of the respective parties in the trial of prosecution complaint case. Appeal dismissed. The core legal questions considered by the Appellate Tribunal under the Prevention of Money Laundering Act (PMLA) in this appeal are as follows:i) Whether the attachment of the sum of Rs. 30 lakhs by the Enforcement Directorate (ED) should be set aside on the ground that ED did not conduct any independent investigation into the predicate offence, relying solely on the investigation conducted by the Central Bureau of Investigation (CBI).ii) Whether the cash amount of Rs. 30 lakhs seized and attached can be treated as a case property subject to attachment during the pendency of the trial of the predicate offence before the competent court.iii) Whether the appellant, who has specifically denied tendering the said amount of Rs. 30 lakhs, is entitled to challenge the attachment on the basis of such denial.Issue-wise detailed analysis:Issue i): Whether the attachment needs to be set aside due to lack of independent investigation by EDThe legal framework under PMLA mandates that the Enforcement Directorate conducts investigation relating to money laundering offences, which are predicated on the commission of scheduled offences investigated by other agencies such as the CBI. The Court recognized that the CBI is the appropriate agency to investigate the predicate offence-in this case, offences under the Prevention of Corruption Act, 1988, and related criminal provisions. The ED's role is not to re-investigate the predicate offence but to investigate aspects relevant to money laundering, including whether proceeds of crime have been generated, laundered, or are likely to be laundered.The Court outlined the scope of ED's investigation as including:Whether there is prima facie incriminating evidence against accused persons for the scheduled offence;Whether proceeds of crime were generated by the commission of the predicate offence;Whether such proceeds have been laundered or are likely to be laundered;If laundering occurred, the mode of layering or tracing of proceeds of crime;If proceeds are dissipated, identification of other properties subject to attachment;Whether claimants of attached properties are genuine or part of the criminal conspiracy.In the present case, the Court found that the FIR registered by CBI contained prima facie material establishing the predicate offence. The ED's attachment order was based on the material collected, including statements and documents gathered during its investigation, which relied on the predicate offence investigation but also included independent steps such as recording statements and collecting documents. Therefore, the contention that ED's attachment was invalid for lack of independent investigation was rejected.The Court thus held that the ED's reliance on the CBI investigation does not vitiate the attachment, as the ED is not required to re-investigate the predicate offence but to focus on money laundering aspects. This issue was decided against the appellant and in favor of the ED.Issue ii): Whether the Rs. 30 lakhs cash can be attached as case property during pendency of trialThe appellant argued that the amount seized is a 'lis'-a disputed property-subject to adjudication in the ongoing trial of the predicate offence before the competent court, and therefore the attachment by ED under PMLA was premature and impermissible.The Court observed that attachment under PMLA does not interfere with the trial of the predicate offence. The PMLA provides for attachment of proceeds of crime to prevent their dissipation pending trial. The seized amount, even if it is subject to trial in the criminal case, can be provisionally attached by ED. The final adjudication of ownership, genuineness of claim, or locus standi of claimants will be determined by the Special Judge, PMLA Court, after the conclusion of trial and after inviting claims or objections.Thus, attachment of the amount does not preclude or affect the trial of the predicate offence. The Court held that the attachment is valid and does not infringe upon the rights of the accused or the trial process. This issue was decided against the appellant.Issue iii): Whether the appellant can challenge the attachment based on his denial of tendering the moneyThe appellant contended that he had specifically denied handing over the Rs. 30 lakhs, and therefore, he should be entitled to challenge the attachment on this ground.The Court noted that the appellant's own submissions in the appeal contained contradictory statements-on one hand denying tendering the money, and on the other claiming ownership or locus to challenge the attachment. The Court held that a party cannot 'blow hot and cold in a single breath' by denying involvement and simultaneously claiming rights over the attached property.Whether the appellant is the rightful claimant or has locus standi to claim the attached amount can only be adjudicated after considering the pleadings and evidence in the trial before the Special Judge, PMLA Court. Mere denial at the stage of attachment proceedings does not entitle the appellant to set aside the attachment.This issue was also decided against the appellant.Throughout the judgment, the Court emphasized the distinction between investigation of the predicate offence and investigation under PMLA. It clarified that ED's role is circumscribed to money laundering aspects and that reliance on the CBI's predicate offence investigation for establishing prima facie material is permissible. The Court also underscored that attachment orders under PMLA are provisional and subject to adjudication post-trial.The Court considered and rejected the appellant's arguments that the attachment was bad in law due to absence of independent ED investigation, that the amount was subject to trial and hence not attachable, and that denial of tendering the money precluded attachment. The respondent ED's submissions regarding incriminating material, including seized cash from the accused's possession and recorded telephonic conversations evidencing conspiracy and demand of bribe, were accepted as sufficient grounds for attachment.Significant holdings include the following verbatim legal reasoning:'The police/CBI has to conduct the investigation for the commission of the predicate/schedule offence and ED is not empowered to re-investigate the same. It has to see only the following points during its investigation for money laundering: (i) Whether there is any prima facie incriminating evidence against the culprits for commission of schedule offence; (ii) Whether any proceeds of crime were generated by commission of crime/predicate offence; (iii) Whether the said proceeds of crime are laundered, or likely to be laundered; (iv) If proceeds of crime are laundered, then the mode of layering of the same, or the trail of POC; (v) If proceeds of crime are already dissipated, then the other properties of the culprits which can be attached, in absence of direct/ indirect POC; (vi) Whether the claimants of attached properties are genuine, or part & parcel of conspiracy.'Core principles established include:ED's investigation under PMLA is limited to money laundering aspects and need not duplicate the predicate offence investigation conducted by agencies like CBI.Attachment of proceeds of crime under PMLA can be made even if the property is subject to trial in the predicate offence case; such attachment is provisional and subject to adjudication after trial.Denial of tendering the attached amount by an appellant does not ipso facto entitle them to challenge attachment unless substantiated in trial; contradictory claims undermine locus standi.Final determinations:The attachment of Rs. 30 lakhs by ED was valid and not liable to be set aside for lack of independent investigation or because the amount was subject to trial.The appellant is not entitled to challenge the attachment solely on the basis of denial of tendering the money.The appeal was dismissed as devoid of merits, with a clarification that the rights of parties in the trial proceedings remain unaffected by the order.