Tribunal upholds property attachment under PMLA despite owner not being charged with predicate offences

The Appellate Tribunal under SAFEMA dismissed the appeal challenging property attachment under PMLA, 2002. The appellant challenged attachment of property purchased in her name, arguing she was not charged with predicate offences, the property was purchased with her daughter's financial assistance, and it was acquired after the alleged offence period (2004-2008). The Tribunal held that properties can be attached regardless of whether the possessor is charged with predicate offences, rejected the claim of legitimate funding from the daughter due to insufficient evidence, and ruled that property purchased after the offence period can still be attached as money laundering is a continuing offence.

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Several core legal questions were considered by the Appellate Tribunal in this appeal arising under the Prevention of Money Laundering Act, 2002 (PMLA). These issues include:

(i) Whether the Provisional Attachment Order (PAO) lapsed due to the expiry of the statutory period under Section 5(1) and 5(3) of the PMLA, and if so, whether the confirmation order passed by the Adjudicating Authority is ineffective;

(ii) Whether the impugned property can be attached even though the appellant was never charged with any predicate offence, and the chargesheet was filed only against her husband and others;

(iii) Whether the property in question was legitimately purchased by the appellant through financial assistance from her daughter, thereby excluding it from being proceeds of crime;

(iv) Whether the property purchased after the alleged period of offence (2004-2008) can be attached under the PMLA.

Issue (i): Validity and Lapse of Provisional Attachment Order

The relevant legal framework under Section 5 of the PMLA prescribes that a provisional attachment order is provisional in nature, valid for 180 days (150 days before amendment), and must be confirmed by the Adjudicating Authority within this period. The officer issuing the PAO must forward it to the Adjudicating Authority, which then adjudicates the matter. If the order is not confirmed within the prescribed period, it lapses.

The appellant contended that the PAO dated 14.02.2013 lapsed as the confirmation order was passed on 18.01.2019, well beyond the 150-day period applicable before amendment. The appellant also argued that the period during which the proceedings were stayed by the High Court should be excluded, but even after exclusion, the confirmation was delayed.

The Tribunal analyzed the timeline and procedural history and noted several points:

• There was no record of when the High Court's order lifting the stay (04.10.2018) was communicated to the Adjudicating Authority;
• The statutory 30-day period to challenge the High Court order before the Supreme Court must be excluded;
• Counting from the resumption of proceedings, the confirmation order was passed within 134 days, i.e., within the 180-day limit;
• The appellants did not seek resumption of proceedings or submit defense documents promptly after the stay was vacated;
• The amended 180-day period applies in the absence of any saving clause, and procedural law amendments do not confer substantive rights retroactively;
• The purpose of attachment proceedings is to protect the property pending investigation and trial to avoid rendering the confiscation process nugatory.

The Tribunal emphasized the legislative intent behind the PMLA to safeguard properties suspected to be proceeds of crime until trial conclusion, noting that releasing the property prematurely would frustrate the entire prosecution process.

Therefore, the Tribunal concluded that the PAO did not lapse and the confirmation order is valid and effective.

Issue (ii): Attachment of Property Without Charges Against the Owner

The appellant argued that since she was never charged with any predicate offence and only her husband was charged, the property in her name could not be attached.

The Tribunal referred to binding Supreme Court precedent which clarified that the scope of Section 5(1) PMLA is not limited to persons charged with the predicate offence. It extends to any person involved in activities connected with proceeds of crime, regardless of whether they are formally accused of the scheduled offence. The objective of the PMLA is to target proceeds of crime wherever held.

The Court quoted the Supreme Court's reasoning that "the objectives of enacting the 2002 Act was the attachment and confiscation of proceeds of crime which is the quintessence so as to combat the evil of money-laundering," and that the Act reaches "the proceeds of crime in whosoever's name they are kept or by whosoever they are held."

Accordingly, the Tribunal held that the property could be attached even if the appellant was not charged with the predicate offence.

Issue (iii): Claim of Legitimate Source of Funds from Daughter

The appellant claimed the property was purchased using financial assistance from her daughter, and thus was not proceeds of crime.

The Tribunal examined the evidence, including prior Income Tax proceedings where the appellant's claim was rejected and the property cost was added to her income. The Tribunal noted that the Income Tax Appellate Tribunal (ITAT) had allowed the appeal on the basis of a gift from the daughter, but the ED was not bound by this decision and had to form an independent view.

Documentary evidence showed that the daughter's funds were transferred into her NRE account and cheques were issued to unrelated third parties rather than directly to the sellers. The sellers denied receiving payments from these intermediaries, and bank statements did not show transfers to the sellers from the daughter's account.

The appellant failed to provide bank statements evidencing regular income of the daughter or legitimate transfer of funds. The burden under Section 24 of the PMLA to prove the legitimate source of property was not discharged.

The Tribunal found the appellant's explanation doubtful and held that the property was likely purchased from proceeds of crime generated by her husband.

Issue (iv): Attachment of Property Purchased After the Alleged Period of Offence

The appellant contended that since the property was purchased on 27.04.2009, after the alleged offence period of 2004-2008, it could not be attached.

The Tribunal held that money laundering is a continuing offence and proceeds of crime can be traced and attached even if the property is acquired after the period of the predicate offence. The fruits of crime cannot be allowed to be enjoyed beyond the offence period.

Since the appellant failed to prove a legitimate source for the property, and it was apparently purchased from proceeds of crime, the property was rightly attached.

Significant Holdings

The Tribunal's crucial legal reasoning includes:

"The sweep of Section 5(1) is not limited to the Accused named in the criminal activity relating to a scheduled offence. It would apply to any person (not necessarily being Accused in the scheduled offence), if he is involved in any process or activity connected with the proceeds of crime."

"The objectives of enacting the 2002 Act was the attachment and confiscation of proceeds of crime which is the quintessence so as to combat the evil of money-laundering. The second proviso, therefore, addresses the broad objectives of the 2002 Act to reach the proceeds of crime in whosoever's name they are kept or by whosoever they are held."

"The purpose of the attachment proceedings is to protect the property, till the conclusion of the investigation of the offence of money laundering and after filing of prosecution complaint, till the conclusion of trial."

"Money laundering being a continued offence and property can be attached, as & when it comes to the knowledge of the investigation agency."

In conclusion, the Tribunal dismissed the appeal, affirming the validity of the provisional attachment and confirmation orders, holding that properties can be attached even if the owner is not charged with predicate offences, rejecting the claim of legitimate source of funds from the daughter, and upholding attachment of property purchased after the offence period due to the continuing nature of money laundering offences. The decision preserves the legislative intent of the PMLA to effectively combat money laundering by preventing dissipation of proceeds of crime pending trial.

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