2025 (6) TMI 1272 - AT - Money Laundering

ED's retention of seized gold and jewelry in money laundering case upheld despite absence of police charge sheet

Shri Ravi Aggarwal Versus The Deputy Director, ED Delhi

The AT dismissed the appeal challenging ED's retention of seized gold and jewelry linked to money laundering during demonetization. The appellant ... Monet Laundering - proceeds of crime - fraudulently converting demonetized black money into Gold by way of depositing the same in the accounts of front companies having bank account with Axis Bank - HELD THAT:- The fact that if no charge sheet is filed by the police against any person after the registration of FIR, as submitted Ld. Counsel for appellant, even then, the appellant is not entitled to any relief, till the filling and acceptance of the closure report. In case any closure report is accepted, then certainly the consequences will follow, in prosecution complaint case under PMLA. This Appellate Tribunal cannot release the property on this ground at this stage. There is nothing to doubt the allegation of respondent ED that the many persons including the appellant agreed to give RTGS entry to the Jewellers at the instance of main accused persons, as mentioned in para no. 2 above. The defense of appellant cannot be entertained by this Appellate Tribunal and the appellant has to prove the same during the criminal trials. The delivery of jewellery after demonetization declared on 08.11.2016 clearly points out that accommodation entries were given to facilitate the main accused persons to convert the demonetize currency notes of the denomination of Rs. 500/- and Rs. 1000/-, in lieu of commission in pursuance to conspiracy. This fact is apparent on record. Under these circumstances there is no reasonable ground to allow the present appeal - Further, where perusal of provisions of the PMLA, as mentioned in Section 5, 8 or 17 of PMLA, 2002, shows that no reason to believe are required to be communicated to the effected party. Conclusion - i) The retention order permitting ED to retain seized gold and jewelry was lawful and valid. ii) The appellant is not entitled to release of the seized gold at this stage due to lack of charge sheet and pending trial. iii) Procedural delays in filing retention application and prosecution complaint do not vitiate the retention order. iv) The seized gold is prima facie proceeds of crime linked to demonetization-related money laundering. The present appeal is hereby dismissed, with liberty to claim the relied upon and seized material/articles from Ld. Special Judge PMLA Court, in case of acquittal of the appellant. The core legal questions considered in this appeal under Section 26 of the Prevention of Money Laundering Act (PMLA), 2002, revolve around the following issues:1. Whether the impugned order permitting retention of seized gold and jewelry by the Enforcement Directorate (ED) under Section 17(4) of PMLA was valid and lawful, given the procedural and substantive facts.2. Whether the appellant, not named in the FIR and without any charge sheet filed against him, is entitled to the release of the seized gold on grounds of procedural delay and lack of incriminating evidence.3. The applicability and interpretation of provisions under PMLA, including Sections 2(1)(u), 5, 8, 17, and 20(4), particularly regarding communication of reasons to the affected party and the retention and attachment of proceeds of crime.4. The sufficiency of evidence linking the appellant's possession of gold to proceeds of crime derived from the demonetization-related money laundering scheme.5. The impact of procedural timelines, specifically the delay in filing the Original Application (OA) for retention beyond the mandatory 30-day period, and the delayed filing of the prosecution complaint.Issue-wise Detailed Analysis1. Validity of Retention Order under Section 17(4) of PMLAThe legal framework under Section 17(4) of PMLA allows the Adjudicating Authority to permit the Enforcement Directorate to retain seized property if it is prima facie involved in money laundering. The Court considered the procedural propriety of the retention order dated 14.06.2017 passed by the Adjudicating Authority in Original Application No. 78/2017.Precedents and statutory provisions were examined, including the requirement that the property retained must be connected to proceeds of crime as defined in Section 2(1)(u) of PMLA, which defines 'proceeds of crime' as any property derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence.The Court analyzed the evidence gathered during investigation, including statements recorded under Section 50 of PMLA, bank account scrutiny, and the modus operandi involving front companies, fictitious firms, and collusion with bank officials to convert demonetized currency into monetized form through gold purchases.The Court found that the seized gold was part of the proceeds of crime generated through this scheme and that the retention order was passed after due consideration of all facts and circumstances. The procedural delay in filing the OA on the 31st day, rather than within 30 days, was excused on the ground that the 30th day was a Sunday, and the application was filed on the next working day.Competing arguments raised by the appellant regarding procedural irregularities were rejected, with the Court holding that such delays did not vitiate the retention order.Conclusion: The retention order under Section 17(4) was lawful and valid, supported by sufficient evidence and proper application of the legal framework.2. Entitlement of the Appellant to Release of Seized Gold in Absence of Charge Sheet and Incriminating EvidenceThe appellant contended that he was not named in the FIR, no charge sheet had been filed against him, and that the seized gold could not be considered proceeds of crime without incriminating evidence. He also argued that no reasons to believe were communicated under Sections 5, 8, or 17 of PMLA, and no order under Section 20(4) was passed.The Court noted that absence of a charge sheet or naming in the FIR does not entitle the appellant to relief at this stage. The Court emphasized that the appellant's defense and denial of involvement must be tested during the criminal trial and cannot be entertained in this appellate proceeding concerning retention of property.Regarding the communication of reasons to believe, the Court referred to the judgment of the Hon'ble Madras High Court in G. Gopalakrishnan Vs. Deputy Director, which held that no such communication is mandated under the relevant provisions of PMLA for retention orders.The Court also observed that the appellant failed to produce any invoice or documentary evidence to establish the genuineness of the gold, and his own admission that the gold was purchased without invoices from a middleman linked to the money laundering scheme supported the inference of proceeds of crime.Conclusion: The appellant is not entitled to release of the seized gold at this stage, and the evidentiary burden to prove innocence lies with him during trial.3. Application of PMLA Provisions and Interpretation of Procedural RequirementsThe Court examined the statutory scheme of PMLA, particularly the definitions and procedural provisions. It clarified that:Section 2(1)(u) defines proceeds of crime broadly to include property obtained directly or indirectly from scheduled offences.Section 5 allows for attachment of property involved in money laundering, with provisional attachment orders confirmed by the Adjudicating Authority.Section 8 deals with adjudication of attached properties.Section 17(4) empowers the Adjudicating Authority to permit retention of seized property.Section 20(4) pertains to the passing of orders for attachment or confiscation after adjudication.The Court held that no requirement exists under these provisions for communication of reasons to the affected party before retention or attachment. The Court underscored that the retention and attachment orders are interim measures pending adjudication and trial.Competing arguments by the appellant on procedural lapses were rejected as inconsistent with the statutory scheme and judicial precedents.Conclusion: The procedural requirements under PMLA were complied with, and no violation occurred in the retention and attachment process.4. Sufficiency of Evidence Linking Appellant's Possession of Gold to Proceeds of CrimeThe Court reviewed the investigative findings, including:Statements under Section 50 of PMLA implicating the appellant in the scheme.Bank account analysis revealing deposits of demonetized currency into fictitious companies' accounts with collusion of bank officials.Recovery of gold and diamonds from the appellant's premises, valued substantially higher than market rates, indicating purchase at premium linked to laundering proceeds.Admission by the appellant of purchasing gold from a middleman without invoices.The Court found the evidence cogent and corroborated by electronic records such as bank statements, call data records (CDR), and CCTV footage, establishing a prima facie case that the seized gold was proceeds of crime.The Court noted that the appellant's defense on these facts must be tested during trial and cannot be a ground for release or setting aside the retention order at this stage.Conclusion: The evidence sufficiently links the seized gold to proceeds of crime, justifying retention and attachment.5. Impact of Procedural Timelines and DelaysThe appellant challenged the retention order on grounds that the OA for retention was filed beyond the mandatory 30-day period and that the prosecution complaint was filed with a delay of over 400 days from seizure.The Court reasoned that the filing of the OA on the 31st day was excusable since the 30th day was a Sunday, and filing on the next working day is permissible. The delay in prosecution complaint filing was held to be immaterial to the validity of the retention order, especially since the complaint was eventually filed and taken cognizance of by the Special PMLA Court.The Court emphasized that the seized articles and documents become case property upon filing of the complaint, and the retention order remains valid pending adjudication and trial.Conclusion: Procedural delays did not invalidate the retention order or entitle the appellant to release of property.Significant Holdings'The fact that no charge sheet is filed by the police against any person after the registration of FIR... even then, the appellant is not entitled to any relief, till the filling and acceptance of the closure report.''Under these circumstances there is no reasonable ground to allow the present appeal.''The fact that search was conducted on 17.02.2017 and application for retention was filed on 31st day is no ground to set aside the order of retention, seeing the fact that the 30th day was Sunday.''Where perusal of provisions of the PMLA... shows that no reason to believe are required to be communicated to the effected party.''If the seized gold from the possession of the present appellant is not relied upon in the prosecution complaint PMLA for the purpose of confiscation, then certainly appellant is entitled to move application before Ld. Special Judge, for release of the seized gold, otherwise not.'Core principles established include the permissibility of retention of seized property under PMLA without prior communication of reasons to the affected party, the non-entitlement of accused to release of property absent closure or acquittal, and the acceptance of procedural flexibility in filing applications and complaints.Final determinations:The retention order permitting ED to retain seized gold and jewelry was lawful and valid.The appellant is not entitled to release of the seized gold at this stage due to lack of charge sheet and pending trial.Procedural delays in filing retention application and prosecution complaint do not vitiate the retention order.The seized gold is prima facie proceeds of crime linked to demonetization-related money laundering.The appellant may seek release of the seized property only after acquittal or if the property is not relied upon in prosecution.