2025 (7) TMI 1080 - AT - Money Laundering

Appellate Tribunal upholds retention of Rs. 65 lakhs seized in money laundering case under Section 50 PMLA

The Appellate Tribunal under SAFEMA dismissed the appeal challenging retention of Rs. 65 lakhs seized during money laundering investigation. The appellant ... Money Laundering - proceeds of crime - Seizure and retention of cash / documents / digital devices / Indian currencies / gold jewelleries - predicate/scheduled offence - appellant was not served with the reasons to believe despite mandated under Section 8(1) of PMLA, 2002 - offence under Sections 3 and 25 of Arms Act read with Section 5(2) of Prevention of Corruption Act Samvat, 2006 (pari-materia to Section 13(2) of the Prevention of Corruption Act, 1988) - HELD THAT:- The appellant has failed to submit the bank statement to show the withdrawal of the amount from time to time to justify the amount of Rs. 65 lakhs in the hands of the appellant. The ledger and the balance-sheet remain with the appellant and can be prepared any time whereas the bank statement is an independent document and could have fortified the case of the appellant but no bank statement has been enclosed along with the appeal to justify Rs. 65 lakhs in the hands of the appellant at the time of search. It is necessary to add that even the Income Tax Return does not justify or fortify existence of Rs. 65 lakhs with the appellant and therefore appellant has failed to disclose the true source of Rs.65 lakhs in his hands. Therefore, the Adjudicating Authority has rightly allowed retention of the said amount till conclusion of the trial. It is further found that the appellant has taken a plea about savings in the hands of the appellant’s wife, who was running business independently. The appellant has again failed to place on record the bank statement to disclose the withdrawal of the equivalent amount so as to justify cash in hand of the appellant’s wife. Mere submission of the cash ledger and even Income Tax Return would not justify existence of Rs. 65 lakhs in the hands of the appellant and out of which Rs.6-7 lakhs alleged to be from wife’s savings. It is necessary to add that while appellant is trying to show and disclose the source, his statement under Section 50 of the Act of 2002 has fortified the case of the respondent. The appellant admitted that for the sale of the arms, he was instrument in getting the illegal licence because arms cannot be sold without an Arm License. The FIR was lodged in the year 2018 while ECIR was recorded on 13.03.2020. The respondent have referred the Notification dated 31.10.2019 in regard to the Article 370 of the Constitution of India for special status of Jammu and Kashmir and submitted that once the notification was issued on 31.10.2019 the provisions of the Prevention of Corruption Act, 1988 and the Indian Penal Code, 1860 became applicable to Jammu and Kashmir and otherwise an offence under Section 25 of the Arms Act is a predicate offence which is in reference to sells, transfers, converts, repairs, test any arms or ammunition in contravention of Section 5 of the Arms Act. It is necessary to add that with the withdrawal of the special status of Jammu and Kashmir, all the laws became applicable which include the Prevention of Corruption Act, 1988 and the Indian Penal Code, 1860 as on the date of registration of ECIR i.e. 13.03.2022. Thus, the case of predicate offence had been disclosed. The appellant was in the trade of arms and to promote it, he involved in getting arms licenses and as per the admission made by the appellant, he was the recipient of the money from the ex-army personnel for illegal arm licenses. It has already observed that the involvement of the appellant was to obtain or support the person in need of illegal arm license was to advance his trade of arms licenses. This is not a case to cause for interference in the impugned order. The appeal accordingly fails and is dismissed. ISSUES: Whether the retention of seized cash under Section 17(1) of the Prevention of Money Laundering Act, 2002 ('the Act of 2002') was justified in the absence of the appellant satisfactorily disclosing the source of the amount.Whether the appellant's disclosure of source of seized cash through proprietorship firm accounts and wife's independent business sufficed to challenge retention of the amount.Whether a predicate offence was made out against the appellant to sustain the invocation of the Act of 2002, considering the FIR allegations and applicability of laws to Jammu and Kashmir.Whether the procedural requirements under the Act of 2002, including service of reasons to believe under Section 8(1) and supply of relied-upon documents and statements under Section 50, were complied with.Whether the Adjudicating Authority properly applied its mind in framing reasons to believe based on the application under Section 17(4) of the Act of 2002. RULINGS / HOLDINGS: The retention of the seized amount of Rs. 65 lakhs was upheld as the appellant failed to disclose the true source of the amount, particularly due to absence of bank statements and independent evidence; mere cash ledger and balance sheet were insufficient.The appellant's claim regarding wife's savings and independent business was rejected for lack of corroborative bank statements and independent proof, and the appellant's own admissions under Section 50 of the Act fortified the case for retention.The existence of a predicate offence was affirmed, noting that with the abrogation of Jammu and Kashmir's special status by the notification dated 31.10.2019, the Prevention of Corruption Act, 1988 and Indian Penal Code, 1860 became applicable, thereby validating the predicate offence under the Arms Act and related statutes.Procedural compliance was found with respect to service of reasons to believe and relied-upon documents under Section 8(1) and Section 50 of the Act, as these were duly served and reflected in the record, negating the appellant's claim of non-supply.The Adjudicating Authority was held to have appropriately applied its mind in framing reasons to believe and reliance on the application under Section 17(4) of the Act was proper and lawful. RATIONALE: The Court applied the statutory framework of the Prevention of Money Laundering Act, 2002, particularly Sections 8(1), 17(1), 17(4), and 50, alongside the evidentiary standards for disclosure of source of seized property.Precedent and statutory interpretation confirmed that mere bookkeeping entries without independent corroboration such as bank statements or tax returns do not suffice to establish lawful source of seized cash.The Court recognized the effect of the notification dated 31.10.2019 which abrogated the special status of Jammu and Kashmir, thereby extending the applicability of central laws including the Prevention of Corruption Act, 1988 and IPC, 1860, establishing the predicate offence necessary under the Act of 2002.The Court emphasized adherence to procedural safeguards under the Act, finding no violation of natural justice or procedural lapses in service of documents or framing of reasons to believe.No dissenting or concurring opinions were recorded; the decision reflects a consistent application of the Act's provisions and relevant constitutional changes affecting the region.