Proof of lawful source and predicate offence basis justified retention of seized cash under the money-laundering regime.

Seized cash retention was sustained because the appellant did not establish a lawful source for the cash through independent corroboration. The Tribunal found that cash ledger, balance-sheet and income-tax material were insufficient on their own, while the absence of bank records undermined the claim that the funds came from business savings; the statutory statement also supported the respondent. It further rejected objections that the proceedings lacked a predicate offence or that reasons to believe and relied-upon documents were not supplied, noting that the record showed service of those materials and that the earlier FIRs and applicable penal laws provided the necessary offence basis. The appeal therefore failed.

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Issues: (i) Whether the retention of the seized cash was justified on the ground that the appellant failed to prove its lawful source. (ii) Whether the proceedings were vitiated for want of a predicate offence and for non-supply of reasons to believe and relied upon documents.

Issue (i): Whether the retention of the seized cash was justified on the ground that the appellant failed to prove its lawful source.

Analysis: The appellant produced a cash ledger, balance-sheet and income-tax material, but no bank statement showing withdrawals or other independent proof of availability of cash was filed. The Tribunal treated the ledger and balance-sheet as documents capable of being prepared unilaterally, whereas a bank statement would have provided independent corroboration. The explanation regarding part of the cash being from the wife's business savings was also unsupported by bank records. The statement recorded under the statute further supported the respondent's case.

Conclusion: The explanation for the seized cash was not proved, and the retention of Rs. 65 lakhs was upheld.

Issue (ii): Whether the proceedings were vitiated for want of a predicate offence and for non-supply of reasons to believe and relied upon documents.

Analysis: The Tribunal held that the record showed service of the application, the reasons to believe and the relied upon documents, and therefore the complaint of non-supply was contrary to the record. On the predicate offence issue, the Tribunal relied on the registration of the earlier FIRs and the legal position following the withdrawal of Jammu and Kashmir's special status, by which the relevant penal laws became applicable. The appellant's admitted role in arranging illegal arms licences also supported the existence of a scheduled offence basis for action under the statute.

Conclusion: The challenge on the grounds of absence of predicate offence and non-supply of material was rejected.

Final Conclusion: The appeal failed, and the impugned retention order was sustained.

Ratio Decidendi: Where seized cash is not supported by independent proof of lawful source, and the statutory record shows service of reasons and materials as well as a valid predicate-offence basis, retention under the money-laundering regime will not be interfered with.

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