2025 (8) TMI 504 - AT - Money Laundering

Attachment of Property Under PMLA Valid Despite No Direct Charges; Section 5(1) Applies to Equivalent Value Assets

The AT under SAFEMA upheld the attachment of property linked to the appellant company under PMLA, rejecting the contention that the property was not ... Money Laundering - proceeds of crime - attachment of impugned property being not acquired directly/indirectly from the proceeds of crime - twin conditions as enumerated u/s 5(1) of PMLA is not fulfilled for attachment or not - predicate offences committed on or before 2009 Amendment in the schedule of PMLA cannot be applied retrospectively or not - property of appellant company needs to be released as the appellant company is not arrayed as accused in chargesheet cases filed by CBI. Whether the impugned property cannot be attached being not acquired directly/indirectly from the proceeds of crime? - HELD THAT:- There are no force in the first argument when the proceeds out of crime was not available with the appellant rather vanished and siphoned off, the property of equivalent value has been attached. Any accused committing a predicate offence cannot be permitted to enjoy his other properties, by siphoning off the proceeds of crime and thereby take a plea that he is not in possession of any proceeds of crime. The appellant M/s Bright Commodeal Pvt. Ltd. is shareholding company of the accused persons and their family members. In the light of the aforesaid, second limb of the definition of “proceeds of crime” has been applied to attach the property of equivalent value. This ground raised by the appellant cannot be accepted - the issue decided against the appellant and in favour of the respondent ED. Whether the twin conditions as enumerated u/s 5(1) of PMLA is not fulfilled for attachment? - HELD THAT:- In the matter at hand, there is ample evidence available from the investigation against the accused persons who were managing the affairs of the accused company & firm and in pursuance to conspiracy they committed bank frauds to the tune of Rs.138.37 crores, by siphoning of the loan funds for the other purposes, as detailed in para no.2 above. They and their family members were also the directors of the present appellant company and managing its affairs. The explanation and defence taken by the appellant company are apparently without any basis for the aforesaid reason. There was a prima facie material for forming reason to believe by Respondent ED for passing the PAO, on the basis of allegations mentioned in the FIR and the investigation conducted by CBI. The appellant company and its directors were conscious of the fact that the properties of the Appellant company are likely to be attached and confiscated in due course under PMLA, 2002. Thus, the conditions as stated under the second proviso of Section 5(1) are fulfilled for passing the PAO - issue is also decided against the appellant company and in favour of Respondent ED. Whether the predicate offences committed on or before 2009 Amendment in the schedule of PMLA cannot be applied retrospectively? - HELD THAT:- The relevant date is a date when the tainted property is projected to be untainted and as a consequence to it, the ECIR is recorded showing offence under Section 3 of the 2002 Act. The relevant date to find out the scheduled offence and the offence of money laundering is when it is projected to be untainted property to make out an offence under section 3 of the Act of 2002 - the issue also decided against the appellant and in favour of the respondent ED. Whether the property of appellant company needs to be released as the appellant company is not arrayed as accused in chargesheet cases filed by CBI, nor in prosecution complaint filed by ED? - HELD THAT:- The property in the hands of any person in possession of proceeds of crime can be attached even if he is not accused of the offence of money-laundering. Perusal of prosecution complaint reveals that present property is cited for the purpose of confiscation as apparent from list of documents wherein at serial no. 24 2 PAOs dated 29.09.2016 & 29.12.2017 are referred. Further, the Directors of the accused company namely, M/s Kali International Pvt. Ltd. & partners of M/s Rajco Steel Pvt. Ltd. are common in the present appellant company either directly or as family members and there is ample evidence on record. Accordingly, the issue is also decided in favour of the Respondent ED and against the appellant company. Appeal dismissed. ISSUES: Whether the impugned property can be attached as proceeds of crime or equivalent value under the Prevention of Money Laundering Act, 2002 (PMLA), despite not being acquired directly or indirectly from proceeds of crime'Whether the twin conditions under Section 5(1) of PMLA for provisional attachment-(a) possession of proceeds of crime and (b) likelihood of concealment, transfer or dealing frustrating confiscation proceedings-are satisfied'Whether amendments to the schedule of offences under PMLA can be applied retrospectively to predicate offences committed before such amendments'Whether property can be attached under PMLA if the owner is not named as accused in the chargesheet or prosecution complaint? RULINGS / HOLDINGS: Attachment of property as 'value of any such property' under Section 2(1)(u) of PMLA is valid where actual proceeds of crime cannot be traced; thus, property of equivalent value may be attached even if not directly purchased from proceeds of crime. The property was rightly attached as 'value thereof' since the proceeds of crime were siphoned off and not in possession of the appellant.The conditions under Section 5(1) of PMLA for provisional attachment were fulfilled, as there was 'reason to believe' based on material that the appellant was in possession of proceeds of crime and that non-attachment would frustrate confiscation proceedings. The attachment order was justified on prima facie material from investigations and FIRs.The offence of money laundering is a continuing offence; therefore, the relevant date for application of the schedule is the date when the property is projected as untainted and the offence under Section 3 of PMLA is committed. Amendments to the schedule apply prospectively to acts of money laundering, not retrospectively to predicate offences. Hence, retrospective application of schedule amendments is impermissible.Property can be attached under PMLA even if the owner is not named as accused in the predicate offence chargesheet or prosecution complaint, as Section 5(1) applies to 'any person' involved in processes connected with proceeds of crime. The objective of PMLA is to reach proceeds of crime 'in whosoever's name they are kept or by whosoever they are held.' RATIONALE: The Court applied the statutory definition of 'proceeds of crime' under Section 2(1)(u) of PMLA, which includes both property 'derived or obtained, directly or indirectly' and 'the value of any such property.' The Court relied on authoritative precedents, including the Supreme Court judgment in Vijay Madanlal Chaudhary v. Union of India, which clarified that attachment of property equivalent in value is permissible when actual tainted property is not traceable. This interpretation aligns with the legislative intent to effectively prevent money laundering and recover proceeds of crime.The Court examined Section 5(1) of PMLA, emphasizing the requirement of 'reason to believe' supported by material in possession of the authorized officer. The presence of prima facie evidence from FIRs, investigations, and statements sufficed to meet the statutory threshold for provisional attachment. The Court found no merit in the appellant's contention that the twin conditions were not satisfied.Regarding retrospective application, the Court followed the principle that the offence of money laundering is independent and continuing, linked to acts connected with proceeds of crime after the predicate offence. The Court cited judgments holding that the relevant date for prosecution under PMLA is when the laundering activity occurs, not the date of the predicate offence. This avoids constitutional infirmity under Article 20 against retrospective penal laws.The Court referred to the Supreme Court's elucidation that the scope of Section 5(1) is not confined to persons accused in the scheduled offence but extends to any person involved in activities connected with proceeds of crime. This broad interpretation prevents evasion of attachment by holding property in names other than the accused, thereby furthering the object of PMLA to combat money laundering effectively.