2025 (8) TMI 807 - AT - Money Laundering

Tribunal Upholds ED's Property Attachment Under PMLA, Affirms Retrospective Application and Reliance on Prior Investigations

Sohit Chaturvedi, Eshan Chaturvedi, Anju Chaturvedi, Neelima Chaturvedi, Kotwan Traders Pvt. Ltd., Amit Chaturvedi, HB Chaturvedi, Sanjay Chaturvedi and Aditi Chaturvedi Versus The Deputy Director Directorate of Enforcement, Delhi

Sohit Chaturvedi, Eshan Chaturvedi, Anju Chaturvedi, Neelima Chaturvedi, Kotwan Traders Pvt. Ltd., Amit Chaturvedi, HB Chaturvedi, Sanjay Chaturvedi and ... 1. ISSUES PRESENTED AND CONSIDERED Whether the attached properties should be released due to lack of independent investigation by Enforcement Directorate (ED) regarding the predicate offence. Whether the attached properties should be released as the alleged predicate offences were committed prior to the commencement of the Prevention of Money Laundering Act (PMLA), 2002. Whether the ED had reason to believe under Section 5(1) of PMLA that the appellants were in possession of proceeds of crime and that such proceeds were likely to be concealed, transferred or dealt with to frustrate confiscation proceedings. Whether the attached properties should be released on the ground that they were not acquired directly or indirectly from proceeds of crime. Whether the property at 97-D Eastern Avenue Sainik Farms, New Delhi should be released on the basis that a third party claimed ownership and was not served notice during attachment proceedings. Whether the contention that attached jewellery constituted 'streedhan' of the appellant holds merit and whether sufficient evidence was produced to prove the same. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Whether the attached properties need to be released for want of any independent investigation by ED with respect to predicate offence - Legal Framework and Precedents: ED's role under PMLA is limited to investigation of money laundering aspects and not to re-investigate the predicate offence, which remains within the domain of police/CBI. - Court's Reasoning: The Court emphasized that ED's investigation focuses on (i) prima facie incriminating evidence for scheduled offence, (ii) quantum of proceeds of crime, (iii) laundering or likelihood thereof, (iv) mode of layering/trail of proceeds, (v) identification of other attachable properties, and (vi) genuineness of claimants of attached properties. - Application of Law to Facts: Since appellants were facing trial for predicate offences, the Tribunal refrained from assessing quality of evidence collected by police/CBI. ED is not empowered to re-investigate predicate offences but can exceed quantum of proceeds of crime based on its investigation and communicate findings to police/CBI for supplementary chargesheet. - Conclusion: Issue decided against appellants; ED's investigation scope and attachment valid despite no independent predicate offence investigation by ED. Issue 2: Whether the attached properties need to be released as the alleged predicate offences were committed prior to coming into operation of PMLA Act - Legal Framework and Precedents: The offence of money laundering is a continuing offence under Section 3 of PMLA. The relevant date for prosecution is the date of laundering or dealing with proceeds of crime, not the date of commission of predicate offence. Constitutional prohibition against retrospective punishment applies to the predicate offence but not to money laundering acts occurring after PMLA came into force. - Court's Reasoning: The Court relied on authoritative judgments holding that possession, concealment, or projection of proceeds of crime as untainted property after PMLA's commencement constitutes money laundering. The offence is independent and distinct from predicate offence. The Court rejected the contention that PMLA cannot be applied retrospectively to acts occurring after its commencement. - Application of Law to Facts: The appellants' acts of dealing with proceeds of crime occurred post-PMLA enforcement. The retrospective application objection was held untenable. - Conclusion: Issue decided against appellants; PMLA applies to continuing acts of money laundering irrespective of date of predicate offence. Issue 3: Whether there was no reason to believe on the part of ED u/s 5(1) of PMLA that the appellants were in possession of any proceeds of crime and such proceeds were likely to be concealed/transferred - Legal Framework: Section 5(1) PMLA authorizes provisional attachment if the authorized officer has reason to believe, recorded in writing and based on material, that a person is in possession of proceeds of crime and such proceeds are likely to be concealed or dealt with to frustrate confiscation. - Court's Reasoning: The Court found ample incriminating material from investigations including statements under Section 50 PMLA, bank records, forged documents, and fraudulent transactions showing misutilization of loan funds worth Rs. 118.5 Crores. Appellants failed to prove legitimate sources of income for acquiring attached properties. The apprehension of alienation of properties justified attachment under second proviso of Section 5(1). - Application of Law to Facts: The ED's reason to believe was based on material in possession, including chargesheets, ECIRs, and financial records. The Court found no merit in appellants' denials and held that conditions for attachment were fulfilled. - Conclusion: Issue decided against appellants; ED had valid reason to believe under Section 5(1) to provisionally attach properties. Issue 4: Whether the attached properties need to be released being not acquired directly/indirectly from the proceeds of crime - Legal Framework: Section 2(1)(u) PMLA defines 'proceeds of crime' as property obtained directly or indirectly from criminal activity or the value of such property. Jurisprudence permits attachment of properties equivalent in value to proceeds of crime when actual tainted property cannot be traced. - Court's Reasoning: The Court relied on precedent that properties not directly acquired from proceeds of crime may still be attached to the extent of value of such proceeds if the tainted property is not traceable. The Court noted that the attached properties' aggregate value (approx. Rs. 96.38 Crores) was less than the misutilized loan amount (Rs. 118.5 Crores). The appellants failed to establish legal ownership or source of funds. - Treatment of Competing Arguments: The appellants' claim that properties were not acquired from proceeds of crime was rejected in light of the wide definition and judicial interpretation allowing attachment of equivalent value properties. - Conclusion: Issue decided against appellants; attachment of properties equivalent in value to proceeds of crime is valid even without direct tracing of tainted property. Issue 5: Whether the property 97-D Eastern Avenue Sainik Farms, New Delhi needs to be released on the ground that Ms. Aditi Chaturvedi is the owner and was not served notice - Legal Framework: Principles of natural justice require notice to be served to persons claiming ownership. However, the burden to prove legitimate source of funds and ownership lies on the claimant. - Court's Reasoning: The Court observed that Ms. Aditi Chaturvedi did not disclose source of income or produce bank statements evidencing payment of Rs. 20 lakhs consideration. The transaction was viewed as a sham to shield the property from attachment. The property was purchased from family members who are accused persons. The Court noted that Ms. Aditi Chaturvedi was not impleaded or served notice in adjudication proceedings but allowed her to claim ownership before the Special Judge PMLA Court. - Application of Law to Facts: The Court declined to release the property on this ground but preserved the third party's right to claim ownership in trial court. - Conclusion: Issue decided against appellants; property not released but third party may pursue claim in appropriate forum. Issue 6: Whether the contention regarding jewellery attached as streedhan holds merit and whether evidence was produced - Legal Framework: Claim of streedhan requires proof by documentary or credible evidence to establish ownership and exemption from attachment. - Court's Reasoning: The appellants Neelima Chaturvedi and Anju Chaturvedi failed to produce any documentary evidence to substantiate that the jewellery was their streedhan. The Tribunal held that such factual disputes are to be adjudicated in trial court after examination of witnesses. - Conclusion: Issue decided against appellants; claim of streedhan not accepted at this stage. 3. FINAL CONCLUSIONS All appeals against confirmation of attachment order dismissed as devoid of merit. The ED is restrained from taking coercive steps against attached properties during trial except under exceptional circumstances. Third party ownership claims and factual disputes to be adjudicated in trial court.