2025 (8) TMI 807 - AT - Money Laundering

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

The appellate tribunal upheld the ED's attachment of properties under PMLA, rejecting appellants' claims for release due to lack of independent ... Money Laundering - provisional attachment order - proceeds of crime - diversion of funds - misutilisation of loan funds - seeking release of attach properties for want of any independent investigation by ED with respect to predicate offence - alleged predicate offences were committed during the period 1998 to 2002 i.e. prior to coming into operation of PMLA Act or not - 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 or not - jewellery attached as proceeds of crime being her streedhan holds any merit and has she produced any evidences to prove the same or not. Whether the attached properties need to be released for want of any independent investigation by ED with respect to predicate offence? - HELD THAT:- ED has to confine its inquiry/investigation qua the quantum of proceeds of crime and the remaining four points mentioned above. Further, ED can also point out any glaring mistake, or lacunae in the said investigation conducted by Police/CBI, which may come to its knowledge while conducting the investigation under PMLA. However, ED cannot arrive at different conclusion qua the predicate offence, while conducting investigation under PMLA, as it is not a supervisory investigating agency over police/CBI. But ED can certainly exceed the limit of quantum of proceeds of crime on the basis of investigation conducted by it, if new facts and evidence comes to its knowledge, and thereafter, inform the police/CBI regarding the same for filing supplementary chargesheet, if any. However, it will be the prerogative of the police/CBI to file the supplementary chargesheet on the basis of information received from ED - the issue is decided against the appellants and in favour of Respondent ED. Whether the attached properties need to be released as the alleged predicate offences were committed during the period 1998 to 2002 i.e. prior to coming into operation of PMLA Act? - HELD THAT:- It is pertinent to mention here that before coming into force of PMLA, 2002, the procedure for seizure/attachment and its confiscation was mentioned in Chapter VII and XXXIV of CrPC. Under CrPC, the erson claiming the ownership was empowered to take the property under Superdari/execution of Surety bond. Apart from CrPC, the detailed procedure for attachment and confiscation was also exercised by police/ CBI under Criminal Amendment Ordinance, 1944, which used to be invoked after the conviction of the accused under the Prevention of Corruption Act. Hence, the procedure for attachment and confiscation is not a new concept prior to coming into force of PMLA. With the coming into force of PMLA, the provisions of search, seizure and attachment were made more specific and effective to preserve the property at the initial stage of investigation, without waiting for conviction for the purpose of confiscation. Thus, the contention of the appellants that their interest is prejudiced on account of retrospective application of PMLA is devoid of any merits. Accordingly, the contention of the Ld. Counsel for the appellant raising the objection to retrospective application of PMLA, 2002 is devoid of any merits. Accordingly, the issue is decided against the appellants and in favour of the Respondent ED. 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 the such proceeds of crime are likely to be concealed/transferred? - HELD THAT:- In the matter at hand, there is ample evidence available from the investigation against the appellants regarding the commission of offence of money laundering by committing various financial frauds by misrepresenting facts and by furnishing false and fabricated information/documents to banks for availing loans worth Rs.118.5 Crores during the years 1998-2003 for procurement of plant and machinery, but instead mis-utilized and siphoned off the disbursed funds for the purposes other than for those sanctioned. Against the said defrauded amount of Rs. 118.5 Crore, the ED has attached the total assets of the accused persons and their family members only to the extent of Rs. 96,38,35,580.17. Moreover, there is apparent apprehension of alienation of these properties, seeing the fact that ED has recorded the ECIR and the properties of the Appellants are likely to be confiscated in due course under PMLA, 2002, after attachment proceedings. Thus, the conditions as stated under the second proviso of Section 5(1) are fulfilled - the issue is decided against the appellants and in favour of the Respondent ED. Whether the attached properties need to be released being not acquired directly/indirectly from the proceeds of crime? - HELD THAT:- When the proceeds of crime were not available with the appellants rather vanished and siphoned off, the properties of equivalent value have been attached, in absence of any evidence that said attached properties are direct or indirect investments from the proceeds of crime. 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, though in-fact the said attachment is quite less than the actual proceeds of crime siphoned of by the appellants. Accordingly, this issue is decided against the appellants and in favour of the Respondent ED. Whether the said property 97-D Eastern Avenue Sainik Farms, New Delhi 110062, needs to be released in lieu of the contention that Ms. Aditi Chaturvedi is the owner of the property as she purchased the same for a consideration of Rs. 20 lakhs as per the agreement to sell and she was not served a notice regarding the proceedings for attachment of the same? - HELD THAT:- The execution of the documents in favor of Aditi Chaturvedi is a sham transaction to save the said property after committing the bank fraud. However, Ms. Aditi Chaturvedi may put her claim qua the said property before Ld. Special judge PMLA Court, who may release the property if the present appellant’s claim is found to be genuine. Accordingly, the issue is decided against the appellants and in favour of Respondent ED. Whether the contention of the appellant regarding the jewellery attached as proceeds of crime being her streedhan holds any merit and has she produced any evidences to prove the same? - HELD THAT:- The contention of the appellants Neelima Chaturvedi and Anju Chaturvedi that the jewellery attached by the ED belongs to them, being their stridhan does not hold good in light of the fact that no documentary evidence is produced by them regarding the same. Hence, the veracity of the ground taken by the appellants can’t be checked and verified by this Appellate Tribunal. The same would be appreciated by the Ld. Trial Court after the examination and cross examination of the prosecution and defence witnesses on this aspect in the prosecution complaint case under PMLA. Therefore, this issue is also decided against the appellants and in favour of the ED. The present appeals are hereby dismissed being devoid of any merits. 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.