2025 (8) TMI 867 - AT - Money Laundering

Appeal allowed as payments verified by bank statements, dismissing money laundering claims under PBPT Act Section

Raveendra Kumar Goel Versus The Deputy Director, Directorate of Enforcement, Delhi

Raveendra Kumar Goel Versus The Deputy Director, Directorate of Enforcement, Delhi - TMI 1. ISSUES PRESENTED and CONSIDERED Whether the properties attached under the Prevention of Money Laundering Act (PMLA), 2002, specifically the funds in the bank account of M/s R K Emporium, constitute proceeds of crime linked to demonetized currency and money laundering activities. Whether the appellant, whose proprietorship is M/s R K Emporium, can be held liable under PMLA despite not being named as an accused in the FIR or charge sheet filed by the Delhi Police Crime Branch. Whether the transactions between M/s R K Emporium and firms allegedly controlled by accused persons are genuine business transactions or mere paper entries used for money laundering. Whether the prior exoneration of the appellant in proceedings under the Prevention of Black Money Act (PBPT), 1988, and dismissal of the appeal filed by the Initiating Officer in that case, precludes confirmation of attachment under PMLA on the same facts. Whether the payments received by M/s R K Emporium from M/s RK International and M/s Virgo International were out of demonetized currency or legitimate business proceeds. Whether the impugned order confirming the provisional attachment under PMLA should be set aside based on the above considerations. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Whether the attached properties constitute proceeds of crime under PMLA linked to demonetized currency and money laundering Legal Framework and Precedents: The Prevention of Money Laundering Act, 2002, empowers the Enforcement Directorate (ED) to provisionally attach properties that are proceeds of crime under section 5(1) and confirm such attachment under section 8(3). The Act contemplates investigation of money laundering offenses linked to predicate offences such as those under the Indian Penal Code and the Prevention of Corruption Act. Court's Interpretation and Reasoning: The ED's investigation revealed a money trail involving demonetized currency amounting to approximately Rs. 38 Crores, with an additional commission of 35%, totaling about Rs. 51 Crores. Multiple provisional attachment orders (PAOs) cumulatively attached properties and proceeds of crime amounting to Rs. 49.11 Crores. The attached funds in the Kotak Mahindra Bank account of M/s R K Emporium were attributed to accused persons involved in the money laundering scheme. Key Evidence and Findings: The investigation uncovered forged documents used to open bank accounts, criminal conspiracy to deposit demonetized currency in non-home branch accounts, and acceptance of illegal gratification by a public servant (Branch Manager). The transactions between shell firms and M/s R K Emporium were scrutinized, and searches at premises linked to accused persons yielded no evidence of genuine business activity. Application of Law to Facts: Based on the investigation, the ED concluded that the funds in M/s R K Emporium's account were proceeds of crime, linked to the laundering of demonetized currency. The Adjudicating Authority confirmed the provisional attachment accordingly. Treatment of Competing Arguments: The appellant contended that the payments were legitimate business transactions and not linked to demonetized currency. The ED maintained that the transactions were paper entries to park illicit funds. Conclusion: The Adjudicating Authority initially upheld the attachment, finding sufficient nexus between the funds and proceeds of crime under PMLA. Issue 2: Whether the appellant can be held liable under PMLA despite not being named as an accused in the FIR or charge sheet Legal Framework and Precedents: Under PMLA, attachment and prosecution can be independent of criminal proceedings under the IPC or other statutes. The Act focuses on proceeds of crime and their recovery, not necessarily requiring the person to be an accused in predicate offences. Court's Interpretation and Reasoning: The ED argued that absence of the appellant's name in the FIR or chargesheet does not absolve him from liability under PMLA, given the specific allegations and evidence linking the appellant's account to proceeds of crime. The appellant relied on his exoneration in PBPT proceedings to contest this. Key Evidence and Findings: The appellant's account received funds transferred from firms controlled by accused persons. Statements under section 50 PMLA and investigation findings indicated that the appellant had limited knowledge of the source and nature of these transactions. Application of Law to Facts: The Court noted that PMLA's scope includes attachment based on proceeds of crime regardless of criminal charges against the person. However, the genuineness of transactions and nexus to proceeds of crime must be established. Treatment of Competing Arguments: The appellant emphasized prior exoneration and lack of criminal charges; the ED stressed the independent scope of PMLA and evidence of suspicious transactions. Conclusion: The Court acknowledged the legal position but proceeded to examine the nature of transactions to determine if the attachment was justified. Issue 3: Whether transactions between M/s R K Emporium and firms controlled by accused persons were genuine or paper entries Legal Framework and Precedents: Genuine business transactions are not proceeds of crime under PMLA. The burden lies on the ED to establish that transactions were sham or intended to launder proceeds. Court's Interpretation and Reasoning: The appellant claimed the transactions were legitimate supplies of goods, supported by invoices and goods consignment receipts (GCRs). The ED highlighted absence of substantive proof of supply and suspicious circumstances such as lack of knowledge of the firms' proprietors and non-supply of goods within reasonable time. Key Evidence and Findings: Bank statements showed payments received on 08.11.2016 from M/s Yashawini Exports to M/s RK International and Virgo International, with subsequent transfers to M/s R K Emporium on 12.11.2016. The appellant could not identify the agent who placed orders. Invoices and GCRs were produced, with minor discrepancies such as a wrongly mentioned registration number. Searches at premises yielded no evidence of goods or documents corroborating the alleged supplies. Application of Law to Facts: The Court found that the payments to M/s RK International and Virgo International predated the demonetization announcement (which was at 8:00 PM on 08.11.2016), indicating these payments were not from demonetized currency. The appellant's account transactions were consistent with legitimate business dealings supported by invoices and GCRs. Minor errors in documentation did not undermine the genuineness of transactions. Treatment of Competing Arguments: The ED argued the transactions were paper entries to park illicit funds. The appellant rebutted by demonstrating the timing of payments, existence of invoices, and prior exoneration in PBPT proceedings. Conclusion: The Court concluded that the transactions were genuine business transactions and not proceeds of demonetized currency or money laundering. Issue 4: Effect of prior exoneration under PBPT proceedings on the present attachment under PMLA Legal Framework and Precedents: The Prevention of Black Money Act (PBPT), 1988, and PMLA, 2002, are distinct statutes with different objectives and procedures. However, findings under one may be relevant to proceedings under the other if based on the same facts. Court's Interpretation and Reasoning: The appellant relied on the Adjudicating Authority's exoneration under PBPT and dismissal of the appeal by this Tribunal in PBPT proceedings, contending that the present attachment under PMLA on the same facts is unjustified. Key Evidence and Findings: The Tribunal noted that the appellant was exonerated in PBPT proceedings by order dated 25.03.2019 and the appeal filed by the Initiating Officer was dismissed on 30.01.2025. The appellant submitted these orders and argued for consistency in findings. Application of Law to Facts: The Court acknowledged the distinction between the statutes but recognized the relevance of prior findings on the genuineness of transactions and absence of illicit proceeds. The Tribunal noted that the ED failed to distinguish the present case from the PBPT proceedings effectively. Treatment of Competing Arguments: The ED contended that PMLA proceedings are independent and not bound by PBPT findings. The appellant emphasized the identical facts and prior exoneration. Conclusion: The Court accepted the appellant's contention that the prior exoneration under PBPT and dismissal of appeal weigh heavily against confirmation of attachment under PMLA in the present case. Issue 5: Whether the payments to M/s R K Emporium were out of demonetized currency or legitimate business proceeds Legal Framework and Precedents: Proceeds of demonetized currency converted into legitimate currency are proceeds of crime under PMLA. The timing and source of payments are crucial in determining the nature of funds. Court's Interpretation and Reasoning: The Tribunal examined bank statements showing that M/s RK International and Virgo International received payments from M/s Yashawini Exports on 08.11.2016 during banking hours before demonetization announcement at 8:00 PM. Subsequently, these firms transferred funds to M/s R K Emporium on 12.11.2016. Key Evidence and Findings: The timing of payments indicated that the funds were not demonetized currency. Invoices and GCRs corroborated the supply of goods. The appellant's explanation regarding the agent and business dealings was accepted despite minor gaps. Application of Law to Facts: Since the payments to the supplier firms predated demonetization, and the subsequent transfer to M/s R K Emporium was consistent with business transactions, the funds were not proceeds of demonetized currency. Treatment of Competing Arguments: The ED argued the transactions were part of laundering demonetized currency. The appellant rebutted with documentary evidence and timing analysis. Conclusion: The Court held that the payments were legitimate business proceeds and not demonetized currency proceeds, undermining the basis for attachment. Issue 6: Whether the impugned order confirming attachment under PMLA should be set aside Court's Interpretation and Reasoning: Considering the genuineness of transactions, timing of payments, prior exoneration under PBPT, and lack of evidence linking the appellant's account to proceeds of demonetized currency, the Tribunal found no justification for confirming the attachment. Conclusion: The appeal was allowed; the impugned order confirming provisional attachment was set aside, and consequences to follow accordingly.