2025 (8) TMI 1072 - AT - Money Laundering

Provisional attachment of immovable property upheld as proceeds of crime under s.5(1) PMLA; occupation charge reduction denied

Vaibhav Choradia Versus The Deputy Director Directorate of Enforcement, Jaipur

AT upheld the provisional attachment of the immovable property as proceeds of crime, finding sufficient material and reasons to believe under s.5(1) PMLA ... Money Laundering - proceeds of crime - scheduled offence - provisional attachment of immovable property - attached impugned property can correlate to the proceeds of crime or not - reliability upon the statements recorded under Section 50 of PMLA - entire case of the Respondent Directorate is based upon oral statements which has less evidentiary value than the evidence based on documents - HELD THAT:- It is clear from the material on record that the allegation relates to diversion of loans taken from Bank of Baroda from the declared purpose of financing the activities relating to exports to other avenues which were meant for personal use. However, the Appellant has misinterpreted and misconstrued the same to contend that the loans from Bank of Baroda were parked abroad in the form of exports made and hence diversion of such loans for personal purposes domestically is infeasible. The Choradia family by its own admission have been a major exporter who for reasons which were under investigation under a separate Act of FEMA failed to realize export proceeds to the tune of almost Rs. 105 crores. The present impugned order does not decide the issue taken up under FEMA. What is clear from the records is the fact that being exporter the Choradia family succeeded in obtaining loans from BOB to its firms and companies for the purpose of export but in fact used it for personal gains including purchase of the impugned property in the name of the Appellant. The argument made by the Appellant that reasons to believe u/s 5(1) of PMLA for issuing the Provisional Attachment Order cannot be accepted in the light of the material which has been placed. The PAO was issued on 30.04.2014 and the Charge Sheet under the scheduled offence was filed on 27.03.2009. The ECIR was lodged by the Respondent Directorate on 10.12.2012. There was thus sufficient time for the Respondent Directorate to collect material for issuing the PAO. This is also obvious on perusal of the material which clearly shows that a large number of statements of the involved persons and parties had been recorded before issuing the PAO - the reasons to believe u/s 5(1) of PMLA were available with the Respondent Directorate to effect the attachment. It is also seen that the Ld. Adjudicating Authority passed the impugned order after taking into consideration not only the material on record but also after having given the opportunity to the Appellant as well as others to submit their defence. The Application filed by the Appellant for reduction in occupation and user charges from Rs. 50,000/- per month to Rs. 20,000/- per month is required to be disposed of at the time of consideration of the Appeal as has already been pointed out in Paragraph No. 2 of this Order - It is observed that the payment of such charges allowed the Appellant to continue to enjoy the attached impugned property. The Order dated 05.11.2014 of this Tribunal which stayed the Eviction Notice has not mentioned about market rent being a criterion for fixing the occupation and the user charges. In any case, the Application under consideration is not even supported by any document reflecting the prevailing market rent. Application dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether provisional attachment under Section 5(1) of the Prevention of Money Laundering Act (PMLA) is maintainable in respect of immovable property held by a person who is not named as an accused in the charge-sheet of the scheduled offence. 2. Whether the material available to the authorised officer and the Adjudicating Authority constituted 'reasons to believe' within the meaning of Section 5(1) PMLA to issue the Provisional Attachment Order (PAO) in respect of the impugned property. 3. Whether the impugned immovable property can be shown to be proceeds of crime (directly or indirectly) on the basis of bank records, inter-related transactions, cash pre-deposits and alleged diversion of sanctioned export loans. 4. Whether statements recorded under Section 50 PMLA and oral statements alone can sustain attachment when corroborated (or not) by documentary/bank evidence. 5. Whether the occupation and user charges fixed by the Tribunal pending adjudication ought to be reduced on the asserted basis of prevailing market rent and prior payments. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Maintainability of attachment against a person not named in the charge-sheet Legal framework: Section 5(1) PMLA permits provisional attachment of property when the authorised officer has reasons to believe that any property is proceeds of crime; definition of 'proceeds of crime' includes property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence. Precedent treatment: The Tribunal followed and applied prior Tribunal authority explaining that attachment may extend to persons not named in the FIR/charge-sheet if they are holding proceeds of crime or property of equivalent value; the judgment of the Apex Court (Vijay Madanlal Choudhary) was relied upon for statutory scope. Interpretation and reasoning: The Court reasoned that restricting attachment to only those named in a criminal charge would frustrate the Act's object because proceeds may be 'parked' with third parties; therefore, the sweep of Section 5(1) is not confined to accused in the scheduled offence but applies to any person connected with proceeds of crime. Ratio vs. Obiter: Ratio - attachment against non-accused holders of proceeds is permissible under PMLA when material indicates possession or value derived from scheduled offence. Conclusion: Maintainability challenge rejected; provisional attachment against the person in possession of the property is permissible despite absence from the CBI charge-sheet. Issue 2 - Availability of 'reasons to believe' under Section 5(1) PMLA Legal framework: Section 5(1) requires that PAO be issued on the basis of material indicative of possession of proceeds of crime; authorised officer must have reasons to believe before attaching property. Precedent treatment: The Court applied established principles that reasons to believe may be formed from documentary material, bank enquiries and recorded statements; the timing between charge-sheet, ECIR and PAO was noted as relevant to adequacy of material collection. Interpretation and reasoning: The Tribunal examined chronological investigative steps (charge-sheet, ECIR, recorded statements) and bank enquiries; it found sufficient pre-existing material and multiple recorded statements before the PAO date, establishing a basis to form reasons to believe. The Tribunal rejected the contention that reliance on Section 50 statements alone invalidated the PAO because attachment was also founded on bank analyses and other enquiries. Ratio vs. Obiter: Ratio - reasons to believe were properly formed given the contemporaneous and antecedent investigation materials and bank document analysis. Conclusion: The PAO satisfied the Section 5(1) threshold; the 'reasons to believe' challenge fails. Issue 3 - Whether impugned property is proceeds of crime through diversion of export loans and related transactional analysis Legal framework: Proceeds of crime include property obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence; forensic analysis of bank accounts, loans and fund flows is permissible evidence to trace such proceeds. Precedent treatment: The Court relied on the broad statutory concept of proceeds and on appellate/Apex Court guidance that indirect linkage and value equivalence suffice when supported by material. Interpretation and reasoning: The Tribunal analysed: (a) bank statements showing inward cash deposits into inter-related entities shortly before remittances/RTGS to the purchaser's account; (b) timing and pattern of cash pre-deposits followed by transfers/loans from related firms; (c) absence of credible documentary explanation for sources of cash; (d) alleged misuse/diversion of Bank of Baroda packing credit and post-shipment demand loans for purposes other than exports; and (e) corroborative findings that export proceeds had not been realised in large sums. The Tribunal treated the pattern (cash pre-deposits, immediate transfers to the purchaser, inter-company movements and lack of repayment/documentation) as indicative that the loans/diversions financed the impugned property, and that loans purportedly shown as repayments were in fact circular accounting to camouflage diversion. Ratio vs. Obiter: Ratio - where bank records and transactional patterns, together with failure to explain cash sources, demonstrate diversion of funds and a nexus (direct or indirect) to the scheduled offence, attachment of property as proceeds of crime is sustainable. Conclusion: The impugned property was properly treated as proceeds of crime (directly or indirectly) arising from diversion of sanctioned export loans and interrelated fund movements; appellant's loan-source explanation was found unconvincing. Issue 4 - Evidentiary weight of statements under Section 50 PMLA vis-à-vis documentary/bank evidence Legal framework: Statements under Section 50 PMLA may be used in the investigation; corroboration by documentary material strengthens evidentiary value; reliance on oral statements alone is vulnerable if unsupported. Precedent treatment: Tribunal recognised that Section 50 statements are part of the material but that attachment may be sustained where such statements are corroborated by bank enquiries and documentary analysis. Interpretation and reasoning: The Court observed the Respondent did not rely solely on Section 50 statements; rather, the attachment was based on bank statement analyses, RTGS/cash deposit sequences, enquiries with banks and inconsistencies in explanations. Thus, oral statements were corroborative and not sole foundation. Ratio vs. Obiter: Ratio - statements under Section 50, when corroborated by contemporaneous documentary bank evidence and transactional analysis, may validly contribute to formation of reasons to believe for attachment. Conclusion: The challenge that reliance on Section 50 statements alone invalidated the PAO is rejected; documentary corroboration existed and was relied upon. Issue 5 - Reduction of occupation and user charges fixed by the Tribunal Legal framework: Tribunal may permit continuation in possession of attached property subject to occupation/user charges; such orders consider equities, market rent and supporting proof. Precedent treatment: The Tribunal's earlier order fixed Rs. 50,000/month to allow continued possession; an application for reduction requires prima facie evidence of prevailing market rent or other grounds. Interpretation and reasoning: The Court noted prior voluntary acceptance and payment by the appellant of the imposed charges and the absence of any documentary evidence of prevailing market rent or justification for reduction. The original stay of eviction did not tie fixation to market rent; applicant's belated plea after benefiting from possession and payments lacked supporting material. Ratio vs. Obiter: Ratio - reduction of occupation charges cannot be granted in absence of supporting evidence of prevailing market rent or other cogent grounds, especially where the appellant already accepted and paid the originally fixed amount. Conclusion: Application to reduce occupation/user charges from Rs. 50,000 to Rs. 20,000 per month dismissed. Overall Disposition Having considered the material, the Tribunal concluded that (a) attachment against a non-named holder of property is maintainable under PMLA where material indicates possession of proceeds of crime; (b) sufficient reasons to believe under Section 5(1) existed at the time of PAO; (c) bank records, transaction patterns and failure to explain cash deposits supported the finding that the impugned property represented proceeds of crime; and (d) the application to reduce occupation/user charges was properly dismissed for lack of supporting evidence.