Tracing of tainted funds and independent money-laundering action upheld despite pending insolvency proceedings

Where the record showed that loan funds were diverted from the sanctioned project, transferred to another entity, and partly used for unrelated repayment, the attached shares were treated as representing value equivalent to tainted funds and the attachment was justified. Pending insolvency proceedings and a stated moratorium did not by themselves bar action under the Prevention of Money Laundering Act, because attachment under the anti-money laundering framework operates independently to protect proceeds of crime unless some final insolvency consequence affects the property. The challenge therefore failed on both grounds, and the impugned attachment was sustained.

---

---

Issues: (i) Whether the attachment of the appellant's property was sustainable on the ground that the loan funds were diverted and formed part of the proceeds of crime; (ii) Whether proceedings under the Prevention of Money Laundering Act could be interdicted because insolvency proceedings and moratorium were stated to be pending.

Issue (i): Whether the attachment of the appellant's property was sustainable on the ground that the loan funds were diverted and formed part of the proceeds of crime.

Analysis: The appellant's own pleadings showed sanction and disbursement of the loan in the relevant period, including disbursement on 24.09.2018, and the record disclosed further diversion of the borrowed amount for purposes other than the sanctioned project. The transfer of funds to another entity, the admitted utilisation of part of the amount for unrelated repayment, and the surrounding circumstances supported the finding that the money was diverted and that the attached shares represented value equivalent to the tainted funds. The challenge based on a later factual narrative was found inconsistent with the pleadings and record.

Conclusion: The attachment was held to be justified and the appellant's challenge on this issue failed.

Issue (ii): Whether proceedings under the Prevention of Money Laundering Act could be interdicted because insolvency proceedings and moratorium were stated to be pending.

Analysis: The mere initiation of insolvency proceedings or the existence of a moratorium was held not to bar action under the Prevention of Money Laundering Act where the object was to protect the proceeds of crime. The Tribunal treated the anti-money laundering statute as operating in its own sphere and held that, absent approval of a resolution plan or other final insolvency consequence affecting the property, attachment proceedings could continue.

Conclusion: The insolvency-based objection was rejected and did not prevent the impugned attachment.

Final Conclusion: The appeal did not succeed because the Tribunal affirmed the finding that the property was liable to attachment as proceeds of crime and that insolvency proceedings did not oust the enforcement action under the money-laundering .

Ratio Decidendi: Where the record supports diversion of tainted funds, property traceable to or representing those funds may be attached under the prevention of money laundering framework, and pending insolvency proceedings or moratorium do not by themselves bar such action.

---