2025 (8) TMI 1299 - AT - Money Laundering

Challenge to provisional property attachment dismissed; appellant's assets not released despite alleged mismatch in seized assets

M/s. D.B. Jajodia (HUF) Versus The Deputy Director Directorate of Enforcement, Mumbai

AT dismissed the appellant's application challenging provisional attachment of properties. Tribunal held that the aggregate alleged proceeds of crime far ... Money Laundering - provisional attachment of properties - proceeds of crime - HELD THAT:- The total alleged proceeds of crime made by the accused persons is much more than the total attachment made by the ED, till date. Hence, the question of releasing the properties of the present appellant does not arise, just because additional properties (quite less than POC of Rs. 743 Crores) are attached by ED as direct/indirect proceeds of crime. Application dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether a property provisionally attached as 'value/equivalent' of proceeds of crime under the PMLA should be released after the ED subsequently confirms attachment of certain other properties as direct/indirect proceeds of crime. 2. Whether the pendency of a subsequent Adjudicating Authority order confirming attachment of other properties (alleged direct proceeds) mandates release of a property earlier attached as equivalent value when the total proceeds of crime exceed aggregate attachments. 3. Whether reliance on the proposition that 'alternative/tenant' properties (attached as equivalent value) stand released upon attachment/confirmation of direct proceeds is sufficient to compel release where overall proceeds of crime remain substantially higher than total attachments. 4. Procedural scope: Whether an appellant's narrow focus on release (rather than challenging merits) affects the Tribunal's exercise of discretion under Section 26 PMLA. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Release of property attached as 'value/equivalent' after subsequent confirmation of other properties as direct/indirect proceeds Legal framework: Attachment and confirmation under the Prevention of Money Laundering Act, 2002 permit provisional attachment of property as proceeds of crime or as equivalent/value where direct proceeds are not traceable; the Adjudicating Authority confirms attachment after consideration of material. Precedent treatment: The appellant relied on a High Court exposition that properties attached as equivalent (alternative attachable properties) are to be treated as tenant properties and may be released when direct proceeds are found/attached. The Tribunal considered that precedent but did not apply it to mandate release in the facts of this matter. Interpretation and reasoning: The Tribunal examined the quantum of alleged proceeds of crime (calculated at Rs. 743 Crore) and compared it to the aggregate value of all attachments made by the Enforcement Directorate (including the subsequently confirmed direct/indirect attachments). The total attachment value remained substantially lower than the total proceeds of crime. The Tribunal reasoned that where overall proceeds of crime significantly exceed total attachments, the mere fact that some properties have later been confirmed as direct/indirect proceeds does not automatically entitle the release of a property previously attached as equivalent/value. Ratio vs. Obiter: Ratio - Where the aggregate attachment value (direct and equivalent attachments) is materially less than the quantified proceeds of crime, an application for release of a property attached as equivalent/value will not be allowed solely because some other properties were later confirmed as direct proceeds. Obiter - Observations on the treatment of 'tenant' properties and the cited High Court view were considered but not treated as obliging release in such factual matrix. Conclusions: The Tribunal denied release of the property attached as equivalent/value because the total proceeds alleged substantially exceeded total attachments; thus the ground of subsequent confirmation of other properties did not satisfy release criteria. Issue 2 - Effect of aggregate quantum of proceeds of crime vis-à-vis aggregate attachments Legal framework: PMLA contemplates attachment of proceeds of crime and allows enforcement authorities to attach properties whose value corresponds to proceeds when direct proceeds are not available in India; quantification of proceeds is material to determining sufficiency of attachments. Precedent treatment: The Tribunal relied upon the submissions and investigation record to treat the quantification of proceeds as determinative for the release application; no authority was held to override an uncontested or sufficiently supported quantification that exceeds attachments. Interpretation and reasoning: The Tribunal accepted the ED's calculation of proceeds (Rs. 743 Crore) derived from investigation (siphoning of FCCB funds and bogus purchases), and noted that total attachments (including the subsequently confirmed properties) were far less than that figure. Given this imbalance, the Tribunal concluded that permitting release of any attached property would frustrate the statutory scheme and the investigatory object of PMLA. Ratio vs. Obiter: Ratio - When the quantified proceeds of crime exceed the total value of all attachments by a substantial margin, an application to release an attached property on the basis that alternative/direct properties were later attached should be refused. Obiter - Remarks that further quantification remains under investigation and that attachments may be reassessed at trial or in the Adjudicating Authority. Conclusions: The Tribunal dismissed the release application and appeal because the overall confiscatable pool (proceeds) remained far greater than the sum total of attachments. Issue 3 - Reliance on authority treating 'alternative/tenant' properties and effect of subsequent direct-attach confirmations Legal framework: Judicial pronouncements recognize the concept of alternative/tenant properties and permit attachment of equivalent value; courts have grappled with when such properties must be released if direct proceeds are later located and attached. Precedent treatment: The Tribunal acknowledged the cited High Court decision explaining the concept of tenant/alternative properties. That authority was examined but not applied to produce the relief sought because factual thresholds (aggregate proceeds vs attachments) differed. Interpretation and reasoning: The Tribunal observed that the legal proposition relied upon by the appellant does not automatically mandate release in every case where some direct proceeds are later attached. The decisive factor is whether the aggregate value of attachments satisfies the quantified proceeds of crime. Since the attachments remained insufficient to cover the alleged proceeds, the principle invoked by the appellant did not operate to require release. Ratio vs. Obiter: Ratio - The applicability of precedents on 'alternative' properties depends on factual parity between proceeds quantified and aggregate attachments; courts/tribunals need not release an equivalent-attached property where overall attachments are insufficient. Obiter - The Tribunal did not undertake a detailed overruling or distinction of the cited precedent beyond applying it factually. Conclusions: Reliance on the High Court exposition did not entitle the appellant to release under the facts; the Tribunal distinguished the cited authority on the basis of insufficiency of total attachments relative to total proceeds. Issue 4 - Procedural posture and scope of appeal where appellant limited its challenge to release Legal framework: Appeals under Section 26 PMLA permit challenge to Adjudicating Authority orders; appellants may raise substantive and/or interlocutory reliefs (including release). The Tribunal retains discretion to decide reliefs on merits and in light of the record. Precedent treatment: The Tribunal noted the appellant's strategic narrowing of arguments to seek release rather than contest the merits of attachment; this limited scope informed the Tribunal's assessment but did not preclude consideration of the ED's broader factual matrix. Interpretation and reasoning: The Tribunal observed that the appellant did not press substantive merits of the original attachment order but confined submissions to the release claim based on subsequent confirmations. The Tribunal nonetheless examined the full quantification and investigative material submitted by the ED to determine whether release was appropriate. Ratio vs. Obiter: Obiter - The Tribunal's observation that appellants remain free to raise all valid defenses at trial or before the Special Judge (PMLA) is permissive and procedural. Ratio - An appeal limited to seeking release can be decided against the appellant where the broader evidentiary picture (quantified proceeds v. total attachments) negates entitlement to interim or permanent release. Conclusions: The appeal and related interlocutory application were dismissed; the Tribunal granted liberty to raise defenses before the Special Judge, preserving statutory and procedural rights without affecting substantive adjudication by the trial court.