2025 (9) TMI 1609 - AT - Money Laundering

Appeal dismissed; provisional attachment under PMLA upheld on strong banking documentary evidence and Section 2(na) scope

Shri Sankar Paul and Versus M/s Nandini Construction The Joint Director Directorate of Enforcement, Kolkata

AT dismissed the appeal and upheld the impugned provisional attachment order under PMLA. The Tribunal found overwhelming documentary and banking evidence ... Money Laundering - provisional attachment order - Coram prescribed under Sub-Section (1) of Section 6 of PMLA was not complete - Ld. AA failed to afford opportunity of any reply to the notice issued under Section 8(1) of the PMLA - corruptions against certain officials of SJDA, who made payments for non-existent work relating to supply of material and completion of projects assigned by SJDA to private parties. HELD THAT:- The perusal of the record brings out overwhelming evidence to corroborate the allegations of money flows from SJDA to M/s Eureka Traders Bureau, Kolkata and thereafter to the Appellants. The analysis of the Account of M/s Eureka Traders Bureau, Kolkata in the Union Bank of India reveals transfer of two substantial amounts of Rs. 3 crores and Rs. 2 Crores to the Appellant Firm M/s Nandini Construction on 05.12.2012 and 08.01.2013 vide specific Cheques for which the Cheque Numbers have been mentioned - The perusal of the record brings out overwhelming evidence to corroborate the allegations of money flows from SJDA to M/s Eureka Traders Bureau, Kolkata and thereafter to the Appellants. The analysis of the Account of M/s Eureka Traders Bureau, Kolkata in the Union Bank of India reveals transfer of two substantial amounts of Rs. 3 crores and Rs. 2 Crores to the Appellant Firm M/s Nandini Construction on 05.12.2012 and 08.01.2013 vide specific Cheques for which the Cheque Numbers have been mentioned. The Respondent Directorate has been authorised and empowered to investigate the offence of Money Laundering. Accordingly, every such case which is investigated is referred to by the ECIR Number. In fact, the definitional provision under Section 2 (na) makes it obvious that the ‘investigation’ includes all the proceedings under this Act conducted by the Director or by an authority authorised by the Central Government under this Act for the collection of the evidence. The Central Government as mentioned afore has authorized the Directorate of Enforcement and its Director and other officials for the said purpose. The Appellants have also argued that the statements of the Appellants were recorded under coercion. However, the allegation has been made without any substantiation. Moreover, such allegation has been made as part of the Additional Affidavit filed on 30.11.2015 much after the dates on which the statements were tendered by the Appellants under Section 50 of PMLA. The Impugned Order is therefore not interfered with - appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether an Adjudicating Authority under the Prevention of Money Laundering Act, 2002 (PMLA) can validly exercise powers and pass orders as a single-member Bench notwithstanding Section 6(2) prescribing a Chairperson and two other Members. 2. Whether the Adjudicating Authority violated procedural fairness under Section 8(2) of PMLA by failing to afford adequate opportunity/time to the appellants to present their defence before confirming a provisional attachment under Section 5. 3. Whether the provisional attachment of multiple bank accounts is vitiated where only some accounts received identified transfers from an alleged tainted source and other accounts had no direct inward transfers from that source. 4. Whether the Directorate/authorized investigating agency has power under the PMLA to register an ECIR and to investigate and refer matters under the Act. 5. Admissibility and evidentiary weight of statements recorded under Section 50 of PMLA where appellants allege coercion. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of single-member Bench of Adjudicating Authority Legal framework: Section 6(2) provides that the Adjudicating Authority shall consist of a Chairperson and two other members; Section 6(5)(b) empowers the Chairperson to constitute Benches of one or two members; Section 6(6) and 6(7) permit transfer and reconstitution of matters among Benches; Section 6(10) permits proceedings to continue despite vacancy. Precedent Treatment: The Tribunal relied on authorities holding that subsectional provisions must be read conjunctively and that powers under Section 6 can be exercised by a Bench comprising a single member, with citation to precedents upholding single-member adjudication and rejecting a construction that renders Section 6(5) and 6(7) nugatory. Interpretation and reasoning: The Court read Section 6 as a scheme providing for a full Authority (Chairperson plus two members) while expressly empowering the Chairperson to constitute Benches of one or two members. The legislative intent is construed as allowing flexibility; reading Section 6(2) in isolation to require a three-member bench in all cases would render other subsections meaningless. The statutory scheme contemplates diversity of fields among Members but does not convert that composition into a jurisdictional requirement that every order must be passed by a three-member Bench. Ratio vs. Obiter: Ratio - the composition provisions in Section 6 permit single-member Benches to validly exercise powers under the Act; obiter - observations on legislative intent regarding diversity of fields, while supportive, are ancillary. Conclusions: The challenge to the impugned order on the ground that it was passed by a single Member of the Adjudicating Authority is rejected; a single-member Bench was competent to pass the order under the statutory scheme. Issue 2: Adequacy of opportunity under Section 8(2) and timing vis-à-vis Section 5(1) - confirmation of provisional attachment Legal framework: Section 8(1) prescribes issuance of notice by the Adjudicating Authority; Section 8(2) requires opportunity to the person concerned to make a representation; Section 5(1) authorizes provisional attachment for up to 180 days and imposes a time-bound duty to confirm or otherwise the PAO within that period. Precedent Treatment: The Tribunal relied on the impugned authority's findings and prior decisions affirming that where opportunity was granted but not availed, the Authority may proceed; also invoked statutory mandate to act within 180 days under Section 5(1). Interpretation and reasoning: The Court accepted the Adjudicating Authority's factual recording that appellants were granted two opportunities but did not present their case or file written submissions on two occasions, and further time was refused. The statutory interplay requires the AA to dispose of the original complaint within 180 days of the PAO; therefore, indefinite extension is not permissible merely because the Act sets a minimum period for notice. The appellants cannot benefit from their default in failing to avail opportunities granted. Ratio vs. Obiter: Ratio - where an Authority furnishes opportunities in compliance with Section 8(2) and the party fails to avail them, the Authority may refuse further time and proceed to meet the time-bound obligation under Section 5(1); obiter - commentary on limits of 'reasonable time' beyond statutory minima. Conclusions: No violation of Section 8(2); confirmation of the PAO was procedurally valid given the recorded defaults and the statutory 180-day constraint under Section 5(1). Issue 3: Validity of attachment of multiple accounts where only some show direct transfers from alleged tainted source; burden under Section 24 Legal framework: PMLA presumes certain facts in relation to proceeds of crime and casts burden under Section 24 on persons to rebut presumption that property is proceeds of crime; attachment under Section 5 is predicated on reason to believe based on material in possession. Precedent Treatment: The Tribunal applied the statutory burden-shifting in Section 24 and relied on investigative material (bank statements, identified cheque numbers, confessional or explanatory statements recorded under Section 50) as supporting attachments. Interpretation and reasoning: The Court analyzed bank records of transfers from the alleged tainted source to specific accounts (identifying dates, amounts, cheque numbers) and found corroboration in statements recorded from relevant persons admitting receipt and purpose of transfers. The appellants' contention that some accounts were unattached to the alleged transfers was considered but rejected because (a) the specific transfers to certain accounts were established, (b) appellant statements corroborated the transfers and their purpose (withdrawal and handover to an official), and (c) appellants failed to discharge the evidentiary burden under Section 24 to show that the funds were not proceeds of crime or to explain legitimate source (no documentary evidence of distillation work or other legitimate receipt was furnished). The Authority's findings that inspections revealed no material supplied and no completion of works supported the inference of siphoning of funds. Ratio vs. Obiter: Ratio - where specific transfers from an alleged tainted source to accounts are evidenced and the person fails to rebut the statutory presumption under Section 24 with cogent documentary proof, attachment of the accounts is sustainable; obiter - remarks on insufficiency of bald assertions (e.g., payments for 'distillation work') absent documentary proof. Conclusions: Attachment of the accounts receiving identified transfers is upheld; attachments of associated accounts are not vitiated by the absence of direct transfers to each account where the material and statements support linkage and appellants failed to discharge the burden under Section 24. Issue 4: Power of Directorate/authorized agency to register ECIR and investigate under PMLA Legal framework: Section 49(1-3) empowers Central Government to appoint authorities for the Act; notification under Section 49 appoints the Director of Enforcement and delegates powers to exercise exclusive powers conferred under various sections including Section 5, 8, 50, etc.; Section 2(na) defines 'investigation' under the Act. Precedent Treatment: The Tribunal relied on the statutory notification and the definition of investigation to validate the Directorate's authority to register ECIR and conduct proceedings. Interpretation and reasoning: The notification exercising powers under Section 49 demonstrates that the Directorate has been authorized to exercise powers of investigation and other functions under the Act. The definitional provision encompasses proceedings conducted by the Director or authorized authority for collection of evidence; accordingly, registration and reference to ECIR is an established practice to denote the investigative proceedings under the Act. Ratio vs. Obiter: Ratio - the Directorate/authorized agency is empowered under PMLA and notification to investigate offences and register ECIRs as part of statutory investigative proceedings; obiter - none material. Conclusions: The challenge that the Directorate lacks power to register ECIR or investigate under PMLA is rejected; the notification and statutory scheme authorize such action. Issue 5: Admissibility and weight of statements recorded under Section 50 alleged to be under coercion Legal framework: Section 50 provides for recording of statements by persons during investigation under PMLA; general evidentiary principles require allegations of coercion to be substantiated. Precedent Treatment: The Tribunal required substantiation for coercion allegations and treated unexplained or belated claims skeptically. Interpretation and reasoning: The allegation of coercion was raised in an additional affidavit filed substantially later than the dates of recording of statements; no contemporaneous substantiation or material was produced to demonstrate coercion. In absence of corroborative material or prompt challenge, the statements recorded under Section 50 retain evidentiary value and were relied upon by the Authority for corroboration with bank records and other material. Ratio vs. Obiter: Ratio - bald or belated allegations of coercion do not automatically render Section 50 statements inadmissible; such claims must be substantiated with material evidence to negate their probative value; obiter - procedural admonition to avoid unsubstantiated late challenges. Conclusions: The challenge to the admissibility of Section 50 statements on grounds of coercion is rejected for want of substantiation; the statements are accorded evidentiary weight in corroboration with documentary bank evidence.