2025 (10) TMI 886 - AT - Money Laundering

Appeal dismissed; provisional attachment under PMLA upheld as Rs.8 crore held proceeds of crime, limited to proceeds.

The AT dismissed the appeal, upholding the provisional attachment under PMLA. The tribunal found Rs. 8 crore received by the appellant constituted ... Money Laundering - provisional attachment order - operation of Ponzi scheme - proceeds of crime in the hands of the appellant to the extent of Rs. 8 Crores - rightful receipt of the aforesaid amount on leasing out the hospital to M/s Lamjingba Finance Group - valuation of property - HELD THAT:- The lease deed was executed on 25.11.2019 while payment of Rs. 1.50 Crores is said to have invested by the appellant and his family. Thus, it cannot be considered to be a refund of the amount out of the security deposit. It is otherwise not made out in view of the statement of the appellant under Section 50(2) of PMLA 2002. The appellant categorically stated that the amount of Rs. 1.50 crores is yet to be received by the appellant with interest as it was an investment. It is coupled with the facts that the appellant further admitted that a sum of Rs. 2.2 Crores was received through cheques while Rs. 3.8 Crores in cash making it Rs. 6 Crores after the initial amount of Rs. 2 crores making out Rs. 8 Crores. In his statement recorded on 24.03.2023, the appellant, further, admitted that Rs. 6 Crores was received by him in different instalments and accordingly he verified the money receipts for the sum aforesaid. Out of the security amount, he was paid only Rs. 2 Crores by cheques. In reference to the repayment, it is stated that Rs. 1.50 Crores was invested in the scheme and the remaining amount is yet to be repaid for which appellant would make an endeavor to his best to return back the remaining amount - If the repayment has to be made to the investors, it could not have been without the knowledge of the financial company and with proper proof regarding deposit of the money by the investors and non-payment thereupon. It is lacking in the present matter. It is even realizing that the statements of the appellant himself were recorded in the year 2002 where he did not make a reference of 62 investors, rather, shown his willingness to repay the amount of security after making proper arrangement. Subsequent generation of the receipt speaks against the appellant and cannot be trusted. So far as the amount of Rs. 2,12,76,710/- is concerned, it is shown towards the payment to the doctors, medical equipments, pharmacies and sundry expenses which includes the payment towards the electricity charges. The appellant has placed on record the documents of various payments but are self-created documents. If the amount was paid by the appellant, he was required to disclose the source for payment and independent evidence for its receipt. A perusal of the electricity charge would reveal that the payment is of subsequent month to the cancellation of the lease-deed. Thus, it could not be taken towards the payment of due bills left unpaid by the accused company. The appellant has throughout referred to the payment in cash without any credible evidence to prove it. He could not clarify as to why the appellant made the payment to the doctors for the period when the hospital was under lease. It would be even for the medical equipments, pharmacies and other expenses - The sum of Rs. 2,12,76,710/- payment, thus cannot be accounted towards the repayment of the money out of Rs. 8 crores received by the appellant. It is not found that amount of security deposit received by the appellant to the extent of Rs. 8 Crores have repaid to the accused or its investors with required proofs so as to be accounted for. In the light of the aforesaid, there are no ground to cause interference in the impugned order based on the facts available on records. Value of the property which according to the appellant is worth of Rs. 100 Crores and otherwise as per the assessment by the appellants valuer it is for a sum of Rs. 25 Crores - HELD THAT:- The value of the property would as was at the time of execution of the deed and if it is not so mentioned then it to be taken as was existing at the time of taking possession of the property. Ld. Counsel for the appellant could not refer to any document showing at what value the land was purchased and thereupon the construction cost of the hospital. A document to this effect has not been submitted to show the value of the hospital to be of Rs. 100 Crores. The value of the property has to be ascertained based on the definition of ‘value’ given under the Act of 2002. In absence of any document to show purchase of land and amount involved in the construction to be for a sum of Rs. 100 Crores, it is unable to accept even the last argument raised by the appellant, rather, it is found that respondent have caused attachment of the property only to the extent of proceeds of crime in the hands of the appellant. This is not a case to cause interference in the impugned order on any of the arguments urged by the appellant and accordingly appeal fails and is dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the Provisional Attachment Order (PAO) confirmed by the Adjudicating Authority under the Prevention of Money Laundering Act, 2002 is liable to be set aside insofar as it attaches properties of the appellant alleged to represent proceeds of crime. 2. Whether the appellant was in possession of or continued to hold 'proceeds of crime' to the extent of Rs. 8 crores received from the accused and, if so, whether the appellant discharged the burden of proving repayment or legitimate disposition of that amount. 3. Whether the documents and oral statements relied upon by the appellant (receipts, ledger entries, payments to investors and third parties, alleged repayments) constitute adequate and credible evidence to negate the inference that the amount received was proceeds of crime. 4. Whether the extent and value of property attached is disproportionate to the alleged proceeds of crime and, if so, whether attachment should be limited by the statutory definition of 'value' under the Act. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of PAO confirmation Legal framework: The Adjudicating Authority's confirmation of a PAO under the Prevention of Money Laundering Act, 2002 follows investigation under the ECIR predicated on registered FIRs; attachment aims to secure proceeds of crime. The Act permits provisional attachment and subsequent confirmation upon satisfaction of nexus with proceeds. Precedent Treatment: No specific precedents were cited by the Tribunal in the judgment; the Court applied statutory principles and evidentiary findings from investigation and statements under Section 50(2) and (3) of the Act. Interpretation and reasoning: The Tribunal examined the predicate offence (Ponzi scheme, large-scale investor loss, ECIR) and the investigative material demonstrating transfer of funds from the accused to the appellant. The Tribunal found credible admissions in the appellant's Section 50 statement acknowledging receipt of Rs. 8 crores (differentiating amounts received in cash and cheque) and absence of reliable documentary proof of complete repayment. Given the established flow of funds and lack of convincing exculpatory proof, the Tribunal concluded that the Adjudicating Authority properly confirmed the PAO. Ratio vs. Obiter: Ratio - Confirmation of PAO was justified where investigative records and appellant's own statements establish receipt of alleged proceeds and repayment is not satisfactorily demonstrated. Obiter - observations on completeness of evidence for repayment and on ledger authenticity. Conclusion: The Tribunal refused to interfere with confirmation of the PAO; the attachment was held valid on the facts and evidence before it. Issue 2 - Whether appellant held proceeds of crime and burden of proof on repayment Legal framework: Under the Act, property representing proceeds of crime may be attached; the person in possession may seek to demonstrate that funds are not proceeds or have been returned/legitimately disposed of. Statements recorded under Section 50 are admissible and relevant to determination. Precedent Treatment: None applied; the Tribunal relied on statutory standards and evidentiary evaluation. Interpretation and reasoning: The Tribunal closely scrutinised the appellant's Section 50(2) statement where the appellant acknowledged receipt of Rs. 6 crores by three money receipts and another Rs. 2 crores by cheque, totalling Rs. 8 crores. The Tribunal noted inconsistencies - admission that Rs. 1.5 crores was an 'investment' and thus not a repayment, admissions that much of the receipt was in cash, and a lack of documentary proof of repayment to investors (no cheque numbers, bank account entries, or credible third-party corroboration). The Tribunal found the asserted repayments to 62 investors and payments to third parties were unsupported by independent proof and in some instances temporally inconsistent (e.g., electricity payments post-dating lease cancellation). The appellant's failure to produce bank account details despite undertaking to do so further weakened his claim. The Tribunal held that the appellant did not discharge the onus of proving that the alleged proceeds had been repaid or legitimately accounted for. Ratio vs. Obiter: Ratio - Admissions in investigative statements coupled with inadequate documentary evidence of repayment suffice to sustain attachment of alleged proceeds. Obiter - expectations regarding mode of proof (cheque numbers, bank entries) for repayments and payments). Conclusion: The appellant remained in possession of, or failed to rebut possession of, proceeds of crime amounting to Rs. 8 crores; repayment claims were not satisfactorily established. Issue 3 - Sufficiency and credibility of documents relied upon by appellant (receipts, ledger, payment vouchers) Legal framework: Documentary proof must be credible, contemporaneous and, where necessary, corroborated by bank records or third-party evidence to negate proceeds allegations; self-created documents and unsupported receipts are of limited weight. Precedent Treatment: No precedents invoked; the Tribunal applied basic evidentiary principles. Interpretation and reasoning: The Tribunal found several infirmities: money receipts were acknowledged but admission that part of the amount recorded was in fact adjusted as loan contradicted receipts; the claimed repayments to investors lacked identifiable payment mode or banking corroboration; ledger entries were for the period of the lease and did not explain change of operation/name; many claimed payments were self-created documents without independent verification. The Tribunal emphasized that repayment to investors could not plausibly occur without knowledge of the finance company if the company was the counterparty and that the appellant's explanations as to off-book cash payments and subsequent generation of receipts undermined credibility. Where documentary evidence was expected (bank entries for an alleged cheque payment, evidence of deposit of cash, third-party acknowledgements), none was produced. Ratio vs. Obiter: Ratio - Unsupported self-created documents and post-hoc receipts cannot discharge the appellant's burden of proving repayment of proceeds; contemporaneous banking evidence or credible third-party proof is required. Obiter - commentary on likely evidentiary standards for similar ledger and receipt disputes. Conclusion: Documents placed on record by the appellant were insufficient and not credible enough to rebut the inference that the amounts constituted proceeds of crime; they did not justify setting aside the attachment. Issue 4 - Valuation and proportionality of attachment vis-à-vis alleged proceeds; application of statutory definition of 'value' Legal framework: 'Value' under the Act is defined as fair market value of property on date of acquisition or, if acquisition date cannot be determined, date of possession. Attachment must be for value of proceeds; proportionality requires consideration of the statutory definition. Precedent Treatment: No case law cited; the Tribunal applied the statutory definition in Section 2(1)(zb). Interpretation and reasoning: The Tribunal observed conflicting assertions on property value (appellant's claim of Rs. 100 crores; appellant's valuer ~Rs. 25 crores; respondent's valuation ~Rs. 24 crores). The Tribunal held that value must be determined in accordance with the statutory definition - grounded in acquisition/possession date- and that the appellant failed to produce purchase/construction cost documents or contemporaneous valuation evidence to support the Rs. 100 crores claim. On available material, the Tribunal concluded that attachment was confined to the extent of proceeds (Rs. 8 crores) and the respondent had not attached property beyond the value of alleged proceeds on the record before the Court. Ratio vs. Obiter: Ratio - Property valuation for attachment must follow the Act's definition of 'value' and requires documentary proof of acquisition/possession valuation; in absence of such proof, inflated valuations by the appellant will not defeat attachment. Obiter - remarks on comparative valuer estimates and appropriate evidentiary approach to valuation disputes. Conclusion: The Tribunal rejected the appellant's contention of disproportionate attachment based on an unsubstantiated high valuation; attachment was held to be limited to the value of alleged proceeds as established on record. Cross-References and Final Conclusion Findings on Issues 2 and 3 are interdependent: the appellant's admissions in investigative statements (Issue 2) and the inadequacy of documentary proof (Issue 3) together support the Tribunal's conclusion that the PAO confirmation was proper (Issue 1). Issue 4 (valuation) was resolved by applying the statutory definition and requiring contemporaneous evidence of acquisition/possession value; in absence of such evidence, the appellant's high valuation was rejected. Overall conclusion: The Tribunal dismissed the appeal, holding that the appellant failed to establish that the amounts received were not proceeds of crime or had been repaid with adequate proof, and that the attachment conformed to the statutory scheme and value assessment.