2025 (10) TMI 970 - AT - Money Laundering

Provisional attachment of 68% of property upheld as proceeds of crime; appeal dismissed after evidence rejected

Shri Anand Chauhan Versus The Deputy Director, Directorate of Enforcement, Delhi

AT dismissed the appeal and upheld provisional attachment of 68% of the property as proceeds of crime. Tribunal found the 2012 amendments (effective ... Money Laundering - proceeds of crime - provisional attachment order of 68% of the property acquired by the Appellant through family settlement deed - applicability of amendment in 2012 of Section 3 of PMLA, which became effective from 15.02.2013 - Appellant has contended that the proceedings under the PMLA have been invoked retrospectively since the alleged period of generation of proceeds of crime relate to the period from the year 2009 to the year 2012 - HELD THAT:- The amendments made in Section 3 of PMLA and in Schedule to the PMLA were with effect from 15.02.2013. The contention is not even sustainable on the basis of the facts, since the ECIR was registered against the Appellant on 27.10.2015 and the PAO was issued on 26.07.2018 which was confirmed on 11.01.2019. It is obvious that it is only after the amendments in the afore cited sections of PMLA that the necessary action under the Act were initiated. Moreover, even on the basis of the interpretation of the law as made by the Hon’ble Supreme Court in the Judgment dated 22.07.2022 in the matter of Vijay Madanlal Choudhary and Ors. Vs. Union of India and Ors. [2022 (7) TMI 1316 - SUPREME COURT (LB)] the argument of the Appellant is not sustainable. Another argument which has been taken by the Appellant is that the alleged proceeds of crime is the commission which the Appellant earned through the sale of the LIC Policies - HELD THAT:- In this matter the Hon’ble Karnataka High Court in Razorpay Software Private Limited vs. Union of India [2024 (3) TMI 926 - KARNATAKA HIGH COURT] had observed that there was no evidence to suggest that Razor pay had knowledge that funds were derived from criminal activity or knowingly assisted in concealing illicit proceeds. However, in the Appeal in the present case, the facts are contrary. The Appellant is already an accused in the charge-sheet for the Scheduled offence as well as in the Prosecution Complaint filed under PMLA. Allegedly the Appellant had the knowledge of the earnings being proceeds of crime, as huge deposits in cash were made by the Appellant in his Bank accounts and he is on record to state that cash was received from the buyer of apples sold from the Orchards of Virbhadra Singh (HUF). Further the investigation revealed his claim to be false in view of the enquires made about the transport vehicles which supposedly carried the apples and for the stamp paper used to prepare the MOU between the Appellant and his principals. The Appellant has also challenged the Impugned Order on the ground that the property which has been attached is the immovable property which the Appellant owned by virtue of family settlement - HELD THAT:- The investigation has culled out the evidences which clearly bring out that the Appellant was involved in money laundering which generated proceeds of crime to the extent of Rs. 11,41,800/-. It is also found that many of the transactions indulged in by the Appellant were in cash. The attempt made by the Appellant to explain such transactions as arising from the sale from the Apple Orchard has miserably failed in the face of the evidence brought out during the course of investigation. The Appellant has tried to rely upon the interim ordergranted by the Hon’ble High Court of Delhi in the matter relating to Late Shri Virbhadra Singh and Smt. Pratibha Singh which also cannot carry forward his case, since the Appellant himself withdrew the writ filed in this regard before the Hon’ble High Court. The Appeal is dismissed being devoid of merit. ISSUES PRESENTED AND CONSIDERED 1. Whether amendments to Section 3 of the PMLA and inclusion of provisions of the Prevention of Corruption Act in the Schedule to PMLA with effect from 15.02.2013 can be applied in proceedings where the predicate scheduled offences were alleged to have been committed prior to that date, i.e., whether invocation of PMLA in such facts is retrospective and constitutionally impermissible. 2. Whether commission earned by an insurance agent (received for procuring LIC policies) can be treated as 'proceeds of crime' under Section 2(1)(u) of PMLA, including where the agent is accused in predicate offences and investigations reveal cash layering and suspected falsification. 3. Whether immovable property acquired pursuant to an antecedent family settlement or settlement deed (including deeds predating the alleged predicate offences) is immune from attachment under PMLA or can be treated as 'value of any such property' / deemed tainted property under Section 2(1)(u). 4. Whether the material before the Enforcement Directorate provided adequate 'reason to believe' under Section 5(1) of PMLA to issue a Provisional Attachment Order and whether the sufficiency of such reasons is amenable to detailed judicial inquiry. 5. Admissibility and impact of statements recorded under Section 50 of PMLA while the person was in judicial custody on the overall evidentiary matrix and validity of attachment where such statements form part of investigation. 6. Whether proceedings under PMLA against the appellant should be kept in abeyance pending disposal of related writ petitions filed by other accused persons before the High Court. ISSUE-WISE DETAILED ANALYSIS Issue 1: Applicability of post-2013 amendments to Section 3 of PMLA and inclusion of PC Act offences in Schedule - retrospectivity challenge Legal framework: The operative question turns on interpretation of Section 3 (as amended) of PMLA, the Schedule to the Act (which lists predicate/scheduled offences), and the temporal focus for money-laundering offences - i.e., whether the date of commission of predicate offence or the date of the money-laundering act is determinative. Precedent treatment: The Tribunal relied on the Supreme Court exposition in Vijay Madanlal Choudhary (22.07.2022) which clarified that money-laundering offences concern the date when a person indulges in processes or activities connected with proceeds of crime and that the offence may be continuing irrespective of when the predicate offence occurred. Interpretation and reasoning: The Court held that amendments effective 15.02.2013 cannot be characterized as impermissibly retrospective where ECIR/investigation and PAO issuance occurred after those amendments. Emphasis was placed on the continued/ongoing nature of money-laundering acts - possession, concealment, acquisition, use - which can occur after the predicate offence and render the post-amendment provisions applicable. Ratio vs. Obiter: Ratio - the relevant date for PMLA applicability is the date on which activities connected with proceeds of crime are undertaken; post-amendment invocation is permissible when the money-laundering conduct occurred after amendment even if predicate offence predates amendment. This follows and applies the Supreme Court ratio in Vijay Madanlal Choudhary. Conclusions: The retrospectivity challenge is rejected; PMLA provisions (post-2013) apply given initiation of investigative action and PAO issuance post-amendment and in light of the continuing-offence doctrine. Issue 2: Whether commission from LIC policies constitutes 'proceeds of crime' Legal framework: Definition of 'proceeds of crime' in Section 2(1)(u) of PMLA includes property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence and expressly includes the 'value of any such property.' The Act permits attachment of property equivalent in value where direct tainted property cannot be traced. Precedent treatment: The Tribunal considered (i) Razorpay (Karnataka HC) where lack of knowledge and absence of evidence insulated the intermediary, and (ii) authoritative expositions in Vijay Madanlal Choudhary and Axis Bank/Prakash Industries reasoning endorsing a broad interpretive approach to 'value of any such property.' The Tribunal observed that the Karnataka decision is distinguishable and under challenge. Interpretation and reasoning: The Tribunal contrasted facts: here the appellant is an accused in predicate charges; investigation disclosed large cash deposits, alleged layering, falsifications (transport vouchers, stamp papers), and inconsistencies in claimed provenance (apple orchard receipts). Given those investigative findings, the commission (or its equivalent in value) was reasonably attributable to proceeds of crime and/or used in layering, warranting attachment to the extent of established proceeds (Rs.11,41,800/-). Ratio vs. Obiter: Ratio - where an accused is implicated in predicate offences and the investigative material demonstrates cash layering, falsification and the inability to trace direct tainted assets, commission or other property in the hands of the accused can be treated as proceeds or as property equivalent in value under Section 2(1)(u). Conclusions: Commission received by the appellant could be regarded as proceeds of crime or its value, given the incriminating material, and attachment to the extent of proven laundered value was justified. Issue 3: Attachment of immovable property acquired under family settlement - scope of 'value of any such property' and protection of prior bona fide third-party interests Legal framework: Section 2(1)(u) and judicial interpretations (Axis Bank; Prakash Industries) allow attachment of property equivalent in value where actual tainted property is not traceable; safeguards exist for bona fide third-party interests acquired for valid consideration and acquired prior to the predicate offence. Precedent treatment: The Tribunal distinguished Pavana Dibbur where the appellant was not an accused; it relied on Axis Bank and Delhi High Court decisions (Prakash Industries) endorsing the broad reading of 'value of any such property' and permitting action against pre-acquisition properties in limited circumstances subject to safeguards. Interpretation and reasoning: The Court held that simply being an heir/beneficiary under an earlier family settlement does not make property immune if the accused had an interest in it and if proceeds of crime cannot be traced. The Tribunal noted the need to apply Axis Bank safeguards (proving interest at the time of proscribed activity; protection for bona fide third parties) and concluded that evidence showed the appellant's involvement and misuse of cash, supporting attachment of 68% share equal to alleged proceeds. Ratio vs. Obiter: Ratio - properties acquired prior to predicate offences can be subject to PMLA action to the limited extent of the value of proceeds where tainted property is untraceable, provided statutory safeguards and tests (as in Axis Bank) are observed; prior family settlement does not automatically bar attachment. Conclusions: Attachment of the appellant's share in immovable property was permissible to the extent of the established proceeds value, subject to attendant statutory safeguards; the family-settlement plea did not preclude attachment on the facts. Issue 4: Adequacy of 'reasons to believe' under Section 5(1) and judicial review of sufficiency Legal framework: Section 5(1) permits provisional attachment where the officer has 'reason to believe' that property is proceeds of crime. Judicial review is limited to whether there was material with nexus to the belief; courts cannot probe adequacy or substitute their judgment for officer's subjective satisfaction. Precedent treatment: The Impugned Order's rationale (quoted) and Tribunal's analysis adopt established tests: existence of material, rational nexus to belief, and not mere ipse dixit; sufficiency in depth is not for the court to re-examine except to detect absence of any material link. Interpretation and reasoning: The Tribunal found documentary material, bank analyses, witness statements, inconsistencies and other corroboration forming a rational basis for the Deputy Director's belief; PAO and ECIR dates and charge-sheeting supported the existence of material. The Tribunal rejected the contention that reasons were absent or baseless. Ratio vs. Obiter: Ratio - where material with relevant nexus exists, the 'reason to believe' requirement is satisfied; courts should not re-weigh adequacy beyond checking for nexus and existence of material. Conclusions: The reasons to believe were adequately recorded and linked to material; PAO issuance under Section 5(1) was valid. Issue 5: Admissibility/evidentiary impact of Section 50 statements recorded during judicial custody Legal framework: Section 50 statements are admissible subject to law; recent Supreme Court pronouncements were cited by appellant to challenge custody recordings. Precedent treatment: The Tribunal noted that only two statements were recorded while in custody; the prosecution relied on other non-custodial statements, third-party statements, bank analyses and documentary inquiries. Prem Prakash (Supreme Court) was cited by appellant but the Tribunal assessed the totality of evidence. Interpretation and reasoning: The Tribunal held that even if custody statements were subject to challenge, the investigative matrix contained independent and corroborative materials (bank records, transport and stamp vendor inquiries, other witnesses) establishing involvement and laundered amount; therefore admissibility issues did not vitiate the attachment. Ratio vs. Obiter: Ratio - defect (if any) in a subset of statements does not nullify an attachment where independent corroborative material establishes reasonable belief; admissibility challenges to specific statements do not automatically invalidate the PAO. Conclusions: The PAO and subsequent confirmation were sustainable on the overall evidentiary record notwithstanding the two custodial statements. Issue 6: Seeking abeyance of PMLA proceedings pending related writ petitions Legal framework & reasoning: Petition for abeyance hinges on whether relief granted in related writs binds or prejudices present proceedings and whether applicant sought and obtained similar interim relief previously. Interpretation and reasoning: The Tribunal observed the appellant himself withdrew his writ seeking abeyance before the High Court; accordingly the appellant could not seek the same relief before the Tribunal, and an interim order granted to other accused in separate writs did not entitle appellant to identical relief. Conclusions: Abeyance was not warranted; withdrawal of earlier writ precluded reliance on that remedy to delay Tribunal proceedings. Overall Conclusion The Appeal was dismissed as devoid of merit: post-2013 amendments and Schedule inclusions lawfully applied; commission and property could be treated as proceeds/value of proceeds given investigative material; reasons to believe were adequately recorded; custodial statement issues did not fatally impair the evidentiary matrix; family settlement did not confer absolute immunity; and abeyance was not warranted. The Tribunal applied extant precedents (notably Vijay Madanlal Choudhary and Axis Bank/Prakash Industries interpretations) and distinguished decisions relied upon by the appellant where factually inapposite.