2025 (10) TMI 971 - AT - Money Laundering

Appeals dismissed; PMLA provisional attachments upheld as proceeds of crime attachable despite temporal predicate-offence limits and innocent holders

Mrs. Veena Kumar Srivastava, Mr. Pankaj Kumar Srivastava and Mrs. Vidhi Kumar Versus The Deputy Director, Directorate of Enforcement, Mumbai

AT dismissed the appeals and upheld ED's provisional attachment orders under PMLA, finding money-laundering continued post-amendment and the temporal ... Money Laundering - Provisional attachment order - criminal conspiracy to cause wrongful gain for themselves and wrongful loss to the shareholders and foreign currency convertible bondholders - siphoning off shareholders money by showing bogus purchases of software modules and also failed to redeem Foreign Currency Convertible Bonds - creating a web of shell companies in various countries with a malafide intention to defraud the shareholders. Whether the proceedings under PMLA are not applicable given the fact that the Sections 120 B & 420 of IPC were not in the schedule of PMLA when those alleged offences took place in the year 2008? - HELD THAT:- The relevant date is a date when the tainted property is projected to be untainted and as a consequence to it, the ECIR is recorded showing offence under Section 3 of the 2002 Act. The issue aforesaid has been decided in the case of Dyani Antony Paul vs Union Of India [2020 (12) TMI 1296 - KARNATAKA HIGH COURT] where it was held that 'A person acquiring assets through illegal means who comes before the society and claims that said money was acquired by proper means, then he would be guilty of the offence of money laundering. A person might have committed an offence long back and the proceeds of it is being placed, layered or sought to be integrated to the main stream of economy, then also, he is said to have committed the offence of money laundering. Incorporation of certain offences in the Schedule is to bring it within the net of PML Act namely, proceeds of that crime within the provisions of the Act. For constituting an offence under Section 3 of PML Act, it is the connection of transaction to proceeds of crime which is sufficient and not the crime.' The relevant date to find out offence of money laundering is when proceeds is projected to be untainted property - in the present case, the offence of money laundering continued even post amendment, thus, the contention of the appellants in issue no.1 falls flat. Hence, the issue is decided against the appellants and in favour of respondent ED. Whether the property should not be attached in view of the fact that the appellants of appeal no 1 & No. 3 are not an accused in the scheduled offence? - HELD THAT:- The law on this issue now stands settled by the landmark judgment of the Hon’ble Supreme Court in the case of Vijay Madanlal Choudhary and Ors. vs. Union of India (UOI) and Ors. [2022 (7) TMI 1316 - SUPREME COURT (LB)] where it was held that 'We find force in the stand taken by the Union of India that the objectives of enacting the 2002 Act was the attachment and confiscation of proceeds of crime which is the quintessence so as to combat the evil of money-laundering. The second proviso, therefore, addresses the broad objectives of the 2002 Act to reach the proceeds of crime in whosoever's name they are kept or by whosoever they are held.' Therefore, the property in the hands of any person in possession of proceeds of crime can be attached even if he is not accused of the offence of money-laundering. This argument of the Appellants is accordingly, rejected and issue is decided against the Appellants and in favour of Respondent No. 1. Whether the appellant in appeal no. 1 had sufficient legal source to purchase the impugned property? - non-application of PMLA due to amendment of 2009 w.e.f. 01.06.2009? - HELD THAT:- The fact that the entire housing loan of Rs. 20 Lakhs was discharged by appellants within a short span from February 2003 to May 2005, points towards the direction that the said repayment was made by them from the proceeds of crime. Thereafter, appellant Shri Pankaj Srivastava (husband of appellant no.1 and also an accused) transferred his entire share to his wife, Mrs. Veena Kumar Srivatava, in September 2011, which is nothing but a sham transaction to protect the property from attachment, as the appellant no.2 being the promoter as well as Chairman of the M/s GL anticipated the action to be carried out against him and the company and thus, acted mischievously to avoid any action being taken against the properties. Hence, the impugned properties are covered under the scope of PMLA. The mala fide intention on the part of appellants is also apparent from the fact that later-on, the property was gifted by the appellant no. 1 to her married daughter, i.e. appellant no. 3, which is also another sham transaction done with the motive to avoid the property from being attached as the same was carried out after the registration of FIR against appellant no.2, i.e. husband of appellant no.1. The reasoning given by appellant no.1 for gifting the property to her daughter that it was to avoid the expenditure involved in Succession Certificate is apparently incorrect on the ground that the Appellant no.3 is the only child, and thus, the only legal heir of the Appellant no.1 & 2. Hence, this issue is also decided against the appellants and in favour of the respondent. The present appeals are hereby dismissed, being devoid of any merits. ISSUES PRESENTED AND CONSIDERED 1. Whether proceedings under the Prevention of Money Laundering Act, 2002 (PMLA) are inapplicable because the predicate offences (sections 120B & 420 IPC) were not part of the Schedule to the PMLA at the time those offences were allegedly committed. 2. Whether immovable property held by persons who are not accused in the scheduled offence can be attached under the PMLA. 3. Whether the appellant asserting independent legal sources for acquiring the impugned immovable property has rebutted the presumption that the property is derived from proceeds of crime. ISSUE-WISE DETAILED ANALYSIS Issue 1: Applicability of PMLA where predicate offences pre-date scheduling Legal framework: Section 3 (offence of money-laundering) and the concept of 'proceeds of crime' under section 2(1)(u) of the PMLA focus on acts or processes connected with proceeds derived from scheduled offences. The relevant inquiry is the date when property is 'projected to be untainted' or when the act of laundering (possession, use, concealment, projection as untainted property, etc.) occurs. Precedent treatment: The Tribunal relied on authoritative High Court and Supreme Court analyses (as quoted in the impugned order) that treat money-laundering as an independent and potentially continuing offence, requiring examination of the date of laundering rather than the date of the predicate offence. Interpretation and reasoning: The Court reasoned that Article 20 (prohibition on retrospective criminal law) does not obstruct prosecution under PMLA for money-laundering where the laundering acts occurred after the PMLA became applicable. The critical factual question is when the laundering acts (projection as untainted property, concealment, use, possession) took place; these can occur subsequent to the predicate offence and fall within PMLA's ambit. The Tribunal observed that money-laundering is a continuing offence; therefore, subsequent acts of dealing with proceeds render PMLA applicable irrespective of the date of the predicate offence. Ratio vs. Obiter: Ratio - the relevant date for PMLA liability is the date of the laundering act or projection of proceeds as untainted, not the date of commission of the predicate offence; money-laundering may be prosecuted even if the scheduled offence predates inclusion in the Schedule, so long as laundering acts continued thereafter. Obiter - ancillary observations on historical amendments and explanations. Conclusion: Issue decided against appellants; PMLA proceedings are maintainable where the act of money-laundering occurred or continued after the relevant provisions became operative. Issue 2: Attachment of property held by persons not named as accused in the scheduled offence Legal framework: Section 5 (and related provisions) permit provisional attachment of property that is proceeds of crime or likely to be so; the statutory scheme targets proceeds irrespective of the formal identity of the holder. The second proviso to section 5 and the objectives of the PMLA emphasize reaching proceeds 'in whosoever's name they are kept'. Precedent treatment: The Tribunal relied on higher-court jurisprudence establishing that liability under PMLA is not confined to those named as accused in the predicate offence; any person involved in process or activity connected with proceeds of crime may be subject to attachment and subsequent prosecution under Section 3. Interpretation and reasoning: The Tribunal held that the sweep of PMLA extends to any person who is involved in activities connected with proceeds of crime - including possession, acquisition, use, concealment, or projection as untainted property - even if that person was not an accused in the predicate FIR/charge-sheet. The purpose of the statutory scheme is to deprive criminals of the benefit of proceeds and to attach properties held by intermediaries or transferees where involvement or benefit can be established. Ratio vs. Obiter: Ratio - property in the hands of persons possessing or dealing with proceeds of crime can be provisionally attached under PMLA even if those persons are not accused in the predicate offence; absence of prior naming in the charge-sheet does not preclude attachment. Obiter - policy observations concerning parliamentary intent to reach proceeds in any name. Conclusion: Issue decided against appellants; attachment of property held by non-accused transferees is permissible where connection to proceeds of crime is established or reasonably inferred. Issue 3: Sufficiency of asserted lawful source to rebut presumption of proceeds of crime Legal framework: PMLA places on the authorised officer (and ultimately the adjudicating authority) the duty to examine material to establish that property is proceeds of crime; alleged owners may present evidence to show legitimate sources. The inquiry requires documentary proof, bank records, explanations for transfers, and tracing of funds. Precedent treatment: The Tribunal applied established standards that where claims of lawful source are raised, the adjudicating authority must scrutinize bank statements, loan records, receipts, and contemporaneous documents to accept or reject the claim; sham transfers and transfers made with mala fide intent to avoid attachment are cognisable under PMLA jurisprudence. Interpretation and reasoning: The Tribunal evaluated the evidence offered by the appellants (sale deeds, loan closure letter, bank statements, VRS/gratuity receipts, sale-proceeds receipts, later transfers and gift deed). It identified several infirmities: unexplained transfers from the retirement account soon after VRS, incomplete/partial bank statement production, heavy unexplained cash and bank deposits, repayments of housing loan in a short span that could indicate use of tainted funds, timing of intra-family transfer of share (post registration of FIR) and subsequent gift to daughter - events that suggested sham transactions and mala fide intent to evade attachment. The Tribunal treated the husband's and wife's finances as operating on a unitary basis given cross entries and inter-account transfers, undermining the claim of independent lawful source. The Tribunal also noted that certain contentions (e.g., investment and surrender of a different property to yield large sums) lacked corroborative documents and so remained contentious matters to be tested at trial. Ratio vs. Obiter: Ratio - where claimed lawful source is inadequately documented, contains unexplained transfers, exhibits timing indicative of purpose to defeat enforcement, or where transfers occur after knowledge of investigations, the presumption of proceeds of crime is not rebutted and attachment is sustainable. Obiter - observation that contested factual issues (e.g., whether a particular receipt was legitimately derived from a sale/booking) may be resolved in trial by evidence and cross-examination. Conclusion: Issue decided against appellants; the appellants failed to satisfactorily demonstrate that the impugned property derived from lawful sources. The transfers and subsequent transactions were found to be sham or inadequately explained, supporting confirmation of provisional attachment. Final outcome (derivative conclusion) The appeals were dismissed as devoid of merit: (a) PMLA proceedings were held maintainable notwithstanding the date of the predicate offences because laundering acts continued subsequently; (b) property held by persons not named in the predicate charge can be attached where connected to proceeds of crime; and (c) the evidence produced by the claimants did not satisfactorily rebut the inference that the impugned property represented proceeds of crime or that transfers were contrived to evade attachment. The adjudicating authority's confirmation of the provisional attachment was upheld.