2025 (11) TMI 520 - AT - Money Laundering

Appeal dismissed and provisional attachment of properties upheld as equivalent proceeds where direct criminal proceeds were unavailable

Shri Arun Kumar Sahu, Shalini Sahu, Shri Piyush Kumar Sahu, Shri Tushar Sahu, Laxmi Sahu, Revti Sahu, Ranu Sahu, Shri Pankaj Kumar Sahu and Poonam Sahu Versus The Deputy Director, Directorate of Enforcement, Raipur

AT dismissed the appeal and upheld provisional attachment of properties. The tribunal found the appellants failed to disclose credible sources for ... Money Laundering - Provisional Attachment Order - disclosure of the source of income for acquiring the properties - reliabiility of statements of witnesses - properties acquired prior to the commission of crime have also been provisionally attached though not directly or indirectly connected with the commission of crime - Unavailability of the predicate offence so as to proceed under the Act of 2002. Reliabiility of statements of witnesses - HELD THAT:- Reference made to the statements of the witnesses relevant to the case to show that the source cooked up by the appellants would not stand. Their statements were not corroborated by other witnesses in regard to the borrowing of the money for purchase of the properties and even other statement. In general, the appellants were putting cash in the bank accounts in favour of those who had allowed their bank accounts to be used for transfer of money after accepting it in cash and then to be transferred through the banking channel. The appellants have failed to disclose the source of cash amount other than the statement that it was out of the agriculture income or the income of the firms controlled by the appellants. To substantiate the argument, the appellants failed to disclose sufficient agriculture land in their hands in the relevant years so as to earn disclosed amount. In few cases, agriculture land was purchased during the crime period and in few other cases just before it thus could not have generated agriculture income for earlier period so as to purchase other properties. The respondents even made analysis of income of the appellants in reference to the income-tax return for the relevant years - At the first instance, the appellants engaged a Chartered Accountant to use the bank account of others to pass on the cash in their account and thereupon to transfer the amount in the bank account of the appellants through the banking channel and at the second level, the amount was directly used for purchase of the properties though while doing so, consideration was paid through the banking channel and even in cash as per the statement of the seller, as recorded by the respondents - it is unable to accept the plea raised by the appellants that the purchase of properties under provisional attachment was out of disclosed source of income. It is otherwise a fact that appellant Ranu Sahu was a Government employee and thus recipient of the salary only but she had also accumulated many immovable properties in a short period of four years between the years 2017 to 2020. Looking to the facts given above, there are no reason to cause interference in the impugned order on the first ground urged by the appellant. Properties acquired prior to the commission of crime have also been provisionally attached though not directly or indirectly connected with the commission of crime - HELD THAT:- The argument has been raised without referring to the definition of “proceeds of crime” under Section 2(1)(u) of the Act of 2002. In case of non-availability of proceeds of crime, directly or indirectly obtained out of the criminal activity in reference to the predicate offence, properties of equivalent value can be attached as it would fall within the definition of “proceeds of crime”. In the instant case, even after attachment of properties acquired during the period of crime or subsequent, it was not enough to get all proceeds of crime thus properties of equivalent value acquired prior to the commission of crime have been provisionally attached. The judgment in the case of Shri Sadananda Nayak Vs. Directorate of Enforcement, Bhubaneswar [2024 (10) TMI 1619 - APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI] with relevant paras permit provisional attachment of the properties of the equivalent value if the proceeds acquired directly or indirectly are not available with the accused. In view of the judgment referred above and finding that the proceeds of crime was not available or vanished by the appellants, the properties of equivalent value have been provisionally attached. Thus, there are no error or illegality in attachment of the properties acquired prior to the commission of crime. Unavailability of the predicate offence so as to proceed under the Act of 2002 - HELD THAT:- An argument has been made by the counsel for the appellants that there was no reason to denote ‘RS’/’R’ to mean Ranu Sahu so as to co-relate the diary recovered from Rajni Kant Tiwari in reference of bribe money to the appellant. The counsel for the respondents contested the argument and submitted that ‘RS’ was mentioned in short to denote Ranu Sahu and similarly ‘R’ was to denote again Ranu who was the District Magistrate/Collector of Korba District at the relevant time. This is otherwise fortified from the statement of Nikhil Chandrakar one of the close associate of Suryakant Tiwari. The counsel for the appellants made an argument in reference to the Notification dated 15.07.2020 when appellant Ranu Sahu was not posted as District Magistrate/Collector of District Korba. There cannot be a debate on the aforesaid because Notification dated 15.07.2020 was issued much prior to the posting of the appellant Ranu Sahu in the District Korba. However, it would not absolve appellant Ranu Sahu from the allegation because the accused remained beneficiary of the Notification during the period she remained posted in District Korba. After collection of ill-gotten money by the accused, it was distributed among the Govt. officials/politicians which is proved by the evidence available on record. Reference of the Notification dated 15.07.2020 has been given to indicate modus operandi of the accused for extortion of Rs. 25 per ton for coal transport. Thus, even the last argument raised in reference to the Notification dated 15.07.2020 is also not made out. Appeal dismissed. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether properties provisionally attached under the Prevention of Money Laundering Act, 2002 (PMLA) can be sustained where appellants claim those properties were acquired out of disclosed sources (income from agriculture/business) and not out of proceeds of crime. 2. Whether properties acquired prior to the commission of the scheduled offence can be provisionally attached as 'proceeds of crime' or as property of equivalent value under Section 2(1)(u) of the PMLA. 3. Whether PMLA proceedings (attachment/ECIR) were maintainable in the absence of a surviving predicate (scheduled) offence, where the FIR/charge-sheet variably included or omitted a scheduled offence. 4. Whether reliance on statements recorded under Section 50(2)/(3) PMLA and on diary entries (abbreviations such as 'RS'/'R') suffices to link appellants to receipt of proceeds of crime for purposes of provisional attachment. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of provisional attachment when appellants assert acquisition from disclosed sources Legal framework: Provisional attachment under PMLA may be ordered where property is alleged to be 'proceeds of crime' as defined in Section 2(1)(u); the Adjudicating Authority examines material including statements under Section 50(2)/(3) and other evidence to form prima facie satisfaction. Precedent treatment: Tribunal relied on reasoning in prior orders and the approach in judgments interpreting PMLA evidentiary standard for provisional attachment; appellate review proceeds on sufficiency of material to sustain prima facie link. Interpretation and reasoning: The Court analyzed contemporaneous statements of the family and third parties, bank transaction patterns, sellers' statements and witnesses showing cash over-and-above registered transaction values, arranged bank entries and use of third-party accounts. The Court found appellants' claimed sources (agricultural income, unsecured loans) not corroborated: (a) agriculture holdings insufficient to generate declared amounts; (b) unsecured loans professed were contradicted by declarations of accountants and lenders; (c) cash payments corroborated by sellers' statements and bank analyses. The Tribunal concluded that appellants used layered cash-bank transactions and third-party bank accounts to mask cash origin; therefore the claimed disclosed sources did not withstand scrutiny. Ratio vs. Obiter: Ratio - provisional attachment may be sustained where documentary and testimonial material collectively discredit claimed lawful sources and establish a prima facie link between property acquisition and laundered funds. Obiter - none beyond factual application. Conclusion: The Tribunal found no ground to set aside provisional attachment on the basis that properties were acquired from disclosed lawful sources; the impugned order stands in this respect. Issue 2: Attachment of properties acquired prior to commission of scheduled offence (equivalent value doctrine) Legal framework: Definition of 'proceeds of crime' in Section 2(1)(u) includes (i) property derived/obtained directly or indirectly by criminal activity; (ii) the value of any such property (property of equivalent value); and (iii) where property is held outside India, property equivalent in value held within the country. Attachment of untainted property of equivalent value is permissible when tainted property is not available. Precedent treatment (followed/distinguished): The Tribunal followed the three-limbed interpretation articulated in higher court authority and accepted the Axis Bank / Delhi High Court approach that the second limb (value of any such property) permits attachment of untainted property of equivalent value when proceeds cannot be traced. The Tribunal rejected contrary High Court views that would render the second limb redundant. Interpretation and reasoning: The Tribunal reasoned that a two-limb construction would frustrate legislative intent and facilitate siphoning off of proceeds by accused immediately after commission of scheduled offence. The 'value of any such property' limb is purposive: to secure victim interests and preserve assets when tainted property is traceable or has vanished. The Court required (as in precedent) an assessment, even if tentative, of wrongful gain to justify equivalence and attachment of prior-acquired property only where proceeds are not available. Ratio vs. Obiter: Ratio - properties acquired prior to commission of scheduled offence can be provisionally attached as property of equivalent value under Section 2(1)(u) when: (a) proceeds of crime are not available/vanished; and (b) there is prima facie assessment of equivalence in value; safeguards for bona fide third parties must be observed. Obiter - discussion on policy consequences of alternate constructions. Conclusion: Given findings that proceeds were not fully traceable/available and that substantial acquisitions matched unexplained cash flows, the provisional attachment of properties acquired prior to the scheduled offence as equivalent value was upheld. Issue 3: Maintainability of PMLA proceedings in light of alleged non-existence/dropping of predicate (scheduled) offence Legal framework: PMLA action requires a predicate scheduled offence; however, whether a scheduled offence exists is determined by the FIR and ECIR context and finally by courts (discharge/acquittal/quashing required to negate predicate). Precedent treatment (followed/distinguished): The Tribunal relied on binding higher court authority holding that mere omission of a scheduled offence in a later charge-sheet does not amount to dropping of the scheduled offence for PMLA purposes where the FIR originally alleged scheduled offences and ECIR was recorded; final judicial disposition (discharge/acquittal/quashing) alone eliminates predicate for money-laundering proceedings. Interpretation and reasoning: The Tribunal noted that ECIR was recorded when Section 384 IPC was added to the FIR; subsequent procedural variations (charge-sheet content, transfers to other State Police) do not nullify the predicate for PMLA absent final judicial order. The Court further observed earlier higher court rulings rejecting argument that PMLA proceedings become untenable merely because later charge-sheet omitted a scheduled offence; prosecution cannot unilaterally 'drop' charges to evade PMLA. Ratio vs. Obiter: Ratio - PMLA proceedings are maintainable where the FIR/ECIR included scheduled offences at the time of ECIR recording and no judicial discharge/acquittal/quashing has occurred; omission in charge-sheet does not ipso facto negate predicate. Obiter - critique of selective reliance on interim bail orders that do not decide the predicate question. Conclusion: The Tribunal held ECIR and PMLA proceedings to be maintainable; the appellants' contention that no scheduled offence survived was rejected. Issue 4: Sufficiency of statements under Section 50(2)/(3) PMLA and diary entries to link appellants to proceeds of crime Legal framework: Statements under Section 50(2)/(3) PMLA, corroborative witness statements and documentary/bank analysis are admissible and relevant for forming prima facie satisfaction for provisional attachment; corroboration by independent witnesses/sellers and transactional records strengthens inference of taint. Precedent treatment: Tribunal treated Section 50 statements and contemporaneous third-party statements as material for provisional attachment; judicial background requires caution but permits reliance when statements and contemporaneous records form coherent probative mosaic. Interpretation and reasoning: Tribunal examined diary entries (abbreviations 'RS'/'R') and found contextual corroboration from statements of associates (e.g., Nikhil Chandrakar) and transaction patterns linking cash flows to appellants' family accounts and property purchases. The Court rejected appellants' argument that abbreviations could not be attributed to them, holding that such inferences are permissible where corroborated by other evidence. The Tribunal also scrutinized Section 50 statements of appellants and third parties, noting contradictions (e.g., claimed unsecured loans denied by alleged lenders/CA) and the practice of routing cash through third-party bank accounts and later repayment in cash, which was supported by sellers' testimony. Ratio vs. Obiter: Ratio - statements under Section 50 combined with independent corroborative evidence (sellers' statements, bank analyses, third-party admissions) can sustain provisional attachment; isolated diary not necessarily decisive but corroborated entries form admissible basis for prima facie link. Obiter - caution that mere diary reference without corroboration would be insufficient. Conclusion: Reliance on Section 50 statements and diary entries, when read with corroborative transactional and witness evidence, was held sufficient to link appellants to alleged receipt/use of proceeds and to justify provisional attachment. Cross-references and final disposition All issues were considered together: the finding that claimed lawful sources were not plausibly substantiated (Issue 1), combined with the unavailability/vanishing of traceable tainted property (Issue 2), and the presence of an ECIR founded on FIR allegations of scheduled offences (Issue 3), justified provisional attachment based on corroborative statements and diary entries (Issue 4). Consequently, the Tribunal dismissed the appeals and declined interference with the Adjudicating Authority's confirmation of provisional attachment.