2025 (11) TMI 777 - AT - Money Laundering

Appellant's company laundered funds: Rs 208.31 crore gathered on false promises, Rs 86.10 crore diverted; attachments upheld

Ms Disha Chaudhary and M/s Dreamz Infra India Ltd. Versus The Deputy Director Directorate of Enforcement, Bangalore

AT dismissed the appeal and upheld provisional attachment of properties, finding the appellant's company received Rs. 208.31 crore from depositors on ... Money Laundering - provisional attachment order - commission of predicate offence - no material was produced to indicate that the property under provisional attachment is proceeds of crime - HELD THAT:- The appellant through its company received Rs. 208.31 crores from the depositors on false promises to give them a home. A sum of Rs. 86.10 crore was withdrawn in cash and diverted to the bank accounts of the shell companies or unrelated companies opened by the accused to launder the funds. The funds were used to even purchase immovable properties which remain even in the name of the appellant and therefore she could not disclose the source for acquisition of the properties. The proceeds of crime was used even to invest in the mutual fund in the name of the kids and even sponsoring IPLT, inviting Bollywood actors, spending huge money on marriage, birthday, etc. which was nowhere related to business activity of M/s Dreamz Infra India Pvt. Limited. There are no illegality in the action of the respondents to provisionally attach the properties obtained out of the proceeds of crime. The statement of other witnesses would also be relevant which includes the statement of Anoop M.K. It was along with the statement of Prateeth Rai. The appellant had acquired the properties under the provisional attachment out of the proceeds of crime and therefore she could not disclose the source. There are no reason to cause interference in the impugned order - appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the provisional attachment of immovable properties under the Prevention of Money-Laundering Act (PMLA) can be sustained where the respondent contends those properties are proceeds of crime alleged in predicate offences under the Indian Penal Code. 2. Whether the defence that a person ceased to be in effective control of the company (by leaving management and handing over charge) negates prima facie satisfaction that the attached properties are proceeds of crime. 3. Whether assertions that properties were acquired from personal sources (including purported settlement payments and film-production receipts) sufficiently rebut the provisional attachment in the absence of documentary decree or corroborative evidence. 4. Whether the material collected during PMLA investigation met the standard required for confirmation of provisional attachment-i.e., prima facie involvement in money-laundering and nexus between property and proceeds of crime. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of provisional attachment of properties as proceeds of crime Legal framework: The PMLA permits provisional attachment where the Adjudicating Authority is prima facie satisfied that any property is proceeds of crime; confirmation requires material to support that satisfaction. Precedent Treatment: No specific judicial precedent was invoked or displacing existing standard; the Tribunal applied statutory prima facie standard to the investigative material. Interpretation and reasoning: The Court examined FIRs, ECIR and investigative findings which alleged large-scale cheating and diversion of investor funds. The investigation showed receipt of substantial deposits by the company, unusual withdrawals, diversion to unrelated or shell entities, and acquisition of immovable assets in the accused's names. Expenditures inconsistent with business activity (investments in mutual funds for minors, entertainment sponsorships, large social events) were treated as indicia of laundering and dissipation of proceeds. Ratio vs. Obiter: Ratio - confirmation of provisional attachment can be sustained where the investigation produces material creating prima facie nexus between proceeds of predicate offence and properties subject to attachment. Obiter - descriptive observations about the nature of expenditures as inconsistent with business were supplementary to core finding. Conclusions: The Court held there was no infirmity in confirming provisional attachment because investigative material established a prima facie linkage of attached properties to proceeds of crime. Issue 2 - Effect of asserted relinquishment of management/control on attachment Legal framework: Liability under predicate offences and consequent PMLA proceedings depend on involvement and nexus to proceeds; formal resignation or physical absence does not automatically negate prima facie involvement if records or conduct indicate continuing control or benefit. Precedent Treatment: No precedent was applied to alter the statutory approach; the Tribunal relied on documentary and testimonial material to test the claim of earlier disengagement. Interpretation and reasoning: The appellant's assertion of having left management was contrasted with admissions in her own statements (non-resignation from the post of Managing Director and continuation as controlling officer) and with investigative findings. The Tribunal treated the admission that she did not formally resign as significant to rebut a claim of severed control. Further, transfers and transactions occurring during the period she remained in office were relied upon to infer involvement. Ratio vs. Obiter: Ratio - mere physical departure or alleged relinquishment is insufficient to defeat a prima facie finding where admissions and transaction records indicate continued control or benefit. Obiter - the Court's comment that evidence of capture of company by another person did not, by itself, absolve statutory attachment. Conclusions: The Tribunal found the claim of disengagement unavailing to defeat attachment because contemporaneous statements and transaction evidence indicated continued connection to the company and its funds. Issue 3 - Sufficiency of claimed personal sources (settlement payment, film receipts) to rebut attachment Legal framework: To rebut a provisional attachment, a person must show plausible, lawful source for the challenged properties; documentary or judicially recognized proof strengthens the claim; mere assertions are inadequate where investigation discloses alternate incriminating channels. Precedent Treatment: No precedent was cited to relax the requirement of corroboration; the Tribunal applied investigative evidentiary norms to judge sufficiency. Interpretation and reasoning: The appellant claimed receipt of a large settlement (Rs. 20 crores) and substantial movie-production receipts (around Rs. 10 crores) as sources for property acquisitions. The Tribunal found absence of supporting court decree, bank trail or corroborative documentation for the alleged settlement and transfers. The admitted transactions described in the appellant's written statement were instead used by investigators as links showing diversion from company accounts to personal or related entities. The absence of independent corroboration rendered the personal-source claim unreliable. Ratio vs. Obiter: Ratio - uncorroborated claims of private settlements or business income do not, in themselves, rebut investigational material establishing proceeds-of-crime nexus; documentary evidence or decree is necessary to displace prima facie satisfaction. Obiter - remarks on the implausibility of film expenditures being funded from company accounts without proper accounting. Conclusions: The Court held that the appellant failed to establish lawful sources for the properties; lack of documentary proof and investigative links to diversion supported confirmation of attachment. Issue 4 - Standard and sufficiency of material for prima facie satisfaction under PMLA Legal framework: Confirmation of provisional attachment under PMLA requires the Adjudicating Authority to be prima facie satisfied, based on materials gathered during investigation (ECIR, statements, banking and transaction trails), that the properties are proceeds of crime. Precedent Treatment: The Tribunal applied the statutory prima facie standard without invoking or overruling authorities; it assessed whether material cumulatively met that threshold. Interpretation and reasoning: The Tribunal reviewed the FIRs, ECIR, statements (including the accused's own statements under section 50(3) of PMLA), bank transaction patterns, diversion to shell entities, large cash withdrawals, and acquisition of assets inconsistent with declared business purpose. The Court treated admissions in the accused's statements (non-resignation, descriptions of transfers) as substantive corroborative material. The presence of multiple corroborative threads was held sufficient to meet the prima facie threshold, even if full proof of guilt remained to be established in a trial. Ratio vs. Obiter: Ratio - a cumulative assessment of investigative documents and admissions can satisfy the prima facie standard required to confirm provisional attachment; the standard does not demand conclusive proof but does require credible material linking property to proceeds of crime. Obiter - procedural observations about the relevance of third-party witness statements were ancillary. Conclusions: The Tribunal concluded that material collected during investigation met the prima facie standard for confirmation of provisional attachment and that no interference with the Adjudicating Authority's order was warranted. Final Disposition The Court affirmed the confirmation of provisional attachment: the investigative material, including admissions and transactional records, established prima facie involvement in predicate offences and nexus between the properties and proceeds of crime; assertions of innocence, relinquished management, and personal source receipts were unsubstantiated and insufficient to displace the attachment.