2025 (11) TMI 1028 - AT - Money Laundering

Appeal dismissed; ED's provisional attachment and confirmation upheld; assets attached as proceeds of crime; factual issues reserved

The AT dismissed the appeal and upheld the ED's provisional attachment and adjudicating authority's confirmation. The tribunal found sufficient evidence ... Money Laundering - Provisional Attachment Order - proceeds of crime - illegal mining - scheduled offence or not - attachment order passed by the ED and the confirmation order passed by the Adjudicating Authority are without any reason, seeing the fact that the appellants have purchased most of the properties out of income earned and declared in ITRs - properties purchased prior to the enactment and coming into force of PMLA Act - property purchased prior to the quarrying permit dated 20.04.2006 are not covered under PMLA - alleged predicate offences under Section 420, 467, 471, 120-B of IPC and Section 3 & 4 of Explosive Substances Act - appellants are not directly or indirectly attempted to have indulged in or knowingly not assisted or actually not involved in the activity connected with the proceeds of crime and further not involved in projecting or claiming such properties as proceeds of crime as untainted property. Whether the matter needs to be remanded to the Adjudicating Authority for passing fresh order? - Whether the attachment order passed by the ED and the confirmation order passed by the Adjudicating Authority are without any reason, seeing the fact that the appellants have purchased most of the properties out of income earned and declared in ITRs? - HELD THAT:- In the present case, many FIRs were registered against the accused persons, including the appellants for carrying out illegal excavation of granite stones from the unleased State Government land or the land reserved for common use of the community, which was adjoining to their lease lands. Final Reports are already filed by the police in the said FIRs, wherein they were arrayed as accused persons - The sale consideration shown on the Document was only Rs. 10,50,000/-, whereas the Guideline value is Rs. 1,02,00,000/- and the Fair Market Value would be much higher. All the transactions were made only in cash and hence the quantum of cash transacted among themselves is not known. Shri C. Panneer Mohamed in conspiracy with Smt. S. Manimegalai and others had transferred the landed property of 35 Cents at Melur into the name of Shri S. Siddique Raja in order to escape the clutches of law, which is nothing, but an act of laundering the proceeds of crime derived by him out of the commission of the said scheduled offences. Therefore, it stands to reason that the subject landed property is nothing but property involved in Money laundering. The proceeds of crime are then utilized in acquisition of the assets in the form of 511 Immovable properties in the names of the aforesaid persons and their family, which are totally valued at Rs. 17.46 Crores (approximately) as per the registered documented value, and the Guideline value prescribed by the Government of Tamil Nadu is to the tune of Rs. 96.05 Crores (Approx.). Moreover, the appellants have not given any proper defence to negate the above conclusions made out in investigation and thus, the burden of proof has not been discharged by them. There is no ground to remand this matter to the Adjudicating Authority for passing the fresh order. Even otherwise, the Hon’ble High Court of Karnataka in recent case titled as Joint Director ED v. M/s Devas Multimedia Pvt. Ltd. in Miscellaneous Second Appeal No. 24 of 2020 has held that this Appellate Tribunal ATFP is not empowered to remand any matter to the Adjudicating Authority for passing the fresh order, in absence of any specific provision in this regard in PMLA, 2002 - Issues decided against the appellants and in favour of respondent ED. Whether properties purchased prior to the enactment and coming into force of PMLA Act i.e. 01.07.2005 are not covered under PMLA? - Whether the property purchased prior to the quarrying permit dated 20.04.2006 are not covered under PMLA, being untainted properties? - HELD THAT:- The judgment of the Apex Court in the case of Smt. Pavana Dibbur v. The Directorate of Enforcement [2023 (12) TMI 49 - SUPREME COURT] has also been considered. However, findings given by three judges Bench of the Apex Court in the Vijay Madanlal Choudhary v. Union of India [2022 (7) TMI 1316 - SUPREME COURT (LB)] has been relied to give interpretation to the definition. In the light of the above, there are no force in the first argument when the proceeds out of crime was not available with the appellant, the property of equivalent value has been attached. In the light of the aforesaid, second limb of the definition of “proceeds of crime” has been applied to attach the property of equivalent value. Thus, this ground raised by the appellants cannot be accepted - issues decided against the appellants and in favour of respondent ED. Whether the impugned order is liable to be set-aside, qua the properties at Serial no 1 to 55 under Schedule III of complaint, as the alleged predicate offences under Section 420, 467, 471, 120-B of IPC and Section 3 & 4 of Explosive Substances Act were inserted in the list Schedule Offences under PMLA, w.e.f. 01.06.2009? - Whether the impugned order needs to be set-aside on the ground that the illegal mining is not a Scheduled Offence? - HELD THAT:- The appellants asserted regarding the non-application of PMLA due to amendment of 2009 w.e.f. 01.06.2009. With regard to the same, we find 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 relevant date to find out the scheduled offence and the offence of money laundering is when it is projected to be untainted property to make out an offence under section 3 of the Act of 2002. Regarding the fact that illegal mining is not a scheduled offence and thus, impugned order should be set aside merely on this ground does not hold good, as there are many other predicate offences committed by the appellants which fall under the scheduled offences as mentioned above and hence, PMLA proceedings won’t get affected merely because one of the many offences committed is not covered under the scheduled offence - Issues decided against the appellants and in favour of respondent ED. Whether the appellants are not directly or indirectly attempted to have indulged in or knowingly not assisted or actually not involved in the activity connected with the proceeds of crime and further not involved in projecting or claiming such properties as proceeds of crime as untainted property, considering the fact that the attached properties were purchased out of income earned from the quarrying operation, during the period from 2005-2012 to the extent of USD 6710183 equivalent to Rs. 35 Crores? - HELD THAT:- The contention that the attached properties were purchased out of the income earned from quarrying operations during the period from 2005-2012 and thus these properties should not be attached does not hold good in light of the fact that firstly, as per investigation the properties were bought using illegal acquired money by excavating granite from the State Government Land or Community Land, as mentioned in para no. 2 above. Shri C. Panneer Mohamed in conspiracy with Smt. S. Manimegalai and others have transferred the land, which was in his possession under power of attorney, in order to escape the clutches of law, which is nothing but an act of laundering the proceeds of crime derived by him out of the commission of offences in FIRs/Chargesheets of Madurai District Police of Tamil Nadu. Therefore, it stands to reason that the subject landed property as detailed in SCHEDULE-II (@para 17@pg. 69,70 of PAO) is nothing but property involved in Money laundering and secondly, even if it is assumed that the properties were bought using the legal money, still the same can be attached as “value thereof” in case the POC is not available, which is about Rs. 450 crores and the attached properties are quite less in value. Hence, the issue is accordingly hereby decided against the appellants and in favour of respondent ED. Whether the PAO and its confirmation vide impugned order needs to be set aside on account of laches? - HELD THAT:- The contention regrading laches in passing the PAO and prayer for setting aside of the order under Section 5(1) of PMLA on that ground does not hold good in the present case, because the mandate of time period for passing the PAO has not been provided under Section 5(1), rather the time period is provided for confirmation of the PAO. Hence, this is no ground for setting aside the impugned order. Hence, the issue is accordingly hereby decided against the appellants and in favour of respondent ED. Whether the property of appellant K. Murugesan jointly owned with appellant C. Panneer Mohmad purchased vide sale deed dated 15.12.2006, needs to be released to the extent of his share i.e. 50%, seeing the fact that he is neither accused in charge sheet case pertaining to predicate offence, nor arrayed as accused in prosecution complaint under PMLA? - HELD THAT:- The fact that whether Sh. K. Murugesan in fact purchased the said property out of investment from his own pocket or whole property was purchased by Sh. Paneer Mohammad cannot be ascertained by this Appellate Tribunal as appellant has not filed his saving bank statements to show that he was having sufficient savings to purchase the property. Moreover, ED has contended that the actual value of the property was much more than the value recorded in the Sale Deed and even the Circle Rate of the property was much higher than the sale consideration mentioned therein. Therefore, this issue needs to be decided by the Trial Court after examination and cross examination of rival witnesses. Hence, the issue is accordingly hereby decided against the appellant Sh. K. Murugesan and in favour of respondent ED. Whether the appeal filed by the appellant P. Senthil needs to be allowed as he was previously the dormant partner in M/s M.R. Granites, in absence of attachment of any property in his name in the present case? - HELD THAT:- It is pertinent to mention here that the appellant P. Senthil Kumar has not pointed out any property attached by ED in the present OC number 852/2017. It seems that appellant P. Senthil Kumar has filed the present appeal in view of the allegations mentioned against him in the PAO No. 21/2017 and the OC No. 852/2017, being the partner in M/s M.R. Granites. He has stressed that, he was only dormant partner in the said partnership firm as appellant Sh. Rabeek Raja was looking after the affairs of M/s MR Granites. The property of present appellant Sh. P. Senthil Kumar accused in FIR no.158/2012 is attached by ED in another PAO No. 06/2018, which is subject matter of OC No. 930/2018. Hence, he has no locus standi in the present appeal. Accordingly, his appeal needs to be disposed of with liberty to lead his defence in the criminal case as per law. Appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the appeals should be remanded to the Adjudicating Authority for fresh adjudication on account of alleged non-application of mind and templated/repetitive reasoning in the impugned confirmation order. 2. Whether the Provisional Attachment Order (PAO) and its confirmation are unsustainable because attached properties were not purchased out of proceeds of crime and were declared in Income Tax Returns. 3. Whether immovable property acquired prior to the enactment/coming into force of the Act (1.7.2005) is immune from attachment as 'proceeds of crime'. 4. Whether properties acquired prior to grant of quarrying permit (20.4.2006) are outside the ambit of money-laundering proceedings and therefore untainted. 5. Whether the retrospective effect of amendments (2009 insertion of certain offences in the Schedule) renders PMLA inapplicable to alleged predicate offences committed before such inclusion. 6. Whether illegal mining, as alleged, does not constitute a scheduled offence and thus bars attachment under PMLA. 7. Whether properties allegedly purchased from income earned by quarrying operations (2005-2012) are immune from attachment when the prosecution alleges those funds are proceeds of scheduled offences. 8. Whether delay/laches in passing the PAO/confirmation warrants setting aside the attachment. 9. Whether joint/co-owned property should be released to a co-owner who is not shown to have obtained proceeds of crime or is not an accused in predicate proceedings. 10. Whether an appellant who was a dormant partner and who has no property attached in the present complaint has locus to challenge the PAO in that complaint. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Remand for fresh adjudication (non-application of mind) Legal framework: The Adjudicating Authority confirms PAOs after consideration of Original Complaint (OC) and material; appellate jurisdiction is limited, and there is no express statutory power for this Tribunal to remand for fresh adjudication in absence of specific provision. Precedent treatment: Reliance on authorities cautioning against templated paragraphs and non-application of mind; Tribunal also notes jurisprudence limiting remand powers of this Appellate Tribunal. Interpretation and reasoning: The Tribunal examined the impugned order and found that the Adjudicating Authority reproduced ED's reasons to believe, engaged with replies and rejoinders, discussed incriminating material across multiple paragraphs and reached a reasoned conclusion. Mere length or repetition does not automatically denote non-application of mind. The Tribunal also observed that appellants were given opportunity to argue but chose to press the remand contention rather than contest merits. Ratio vs. Obiter: Ratio - remand is not warranted where the Adjudicating Authority has recorded reasons, considered evidence and reached conclusions; obiter - cautionary remarks on templated orders are acknowledged but did not apply to nullify the impugned order here. Conclusion: Remand refused; appeal on this ground dismissed. Issues 2 & 7 - Whether properties were purchased from legitimate income / declared in ITRs Legal framework: PMLA requires formation of 'reason to believe' and permits attachment where proceeds of crime are established or where property equivalent in value is attachable if tainted property is not traceable; ED's investigation focuses on specified aspects distinct from predicate investigation. Precedent treatment: Reliance on principles that ED need not re-investigate predicate offence but must form reason to believe based on FIR/173 CrPC/ECIR and evidence; Supreme Court and Tribunal authorities permit attachment of untainted properties equal in value where tainted property cannot be found. Interpretation and reasoning: The Tribunal set out ED's investigatory scope (prima facie incriminating evidence; quantum of proceeds; laundering modus operandi; tracing/layering; other attachable properties; genuineness of claimants). It found multiple FIRs, final police reports, technical surveys using Total Station, evaluation reports quantifying illegal extraction and valuation, inconsistencies between declared income/ITRs and immovable property holdings, late/afterthought filings of ITRs, failure to produce records and instances of transfers aimed at evasion. Given the aggregate material, the Tribunal concluded the Adjudicating Authority legitimately formed reason to believe and the burden to negate that belief was not discharged by claimants. Ratio vs. Obiter: Ratio - where investigation establishes proceeds and reinvestment into immovable property, attachment even of properties claimed to be from declared income is permissible; obiter - remarks on use of cash transactions and document value discrepancies. Conclusion: Ground that properties were purchased from legitimate/declared income fails; attachment sustained. Issues 3 & 4 - Attachment of property acquired before 1.7.2005 or prior to quarry permit (20.4.2006) Legal framework: Definition of 'proceeds of crime' includes property derived/obtained directly or indirectly from criminal activity and 'the value of any such property'; law contemplates attachment of property equivalent in value when tainted property cannot be traced. Precedent treatment: The Tribunal relied on higher court rulings holding that properties acquired prior to enforcement date may, in limited circumstances, be subject to action as 'value of any such property' provided safeguards (interest of accused in property during criminal activity; bona fide third party protections) are observed. Interpretation and reasoning: Applying the cited principles, the Tribunal held that attachment of pre-2005/2006 acquisitions is not per se barred. If tainted property cannot be traced, property of equivalent value may be attached subject to Axis Bank-type safeguards. Given investigation findings and inability to trace tainted proceeds, second limb of the definition was engaged. Ratio vs. Obiter: Ratio - pre-enactment acquisitions may be attachable as property equivalent in value if statutory safeguards and tests are satisfied; obiter - reference to third-party bona fides. Conclusion: Challenge on this ground rejected; properties not immune merely for pre-dating PMLA or quarry permit. Issues 5 & 6 - Applicability despite 2009 Schedule amendment and whether illegal mining is a scheduled offence Legal framework: Offence of money-laundering is independent and continuous; the relevant moment for PMLA liability is the date of the activity connected with proceeds (projection as untainted/continuing dealing) rather than only date of predicate offence. Inclusion of offences in the Schedule affects identification of predicate offences but does not restrict money-laundering liability where laundering acts occur later. Precedent treatment: Reliance on authorities holding money-laundering can be prosecuted for continued dealing with proceeds even if predicate crime pre-dates Schedule inclusion; courts have held the relevant date is when proceeds are projected as untainted or when laundering acts occur. Interpretation and reasoning: The Tribunal accepted that money-laundering is a continuing offence; laundering acts post-dating inclusion of predicate offences in Schedule or post-dating PMLA enforcement can form basis for PMLA action. Even if illegal mining per se were not scheduled, multiple other predicate offences within the Schedule were alleged, so PMLA proceedings are not defeated by exclusion of a single alleged offence. Ratio vs. Obiter: Ratio - PMLA applies where acts of laundering are committed or continued after relevant enactment/amendment; obiter - remarks on multiplicity of predicate offences. Conclusion: Grounds based on 2009 amendment and non-scheduled status of illegal mining fail. Issue 8 - Laches / delay in passing PAO Legal framework: Statute prescribes timelines for confirmation of PAO but does not prescribe limitation for passing PAO; principles of laches are fact-sensitive. Interpretation and reasoning: The Tribunal observed no statutory bar or prescribed time limit for issuance of PAO itself under Section 5(1); delay in investigation/attachment without statutory time limit does not automatically vitiate the PAO. No prejudice or statutory violation established to set aside attachment on laches. Ratio vs. Obiter: Ratio - delay/laches not fatal absent statutory time bar or demonstrable prejudice; obiter - none significant. Conclusion: Laches plea rejected. Issue 9 - Joint/co-owned property and claim by non-accused co-owner Legal framework: Claimant bears onus to demonstrate legitimate source for his share; ED may oppose by reference to valuation and investigation findings; trial-level fact-finding (documentary/examination) necessary when records are not produced. Interpretation and reasoning: The Tribunal found record deficient to ascertain whether the co-owner financed his share from legitimate savings; appellant failed to produce bank/savings statements. Discrepancies in recorded sale consideration vs. market/guideline value and ED's allegations of transactions designed to evade enforcement require trial-level evidence and cross-examination. Thus, release of co-owner's share cannot be ordered on appeal. Ratio vs. Obiter: Ratio - where factual dispute as to source of funds persists and claimant fails to discharge evidentiary burden, appellate forum will not release joint property; obiter - need for trial adjudication. Conclusion: Claim for release of 50% share rejected; issue to be decided at trial if pursued with evidence. Issue 10 - Dormant partner with no property attached in present OC (locus) Legal framework: Locus requires a direct interest in the attached properties or that the appellant's assets are subject to the particular OC/PAO under challenge. Interpretation and reasoning: The Tribunal noted appellant was a dormant partner but no property of his was attached in the instant OC; his grievance relates to allegations rather than specific attachment here. He has remedy in the separate proceeding where his property is attached. Consequently, he lacks locus in this OC. Ratio vs. Obiter: Ratio - appeal dismissed for lack of locus where no property of appellant is attached in the challenged proceeding; obiter - liberty to defend in relevant proceedings. Conclusion: Appeal dismissed for want of locus; liberty to contest in appropriate OC where attachment exists.