2025 (12) TMI 1314 - AT - Money Laundering

Attaching untainted assets as 'proceeds of crime' on equivalent value basis when tainted property is untraceable upheld

The dominant issue was whether assets unconnected to the scheduled offence, including property acquired prior to the crime, can be provisionally attached ... Money Laundering - proceeds of crime on an equivalent value basis - scheduled offences - Provisional Attachment Order - offence under section 120(B), 468, 471 & 420 of IPC and Section 13(2) read with 13(1)(d) of Prevention of Corruption Act, 1988 - HELD THAT:- The definition of “proceeds of crime” has three limbs out of which first limb is the property acquired or obtained directly or indirectly out of the proceeds of crime related to the scheduled offence. The definition of “proceeds of crime” has two other limbs out of which one limb allows the property to fall under the proceeds of crime for equivalent value. The issue is not required to be debated further because the judgment of this Tribunal in the case of Shri Sadananda Nayak Vs. Directorate of Enforcement, Bhubaneswar [2024 (10) TMI 1619 - APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI] and recent judgment of the Punjab and Haryana High Court in the case of Dilbag Singh @ Dilbag Sandhu Vs. Union of India & Ors. [2024 (11) TMI 833 - PUNJAB AND HARYANA HIGH COURT] covers the issue - it was held in the case of Sadananda Nayak that 'if the definition of “proceeds of crime” is given interpretation by dividing it into two parts or by taking only two limbs, then it would be easy for the accused to siphon off or vanish the proceeds immediately after the commission of scheduled offence and in that case none of his properties could be attached to secure the interest of the victim till conclusion of the trial. This would not only frustrate the object of the Act of 2002, but would advance the cause of the accused to promote the crime of money laundering.' The Punjab and Haryana High Court had even considered the judgment in the case of Seema Garg [2020 (3) TMI 460 - PUNJAB & HARYANA HIGH COURT] and held it to be not laying good law. In the light of the authoritative pronouncement on the issue, it is found that even property acquired prior to commission of crime can be provisionally attached finding it falling in the definition of “proceeds of crime”. It is, however, only when the proceeds of crime is not found traceable or available in the hands of the accused or a person having vanished or siphoned off it. There are no merit in any of the arguments raised by the appellants - Accordingly, appeals fail and are dismissed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether properties acquired prior to the alleged scheduled offence can be provisionally attached under the Act of 2002 as 'proceeds of crime' on an equivalent value basis when the actual proceeds of crime are not traceable/available. (ii) Whether, on the material placed, the confirmation of provisional attachment was justified on the footing that a prima facie case of money-laundering existed and that unpaid loan amount represented proceeds of crime which had allegedly been siphoned off/vanished. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Attachment of properties acquired prior to the offence as 'proceeds of crime' (equivalent value) Legal framework (as discussed by the Tribunal): The Tribunal examined the definition of 'proceeds of crime' and treated it as comprising distinct limbs, including (a) property derived/obtained directly or indirectly from criminal activity relating to the scheduled offence, and (b) 'the value of any such property', i.e., attachment of property of equivalent value when the tainted property is not available/traceable. The Tribunal also relied on binding higher-court interpretation that the definition is wide enough to cover not only tainted property but also the value thereof, so as to further the object of the Act of 2002. Interpretation and reasoning: The Tribunal rejected the contention that properties acquired prior to the alleged offence are immune from attachment. It held that such a reading would render the 'value of any such property' limb redundant and would frustrate the statute's purpose, because an accused could siphon off or make unavailable the actual tainted property and thereby defeat attachment. The Tribunal accepted the respondent's position that, since the proceeds of crime to the relevant extent were not found available during investigation (having allegedly vanished/siphoned off), attachment of properties of equivalent value was permissible even if those properties were acquired earlier, provided the attachment is limited to the quantified value of proceeds considered untraceable. Conclusion: The Tribunal conclusively held that properties acquired prior to the commission of the alleged offence can be provisionally attached as 'proceeds of crime' on an equivalent-value basis where the actual proceeds of crime are not traceable/available, and that the appellants' contrary argument was untenable. Issue (ii): Justification for confirmation of provisional attachment on a prima facie money-laundering case and quantified untraced proceeds Legal framework (as applied): The Tribunal proceeded on the basis that provisional attachment may be confirmed where there is a prima facie case of money-laundering and where the attachment corresponds to proceeds of crime (including equivalent value where proceeds are not traceable). It also noted that final determination of guilt for the scheduled offence is for the trial court, while attachment proceedings can proceed on prima facie evaluation. Interpretation and reasoning: The Tribunal found it undisputed that a substantial loan remained unpaid to the extent quantified, and that multiple facts were recorded regarding irregularities connected with the securing/liquidation of policies (including dishonour of instruments and irregular/forged documentation). It rejected the appellants' attempt to shift blame to the insurer/bank for non-liquidation, holding that the onus to repay the loan remained on the borrowers. While observing that the final finding on the scheduled offence would be recorded by the trial court, the Tribunal held that the material nevertheless disclosed a prima facie case of money-laundering and supported the conclusion that proceeds of crime to the quantified extent were not available and, therefore, attachment for equivalent value was warranted. Conclusion: The Tribunal upheld the confirmation of the provisional attachment to the quantified extent, found no merit in the appellants' limited challenge (confined mainly to pre-acquisition of properties), and dismissed the appeals.