PMLA attachment of Alibaug and Dadar properties: no proven money trail or nexus to proceeds of crime, set aside.

The dominant issue was whether the two attached properties constituted "proceeds of crime" under PMLA based on a demonstrable nexus with the scheduled offence. For the Alibaug property, the tribunal held that there was no FIR allegation of undervaluation and the authority failed to produce any money trail or prima facie material showing that purchase funds were derived from proceeds of crime or that the purchaser was a recipient or participant in the predicate offence; attachment was therefore unsustainable and set aside for that property. For the Mumbai (Dadar) property, the tribunal found the purchase was funded by a loan allegedly tainted in the lender's hands but repaid in full before ECIR registration, leaving no proceeds of crime with the purchaser; attachment was accordingly set aside and the appeal allowed.

---

---

1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the provisional attachment and its confirmation could be sustained when the respondent failed to produce a prima facie money trail connecting the consideration paid for the Alibaug property to "proceeds of crime".

(ii) Whether the attachment of the Mumbai (Dadar) property could be sustained where the alleged "proceeds of crime" component (loan amount) was shown, prima facie, to have been repaid prior to the recording of the ECIR, and where the confirming authority proceeded on an erroneous factual premise about the timing of repayment.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Sustainability of attachment of the Alibaug property in absence of prima facie money trail linking purchase funds to proceeds of crime

Legal framework (as reflected in the decision): The Tribunal proceeded on the requirement that, for sustaining attachment, there must be prima facie material connecting the property (or funds used to acquire it) with "proceeds of crime", including a demonstrable money trail linking the consideration to such proceeds.

Interpretation and reasoning: The Tribunal found that the Alibaug property was purchased between 2010-2012 for stated consideration paid through banking channels, contrary to the allegation of a cash component. The appellant's contribution was limited, and the balance was stated to have come through an interest-free loan arrangement sourced from a third person. The Tribunal further noted that allegations of undervaluation were not supported by the FIR and, in any event, property registration occurs after valuation consistent with the applicable benchmark for the area. Critically, the respondent did not place prima facie material showing that the funds used were received from entities allegedly involved in the predicate offence, nor did it show that the lender/source was a recipient of proceeds of crime or involved in the crime.

Conclusion: In the absence of prima facie proof and money trail connecting the purchase consideration of the Alibaug property to proceeds of crime, the attachment and its confirmation, to that extent, could not be sustained.

Issue (ii): Sustainability of attachment of the Mumbai (Dadar) property where the alleged tainted loan component was repaid prior to ECIR and the confirming authority relied on an incorrect factual basis

Legal framework (as reflected in the decision): The Tribunal treated the existence of proceeds of crime "in the hands" of the appellant and the need for prima facie factual foundation as material to sustaining attachment, particularly where attachment was premised on funds allegedly received from a person linked to the proceeds of crime.

Interpretation and reasoning: The Tribunal recorded that the Mumbai (Dadar) property was purchased for consideration and that a substantial portion was paid from a loan received from a friend. The respondent's case was that this loan amount constituted proceeds of crime because of the alleged proceeds in the hands of the lender's spouse. The Tribunal accepted, prima facie, the appellant's showing (supported by bank statement) that the borrowed amount had been repaid in December 2020, i.e., prior to the recording of the ECIR dated 08.09.2021. On that basis, the Tribunal reasoned that, with the repayment, nothing remained with the appellant "out of the proceeds of crime"; the alleged proceeds stood returned to the lender, and the respondent's observation that repayment occurred after initiation of investigation proceeded on a materially incorrect timeline.

Conclusion: The Tribunal held that these facts warranted interference; the confirming order was set aside and the appeal allowed. The Tribunal clarified that its decision would not affect the pending criminal case.

---