PMLA attachment of mortgaged and third-party properties, including equivalent-value pre-offence assets, upheld; appeal against seizure dismissed.

Attachment of property held by persons not named in the FIR/chargesheet was upheld because PMLA targets "proceeds of crime" in whosoever's possession, and attachment is permissible even against non-accused holders; the challenge was rejected. Attachment of properties acquired prior to the scheduled offence period was sustained by applying the "value thereof" limb in the definition of proceeds of crime, permitting attachment of equivalent-value assets; the ground failed. Release of remaining properties for lack of direct nexus was denied since PMLA allows attachment of indirectly acquired assets and equivalent-value properties irrespective of direct tracing; no relief was granted. Attachment of mortgaged properties was affirmed under the second proviso to s.5(1) PMLA to prevent alienation, while permitting secured creditors to seek auction through the Special Judge subject to safeguards; the appeal was dismissed.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether attachment under PMLA can be sustained against persons whose names do not appear as accused in the FIR/charge-sheet for the scheduled offence, if the properties are alleged to represent proceeds of crime or are held in connection therewith.

(ii) Whether immovable properties acquired prior to the alleged period of criminal activity can be attached as "value" of proceeds of crime when the alleged tainted property is not traceable/available.

(iii) Whether release of attached properties is warranted for absence of a direct nexus between the specific properties and the proceeds of crime, where attachment is also justified on the basis of indirect acquisition or "value thereof".

(iv) Whether the fact that properties are mortgaged to banks negates the statutory basis for attachment and/or the "reason to believe" regarding likelihood of frustration of proceedings, and whether attachment can still be maintained to prevent alienation.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Attachment of property held by persons not named as accused in scheduled offence

Legal framework: The Tribunal examined the reach of attachment under the PMLA as applied to persons other than those named as accused in the scheduled offence.

Interpretation and reasoning: The Tribunal held that the statutory sweep of attachment is not confined to persons arraigned in the scheduled offence case. It accepted that property can be attached in the hands of "any person" if it is connected with proceeds of crime, and that attachment may extend beyond those charge-sheeted for the predicate offence.

Conclusion: The plea for release merely because certain appellants were not named in the FIR/charge-sheet was rejected; attachment was held maintainable against non-accused holders as well.

Issue (ii) & (iii) (Grouped): Attachment of pre-offence properties; necessity of direct nexus; attachment as "value thereof" and indirect proceeds

Legal framework: The Tribunal applied the definition of "proceeds of crime" as including not only property derived/obtained directly or indirectly from criminal activity relating to a scheduled offence, but also "the value of any such property".

Interpretation and reasoning: The Tribunal reasoned that the definition has multiple limbs, one permitting attachment of property representing the "value" of proceeds of crime. On the facts, it noted the finding that the proceeds of crime were misappropriated/laundered and were not available/traced during investigation, and that immovable properties were therefore attached as "value thereof" and/or as indirectly acquired from proceeds of crime. It further held that establishing a direct connection of each attached property with the proceeds of crime is not essential where the property is attached as indirect proceeds or as equivalent value under the statutory definition.

Conclusion: Properties acquired even prior to the alleged period of offence were not treated as immune from attachment where attachment was justified as "value" of proceeds of crime and the tainted assets were not traceable. The contention that properties must have a direct, demonstrated nexus with the proceeds of crime to sustain attachment was rejected.

Issue (iv): Effect of mortgage; "reason to believe" and apprehension of frustration; continued attachment despite security interest

Legal framework: The Tribunal considered the statutory threshold concerning apprehension/likelihood of frustration of proceedings underlying attachment, and the purpose of attachment to preserve property for potential confiscation upon conclusion of trial.

Interpretation and reasoning: The Tribunal held that mortgage does not eliminate the possibility of alienation: settlement with the secured creditor could enable transfer to a buyer with payment of dues directly to the bank, creating new third-party claims and frustrating attachment/confiscation objectives. It also considered that if attachment were lifted merely due to mortgage, it could enable restructuring/takeover of the mortgage by another lender and further dealings, thereby undermining effective preservation. It emphasized that attachment under PMLA is for protection of property pending trial and cannot be equated with physical possession concepts under other recovery regimes. It further reasoned that once a prosecution complaint relying on the attached properties is filed, the properties are to be preserved for adjudication of confiscation and rival claims by the competent PMLA Court, and should not be released on alleged irregularities at the attachment stage.

Conclusion: Mortgaged status was held not to bar attachment; the Tribunal upheld the "reason to believe" that absence of attachment could permit alienation and frustrate proceedings. It indicated that secured creditors may seek permission from the PMLA Court to auction, subject to safeguarding excess sale proceeds (after loan adjustment) by deposit/FDR to be dealt with as per the PMLA's confiscation/disposal framework.

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