Corporate-held properties bought with alleged NRHM "proceeds of crime" upheld as attachable under PMLA, appeals dismissed

Whether properties held by corporate appellants could be attached under PMLA despite the companies not being accused in the scheduled offence was the dominant issue. The AT held that the funds used to acquire the appellants' shareholding and assets were "proceeds of crime" derived indirectly from NRHM fund misuse, evidenced by infusion of crores into a shell entity with nominal capital through non-commercial transfers and by recorded statements under s.50. Relying on SC in Vijay Madanlal Choudhary, the AT affirmed that "proceeds of crime" has the widest amplitude and s.5(1) attachment extends to any person involved in activities connected with such proceeds, irrespective of being an accused in the predicate offence. The attachment order was upheld and the appeals were dismissed.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the appeals were maintainable despite the appellants' conversion from private limited companies into LLPs and the respondent's objection to the locus standi of the individuals prosecuting the appeals.

(ii) Whether the attached commercial properties could be treated as involved in money-laundering/proceeds of crime (including "value thereof"), having regard to the appellants' contention that the acquisition of control/shareholding and the underlying properties pre-dated the alleged scheduled offence period.

(iii) Whether attachment was invalid because the appellant entities were not accused in the prosecution complaint under the money-laundering law.

(iv) Whether the attachment/confirmation was illegal for want of "pending proceedings" at the time of confirmation, and whether the attachment had lapsed due to alleged non-compliance with amended time-limits for filing the prosecution complaint.

(v) Whether the Tribunal could accept the appellants' argument that no "proceeds of crime" existed because the scheduled offence was not committed, so as to defeat continued attachment.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Maintainability after conversion into LLPs and locus standi objection

Legal framework: The Court considered the LLP Act provisions (Third Schedule) dealing with continuation of pending proceedings upon conversion of a company into an LLP.

Interpretation and reasoning: The Court noted the respondent's objection that the individuals lacked authority because they had ceased to be directors and because of alleged company-law non-compliances. On verification, the Court found the appellant entities had been converted into LLPs. The Court accepted the application bringing the conversion and amended memo of parties on record, holding that conversion does not bar continuation of proceedings; pending proceedings "may be continued, completed and enforced" by or against the LLP. The respondent's reply was treated as not opposing substitution and as misunderstanding the purpose of the application.

Conclusion: The appeals were held maintainable and were to be decided on merits notwithstanding conversion into LLPs and the locus standi objection.

Issue (ii): Whether properties acquired earlier could be attached as proceeds of crime / "value thereof" and whether the shares/control were acquired out of tainted funds

Legal framework: The Court applied the statutory conception of "proceeds of crime" (including "value thereof") and relied on binding precedent (as applied by the Court) that the definition is of wide import and permits attachment reaching proceeds of crime "in whosoever's name they are kept" and also attachment with reference to "value of such property." The Court also relied on statutory burdens/presumptions noted in the judgment (onus under section 8(1), burden under section 24, and presumption regarding interconnected transactions under section 23).

Interpretation and reasoning: The appellants argued that share acquisitions were funded by cheque payments by another entity and completed prior to the alleged crime period, and that the underlying properties were owned since 2002; hence, they were outside the money-laundering law. The Court rejected this, accepting the investigative findings recorded in the complaint: the entity used for share purchase was found to be a shell company with no genuine business transactions; large sums were infused through entities identified as engaged in providing cheques against cash; share consideration was allegedly paid in a structured manner including payments after control had already shifted; and substantial aspects indicated that the accused were in control and management of the appellant companies during the relevant period. The Court held that, upon show cause notice, the appellants failed to satisfactorily explain the source of funds and did not discharge the statutory onus; the statutory burden/presumptions operated against them.

On the "pre-acquired property" contention, the Court held that attachment was made as "proceeds of crime/value thereof," and that it was permissible to attach properties with reference to value even if the assets were acquired earlier, particularly where attachment proceeds on the "value" limb. The Court expressly rejected the appellants' argument that properties purchased earlier were immune, applying its stated legal position that the definition of proceeds of crime is wide enough to include "value of any such property."

Conclusion: The Court concluded the attached commercial properties were validly attached/confirmed as involved in money-laundering/proceeds of crime or "value thereof," and the appellants' "pre-crime acquisition" defence did not warrant interference.

Issue (iii): Whether attachment was invalid because the appellant entities were not accused in the prosecution complaint

Legal framework: The Court applied the principle (as adopted in its reasoning) that the attachment power is not confined to persons named as accused in the scheduled offence/prosecution complaint; it extends to any person involved in processes/activities connected with proceeds of crime, and the statutory objective is to reach proceeds of crime irrespective of the name in which held.

Interpretation and reasoning: The Court held it is well-established that the statutory sweep is not limited to accused persons. It further accepted that, for the continuation mechanism referred to by the Court, it is sufficient that a complaint alleging the money-laundering offence is pending; it is not necessary that every affected person be shown as an accused because cognizance is of the offence and not of specific offenders.

Conclusion: The Court rejected the contention that attachment failed merely because the appellant entities were not named as accused in the prosecution complaint.

Issue (iv): Whether confirmation was illegal for lack of pending proceedings / lapse due to amended time-limits

Legal framework: The Court examined the statutory amendments introducing time-limits for continuation of attachment during investigation and the requirement tied to pendency of proceedings, and applied those amendments to the case chronology.

Interpretation and reasoning: The Court noted that the confirmation order was passed when no statutory time-limit for filing the prosecution complaint existed. Later amendments introduced a 90-day (and later 365-day) cap. On facts, however, the prosecution complaint had already been filed before the amendment introducing the 90-day period came into force. Therefore, the Court held that the agency was not in breach of the amended requirement as invoked by the appellants, and the attachment would continue till final disposal of the prosecution case. The Court relied on a Tribunal precedent to reach this conclusion.

Conclusion: The Court held the attachment had not lapsed and the confirmation was not illegal on the ground of absence of pending proceedings/time-limit non-compliance.

Issue (v): Whether attachment must fail because there were allegedly no proceeds of crime (scheduled offence not committed)

Legal framework: The Court applied the principle (as adopted in its reasoning) that money-laundering action linked to a scheduled offence cannot survive if the accused is finally absolved of the scheduled offence by discharge/acquittal/quashing, but until such final absolution the attachment mechanism operates as a balancing arrangement to secure availability of the proceeds/value pending adjudication.

Interpretation and reasoning: The Court declined to accept the appellants' attempt to negate the existence of proceeds of crime by disputing commission of the scheduled offence on merits. It held a prosecution complaint in the scheduled offence existed and the accused had not been finally absolved; further, the Tribunal lacked jurisdiction to render a verdict on culpability in the scheduled offence. Until competent criminal adjudication absolves the accused, continued attachment was held justified to balance interests and secure the property/value for the statutory process.

Conclusion: The Court rejected the "no scheduled offence/no proceeds of crime" contention at this stage and upheld continuation of attachment pending outcome before the competent criminal court.

Result: All material challenges failed; the Court found no ground to interfere with the confirmation of attachment and dismissed the appeals.

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