2026 (1) TMI 523 - AT - Money Laundering

Provisional attachment of property under PMLA s.5(1) over 'reasons to believe' and valuation dispute upheld; appeal dismissed

Provisional attachment under s.5(1) PMLA was challenged for alleged failure to record reasons to believe that the property was likely to be concealed, ... Money Laundering - Provisional Attachment Order - invocation of Section 5(1) of the Act of PMLA, 2002 without recording any apprehension of alienation of property under attachment - value of the proceeds of crime vis-à-vis the value of the property. Invocation of Section 5(1) of the Act of PMLA, 2002 without recording any apprehension of alienation of property under attachment - HELD THAT:- As per Section 5(1)(b), provisional attachment can be caused when the competent authority has reasons to believe that the proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation. The second proviso to the provision aforesaid starts with non-obstante clause to the first proviso and can be invoked when the Director or any other officer not below the rank of Deputy Director authorized by him has reasons to believe that if the property involved in money-laundering is not attached immediately under this Chapter, the non-attachment of the property is likely to frustrate any proceeding under the Act of 2002. The reasons to believe have to be recorded in writing. It is submitted that no reasons to believe to apprehend alienation or transfer the property by the appellants were recorded for invoking Section 5(1) of the Act of 2002. The reasons to believe for alienation or to deal with the property are not to be drawn only when action has been initiated because for sale of the property, the document can be executed within no time and once it is alienated, the provisional attachment cannot be caused and, therefore, the legislature cautiously used the word “likely” in the provision. In the instant case, the competent authority drawn its conclusion that property is likely to be concealed or dealt with if the Provisional Attachment Order is not caused. Thus, Section 5(1) of the Act of 2002 has been satisfied in this case. Value of the proceeds of crime vis-à-vis the value of the property - HELD THAT:- The case of the appellant is not that the value of the property was more on the date of acquisition than taken by the respondents, rather the case of the appellants is based on the valuation report going against the provisions of the Act of 2002. The counsel for the appellants could not refer to any provision which may allow the appellants to get independent assessment of the property from the valuer to determine the “value” of the property. In absence of any provision to this effect, rather in the light of the definition of the value, it is unable to accept even the second argument raised by the appellants. It is further found that the value of the property in the hands of the appellant, as taken by the respondents, is much lesser to the proceeds of crime in their hands and accordingly even the second ground is not made out. Appeal dismissed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether provisional attachment under Section 5(1) read with the second proviso of the Prevention of Money Laundering Act, 2002 was invalid for want of recorded 'reasons to believe' showing that the attached properties were likely to be concealed, transferred, or dealt with so as to frustrate confiscation, specifically in relation to the appellants. (ii) Whether the attachment was liable to be interfered with on the ground of alleged disproportion between the quantified proceeds of crime allegedly received by the appellants and the value of the attached properties, and whether 'value' had to be taken on current valuation/independent valuer's report instead of the statutory measure. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Validity of invoking Section 5(1) and the second proviso-recording of 'reasons to believe' and 'likely' apprehension Legal framework: The Court examined Section 5(1)(a)-(b) and the second proviso, noting that provisional attachment requires recorded 'reasons to believe' based on material in possession: (a) possession of proceeds of crime, and (b) that such proceeds are likely to be concealed, transferred, or dealt with to frustrate confiscation. The second proviso permits immediate attachment notwithstanding the first proviso where non-attachment is likely to frustrate proceedings. Interpretation and reasoning: On calling for and examining the provisional attachment order, the Court found that the recorded reasons did not remain confined to one individual's conduct; after narrating that conduct, the competent authority expressly extended the apprehension to others by stating that they 'failed to discharge the burden of proof and are likely to dispose of the immovable properties liable to be attached.' The Court rejected the argument that apprehension must be founded on initiated alienation steps, holding that the statutory word 'likely' permits attachment based on apprehended chances of transfer/concealment, without requiring proof of actual alienation. Conclusion: The Court held that the statutory conditions under Section 5(1) stood satisfied, including the recording of 'reasons to believe' and the permissibility of invoking the second proviso on the basis of likelihood of concealment/transfer; therefore, the challenge to attachment on this ground failed. Issue (ii): Alleged disproportion and determination of 'value' of attached property Legal framework: The Court applied the statutory definition of 'value' in Section 2(1)(zb), namely fair market value on the date of acquisition (or, if that cannot be determined, on the date of possession). Interpretation and reasoning: The Court rejected the appellants' reliance on an independent/current valuation report as inconsistent with the Act's definition. It held that, absent any provision permitting a different valuation methodology for the purpose of attachment on 'value equivalent,' the statutory definition governs and cannot be substituted by a current market valuation approach. The Court further noted that the appellants' case was not that the respondent's valuation understated the fair market value as on the acquisition date; rather, the challenge was premised on a valuation approach 'going against' the Act. On facts, the Court also found that the value of the attached properties as taken by the respondents was much lesser than the proceeds of crime in the appellants' hands. Conclusion: The Court held that the attachment could not be set aside on the ground of disproportion or on the basis of independent/current valuation, and that the statutory 'value' under Section 2(1)(zb) governed; the second ground was therefore rejected.