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. Issues: (i) Whether invocation of the second proviso to Section 5(1) of the Prevention of Money-Laundering Act, 2002 and provisional attachment was invalid for lack of recorded apprehension of alienation of the appellants' properties; (ii) Whether the value of attached properties for purposes of attachment must be assessed at current market value at the date of attachment instead of the fair market value on the date of acquisition or, if acquisition date cannot be determined, the date of possession as defined in Section 2(1)(zb) of the Act.Issue (i): Whether invocation of the second proviso to Section 5(1) PMLA was invalid for lack of recorded apprehension of alienation in respect of the appellants' properties.Analysis: The statutory test under Section 5(1)(b) requires recorded reasons to believe that proceeds of crime are likely to be concealed, transferred or dealt with so as to frustrate confiscation proceedings; the second proviso permits immediate attachment where non-attachment is likely to frustrate proceedings. The recorded reasons referred to specific conduct (dispositions and concealment by a recipient) and then extended apprehension to others by stating that they had failed to discharge the burden of proof and were likely to dispose of immovable properties. Precedent relied upon in the judgment interprets the word 'likely' as encompassing apprehension of transfer or concealment even absent completed alienation, and permits provisional attachment where such likelihood is supported by material showing propensity or risk of disposal.Conclusion: The invocation of the second proviso to Section 5(1) PMLA and the provisional attachment were valid because recorded reasons established a prima facie likelihood of alienation or concealment applicable to the appellants.Issue (ii): Whether property value for attachment must be assessed at current market value at the date of attachment rather than under the definition of 'value' in Section 2(1)(zb) PMLA.Analysis: Section 2(1)(zb) prescribes 'value' as the fair market value on the date of acquisition or, if the acquisition date cannot be determined, the date of possession. The statutory definition is authoritative for assessing value of property in relation to proceeds of crime. Judicial reasoning applied the definition to disallow recharacterisation of 'value' as current market price at the date of attachment, noting that altering the statutory meaning would amount to rewriting the statute and is a matter for constitutional challenge, not tribunal reinterpretation. The record showed that the respondents' valuation, based on the statutory definition, did not exceed proceeds of crime in the appellants' hands.Conclusion: The statutory definition in Section 2(1)(zb) governs valuation for attachment; current market value at the date of attachment is not the prescribed standard, and no disproportion was established on the record.Final Conclusion: The decision upholds that provisional attachment under Section 5(1) PMLA may be sustained on recorded material establishing a likelihood of concealment or transfer and that valuation for attachment is governed by the statutory definition of 'value' in Section 2(1)(zb), applied as the fair market value on the date of acquisition or, if indeterminate, the date of possession, ensuring statutory conformity in attachment and valuation assessments.Ratio Decidendi: Provisional attachment under Section 5(1) PMLA is permissible where recorded material gives reason to believe a likelihood of concealment or transfer that would frustrate confiscation proceedings, and the value of property for attachment must be determined under Section 2(1)(zb) PMLA as fair market value on the date of acquisition or, if indeterminate, the date of possession.