2026 (1) TMI 717 - AT - Money Laundering

Proceeds injected into appellant via share warrant purchases, equity conversion and NBFC loans; PMLA provisional attachment upheld

Dominant issue: lawfulness of provisional attachment under the PMLA where alleged proceeds of crime were injected into the appellant by purchase of share ... Money Laundering - provisional attachment order - proceeds of crime - utilization of network of the company and financial transactions to divert fund - HELD THAT:- The facts were elaborately discussed in the PAO and even in the Original Complaint (OC) coupled with the money trail for routing the proceeds of crime to inject the shareholding in the appellant company. The OC detailed out the name of more than 147 entities managed by the accused, Shri Neeraj Singal. It is apart from the other companies and accordingly finding proceeds of crime travelled to the appellant, OSISL directly in the shape of proceeds in share warrants and after making additional payment of Rs. 39.75 Crores to OSISL, it could obtain equity shares of OSISL and accordingly the respondent provisionally attached the properties belonging to OSISL - there is no illegality in the action of the respondent for provisional attachment of the properties where the proceeds of crime were injected by the accused directly in the shape of purchase of share warrants and then converted it into equity shares. It is apart from the amount injected through NBFCs controlled by the accused, Shri Neeraj Singal. It is, however, shown to be for utilization of funds for mobilization. It is in the shape of loan to the appellant company said to have served. The appellant, however, failed to make out a case that no amount was injected in the NBFCs out of the proceeds of crime. Therefore, even if the loan was served, extension of loan was out of the proceeds of crime and therefore the defence taken by the appellant cannot be accepted. Therefore, the Appellate Tribunal not inclined to interfere in the impugned order. The arguments of the Ld. Counsel for the appellants cannot be accepted that the purchase of shares could not have been co-related with the injection of proceeds of crime in the appellant company, rather, facts available on record show how the proceeds of crime was injected in the appellant company and for that the appellant was not falling in classified Category of ‘B’ & ‘C’ co-related with the BSL. The facts on record show how the money was injected in the appellant company and accordingly while filing OC, the appellants have been named as accused in the Prosecution Complaint. The position of facts of BKM Mining are similar because loan was obtained from NBFCs where the proceeds of crime was injected by the accused. There are no merit in the appeals and accordingly the same are dismissed. Issues: (i) Whether the Provisional Attachment Order and its confirmation attaching land, building, plant and machinery of the appellant company (OSISL) were justified on the ground that proceeds of crime were injected into the company (by purchase/conversion of share warrants and via NBFCs); (ii) Whether the Provisional Attachment Order and its confirmation attaching 55,00,000 shares held by the appellant shareholder (BKM Mining Pvt. Ltd.) were justified as being derived from proceeds of crime.Issue (i): Whether attachment of immovable and movable assets of the appellant company could be sustained on the finding that proceeds of crime were injected into the company by way of purchase/conversion of share warrants and through NBFCs controlled by the accused.Analysis: The material under consideration includes the investigative charting of fund flows, statements recorded under Section 50 of the Prevention of Money Laundering Act, 2002, documentary evidence of investments and conversions of share warrants, and tracing of funds through multiple entities and NBFCs. The respondents case is that funds originating from the predicate offence were layered through identified entities and NBFCs and injected into the company by purchase and conversion of share warrants and by loans/funding routed through such NBFCs. The appellants relied on antecedent incorporation, historical acquisition of fixed assets, servicing of loans, and asserted absence of direct receipt of tainted funds into the companys accounts. The Tribunal examined the contemporaneous investigative findings, the identified money trail, the role of NBFCs as conduits for routed funds, and admissions in recorded statements, and evaluated whether these established a sufficient link between the predicate offence proceeds and the investments/loans to justify provisional attachment under the Act.Conclusion: The provisional attachment and its confirmation in respect of the companys land, building, plant and machinery are sustained; the Court finds that proceeds of crime were injected into the company by means of purchase/conversion of share warrants and via NBFCs, justifying attachment.Issue (ii): Whether attachment of the shares held by the appellant shareholder could be sustained on the finding that acquisition was financed by proceeds of crime routed through NBFCs and related entities.Analysis: The Tribunal considered the evidence of the share purchase, the financing arrangements involving NBFCs, statements indicating the role of the accused and intermediaries, and the traced flow of funds from entities identified in the investigation to the acquisition. The respondents investigation linked the source of funds for the share acquisition to proceeds of the predicate offence, including admissions and documentary tracing; the appellants contended that the purchase was made from a bank and financed by legitimate loans and that the acquisition post-dated the check-period. The Tribunal evaluated the nexus between the routed funds and the share acquisition and the sufficiency of the material to treat the shares as derived from proceeds of crime.Conclusion: The provisional attachment and its confirmation in respect of the shares held by the shareholder appellant are sustained; the Court finds that the shares were acquired using funds traced to proceeds of crime and that attachment is justified.Final Conclusion: The appeals challenging confirmation of the provisional attachment orders are without merit and are dismissed, upholding the investigative findings that proceeds of the predicate offence were routed into the subject company and the share acquisition through identified entities and NBFC conduits, thereby justifying attachment under the Prevention of Money Laundering Act, 2002.Ratio Decidendi: Provisional attachment under the Prevention of Money Laundering Act, 2002 is justified where investigative material establishes a tracible nexusby money trail, admissions, and routing through intermediary entities (including NBFCs)between proceeds of a predicate offence and the assets or investments sought to be attached.