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of <h1>Cash deposits, sham-firm transfers and concealed property purchases found proceeds of crime; provisional attachments largely confirmed, two account freezes lifted</h1> Whether funds/properties constituted 'proceeds of crime': tribunal found cash deposits, transfers to a non-existent firm and concealment amounted to ... Proceeds of crime - provisional attachment - deposit of huge cash in the bank account of the complainants without their knowledge - forged documents or forgery of valuable security - seizure of records and digital devices - freezing of bank accounts - Appellate Tribunal under SAFEMA - definition of proceeds of crime - statement recorded u/s 50(2) - acquisition of the properties - HELD THAT:- In the instant case, the transaction or putting cash in the bank account of the complainant has been taken to be crime and therefore FIR was registered in reference to offences under IPC. The inducement of the cash not only invited offence under IPC but remained proceeds of crime because it was initially deposited in the bank accounts of the complainants and was thereupon transferred in the account of non-existing firm. The concealment or laundering of the funds amounts to an offence under section 3 of the Money Laundering Act of 2002 which has been ignored by the appellant. It is even in ignorance of the fact that if tainted money is projected to be untainted then also an offence under section 3 of the Act of 2002 is made out. Assuming in a case of dacoit, the accused secured the money and it has been used for the purchase of property, then such a property would fall in the definition of ‘proceeds of crime’ having been obtained out of proceeds of crime. In other case where the property was not acquired or derived by the accused himself but he passed on money out of the crime to another person and he acquired the property, then also it would be considered to be the proceeds of crime to acquire the property. In any case, there should be an element for use of the proceeds directly or indirectly obtained out of the crime and thereby the property would have nexus with the crime. We do not find any illegality in causing provisional attachment of the properties acquired prior to the commission of the crime in a situation where the proceeds of crime were laundered and thereby not found available with the appellant, otherwise the respondents would have caused the provisional attachment of the proceeds directly or indirectly acquired or obtained out of scheduled offence but when it was not found available with the appellant, the property of equivalent value were attached. It has been informed that documents seized in the hands of Dhiraj Jain has already been released after keeping the Xerox copies of those documents by the respondents, thus nothing survives on that account. The issue now remains about the freezing of bank accounts. Subsequent to the freezing of bank accounts, majority of those accounts were provisionally attached by the respondents and the issue in reference to the provisional attachment of moveable and immovable property has already been dealt with by us. Thereby, the freezing of the bank account was superseded by the provisional attachment for majority of bank accounts thus nothing would survive now for those bank accounts and even if we cause interference in the freezing of the bank accounts, it is not going to be released on account of subsequent provisional attachment of those bank accounts. We, however find that out of many bank accounts freezed in the hands of appellant Dhiraj Jain, two bank accounts have not been provisionally attached and accordingly, there remains no justification to retain or keep those two bank accounts under freezing, otherwise the respondent would have provisionally attached even those bank accounts. Thus, the interference in the order is made only to the extent of the retention of the bank accounts in the hands of the appellant Dhiraj Jain which were not subsequently provisionally attached and thus, no justification for further retention remains. Thus, we find no reason to cause interference in the order passed by the Adjudicating Authority confirming the provisional attachment of the properties, while we partially allow the appeal of the appellant Dhiraj Jain on a challenge to the freezing of bank account as indicated. Issues: (i) Whether the Adjudicating Authority was justified in confirming provisional attachment of immovable and movable properties (including properties acquired prior to the scheduled offence) as proceeds of crime or property of equivalent value; (ii) Whether retention/seizure of documents and digital devices ought to be continued; (iii) Whether freezing of bank accounts not subsequently provisionally attached was justified.Issue (i): Whether provisional attachment of properties (including those acquired prior to the scheduled offence) could be sustained as proceeds of crime or as property of equivalent value under the Prevention of Money Laundering Act, 2002.Analysis: Evidence from investigation included statements and transaction tracing showing large cash deposits and transfers into accounts of non-existent entities and attribution of instructions for deposits to the appellant. The definition of 'proceeds of crime' under section 2(1)(u) PMLA includes (a) property derived from criminal activity and (b) the value of such property where proceeds are not traceable, thereby permitting attachment of property of equivalent value. Authorities and precedent interpreting the definition to permit attachment of property of equivalent value where proceeds have been laundered or are not traceable were applied.Conclusion: The confirmation of provisional attachment of the properties is justified and is upheld; attachment of properties acquired prior to the scheduled offence is permissible as property of equivalent value where proceeds are not traceable.Issue (ii): Whether continued retention of seized documents and digital devices was warranted.Analysis: Seized documentary material in part was already released after taking copies; the investigative record and subsequent provisional attachments addressed the evidentiary need for many seized items. No continuing justification remained for retention of items already released or for those superseded by provisional attachment.Conclusion: The earlier detention/retention of seized documents and digital devices does not survive to the extent already released; no interference is required for matters already dealt with by release and by subsequent provisional attachment.Issue (iii): Whether freezing of bank accounts that were not provisionally attached should be sustained.Analysis: The majority of frozen accounts were subsequently provisionally attached; two specified bank accounts were not provisionally attached and no further justification for their continued freezing was shown. Where provisional attachment was not effected, freezing cannot be sustained absent specific grounds or subsequent attachment.Conclusion: Freezing of the two bank accounts not subsequently provisionally attached is unjustified and interference is warranted to lift the freezing in respect of those accounts; freezing upheld for accounts that were subsequently provisionally attached.Final Conclusion: The Adjudicating Authority's confirmation of provisional attachment is sustained based on the act of laundering and the availability of authority to attach property of equivalent value where proceeds are not traceable; retention of seized documents has been rendered largely moot by release of copies and by provisional attachments; limited relief is granted by directing release/unfreezing of specific bank accounts that were not provisionally attached.Ratio Decidendi: The definition of 'proceeds of crime' in section 2(1)(u) PMLA encompasses both property derived from scheduled offences and the value of such property, permitting provisional attachment of property of equivalent value where the actual proceeds are laundered or not traceable, and provisional attachment of properties acquired prior to the offence is permissible under the second limb when proceeds are not available.
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