Money Laundering: second limb permits attachment of pre-acquisition property as proceeds when original proceeds are untraceable; appeals dismissed

Money laundering law clarified that the second limb of the definition of proceeds of crime applies where predicate-offence proceeds are not traceable, permitting provisional attachment of property acquired prior to the offence to the extent of equivalent value; that principle was applied to sustain attachment. The decision accepts virtual hearing as adequate opportunity and rejects natural justice violation where physical hearing was declined by the appellant. Findings of fraudulent accounts and failure to return a portion of received funds were treated as maintenance of proceeds, supporting continued attachment and dismissal of the appeals.

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Issues: (i) Whether the Adjudicating Authority violated principles of natural justice by not providing a hearing before confirming the provisional attachment; (ii) Whether immovable property acquired prior to commission of the predicate offence can be attached as "proceeds of crime" under Section 2(1)(u) of the Prevention of Money Laundering Act, 2002; (iii) Whether the undisputed retention by the appellants of Rs. 10,50,75,000 out of funds received amounts to proceeds of crime attracting provisional attachment.

Issue (i): Whether the Adjudicating Authority's confirmation of the provisional attachment without providing the appellants an opportunity of hearing violated principles of natural justice.

Analysis: The statutory timeline for finalizing the Adjudicating Authority's order and availability of virtual hearing were considered; correspondence requesting physical hearing was weighed against the availability of virtual hearing and the requirement that the authority conclude within statutory period. The record shows opportunities for participation were provided and not availed; change of venue within the authority's nationwide jurisdiction was examined in the context of procedural adequacy.

Conclusion: The non-attendance of the appellants did not amount to denial of hearing and there was no infringement of principles of natural justice in confirming the provisional attachment.

Issue (ii): Whether property acquired prior to the commission of the predicate offence can be attached under the definition of "proceeds of crime" in Section 2(1)(u).

Analysis: The definition of "proceeds of crime" was interpreted as comprising three limbs, including a limb permitting attachment of property equivalent in value where directly traceable proceeds are not available. Precedents explaining the concept of deemed tainted property and safeguards for bona fide third-party interests and the need to prevent evasion by siphoning off proceeds were applied to the statutory text and legislative purpose.

Conclusion: Property acquired prior to the predicate offence can be attached as property of equivalent value under Section 2(1)(u) when traceable proceeds are not available, subject to the statutory safeguards for bona fide third-party interests.

Issue (iii): Whether the appellants' retention of Rs. 10,50,75,000 out of receipts linked to the predicate offence constitutes proceeds of crime justifying attachment.

Analysis: Evidence regarding receipt, partial repayment, absence of demonstrable legitimate utilization of the retained sum, and witness statements indicating non-return were considered; the applicability of the second limb of Section 2(1)(u) to attach equivalent value where proceeds are retained was applied.

Conclusion: The retained amount of Rs. 10,50,75,000 was held to be proceeds of crime in the hands of the appellants and sustained the provisional attachment.

Final Conclusion: The appeals are dismissed and the confirmed provisional attachment stands, reflecting that (i) procedural opportunity to be heard was not denied, (ii) the second limb of Section 2(1)(u) permits attachment of property acquired prior to the predicate offence as property of equivalent value when proceeds are not otherwise available, and (iii) the retained sum was properly treated as proceeds of crime under the statute.

Ratio Decidendi: Section 2(1)(u) of the Prevention of Money Laundering Act, 2002 encompasses (a) property directly or indirectly derived from the scheduled offence, (b) property of equivalent value where such proceeds are not traceable, and (c) property equivalent in value to proceeds taken or held outside the country; accordingly, attachment of property acquired prior to the offence is permissible under the second limb where traceable proceeds are unavailable, subject to statutory safeguards for bona fide third-party interests.

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