2026 (2) TMI 128 - AT - Money Laundering

Proceeds of crime attachment under second limb allows preoffence assets to be attached as equivalent value; appeal dismissed

Attachment under the second limb of the statutory definition of proceeds of crime permits seizure of property acquired before the predicate offence where ... Proceeds of crime - influencing the public servants to engage in unauthorized downstream investment - value of any such property - property equivalent in value / deemed tainted property - attachment of property of equivalent value under second limb - Provisional Attachment Order - Adjudicating Authority - appeal u/s 26 - Commission of offence punishable u/s 120-B read with Section 420 of Indian Penal Code, 1860 and Sections, 8, 13(2) & 13(1)(d) of Prevention of Corruption Act, 1988 - HELD THAT:- It is not dispute that the attached property was acquired in year 1994 by the appellant i.e. much prior to the commission of crime. However, the record would reveal that the attachment has been made under the second limb of the definition of the “proceeds of crime” under the Act of 2002. The argument has been raised in ignorance of the definition of “proceeds of crime” having three limbs out of which the second limb of the definition can be applied when the proceeds of crime acquired or derived directly or indirectly out of the predicate offence is not found available with the person and cannot be otherwise traced out, having been siphoned off. In such case, the respondent can attach the property of equivalent value to the value of the proceeds of crime and in the instant case, the second limb of the definition of “proceeds of crime” has been applied. In that case, the property acquired prior to commission of crime can be attached for equivalent value to the proceeds. The issue aforesaid has been settled by this Tribunal in the case of Sadananda Nayak Versus The Deputy Director, Directorate of Enforcement [2024 (10) TMI 1619 - APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI] Thus, we do not find that the only ground raised by the appellant is made out to cause interference in the impugned order. It is stated that what can be attached is not only proceeds of crime acquired directly or indirectly but also for value equivalent. It is not taking only first limb of the definition of proceeds of crime to attach the property only when it is directly or indirectly obtained or acquired out of predicate offence. If the proceeds are not found available or traceable having been laundered, the property of equivalent value would fall within the definition of proceeds of crime which can be attached as per the judgment of the Apex Court in the Vijay Madanlal Choudhary [2022 (7) TMI 1316 - SUPREME COURT (LB)] The recent judgment has been given by the Division Bench of the Hon’ble Punjab and Haryana Court in the Dilbag Singh [2024 (11) TMI 833 - PUNJAB AND HARYANA HIGH COURT] Thus, we do not find any case to cause interference in the impugned order. Accordingly, appeal fails and is dismissed. Issues: Whether an immovable property acquired by the appellant prior to the commission of the scheduled offence can be attached and confirmed under the second limb of the definition of 'proceeds of crime' in Section 2(1)(u) of the Prevention of Money Laundering Act, 2002 (i.e., attachment of property of equivalent value when proceeds are not traceable).Analysis: Section 2(1)(u) is parsed into distinct limbs: (i) property derived or obtained directly or indirectly from a scheduled offence; (ii) the value of any such property, ordinarily understood as property of equivalent value where the proceeds are not traceable; and (iii) property equivalent in value held within the country or abroad. The second limb permits attachment of untainted property of equivalent value when tainted property has been siphoned off or cannot be located, subject to assessment (even if tentative) of the value of illicit gains and protection of bona fide third-party interests. Where the record demonstrates that proceeds are not available or have been routed/vanished and the attachment is made under the second limb as an equivalent-value measure, interference is not warranted absent failure to meet the statutory safeguards.Conclusion: The attachment of the immovable property acquired prior to the scheduled offence was appropriately effected under the second limb of Section 2(1)(u) as property of equivalent value; no interference with the confirmed attachment order is warranted (decision adverse to the appellant).