Provisional attachment under PMLA sustained where recorded reasons and traced funds established nexus with proceeds of crime.

Recorded reasons that property represented proceeds of crime and that non-attachment could frustrate confiscation proceedings satisfied the statutory "reason to believe" requirement for provisional attachment under the PMLA, so the challenge on that ground failed. The Tribunal also found a clear nexus between the aircraft and the alleged proceeds of crime because the acquisition funds were traced to diverted company funds and related routed payments, while the appellant produced no cogent evidence to disprove the tainted source. The objection that the attachment was excessive was rejected, and the attachment of the aircraft was sustained.

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Issues: (i) Whether the provisional attachment was vitiated for want of a valid reason to believe under section 5(1) of the Prevention of Money Laundering Act, 2002, including the second proviso thereto. (ii) Whether the attached aircraft had a sufficient nexus with the alleged proceeds of crime and whether the attachment was excessive or unsupported by a money trail.

Issue (i): Whether the provisional attachment was vitiated for want of a valid reason to believe under section 5(1) of the Prevention of Money Laundering Act, 2002, including the second proviso thereto.

Analysis: The recorded reasons in the provisional attachment order expressly stated that the property represented proceeds of crime and that non-attachment was likely to frustrate confiscation proceedings. The reasons also referred to the pendency of the predicate investigation and the likelihood of alienation or creation of third-party interests. The Tribunal found these reasons to be specific and cogent, and held that the statutory requirement for invoking the provisional attachment power was satisfied.

Conclusion: The challenge on the ground of absence of reason to believe was rejected, and the attachment was held to be valid on this aspect.

Issue (ii): Whether the attached aircraft had a sufficient nexus with the alleged proceeds of crime and whether the attachment was excessive or unsupported by a money trail.

Analysis: The Tribunal examined the source of funds for acquisition of the aircraft and found that the payments were traced to diverted funds from the main accused company and to loan repayments routed through associated entities and cash deposits linked to the same tainted fund flow. It held that the appellant failed to produce documentary evidence to discharge the statutory burden under the PMLA, and that the Directorate had established a clear nexus between the property and the proceeds of crime. The plea that the attachment was excessive was also rejected because the appeal concerned only the aircraft attached in the appellant's hands and not the overall quantum of attachment in other proceedings.

Conclusion: The challenge to the attachment on the grounds of absence of nexus and excessiveness was rejected.

Final Conclusion: The appeal failed in entirety, and the confirmed attachment of the aircraft was sustained.

Ratio Decidendi: For provisional attachment under the PMLA, recorded reasons showing likely frustration of confiscation proceedings are sufficient, and once the enforcement authorities trace the property to proceeds of crime, the person in possession must disprove the tainted source with cogent evidence.

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