2026 (3) TMI 30 - AT - Money Laundering

Lawful source burden: failure to produce contemporaneous evidence or reliable corroboration supports confirmation of provisional attachment.

Where a person whose property is provisionally attached fails to produce contemporaneous documentary evidence or reliable corroboration for claimed ... Provisional attachment of property - proceeds of crime - burden of proof to disclose source of acquisition - fake indents for requisition of goods - fake supply orders - validity of confirmation in absence of person served with notice - ex parte order of the Adjudicating Authority - compulsion to pass an order within statuary date from the date of Provisional Attachment Order. Provisional attachment of property as proceeds of crime - burden of proof to disclose source of acquisition - HELD THAT: - The Tribunal examined the material relied upon by the respondents, including statements recorded under Section 50(2) and (3) of the Act and the investigation which showed channelising of funds through various bank accounts. The appellant asserted purchase from personal savings, stridhan and a friendly loan, but produced no documentary evidence (such as bank statements or loan agreements) to corroborate the alleged friendly loan or savings. Witnesses originally recorded under Section 50(2) and (3) denied having extended the loan and later filed affidavits contrary to their earlier statements; the Tribunal treated the original recorded statements as more reliable and noted the risk and impropriety of filing false affidavits. Given the absence of documentary proof and the investigative material indicating transfer of funds into and through other accounts controlled by the main accused, the Tribunal held that the appellant failed to discharge the onus to establish a legitimate source for the acquisition. On that basis, the provisional attachment was found to be justified. [Paras 14, 15, 16] Provisional attachment was properly confirmed because the appellant did not satisfactorily disclose or prove a legitimate source for the property, which was plausibly linked to proceeds of crime. Validity of confirmation in absence of person served with notice - Whether the Adjudicating Authority's confirmation of the provisional attachment was vitiated by being passed ex parte after the death of the appellant's husband. - HELD THAT: - The Tribunal found that the appellant had been served with the show cause notice but did not appear or get represented before the Adjudicating Authority. The Adjudicating Authority was required to decide within the statutory period and recorded the appellant's absence before passing the final order. The death of the appellant's husband prior to the confirmation did not excuse the appellant's non appearance, nor did it render the proceedings a nullity where notice had been validly served and the appellant remained unrepresented. Consequently, there was no procedural infirmity in passing the order in the appellant's absence. [Paras 17] Confirmation of the provisional attachment in the appellant's absence was valid because notice had been served and the Adjudicating Authority acted within the statutory timeframe. Final Conclusion: The Tribunal dismissed the appeal, upholding the Adjudicating Authority's confirmation of the provisional attachment on grounds that the appellant failed to prove a legitimate source for the property and that the confirmation was validly rendered in her absence after service of notice. Issues: (i) Whether the Adjudicating Authority rightly confirmed the provisional attachment of the appellant's immovable property under the Prevention of Money Laundering Act, 2002 despite the appellant's claim of lawful source; (ii) Whether the confirmation order was vitiated by being passed ex parte after the death of the appellant's husband and absence of representation before the Adjudicating Authority.Issue (i): Whether the provisional attachment was rightly confirmed despite the appellant's assertion that the property was purchased from disclosed friendly loans, savings and stridhan.Analysis: The Adjudicating Authority and the Tribunal examined documentary evidence and statements recorded under Section 50(2) and (3) of the Prevention of Money Laundering Act, 2002. No documentary loan agreement or bank records were produced to substantiate the claimed friendly loans or savings. Witnesses earlier recorded under Section 50(2) and (3) denied the alleged extensions of loan and explained transfers consistent with channelizing proceeds of crime. The appellant, being a housewife, did not provide evidence of means to acquire the property or repayment details. The Tribunal treated the failure to produce contemporaneous documentary evidence and the contradicted affidavits as insufficient to discharge the burden on the person whose property is attached.Conclusion: The provisional attachment was rightly confirmed; the appellant failed to satisfactorily disclose or prove lawful source for acquisition of the property and therefore the confirmation is upheld against the appellant.Issue (ii): Whether the confirmation order dated 27.01.2023 was vitiated as ex parte because the appellant's husband died during proceedings and the appellant was unrepresented before the Adjudicating Authority.Analysis: The record shows service of notice on the appellant. The Adjudicating Authority was required to decide within the statutory period under Section 5 of the Prevention of Money Laundering Act, 2002 and recorded the appellant's absence before it. The Tribunal found no infirmity in proceeding to finalise the order where the appellant, though served, remained unrepresented and did not avail the opportunity to place evidence or seek adjournment.Conclusion: The confirmation order was not vitiated on account of being ex parte; the Adjudicating Authority's action in completing proceedings in the appellant's absence after service was proper.Final Conclusion: The Tribunal dismissed the appeal and declined interference with the Adjudicating Authority's confirmation of the provisional attachment, upholding the attachment on the ground that the appellant failed to establish lawful source of funds and there was no procedural infirmity in the Adjudicating Authority proceeding in the appellant's absence.Ratio Decidendi: Where a person whose property is provisionally attached fails to produce contemporaneous documentary evidence or reliable corroboration to establish lawful source of acquisition and earlier statements under Section 50 contradict the claimed sources, the Adjudicating Authority may confirm attachment; confirmation is not vitiated if proceedings are completed in the person's absence after valid service of notice and within the statutory period.