PMLA attachment survives where predicate offences remain pending and the source of funds for assets is not satisfactorily proved.

Quashing of an FIR against one accused did not undo PMLA attachment where multiple predicate-offence FIRs for bank fraud, conspiracy, cheating, forgery and corruption still survived. The Tribunal noted that the ECIR and provisional attachment remained supported by the continuing connected proceedings, so the challenge based on the quashed FIR failed. It also found that the appellants did not prove a lawful source for the funds used to acquire the wind mills: the record showed a trail through dummy and shell companies, missing contemporaneous loan documents, and diversion of funds linked to the fraud. The statutory burden on the source of assets was therefore not discharged.

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Issues: (i) Whether the quashing of the FIR against one accused rendered the proceedings and provisional attachment unsustainable; (ii) Whether the appellants had shown that the funds used for acquiring the wind mills were legitimate loan monies and that the attachment could not be sustained.

Issue (i): Whether the quashing of the FIR against one accused rendered the proceedings and provisional attachment unsustainable.

Analysis: The attachment proceedings were founded on multiple FIRs disclosing predicate offences involving bank fraud, criminal conspiracy, cheating, forgery and corruption. The quashing of the FIR against one individual did not close the case against the group, and the predicate offence and connected proceedings remained pending before the competent court. The existence of the ECIR and the attachment was therefore not displaced merely because one FIR had been quashed against one accused.

Conclusion: The issue was decided against the appellants.

Issue (ii): Whether the appellants had shown that the funds used for acquiring the wind mills were legitimate loan monies and that the attachment could not be sustained.

Analysis: The material showed a money trail through a web of dummy and shell companies, absence of contemporaneous loan documents for the asserted Rs. 50 crores, and diversion of funds linked to the larger bank fraud. The appellants did not place reliable account material to establish a lawful source for the money or to rebut the statutory burden regarding the source of funds and proceeds of crime. The Tribunal found the repayment explanation unsupported by the record and treated the transactions as part of laundering of proceeds of crime.

Conclusion: The issue was decided against the appellants.

Final Conclusion: The provisional attachment was upheld and both appeals failed on merits.

Ratio Decidendi: Quashing of proceedings against one accused does not invalidate PMLA action where the predicate offence and connected proceedings survive, and a person in possession or control of assets must satisfactorily explain the lawful source of funds once the statutory burden is attracted.

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