2026 (3) TMI 32 - AT - Money Laundering

Provisional attachment under PMLA upheld where prima facie material shows proceeds of crime; fiscal payment does not confer immunity.

Whether PMLA proceedings may target a person not named in the FIR/ECIR: the Act is independent of scheduled-offence prosecution and absence from FIR/ECIR ... Provisional attachment - Conversion of demonetized currency into bank entries - PMLA proceedings independent of scheduled offence proceedings - Proceeds of crime - Attachment of property of equivalent value - Reason to believe - Preventive nature of attachment - Voluntary declaration and payment under the Pradhan Mantri Garib Kalyan Yojna (PMGKY) or deposit in government bonds disentitles attachment or absolves. PMLA proceedings independent of scheduled offence proceedings - Reason to believe - Whether initiation of action under the PMLA and provisional attachment can be valid against a person not named in the FIR or ECIR. - HELD THAT: - The Tribunal held that proceedings under the PMLA are independent of criminal proceedings relating to the scheduled offence and are not confined to those named in the FIR or ECIR. Section 5(1) permits action where the authorised officer has material indicative of any person being in possession of proceeds of crime; hence absence of the appellant's name in the FIR or ECIR does not preclude attachment if the investigation discloses involvement in activities connected with proceeds of crime. The Tribunal relied on the reasoning in Vijay Madanlal Choudhary [2022 (7) TMI 1316 - SUPREME COURT (LB)] to confirm that the sweep of Section 5(1) extends to any person involved in processes connected with proceeds of crime. Accordingly, the contention that non-naming in the FIR or ECIR renders the attachment arbitrary was rejected. [Paras 11, 12] Proceedings and provisional attachment under the PMLA are maintainable against the appellant despite his not being named in the FIR/ECIR. Provisional attachment under PMLA - Preventive nature of attachment - Proceeds of crime - Whether provisional attachment of the appellant's bank accounts was justified on the material showing routing of demonetized currency and involvement in layering and integration. - HELD THAT: - The Tribunal found prima facie material that post-demonetisation the appellant handed over demonetised currency which, after commissions, resulted in RTGS credits into accounts linked to his firm and companies. These transactions indicated placement, layering and integration into the banking system and thus prima facie involvement in processes connected with proceeds of crime as envisaged by Section 3 of the PMLA. Given the preventive purpose of provisional attachment, the Respondent need only have 'reason to believe' that the property is involved in money laundering and that non-attachment may frustrate proceedings; the nature and manner of the transactions and the appellant's proximity to the laundering mechanism satisfied that threshold. The Tribunal held that the attachment was not arbitrary, illegal or perverse. [Paras 13, 14, 15, 19] The provisional attachment of the appellant's bank accounts was lawful on the prima facie material of routing demonetised currency and could be sustained. No immunity by voluntary tax declaration - Attachment of property of equivalent value - Proceeds of crime - Whether the appellant's voluntary declaration and payment under the Pradhan Mantri Garib Kalyan Yojna (PMGKY) or deposit in government bonds disentitles attachment or absolves him under the PMLA, and whether attachment of equivalent value is permissible. - HELD THAT: - The Tribunal rejected the submission that declaration under PMGKY or payment of taxes/penalty confers immunity from PMLA proceedings; there is no statutory bar in the PMLA granting such immunity and tax compliance does not negate money laundering if otherwise made out. Further, the Tribunal reiterated the wide definition of 'proceeds of crime' which includes the value of such property, entitling authorities to attach property of equivalent value where original proceeds are not traceable. The appellate decision in a related matter was invoked to explain the three limbs of the definition and to affirm that attachment of equivalent value is legally permissible and applicable where proceeds have vanished or been converted. [Paras 7, 16, 17, 18] Voluntary tax declaration under PMGKY does not preclude PMLA proceedings or attachment; attachment of property of equivalent value is permissible under the definition of 'proceeds of crime'. Final Conclusion: The Tribunal found sufficient prima facie material linking the appellant to activities connected with proceeds of crime, held that provisional attachment was legally justified and not vitiated by his absence from the FIR/ECIR or by his PMGKY declaration, and accordingly dismissed the appeal, upholding the Adjudicating Authority's orders subject to final adjudication. Issues: Whether the provisional attachment of the appellant's bank accounts under Section 5 of the Prevention of Money Laundering Act, 2002 is legally tenable, including (i) whether proceedings under the PMLA can be initiated against a person not named in the FIR/ECIR, and (ii) whether voluntary declaration and payment under Pradhan Mantri Garib Kalyan Yojna absolve the appellant from attachment under the PMLA.Analysis: The appeal challenges confirmation of a provisional attachment arising from alleged conversion of demonetized currency into bank entries. Proceedings under the Prevention of Money Laundering Act, 2002 are independent of criminal proceedings in a scheduled offence and may be invoked against any person involved in processes connected with proceeds of crime; absence of the person's name in the FIR or ECIR does not by itself bar action under the PMLA. Section 5 and Section 5(1) permit provisional attachment on material giving 'reason to believe' that property is proceeds of crime; Section 2(1)(u) and Section 2(1)(v) define 'proceeds of crime' to include the property derived or the value thereof, permitting attachment of equivalent value where original proceeds are not traceable. The record contains prima facie material of routing demonetized currency through intermediaries and RTGS credits into the appellant's firm and company accounts, indicating placement, layering and integration steps consistent with money laundering processes. Payment of taxes or deposits under a separate fiscal scheme does not confer statutory immunity under the PMLA or negate prima facie involvement in money laundering activity.Conclusion: The provisional attachment under Section 5 of the Prevention of Money Laundering Act, 2002 is upheld; the appellate challenge is dismissed and the Adjudicating Authority's confirmation of the Provisional Attachment Order is maintained in favour of the respondent.