Attachment of equivalent property allowed when proceeds are untraceable; Covid exclusion extends the statutory time limit for confirmation.

The article explains that under the three limb statutory definition of proceeds of crime a property acquired before commission of the scheduled offence may be attached as property equivalent in value when the actual proceeds cannot be traced, subject to statutory safeguards and the claimant's onus to prove lawful source; the article further states that the Covid 19 exclusion period must be omitted when computing the statutory time limit for confirmation of provisional attachment, so a confirmation issued after the excluded interval remains valid where the adjusted computation falls within the permissible period.

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Issues: (i) Whether immovable property purchased prior to the commission of the scheduled offence can be provisionally attached / confirmed as proceeds of crime or as property equivalent in value; (ii) Whether confirmation of a provisional attachment order passed beyond 180 days from attachment is invalid where the intervening period falling within the Covid-19 exclusion (15.03.2020 to 28.02.2022) is excluded from computation.

Issue (i): Whether property acquired prior to the commission of the scheduled offence may be attached under the definition of "proceeds of crime" or as property equivalent in value when the actual proceeds are not traceable.

Analysis: The Tribunal analysed the three-limbed definition of "proceeds of crime" in Section 2(1)(u) of the Prevention of Money Laundering Act, 2002 and followed authoritative precedents recognizing (a) tainted property derived directly or indirectly from criminal activity, and (b) the second limb permitting attachment of property of equivalent value where proceeds are not traceable. The Tribunal considered decisions including Axis Bank and subsequent High Court and Supreme Court pronouncements, and applied the tests and safeguards for attachment of deemed tainted (untainted) property. It also applied the statutory onus under Section 24 on persons claiming the property to show lawful source and relied on admissions and documentary record (including admission under Section 50(2)) showing repayment/servicing from alleged proceeds where applicable.

Conclusion: The Tribunal held that a property acquired prior to the commission of the scheduled offence can be provisionally attached / confirmed as proceeds of crime under the second limb (property equivalent in value) when the actual proceeds are not traceable and statutory safeguards and tests are satisfied. This conclusion is adverse to the appellants.

Issue (ii): Whether the confirmation order of provisional attachment dated 22.08.2022 (after attachment dated 21.02.2022) is invalid for being passed beyond 180 days in terms of Section 5(3) of the Prevention of Money Laundering Act, 2002.

Analysis: The Tribunal examined the nature of the 180-day timeline in Section 5 and the Supreme Court's orders excluding the period from 15.03.2020 to 28.02.2022 for computation of limitation and termination of proceedings (In re: Limitation and subsequent orders). It considered conflicting authorities and detailed High Court decisions interpreting applicability of the Covid exclusion to statutory time-limits for termination of proceedings. The Tribunal concluded that the Covid exclusion applies for computing the 180-day period under Section 5(3), and therefore the confirmation order fell within the permissible period once the excluded interval was omitted. The Tribunal also considered facts such as admissions regarding use/servicing of loan from proceeds and failure of appellants to discharge the onus under Section 24.

Conclusion: The Tribunal held that the confirmation of the provisional attachment was within the extended/adjusted period after excluding the Covid-19 interval and thus is not invalid under Section 5(3). This conclusion is adverse to the appellants.

Final Conclusion: On the decided issues, the Tribunal upheld the Adjudicating Authority's confirmation of provisional attachment: properties acquired prior to the scheduled offence may be attached as property equivalent in value when proceeds are untraceable and the 180-day period for confirmation must be computed excluding the Covid-19 exclusion period from 15.03.2020 to 28.02.2022; consequently the appeals are dismissed.

Ratio Decidendi: Section 2(1)(u) of the Prevention of Money Laundering Act, 2002 comprises three limbs permitting attachment of (i) property directly/indirectly derived from crime and (ii) property equivalent in value where proceeds are not traceable; and the Covid-19 exclusion (15.03.2020-28.02.2022) applies in computing the 180-day period under Section 5(3) for confirmation of provisional attachment, subject to statutory safeguards and onus on the person claiming the property.

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