2026 (3) TMI 152 - AT - Money Laundering

Proceeds of crime definition and valuation guide attachment of equivalent property; pandemic limitation exclusion preserves 180 day outer limit compliance.

The text addresses whether attached properties qualify as 'proceeds of crime' or property equivalent in value and whether confirmation beyond 180 days was ... Proceeds of crime - attachment of property of equivalent value - computation of 180 days for confirmation of provisional attachment - fair market value for value - definition of 'value' under Section 2(zb) - definition of 'proceeds of crime' - Offence under Section 120-B, 467 and 471 IPC against M/s National Spot Exchange Ltd. (M/s NSEL) and its Directors apart from key officials of the company, 25 defaulters and others. Proceeds of crime - The appellant received proceeds of crime and the provisional attachment of his properties was justified on the basis of traced money flows and failure to satisfactorily disclose source. - HELD THAT: - The Tribunal found on the material in the investigation, statements recorded under section 50 and bank/payment records that the appellant received Rs.10.50 crores from M/s Vihang Aastha Housing Projects LLP which were part of funds siphoned from NSEL through Aastha group. Although the appellant paid certain sums to farmers (accepted to the extent of approx. Rs.1.34 crores), the respondents were able to trace the balance to acquisition of properties by the appellant and his wife. The appellant failed to disclose a bona fide source for acquisition when issued notice under Section 8(1), and the Adjudicating Authority therefore correctly treated the receipts as proceeds of crime for the purpose of provisional attachment. [Paras 17, 20, 21] Provisional attachment confirmed as the appellant received proceeds of crime and failed to satisfactorily disclose legitimate source. Attachment of property of equivalent value - Properties acquired prior to the commission of the scheduled offence may be provisionally attached as property of equivalent value where the actual proceeds are not traceable. - HELD THAT: - Examining the definition of 'proceeds of crime' and relevant precedents, the Tribunal accepted the three limb construction that permits attachment of property of equivalent value when tainted property is not traceable or has vanished. The Tribunal relied on the Delhi High Court's approach in Axis Bank [2019 (4) TMI 250 - DELHI HIGH COURT] and subsequent authorities and concluded that attachment of prior acquired properties is permissible subject to safeguards and assessment of equivalence in value; hence even if some properties were acquired before the crime period, provisional attachment can be sustained in the circumstances where proceeds could not be traced and were siphoned off. [Paras 23, 24, 25] Attachment of properties acquired before the crime is permissible as equivalent value attachment where proceeds are not traceable; therefore the challenge to attachment on this ground fails. Fair market value for value under the Act - The value for attachment was correctly assessed by reference to the sale deed/ acquisition date fair market value under the Act and the provisional attachment was not in excess of the proceeds of crime. - HELD THAT: - The Tribunal applied the definition of 'value' under Section 2(zb) - fair market value on date of acquisition (or date of possession if acquisition date cannot be determined) - rather than current market value. Having accepted that the appellant received Rs.10.50 crores and utilised approx. Rs.1.34 crores for payments to farmers, the value of properties attached (totaling Rs.3,74,71,900/- as per acquisition values) was found to be less than the proceeds attributable to the appellant. Consequently the contention that attachment exceeded proceeds was rejected. [Paras 22, 25] Attachment value was correctly computed under the Act and is not excessive relative to proceeds of crime in appellant's hands. Computation of 180 days for confirmation of provisional attachment - The confirmation of the provisional attachment was within the 180 day period after excluding the Covid 19 exclusionary period directed by the Supreme Court, so the attachment did not lapse under Section 5(3). - HELD THAT: - The provisional attachment was dated 03.06.2021 and the confirmation was dated 08.02.2022. The Tribunal held that the period from 15.03.2020 to 28.02.2022 must be excluded for computation of limitation in light of the Supreme Court's orders in the suo motu proceedings extending/excluding Covid period for judicial and quasi judicial timelines. Applying that exclusion, the confirmation fell within 180 days and therefore Section 5(3) did not operate to render the provisional attachment ineffective. The Tribunal considered and distinguished contrary High Court views and relied on authority holding the exclusion applicable to PMLA timelines for termination/confirmation of attachment. [Paras 26, 27] Provisional attachment remained effective because the Covid exclusionary period is to be excluded when computing the 180 day limit for confirmation. Final Conclusion: The appeal is dismissed. The Adjudicating Authority's confirmation of the provisional attachment was upheld: the appellant was found to have received proceeds of crime, the value and extent of attachment were proper, properties acquired prior to the crime may be attached as equivalent value where proceeds are not traceable, and the confirmation was within the 180 day period after excluding the Covid 19 suspension period. Issues: (i) Whether the properties provisionally attached and confirmed are proceeds of crime or property equivalent in value such that confirmation of provisional attachment is sustainable; (ii) Whether the Adjudicating Authority's confirmation of the provisional attachment beyond 180 days is invalid by reason of Section 5(3) of the Prevention of Money Laundering Act, 2002.Issue (i): Whether the impugned provisional attachment and its confirmation can be sustained by treating the attached properties as proceeds of crime or as property equivalent in value under the definition of 'proceeds of crime'.Analysis: The definition of 'proceeds of crime' contains distinct limbs covering (a) property derived or obtained directly or indirectly from scheduled offences, and (b) the value of any such property where the tainted property is not traceable (allowing attachment of property of equivalent value). The statutory language and authoritative decisions interpreting the definition permit attachment of property of equivalent value when proceeds are siphoned off or not traceable. Evidence tracing funds received by intermediary entities to the scheduled offence, contemporaneous payments to the appellant, farmers' statements disputing bona fides of transfers, bank remittances into the appellant's account, and the respondent's assessment of utilization and value were applied to determine the extent of proceeds in the appellant's hands. The valuation principle requires using fair market value on date of acquisition (Section 2(zb)), not current market value. The provisional attachment amount was not in excess of the assessed proceeds after accounting for legitimate payments to sellers.Conclusion: The attachment and confirmation as to the properties are sustained; conclusion is in favour of the Respondent.Issue (ii): Whether confirmation of the provisional attachment order dated 03.06.2021 by the Adjudicating Authority on 08.02.2022 was rendered invalid for being beyond the 180-day period prescribed by Section 5(3) of the Act.Analysis: The period from 15.03.2020 to 28.02.2022 has been judicially excluded for purposes of limitation and certain prescribed outer time limits by binding Supreme Court orders addressing the Covid-19 pandemic. The exclusion applies where a statutory time frame effectively operates as an outer limit for termination of proceedings. Section 5(3) prescribes cessation of provisional attachment after expiry of 180 days and functions as such an outer limit. Applying the exclusion for the Covid period yields that the confirmation fell within the permitted 180-day computation.Conclusion: The confirmation order is not invalid on the ground of delay under Section 5(3); conclusion is in favour of the Respondent.Final Conclusion: The appeal is dismissed; the provisional attachment and its confirmation are upheld and the Adjudicating Authority's order remains operative.Ratio Decidendi: The definition of 'proceeds of crime' under the Prevention of Money Laundering Act, 2002 comprises (i) property derived or obtained directly or indirectly from scheduled offences and (ii) the value of any such property permitting attachment of property equivalent in value when tainted assets are not traceable; valuation uses fair market value on date of acquisition; and the Covid-19 exclusion of limitation period (15.03.2020-28.02.2022) applies in computing statutory outer time limits such as the 180-day period in Section 5(3).