2026 (3) TMI 153 - AT - Money Laundering

Provisional attachment of property as proceeds of crime upheld where possession, unexplained repayments and layering establish the requisite nexus.

Confirmation of the provisional attachment was upheld on evidence showing a plausible nexus between proceeds of the scheduled offence and the impugned ... Provisional attachment of proceeds of crime - bitcoin- based scam operated - possession by a person not named as accused - unexplained repayment of loan as indicium of layering - death of the principal accused - funds collected from the investors on false promises were identified as the proceeds of crime and were laundered through layered banking transactions, acquisition of movable and immovable properties, and incorporation and operation of shell entities in order to conceal the same - apprehension of alienation as basis for provisional attachment. Provisional attachment of proceeds of crime - HELD THAT: - The Tribunal found that funds collected through the gainbitcoin.com scheme were proceeds of crime and were laundered through layered transactions and acquisition of movable and immovable properties. Material, including admissions by Amit Bhardwaj and tracing of bank transactions, supported the finding that the properties now held by the appellants derived directly or indirectly from the criminal scheme. The Adjudicating Authority therefore correctly characterised the impugned properties as proceeds of crime and justified confirmation of the provisional attachment. [Paras 20, 21, 23, 26] Provisional attachment confirmed as properties represented proceeds of crime. Possession by a person not named as accused - Provisional attachment is permissible where property in possession of a person who is not yet named as an accused, if material indicates it is proceeds of crime. - HELD THAT: - Relying on the statutory sweep of Section 5(1) of the Act and the Apex Court's exposition in the case of Vijay Madanlal Choudhary Vs. Union of India [2022 (7) TMI 1316 - SUPREME COURT (LB)] the Tribunal held that the authority to provisionally attach property is not confined to property held by an accused named in FIR/ECIR. The trigger is material indicative of any person being in possession of proceeds of crime; such person may later be made an accused. The appellants' non-inclusion in the FIR/ECIR did not bar attachment where the property was found to be tainted. [Paras 24] Attachment valid despite appellants not being named accused. Unexplained repayment of loan as indicium of layering - Repayment of a loan within a short period from undisclosed cash deposits can be treated as manipulation to layer proceeds of crime and justify attachment. - HELD THAT: - The Tribunal accepted that although the purchase was shown as funded by a bank loan, the unusually swift repayment within four months by cash deposits-without disclosed source-indicated that the loan was used as a vehicle to disguise tainted funds. Admissions in statements and bank analysis corroborated that repayment arose from proceeds of the criminal scheme, justifying treatment of the property as acquired through laundering. [Paras 21, 22, 23] Undisclosed rapid loan repayment treated as layering; property attributed to proceeds of crime. Death of accused does not automatically vitiate attachment without order of abatement - The appellants' contention that proceedings abated on death of Amit Bhardwaj was not established and does not, on the record, invalidate provisional attachment. - HELD THAT: - The Tribunal noted absence of any order recording abatement of criminal proceedings on the file and observed that mere death of the principal does not ipso facto nullify attachment steps unless abatement is formally recorded. The respondents also indicated that the appellants may be arrayed as accused for laundering; in those circumstances the challenge based on alleged abatement failed. [Paras 25] No interference on ground of death/abatement where no order of abatement exists. Apprehension of alienation as basis for provisional attachment - Apprehension of alienation of property in a person's possession is a sufficient basis for invoking provisional attachment under the Act. - HELD THAT: - The Tribunal held that when property is held by the person against whom attachment is sought, there naturally exists a risk of alienation; that risk justified invoking Section 5(1). Provisional attachment operates as a protective measure pending trial and final adjudication under the scheme of the Act, and the mere occupation of the property by the appellant did not negate the statutory basis for attachment. [Paras 27] Apprehension of alienation properly relied upon to justify provisional attachment. Final Conclusion: On the material before it, including admissions and bank-trace analysis, the Tribunal found the Adjudicating Authority correctly concluded the impugned properties were proceeds of crime, held that attachment may be made against persons not named in the FIR where material so indicates, treated unexplained rapid loan repayment as evidence of layering, rejected the abatement argument for lack of record, and upheld provisional attachment justified by apprehension of alienation; appeals dismissed. Issues: (i) Whether the confirmation of the Provisional Attachment Order under Section 26 of the Prevention of Money Laundering Act, 2002, finding the impugned properties to be proceeds of crime, is legally sustainable; (ii) Whether provisional attachment under Section 5(1) of the Prevention of Money Laundering Act, 2002 requires the property to be in the hands of a person formally accused in the scheduled offence; (iii) Whether acquisition of property by way of loan repaid shortly after borrowing severs the link with proceeds of crime or precludes attachment; (iv) Whether the death of the principal accused and alleged abatement of criminal proceedings invalidates provisional attachment of properties derived from alleged proceeds.Issue (i): Whether the confirmation of the Provisional Attachment Order under Section 26 of the Prevention of Money Laundering Act, 2002, finding the impugned properties to be proceeds of crime, is legally sustainable.Analysis: The materials include admissions under Section 50(2) of the Act, bank statements showing layering and unexplained credits, contemporaneous investigative findings linking funds collected through the fraudulent scheme to acquisition of immovable properties, and valuation evidence. The adjudicating authority recorded that the attached properties were derived from or represented value equivalent to proceeds of crime as defined in Section 2(1)(u). The repayment of a loan by cash deposits from undisclosed sources within a short period was treated as a layering mechanism indicating use of tainted funds for acquisition. The Tribunal examined these factual and documentary materials and found a plausible nexus between the proceeds of the scheduled offence and the properties.Conclusion: The confirmation of the Provisional Attachment Order was upheld; the attached properties were held to be proceeds of crime.Issue (ii): Whether provisional attachment under Section 5(1) of the Prevention of Money Laundering Act, 2002 requires the property to be in the hands of a person formally accused in the scheduled offence.Analysis: The Tribunal applied the legal principle that Section 5(1) extends to any person found to be in possession of proceeds of crime, not solely to those already named as accused in FIR/ECIR, relying on binding authority interpreting the scope of the provision. The authority discussed makes clear that provisional attachment can be directed at any person where material indicates possession of proceeds of crime and that such persons may subsequently be made parties to prosecution under Section 3 of the Act.Conclusion: Provisional attachment under Section 5(1) does not require the person to be previously or presently named as an accused; attachment against a person in possession of proceeds of crime is permissible.Issue (iii): Whether acquisition of property by way of loan repaid shortly after borrowing severs the link with proceeds of crime or precludes attachment.Analysis: The Tribunal examined evidence that a loan was availed for purchase but was repaid within four months by cash deposits into the account without disclosure of legitimate source. The short repayment period, unexplained cash inflows, and corroborative admissions supported the finding that the loan arrangement was used to disguise the origin of criminal proceeds (a layering transaction). The adjudicating authority's reliance on those facts to treat repayment as indicative of tainted funds was sustained.Conclusion: A loan-funded acquisition followed by rapid repayment from undisclosed cash sources did not break the nexus with proceeds of crime; attachment on that basis was justified.Issue (iv): Whether the death of the principal accused and alleged abatement of criminal proceedings invalidates provisional attachment of properties derived from alleged proceeds.Analysis: The record did not establish any order of abatement or final termination of criminal proceedings such that the basis for investigative and provisional measures ceased to exist. Moreover, statutory scheme permits attachment of properties in possession of persons who may be legal heirs or others holding proceeds; death of the principal accused does not automatically nullify a finding of proceeds or the authority to provisionally attach pending trial or further proceedings.Conclusion: Death of the principal accused did not invalidate provisional attachment in the absence of an order terminating proceedings or other legal basis for abatement affecting the attachment.Final Conclusion: The adjudicatory findings linking the impugned properties to proceeds of crime were supported by the material on record; the statutory framework permits provisional attachment against persons in possession of such property; none of the grounds raised by the appellants warranted interference with the confirmation of attachment.Ratio Decidendi: Section 5(1) of the Prevention of Money Laundering Act, 2002 authorises provisional attachment of property held by any person where material shows it to be proceeds of crime, and unexplained or proximate repayment of loans with funds from undisclosed sources can establish the requisite nexus to sustain such attachment.