2026 (3) TMI 203 - AT - Money Laundering

Provisional attachment of tainted property under PMLA upheld where investigative links justify treating deposits as proceeds.

Under the Prevention of Money Laundering Act, the note explains that provisional attachment may extend to property held by persons who are not accused ... Provisional attachment - definition of 'proceeds of crime' - value of property equivalent - sufficient reason to believe for issuance of show cause notice - presumption of tainted deposits - disproportionate assets - huge proceeds of crime in cash through cheques and from ATM and also issued cheques in the name of others and used the embezzled amount for his own purposes - Whether the property can be attached, even if the appellant were not the accused persons for commission of any predicate offence? Provisional attachment irrespective of whether the holder is accused of the predicate offence - Property can be attached even if the person in whose name it stands is not accused in the predicate offence. - HELD THAT: - The Tribunal held that Section 5(1) and the scheme of the PMLA permit attachment of property linked to proceeds of crime regardless of whether the person holding the property is an accused in the scheduled offence. Reliance was placed on the Supreme Court's decision in Vijay Madanlal Choudhary [2022 (7) TMI 1316 - SUPREME COURT (LB)] which recognises that the Act reaches proceeds of crime 'in whosoever's name they are kept'. The investigation disclosed cash deposits, transfers and transactional patterns connecting the Mangal family to embezzled funds and the CBI charge sheet included the appellant's husband for offences under the IPC; on this basis the appellant's contention that attachment is impermissible in absence of predicate accusation was rejected. [Paras 6] Attachment in the hands of a non accused is permissible; issue answered against the appellant. Proceeds of crime - sufficient reason to believe for issuance of show cause notice may be formed from confessional statements and corroborative seizures - Deposits made by the accused and statements, together with seizures, furnished sufficient basis to treat such deposits as proceeds of crime and to issue the show cause notice; the appellant's explanation that deposits were genuine family transactions was not accepted. - HELD THAT: - The Tribunal examined the statement of the principal accused under Section 50 of PMLA admitting transfer of embezzled funds to the Mangal family, corroborative bank deposits into accounts of the appellant and her husband, seizing of cash and gold from lockers, unexplained cash deposits and expenditure (including partially burnt notes), and inconsistencies in income expenditure calculations. It applied the legal interpretation of 'proceeds of crime' (including the 'value of any such property' limb) as expounded in Vijay Madanlal Choudhary [2022 (7) TMI 1316 - SUPREME COURT (LB)] and Prakash Industries [2025 (11) TMI 257 - DELHI HIGH COURT] and concluded that ED had sufficient material to form the requisite 'reason to believe' and to treat the impugned assets as derived from proceeds of crime. The appellant's plea that deposits were legitimate family assistance and that no disproportionate assets were shown was found unpersuasive in view of the cumulative evidence. [Paras 7, 8] The show cause notice and attachment were justified; issues decided against the appellant. Proceeds of crime includes the value of such property and property equivalent in value - The appellant failed to satisfactorily explain sources for acquiring the impugned property and ED's computation of unexplained income, expenditure and investments supported attachment. - HELD THAT:- The appellant produced documents concerning sale proceeds of a plot and instalment payments for a flat and claimed an exchange of flats without monetary consideration. The Tribunal found that ED had properly scrutinised bank records, salary receipts, provident fund and other documentary material, adjusted previously undervalued components, and taken into account seized items and unexplained expenses. Applying the statutory definition of 'proceeds of crime' and the authorities which allow attachment of property or its value where tainted property cannot be traced, the Tribunal concluded that the appellant's explanations did not satisfactorily account for the differential between declared income and the assessed expenditure/investments. [Paras 8] Explanation of source was inadequate; attachment confirmed. Final Conclusion: The appeal is dismissed for lack of merit; the Adjudicating Authority's confirmation of the provisional attachment order is sustained. Issues: (i) Whether property can be attached even if the person in whose name it stands is not accused of the predicate offence; (ii) Whether deposits made by Shri Muzaffar Ali Bohra can be presumed to be proceeds of crime despite the appellant claiming them as own funds; (iii) Whether there was no reason to believe on the part of the Adjudicating Authority for issuance of the Show Cause Notice to the appellant; (iv) Whether the appellant has satisfactorily explained the sources of funds for acquiring the properties including housing loans.Issue (i): Whether property can be attached even if the person in whose name it stands is not accused of the predicate offence.Analysis: The Tribunal applied Section 5(1) of the Prevention of Money Laundering Act, 2002 and the Supreme Court precedent in Vijay Madanlal Choudhary v. Union of India, holding that attachment power extends to any person in possession of proceeds of crime irrespective of whether that person is accused in the predicate offence. The Tribunal also examined investigative material indicating cash deposits and transactions linking the appellant's family to proceeds of the embezzlement.Conclusion: Issue decided against the appellant; property can be attached even if the person is not an accused.Issue (ii): Whether deposits made by Shri Muzaffar Ali Bohra can be presumed to be proceeds of crime despite the appellant claiming them as own funds.Analysis: The Tribunal relied on statements recorded under Section 50 of the Prevention of Money Laundering Act, 2002 and investigative findings that identified significant cash deposits, seized cash and jewellery, and transfers from the embezzled corpus to the appellant and relatives. The Tribunal found these facts, together with unexplained transactions and expenditures, sufficient to treat the deposits as proceeds of crime for the purpose of attachment.Conclusion: Issue decided against the appellant; deposits were correctly treated as proceeds of crime for attachment purposes.Issue (iii): Whether there was no reason to believe on the part of the Adjudicating Authority for issuance of the Show Cause Notice to the appellant.Analysis: The Tribunal evaluated the investigative material, including cash deposits, seizure of burnt notes, investments and charge sheeting entries, and concluded that there existed a reasonable basis and apprehension regarding the appellant's involvement or connection with the proceeds of crime, thereby justifying issuance of the Show Cause Notice.Conclusion: Issue decided against the appellant; there was sufficient reason to believe to issue the Show Cause Notice.Issue (iv): Whether the appellant has duly explained the sources of funds for acquiring the properties including housing loans.Analysis: The Tribunal considered the appellant's explanation regarding sale proceeds of a plot and instalment payments, but found the Enforcement Directorate's accounting of salary, deposits, PF, arrears, seized assets and unexplained expenditures more persuasive. The Tribunal concluded the declared sources and loans did not satisfactorily account for the deposits, investments and acquisitions when measured against the investigative findings.Conclusion: Issue decided against the appellant; explanations were insufficient to discharge the burden of showing acquisitions were not from proceeds of crime.Final Conclusion: The Tribunal upheld the Adjudicating Authority's confirmation of the provisional attachment order, concluding that the investigative record furnished sufficient basis under the Prevention of Money Laundering Act, 2002 to link the impugned properties to proceeds of crime and to proceed with attachment.Ratio Decidendi: Where property is linked to proceeds of crime, the Prevention of Money Laundering Act, 2002 permits provisional attachment of that property in the hands of any person irrespective of whether that person is an accused, and the definition of 'proceeds of crime' under Section 2(1)(u) includes the value of such property thereby permitting attachment equivalent to the value of proceeds when tainted property cannot be traced.