2026 (3) TMI 252 - AT - Money Laundering

Provisional attachment under PMLA upheld where tracing of proceeds through corporates to recipients supports confirmation.

Provisional attachment under the PMLA may be confirmed on the basis of collective corroborative material tracing proceeds from scheduled offences through ... Provisional Attachment Order (PAO) - proceeds of crime - collected/generated huge amount of proceeds of crime from the schedule offence involving illegal coal mining / trading operations with the help of his associates - Reliance on statements recorded under a different statute as corroborative evidence - lifting of corporate veil - compliance with language requirement under Regulation 3 of the Adjudicating Authority (Procedure) Regulations, 2013 - scope of provisional attachment under Section 8(3)(a) of the PMLA - attachment during investigation or pendency of related proceedings - attachment of property of individuals or corporates where persons are recipients of proceeds of crime Reliance on statements recorded under a different statute as corroborative evidence - Whether the Adjudicating Authority acted improperly by relying on a statement recorded under the Income Tax Act, 1961 to confirm the Provisional Attachment Order. - HELD THAT: - The Tribunal found that the PAO and its confirmation were not drawn solely on the statement of Shri Niraj Singh recorded under the Income Tax Act but on a body of evidence including multiple statements recorded under section 50(2) of the PMLA, material recovered during searches, and a disclosed modus operandi. Summons were issued to Shri Niraj Singh and a complaint under section 174 CrPC was filed for non-compliance; thus reliance on the statement was only corroborative. Given the cumulative evidence linking the appellants to receipt and layering of proceeds, the challenge that statements recorded under a different statute were impermissibly relied upon was rejected. [Paras 17, 18, 32, 33] The challenge to the Adjudicating Authority's reliance on the statement recorded under the Income Tax Act was dismissed; the statement was treated as corroborative within a broader evidentiary matrix. Compliance with language requirement under Regulation 3 of the Adjudicating Authority (Procedure) Regulations, 2013 - Whether the proceedings before the Adjudicating Authority were vitiated for want of compliance with Regulation 3 requiring documents to be in Hindi or English. - HELD THAT: - The Tribunal accepted the Adjudicating Authority's finding that English translations of statements recorded in Bengali were furnished on 07.12.2021 and that the complaint contained an English gist of the statements and sale deeds. The Authority also noted that the persons had given statements in Bengali and were familiar with that language. The objection was therefore treated as factually incorrect and merely a hypothetical technicality. On these factual findings the Tribunal refused to accept the challenge based on alleged non-compliance of Regulation 3. [Paras 35, 36, 37] The objection under Regulation 3 was rejected and did not vitiate the Adjudicating Authority's order. Scope of provisional attachment under Section 8(3)(a) of the PMLA - attachment during investigation or pendency of related proceedings - Whether provisional attachment could continue only in respect of properties that are the subject matter of proceedings before the Special Court, as contended by appellants relying on a High Court single-judge decision. - HELD THAT: - The Tribunal construed Section 8(3)(a) in light of the Apex Court's decision cited (Vijay Madanlal Choudhary [2022 (7) TMI 1316 - SUPREME COURT (LB)] and held that provisional attachment under the PMLA is not confined to properties that are already subject matter of a complaint before the Special Court; attachment can be made where material indicates a person is in possession of proceeds of crime, whether as an accused or as a recipient. The Tribunal observed that the High Court single-judge ratio relied upon by appellants conflicted with the Apex Court and was stayed by a Division Bench; therefore that ratio could not be applied to defeat the statutory scheme under Article 141. [Paras 38, 39, 40, 41] Section 8(3)(a) permits continuance of attachment during investigation or pendency of related proceedings against persons shown by material to be involved or to be recipients of proceeds; the appellants' contention based on the High Court single-judge decision was rejected. Attachment of property of individuals or corporates where persons are recipients of proceeds of crime - Whether properties of individuals or of corporate entities could be provisionally attached where evidence shows receipt or layering of proceeds through shell companies and transfers to relatives/associates. - HELD THAT: - The Tribunal examined the material: statements under section 50(2) of the PMLA attributing use of dummy directors and routing of funds through 'jamakharchi' companies, admissions by the main accused about acquisition and use of shell companies, and detailed bank-transfer and property-purchase linkages set out in the impugned order. Given the disclosed modus operandi, unexplained credits, and transfers from shell/company accounts into personal accounts used to purchase properties, the Tribunal found a direct correlation between the criminal activity and acquisition of the attached properties. The principle in Bacha F. Guzdar regarding corporates and shareholders was held distinguishable on facts and statutory scheme; lifting the corporate veil was not required where material showed recipients of proceeds were beneficiaries of laundering through corporate entities. [Paras 10, 42, 43] The provisional attachment of properties in the names of the individuals and corporate entities was upheld as justified on the material showing receipt and layering of proceeds of crime. Final Conclusion: On consideration of the material and rival submissions the Tribunal found no infirmity in the Adjudicating Authority's confirmation of the Provisional Attachment Order; challenges on reliance of statements recorded under another statute, on language non-compliance, on the scope of Section 8(3)(a), and on separation of corporate and individual assets were rejected, and the appeals were dismissed. Issues: (i) Whether the Adjudicating Authority could rely on statements and materials (including statements recorded under statutes other than the PMLA and a diary) as part of evidence to confirm a Provisional Attachment Order; (ii) Whether Regulation 3 of the Adjudicating Authority (Procedure) Regulations, 2013 was violated by not providing documents/statements in Hindi or English; (iii) Whether properties of individuals/shareholders could be provisionally attached for proceeds routed through corporate/jamakharchi companies; (iv) Whether provisional attachment under Section 8(3)(a) of the PMLA may continue during investigation or pendency of proceedings and its scope vis-a -vis scheduled offences.Issue (i): Whether the Adjudicating Authority could rely on statements and materials (including statements recorded under statutes other than the PMLA and a diary) as part of evidence to confirm a Provisional Attachment Order.Analysis: The Tribunal examined the record and found multiple statements recorded under Section 50(2) of the PMLA and other material recovered during searches. Although a statement of one witness recorded under the Income-tax Act was present, the Adjudicating Authority did not base the PAO solely on that statement or the diary; those items were corroborative among a body of evidence including statements taken under the PMLA, transaction records and tracing of funds from shell companies to personal accounts.Conclusion: The Adjudicating Authority permissibly relied on the collective evidence; reliance on statements recorded under another statute as corroborative material did not vitiate confirmation of the PAO. This conclusion is against the appellants.Issue (ii): Whether Regulation 3 of the Adjudicating Authority (Procedure) Regulations, 2013 was violated by not providing documents/statements in Hindi or English.Analysis: The impugned order records that English translations of the statements were provided to the Adjudicating Authority on 07.12.2021 and that the statements were recorded in Bengali by witnesses well versed in that language. The Tribunal found the objection to be factually incorrect and essentially technical, noting the Adjudicating Authority's explicit findings about translation and provision of English gist in the complaint.Conclusion: There was no contravention of Regulation 3; the argument on this ground fails. This conclusion is against the appellants.Issue (iii): Whether properties of individuals or shareholders can be provisionally attached when proceeds have been routed through corporate/jamakharchi companies.Analysis: The Tribunal considered evidence of fund flows from identified shell/jamakharchi companies into the bank accounts of the appellants and purchases of properties from those funds. It distinguished the facts from authorities invoked by appellants on corporate separation, finding direct correlation between the main accused's criminal activity, layering through companies and acquisition by persons connected to him; thus attachment could target recipients of proceeds even if routed through corporate vehicles.Conclusion: Provisional attachment of properties of individuals/shareholders was permissible on the facts and evidence; the corporate veil argument did not warrant interference. This conclusion is against the appellants.Issue (iv): Whether provisional attachment under Section 8(3)(a) of the PMLA may continue during investigation or pendency of proceedings and its relation to scheduled offences.Analysis: The Tribunal interpreted Section 8(3)(a) in light of statutory text and binding authority of the Apex Court, noting that provisional attachment need not be limited to those formally accused in the scheduled offence and may apply to any person involved in processes connected with proceeds of crime; attachment may continue during investigation (subject to statutory limits) or pendency of proceedings.Conclusion: Section 8(3)(a) permits continuation of attachment in the circumstances shown; the appellants' contention based on contrary Single Bench reasoning was rejected as inconsistent with higher authority. This conclusion is against the appellants.Final Conclusion: The Tribunal found that the Adjudicating Authority recorded sufficient corroborative evidence, complied with Regulation 3, correctly treated recipients of laundered funds as proper subjects of provisional attachment and applied Section 8(3)(a) consistently with higher authority; consequently there is no ground to interfere with confirmation of the Provisional Attachment Order.Ratio Decidendi: Where an authorised officer adduces sufficient material tracing proceeds from scheduled offences through corporate or other channels to identifiable recipients, the Adjudicating Authority may confirm a provisional attachment relying on the collective corroborative evidence (including translated statements and material recorded under different statutes) and provisional attachment under Section 8(3)(a) may continue during investigation or pendency of proceedings as permitted by the PMLA.