2026 (3) TMI 253 - AT - Money Laundering

Provisional attachment upheld where prima facie evidence links property to proceeds of crime via placement, layering and conversion into gold.

Whether provisional attachment of immovable property is sustainable where investigation material gives reason to believe the property represents proceeds ... Provisional attachment under the PMLA - well-organized racket for laundering unaccounted demonetized currency - converting the old currency notes to gold/bullion - “process and activity connected with the proceeds of crime” within the meaning of Section 3 of the PMLA​​​​​​​ - reason to believe test for provisional attachment - proceeds of crime - non-mention of the Appellant’s name in the FIR or ECIR - ​​​​​​​independence of PMLA proceedings from FIR/ECIR. Independence of PMLA proceedings from FIR/ECIR - HELD THAT: - The Tribunal held that mere absence of the appellant's name in the FIR or ECIR is not determinative of non-involvement when subsequent investigation under the PMLA produces material indicating active participation in money laundering. Proceedings under the Act depend upon the material gathered during investigation under the PMLA and may justify attachment even if the accused was not originally named in the FIR/ECIR. The conclusion follows from the material on record, including statements under Section 50 and corroborative evidence, which permit forming a prima facie view of involvement. [Paras 9] Non-mention in the FIR/ECIR does not preclude initiation of PMLA attachment proceedings; the distinct investigative material suffices for provisional attachment. Proceeds of crime - provisional attachment under the PMLA - reason to believe test for provisional attachment - HELD THAT: - On the evidence summarized by the Tribunal - including the appellant's statement under Section 50 describing collection and conversion of demonetized currency, corroborative bank/CCTV material, the flow of funds through fictitious firms, commissions charged, and use of RTGS to place funds - there is a proximate link between the seized demonetized currency and its conversion into gold. Such layering and integration, especially during the demonetisation period and involving premium sales of gold, prima facie amount to generation and use of proceeds of crime. For the purposes of provisional attachment the Respondent need only demonstrate a reason to believe, a threshold met by the investigation material. [Paras 10, 11] The Respondent has prima facie established that the appellant's activities amounted to processes connected with proceeds of crime, meeting the reason to believe standard for provisional attachment. Provisional attachment under the PMLA - proceeds of crime - HELD THAT: - The Tribunal applied the principle that attachment under the PMLA is not confined solely to properties directly acquired from proceeds of crime but extends to equivalent value thereof. At the provisional-attachment stage the Respondent must show a reason to believe, which can be formed from investigative material. Reliance on precedent in the matter of Shri Sadananda Nayak vs. Deputy Director [2024 (10) TMI 1619 - APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI] and the statutory scheme supports treating property acquired earlier as susceptible to attachment when there is a prima facie case that its value is linked to proceeds of crime or their equivalents. [Paras 12] The fact that the immovable property was purchased prior to the scheduled offence does not invalidate provisional attachment where the Respondent has a reason to believe it represents equivalent value of proceeds of crime. Final Conclusion: The Tribunal found that the investigation produced sufficient prima facie material to satisfy the reason to believe test under the PMLA, including that the appellant participated in converting demonetized currency into gold/bullion and that attachment may extend to equivalent value of proceeds; accordingly the appeal was dismissed and the provisional attachment sustained. Issues: Whether the Provisional Attachment Order dated 06.10.2017 and the Impugned Order dated 26.03.2018 confirming attachment of immovable property of the appellant can be sustained on the ground that the property is involved in or represents the value/equivalent of proceeds of crime arising from alleged conversion of demonetized currency into gold/bullion.Analysis: The proceedings arise from recovery of large quantities of demonetized currency and subsequent investigation under the Prevention of Money Laundering Act, 2002. Investigation material includes statements recorded under Section 50 of the Prevention of Money Laundering Act, 2002, CCTV evidence, bank transaction trails showing deposits into accounts of alleged shell entities, inter-account transfers, RTGS payments to bullion traders, and admissions by the appellant regarding collection of demonetized currency and purchase/sale of gold. The statutory test for provisional attachment requires a 'reason to believe' that property is involved in money laundering or represents the value/equivalent of proceeds of crime. The material on record discloses a pattern of collection of demonetized currency, placement through front/shell entities, layering by inter-account transfers, and integration by conversion into gold at a premium. The statements and corroborative material supply a prima facie basis to connect the appellant to the alleged process and activity connected with proceeds of crime within the meaning of Section 3 of the Prevention of Money Laundering Act, 2002. Attachment is not limited to properties directly acquired from proceeds of crime but extends to equivalent value; at the provisional stage the respondent need only demonstrate reason to believe, which the investigation material supplies.Conclusion: The Provisional Attachment Order and the Impugned Order confirming attachment are sustainable on the available prima facie material; the appeal is dismissed and the attachment stands confirmed in favour of the Respondent.