2026 (3) TMI 659 - AT - Money Laundering

Provisional attachment under PMLA: confirmed where recipient fails to discharge reverse burden proving legitimate origin.

Provisional attachment under the Prevention of Money Laundering Act was upheld on the legal ground that property in the possession of a recipient may be ... Provisional attachment - proceeds of crime in possession of a person - fraudulent actions resulted in defaults on promise to return the money with high returns - Multiple FIRs and an ECIR describing a scheme of collecting funds from investors and diverting them into purchases and transfers - reverse burden of proof in proceedings under the Prevention of Money Laundering Act, 2002. Provisional attachment of proceeds of crime in possession of a person - HELD THAT: - The Tribunal applied the principle that section 5(1) (as explained in the cited Apex Court passage) permits provisional attachment where material indicates that a person is in possession of proceeds of crime; the sweep is not confined to persons named as accused. The Court found evidence that amounts derived as proceeds of crime were transferred for purchase of properties in the appellant's name and that sums were transferred into her bank account by the main accused. In that factual matrix the attachment of properties purchased out of such funds was held to be permissible under the Act, and the appellant's non-accused status did not preclude provisional attachment. (Paras 11, 12, 13) [Paras 11, 12, 13] Provisional attachment of the appellant's properties stood validly made as they were found to have been purchased out of proceeds of crime. Reverse burden of proof in PMLA proceedings - The appellant was required to discharge the reverse burden to show that transfers to her husband or to her account were not proceeds of crime, and failure to produce supporting bank records warranted upholding the attachment. - HELD THAT:- The Tribunal recorded that the appellant relied on alleged transfers from her account to the main accused but failed to produce the husband's bank statements or other evidence to establish that the impugned transfers were bona fide, longstanding savings or repayments. The Tribunal held that where the material indicates transfers from the accused, the onus shifts to the recipient to substantiate legitimate source; the appellant's inability to produce the clinching bank evidence disentitled her to relief. (Paras 10, 11, 13) [Paras 10, 11, 13] The appellant failed to discharge the reverse burden of proof and accordingly the attachment was not interfered with. Final Conclusion: The Tribunal dismissed the appeal, holding that provisional attachment of properties acquired out of proceeds of crime was permissible even though the appellant was not an accused, and that the appellant failed to discharge the reverse burden of proof by producing bank records to show legitimate source of the impugned transfers. Issues: Whether the provisional attachment of properties belonging to the appellant under the Prevention of Money Laundering Act, 2002 was justified on the finding that such properties represented proceeds of crime or were purchased with proceeds of crime.Analysis: The appeal challenged confirmation of a provisional attachment order under Section 26 of the Prevention of Money Laundering Act, 2002. The record shows multiple FIRs and an ECIR describing a scheme of collecting funds from investors and diverting them into purchases and transfers. Material on record includes direct transfers from the main accused to sellers and transfers into the appellant's bank account and property acquisitions in the appellant's name. The appellant relied on asserted transfers to her husband and on her alleged government service and savings, but did not produce the husband's bank statements or other documentary evidence to establish that the impugned transfers derived from legitimate savings and not from proceeds of crime. The principle that provisional attachment may be made in respect of property in the possession of a person who is a recipient of proceeds of crime, even if not an accused, applies; the precondition under Section 5(1) is satisfaction from material in possession that the property is derived from criminal activity. The appellant failed to discharge the reverse burden to show that the impugned transfers were legitimate and maintained over the intervening period.Conclusion: The provisional attachment of the appellant's properties was justified and the confirmation of the provisional attachment order is upheld; the appeal is dismissed.Final Conclusion: The appellate challenge to the confirmation of provisional attachment under the Prevention of Money Laundering Act, 2002 is rejected for failure to rebut material indicating that the properties or funds were proceeds of crime.Ratio Decidendi: Under the Prevention of Money Laundering Act, 2002, provisional attachment under Section 5(1) may be ordered against a person in possession of proceeds of crime even if not an accused, and the recipient must discharge the reverse burden by adducing credible evidence that the property or transfers are not derived from criminal activity; failure to do so permits confirmation of provisional attachment.