Equivalent-value attachment permits restraint of untainted property when criminal proceeds are untraceable and alienation risk supports provisional action.
Equivalent-value property may be provisionally attached under the Prevention of Money Laundering Act where traceable proceeds of crime have been siphoned off or layered, provided statutory safeguards are met. Common directorships during the period of alleged criminality, unexplained resignations and share transfers, and failure to establish consideration supported the appellant company's connection with the alleged fraud. Properties acquired before the alleged offence period were not immune from attachment because their aggregate value was below the identified proceeds of crime and actual tainted assets could not be traced. Multiple FIRs, charge sheets, attempted disposal of property, and transfer patterns supported a recorded reason to believe and risk of alienation, justifying immediate provisional attachment.
Issues: (i) Whether the appellant company is an independent company and has no link/connection with M/s Biotor Industries Ltd. and its directors; (ii) Whether the properties held by the appellant (sr. nos. 9 & 11) purchased prior to the alleged fraud cannot be attached as proceeds of crime or as equivalent value; (iii) Whether the conditions for provisional attachment under Section 5(1) of the PMLA, 2002 (including reason to believe and risk of concealment/alienation) were satisfied.
Issue (i): Whether the appellant company is an independent company and has no link/connection with M/s Biotor Industries Ltd. and its directors.
Analysis: The record shows the same individuals were directors of the appellant and M/s Biotor Industries Ltd. up to and during the period when proceeds of crime were generated; subsequent resignations and share transfers to relatives were found to be unexplained and consistent with a strategy to shield liabilities. The appellants did not establish receipt of consideration for share transfers or other facts sufficient to rebut the connection with the alleged criminality.
Conclusion: In favour of Respondent.
Issue (ii): Whether properties acquired prior to the alleged offence period (sr. nos. 9 & 11) are immune from attachment or may be attached as equivalent value.
Analysis: The definition of "proceeds of crime" includes the value of any such property and permits attachment of property of equivalent value where the actual tainted property cannot be traced. Authorities and prior decisions were applied to conclude that when proceeds have been siphoned off and cannot be located, properties of equivalent value may be attached subject to statutory safeguards. The attached properties' aggregate value was found to be less than the identified proceeds of crime; tracing the actual tainted property was not possible.
Conclusion: In favour of Respondent.
Issue (iii): Whether the conditions of Section 5(1) PMLA (reason to believe and likelihood of concealment/transfer) for provisional attachment were met.
Analysis: Multiple FIRs, charge sheets and investigative material showed large-scale fraud and generation of proceeds of crime. Evidence of attempted disposal/public notice for the appellant's property and the pattern of transfers supported a recorded reason to believe and risk of alienation. The statutory proviso permitting immediate attachment where non-attachment would frustrate proceedings was held to be engaged on the material placed on record.
Conclusion: In favour of Respondent.
Final Conclusion: The appeal is dismissed and the provisional attachments confirmed; the decision upholds the Directorate's attachment of the subject properties as authorized under the Prevention of Money Laundering Act, 2002.
Ratio Decidendi: Where proceeds of crime cannot be traced because they have been siphoned off or layered, property of equivalent value may be provisionally attached under Sections 2(1)(u) and 5(1) of the Prevention of Money Laundering Act, 2002, provided there is a recorded reason to believe and material demonstrating risk of concealment or transfer.