2026 (3) TMI 1075 - AT - Money Laundering

Proceeds of Crime treatment upheld: provisional attachment sustained under PMLA where transactions and documentation failed to rebut criminal linkage.

Confirmation of a provisional attachment under the Prevention of Money Laundering Act was sustained where transaction records, bank transfers, lack of ... Validity of confirmation of the provisional attachment of bank accounts under the Act of 2002 - scheduled offences - PFI Member and National General Secretary of CFI - fraudulently transfer mpney from abroad in the guise of payments related to international trade of goods - criminal conspiracy to impart training to their cadres - use of explosive weapons with intention to promote enmity between different religious group and prepared them for terrorist activities - proceeds of crime and benami vehicle - requirement of credible documentary nexus. Provisional attachment under the PMLA - HELD THAT: - The Tribunal examined the material on record and found sufficient evidence to support the Adjudicating Authority's confirmation of the provisional attachment. The court accepted the finding that MBPL was used to park and distribute funds connected to the scheduled offences, noting inter alia the seized document linking MBPL to the group, the nature of credits into the NRE account from abroad, transfers from MBPL to multiple individuals, and banking transactions between MBPL and entities controlled by the organisation. The appellants' documentary explanations were found inadequate: share certificates bore dates inconsistent with incorporation, no credible source was shown for alleged capital contributions by the purported shareholders, the asserted sale deeds were not countersigned, and the balance sheet/auditor material indicated absence of genuine business operations or fixed assets. On this basis the Tribunal upheld the attachment as legally sustainable. [Paras 17, 18, 19, 20, 21] The confirmation of the provisional attachment was valid and sustainable on the material before the Adjudicating Authority. Proceeds of crime and benami vehicle - requirement of credible documentary nexus - Whether MBPL and transfers to the appellants constituted legitimate business/returns or proceeds of crime routed through the entity - HELD THAT: - The Tribunal rejected the appellants' contention that transfers represented genuine share application refunds and accumulated profits. It relied on the absence of reliable share documentation, discrepancies in dates of purported share certificates, absence of demonstrated source for capital contributions, lack of counter signed sale agreements, and accounting records showing no revenue operations. The existence of transactions between MBPL and entities controlled by the organisation, together with the pattern of receipts and distributions, supported the conclusion that MBPL functioned as a vehicle for illicit funds rather than a bona fide trading concern. [Paras 17, 18, 19, 20] MBPL and the transfers to the appellants were not shown to be legitimate business transactions; they were properly treated as proceeds routed through a vehicle used by the organisation. Final Conclusion: The Tribunal dismissed the appeals and upheld the Adjudicating Authority's confirmation of the provisional attachment, concluding that the material established MBPL's role as a vehicle for funds connected to the scheduled offences and that the appellants failed to substantiate lawful ownership or genuine business transactions. Issues: Whether the Adjudicating Authority's order dated 08.04.2024 confirming the Provisional Attachment Order dated 02.11.2023 under the Prevention of Money Laundering Act, 2002 was legally sustainable.Analysis: The Tribunal examined the factual matrix including FIRs under IPC, UAPA and IT Act leading to an ECIR, seizure of documents from PFI premises identifying M/s Multiflor Builders Pvt. Ltd. (MBPL) as an entity alleged to be used to park and distribute funds; bank transaction history showing substantial credits from NRE accounts and transfers from MBPL to multiple individuals; failure of the appellants to produce timely and consistent share certificates evidencing genuine shareholding; absence of credible source of funds for alleged capital infusion by the appellants; lack of revenue operations in MBPL's records and absence of corroborative documentary evidence for the claimed buyer/seller transactions relied upon by appellants; and banking transactions between MBPL and entities controlled by PFI. The Tribunal found these materials sufficient to establish a link between MBPL and PFI and to treat the impugned transfers as proceeds of crime within the meaning of the Act. The Tribunal also noted that documents relied upon by appellants (sale deeds, share certificates) suffered from material discrepancies and were not adequately countersigned or otherwise substantiated to rebut the respondents' case.Conclusion: The Adjudicating Authority's confirmation of the Provisional Attachment Order is upheld and the appeals are dismissed; the order confirming attachment is sustainable under Section 26 and Section 2(1)(u) of the Prevention of Money Laundering Act, 2002.