Flow of tainted funds must be shown to attach property; common directorship alone cannot support provisional attachment.

Provisional attachment under the Prevention of Money Laundering Act is sustainable only where material exists showing that proceeds of crime, or their value, flowed directly or indirectly to the person whose property is sought to be attached; the value limb requires evidence of actual transfer or receipt of tainted funds. Mere common directorship or shareholding and transactional records absent proof of fund flow do not satisfy the reason-to-believe threshold and cannot support attachment. Consequently, attachments based solely on forensic reports identifying related companies without evidence of transfer of tainted funds must be set aside.

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Issues: Whether the confirmation of the provisional attachment of immovable properties of the appellants under the Prevention of Money Laundering Act, 2002 can be sustained in the absence of material establishing flow of proceeds of crime (tainted funds) from the accused/scheduled-offence entities to the alleged "related companies" and thence to the appellants.

Analysis: The Tribunal examined the Provisional Attachment Order, the Original Complaint and the impugned adjudication order to determine whether the attaching authority had material to form a reason to believe that the appellants were in possession of proceeds of crime or the value thereof. The PAO relied upon forensic audit reports and identified three companies as "related" to the accused by virtue of common directors/shareholders, and recorded transactions between those related companies and the appellants. The Tribunal found no material on record showing any flow of funds from the accused entities (including M/s ASL) to those three related companies. The respondent was specifically asked to point to evidence of any such flow; none was produced. The Tribunal applied the statutory definition of "proceeds of crime" under Section 2(1)(u) and the statutory threshold for provisional attachment under Section 5(1), concluding that invocation of the "value" limb requires material showing that actual proceeds flowed, directly or indirectly, to the person whose property is sought to be attached. Mere common directorship/shareholding, without evidence of transfer of tainted funds, does not establish such a flow and cannot support attachment in the hands of the appellants. The Tribunal noted precedent principles permitting attachment of properties in whose name proceeds are kept, but emphasised that attachment cannot stand where there is no evidence of any tainted money reaching the person whose property is attached.

Conclusion: The appeals are allowed and the confirmation of attachment of the appellants' properties under the Prevention of Money Laundering Act, 2002 is set aside for want of any material showing flow of proceeds of crime to the appellants.

Ratio Decidendi: For provisional attachment under Section 5(1) of the Prevention of Money Laundering Act, 2002 the authority must have material to form a reason to believe that proceeds of crime (or their value) flowed, directly or indirectly, to the person whose property is sought to be attached; mere common directors or shareholders without evidence of transfer of tainted funds is insufficient to sustain attachment.

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