2026 (3) TMI 1206 - AT - Money Laundering

Equivalent-value attachment under PMLA sustained where tainted assets were not traceable and transaction records showed fund deployment.

Section 2(1)(u) of the PMLA covers property derived from criminal activity, the value of such property, and equivalent-value property where the tainted ... Provisional Attachment Order (PAO) - equivalent value attachment - remittances pre-dated the scheduled offence - definition of 'proceeds of crime' in Section 2(1)(u) - deemed tainted property - reason to believe - bona fide third party interest - shell company - Whether properties acquired prior to the commission of the scheduled offence can be provisionally attached as the 'value of any such property' under the definition of 'proceeds of crime'. Attachment of property as the value of proceeds of crime - HELD THAT: - The Tribunal adopted the three limb interpretation of Section 2(1)(u), holding that where the actual tainted property derived from a scheduled offence is not available, any other property of equivalent value may be attached as the 'value of any such property'. The Tribunal followed its earlier exposition (citing Vijay Madanlal Choudhary [2022 (7) TMI 1316 - SUPREME COURT (LB)] and Axis Bank [2019 (8) TMI 1613 - SC ORDER] reasoning) that the second limb permits attachment of property acquired prior to the offence in circumstances where proceeds have been siphoned off or are not traceable, and that treating the second limb as redundant would frustrate the statutory object of recovering illicit gains. [Paras 37, 38] Attachment of properties acquired prior to the alleged scheduled offence is permissible as attachment of the value of proceeds of crime where the original proceeds are not available or traceable. Proceeds of crime includes property equivalent in value - Whether the remittances received by M/s Media Exim Pvt. Ltd. between 26.10.2005 and 26.04.2007 constituted 'proceeds of crime' within the meaning of the PMLA. - HELD THAT:- On the material before it, including statements recorded under Section 50 and transactional tracing, the Tribunal concluded there was sufficient material to establish that funds transferred from M/s Global Services FZE (Christian Michel) to Media Exim were used to acquire immovable and movable assets and that Media Exim functioned as a vehicle for those funds. The Tribunal found the appellant's contention of legitimate commercial transactions unsupported by evidence and accepted the Directorate's case that the receipts and ensuing gains constituted proceeds of crime or their value. [Paras 34, 40, 44] The remittances and assets acquired through them qualify as proceeds of crime or the value thereof; the adjudicating authority's confirmation of the provisional attachment was supported by material. The Tribunal reaffirmed the settled position that the statutory sweep of attachment is not limited to those named as accused in the FIR. Relying on binding authority, it held that attachment may extend to any person involved in processes or activities connected with proceeds of crime and that the authority to attach is directed at the proceeds wherever they are held, irrespective of whether the holder is arrayed in the predicate complaint. [Paras 42, 43] Provisional attachment may be made in respect of persons not named as accused where material shows involvement with proceeds of crime. Final Conclusion: The Tribunal dismissed the appeals, upholding the Adjudicating Authority's confirmation of the provisional attachment on the grounds that the properties could be attached as the value of proceeds of crime, the remittances and assets were shown to be proceeds or their value, and attachment is not confined to persons named in the predicate FIR. Issues: Whether the Provisional Attachment Order (PAO) dated 19.03.2015 and its confirmation by the Adjudicating Authority under the Prevention of Money Laundering Act, 2002, attaching properties of the appellants, was lawful and sustainable given the appellants' contention that (i) the alleged remittances pre-dated the scheduled offence and therefore could not constitute proceeds of crime and (ii) no nexus existed between the appellants/properties and the alleged scheduled offence.Analysis: The statutory definition of 'proceeds of crime' in Section 2(1)(u) of the Prevention of Money Laundering Act, 2002, encompasses three limbs: property derived or obtained directly or indirectly from criminal activity; the value of any such property; and property equivalent in value. Where the actual tainted property is not traceable or has been siphoned off, the Authority may provisionally attach property of equivalent value to secure recovery. The Tribunal examined the chronology and material on record, including statements recorded under Section 50 PMLA and transaction records, and considered precedents interpreting Section 2(1)(u) (including authority holding that the second limb permits attachment of equivalent-value property, subject to safeguards protecting bona fide third-party interests). The Tribunal also applied the standard of 'reason to believe' required for provisional attachment under Section 5(1) and the power of the Adjudicating Authority under Section 8(1). The Tribunal found material indicating transfers from M/s Global Services FZE to the appellant company, subsequent investments and disposals of assets, and admissions indicating the appellant company was used to receive and deploy the funds. The Tribunal rejected the argument that prior acquisition of property automatically precludes attachment where the property is sought to be attached as the value of proceeds of crime, and held that the second limb of Section 2(1)(u) can apply when proceeds are not available and equivalent-value attachment is necessary to preserve recovery.Conclusion: The appeal is dismissed and the confirmation of the Provisional Attachment Order is upheld; the attachment is lawful and in favour of the Respondent.