2026 (3) TMI 1435 - AT - Money Laundering

PMLA provisional attachment of mortgaged bank-secured properties set aside where no material showed they were proceeds of crime.

Provisional attachment under PMLA Section 5(1) must rest on recorded reasons, based on material in possession, that the property itself is proceeds of ... Provisional attachment of mortgaged properties - Reason to believe - Value of proceeds of crime - Conspiracy to cheat the lenders by making fraudulent transactions such as huge non-trade transactions and diverted the funds for their own use and the use of their connected entities - default in repayment of loans and credit limits availed from a consortium of banks. Attachment of mortgaged property - Reason to believe - Value of proceeds of crime - HELD THAT: - The Tribunal found that, despite an argument advanced at the stage of final hearing that some of the attached properties were themselves acquired out of proceeds of crime, the record did not support that stand. The Original Complaint and the impugned order treated those properties as value thereof and not as property directly or indirectly derived from the scheduled offence; the later contention was therefore a new case dehors the record and was rejected. On the statutory scheme of Section 5, the Tribunal held that attachment requires recorded reasons to believe, based on material, that the property involved in money-laundering is likely to be concealed, transferred or otherwise dealt with so as to frustrate proceedings, and in the absence of such satisfaction attachment cannot be made. Since the properties already stood mortgaged to the appellant banks, possession had been taken by the banks and some properties had already been auctioned, there was no material showing likelihood of alienation in the manner contemplated, particularly in the absence of any allegation of collusion or complicity of the banks. [Paras 13, 14, 17, 18, 19] Following the earlier Tribunal view in Bank of Baroda, the appeals were allowed and the impugned confirmation of attachment, insofar as it concerned the appellant banks, was set aside. Final Conclusion: The Tribunal held that the impugned attachment of the mortgaged properties was contrary to the statutory requirement governing provisional attachment under the PMLA. The appeals filed by the banks were accordingly allowed and the impugned order was set aside qua the appellants. Issues: Whether provisional attachment of mortgaged properties standing in the banks' favour was sustainable when the record indicated that the properties were attached as value of the alleged proceeds of crime and not as property directly or indirectly acquired from proceeds of crime.Analysis: The attachment power under Section 5(1) of the Prevention of Money Laundering Act, 2002 requires the authorised officer to record reasons to believe, on the basis of material in possession, that the property is proceeds of crime and is likely to be concealed, transferred, or otherwise dealt with so as to frustrate confiscation. The material on record showed that the relevant properties were already mortgaged to the appellant banks, possession had been taken by the banks, and some properties had already been auctioned. The record did not support the new contention that the properties were themselves direct or indirect proceeds of crime. The tribunal treated the attachment as one made only as value thereof, and found no substantiation for the assertion that non-attachment would frustrate proceedings.Conclusion: The provisional attachment of the mortgaged properties was not sustainable against the appellant banks, and the impugned order was set aside.