2026 (4) TMI 68 - AT - Money Laundering

PMLA attachment of traced assets upheld despite non-accused status and Covid-excluded limitation period.

Property traceable to diverted government funds was treated as proceeds of crime and remained liable to provisional attachment and confirmation under ... Provisional attachment - attachment of immovable and movable properties - definition of proceeds of crime under section 2(1)(u) - continuing offence of money-laundering - unauthorized diversion of Government funds from the Treasury Accounts to the Accounts which were not assigned for the purpose - scheduled offences both under the IPC and the Prevention of Corruption Act, 1988 - continuation of attachment proceedings after death - exclusion of Covid-19 period in computing limitation. Proceeds of crime - unauthorised diversion of Government funds - projecting tainted property as untainted - HELD THAT: - The Tribunal found that the cooperative society, managed by late Smt. Manorma Devi, was used for financial transactions involving diversion of Government funds from departmental bank accounts to the accounts of the society, and thereafter to private persons and entities. It rejected the plea that these were merely ordinary financial flows or lawful cooperative transactions, noting that there was nothing on record to show any RBI authorisation for carrying on banking business. Applying the statutory meaning of proceeds of crime, the Tribunal held that once the diverted Government funds were used for acquisition of movable and immovable assets, the resulting properties bore the taint of criminal activity relating to the scheduled offences. The material collected in investigation, including bank account analysis and records from builders and developers, was held sufficient to link the impugned properties to such tainted funds. [Paras 31, 32, 33, 38] The challenge to the characterisation of the attached properties as proceeds of crime was rejected. Continuing offence of money-laundering - relevant date for invoking PMLA - exclusion of Covid-19 period in computing limitation - HELD THAT:- The Tribunal held that, for purposes of money-laundering, the relevant date is not the original acquisition of illicit funds but the subsequent process or activity of dealing with those proceeds of crime and projecting them as untainted. Hence, the fact that the diversion of funds extended to a period prior to the coming into force of the Act did not preclude attachment where the process of holding, transferring or using those proceeds continued thereafter. On limitation, although the provisional attachment orders appeared to have been confirmed after 180 days, the Tribunal held that the period from 15.03.2020 to 28.02.2022, together with the further period directed by the Supreme Court, had to be excluded in view of the Covid-19 limitation orders. On that basis, the confirmations were held to be within time and not in breach of Section 5(1). [Paras 34, 35] The plea based on retrospectivity and the plea of expiry of the 180-day period were both rejected. Attachment of property held by persons not accused in the scheduled offence - possession of proceeds of crime - HELD THAT:- The Tribunal held that the sweep of provisional attachment is not confined to persons arraigned as accused in the predicate offence. If material shows that a person is in possession of proceeds of crime or is involved in a process or activity connected with them, action under the PMLA can be taken against such person as well. On the facts, the Tribunal found that none of the appellants could establish a lawful source for the funds or assets received by them, whereas the investigation had linked the money, wholly or partly, to the society or to late Smt. Manorma Devi. The Tribunal therefore rejected the contention that absence of arraignment in the scheduled offence immunised the attached properties from action under the Act. [Paras 36, 38] The objection founded on non-accused status in the scheduled offences was held to be untenable. Continuation of attachment proceedings after death - legal representatives continuing appeal - HELD THAT:- The Tribunal held that, notwithstanding the abatement of criminal proceedings against a deceased person, Section 72 of the PMLA expressly permits continuation of proceedings through legal representatives in matters concerning attached property. It noted that the appeals on behalf of late Smt. Manorma Devi had in fact been pursued by her legal heirs. The Tribunal therefore declined to accept the contention that attachment of properties traceable to late Smt. Manorma Devi had to be vacated merely because of her death. [Paras 37] The plea that the attachments lapsed on account of the death of late Smt. Manorma Devi was rejected. Final Conclusion: The Tribunal upheld both confirmation orders and held that the attached movable and immovable properties were validly treated as connected with proceeds of crime. All fifteen appeals were dismissed, and the pending applications were disposed of. Issues: (i) Whether the properties and funds traced to the appellants were liable to attachment and confirmation under the Prevention of Money-Laundering Act, 2002 as proceeds of crime, including in cases where the appellants were not arraigned as accused and one of the principal persons had died. (ii) Whether the impugned confirmations of the provisional attachment orders were vitiated for breach of the 180-day period under Section 5(1) of the Prevention of Money-Laundering Act, 2002.Issue (i): Whether the properties and funds traced to the appellants were liable to attachment and confirmation under the Prevention of Money-Laundering Act, 2002 as proceeds of crime, including in cases where the appellants were not arraigned as accused and one of the principal persons had died.Analysis: The material showed diversion of government funds into the accounts of SMVSSL and further routing to relatives and associates through bank transfers and cash, with acquisition of immovable properties and other benefits in their names. The statutory definition of proceeds of crime covers property derived or obtained, directly or indirectly, from criminal activity relating to a scheduled offence, and the sweep of provisional attachment is not confined to persons formally shown as accused in the scheduled offence. The death of the principal person did not extinguish the proceedings against the properties or the legal representatives, and the record did not establish any lawful source sufficient to displace the tracing of the assets to tainted funds.Conclusion: The attachment and confirmation of the impugned properties were upheld; the challenge failed and was against the appellants.Issue (ii): Whether the impugned confirmations of the provisional attachment orders were vitiated for breach of the 180-day period under Section 5(1) of the Prevention of Money-Laundering Act, 2002.Analysis: Although the confirmations were passed beyond 180 days from the provisional attachment orders, the period from 15.03.2020 to 28.02.2022 stood excluded by the Supreme Court's Covid-related limitation orders. On that computation, the confirmations were not beyond the permissible period, and no statutory violation was made out.Conclusion: The limitation challenge was rejected and was against the appellants.Final Conclusion: The Tribunal found that the impugned attachment confirmations were legally sustainable and that the appellants had not established any lawful source or procedural illegality warranting interference.Ratio Decidendi: Under PMLA, property traceable to criminal activity relating to a scheduled offence may be provisionally attached and confirmed against any person involved in dealing with the proceeds of crime, and the Covid-related exclusion of limitation applies to the statutory period for confirmation of attachment.