2026 (4) TMI 219 - AT - Money Laundering

Equivalent-value attachment under PMLA can extend to pre-offence property when tainted assets are untraceable.

Property acquired before the scheduled offence may still be attached under the Prevention of Money Laundering Act, 2002 as equivalent value of proceeds of ... Provisional Attachment - Effect of property acquired prior to the commission of the scheduled offence - definition of ' proceeds of crime' - Equivalent value attachment - immovable properties of the appellants, finding their involvement in money laundering - unauthorized deposits. Proceeds of crime - Value equivalent - Property acquired prior to commission of crime - HELD THAT: - It has come on record that Smt. Nowhera Shaik and related others have collected Rs. 5600 crores as unauthorized deposits from around 1,72,000 investors (BIG members) across the country and outside. It engaged market executives and direct selling agents for luring the investors. It was with false promises of return of the amount with high rate of interest i.e., 3% per month (36% to 40% per year) by hatching various schemes and defaulted making payments to the investors. Around 250 accounts were opened in various banks across the country and 8 of them in UAE and Saudi Arabia. It was found that Smt. Nowhera Shaik and related others have diverted the depositor’s money to their personal accounts for wrongful gain and utilized it for purchase of movable and immovable properties. An ECIR was accordingly recorded finding a case of money laundering. The appellant Syed Akhtar is a partner in M/s SA Builders and Developers and the proceeds of crime has been layered by Smt. Nowhera Shaik and Heera Group in lieu of purchasing land. A total proceeds of crime amounting to Rs. 78,63,45,010/- has been layered to M/s SA Builders and Developers, Mr. Syed Akhtar and Mr. Syed Afsar. Out of the said proceeds Rs. 41.05 Crores is lying with M/s Neelanchal Technocrats Pvt. Ltd. and the balance of Rs. 37,58,45,010/- is still with the appellants. The Tribunal held that the definition of proceeds of crime includes, apart from property directly or indirectly derived from criminal activity, the concept of attachment for value equivalent. It accepted the respondent's case that the actual tainted funds received by the appellants were not available in traceable form and had been siphoned off, and therefore attachment of other properties standing in the appellants' names could validly be made for equivalent value. The Tribunal rejected the contention that properties acquired prior to the commission of crime are outside the reach of the Act in all situations, holding that such an interpretation would render the statutory expression relating to value equivalent redundant. Relying on its earlier decision in Shri Sadananda Nayak Vs. Directorate of Enforcement, Bhubaneswar [2024 (10) TMI 1619 - APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI] in Dilbag Singh @ Dilbag Sandhu Vs. Union of India & Ors. [2024 (11) TMI 833 - PUNJAB AND HARYANA HIGH COURT], and the authoritative pronouncement in Vijay Madanlal Choudhary [2022 (7) TMI 1316 - SUPREME COURT (LB)] it held that prior-acquired property is attachable only where the actual proceeds of crime are not found traceable or available. [Paras 18, 19, 20, 21] The challenge to the attachment failed, and the confirmation of attachment was sustained. Final Conclusion: The Tribunal held that attachment under the Act is not confined to property directly derived from the scheduled offence and extends to property of equivalent value where the actual proceeds of crime are unavailable or untraceable. On that basis, the appeals were dismissed and the confirmation of attachment was upheld. Issues: Whether property acquired prior to the commission of the scheduled offence can be attached under the Prevention of Money Laundering Act, 2002 as equivalent value of proceeds of crime when the tainted property is not traceable.Analysis: The definition of proceeds of crime was treated as comprising multiple limbs, including not only property derived or obtained directly or indirectly from criminal activity relating to a scheduled offence, but also the value of such property. On that construction, attachment is not confined to property physically traceable as tainted property. Where the proceeds generated from the offence have been siphoned off, vanished, or are otherwise unavailable, the statute permits attachment of other property of equivalent value, even if such property was acquired before the offence. This interpretation was held necessary to preserve the efficacy of the scheme against money laundering and to avoid rendering the equivalent-value limb redundant.Conclusion: Property acquired prior to the commission of the offence can be attached as equivalent value under the Act when the actual proceeds of crime are not traceable. The appellants' challenge failed.