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2019 (5) TMI 1463 - AT - Money LaunderingOffence under PMLA - Provisional Attachment Order - recording of reason to believe - money belongs to the Appellant is a public money - HELD THAT:- The Appellant is not holdings any funds of any of the defendant/respondent. The mortgage properties are admittedly not derived from criminal activities or proceed of crime. The scope of the PMLA is to punishing the accused person and not to punish the innocent person who is not involved in the crime within the meaning of Section 2 (v) read with Section 3 of the Act. The appellant is not charge sheeted nor any prosecution complaint has been filed against the appellant. The appellants have also no objection if the borrowers properties which were acquired from proceed of crime be dealt by the respondent in any manner. There is no nexus whatsoever, between the alleged crime and the appellant who is mortgagee of the properties and is a victim of the fraud and is innocent party. The definition of proceed of crime as per Section (u) of the Act comprises of the property which is derived or obtained as a result of criminal activities. The mortgaged properties are not acquired from proceed of crime. The scheme of the Act is such that is cannot apply to a transaction of the nature as in the present case against the appellant. Money of appellant is a public money and its right under SARFAESI cannot be taken away by the attachment order, in case the attachment continues against the mortgage property, in all matters the economy of the country would suffer. In the present case as the money belongs to the Appellant it is public money. The appellant has the right to property under the Constitution of India. The property of the appellant cannot be attached or confiscated if there is no illegality in the title of the appellant and there is no charge of money laundering against the appellant. The mortgage of property is the transfer under the transfer of property act. Under Section 8(1), upon receipt of a Complaint U/s 5(5) of the Act, if this Hon'ble Authority has reason to believe that any person has committed an offence under section 3 or is in possession of proceeds of crime, he may serve a notice of not less than thirty days on such person calling upon him to indicate the sources of his income, earning or assets, out of which or by means of which he has acquired the property attached U/s 5(1) of the Act. Provisional attachment order in the present case is bad as no valid reason to believe pertaining to appellant herein has been recorded within the meaning of the provision of Section-5(1) of the Act. Recording of reason to believe under the said provision is not a formality rather it is the duty of the authorized officer to record the valid reason to believe. As far as reason of believe within the meaning of Section 8(1) is concerned, if the Adjudicating Authority chooses to record the same, it must be recorded after having gone through the entire material and copy of complaint and provisional attachment order, the same shall have to be satisfied fully with the mandatory condition as to whether the person-concerned has committed the offence within the meaning of Section 3 of the Act or not or is in possession of proceed of crime. Only than, the notice under section 8(1) is to be issued, otherwise notice is to be declared as invalid. In the present case, copy of reason to believe has not been filed. Counsel for the respondent submits that reason to believe is not required prior to the order of passing the provisional attachment order. The attachment order shows that after recording the facts, the IO has just used the expression by repetition of language of section 5(1) in the provisional attachment order. The Authorised Officer must be aware that due to fixed period of 180 days, normally the person concerned is not allowed to cross-examination of the complaint and other witnesses. Till the provisional attachment order is passed, no notice of appearance is served and till the concluding of the said proceedings, the proceedings are conducted ex-parte. The notice is served after attachment alongwith the copy of provisional attachment and other material and copy of complaint. Thus, it is virtually not possible for any party to discharge the burden of proof unless he knows the nature allegations. No valid findings with the properties mortgaged with the appellant to who is the financial institution and possession of the proceeds of crime or the same is likely to be concealed, transferred or dealt with in any manner as the said properties are already mortgaged with the appellant. Adjudicating Authority failed to apply its mind at the time of issue of the Show Cause Notice (“SCN”). No reason to believe can be discerned from the SCN, or the order dated 29.06.2018 accompanying the SCN under Section 8 of the PMLA, as to how there was reason to believe that the Appellant was in possession of ‘proceeds of crime’. Adjudicating Authority, in its discussions, did not even consider the reply of the Appellant, let alone discuss it. Appeal is allowed. The impugned order with regard to attached property (which is mortgaged with the appellant) is set-aside with regard to the appellant (as the attachment on face of it was bad and contrary to law).
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