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2025 (5) TMI 1137 - AT - Money LaunderingMoney Laundering - attachment of bank accounts - criminal misconduct - misuse of official position - resons to believe - requirement to conduct independent investigation for commission of the predicate offence - properties already seized by police/CBI can be attached under PMLA 2002 or not - intent of seizure under Prevention of Corruption Act 1988 is similar to that of attachment under PMLA 2002 or not. Whether ED is required/bound to conduct independent investigation for commission of the predicate offence to form reason to believe for attachment? - HELD THAT - The first contention of the appellants is that there is no independent investigation undertaken by the ED and thus the requirement of reason to believe under Section 5 of PMLA is not fulfilled and hence the attachment is invalid. However this view is not agreed as no separate investigation needs to be conducted by the ED and the reason to believe is justly formed based on the basis of FIR police investigation relevant documents statements recorded u/s 50 PMLA and the scrutiny of various bank accounts of the appellants and only after that it has ordered attachment of the impugned bank accounts and Demat A/c for sum of Rs. 2, 31, 04, 618.13 against the disproportionate assets of Shri Narendra Kumar Tanwar his family members to the tune of Rs. 6, 79, 59, 678/-. Further the police/CBI has to conduct the investigation for the commission of the predicate/scheduled offence but ED is not empowered to re-investigate the same. However if there is any apparent error in CBI/police investigation in the predicate offence it can certainly suggest to the concerned investigation agency for remedial action without transgressing into the field of investigation for the predicate offence by doing any parallel/independent investigation which may lead to many contradictions. In case of commission of offence u/s 13(1)(e) of PC Act the quantum of disproportionate assets to the known sources of income of the family of the public servant is the proceeds of crime in absence of any explanation for acquisition of the same. As per investigation conducted by ACB of Rajasthan Police appellants were found in possession of the disproportionate assets to the tune of Rs. 6, 79, 59, 678/-. Thus ED was empowered to attach the assets of the appellants to that extent. But in the present case police seized the bank accounts and Demat A/c for sum of Rs. 2, 31, 04, 618.13 which were later-on attached by ED vide PAO No. 04/2014. Thus the contention of the appellant that ED has not conducted any independent investigation is devoid of any merits as ED is not empowered to conduct investigation for commission of the predicate offence. Whether the properties already seized by police/CBI cannot be attached under PMLA 2002 or whether it will amount to double attachment? - Whether the intent of seizure under Prevention of Corruption Act 1988 is similar to that of attachment under PMLA 2002? - HELD THAT - The properties seized by police/CBI cannot be equated with the attachment as defined u/s 2(1)(d) of PMLA 2002. Even otherwise in PMLA the procedure for search and seizure is mentioned in Chapter V from Section 16 to 24 of PMLA 2002 whereas procedure for attachment adjudication and confiscation is mentioned in Chapter III from Section 5 to 11 of PMLA 2002. This points to the direction that concept of search seizure and attachment are different aspects during investigation of a case. Thus the attachment made by ED after the seizure by the police does not amount to double attachment. The Prevention of Corruption Act is silent on the aspect and procedure of attachment. Previously the investigation agencies used to apply for attachment and confiscation of the proceeds of crime under Criminal Law Amendment Ordinance 1944 after the conviction of the accused under Prevention of Corruption Act 1988 - the intent of seizure under PC Act 1988 is not similar to that of attachment under PMLA 2002. As per Cr.P.C. after the search police may seize the incriminating or material evidence found during the search by way of Panchnama. The concerned person has right to apply to the concerned court for release of the said seized material on Supardaginama with an undertaking to preserve the same till the conclusion of trial. However the attachment under PMLA is effective till the conclusion of trial and in case of conviction Ld. Special Judge PMLA Court can confiscate the same. Whether based on the second FIR No. 196/2013 dated 10.05.2013 ED is empowered to make the attachment to the tune of Rs. 1, 60, 85, 107/- vide PAO No. 08/2014 in Original Complaint No. 373/2014? - HELD THAT - It is pertinent to mention here that on admission of the appellant PAO No. 08/2014 dated 30.09.2014 and its confirmation by Adjudicating Authority was made on 27.01.2015. Thus this particular order was passed after the passing of PAO No. 04/2014 and the present impugned order dated 30.07.2014. Appellants have not filed any appeal against the later confirmation order dated 27.01.2015. Even there is nothing on record to show that the properties for the sum of Rs. 1, 60, 85, 107/- are overlapping with the present confirmation order dated 30.07.2014. Hence this issue is also decided against the appellant and in favour of the Respondent ED. Conclusion - i) The ED is not required to conduct an independent investigation into the predicate offence to form a reason to believe under Section 5 of PMLA; reliance on FIR chargesheet and related materials suffices. ii) Seizure under the PC Act is distinct from attachment under PMLA; attachment by ED after police seizure does not amount to double attachment. iii) The intent and legal effect of seizure under the PC Act differ from attachment under PMLA which is a protective measure pending adjudication and possible confiscation. iv) The attachment based on the second FIR and related proceedings is valid and does not overlap with or invalidate the present attachment. Appeal dismissed.
The core legal questions considered by the Tribunal in the present appeals under Section 26 of the Prevention of Money Laundering Act, 2002 (PMLA) are as follows:
i) Whether the Enforcement Directorate (ED) is required or bound to conduct an independent investigation into the commission of the predicate offence to form a "reason to believe" for attachment under Section 5 of PMLA? ii) Whether properties already seized by police or CBI can be attached under PMLA, or whether such attachment would amount to double attachment? iii) Whether the intent and legal effect of seizure under the Prevention of Corruption Act, 1988 (PC Act) is similar to that of attachment under PMLA? iv) Whether the ED is empowered to make an attachment based on a second FIR and related proceedings, and whether such attachment overlaps with previous attachments, potentially leading to double attachment? Issue-wise Detailed Analysis i) Requirement of Independent Investigation by ED to Form "Reason to Believe" under Section 5 of PMLA The appellants contended that the ED had not conducted any independent investigation and merely relied on the FIR and chargesheet filed by the Anti-Corruption Bureau (ACB), thus failing to satisfy the mandatory requirement of forming a "reason to believe" based on independent material as mandated by Section 5 of PMLA. They relied on precedents emphasizing that the power of attachment is not arbitrary and must be exercised on reasonable grounds supported by evidence beyond mere allegations. The Tribunal rejected this contention, clarifying that the ED is not required to conduct a separate investigation into the predicate offence. The predicate offence investigation is the domain of police or CBI, and ED's role is limited to investigating the laundering of proceeds of crime. The "reason to believe" under Section 5 is to be formed based on the material collected from the predicate offence investigation (FIR, chargesheet), statements recorded under Section 50 of PMLA, scrutiny of bank accounts, and other relevant documents. The Tribunal enumerated the scope of ED's investigation under PMLA, which includes:
In the present case, the disproportionate assets of the appellants and family members were established by the ACB investigation, amounting to Rs. 6,79,59,678/-, and the ED attached bank accounts and Demat accounts totaling Rs. 2,31,04,618.13 accordingly. The Tribunal held that the ED's reliance on the FIR and chargesheet, and the material collected, sufficed to form the requisite "reason to believe." The ED is not empowered to re-investigate the predicate offence but may suggest remedial action if errors are apparent. This interpretation aligns with the statutory scheme and avoids contradictory parallel investigations. ii) & iii) Whether Seizure under PC Act is Equivalent to Attachment under PMLA and Whether Double Attachment is Permissible The appellants argued that since the properties were already seized by the ACB under the PC Act, the ED's attachment under PMLA amounts to double attachment, which is impermissible. They further contended that the intent and effect of seizure under PC Act are similar to attachment under PMLA, thus precluding a second action. The Tribunal distinguished between seizure under the PC Act and attachment under PMLA, noting that the two are conceptually and procedurally distinct. The PC Act does not provide for attachment; seizure under it is a temporary custodial measure during investigation, governed under criminal procedure rules (Cr.P.C.), with the right of the accused to seek release of seized property on undertaking. In contrast, PMLA provides for attachment, adjudication, and confiscation procedures, with attachment being a protective measure to preserve proceeds of crime pending trial and possible confiscation. The Tribunal observed that the PMLA's Chapter V (Sections 16 to 24) deals with search and seizure, while Chapter III (Sections 5 to 11) deals with attachment, adjudication, and confiscation, underscoring their distinct legal import. Therefore, attachment by ED after police seizure does not amount to double attachment. The Tribunal further noted that the PC Act is silent on attachment and that the PMLA specifically empowers ED to attach properties during investigation, even before conviction, to prevent dissipation of proceeds of crime. This reasoning was supported by statutory interpretation and the procedural framework, and the Tribunal held that the intent of seizure under the PC Act is not similar to attachment under PMLA. Hence, the contention of double attachment was rejected. iv) Whether Attachment Based on Second FIR and Related Proceedings Overlaps with Present Attachment The appellants argued that the ED had already attached properties worth Rs. 1,60,85,107/- based on a second FIR and filed an Original Complaint for confirmation of that attachment. They contended that the present attachment order (PAO No. 04/2014) overlaps with the earlier attachment, thus being invalid. The Tribunal examined the timeline and records, noting that the earlier attachment and its confirmation order were passed after the present impugned order. Moreover, there was no evidence on record to show any overlap of properties attached under the two orders. The appellants had not preferred any appeal against the later confirmation order. Therefore, the Tribunal held that the ED was empowered to make the attachment under the second FIR and that there was no double attachment or overlap in the present case. Treatment of Competing Arguments The appellants relied heavily on judicial pronouncements emphasizing the need for independent investigation by ED, mandatory recording of reasons to believe based on material evidence, and prohibition of double attachment. They cited decisions of this Tribunal and various High Courts, including the Supreme Court, underscoring safeguards against mechanical or arbitrary attachment orders. The Tribunal acknowledged these precedents but distinguished the facts and statutory context of the present case. It emphasized the complementary roles of police and ED, the procedural distinctions between seizure and attachment, and the sufficiency of the material relied upon by ED to form a reasoned belief. The Tribunal found no procedural or substantive infirmity in the impugned order and rejected the appellants' contentions accordingly. Conclusions The Tribunal concluded that:
Significant Holdings The Tribunal's crucial legal reasoning includes the following verbatim excerpts:
The Tribunal dismissed the appeals as devoid of merit and clarified that the order does not affect the rights of any party in the criminal trial, and the properties shall be disposed of by the Special Judge, PMLA Court after conclusion of trial, as per law.
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