2025 (5) TMI 2101 - AT - Money Laundering

Money Laundering - attachment of properties - proceeds of crime - making investments by false representations and assurances given by the promoters and senior management of National Stock Exchange Limited (NSEL) with a deliberate intention to dishonestly misappropriate his funds - HELD THAT - Just because appellant is not charge-sheeted for commission of predicate offence in the police chargesheet case she is not entitled to any benefit for release of her property seeing the fact that she is arrayed as an accused in the Prosecution Complaint filed by ED and the charges are already framed against her along with the other accused persons. There is ample evidence on record that the flat purchased by her was out of the proceeds of crime in the garb of consultancy charges as mentioned in detail in detail in para no.2 above. The said evidence reflects that Shri Amit Mukherjee the husband of the present appellant was Assistant VP of NSEL. He was hand in glove with the other co-accused persons for commission of NSEL scam including granting of NSEL membership to dubious entities and in allowing them to trade in commodities without the actual delivery of the stock. He was deeply involved in manipulation and generation of bogus documents such as stock offer letters and warehouse receipts. At all time he was aware of non- existent of stock goods. The claim of the Appellant that she was employed by Aastha group as a consultant and the money earned by her from Aastha group is her remuneration was found to be absolutely false and an afterthought defence. As the total quantum of fraud pertains to crores of rupees she is not entitled to get any benefit that the property is valuing less than Rs. 30 lakhs. Even otherwise the predicate offence is covered in Part A of the Schedule even in the pre- amended provision. Ld. Counsel for the appellant has not raised any valid legal issue to allow the present appeal nor any other legal issue is apparent to give any relief. Conclusion - The attachment of the appellant s property confimred as proceeds of crime under PMLA. The appellant s defense of legitimate income and lawful acquisition was rejected. Appeal dismissed.

Summary

The principal legal issues considered by the Tribunal in this appeal under Section 26 of the Prevention of Money Laundering Act, 2002 ("PMLA") were:

1. Whether the attached property, namely Flat No. 801, Ivory Heights, purchased by the appellant, is proceeds of crime under the PMLA and liable to be attached and confirmed by the Adjudicating Authority.

2. Whether the appellant, despite not being charge-sheeted for the predicate offence under the Indian Penal Code (IPC), can be held liable under PMLA for money laundering activities connected to the NSEL scam.

3. Whether the appellant's claim of legitimate income from consultancy services and lawful acquisition of the property withstands scrutiny against the evidence of alleged money laundering and proceeds of crime.

4. The scope of the Tribunal's review powers on confirmation of attachment orders and whether reappreciation of evidence is permissible at this stage.

Issue-wise Detailed Analysis:

1. Legality of Attachment of Property as Proceeds of Crime

Legal Framework and Precedents: Under Section 5 of the PMLA, proceeds of crime are defined as property derived or obtained directly or indirectly by any person as a result of criminal activity. Section 8 authorizes provisional attachment of such property, and Section 26 provides for appellate remedy against confirmation of attachment orders. The Adjudicating Authority must be satisfied on the basis of material on record that the property is proceeds of crime.

Court's Interpretation and Reasoning: The Tribunal noted that the Directorate of Enforcement (ED) had conducted a detailed investigation into the NSEL scam, which involved fraudulent trading practices, misappropriation of investor funds, and creation of bogus warehouse receipts. The appellant's property was purchased during the period of alleged laundering activities and was funded through amounts traced to the defaulting entities involved in the scam.

Key Evidence and Findings: The investigation revealed that the appellant's husband, an Assistant Vice President at NSEL, was instrumental in facilitating the scam. The appellant received substantial sums (approximately Rs. 25 lakhs) purportedly as consultancy fees from the Aastha Group, which were in fact kickbacks linked to proceeds of crime. Bank account analysis showed multiple transfers from the defaulting companies to the appellant's accounts, which were then used to purchase the attached flat.

Application of Law to Facts: The Tribunal held that the property was acquired out of proceeds of crime as defined under PMLA, given the nexus between the funds received by the appellant and the fraudulent activities of the NSEL scam. The mere labeling of payments as consultancy charges was found to be a facade to disguise the origin of illicit funds.

Treatment of Competing Arguments: The appellant contended that she was an independent consultant with legitimate income and that the property was purchased from her own earnings. The Tribunal rejected this, noting absence of credible evidence supporting her claim and reliance on an afterthought defense. The appellant's husband's role and the flow of funds were central to the finding of money laundering.

Conclusion: The attachment of the property was justified as it was proceeds of crime, and the appellant's claim of legitimate acquisition was not substantiated.

2. Liability of the Appellant under PMLA Despite Absence of Charge-sheet for Predicate Offence

Legal Framework: PMLA is a special statute dealing with money laundering, which is a separate offence from the predicate offence. Liability under PMLA can be established even if the accused is not charge-sheeted for the predicate offence, provided there is evidence of involvement in the laundering process.

Court's Reasoning: The Tribunal observed that the appellant was arrayed as an accused in the prosecution complaint filed by ED under PMLA and that charges were framed against her. The absence of a police charge-sheet against her for the predicate offence under IPC was not determinative of her liability under PMLA.

Evidence and Findings: The appellant was shown to have received and utilized proceeds of crime knowingly, as evidenced by the statements of co-accused and documentary proof. The Tribunal emphasized the role of the appellant in the laundering process, including receipt of kickbacks and acquisition of property from tainted funds.

Conclusion: The appellant's liability under PMLA was independent of the predicate offence charge-sheet status, and the attachment order was valid.

3. Validity of Appellant's Claim of Legitimate Income and Property Acquisition

Arguments by Appellant: The appellant claimed 12 years of experience in consultancy, receipt of salary from Aastha Group companies, and that the payments were legitimate remuneration. She also argued that the property purchase predated the 2013 amendment to PMLA and that the Adjudicating Authority ignored documentary evidence of her consultancy business.

Tribunal's Analysis: The Tribunal found these claims to be unsubstantiated and contradicted by the investigation record. The statements of key witnesses and documentary evidence indicated that the payments were in fact kickbacks linked to proceeds of crime. The timing of property acquisition was not determinative since the predicate offence was covered under the pre-amended schedule as well.

Conclusion: The appellant's defense was rejected as an afterthought and the property was rightly held to be purchased from proceeds of crime.

4. Scope of Appellate Review on Confirmation of Attachment

Legal Framework: The Tribunal's role under Section 26 of PMLA is to examine whether the Adjudicating Authority was justified in confirming the attachment order based on the material on record. The Tribunal is not to reappreciate evidence or act as a trial court.

Tribunal's Reasoning: The Tribunal held that the confirmation order was based on sufficient incriminating material and statements recorded under Section 50 of PMLA. The appellant failed to raise any valid legal issue or demonstrate error in the Adjudicating Authority's order to warrant interference.

Conclusion: The Tribunal declined to reappraise evidence and upheld the confirmation of attachment.

Significant Holdings:

"Just because appellant is not charge-sheeted for commission of predicate offence in the police chargesheet case, she is not entitled to any benefit for release of her property, seeing the fact that she is arrayed as an accused in the Prosecution Complaint filed by ED and the charges are already framed against her along with the other accused persons."

"There is ample evidence on record that the flat purchased by her was out of the proceeds of crime in the garb of consultancy charges."

"The claim of the Appellant that she was employed by Aastha group as a consultant and the money earned by her from Aastha group is her remuneration was found to be absolutely false and an afterthought defence."

"The attachment and confirmation order is just for the purpose of protecting property till the conclusion of trial."

Core Principles Established:

- Proceeds of crime include property acquired indirectly from criminal activity and may be attached even if the accused is not charge-sheeted for the predicate offence.

- The burden lies on the appellant to demonstrate legitimate source of funds for property acquisition when challenged under PMLA.

- The appellate authority under PMLA does not reappreciate evidence but examines the sufficiency of material for confirmation of attachment.

- Transactions disguised as legitimate consultancy fees or remuneration can be scrutinized and held to be proceeds of crime if linked to laundering activities.

Final Determinations:

The Tribunal dismissed the appeal, confirming the attachment of the appellant's property as proceeds of crime under PMLA. The appellant's defense of legitimate income and lawful acquisition was rejected. The order of the Adjudicating Authority confirming the provisional attachment was upheld, with the caveat that the final disposal of the property will depend on the outcome of the criminal trial.