2025 (5) TMI 2102 - AT - Money Laundering

Money Laundering - proceeds of crime - abusing powers and misappropriating the huge amount allotted to the Govt. of UP - HELD THAT - The present appellant Abhai Kumar Bajpai the then MD of the Corporation along with other co-accused persons committed criminal misconduct by abusing their powers and thereby misappropriated the huge as commissions for allocating the tender to M/s Surgicoin Medequip Ghaziabad much higher than the prevailing market rates and thereby caused loss of Rs. 10 Crores by awarding tender worth of Rs. 31.59 Crores. CBI filed charge sheet against the said accused persons for commission of predicate offences under Section 409 420 IPC and 13(2) read with 13(1)(c) (d) of the PC Act 1988 and substantive offences thereunder. During investigation CBI recorded the statement of Manvendra Chaddha the representative of M/s Surgicoin Medequip Pvt. Ltd. under Section 164 Cr.P.C. before Magistrate wherein he exposed the modus operandi. During investigation ED also recorded the statements of many persons under Section 50 of the PMLA 2002. The statement of Aditya Goel for tendering Rs. 30 lakhs to appellant is also apparently false and incorrect in absence of any agreement to sell executed between them for Flat no. 4/1 Navsheel Apartments 56 Cantt Road Kanpur in his favour. Moreover appellant has not obtained any permission from his department for purchase and sale of this property. Even after the expiry of 3 years Aditya Goel has not initiated any suit for recovery of advance of Rs. 30 lakhs and hence false defence was attempted by the appellant to camouflage and conceal the proceeds of crime in the hands of Abhai Kumar Bajpai. Moreover Sunil Chaddha also revealed that Naresh Grover got created purchase invoices of FRU/FUD/NR kits from M/s Paras Traders of Gola Gokaran Nath of District Lakhimpur whereas M/s Paras Traders never dealt in said case as it was a Welding material shop. No kits were purchased from the said shop for supplying to NHRM. Investigation revealed that A.K. Bajpai the then MD (herein appellant) obtained huge bribe/commission from the award of contracts as detailed in para 27 of the impugned order. Conclusion - The ED rightly attached the property. The Adjudicating Authority also rightly confirmed the PAO. The ED rightly attached the property vide PAO 03/LKZO/2017 dated 05.04.2017. The Adjudicating Authority also rightly confirmed the PAO vide its order dated 13.09.2017 in OC no. 773/2017. Therefore there is no merit in the contention of Ld. Counsel for appellant - appeal dismissed.

Summary

The core legal questions considered in this judgment include:

1. Whether the attachment of the property belonging to the appellant under the Prevention of Money Laundering Act, 2002 (PMLA) was justified based on the available evidence and investigation findings.

2. Whether the appellant's defense regarding the source and ownership of the attached property, including claims of loans and sale agreements, was credible and sufficient to disprove the property as "proceeds of crime."

3. Whether the adjudicating authority correctly confirmed the attachment order passed by the Enforcement Directorate (ED) under the PMLA.

4. The extent to which the Appellate Tribunal under SAFEMA can reassess the quality of evidence collected by investigative agencies such as the CBI and ED, especially when charges have already been framed by the trial court.

Issue 1: Justification of Attachment of Property under PMLA

The legal framework governing this issue is the Prevention of Money Laundering Act, 2002, which empowers the ED to provisionally attach properties believed to be proceeds of crime. The attachment must be confirmed by the Adjudicating Authority after hearing the parties and considering the evidence.

Precedents establish that attachment orders can be confirmed if there is prima facie material indicating that the property is derived from or involved in money laundering activities.

The Court examined the investigation conducted by the CBI and ED concerning financial irregularities in the National Rural Health Mission (NRHM) scheme funds allocated to the Uttar Pradesh Small Scale Industries Corporation (UPSIC). The appellant, as the then Managing Director of UPSIC, was implicated in awarding tenders at inflated rates and receiving kickbacks, resulting in a loss of approximately Rs. 10 crores to the government.

Key evidence included statements under Section 164 Cr.P.C. by representatives of the supplier company, admissions recorded under Section 50 of the PMLA, and incriminating documents seized during searches. These established a pattern of corrupt practices and misappropriation of funds.

The attached property, an apartment valued at Rs. 93 lakhs, was found to be purchased without proper disclosure and without requisite departmental permission, raising suspicion of its acquisition from illicit gains.

The Court applied the law to the facts by concluding that the property was rightly attached as it represented proceeds of crime. The Adjudicating Authority's confirmation of the attachment was upheld on the basis of the prima facie evidence and the ongoing criminal proceedings.

Competing arguments by the appellant, including claims of legitimate loans and sale agreements, were scrutinized and found to lack credible documentary support or compliance with statutory requirements, such as prior permission under Civil Services Conduct Rules.

The Court concluded that the attachment was justified and consistent with the objectives of the PMLA.

Issue 2: Credibility of Appellant's Defense Regarding Property Ownership and Source of Funds

The appellant contended that the property was acquired through a loan of Rs. 46 lakhs from Rahul Sharma, who allegedly sold ancestral property to finance this loan, and that the property was subsequently sold to Aditya Goel for Rs. 55 lakhs, with Rs. 30 lakhs received as part payment. The appellant argued that these transactions were recorded through banking channels and that possession remained with the buyer, who had filed a suit for specific performance.

The Court evaluated these claims against the investigation record. It found no formal loan agreement or documentation evidencing the loan transaction between the appellant and Rahul Sharma. Additionally, no departmental intimation was made regarding the loan, violating applicable service conduct rules.

The purported sale agreement with Aditya Goel was unregistered, and no suit for recovery of the advance had been initiated by Goel for over three years, undermining the genuineness of the transaction.

The Court also noted inconsistencies and contradictions in the appellant's statements and the absence of corroborative documentary evidence. The defense appeared to be a post hoc attempt to camouflage the true nature of the property as proceeds of crime.

Competing arguments about the appellant's role being supervisory and the tender allocation process being transparent were rejected based on the detailed investigation findings and statements implicating the appellant in demanding bribes.

The Court concluded that the appellant's defense lacked credibility and did not negate the attachment's validity.

Issue 3: Confirmation of Attachment by Adjudicating Authority

The Adjudicating Authority, after hearing the parties and considering the evidence, confirmed the attachment order passed by ED. The Court reviewed this confirmation in light of the facts and legal standards.

The Court found that the Adjudicating Authority had appropriately applied the provisions of the PMLA and had examined the material on record, including statements, seized documents, and investigation reports.

The confirmation was deemed lawful and justified, as the authority had acted within its jurisdiction and followed due process.

Issue 4: Scope of Appellate Tribunal's Review Powers

The respondent ED argued that the Appellate Tribunal is not empowered to reassess the quality of evidence collected by investigative agencies once charges have been framed by the trial court. The Court affirmed this position, emphasizing that the Tribunal's role is limited to examining the legality and propriety of the attachment and confirmation orders under the PMLA.

The Court held that reappraisal of the evidence underlying predicate offences falls within the domain of the trial court and not the Appellate Tribunal under SAFEMA.

This principle preserves the separation of functions between investigative, adjudicatory, and trial processes, ensuring procedural fairness and efficiency.

Significant Holdings and Core Principles Established

The Court held: "In view of the above incriminating material, I am of the considered view that ED rightly attached the property... The Adjudicating Authority also rightly confirmed the PAO... Therefore, there is no merit in the contention of Ld. Counsel for appellant."

The judgment establishes the principle that attachment of property under the PMLA can be confirmed on the basis of prima facie evidence of proceeds of crime, even if the accused disputes ownership or source of funds, provided the defense lacks credible documentary support.

It affirms that the Appellate Tribunal's jurisdiction does not extend to re-evaluating the evidence for predicate offences once charges have been framed by the trial court.

The Court's final determination was to dismiss the appeal, upholding the attachment and confirming the order of the Adjudicating Authority, while clarifying that the ultimate disposal of the attached property will depend on the outcome of the criminal trial.