2025 (5) TMI 2104 - AT - Money Laundering

Money Laundering - Provisional Attachment Order - scheduled offences - trespassing of reserve forest area for hunting of wild elephants - removal of tusk apart from illegally trading of ivory and ivory articles made out of it - specific case is that properties were acquired much prior to commission of offence could not have taken to be the proceeds of crime - Section 50(2) (3) of the Prevention of Money Laundering Act 2002 - HELD THAT - The judgment in the case of Shri Sadananda Nayak 2024 (10) TMI 1619 - APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI was given after considering the rival submissions and judgement on the issue given by the High Court and Hon ble Supreme Court of India. It is after taking note of the object of the Act of 2002. The property acquired prior to commission of crime can also be attached but it would only when proceeds out of crime is not available in the hands of the accused or person associated or connected with. It is also when the proceed has been vanished traceable or is not available. In such a case the property of equivalent value can be attached and in the instant case when respondent found that proceeds in the hands of the appellant of more than Rs. 120 lakhs in each case and was not found available or it was available only to some extent in the form of investment of Rs.15 lakhs in the name of his wife thus has been subjected to the attachment. The position of fact is similar in the case of Shri Umesh Aggarwal who is otherwise said to be the main accused in the case and running the show. The recovery of ivory articles from the appellant s residence during the course of search and otherwise his own statement under Section 50 of the Act of 2002 coupled with the statements of the other connected persons are sufficient to draw a prima facie conclusion about involvement of the above named persons in commission of offence. The proceeds out of the crime came to them and to protect it till the conclusion of the trial PAO was issued by the respondent and has been confirmed by the Adjudicating Authority. There are no illegality in the action of the respondent. Conclusion - The appellant acquired the proceeds out of the scheduled offence and now claiming it to be untainted money thus guilty of offence under Section 3 of the Act of 2002. It was found available with them to the extent of proceeds thus property of equivalent amount has been attached. Appeal dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the properties attached by the respondent were acquired directly or indirectly as a result of criminal activity relating to the scheduled offence under the Wildlife (Protection) Act, 1972 and the Prevention of Money-Laundering Act, 2002.

- Whether properties acquired prior to the commission of the scheduled offence can be treated as proceeds of crime and thus liable to attachment under the Act of 2002.

- The extent of nexus required between the attached properties and the criminal activity to justify attachment.

- The applicability and interpretation of the definition of "proceeds of crime" under Section 2(1)(u) of the Prevention of Money-Laundering Act, 2002, particularly the three limbs of the definition.

- The sufficiency of prima facie evidence to confirm provisional attachment orders under the Act of 2002.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Nexus of Attached Properties with Criminal Activity

The legal framework centers on the Prevention of Money-Laundering Act, 2002 (the Act of 2002), and the Wildlife (Protection) Act, 1972 (the Act of 1972). The appellants were accused of offences under the Act of 1972 involving illegal hunting, possession, and trade of ivory and ivory products, which are scheduled offences under the Act of 2002. The Provisional Attachment Order (PAO) was issued under the Act of 2002 to attach properties allegedly representing proceeds of crime.

The Court considered the evidence including multiple FIRs, recovery of ivory sculptures during search, and statements recorded under Section 50 of the Act of 2002. The appellants admitted involvement in the ivory trade and business, with detailed admissions of payments and transactions linked to illegal ivory procurement and sale. The statements of related persons, including spouses, corroborated the flow and layering of proceeds through bank accounts.

The Court found that the attached properties had sufficient nexus to the criminal activity as they represented proceeds or equivalent value of proceeds derived from illegal ivory trade. The evidence demonstrated a prima facie case of involvement and possession of proceeds of crime. The Court emphasized that the final determination of guilt and extent of involvement would be adjudicated at trial, but for the purpose of confirming provisional attachment, the material was adequate.

Competing arguments by appellants challenged the nexus, especially for properties acquired prior to the commission of the offence, asserting such properties could not be proceeds of crime. The Court reserved detailed consideration of this issue for the next point.

Issue 2: Attachment of Properties Acquired Prior to Commission of Crime

The appellants contended that immovable properties purchased in 1992 and 2001, prior to the alleged offences, could not be attached as proceeds of crime. This raised the interpretative issue of whether properties acquired before the scheduled offence fall within the definition of "proceeds of crime" under Section 2(1)(u) of the Act of 2002.

The Court relied extensively on precedent, particularly a recent judgment of this Tribunal in a similar appeal, which analyzed the three limbs of the definition of "proceeds of crime" as follows:

• First limb: Property derived or obtained, directly or indirectly, from criminal activity relating to a scheduled offence.
• Second limb: The value of any such property (i.e., property equivalent in value to proceeds of crime), applicable when proceeds are not traceable or have vanished.
• Third limb: Property held outside the country equivalent in value to proceeds of crime.

The Court explained that the second limb permits attachment of "untainted property" acquired prior to the offence if the actual proceeds of crime are not available or have been dissipated. This interpretation is supported by authoritative judgments of the Apex Court and High Courts, notably the three-judge bench decision in Vijay Madanlal Choudhary, which clarified that the definition is deliberately broad to prevent accused persons from shielding proceeds by transferring or hiding assets.

The Court rejected the appellants' reliance on contrary judgments from the Kerala High Court and others that narrowly interpreted the definition, holding that such interpretations would render the second limb redundant and frustrate the legislative intent of the Act. The Court emphasized that the legislative scheme aims to prevent dissipation of proceeds and to secure assets equivalent in value to the proceeds of crime.

Further, the Court noted safeguards established in precedent, such as the requirement of some assessment of the value of wrongful gain and protection of bona fide third-party rights. The Court found that in the instant case, the proceeds of crime were quantified at over Rs. 120 lakhs for each appellant, but only a fraction was traceable in the form of investments in spouses' names, justifying attachment of properties of equivalent value.

Issue 3: Sufficiency of Prima Facie Evidence for Attachment

The Court considered whether the evidence on record justified confirmation of the provisional attachment orders. The evidence included:

• Multiple FIRs for offences under the Act of 1972.
• Recovery of ivory sculptures from the appellant's residence.
• Statements under Section 50 of the Act of 2002 admitting involvement in ivory trade.
• Bank account transactions showing layering of proceeds through spouses' accounts.
• Admissions of payments made to other accused persons involved in the illegal trade.

The Court held that the material established a prima facie case of involvement in the scheduled offences and possession of proceeds of crime. The Court reiterated that the trial court would make final findings on guilt but the evidence sufficed for confirming attachment orders to prevent dissipation of assets.

The Court also addressed the appellants' argument that the properties had no nexus to the crime, finding that the admitted involvement and financial transactions established sufficient nexus for attachment under the Act of 2002.

3. SIGNIFICANT HOLDINGS

"The definition of 'proceeds of crime' under Section 2(1)(u) of the Act of 2002 has three limbs: (i) property derived or obtained directly or indirectly from criminal activity relating to a scheduled offence; (ii) the value of any such property; and (iii) property equivalent in value held within or outside the country. The second limb permits attachment of property acquired prior to the commission of crime if the actual proceeds are not traceable or have vanished."

"Attachment of properties acquired prior to the commission of the scheduled offence is permissible under the Act of 2002 to prevent dissipation of proceeds and to secure assets equivalent in value to the proceeds of crime, provided the proceeds are not available or are only partially traceable."

"The Court finds a prima facie case of involvement of the appellants in the commission of offences under the Wildlife (Protection) Act, 1972 and the Prevention of Money-Laundering Act, 2002 based on multiple FIRs, recovery of ivory sculptures, statements under Section 50 of the Act of 2002, and financial transactions evidencing layering of proceeds."

"The provisional attachment orders issued under the Act of 2002 are confirmed as the material on record suffices to establish nexus of attached properties with proceeds of crime and to justify attachment to prevent dissipation of assets till conclusion of trial."

"The argument that properties acquired prior to commission of crime cannot be attached is rejected as it would render the second limb of the definition of 'proceeds of crime' redundant and frustrate the legislative intent of the Act."

"The Court adopts the interpretation and safeguards enunciated in authoritative judgments, including the Axis Bank case and Vijay Madanlal Choudhary, which balance the need to attach properties equivalent in value to proceeds of crime with protection of bona fide third-party interests."