2025 (6) TMI 1178 - AT - Money Laundering

Money Laundering - challenge to the order passed by the Adjudicating Authority confirming the attachment order - ruling out various alluring schemes and investment plans and collected huge amount of money from innocent public - making false promise to provide residential houses in and outside Bhubaneswar as well as assuring high rate of interest. Time limitation - even after lapse of years the charge sheet in reference to the FIR s have not been filed and in absence of charge sheet the commission of predicate offence remains only on assumption - HELD THAT - It would be relevant to refer that the charge sheet in reference to the FIR registered in the year 2010 and 2011 were filed in the year 2011 itself and has been mentioned in the impugned order passed by the Adjudicating Authority. Charge sheet no. 181 was filed on 22.06.2011 while charge sheet no. 325 was filed on 29.10.2011 followed by another two charge sheets on 13.08.2011 - it is not correct to state that charge sheet in pursuance to the FIR s have not been filed by the predicate agency. The fact in reference to the charge sheets has been given in the opening paras of the impugned order and precisely it is in sub-paras (i) to (iv) of para 4.2 of the impugned order. The impugned order does not make a reference of the charge sheet in pursuance to the FIR registered in the year 2012. The facts however remains that merely non filing of the charge sheet would not vitiate the ECIR recorded by the respondents because what is required to initiate the proceedings under the Act of 2002 is the existence of predicate offence which has been disclosed in all the FIRs and in pursuance to it the ECIR was recorded and even prosecution complaint has been filed against the accused - the first ground raised by the appellant is not made out. Offence under section 420 was added in the schedule by the Amending Act of 2013 while the FIR and ECIR were recorded in the year 2012 followed by the provisional attachment order - HELD THAT - The appellant was asked to see the amendments by the Amending Act of 2009 where section 420 was added in the schedule. It was not by Amending Act of 2013 as stated. The FIR and ECIR was registered and recorded much subsequent to the amendment in the Act of 2002 to add offence under section 420 to be a scheduled offence - this ground raised by the appellant is not made out. Shifting of burden of proof - HELD THAT - The attachment order so as the order passed by the Adjudicating Authority refers to the material to show a case for money laundering against the appellant. The reference of the statement recorded under section 50 of the Act of 2002 has been given to indicate a prima facie case of money laundering and otherwise the burden to disclose the source to acquire property attached by the respondent lies on the appellant and has to be disclosed as per section 8(1) of the Act of 2002 being the custodian of the record of the properties. The respondent have referred to the statement under section 50 of the Act of 2022 where witnesses admitted commission of offence. Offence under section 420 IPC - offence falling under the part B of the scheduled offence where the involvement of money in the crime should not be less than of 30 lacs - HELD THAT - In the instant case the serious allegation exist against the appellant for collection of huge amount from the public in reference to different schemes floated by them. It was informed that the total amount involved is of Rs. 200 crores where innocent people were cheated who invested their hard earned money and those people having no means to get back the amount. Therefore the involvement of money in the hands of the appellant was shown to be of more than Rs. 200 crores. Challenge to order alleging that without a charge sheet under section 173 CrPC the provisional attachment order was passed - HELD THAT - The appellant has referred to first proviso of section 5(1) to indicate as to when an order of provisional attachment can be passed ignoring the second proviso which permits an order for provisional attachment when the Directors or authorized officers has reasons to believe that non attachment of property is likely to frustrate any proceedings under the Act - it is not that no provisional attachment order can be passed unless the matter travels to the Court on a report under section 173 CrPC. The Competent Authority has otherwise recorded the reasons for provisional attachment under second proviso to section 5(1). The reasons to believe that the person holding the property is likely to conceal or transfer the property which may result in frustrating proceeding relating to confiscation of the proceeds of crime - even the last issue raised by the appellant cannot be accepted. Conclusion - i) The existence of a predicate offence does not depend solely on the filing of a charge sheet but on the substance of the FIR investigation and prosecution complaint. The presence of charge sheets for four FIRs reinforced this principle. ii) Section 420 IPC was a scheduled offence under the PMLA from 2009 onwards and the ECIR recorded in 2012 was valid. iii) None of the grounds raised by the appellant warranted interference with the impugned order confirming the attachment. There are no ground to cause interference in the impugned order - appeal dismissed.

Summary

The core legal questions considered by the Tribunal in this matter are as follows:

1. Whether the absence of charge sheets filed against the appellant in relation to the FIRs precludes the existence of a predicate offence necessary for recording an ECIR and passing an attachment order under the Prevention of Money Laundering Act, 2002 (PMLA).

2. Whether the offence under section 420 IPC was a scheduled offence at the time of registration of the FIRs and recording of the ECIR, and if not, whether the attachment order is valid.

3. Whether the burden of proof under section 24 of the PMLA can be shifted onto the appellant to prove that attached properties are not proceeds of crime.

4. Whether the amount involved in the offence falls below the monetary threshold prescribed for offences under Part B of the scheduled offences, thereby invalidating the recording of ECIR and attachment.

5. Whether provisional attachment of property without filing a charge sheet under section 173 CrPC violates section 5(1) of the PMLA.

Issue 1: Existence of Predicate Offence in Absence of Charge Sheet

The appellant contended that despite the registration of five FIRs between 2010 and 2012, no charge sheet was filed even after several years, and thus no predicate offence existed to justify recording the ECIR or passing the attachment order. Reliance was placed on paragraph 109 of a Supreme Court judgment to support this contention.

The Tribunal examined the record and found that four charge sheets relating to FIRs registered in 2010 and 2011 were indeed filed in 2011 itself, prior to the attachment order. These charge sheets were explicitly referenced in the impugned order. Although no charge sheet was filed for the FIR registered in 2012, the Tribunal held that mere non-filing of a charge sheet does not vitiate the ECIR, since the requirement is the existence of a predicate offence as disclosed in the FIRs and supported by investigation and prosecution complaints.

The Tribunal distinguished the cited paragraph 109, clarifying it does not mandate charge sheet filing as a prerequisite for predicate offence existence. The paragraph instead allows filing of closure reports when no offence is made out after inquiry.

Consequently, the Tribunal concluded that the first ground was without merit.

Issue 2: Scheduled Offence Status of Section 420 IPC at Time of ECIR

The appellant argued that section 420 IPC was not a scheduled offence under the PMLA at the time of FIR registration and ECIR recording in 2012, as it was only added by an amendment in 2013, rendering the attachment order invalid.

Upon scrutiny, the Tribunal noted that section 420 IPC was actually added to the schedule by the Amending Act of 2009, not 2013. Since the FIR and ECIR were recorded after this amendment, section 420 IPC was a scheduled offence at the relevant time.

This factual correction led the Tribunal to reject the appellant's second ground.

Issue 3: Burden of Proof under Section 24 of the PMLA

The appellant contended that section 24 of the PMLA improperly shifted the burden of proof onto him to demonstrate that the attached properties were not proceeds of crime, whereas the respondents should bear this burden.

The Tribunal observed that after recording the ECIR and conducting investigation, the respondents had filed prosecution complaints and adduced prima facie material indicating money laundering. The attachment order and adjudicating authority's order referenced statements recorded under section 50 of the PMLA, where witnesses admitted commission of offence, supporting a prima facie case.

The Tribunal further noted that as custodian of property records, the appellant was obliged under section 8(1) to disclose the source of acquisition of the attached properties. This statutory framework justified the burden placed on the appellant.

Therefore, the Tribunal found no substance in this argument.

Issue 4: Monetary Threshold for Part B Scheduled Offences

The appellant argued that the offence under section 420 IPC falls under Part B of the schedule, requiring a minimum amount of Rs. 30 lakhs involved to trigger PMLA proceedings. Since the FIR mentioned only Rs. 10 lakhs, the ECIR and attachment were invalid.

The respondent countered by producing documentary evidence, including documents filed by the appellant, indicating that the total amount involved was approximately Rs. 200 crores. The investigation revealed proceeds of crime valued well above Rs. 30 lakhs, including immovable properties worth over Rs. 55 lakhs and movable properties worth over Rs. 32 lakhs attached.

The Tribunal accepted the respondent's evidence, emphasizing the serious allegations and large scale cheating of the public. It held that the monetary threshold was clearly met, validating the ECIR and attachment.

Issue 5: Provisional Attachment Without Charge Sheet under Section 173 CrPC

The appellant contended that provisional attachment could not be made without filing a charge sheet under section 173 CrPC, as mandated by section 5(1) of the PMLA.

The Tribunal clarified that four charge sheets had been filed in 2011, well before the provisional attachment order dated 31.03.2021. More importantly, the Tribunal analyzed section 5(1) of the PMLA, which provides for provisional attachment where the Director or authorized officer has reason to believe, based on material, that property is proceeds of crime and likely to be concealed or transferred, potentially frustrating confiscation proceedings.

The section contains a first proviso requiring a report under section 173 CrPC or a complaint to be filed before attachment, but also a second proviso allowing attachment if non-attachment is likely to frustrate proceedings, based on recorded reasons.

The Tribunal found that the Competent Authority invoked the second proviso, recording detailed reasons for provisional attachment. Thus, attachment without a charge sheet at that time was permissible.

Significant Holdings and Legal Principles

The Tribunal held that the existence of a predicate offence does not depend solely on the filing of a charge sheet but on the substance of the FIR, investigation, and prosecution complaint. The presence of charge sheets for four FIRs reinforced this principle.

It clarified that section 420 IPC was a scheduled offence under the PMLA from 2009 onwards, and the ECIR recorded in 2012 was valid.

The Tribunal upheld the statutory burden placed on the accused under section 24 of the PMLA to disclose the source of attached properties once a prima facie case is established.

It emphasized that the monetary threshold for Part B offences must be assessed based on the total proceeds of crime identified through investigation, not merely the amount stated in the FIR.

Crucially, the Tribunal interpreted section 5(1) of the PMLA as permitting provisional attachment even before filing a charge sheet, provided the authorized officer records reasons to believe that non-attachment would frustrate confiscation proceedings, thus validating the attachment order in this case.

The Tribunal concluded that none of the grounds raised by the appellant warranted interference with the impugned order confirming the attachment, and accordingly dismissed all appeals.