2025 (6) TMI 1511 - AT - Money Laundering

Money Laundering - Provisional Attachment Order - proceeds of crime - making illegal foreign remittances to Hong Kong through banking channels by submitting fake import documents to bank authorities - HELD THAT - The appellant has provided a detailed explanation with regard to the sources of acquisition of the two cars which have been attached by the respondent directorate. The respondents in their submissions on the other hand have not specifically rebutted the submissions with regard to the sources of acquisition of the specific properties i.e. the two cars that have been attached but have relied upon the allegations against the group and the proof of generation and laundering of proceeds of crime and the definition of proceeds of crime as defined under section 2(1)(u) of the Act and the powers of provisional attachment under the Act. It is by now well-settled that the scope of proceeds of crime under PMLA 2002 includes not only the direct proceeds of derived from the scheduled offence but also value of the same. The settled legal position on the subject is that even assuming that a given property itself was acquired out of explained sources the same can still be attached as value of proceeds of crime if the direct proceeds or crime have been dissipated or are unavailable for attachment for any reason. In the set of cases to which the present case belongs prosecution complaints have already been filed and are pending before the competent court of criminal jurisdiction - at this stage when the criminal trial against the appellant group is pending even the balance of interests lies in favour of continued attachment of the subject properties. The same by itself does not disturb the ownership title of the appellants and does not deprive them of possession and enjoyment of the same. The present appeal is hereby dismissed. Money laundering - provisional attachment order - proceeds of crime - sufficient reasons to believe based on evidence gathered present or not - HELD THAT - The evidence against the present appellant comprises apart from the statement of Sh. Manish Jain the statement of Sh. Rakesh Jain brother of Sh. Manish Jain wherein he has provided specific and verifiable details including email IDs phone numbers and proof of remittances made abroad the statement of the appellant Sh. Rajeev Wadhwa himself wherein he was unable to explain the sources of the income he had declared in his own ITRs forensic examination of his mobile phones which contained incriminating information including SWIFT messages/TT messages apart from personal data which undeniably related to him and his family call and location details collected during the investigation statements of other witnesses such as Shri Ram Sagar Driver of Sh. Manish Jain etc. It is not necessary to go into the veracity of claim that the subject properties which have been attached were acquired out of explained sources. Further as already mentioned a prosecution complaint stands filed by the respondent directorate in which the present appellant has been made an accused. However even if the appellant himself had not been accused in the PMLA prosecution case but there are sufficient reasons to believe based on evidence gathered that proceeds of crime had flowed from the accused persons to the appellant the properties could have been validly attached. As such there are no merit in the appellant s challenge to the attachment properties based on these grounds. Appeal dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Appellate Tribunal under the Prevention of Money Laundering Act, 2002 (PMLA) in these appeals include:

• Whether the provisional attachment of properties under section 5 of the PMLA, 2002, confirmed by the Adjudicating Authority (AA), was justified and lawful in the facts of the case.
• Whether the properties attached, including vehicles and immovable property, constitute "proceeds of crime" within the meaning of section 2(1)(u) of the PMLA, 2002, either directly or as "value" of proceeds of crime.
• The scope and applicability of the definition of "proceeds of crime" and the extent to which explained sources of acquisition affect attachment orders.
• The admissibility and evidentiary value of statements recorded under section 50 of the PMLA, 2002, especially those recorded while the accused was in custody.
• The sufficiency and quality of investigation and evidence linking the appellants to the predicate offences and money laundering activities.
• Whether attachment of properties pending trial violates the appellants' rights, including the right to property and possession.
• The extent to which allegations against co-accused and interconnected transactions justify attachment of properties belonging to appellants not named in the original FIR or initial complaints.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification and Lawfulness of Provisional Attachment under PMLA

Legal Framework and Precedents: Section 5(1) of the PMLA authorizes provisional attachment of properties believed to be proceeds of crime to prevent their concealment or transfer. The Supreme Court has held that attachment is a protective and balancing measure, not depriving ownership or possession, pending adjudication (Vijay Madanlal Choudhary & Ors.). The Bombay High Court and Karnataka High Court have similarly upheld the interim nature of attachment orders (Radha Mohan Lakhotia; Dyani Antony Paul).

Court's Reasoning and Application: The Tribunal noted that the AA, after considering the material and providing opportunity to the appellants, passed a reasoned order confirming attachment. The appellants' detailed explanations regarding sources of acquisition were not specifically rebutted by the respondents but were insufficient to negate the broader nexus of criminal activity. The Tribunal emphasized that attachment is an emergent measure to preserve proceeds of crime during ongoing prosecution and does not affect ownership or use of the property.

Competing Arguments: Appellants argued mechanical and non-application of mind by the AA, absence of direct allegations against them, and that the properties were acquired from lawful sources and duly disclosed in tax returns. Respondents relied on the extensive investigation, incriminating material, and the interconnected web of transactions involving the appellants and co-accused.

Conclusion: The Tribunal held that the attachment was justified, lawful, and a necessary interim safeguard while prosecution is pending.

Issue 2: Definition and Scope of "Proceeds of Crime" and Attachment of Property Acquired from Explained Sources

Legal Framework and Precedents: Section 2(1)(u) defines "proceeds of crime" broadly to include property derived or obtained directly or indirectly from criminal activity relating to scheduled offences. The Supreme Court in Vijay Madanlal Choudhary clarified that attachment can be made not only to direct proceeds but also to property representing the "value" of proceeds of crime if the direct proceeds are dissipated or unavailable. Ganpati Dealcom Pvt. Ltd. reaffirmed that possession of attached properties is not ordinarily taken except in exceptional cases.

Court's Reasoning and Application: The Tribunal reiterated that even if appellants proved the source of acquisition of specific properties, attachment could still be sustained as these properties represent the value of proceeds of crime generated through the criminal enterprise. The ongoing prosecution and the complex web of transactions justified continued attachment.

Competing Arguments: Appellants contended that properties were purchased from legitimate sources and reflected in income tax returns. Respondents argued that the properties are part of the laundering chain and represent proceeds of crime, regardless of direct linkage to specific transactions.

Conclusion: The Tribunal confirmed that attachment of properties representing value of proceeds of crime is valid under PMLA, even if direct proceeds are not traceable to those properties.

Issue 3: Admissibility and Evidentiary Value of Statements Recorded under Section 50 of PMLA

Legal Framework and Precedents: Section 50 provides for recording statements of persons under investigation. The Supreme Court in Prem Prakash v. UoI held that statements recorded under section 50 while the accused is in custody may be inadmissible depending on circumstances, but did not lay down a blanket rule. Earlier, Vijay Madanlal Choudhary recognized the need for case-by-case assessment under Section 25 of the Evidence Act.

Court's Reasoning and Application: The Tribunal examined the Prem Prakash judgment and found it does not automatically exclude all custodial statements under section 50. The case against the appellant did not rest solely on such statements but was supported by corroborative evidence including statements of co-accused, forensic examination of mobile phones, call and location data, and other documentary evidence.

Competing Arguments: Appellant challenged the admissibility of statements made in custody and reliance on such statements naming him. Respondents submitted that the evidence is multi-faceted and the statements are corroborated by independent material.

Conclusion: The Tribunal held that the statements under section 50 are admissible in the facts of this case and form part of the evidence supporting attachment and prosecution.

Issue 4: Sufficiency and Quality of Investigation and Evidence Linking Appellants to Offences

Legal Framework: Under section 24 of the PMLA, the burden is on the accused to prove that the property is not proceeds of crime. The investigation must establish "reason to believe" before attachment and prosecution.

Court's Reasoning and Application: The investigation revealed a complex scheme involving fake import documents, bogus firms, forged identities, and large-scale foreign remittances. Statements of co-accused and witnesses, forensic data from mobile phones, email communications, and banking records evidenced the appellants' involvement. The Tribunal found that appellants failed to discharge their burden to rebut the presumption.

Competing Arguments: Appellants argued they were not named in FIRs or initial complaints, and investigations were incomplete or flawed. Respondents emphasized that PMLA proceedings can be initiated even if appellants are not named in predicate offence FIRs and that supplementary prosecution complaints have been filed.

Conclusion: The Tribunal found sufficient material to justify attachment and prosecution against the appellants.

Issue 5: Rights of Appellants and Impact of Attachment on Ownership and Possession

Legal Framework and Precedents: Attachment under PMLA prohibits transfer or disposition but does not deprive possession or use of property (Section 2(1)(d) PMLA). Courts have held that attachment is an interim protective measure and does not violate property rights or constitutional protections (Art. 300A).

Court's Reasoning and Application: The Tribunal reiterated that attachment preserves the property for eventual confiscation if guilt is established but does not affect ownership or possession at the interim stage. The appellants retain the right to use and enjoy the properties.

Competing Arguments: Appellants contended attachment violated their property rights and was unjustified. Respondents argued attachment is a necessary safeguard to prevent dissipation.

Conclusion: The Tribunal upheld the validity of attachment without depriving possession or ownership.

Issue 6: Attachment of Properties of Persons Not Named in Initial FIRs or Complaints

Legal Framework: PMLA allows attachment of properties of persons reasonably believed to be involved in money laundering, even if not named in predicate offence FIRs, provided sufficient material exists.

Court's Reasoning and Application: The Tribunal noted that although appellants were not named in initial FIRs, supplementary prosecution complaints have been filed naming them. The investigation revealed their nexus with the criminal enterprise and flow of proceeds of crime to their properties. The Tribunal relied on the interconnected transactions and statements of co-accused to justify attachment.

Competing Arguments: Appellants argued absence of initial allegations and lack of direct involvement. Respondents emphasized the evolving nature of investigation and evidence linking appellants.

Conclusion: The Tribunal held that attachment and prosecution are valid notwithstanding initial omission from FIRs.

3. SIGNIFICANT HOLDINGS

"The definition of 'proceeds of crime' is wide enough to not only refer to the property derived or obtained as a result of criminal activity relating to a scheduled offence, but also of the value of any such property. If the property is taken or held outside the country, even in such a case, the property equivalent in value held within the country or abroad can be proceeded with."

"Attachment of property is a balancing arrangement to secure the interests of the person, as also ensure that the proceeds of crime remain available to be dealt with in the manner provided by the Act. Mere attachment of property does not alter the position with regard to the ownership or even possession/use of the properties which are the subject matter of such attachment."

"Provisional attachment of property is an emergent measure to be taken by the designated authority upon being satisfied and having reason to believe that the proceeds of crime are likely to be concealed, transferred or dealt with in any manner, which may result in frustrating any proceedings relating to confiscation of such proceeds of crime."

"The scope of attachment under PMLA includes properties of persons not named in the predicate offence FIRs provided sufficient evidence exists to establish their involvement or nexus with proceeds of crime."

"Statements recorded under section 50 of the PMLA, even if recorded in custody, are not per se inadmissible and must be evaluated on a case-to-case basis, considering corroborative evidence."

Final determinations included dismissal of all appeals challenging the confirmation of provisional attachment orders, holding that the attachments were lawful, justified, and necessary interim measures pending prosecution, and that appellants failed to discharge their burden to prove that the attached properties were not proceeds of crime or their value.