2025 (6) TMI 1601 - AT - Money Laundering

Money Laundering - provisional attachment of properties - illegal manufacture of large stock of Indian Made Foreign Liquor (IMFL) - conspiracy - power of Joint Director of ED to provisionally attach the properties in absence of Deputy Director ED - documents placed before the Joint Director were not sufficient to form reasonable belief for issuing PAO or not - documents not placed before the Joint Director at the time of passing the PAO can be relied upon while filing Original Complaint before the Adjudicating Authority or not - non- filing of chargesheet by Police - no reason to believe that the defendants would alienate the properties seeing the fact that PAO was passed seven years after the recording of ECIR - no opportunity was provided to Respondent Pramod Tandel to rebut the presumption before passing the PAO. Whether Joint Director of ED is empowered to provisionally attach the properties in absence of Deputy Director ED? - HELD THAT - The fact that complaint was filed by Deputy Director when he came back from the training is also no ground to set aside the PAO as the said Deputy Director was in fact the investigating officer of the case. The view taken by Ld. Adjudicating Authority with respect to the interpretation of Sub-Section 5 of Section 5 of PMLA 2002 that the officer who attaches the properties has to file the OC is a wrong interpretation of the law. Such technicalities should not be the basis for dismissing the OC which is otherwise based on proper investigation and sufficient evidences. Moreover in the present case the Joint Director who issued the PAO was acting on behalf of the Deputy Director in his absence which is merely an administrative exercise and hence is valid. Therefore there was no reason for not confirming the OC filed by the Deputy Director instead of the Joint Director who issued the PAO in the interest of justice which should not be sacrificed at the altar of mere technicalities seeing the fact that no prejudice is caused to the Respondents - the issue is decided against the Respondents and in favour of the Appellant ED. Whether the documents placed before the Joint Director were not sufficient to form reasonable belief for issuing PAO? - HELD THAT - The allegations prima facie reflects the involvement of respondents in commission of crime in the manner as stated therein and thereby generated huge proceeds of crime. The allegation mentioned in the said FIR is a sufficient ground for initiating the attachment proceedings after recording of ECIR. The reason to believe is apparent on record from the said allegations in the mind of the authorized officer/ Joint Director for passing the Provisional Attachment Order. The standard to form reason to believe for provisional attachment cannot be equated with standard for conviction of the culprits. Whether the documents not placed before the Joint Director at the time of passing the PAO cannot be relied upon while filing Original Complaint before the Adjudicating Authority? - HELD THAT - Since investigation is a continuing process and it cannot be compartmentalized in the before or after the PAO therefore evidences gathered after the PAO cannot be discarded by the Ld. Adjudicating Authority. Moreover in the present case enough and substantial material was available which includes the record of balance sheet from the pen drive bank statements and the corresponding statements of various witnesses taken under Section 50 of PMLA which corroborate the finding that the respondents were involved in the scheduled offences - There is no provision in PMLA or any other law that the additional evidence collected by the investigation agency cannot be placed before the Adjudicating Authority to strengthen the case of prosecution. The approach adopted by Ld. Adjudicating Authority is clearly against the principles of fair investigation to reach at the depth of the truth in the interest of justice equity and good conscience. The pedantic approach adopted by Ld. Adjudicating Authority is likely to give unjust advantage to the criminals/culprits and the persons holding the proceeds of crime. Accordingly issue no. (iii) is decided in favour of appellant ED and against the Respondents. Whether the PAO was rightly set aside by Ld. AA on account of non- filing of chargesheet by Police (as PAO is silent regarding filing of chargesheet in FIR No. 12/2010) as per the provision before the Amendment of 2013? - Whether there was no reason to believe that the defendants would alienate the properties seeing the fact that PAO was passed seven years after the recording of ECIR? - Whether no opportunity was provided to Respondent Pramod Tandel to rebut the presumption before passing the PAO? - HELD THAT - The second proviso to Section 5(1) of PMLA is an exception to clause 5(1)(b) which clearly provides that any property of any person may be attached if the authorized person has reason to believe that if such property is not attached immediately the non-attachment of the property is likely to frustrate any proceeding under PMLA. Seeing the fact that ED has already recorded the ECIR and initiated the investigation there is every apprehension that the concerned noticee/defendant will dispose of the properties under apprehension of attachment before passing of attachment order in absence of any explanation on his part to rebut the presumption u/s 24 of PMLA that the said properties are not proceeds of crime and are untainted. There is no time limit for passing the PAO after recording the ECIR. Thus delay of seven year is no ground to set aside the PAO. Moreover the delay has occurred on account of non- cooperation and non-appearance of the Respondents before the Investigating Officer of the ED. A person cannot get any benefit on account of his own default on the ground of delay in absence of any cogent and reliable explanation on his part that the said properties are not proceeds of crime and are untainted - the issues are decided in favour of the appellant ED and against the Respondents. Conclusion - i) The Joint Director was competent to issue the PAO in absence of Deputy Director and the subsequent filing of OC by the Deputy Director is valid. ii) The material before the Joint Director sufficed to form reasonable belief under Section 5 of PMLA for provisional attachment. iii) Documents gathered after PAO issuance but before filing OC can be relied upon by the Adjudicating Authority. iv) The PAO was validly issued despite delay and absence of chargesheet at the time of attachment under the proviso to Section 5(1) of PMLA. v) The delay of over seven years did not invalidate the PAO especially due to respondents non-cooperation. vi) No prior opportunity is required before PAO issuance to rebut presumption under Section 24 of PMLA. The impugned order passed by the Adjudicating Authority is hereby set aside and the attachment of the properties by appellant ED is hereby confirmed - appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Appellate Tribunal under SAFEMA in the appeal filed by the Enforcement Directorate (ED) against the Adjudicating Authority's order declining confirmation of the Provisional Attachment Order (PAO) No. 05/2017 are as follows:

• Whether the Joint Director of ED is empowered to issue a provisional attachment of properties in the absence of the Deputy Director, and whether the subsequent filing of the Original Complaint (OC) by the Deputy Director affects the validity of the attachment.
• Whether the material and documents placed before the Joint Director at the time of issuing the PAO were sufficient to form a 'reasonable belief' under Section 5 of the Prevention of Money Laundering Act, 2002 (PMLA) to justify provisional attachment.
• Whether documents and evidence gathered after issuance of the PAO but before filing the OC can be considered by the Adjudicating Authority, or whether only documents placed before the Joint Director at the time of PAO issuance are relevant.
• Whether the PAO was rightly set aside on the ground that no chargesheet had been filed against the respondents in the FIR No. 12/2010 at the time of attachment, considering the provisions of the PMLA prior to its 2013 amendment.
• Whether a delay of over seven years between the registration of the ECIR and issuance of the PAO negates the 'reason to believe' that the respondents would alienate the properties and frustrate proceedings.
• Whether the respondents were denied an opportunity to rebut the presumption under Section 24 of PMLA before passing the PAO.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Authority of Joint Director to issue PAO in absence of Deputy Director

Legal framework and precedents: Section 5 of PMLA, 2002 empowers the Director or any officer not below the rank of Deputy Director authorized by the Director to provisionally attach properties. Both Joint Director and Deputy Director are recognized ranks within ED.

Court's interpretation and reasoning: The Tribunal held that the Joint Director, being a higher rank than Deputy Director, is competent to issue a PAO, especially when the Deputy Director is unavailable due to training or other reasons. The subsequent filing of the OC by the Deputy Director, who was the investigating officer, does not invalidate the attachment. The Tribunal rejected the Adjudicating Authority's hyper-technical interpretation that the same officer must issue the PAO and file the OC, emphasizing that such technicalities should not defeat substantive justice.

Key evidence and findings: The Joint Director issued PAO No. 05/2017 dated 28.07.2017 while the Deputy Director was on training. The Deputy Director filed the OC within 30 days of PAO issuance after resuming duties.

Application of law to facts: The Tribunal applied a purposive interpretation of Section 5, recognizing administrative realities and the need to avoid procedural impediments that could frustrate enforcement actions.

Treatment of competing arguments: The respondents argued that only the officer who issues the PAO can file the OC, but the Tribunal found this to be an incorrect and overly technical reading.

Conclusion: The Joint Director was validly empowered to issue the PAO, and the subsequent OC filed by the Deputy Director did not vitiate the proceedings.

Issue 2: Sufficiency of documents before Joint Director to form reasonable belief

Legal framework and precedents: Section 5(1) of PMLA requires the authorized officer to have 'reason to believe' that the property is proceeds of crime. The standard for 'reason to believe' is lower than proof beyond reasonable doubt. Precedents such as BK Shrestha v. Union of India emphasize that sufficiency of reasons to believe is not subject to detailed judicial scrutiny.

Court's interpretation and reasoning: The Tribunal found that the FIR, ECIR, bank statements, statements of witnesses recorded under Section 50 PMLA, and other material placed before the Joint Director were sufficient to form a reasonable belief. The Tribunal noted that the allegations in the FIR and corroborative evidence prima facie showed involvement of respondents in scheduled offences generating proceeds of crime.

Key evidence and findings: Evidence included FIR No. 12/2010, statements of employees and accomplices, bank account cash deposits exceeding Rs. 503 crore, and charge sheets filed by CBI and other agencies.

Application of law to facts: The Tribunal applied the 'reason to believe' standard, which requires a prudent and reasonable person to form such belief on the material before him, not requiring proof beyond doubt.

Treatment of competing arguments: Respondents contended that the documents were insufficient and the PAO should be set aside. The Tribunal rejected this, holding that the material was sufficient to justify attachment.

Conclusion: The documents before the Joint Director were sufficient to form reasonable belief for issuing the PAO.

Issue 3: Reliance on documents not placed before Joint Director at PAO issuance

Legal framework and precedents: Investigation is a continuing process under PMLA and evidence may be gathered after PAO issuance but before filing the OC. There is no statutory bar on relying on such additional evidence to strengthen the prosecution's case.

Court's interpretation and reasoning: The Tribunal held that the Adjudicating Authority erred in disregarding documents not placed before the Joint Director at the time of PAO issuance. The additional documents in the OC were to update the Authority on the progress of investigation and establishment of mens rea. The Tribunal emphasized that excluding such evidence would hinder fair investigation and justice.

Key evidence and findings: Additional documents included statements under Section 50 PMLA and correspondence clarifying license details.

Application of law to facts: The Tribunal applied the principle that the investigation and evidence collection are ongoing and not limited to a snapshot at the time of PAO.

Treatment of competing arguments: The respondents argued that only documents before the Joint Director at PAO issuance are relevant. The Tribunal rejected this narrow approach.

Conclusion: Documents gathered after PAO issuance but before filing OC can be relied upon by the Adjudicating Authority.

Issue 4: Validity of PAO in absence of chargesheet at time of attachment (pre-2013 amendment)

Legal framework and precedents: Prior to the 2013 amendment, Section 5(1)(b) of PMLA required that the person whose property is sought to be attached must be charged with a scheduled offence. However, the second proviso to Section 5(1) allows attachment if the officer has reason to believe that non-attachment would frustrate proceedings.

Court's interpretation and reasoning: The Tribunal held that the proviso is an exception to the main clause and authorizes attachment even before chargesheet filing, provided reasons are recorded. The charge sheets dated 02.06.2010 and 18.07.2010 filed by the LEA included the respondents as accused. The Tribunal rejected the respondents' argument that no chargesheet was filed against them.

Key evidence and findings: Copies of charge sheets and their English translations were provided to the respondents. The FIR and charge sheets implicated the respondents in scheduled offences.

Application of law to facts: The Tribunal applied the proviso to uphold the attachment despite delay in chargesheet filing and the timing of PAO issuance.

Treatment of competing arguments: Respondents relied on a judgment limiting the proviso's application and argued violation of Article 20 protections. The Tribunal found these arguments unpersuasive given the charge sheets and ongoing investigation.

Conclusion: The PAO was validly issued despite delay in chargesheet filing, under the proviso to Section 5(1) of PMLA.

Issue 5: Effect of delay of over seven years between ECIR registration and PAO issuance

Legal framework and precedents: PMLA does not prescribe any time limit for issuance of PAO after ECIR registration. Delay alone is not a ground to set aside attachment if there is reason to believe alienation of property may occur.

Court's interpretation and reasoning: The Tribunal observed that the delay was due to non-cooperation and non-appearance of respondents before the Investigating Officer. The Tribunal held that a person cannot benefit from his own default. The apprehension that respondents might alienate properties justified attachment even after delay.

Key evidence and findings: Respondents' non-cooperation and failure to appear during investigation documented. The complexity of money laundering investigations acknowledged.

Application of law to facts: The Tribunal applied the principle that delay does not negate the reason to believe when non-cooperation and risk of property alienation exist.

Treatment of competing arguments: Respondents argued delay vitiated reason to believe. The Tribunal rejected this argument.

Conclusion: Delay of over seven years did not invalidate the PAO.

Issue 6: Opportunity to respondents to rebut presumption before PAO

Legal framework and precedents: Section 24 of PMLA creates a presumption that property involved in money laundering is proceeds of crime, which the person can rebut. However, the Act does not mandate a prior hearing before provisional attachment.

Court's interpretation and reasoning: The Tribunal held that no prior opportunity to rebut the presumption is required before passing PAO. The respondents were given opportunity during adjudication proceedings and could contest the attachment.

Key evidence and findings: No evidence that respondents were denied opportunity during adjudication. The PAO is a provisional measure to prevent alienation.

Application of law to facts: The Tribunal applied the statutory scheme balancing the need for prompt attachment with procedural fairness.

Treatment of competing arguments: Respondents argued violation of natural justice. The Tribunal rejected this as inconsistent with PMLA provisions.

Conclusion: No prior opportunity to rebut presumption is required before PAO issuance.

3. SIGNIFICANT HOLDINGS

"The view taken by Ld. Adjudicating Authority with respect to the interpretation of Sub-Section 5 of Section 5 of PMLA, 2002 that the officer who attaches the properties has to file the OC, is a wrong interpretation of the law. Such technicalities should not be the basis for dismissing the OC, which is otherwise based on proper investigation and sufficient evidences."

"The 'reason to believe' is apparent on record from the said allegations, in the mind of the authorized officer/ Joint Director for passing the Provisional Attachment Order. The standard to form 'reason to believe' for provisional attachment cannot be equated with standard for conviction of the culprits."

"Investigation is a continuing process and it cannot be compartmentalized in the before or after the PAO, therefore, evidences gathered after the PAO cannot be discarded by the Ld. Adjudicating Authority."

"There is no time limit for passing the PAO after recording the ECIR. Thus, delay of seven year is no ground to set aside the PAO. Moreover, the delay has occurred on account of non- cooperation and non-appearance of the Respondents before the Investigating Officer of the ED."

"No doubt filing of chargesheet is one of the conditions for provisionally attaching the property as per Clause 5(1)(b) of PMLA, 2002. However, the second proviso to Section 5(1) of PMLA is an exception to clause 5(1)(b), which clearly provides that any property of any person may be attached if the authorized person has reason to believe that if such property is not attached immediately, the non-attachment of the property is likely to frustrate any proceeding under PMLA."

"The ends of justice should not be allowed to be sacrificed at the altar of mere technicalities even when the case is proved to the hilt and the accused is found otherwise guilty."

Final determinations:

• The Joint Director was competent to issue the PAO in absence of Deputy Director, and the subsequent filing of OC by the Deputy Director is valid.
• The material before the Joint Director sufficed to form reasonable belief under Section 5 of PMLA for provisional attachment.
• Documents gathered after PAO issuance but before filing OC can be relied upon by the Adjudicating Authority.
• The PAO was validly issued despite delay and absence of chargesheet at the time of attachment, under the proviso to Section 5(1) of PMLA.
• The delay of over seven years did not invalidate the PAO, especially due to respondents' non-cooperation.
• No prior opportunity is required before PAO issuance to rebut presumption under Section 24 of PMLA.
• The impugned order declining confirmation of PAO was set aside, and the attachment of properties was confirmed, subject to the final outcome of related writ petitions and criminal trials.