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2025 (6) TMI 1972 - AT - Money LaunderingMoney Laundering - large scale misappropriation of disbursement of scholarship funds - act committed by appellant or not - failure to establish any direct link between the appellants and the alleged offence - reason to believe of possession of proceeds of crime/records - HELD THAT - The contention of the appellant that no prosecution complaint was filed by ED within 365 days in-spite of the passing of the impugned order by the Adjudicating Authority on 13.02.2024 and hence the same is invalid does not hold good in view of the contention of the respondent ED that the purpose of the attachment proceedings is to protect the property till the conclusion of the investigation of the offence of money laundering and after filing of prosecution complaint till the conclusion of trial. Further the present seized/frozen documents digital records and bank accounts are already cited in the list of properties for the purpose of confiscation in the said prosecution complaint. Therefore technically the present appeal cannot be allowed on the said ground as now this is the prerogative of the trial court/Ld. Special Judge PMLA court after the filing of supplementary prosecution complaint on 28.03.2025. At present since the prosecution complaint is already filed if after the trial the appellants are convicted for commission of offence of money laundering then the investigation and trial proceedings will become infructuous and nugatory as the government will not be able to confiscate the said properties in case appeal is allowed and consequently properties are released. Secondly regarding the contention of the appellants that they have not committed any act and were not involved in any alleged commission of offence and that the respondent has failed to establish any direct link between the appellants and the alleged offence is devoid of any merits. In this regard there is ample evidence as revealed from the investigation that the appellant no.1 Sh. Gulshan Kumar was involved in the offence of money laundering and further he himself has admitted during the course of the recording of statement that the source of money received in his bank account were amount withdrawn by him from the account of M/s ITFT Consultancy Pvt. Ltd. under the aegis of which institute M/s ITFT New Chandigarh was running - the property in the hands of any person in possession of proceeds of crime can be attached even if he is not accused in the predicate offence or in prosecution complaint for the commission of offence of money-laundering. This issue is accordingly decided against the appellants. No reason to believe so recorded by the Adjudicating Authority to show as to why it is satisfied for the confirmation of the PAO does not hold good - HELD THAT - This issue is decided against the appellants as there is sufficient incriminating material against them for receiving the proceeds of crime. Appeal dismissed.
The core legal questions considered by the Appellate Tribunal under the Prevention of Money Laundering Act (PMLA), 2002, in these appeals are:
1. Whether the Enforcement Directorate (ED) was justified in retaining the seized properties, documents, digital records, and bank accounts of the appellants beyond 365 days, especially given the delay in filing the prosecution complaint (PC) after the impugned order. 2. Whether the appellants were involved in the commission of the scheduled offence of money laundering and whether there was sufficient evidence to establish a direct link between the appellants and the proceeds of crime. 3. Whether the Adjudicating Authority validly recorded the "reason to believe" required under the PMLA for confirmation of the provisional attachment order (PAO) and retention of the seized properties. Issue 1: Validity of Retention of Seized Properties Beyond 365 Days and Delay in Filing Prosecution Complaint The relevant legal framework includes Section 8(3) of the PMLA, which permits the provisional attachment of property involved in money laundering for a maximum period of 365 days, subject to confirmation by the Adjudicating Authority. The appellants contended that the ED failed to file the prosecution complaint within 365 days from the order dated 13.02.2024, as the PC was filed only on 28.03.2025, thus rendering the retention of the seized properties illegal. The Court noted that the purpose of attachment proceedings under the PMLA is to protect the property involved in the offence until the conclusion of investigation and trial. The Court emphasized that the seized properties were included in the list of properties for confiscation in the prosecution complaint. Therefore, the filing of the prosecution complaint, even if delayed, does not invalidate the retention of the properties. The Court further observed that allowing release of the properties at this stage would render the investigation and trial infructuous, as the government would be unable to confiscate the properties if the accused are convicted. The Court distinguished this from previous limited provisions under the Criminal Amendment Ordinance, 1944, and Sections 451 and 452 of the CrPC, highlighting the broader scope and intent of the PMLA to protect proceeds of crime through attachment until trial conclusion. Thus, the Court rejected the appellants' contention that delay in filing the prosecution complaint invalidated the retention of the seized properties. Issue 2: Involvement of Appellants in the Scheduled Offence and Link to Proceeds of Crime The appellants argued that they were not involved in the alleged offences, were not named in the predicate offence chargesheets, and that no direct link was established between them and the proceeds of crime. They also submitted that they had cooperated by furnishing financial details and tax records. The Court analyzed the evidence collected by the ED and CBI, including statements recorded under Section 17 of the PMLA, which revealed admissions by the appellants regarding receipt of funds from the proceeds of the fraudulent scholarship scheme. Specifically:
Further, the investigation revealed that scholarship funds disbursed to students were diverted fraudulently to private institutes' accounts and subsequently to the appellants' accounts, without students' knowledge or consent. The Court held that possession of proceeds of crime by any person, even if not named in the predicate offence or prosecution complaint, falls within the scope of Section 5(1) of the PMLA. The Court relied on binding Supreme Court precedents, including:
The Court concluded that the attachment of property in possession of the appellants was not arbitrary and was justified based on the incriminating material and admissions. Issue 3: Recording of "Reason to Believe" by the Adjudicating Authority for Confirmation of PAO The appellants contended that the Adjudicating Authority failed to record any reasonable grounds or "reason to believe" for confirming the provisional attachment order and retention of properties. The Court examined the role of the Adjudicating Authority, which is to form an initial opinion on the existence of "reason to believe" that the property is involved in money laundering offences, based on the material submitted by the investigating agency. The Court referred to the judgment in Pay Perform India Private Limited vs. Union of India, which held that the Adjudicating Authority's primary function is to form a "proper and fair opinion" on the existence of reason to believe, and thereafter confirm the attachment until disposal of the case by the Special Court. The Court found that the Adjudicating Authority had validly recorded a prima facie case against the appellants and had sufficient incriminating material to justify the retention of the properties. Therefore, the contention of the appellants was rejected. Significant Holdings and Core Principles "The purpose of the attachment proceedings is to protect the property, till the conclusion of the investigation of the offence of money laundering and after filing of prosecution complaint, till the conclusion of trial." "There is no dispute that the complaint is based on ECIR dated 17th March, 2017 in which the respondent was shown as one of the accused. Moreover, clause (a) will apply during the continuation of the proceedings relating to an offence under the PMLA in a Court. ... It is not necessary for the applicability of clause (a) that the person affected by the order under Section 8(3) must be shown as an accused in the complaint." "The sweep of Section 5(1) is not limited to the Accused named in the criminal activity relating to a scheduled offence. It would apply to any person (not necessarily being Accused in the scheduled offence), if he is involved in any process or activity connected with the proceeds of crime." "The primary function of the Adjudicating Authority is to form an initial opinion as to existence of the 'reason to believe' that an offence that whether the property is involved in the offence of money laundering and thereafter to make the order of attachment absolute, until the disposal of the case by the Special Court." The Tribunal dismissed the appeals, holding that:
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