2025 (6) TMI 362 - AT - Money Laundering

Money Laundering - provisional attachment order - scheduled offences - proceeds of crime - illegal gratification - criminal conspiracy - sale of ancestral properties and subsequent cancellation of sale agreement - HELD THAT - The facts on record shows that while the appellant was working as Senior Manager Metallurgical Wing MECON Ltd. he entered into criminal conspiracy and received a sum of Rs. 1, 65, 45, 000/- from M/s Zeal India Chemicals Ranchi and M/s Shiv Machine Tools. The amount was received in various accounts belonging to the appellant and his relatives/friends - A sum of Rs. 49, 50, 000/- was paid by M/s Zeal India Chemicals during the period of 12.06.2013 to 15.06.2016 through bank accounts in the name of the appellant and in the name of his relatives/friends. An amount of Rs. 1, 15, 95, 000/- was paid to the appellant by M/s Shiv Machine Tools during the period of 03.08.2015 to 02.08.2016 through the banking channel in the name of his relatives/friends. The facts on record shows that to circulate the crime money the appellant entered into property transactions but could not justify enhancement of the rate of the property more than the double and otherwise receipt of the consideration was from the companies to whom the work was assigned pursuant to the tender. The property at Tritiya Tower was worth of Rs. 1.25 crores for which difference of amount could not be disclosed. The source of the equivalent amount could not be disclosed other than the receipt of money from M/s Shiv Machine Tools and that too on manipulated sale of the plot along with the constructed hall which was purchased by the appellant for the consideration of only Rs. 26.30 lakhs that too out of bribe money. Conclusion - The appellant failed to produce sale deeds or any credible evidence to support the claim of legitimate sale transactions and the cancellation of the sale agreement dated 12.10.2012 nullifies the alleged receipt of sale consideration. There are no illegality in the impugned order for attachment of the properties belonging to the appellant - appeal dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the properties attached under the Provisional Attachment Order (PAO) issued under Section 5(1) of the Prevention of Money Laundering Act, 2002 (PMLA) constitute 'proceeds of crime' as defined under Section 2(1)(u) of the Act?

- Whether the appellant, while functioning as Senior Manager, Metallurgical Wing, MECON Ltd., received illegal gratification from M/s Zeal India Chemicals and M/s Shiv Machine Tools, and whether the amounts received in various accounts of the appellant and his relatives/friends bear nexus to the scheduled offence?

- Whether the appellant's contention regarding the sale of ancestral properties and subsequent cancellation of sale agreement negates the allegation of illegal gratification and acquisition of properties from proceeds of crime?

- Whether the enhancement in the value of the properties and the transactions involving the properties indicate laundering of illegal gratification received?

- Whether the appellant has successfully rebutted the presumption of proceeds of crime under the PMLA?

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Whether the properties attached are 'proceeds of crime' under Section 2(1)(u) of the PMLA?

The legal framework under PMLA defines 'proceeds of crime' as any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence. The Act empowers attachment of such properties under Section 5(1) and confirmation thereof by the Adjudicating Authority under Section 8.

The Court observed that the appellant was alleged to have accepted illegal gratification amounting to Rs. 1,65,45,000/- from M/s Zeal India Chemicals and M/s Shiv Machine Tools during his tenure as Senior Manager, MECON Ltd. The amounts were routed through various bank accounts in the names of the appellant and his relatives/friends.

Material on record revealed that the properties attached-a residential duplex apartment valued at Rs. 1.25 crores and a car valued at Rs. 3,71,848/--were acquired through amounts traced to these illegal payments. The appellant failed to provide any legitimate source for these acquisitions other than the amounts received from the two firms.

The Tribunal noted the disproportionate enhancement in the value of properties and the timing and manner of transactions, which indicated that the properties were acquired out of the proceeds of crime.

Competing arguments by the appellant, alleging legitimate transactions for sale of ancestral properties and independent dealings, were found unsupported by evidence such as sale deeds and were further weakened by the cancellation of the alleged sale agreement.

Conclusion: The properties attached were rightly held to be proceeds of crime under the PMLA.

Issue 2: Whether the appellant received illegal gratification from M/s Zeal India Chemicals and M/s Shiv Machine Tools and the amounts bear nexus to the scheduled offence?

The FIR and charge sheet allege that the appellant, while preparing technical specifications and tender appraisal reports for projects at Durgapur Steel Plant and Bokaro Steel Plant, conspired with the two firms to award contracts despite their lack of requisite experience, in exchange for illegal gratification.

Evidence included bank statements showing receipt of Rs. 49,50,000/- from M/s Zeal India Chemicals and Rs. 1,15,95,000/- from M/s Shiv Machine Tools in accounts belonging to the appellant and his relatives/friends during the relevant periods.

The Court examined the modus operandi, noting the appellant's role in passing designs and tender reports facilitating the firms' selection despite their ineligibility. The transfer of funds through banking channels and subsequent use of these funds to acquire properties and other assets established the nexus between the illegal gratification and the scheduled offence.

The appellant's defense that the amounts were received for legitimate property transactions was undermined by the absence of corroborating sale deeds and the timing of transactions vis-`a-vis the offences.

Conclusion: The appellant received illegal gratification linked to the scheduled offence, establishing the nexus required under the PMLA.

Issue 3: Whether the appellant's claim of sale of ancestral properties and cancellation of sale agreement negates the allegation of illegal gratification?

The appellant contended that amounts received from M/s Zeal India Chemicals and its sister concern were pursuant to a sale agreement dated 12.10.2012 for ancestral properties predating the tender projects. It was argued that the amounts credited to the appellant and his relatives were legitimate sale proceeds.

However, the sale agreement was an unregistered document and only Rs. 2,00,000/- was received as per its terms against a consideration of Rs. 70,00,000/-. Moreover, the agreement was cancelled by a deed dated 12.01.2017, and the entire sale consideration was returned to M/s Zeal India Chemicals.

The Tribunal held that the cancellation of the sale agreement nullified the appellant's claim of legitimate receipt of the amounts. The failure to produce sale deeds and other documentary evidence further weakened the appellant's contention.

The respondent's objection to the introduction of the sale agreement at the appellate stage without prior pleading was also upheld, emphasizing procedural propriety.

Conclusion: The appellant's claim of legitimate sale transactions was not substantiated and did not negate the allegations of illegal gratification.

Issue 4: Whether the enhancement in property values and transaction patterns indicate laundering of illegal gratification?

The appellant purchased a plot at Barasat for Rs. 26.23 lakhs using part of the illegal gratification. The property was later agreed to be sold for Rs. 80 lakhs through an agreement dated 08.07.2015, with payments received in installments over two years, culminating in a registered sale deed only in 2019.

The Tribunal noted the disproportionate increase in value-more than double the original price-and the backdating and manipulation of agreements to facilitate transfer of illegal money.

Further, the appellant transferred Rs. 70 lakhs received from M/s Shiv Machine Tools to a third party to purchase a duplex apartment worth Rs. 1.25 crores and also transferred funds for purchase of a car.

The Court found these transactions indicative of attempts to circulate and launder the proceeds of crime, with no credible explanation for the source of funds or the enhanced property values.

Conclusion: The pattern of transactions and property value enhancement supported the inference of money laundering of illegal gratification.

Issue 5: Whether the appellant has rebutted the presumption of proceeds of crime under PMLA?

Section 24 of the PMLA casts a presumption that the attached property is proceeds of crime unless the contrary is proved. The appellant attempted to rebut this by asserting legitimate sale transactions and independent dealings of his wife.

However, the appellant failed to produce critical evidence such as registered sale deeds and failed to explain the source of funds for enhanced property values and subsequent transactions.

The Tribunal emphasized that mere assertions without documentary proof cannot rebut the statutory presumption, especially in light of the incriminating bank transactions and the timing of property acquisitions.

Conclusion: The appellant failed to discharge the burden to rebut the presumption that the attached properties were proceeds of crime.

3. SIGNIFICANT HOLDINGS

"The properties attached by PAO No. 01/2022 dated 22.04.2022 are the 'proceeds of crime' in terms of Section 2(1)(u) of the Act of 2002."

"The appellant, while posted and functioning as Senior Manager, Metallurgical Wing, MECON Ltd., entered into criminal conspiracy and received a sum of Rs. 1,65,45,000/- from M/s Zeal India Chemicals and M/s Shiv Machine Tools through various accounts belonging to him and his relatives/friends."

"The appellant failed to produce sale deeds or any credible evidence to support the claim of legitimate sale transactions and the cancellation of the sale agreement dated 12.10.2012 nullifies the alleged receipt of sale consideration."

"The disproportionate enhancement in the value of the properties and the pattern of transactions indicate laundering of illegal gratification received from the firms."

"The appellant has failed to rebut the presumption under Section 24 of the PMLA that the attached properties are proceeds of crime."

"Accordingly, the appeal is dismissed, and the impugned order of attachment is upheld."