2015 (7) TMI 1255 - AT - Money Laundering

Provisional attachment - Manner of taking possession of immovable property - plea of the applicant is that the four immovable properties valued at ₹ 5.6 crores and one fixed deposit of ₹ 3 crores which have been attached are not proceed of crime but they have been attached for the value thereof so that assets equal to proceeds of crime i.e. ₹ 8.6 crores are available for proceedings relating to confiscation under PMLA and if the four immovable properties are allowed to be replaced by fixed deposits of equivalent value, the purpose of the attachment will be served in full Held that - At this stage we are not deciding whether the attachment of properties is right or wrong as the same will be decided at the time of disposal of the appeal. Assuming that the attachment order is sustainable, we agree with the plea of the respondent that in the facts and circumstances of the present case, there is no provision under PML Act and Rules made thereunder which will entitle the applicant for replacement of immovable property under attachment with fixed deposit. The applicant has also not made out a case for exceptional circumstances and to justify the same for release of immovable properties in lieu of fixed deposits. Though the counsel for applicant also offered extra amount of fixed deposit equal to interest for the period from the date of attachment but such a plea cannot be accepted in the absence of any provision under the law and considering the fact that after attachment of immovable property, there may be appreciation in the market value of those properties which is not ascertained. Further, the applicant has not challenged that on the date of attachment, other properties such as deposits in bank were available which could or should have been attached by the respondent instead of four immovable properties as attached which would have served the purpose of attachment. Rather the plea of the respondent that he has attached assets of the applicant on 4-10-2012 on the basis of the statement of the director of applicant company u/s 50 of PMLA and other material/detail of assets as available after investigation till then was not even disputed by the applicant. Application dismissed.

Summary

Issues Involved:
1. Legality of provisional attachment of properties under the Prevention of Money Laundering Act (PMLA).
2. Request for substitution of attached immovable properties with fixed deposits.
3. Compliance with statutory provisions of PMLA and related rules.
4. Allegations of proceeds of crime and their nexus with attached properties.
5. Exceptional circumstances for release of attached properties.

Detailed Analysis:

1. Legality of Provisional Attachment:
The applicant challenged the provisional attachment of its properties by the Enforcement Directorate (ED) under PMLA. The properties were attached based on allegations of involvement in money laundering linked to undue benefits received through land allotment by the Andhra Pradesh government. The applicant argued that the attachment was arbitrary and lacked a direct nexus with the alleged proceeds of crime.

2. Request for Substitution with Fixed Deposits:
The applicant proposed substituting the attached immovable properties with fixed deposits worth Rs. 5.60 crores, arguing that this would serve the purpose of attachment while allowing the applicant to use the properties for business expansion. The applicant emphasized that the substitution would secure the value equivalent to the alleged proceeds of crime, thus fulfilling the objective of the attachment.

3. Compliance with Statutory Provisions:
The respondent (ED) contended that the application for substitution was not maintainable under Section 35 of PMLA, which governs the Tribunal's procedures and powers but does not provide for such interim relief. The ED argued that the Prevention of Money Laundering (Taking Possession of Attached or Frozen Properties Confirmed by the Adjudicating Authority) Rules, 2013, did not allow for the replacement of attached properties with fixed deposits, especially when the properties were not under joint ownership.

4. Allegations of Proceeds of Crime:
The provisional attachment was based on allegations that the applicant received undue benefits as part of a quid pro quo arrangement involving investments in companies promoted by a political figure. The ED maintained that the attached properties were proceeds of crime as defined under Section 2(l)(u) and 2(1)(zb) of PMLA. The applicant argued that the attached properties had no direct nexus with the alleged proceeds of crime and were attached merely as equivalent value.

5. Exceptional Circumstances for Release:
The Tribunal considered whether exceptional circumstances justified the release of attached properties in lieu of fixed deposits. The applicant argued that the substitution would prevent potential depreciation of property value and avoid maintenance costs for the ED. However, the Tribunal found no statutory provision or exceptional circumstances to support such substitution. The Tribunal also noted that the applicant did not challenge the initial attachment based on available assets at the time.

Judgment:
The Tribunal dismissed the application, stating that there was no provision under PMLA or related rules to allow the substitution of attached immovable properties with fixed deposits. The Tribunal emphasized that the applicant failed to demonstrate exceptional circumstances warranting such relief. The decision on the legality of the attachment itself would be made during the disposal of the main appeal. The parties were directed to bear their own costs.