2014 (10) TMI 436 - HC - Money Laundering

Attachment of property - Prevention of Money Laundering Act, 2002 - Held that - One is hard pressed to imagine how a trial for an offence of money laundering can continue where the fundamental basis the commission of a schedule offence in this case offence under Section 307 IPC has been found to be disproved - attachment of a property is liable to be vacated if the existence of a scheduled offence is negated. Clearly, attachment of proceeds of crime cannot continue if the alleged scheduled offence is not established after trial. Given the scheme of the PMLA, attachment of property (proceeds of crime) must be lifted if it is found that the scheduled offence, on the basis of which attachment was effected, does not exist. In absence of a scheduled offence, the question of existence of any proceeds thereof, do not arise. The proceedings before the Appellate Tribunal emanate from the order of an Adjudicating Authority passed on 04.02.2011. It is, thus apparent that the Appellate Tribunal would consider the merits of that order. In the present case, an intervening event has occurred inasmuch as the accused of the schedule offence has been acquitted. In the circumstances, it prima facie appears that the attachment order ought to be vacated. The petitioner has already filed a representation before the respondent on 23.04.2013, which is not disposed of as yet. - Decided in favour of assessee.

Summary

Issues:
1. Alleged crime not proved, but properties still attached under PMLA.
2. Basis of attachment under PMLA and related legal proceedings.
3. Interpretation of Section 8(5) of the PMLA and its application post-amendment.

Analysis:

Issue 1:
The petitioner's properties were attached under the Prevention of Money Laundering Act (PMLA) despite the acquittal of the person accused of the scheduled crime. The petitioner argued that the attachment should be lifted since the scheduled offence was not proven. The respondent had initiated proceedings based on a complaint and subsequent investigations by the CBI and the Enforcement Directorate.

Issue 2:
The attachment of the petitioner's properties was based on a provisional order passed under the PMLA after allegations against Dr. Jeevan Kumar in an illegal kidney transplantation racket case. The provisional order was confirmed by the Adjudicating Authority, and the petitioner appealed to the Appellate Tribunal. A criminal complaint under the PMLA was also pending trial before the Special Judge, with a related petition seeking quashing of the complaint under consideration.

Issue 3:
The interpretation of Section 8(5) of the PMLA was crucial in determining the validity of the property attachment. The respondent argued that the amendment to Section 8(5) post-2012 removed the requirement for the conclusion of a trial for a scheduled offence to lift the attachment. However, the court held that the foundation of money laundering charges rests on the existence of proceeds of crime derived from a scheduled offence. Therefore, an acquittal in the scheduled offence case would negate the basis for the attachment under the PMLA.

The court emphasized that the attachment of property under the PMLA must be vacated if the scheduled offence is not established post-trial. The court directed the respondent to dispose of the petitioner's representation within four weeks, irrespective of the proceedings before the Appellate Tribunal. The judgment highlighted the interplay between scheduled offences, proceeds of crime, and the implications of acquittal on property attachment under the PMLA.