2014 (12) TMI 1388 - AT - Money Laundering

Provisional attachment of property involved in money laundering - attachment on the ground that the said property was acquired by the Appellant from the proceeds of crime - existence of scheduled offence or not - HELD THAT - The attachment of a property is liable to be vacated, if the existence of a scheduled offence is negated as the generation of proceeds of crime will also be negated. Therefore, in these facts and circumstances, 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 and, 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, will not arise. Therefore, the attachment of the property is liable to be vacated, as in absence of scheduled offense, it cannot be inferred that the proceeds of crime were generated and the property by the Appellant had been purchased and constructed by the proceeds of crime generated by her husband. The Hon'ble Delhi High Court in Rajiv Chanana Vs Dy. Director, Directorate of Enforcement 2014 (10) TMI 436 - DELHI HIGH COURT had also held that in absence of scheduled offense, the attachment of property cannot continue. The property as described herein above is released from attachment - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Legitimacy of the property acquisition by the appellant.
2. Connection of the appellant's husband with criminal activities and proceeds of crime.
3. Validity of the attachment order under the Prevention of Money Laundering Act (PMLA).
4. Impact of the appellant's husband's acquittal on the attachment order.

Detailed Analysis:

1. Legitimacy of the Property Acquisition by the Appellant:
The appellant claimed that the property was purchased from her own funds through civil works contracts. However, the investigation revealed discrepancies in her statements. She failed to provide credible evidence of her civil contracts, income, or the identity of the contractors. The respondent inferred that her claims were fabricated to project the proceeds of crime as untainted property.

2. Connection of the Appellant's Husband with Criminal Activities and Proceeds of Crime:
The respondent alleged that the appellant's husband, a notorious criminal, had acquired proceeds of crime through extortion and other criminal activities. These proceeds were then invested in the property in question. The investigation under PMLA indicated that the appellant's husband had acquired and projected the proceeds of crime as untainted property through the appellant.

3. Validity of the Attachment Order under the Prevention of Money Laundering Act (PMLA):
The Adjudicating Authority confirmed the provisional attachment order, stating that the appellant's husband was involved in scheduled offences under the PMLA. The appellant's arguments that income tax returns and the acceptance of such returns by the concerned authority should negate the attachment were rejected. The Authority held that the attachment would continue until the criminal proceedings were concluded.

4. Impact of the Appellant's Husband's Acquittal on the Attachment Order:
The appellant's husband was acquitted in all criminal cases related to the proceeds of crime. The Tribunal noted that no appeals were filed against these acquittals, making them final. Consequently, the basis for the attachment order, i.e., the existence of proceeds of crime, was negated. The Tribunal referenced Section 8(5) of the PMLA, which mandates the vacation of property attachment upon acquittal in the scheduled offence trial. The Tribunal concluded that without the scheduled offence, the attachment could not be justified.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order and the provisional attachment. The property was ordered to be released from attachment, and if possession had been taken by the respondent, it was to be restored to the appellant along with any consequential benefits. The parties were directed to bear their own costs.