2017 (8) TMI 1140 - AT - Money Laundering

PMLA - provisional attachment - Held that - In exercise of the powers conferred under clause (f) of sub-section 2 of Section 35 of the Act the Tribunal s order is reviewed to the extent it upheld the confirmation of the provisional attachment of the subject property to the extent of the appellant s undivided share right title and interest in the subject property. Accordingly the order dated 16th September 2013 in Original confirming passed by the Adjudicating Authority is set aside to the extent of the above and the matter is remanded to the Adjudicating Authority for issue of notice under Section 8(1) of the Act to the appellant and also to the defendant therein (respondent-R-2 herein) with a copy to the Respondent-1 herein and to decide the matter in accordance with law after giving an opportunity to the parties to file the reply to the notice along with documents which they rely on and after according opportunity of personal hearing to all parties including the Respondent-1 herein. We may clarify that till the matter is decided by the Adjudicating Authority the subject property to the extent indicated above shall remain attached in terms of the provisions of the PMLA till the completion of the proceedings as directed. Further the appeal against the order dated 16th September 2013 confirming the attachment of the remaining portion of the subject property already stands rejected by this Tribunal Order dated 25.01.2016. This Tribunal also directs that subject to the appellants furnishing an undertaking not to transfer sell create any encumbrance or third party rights in the subject premises and the subject property to the extent of their undivided share title and interest during the pendency of the proceedings as aforesaid the Respondent No. 1 shall restore physical possession of the Subject Premises more particularly described in Exhibit B to this Appeal to the appellants within two weeks from furnishing such undertaking. The appellant no. 1 would be entitled to enjoy the possession of the premises in question to the extent of their claim and which was occupied by him at the time of taking the possession in the year by the respondent-1 in 2014.

Issues Involved:
1. Jurisdiction and Maintainability of Appeal
2. Ownership and Possession of Subject Property
3. Compliance with Section 8 of PMLA
4. Validity of Attachment and Confirmation Orders
5. Civil Rights and Partition of Property
6. Principles of Natural Justice and Fair Hearing
7. Impact of Pending Civil and Criminal Proceedings

Detailed Analysis:

1. Jurisdiction and Maintainability of Appeal:
The appellants filed the appeal under Section 26 of the Prevention of Money Laundering Act (PMLA) against the Confirmation Order dated 16th September 2013. The Tribunal noted that the appellants were not served notice nor heard in the proceedings leading to the attachment of the property. The respondent argued that the appeal was not maintainable since the appellants were strangers to the adjudication proceedings. However, the Tribunal referenced the Bombay High Court’s order allowing the appellants to file the appeal, thus confirming its maintainability.

2. Ownership and Possession of Subject Property:
The appellants claimed co-ownership of the property, asserting their undivided share, right, title, and interest. They provided a detailed history of ownership, including inheritance and possession since 1953. The Tribunal noted that the property was never sold to the accused (Respondent No. 2) and that the appellants had uninterrupted possession of a portion of the property. The Tribunal acknowledged the appellants' claim of ownership and lawful possession, which was supported by various documents, including property cards and court orders.

3. Compliance with Section 8 of PMLA:
The Tribunal found that no notice under Section 8(1) of PMLA was served to the appellants, which is mandatory for anyone claiming a right in the property. The Tribunal emphasized that the second proviso to Section 8(1) requires notice to all persons holding the property. The failure to issue such notice constituted non-compliance with statutory provisions and a breach of natural justice.

4. Validity of Attachment and Confirmation Orders:
The Tribunal observed that the attachment order was based on the erroneous assumption that the property was exclusively owned by Respondent No. 2. The Tribunal highlighted that the Deed of Conveyance and Agreement for Sale contained disclaimers about the appellants' claim. The Tribunal set aside the confirmation order to the extent of the appellants' undivided share, right, title, and interest, and remanded the matter to the Adjudicating Authority for fresh adjudication after issuing the required notice.

5. Civil Rights and Partition of Property:
The Tribunal clarified that it did not have the jurisdiction to decide on the civil rights of the parties or the partition of the property. These issues fall within the domain of competent civil courts. The Tribunal's concern was limited to whether the property involved in the attachment was part of the proceeds of crime and whether due process was followed.

6. Principles of Natural Justice and Fair Hearing:
The Tribunal stressed the importance of adhering to principles of natural justice, stating that no one should be condemned unheard. The failure to serve notice to the appellants deprived them of the opportunity to present their case, rendering the attachment and confirmation orders vitiated. The Tribunal cited various judgments to underscore the necessity of fair hearing and compliance with statutory requirements.

7. Impact of Pending Civil and Criminal Proceedings:
The Tribunal noted the pending civil suit filed by the appellants seeking a declaration of co-ownership and partition of the property. It also acknowledged the criminal complaint against Respondent No. 2. The Tribunal stated that these proceedings did not bar the consideration of the present appeal under PMLA. The Tribunal directed that the possession of the disputed portion be restored to the appellants, subject to their undertaking not to create any encumbrance or third-party rights during the pendency of the proceedings.

Conclusion:
The appeal was disposed of with directions to the Adjudicating Authority to issue notice under Section 8(1) of PMLA to the appellants and decide the matter afresh. The Tribunal ordered the restoration of possession of the disputed portion to the appellants, emphasizing that the appellants' civil rights and the determination of whether the property was involved in money laundering were to be addressed in subsequent proceedings. The Tribunal made no order as to costs.

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