2017 (12) TMI 1103 - AT - Money Laundering

Offence under PMLA - direct / indirect involvement of any person or property with the proceeds of the crime - attachment orders - Held that - As under section 68(A)(1)(d)&(e) even the person who are relative of the accused or associates, the ED has a right to forfeiture and acquired the illegal property of the relative associates. However, in the present case under the PMLA Pritam Kaur is neither the relative or the associates of Shri Hardeep Singh Thapar. At the time of making the payment by Shri Hardeep Singh Thapar no criminal case under the schedule offence or PMLA was pending. At that time the amount received by Pritam Kaur was earnest money cannot be considered as tainted under the PML Act and even she was not aware about any activities about Shri Hardeep Singh Thapar on the date of execution of the agreement. It was a bonafide transaction. The Adjudicating Authority has not discussed any relevant issue involved in the impugned order which was passed in mechanical manner and without application of mind without considering and consulting law.. The appellant is an innocent person. No criminal complaint is pending against her. It is purely a civil dispute. She has no link or nexus with Hardeep Singh Thapar directly or indirectly. Both orders are accordingly set-aside. All the four appeals are allowed. The attachment of only immovable properties stands released. The appellant may take the necessary steps as per law. ED and Adjudicating Authority has totally ignored the said vital facts involved in the present matter. Both orders are passed in mechanical manner. Infact, had ED applied its mind of the peculiar facts of the matter, the provisional attachment order would not have been passed. Both provisional attachment orders and confirmation orders are perversed and against the law.

Issues Involved:
1. Legitimacy of the attachment order under PMLA against the appellant.
2. Appellant's involvement in money laundering.
3. Retrospective application of PMLA amendments.
4. Definition and application of "proceeds of crime" under PMLA.
5. Forfeiture of earnest money and its implications under PMLA.

Issue-wise Detailed Analysis:

1. Legitimacy of the attachment order under PMLA against the appellant:
The appeals were filed under Section 26 of the Prevention of Money Laundering Act, 2002 (PMLA) against the order dated 12.05.2015 by the Adjudicating Authority in OC 405/2015, confirming the attachment of properties under PAO 1/2014. The appellant argued that no proceedings under PMLA could be initiated against her as she was neither named in the FIR nor charged under a scheduled offense. The Tribunal found that the appellant was not involved in any criminal activity and had no direct or indirect link with the proceeds of the crime. The Tribunal set aside the attachment orders, stating that the appellant was an innocent party and the attachment was not justified.

2. Appellant's involvement in money laundering:
The Tribunal examined whether the appellant was involved in money laundering. It was found that the appellant had no knowledge that the earnest money received was from the proceeds of crime. The appellant had entered into a bona fide transaction to sell her land and forfeited the earnest money as per the agreement when the buyer failed to execute the sale deed. The Tribunal concluded that the appellant was not a party to the criminal activity and had no knowledge of the tainted nature of the money.

3. Retrospective application of PMLA amendments:
The appellant argued that the provisions of PMLA could not be applied retrospectively, as the amendments in 2009 and 2013 were not applicable to her case. The Tribunal agreed, stating that the appellant received the money in 2006, and the amendments could not affect her case. The Tribunal emphasized that the case should be adjudicated based on the pre-amendment act of 2002.

4. Definition and application of "proceeds of crime" under PMLA:
The Tribunal analyzed the definition of "proceeds of crime" under Section 2(u) of PMLA, which refers to any property derived or obtained from criminal activity related to a scheduled offense. It was determined that the appellant received the earnest money in a bona fide manner and had no knowledge of its tainted nature. The Tribunal held that the earnest money could not be considered as proceeds of crime in the appellant's hands.

5. Forfeiture of earnest money and its implications under PMLA:
The appellant forfeited the earnest money as per the terms of the agreement when the buyer failed to perform his part of the contract. The Tribunal referred to the Supreme Court's judgment in Shree Hanuman Cotton Mills v. Tata Air Craft Ltd., which outlined the principles of earnest money forfeiture. The Tribunal concluded that the forfeiture was legal and within the appellant's rights. The Tribunal also noted that the suit for recovery of the earnest money had become time-barred in December 2009, further supporting the appellant's position.

Conclusion:
The Tribunal set aside the attachment orders, stating that the appellant was an innocent party with no involvement in money laundering. The earnest money received was not considered proceeds of crime, and the forfeiture was legal. The Tribunal emphasized that the case should be adjudicated based on the pre-amendment act of 2002, and the retrospective application of amendments was not justified. The appeals were allowed, and the attachment of the appellant's properties was released.

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