2018 (5) TMI 992 - AT - Money Laundering

Offence under PMLA - provisional order of attachment - attachment of property involved in money-laundering - order of provisional attachment attaching property on the basis the statement given by this Appellant s son S.V Srinivas on 12.6.2012 who was interrogated by the respondent (who was arrayed as the 9th Defendant) - Held that - Adjudicating Authority is bound to go through reason to believe recorded before passing the provisional attachment order while coming to the conclusion to issue a notice under section 8(1) of the Act particularly to a person who is not an accused in the schedule offence and not a party to the prosecution complaint. Stereotypes notice u/s 8(1) cannot be issued in such types matters in these types of cases. The case of appellant has not been dealt by the Adjudicating Authority in the impugned order. His property was provisionally attached without any notice and without recording his statement. He is senior citizen/ practicing Advocate. He was not aware that the amount spent on renovation was alleged tainted money. Even otherwise, any offence if committed by his son cannot be attributed to the father unless the father has link and nexus in the crime and involves in the criminal activities. In the present, such allegations against the appellant are not raised by the respondent. The impugned order dt. 17/10/2012 passed by the Adjudicating Authority against the appellant is not sustainable in law and wholly contrary to section 5 and 8 of the Act. The appeal is accordingly allowed. The impugned order is set-aside against the appellant, consequently the provisional attachment order with regard to present appellant is also quashed. The property is released forthwith. It is directed that in case, his son who is one of the accused in prosecution complaint which is still pending ( The proceedings have been stayed by the Hon ble High Court at Karnataka ) and if he is hold guilty after trial if to be conducted after disposal of writ petition. The respondent would be entitled to attach a sum of ₹ 10 lacs if it established that it was a proceed of crime. The appeal and pending applications are disposed of.

Summary

Issues Involved:
1. Provisional attachment of property under the Prevention of Money Laundering Act (PMLA).
2. Allegations of proceeds of crime utilized for property renovation.
3. Violation of principles of natural justice.
4. Validity of the notice issued under Section 8(1) of PMLA.
5. Relationship between the accused and the appellant in the context of alleged crimes.

Issue-wise Detailed Analysis:

1. Provisional Attachment of Property under PMLA:
The Joint Director of Enforcement Directorate passed a provisional order of attachment based on the charge-sheet filed by the Karnataka Lokayuktha Police Wing, attaching the properties of the appellant among others. The appellant's property, House No. 20, 18th Cross, Malleswaram, Bangalore, was included in the attachment. The appellant, a practicing advocate and father of Mr. S.V. Srinivas (charged but later acquitted), was not an accused in the scheduled offence or the prosecution complaint under Section 45 PMLA, 2002.

2. Allegations of Proceeds of Crime Utilized for Property Renovation:
The attachment was based on the statement of the appellant's son, S.V. Srinivas, who admitted to using ?10 lakhs derived from M/s ITASCA for renovating the appellant's house. The appellant and his son denied that the money was proceeds of crime. The appellant provided documentary evidence showing the property was purchased and constructed decades before the alleged offences, proving it was not acquired with proceeds of crime.

3. Violation of Principles of Natural Justice:
The appellant argued that no notice or opportunity was given to explain his stand before the provisional attachment order was passed. The adjudicating authority confirmed the attachment without considering the appellant's evidence or recording his statement, violating principles of natural justice and the appellant's rights under Articles 14 and 21 of the Constitution of India.

4. Validity of the Notice Issued under Section 8(1) of PMLA:
The notice issued by the Adjudicating Authority was mechanical and did not conform to the requirements of Section 8(1) of the Act, presupposing the appellant's guilt. The notice failed to disclose reasons or call upon the appellant to indicate the means by which he acquired the attached property, making it violative of Article 14 of the Constitution.

5. Relationship Between the Accused and the Appellant in the Context of Alleged Crimes:
The appellant, not being an accused in any scheduled offence or prosecution complaint, had his property attached based on his son's statement. The court found no evidence linking the appellant to the alleged crimes or proceeds of crime. The adjudicating authority failed to establish any connection or nexus between the appellant and the alleged criminal activities of his son.

Conclusion:
The impugned order dated 17/10/2012 by the Adjudicating Authority was deemed unsustainable in law and contrary to Sections 5 and 8 of the PMLA. The appeal was allowed, and the provisional attachment order quashed. The property was ordered to be released forthwith. The court directed that if the appellant's son is found guilty after trial, the respondent may attach ?10 lakhs if proven to be proceeds of crime. No costs were awarded.