2018 (7) TMI 1223 - AT - Money Laundering

Offence under PMLA - Attachment orders - transaction from proceeds of crime - Held that - In the impugned order there is no finding at all as to whether ₹ 70 lakhs which was received by the appellant was from alleged tainted amount is received from ₹ 85 crores or from ₹ 19 crores which is claim to the untainted money. In the impugned order, there is no specific finding after going through the record to establish as whether ₹ 70 lakh loan which was given to the appellant from ₹ 85 crores and part of ₹ 19 crores (which was admitted untainted amount as per the case of the respondent no. 1). In case provisional attachment order and prosecution complaint are read together, merely a general reasons are given that the amount received by her was generated from the proceed of crime and if amounts to money laundering. There are no reasons or findings that on the date of receipt of loan amount, she was aware that if any, it was proceed of crime. No such question was put when her statement u/s 50(2) of PML Act was recorded. In the light of the above said reasons, we allow the appeal. The impugned order 28.09.2017 passed against the appellant is set-aside. Consequently, provisional attachment order is also quashed.

Issues Involved:
1. Compliance with Section 8(1) of the PMLA and principles of natural justice.
2. Classification of ?70 lakhs as proceeds of crime.
3. Appellant's involvement in the alleged money laundering.
4. Validity of the provisional attachment order.

Detailed Analysis:

1. Compliance with Section 8(1) of the PMLA and Principles of Natural Justice:
The appellant argued that the Adjudicating Authority did not comply with Section 8(1) of the PMLA, resulting in a gross violation of Article 14 of the Constitution and principles of natural justice. The appellant contended that the notice issued under Section 8(1) lacked reasons and did not call upon the appellant to disclose the source of income for the attached property. The Tribunal found that the Adjudicating Authority failed to provide reasons for its conclusions, demonstrating a lack of judicial accountability and violating the principles of audi alteram partem.

2. Classification of ?70 Lakhs as Proceeds of Crime:
The Tribunal had previously remanded the matter to the Adjudicating Authority to determine whether ?70 lakhs was part of the ?19 crores of legitimate money or the ?85.28 crores classified as proceeds of crime in M/s Indu Builders' account. Despite this, the Adjudicating Authority did not provide a clear finding on this issue. The Tribunal noted that the complaint did not disclose whether the ?70 lakhs received by the appellant came from a clean source or was part of the proceeds of crime. The Tribunal highlighted that the Adjudicating Authority failed to appreciate the statement of Sri B.L. Venkataiah, which indicated that ?19 crores in M/s Indu Builders' account was clean money.

3. Appellant's Involvement in the Alleged Money Laundering:
The appellant was not named in the FIR, nor was any chargesheet filed against her under the scheduled offence. The Tribunal noted that the appellant had no direct or indirect link with the accused and was not aware that the ?70 lakhs was part of the proceeds of crime. The Tribunal emphasized that the appellant had utilized the ?70 lakhs for business purposes and repaid the amount from a legitimate loan sanctioned by SBI. The Tribunal found that there was no prima facie evidence to suggest that the appellant knowingly received proceeds of crime or was involved in money laundering.

4. Validity of the Provisional Attachment Order:
The Tribunal found that the provisional attachment order did not satisfy the requirements of Section 5(1) of the PMLA. The Tribunal noted that the appellant was not in possession of any proceeds of crime on the date of the provisional attachment. The Tribunal concluded that the Adjudicating Authority's order was bad in law and liable to be set aside. Consequently, the Tribunal quashed the provisional attachment order and set aside the impugned order dated 28.09.2017.

Conclusion:
The Tribunal allowed the appeal, set aside the impugned order, and quashed the provisional attachment order. The Tribunal found that the Adjudicating Authority failed to provide clear findings on whether the ?70 lakhs was part of the proceeds of crime and violated principles of natural justice. The Tribunal emphasized that there was no evidence to suggest that the appellant was involved in money laundering or knowingly received proceeds of crime.

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