2019 (9) TMI 428 - AT - Money Laundering

Money Laundering - proceeds of crime - commission of the offence of Money Laundering under Section-3, PMLA - guilty of the offences under sections 120B read with 420, IPC; and were acquitted in respect of charges under section 467, 468 and 471, IPC - allocation of the coal block - HELD THAT - The investors have invested in the shares of the Appellant company due to the coal allocation and coal linkage (allocation). Adjudicating Authority s reading of the aforesaid Statements has gone behind the said Statements and amounts to disbelieving the same, without any factual basis or material to the contrary. The aforesaid statements recorded under section 50 of the PMLA have been duly signed and affirmed by the persons giving the statement. The proceedings under Section 50 PMLA are deemed to be judicial proceedings within the meaning of Section 193 and Section 298 of the IPC. The aforesaid Statements have not been disputed by the ED who even has relied upon documents in support of the said OC as well as in Show Cause Notice. The Adjudicating Authority cannot disbelieve the statements of the investors or to interpret them its own matter. The same is not permissible in law - the Adjudicating Authority has gone beyond the material before it to arrive at the finding that the Appellant and/or the other Defendants in the said OC invited investors/public to invest in the Appellant company using the allurement of the allocation of the coal block or its possible allocation, and that therefore, derivation of benefit from such investment would constitute proceeds of crime. The finding in the impugned order was based on materials beyond the record of the present case because there is nothing on record to show that the investors invested in the shares of the Appellant company on being invited by it or by any of the officers of the Appellant company and the allocation or the possibility of allocation of coal block was used as allurement to such investors. There is no conduct, act or omission on the part of the Appellant that has been shown which would lead the ED to believe that the alleged proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceeding under Chapter 2 of PMLA - The transactions pertaining to receipt of SAM from various other companies are duly documented, above-board and legal transactions.The proceedings related to the CBI Charge-sheet and the proceedings under the PMLA have been widely reported and publicized in the media, as such, no prudent person would be willing to deal or transact with Defendant No.1 concerning the attached assets. There can be no question of profiteering or benefitting from the coal allocation and thus, no question of any proceeds of crime - appeal allowed.

Summary

Issues Involved:
1. Validity of the Provisional Attachment Order (PAO) under the Prevention of Money-Laundering Act (PMLA).
2. Allegations of misrepresentation and criminal conspiracy under sections 120B and 420 of the Indian Penal Code (IPC).
3. Determination of proceeds of crime and their attachment.
4. Evaluation of the evidence and statements under Section 50 of PMLA.
5. Retrospective application of PMLA provisions.
6. Interpretation of the term "proceeds of crime" and its relevance to the case.
7. Procedural compliance with PMLA requirements.

Detailed Analysis:

1. Validity of the Provisional Attachment Order (PAO):
The Tribunal examined the PAO issued on 15.09.2016, which attached various properties of the appellants, categorizing the Share Application Money (SAM) received by the appellant as "Proceeds of Crime" generated from the scheduled offense of Sections 420 and 120B, IPC. The Tribunal found that the attachment order was unsustainable in law as the investments were not proceeds of crime or money laundering.

2. Allegations of Misrepresentation and Criminal Conspiracy:
The appellants were accused of misrepresenting facts to the Ministry of Coal (MoC) to obtain coal block allocations. The Tribunal noted that the appellants were held guilty under Sections 120B and 420 IPC, but the appeal against the conviction was pending before the High Court. The Tribunal refrained from expressing any opinion on the guilt regarding the scheduled offense, focusing instead on the legality of the attachment order.

3. Determination of Proceeds of Crime and Their Attachment:
The Tribunal scrutinized the allegations that the appellants received SAM amounting to ?25 crores due to the coal block allocation. It was noted that a portion of SAM was received before the coal block allocation, and the investors stated that their investments were based on the company's growth potential, not the coal allocation. The Tribunal found no evidence that the investments were tainted money or proceeds of crime.

4. Evaluation of Evidence and Statements Under Section 50 of PMLA:
The Tribunal reviewed statements from various investors recorded under Section 50 of PMLA, which indicated that investments were made independently of the coal block allocation. The Tribunal criticized the Adjudicating Authority for disbelieving these statements without any factual basis or material to the contrary, emphasizing that the statements were judicial proceedings under Sections 193 and 298 of IPC.

5. Retrospective Application of PMLA Provisions:
The Tribunal addressed the issue of the retrospective application of PMLA provisions, noting that the scheduled offense of Section 420/120B IPC was included in PMLA on 01.06.2009, while the alleged offense concluded on 13.01.2006. The Tribunal indicated that applying PMLA provisions retrospectively would violate Article 20(1) of the Constitution, although it ultimately focused on the merits of the appeal.

6. Interpretation of "Proceeds of Crime":
The Tribunal examined whether the investments made in the appellant company constituted proceeds of crime. It found that the appellant company had been operational since 2003, prior to the coal block allocation, and continued to make profits even after the de-allocation. The Tribunal concluded that the investments were not proceeds of crime, as there was no evidence of public investment being tainted or influenced by the coal block allocation.

7. Procedural Compliance with PMLA Requirements:
The Tribunal criticized the Show-Cause Notice issued under Section 8(1) of PMLA for being vague and not satisfying mandatory statutory requirements. It noted that the notice lacked a definitive opinion or belief regarding the appellant's involvement in money laundering. The Tribunal also found that the Adjudicating Authority had overstepped its bounds by making presumptions and providing new reasons not recorded by the Enforcement Directorate (ED).

Conclusion:
The Tribunal set aside the impugned order, allowing the appeals and concluding that the attachment order was not sustainable in law. It emphasized that no reasonable person could have formed an opinion that the properties attached could be transferred or dealt with in a manner frustrating PMLA proceedings. The Tribunal also highlighted the lack of evidence showing that the investments were proceeds of crime or influenced by the coal block allocation.