2020 (4) TMI 732 - HC - Money Laundering

Money Laundering - investment of proceeds of crime - Acquiring of Liquor shops - allegation that the investment represent the process of integration of the proceeds of the crime with the main stream economy - Section 5(1) of the PMLA - It has been submitted on behalf of appellant that there is no material whatsoever on the basis of which the competent authority/adjudicating authority could have reasons to believe that movable and immovable properties purchased by the appellants were derived or obtained from proceeds of crime generated from criminal activity relating to schedule offence - right to appeal. HELD THAT - The predicate offence and the offence of money-laundering are two distinct and separate set of offences. The offence of money laundering is independent of schedule offences. As per section 24 of PML Act, the burden of proof that proceeds are legitimate is on the accused - It is the date of laundering which would be relevant and not the date of schedule offence. The laundering as used in Section 3 comprises of involvement in any process or activity by which the illicit money is being projected as untainted. Date of occurrence of scheduled offence is not relevant, rather, date on which laundering of money is committed is the relevant date. Even if money was acquired prior to amending Act but accused has committed offence under Section 3 of act subsequent to coming of the Act he can be proceeded for offence of money laundering i.e. his involvement in projecting illicit money to be untainted. Attachment proceeding and criminal proceedings are two parallel and independent proceedings and are not dependent upon each other. Properties which are found liable for attachment after final adjudication can be confiscated after conviction of accused under Section of PML Act - Against the order passed by the appellate tribunal the aggrieved party under Section-42 of the PMLA has further right of appeal before the High Court, as such the order passed by the appellate tribunal by which instead of deciding the appeal and pass a final order, keeping the appeal pending till disposal of criminal prosecution lodged for offences punishable under Sections 3/4 of the PMLA pending before the PMLA Court, Patna is not sustainable and liable to be set aside. The appellate tribunal is directed to decide the pending appeal of appellant within three months from the date of receipt/production of a copy of the order passed by this Court - Appeal disposed off.

Summary

Issues Involved:
1. Validity of the provisional attachment order under Section 5(1) of the PMLA.
2. Legitimacy of the properties acquired by the appellants.
3. The role of the appellate tribunal and its decision to keep the appeal in abeyance.
4. The distinction between attachment proceedings and criminal proceedings under the PMLA.

Issue-Wise Analysis:

1. Validity of the Provisional Attachment Order:
The appeal was filed under Section 42 of the Prevention of Money Laundering Act, 2002 (PMLA) to set aside the order dated 03.04.2019 by the Appellate Tribunal for PMLA, New Delhi. The tribunal had kept the appeal in abeyance until the disposal of the criminal case under Sections 3/4 of the PMLA, vacating the interim protection granted earlier. The Superintendent of Police, Economic Offences Wing, Patna, reported 27 cases against appellant no. 1, who was allegedly a habitual offender. Based on this, ECIR No. PTZO/07/2014 was registered, and a provisional attachment order was passed under Section 5(1) of the PMLA, attaching properties worth ?4,23,61,990/-.

2. Legitimacy of the Properties Acquired by the Appellants:
The adjudicating authority found that the appellants had acquired properties that did not match their income shown in their Income Tax returns. Bharat Yadav had acquired multiple properties in his and his family members' names, allegedly from the proceeds of crime. The total value of these properties was far in excess of their known sources of income. The appellants argued that the properties were acquired from legitimate sources, including a retail liquor business and construction contracts with Indian Railways. However, the authorities contended that the properties were acquired from the proceeds of crime, as evidenced by the significant cash deposits that did not align with their declared income.

3. The Role of the Appellate Tribunal and its Decision to Keep the Appeal in Abeyance:
The appellate tribunal vacated the interim stay and kept the appeal pending until the disposal of the criminal case. The tribunal cited Section 44 and 43 of the PMLA, indicating that the Special Court should decide the case, including the offence of money laundering. The tribunal believed it did not have the authority to confiscate, release, or restore the attached property, which lies specifically with the Special Courts. The High Court found this reasoning flawed, stating that the tribunal is empowered to hear appeals against the adjudicating authority's order and should have decided the appeal within six months.

4. The Distinction Between Attachment Proceedings and Criminal Proceedings:
The High Court emphasized that attachment proceedings and criminal proceedings are parallel and independent. Properties found liable for attachment after final adjudication can be confiscated after the conviction of the accused under Sections 3/4 of the PMLA. The High Court criticized the appellate tribunal's decision to keep the appeal pending, stating it was not sustainable and liable to be set aside. The tribunal should have examined the legality, validity, and propriety of the adjudicating authority's order.

Conclusion:
The High Court set aside the appellate tribunal's order dated 03.04.2019 and directed the tribunal to decide the pending appeal within three months. The miscellaneous appeal was accordingly disposed of.