2023 (12) TMI 1355 - AT - Money Laundering

Money Laundering - proceeds of crime - provisional attachment order - mis-joinder of parties in the proceedings before the Adjudicating Authority - non-compliance of section 8(1) of PMLA 2002 - Jurisdiction and power of the Adjudicating Authority. Mis-joinder of parties - HELD THAT - The proceeds of crime was under the possession and control of the Official Liquidator, but he was not given an opportunity of hearing despite the mandate under section 5(1) of the Act. There are no mandate under section 5(1) that before attachment of the property, the Official Liquidator was required to be heard by the Adjudicating Authority. The provision for hearing is given under section 8(1) of the Act. Section 5(1) provides for attachment against any person in possession of proceeds. At the relevant time defendant was in possession of the proceeds. The Competent Authority passed the order of attachment was not having information that an Official Liquidator has been appointed. The information was given only to the Adjudicating Authority - the argument in reference to section 5(1) of the Act of 2002 alleging mis-joinder of parties is not made out. The facts available on records shows a serious allegation against the accused for inviting investments on higher rate of interest and then investors were denied interest and refund of amount. Thus, the accused had cheated the investors. The apprehensions of the respondent was that proceeds of crime or the property of equivalent value of the proceeds of crime may be transferred or alienated, thus the attachment of the property was made. In view of the aforesaid, ground of misjoinder in reference of section 5(1) is not made out. Non compliance of section 8(1) of the Act of 2002 - HELD THAT - As per section 8(1), the Adjudicating Authority remain under obligation to have reasons to believe that any person has committed an offence under section 3 of the Act of 2002 or is in possession of proceeds of crime then to serve a notice of not less than thirty days calling up the person to indicate the source of income, earning or assets out of which he has acquired the property attached under section 5(1) of the Act - The Adjudicating Authority found and recorded reasons to believe that defendant have committed offence under section 3 of the Act of 2002 and accordingly all those persons were given an opportunity of hearing. It is not that Official Liquidator has made an application to provide an opportunity of hearing and has been denied. Rather, it is found that M/s Birla Surya Limited remain unrepresented and it is they who were relevant party to inform about the appointment of Official Liquidator - section 8(1) mandate a notice to a person committed an offence under section 3 of the Act and defendants were alleged to have committed offence and for possession of proceed, it could have been either M/s Birla Surya Limited or the Official Liquidator and not the appellant. It is not that the hearing under section 8(1) is to be given only to a person in possession of proceeds of crime, but also to a person committed the offence under section 3 of the Act and accordingly all the defendants before the Adjudicating Authority, having an allegation for commission of offence under section 3 of the Act of 2002 were necessary party and provided an opportunity of hearing. The Official Liquidator never came forward to seek an opportunity of hearing and otherwise the appellant said to be not in possession of proceeds of crime cannot make an issue when they alleged to have committed an offence under section 3 of the Act of 2002 and were provided opportunity of hearing. - there are no violation of section 8(1) of the Act of 2002. Power and jurisdiction of Adjudicating Authority under Sections 8(2) and 8(3) of the Act - HELD THAT - It is not correct to state that the final conclusions about commission of offence has been drawn by the Adjudicating Authority. The Adjudicating Authority is under obligation to record a finding that properties are involved in money laundering. To find out that a case of money laundering is made out, essentially a prima facie opinion has to be drawn about commission of offence. Otherwise, the question may be raised for formation of opinion of money laundering without an offence - no illegality has been committed by the Adjudicating Authority to record a prima facie opinion about the commission of offence which may generate the proceeds of crime and if laundered, then an offence under section 3 of the Act of 2002. It is however made clear that the prima facie opinion of Adjudicating Authority is not conclusive, rather it would be recorded by the Special Court in criminal case and accordingly the issue is clarified to the extent - there are no reasons to cause interference in the impugned order. The appeals are disposed of.

Summary

Issues Involved:

1. Mis-joinder of parties in the proceedings before the Adjudicating Authority.
2. Non-compliance with Section 8(1) of the Prevention of Money Laundering Act, 2002.
3. Jurisdiction and power of the Adjudicating Authority under Sections 8(2) and 8(3) of the Act.

Detailed Analysis:

1. Mis-joinder of Parties:

The appellants contended that the proceedings before the Adjudicating Authority were flawed due to mis-joinder of parties. They argued that they were not in possession of the proceeds of crime, and those who were in possession, such as the Official Liquidator, were not impleaded. The Tribunal examined Section 5(1) of the Prevention of Money Laundering Act, 2002, which allows for the attachment of property if any person is in possession of proceeds of crime. The Tribunal found that, at the time of attachment, the defendants, including M/s Birla Surya Limited, were alleged to be in possession of the proceeds of crime. The Tribunal noted that the Official Liquidator was not required to be heard under Section 5(1) before attachment, as the provision for hearing is under Section 8(1). Therefore, the Tribunal concluded that the argument of mis-joinder was not substantiated, as the defendants were in possession of the proceeds at the relevant time.

2. Non-compliance with Section 8(1):

The appellants argued that the Adjudicating Authority failed to comply with Section 8(1) of the Act, which mandates serving a notice to persons in possession of proceeds of crime or those who committed an offence under Section 3 of the Act. They claimed that the Official Liquidator, who had control over the attached properties, was not notified. The Tribunal found that the Adjudicating Authority had reason to believe that the defendants committed an offence under Section 3 and were given an opportunity for a hearing. The Tribunal noted that M/s Birla Surya Limited, who were relevant to inform about the appointment of the Official Liquidator, remained unrepresented. The Tribunal concluded that there was no violation of Section 8(1), as the defendants accused of the offence were provided an opportunity to be heard.

3. Jurisdiction and Power of Adjudicating Authority:

The appellants challenged the jurisdiction of the Adjudicating Authority, arguing that it exceeded its powers under Sections 8(2) and 8(3) by recording findings on the commission of a scheduled offence. The Tribunal examined the Adjudicating Authority's conclusions, noting that a prima facie conclusion was drawn regarding the commission of the scheduled offence, generation of proceeds of crime, and money laundering. The Tribunal clarified that the Adjudicating Authority is obligated to form a prima facie opinion to determine if a case of money laundering is made out, which is not a conclusive finding. The Tribunal emphasized that the final determination of the offence would be made by the Special Court based on evidence, independent of the Adjudicating Authority's order.

Conclusion:

The Tribunal found no reasons to interfere with the impugned order and disposed of the appeals with the clarification that the prima facie opinion recorded by the Adjudicating Authority would not influence the Special Court's findings. The interim order remained unchanged.