2014 (1) TMI 1951 - AT - Money Laundering

Money Laundering - proceeds of crime - provisional attachment order - reasons to believe - applications of the appellants for cross examination of witnesses have not been disposed of - No opportunity was given before passing the provisional attachment order - principles of natural justice - HELD THAT - The PML Act is a special enactment. The Act inter-alia seeks to prohibit any act of money laundering and seeks attachment and confiscation of proceeds of crime/properties involved in money laundering and stringent punishment and fine for a person found guilty of offence of money laundering. The attachment proceedings are in the nature of interlocutory proceedings. At this stage the primary objective is to protect the property so that they are not alienated, transferred, dissipated or dealt with so that they are available at the confiscation stage which proceedings take place at a later stage. At this stage it is not necessary to follow a full fledge adjudication including cross examination of witness, if necessary, to arrive at a final conclusion. The facts of the Shahid Balwa case 2013 (2) TMI 39 - DELHI HIGH COURT are different from the facts of the present case. In the Shahid Balwa case, the petitioner was charged for the contravention of the provisions of section 42 of the Foreign Exchange Management Act, 1999 and proceedings could have resulted in imposing penalty. Further the provisions pertaining to adjudication proceedings under the FEMA are different from the adjudication proceedings under PML Act. The Supreme Court in Bharat Petroleum Corporation Ltd. and Anr. v. N.R. Vairamani and Anr. 2004 (10) TMI 576 - SUPREME COURT had also held that a decision cannot be relied on without considering the factual situation. The appellants neither disclosed sufficient reasons or special circumstances in the application for cross examination nor they pressed the application at the time of oral submissions before the Adjudicating Authority. Thus the contention raised by the appellants is rejected. No opportunity was given before passing the provisional attachment order - principles of natural justice - HELD THAT - As per scheme of the PMLA, provisional attachment is done with a view to prevent frustration of any proceedings relating to confiscation of proceeds of crime under the PML Act and also with the objective that the accused does not enjoy the proceeds of crime. The proceeds of crime are gradually laundered with a view to inject it in the economy as clean money. If proceeds of crime are detected and noticed, it is the first step required to be taken by the respondent so that such proceeds of crime are not concealed or transferred or wasted and remain available for their confiscation and they are also dealt with during the proceedings. The urgency of the situation, therefore, requires that the provisional attachment as prescribed in sub-section (1) of section 5 is made at the earliest possible time - Similar question came up for consideration in Purshottam Budhwani v. Dy. Director PMLA, Ahmedabad. By its judgment dated 30.3.2011 this Tribunal held that as the provisional attachment proceedings are based on urgency of the matter and are followed up with full-fledged adjudication proceedings before Adjudicating Authority in a time bound manner, the Act does not contemplate an opportunity of hearing by respondent before passing provisional attachment order and there in no violation of principles of natural justice. Every order of Provisional attachment passed u/s 5(1) of the Act shall cease to have effect after the expiry of the period specified in sub section 5(1) or on the date of an order made under sub section (2) of section 8 whichever is earlier. Passing of order of provisional attachment is the first stage of the Attachment, Adjudication and Confiscation proceedings under the Act and at this stage the prima facie satisfaction that the property in question constitutes proceeds of crime as defined in the Act, is a satisfaction that the appropriate authority arrives on his own on the basis of material in possession and opportunity is not envisaged, obliged or contemplated to the accused/affected party at this stage. Therefore, provision of Section 5(4) contemplates that accused/affected party shall not be prevented from the enjoyment of the immovable property attached u/s 5(1) of the Act. In the present case, it is not in dispute that the properties attached have been acquired out of proceeds from sale of medicine Body Revival . One of the objects of PMLA is that the perpetrators of scheduled crimes should not be allowed to enjoy the fruits of the money that passed under the activity and the enactment is intended to deprive them of the property which is related to the proceeds of specific crimes listed in the Schedule to the Act. The plea raised by the appellants that the word shall should be read as may and provisions of section 8(4) should be read as discretionary is not relevant in the facts and circumstances and does not require any further consideration in view of The Prevention of Money Laundering (Taking Possession of Attached or Frozen Properties Confirmed by the Adjudicating Authority) Rules, 2013 - the appellants have failed to make out any illegality or irregularity in the orders of the Adjudicating Authority. Appeal dismissed.

Summary

Issues Involved:

1. Legitimacy of the provisional attachment orders under the Prevention of Money Laundering Act (PMLA).
2. Applicability of PMLA provisions to offences committed before the amendment of the Act.
3. Calculation of the threshold limit under Section 2(y)(ii) of PMLA.
4. Requirement of reasons to believe for attachment under Section 5(1)(c) of PMLA.
5. Right to cross-examine witnesses in adjudication proceedings.
6. Attachment of properties of individuals not charged with a scheduled offence.
7. Interpretation of Section 8(4) regarding taking possession of attached properties.

Detailed Analysis:

1. Legitimacy of Provisional Attachment Orders:
The appeals challenge the orders confirming provisional attachment under PMLA, arguing that the properties were acquired legally through the sale of an Ayurvedic product, "Body Revival," which had a valid license. The tribunal found that the license was not consistently valid, and the manufacturing was not conducted under proper supervision. The tribunal upheld the attachment orders, noting that the properties were acquired from proceeds of crime.

2. Applicability of PMLA Provisions:
The appellants argued that PMLA provisions should not apply to offences committed before the amendment that included sections 420 and 471 of IPC as scheduled offences. The tribunal, referencing the Andhra Pradesh High Court's judgment, held that the relevant date is when the charge sheet is filed, not when the offence was committed. Since the charge sheet was filed after the amendment, PMLA provisions were applicable.

3. Threshold Limit Under Section 2(y)(ii):
The appellants contended that the total value involved in the alleged offence was below the threshold of Rs. 30 lakh. The tribunal rejected this argument, stating that the offences were committed over a period against multiple individuals, and the cumulative proceeds exceeded the threshold. The tribunal emphasized considering the entire proceeds from the sale of the product rather than individual transactions.

4. Reasons to Believe for Attachment:
The appellants argued that there were no reasons to believe that the properties would be concealed or transferred, as required under Section 5(1)(c) of PMLA. The tribunal found that the argument was superficial, noting that the provisions aim to prevent the dissipation of proceeds of crime. The tribunal concluded that there were sufficient reasons to believe the properties were involved in money laundering.

5. Right to Cross-Examine Witnesses:
The appellants claimed a violation of natural justice due to the denial of cross-examination. The tribunal noted that the appellants did not press for cross-examination during the proceedings and that the adjudication under PMLA is interlocutory, not requiring full-fledged trial procedures. The tribunal upheld the adjudicating authority's decision, emphasizing that the appellants failed to demonstrate specific reasons for cross-examination.

6. Attachment of Properties of Non-Accused Individuals:
The tribunal addressed the attachment of properties belonging to individuals not charged with a scheduled offence, such as Rukhsana Munir Khan. It relied on the Bombay High Court's judgment, affirming that properties derived from proceeds of crime can be attached regardless of whether the holder is charged with a scheduled offence, as long as they are involved in money laundering.

7. Interpretation of Section 8(4):
The appellants argued that possession of attached properties should not be taken until the trial's conclusion. The tribunal, referencing the Andhra Pradesh High Court, held that Section 8(4) mandates taking possession after confirmation of attachment to prevent wastage or spoilage of the property. The tribunal found no merit in the appellants' argument to interpret "shall" as "may" in this context.

In conclusion, the tribunal dismissed the appeals, upholding the provisional attachment orders and confirming that the proceedings under PMLA were valid and justified based on the evidence and legal provisions.