2024 (10) TMI 1619 - AT - Money Laundering

Money Laundering - Provisional Attachment Order of the properties - proceeds of crime - properties acquired prior to the commission of crime had no nexus with the crime - HELD THAT - The argument has been made in reference to the judgment of Kerala High Court in the case of Satish Motilal Bidri 2024 (6) TMI 1392 - KERALA HIGH COURT and the judgment of Apex Court in Pavana Dibur 2023 (12) TMI 49 - SUPREME COURT to hold that the properties acquired prior to commission of crime would not fall in the definition of proceeds of crime . The arguments which may otherwise make second part of the definition of proceeds of crime to be redundant cannot be accepted. It would be for the reason that if the definition is taken only in two parts leaving the middle part, then it would be difficult for the enforcement agencies to protect the property till completion of the crime to save the victim from crime committed by the accused. It would be for the reason that if the property acquired prior to commission of crime would not fall in the definition of proceeds of crime , then the accused would commit the crime and immediately proceeds would be siphoned off or vanished so that it may not remain available for attachment. If the definition of proceeds of crime is given interpretation by dividing it into two parts or by taking only two limbs, then it would be easy for the accused to siphon off or vanish the proceeds immediately after the commission of scheduled offence and in that case none of his properties could be attached to secure the interest of the victim till conclusion of the trial. This would not only frustrate the object of the Act of 2002, but would advance the cause of the accused to promote the crime of money laundering. It is reiterated that any other interpretation other than the one taken by Delhi High Court in the cases of Axis Bank 2019 (4) TMI 250 - DELHI HIGH COURT and Prakash Industries 2022 (7) TMI 877 - DELHI HIGH COURT for the definition of proceeds of crime would defeat the object of the Act of 2002. It is more especially when the arguments raised by the appellant that the property acquired prior to the commission of crime would not fall in the definition of proceeds of crime . In that case, the task of the accused would become very easy to first commit the scheduled offence and after obtaining or deriving the property out of the criminal activities, immediately siphon off or vanish so that it may not remain available for attachment and otherwise the contingency aforesaid would satisfy only the first limb of definition of proceeds of crime leaving the second. The argument raised by the appellant cannot be accepted so as to make the middle part of the definition of proceeds of crime to be redundant. The only argument raised by the appellant cannot be accepted and for that appeal fails and is dismissed.

Summary

Issues Involved:

1. Legality of the attachment of properties acquired prior to the commission of a crime under the Prevention of Money Laundering Act, 2002.
2. Interpretation of the term "proceeds of crime" as defined under Section 2(1)(u) of the Act.
3. Applicability of judicial precedents in determining the attachment of properties.

Issue-wise Detailed Analysis:

1. Legality of the attachment of properties acquired prior to the commission of a crime:

The appellant challenged the attachment of three properties that were acquired before the alleged criminal activities, arguing that they were not purchased with the proceeds of crime. The appellant contended that the properties were acquired through independent sources and should not be subject to attachment. The Tribunal, however, upheld the attachment, emphasizing that the properties could be attached if they were of equivalent value to the proceeds of crime, especially when the actual proceeds were not available or had been siphoned off. The Tribunal relied on the interpretation that properties acquired prior to the commission of crime could still be attached if they served as equivalent value to the proceeds of crime, thereby aligning with the legislative intent of the Act to prevent money laundering.

2. Interpretation of the term "proceeds of crime":

The Tribunal delved into the definition of "proceeds of crime" under Section 2(1)(u) of the Act, which includes any property derived or obtained directly or indirectly from criminal activity or the value of any such property. The definition is divided into three limbs, with the second limb allowing for the attachment of property of equivalent value when the actual proceeds are unavailable. The Tribunal clarified that this interpretation ensures the enforcement agencies can secure assets equivalent to the illicit gains, even if the original tainted assets are not traceable. This interpretation was supported by previous judgments, which emphasized that the legislative intent was to encompass both tainted and untainted properties within the ambit of "proceeds of crime" to effectively combat money laundering.

3. Applicability of judicial precedents:

The appellant cited judgments from the Kerala High Court and the Supreme Court to argue against the attachment of properties acquired before the crime. However, the Tribunal found these precedents inapplicable, particularly in light of the Supreme Court's judgment in Vijay Madanlal Choudhary, which upheld a broader interpretation of "proceeds of crime." The Tribunal noted that the Kerala High Court's judgment did not consider the comprehensive definition of "proceeds of crime" and that the Supreme Court's decision in Vijay Madanlal Choudhary was binding. The Tribunal also referenced the Delhi High Court's interpretation in Axis Bank, which supported the attachment of properties of equivalent value to the proceeds of crime, reinforcing the Tribunal's decision to dismiss the appeal.

In conclusion, the Tribunal dismissed the appeal, reaffirming the attachment of the properties based on the interpretation that properties of equivalent value to the proceeds of crime could be attached, even if acquired prior to the commission of a crime. This decision aligns with the legislative intent and judicial precedents aimed at effectively preventing money laundering.