2023 (7) TMI 1530 - AT - Money Laundering

Money Laundering - provisional attachment order - invocation of Section 8(4) of PMLA 2002 not as a rule but as an exception - validity of notice - notice for possession has been issued without giving any exceptional reasons (for eviction) rather caused as a rule - violation of principles of natural justice - reliance placed in the of OPTO CIRCUIT INDIA LTD. VERSUS AXIS BANK OTHERS 2021 (2) TMI 117 - SUPREME COURT to emphasize that reasons needs to be given in the notice and cannot be supplemented. Challenge to notice - HELD THAT - The notice for possession has been questioned by the appellant even on the ground that no reason has been given therein whereas administrative order should disclose the reason. The reference of the judgement of Apex Court in the case of OPTO Circuits (India) Ltd. v. Axis Bank has been given where it was held that the reasons for passing of an order shall be given therein and cannot be substituted - It is found that the order impugned therein was containing reasons but additional reasons were given before the court for the first time. Such a practice was not accepted. The case in hand is not of similar nature. In this case there is no order under challenge but a notice under Section 8 (4) of the Act of 2002 which does not direct for giving reasons in the notice for possession. In fact the provision aforesaid allow possession of the property forthwith on passing order of confirmation of provisional attachment order. The stage for taking possession comes forthwith on the confirmation of order of provisional attachment and it does not mandate assignment of reasons therein for causing possession. The notice otherwise does not require a reply from the effected person so as to assign the reasons for its reply. The appellants have failed to make a differentiation between the administrative order and the notice under the statute not requiring assessment of reasons for taking possession - In fact it is in view of the judgement of Apex Court in the case of Vijay Madanlal Choudhary 2022 (7) TMI 1316 - SUPREME COURT (LB) that provision of Section 8 (4) cannot be invoked as a course but as an exception. The said judgment does not mandate assignment of the reason in the notice itself. What has been ruled is that the possession should not be sought as a course but as an exception. In such circumstance notice was not required to contain the reason for taking possession of the attached property. The reasons can be supplied by the respondents as and when the notice is questioned by the aggrieved party. Confirmation of provisional attachment order - HELD THAT - The possession of the property may be taken at the stage of confiscation but in the case of exceptional nature it can be after confirmation of provisional attachment order. On strictly going by the Section 8 (4) the right of the respondents to invoke aforesaid provision comes in existence forthwith upon confirmation of the provisional attachment order. The statutory provision cannot be ignored even by the court. In fact possession at the stage of confiscation of the property remains automatic because on confiscation of the property it vests in the government and would be along with the possession and therefore Section 8 (4) was brought on the statute to allow possession of the property even prior to confiscation and the said provision has been upheld by Apex Court where its constitutional validity was challenged. Once the provision is held to be constitutionally valid a view contrary or offending the statutory provision cannot be taken. Thus the appellant cannot be agreed that possession of the property can be taken only on confiscation. It would be rewriting Section 8 (4) of the Act though possession after confirmation of the provisional attachment order would not be as a rule but an exception. What would be an exception? - HELD THAT - The principle established is that possession post-confirmation of provisional attachment is permissible as an exception provided exceptional reasons are demonstrated - The present case being a case of organised crime the exception exist to invoke Section 8 (4) to take possession of the property. Conduct of the appellant - HELD THAT - As per the statement made by them the purchase of the property is shown to be out the funds earned in cash and not out of the proceeds of crime. It is stated that whatever fund was taken from ABG International Pvt. Ltd. was not out of the bank loan taken by ABG Shipyard Ltd. but out of their own earnings in cash. The fact could not be substantiated and further with regard to the loan amount said to have been re-paid to the company through a notarized assignment deed it is stated by the Notary that there is no entry of the said document in the register and that it bears an odd no. 12-A which can happen only in a case of interpolation. The respondents have successfully shown that even the alleged re-payment through the assignment deed is out of the funds of associated companies of ABG Shipyard by routing the proceeds of crime and not after taking loan from the bank or earning for its re-payment. Conclusion - The money trail is enough to show that the proceeds of crime was diverted for purchase of property in question and thereby the flat no. 4-C was purchased out of the proceeds of crime. The possession of the attached property should not be taken by invoking Section 8(4) of the Act of 2002 as a rule but can be as an exception. The appellant s application for an interim order dismissed - The notice for possession upheld. Application dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The legal judgment revolves around the following core issues:

• Whether the notice for possession issued under Section 8(4) of the Prevention of Money Laundering Act, 2002 (PMLA) was valid without exceptional reasons being disclosed.
• Whether the property in question, Flat No. 4-C, was acquired out of the proceeds of crime.
• Whether the procedural requirements under PMLA and relevant judgments were adhered to in the issuance of the notice for possession.
• Whether the appellant's arguments against the possession notice, including the humanitarian grounds and alleged procedural lapses, hold merit.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Notice for Possession Without Exceptional Reasons

• Relevant Legal Framework and Precedents: Section 8(4) of PMLA allows for possession of property post-confirmation of provisional attachment. The Apex Court in Vijay Madanlal Choudhary's case emphasized that possession should be an exception, not a rule.
• Court's Interpretation and Reasoning: The Tribunal noted that the statutory provision does not mandate reasons in the notice itself. The Apex Court's judgment allows for possession post-confirmation as an exception, not a rule.
• Key Evidence and Findings: The Tribunal found that the respondents provided exceptional reasons post-challenge, aligning with the statutory framework.
• Application of Law to Facts: The Tribunal held that the absence of reasons in the notice did not invalidate it, as reasons were provided during the challenge.
• Treatment of Competing Arguments: The appellant's reliance on OPTO Circuits case was distinguished as it involved administrative orders requiring reasons, unlike a statutory notice.
• Conclusions: The notice was deemed valid as exceptional reasons were provided during the challenge, satisfying the legal requirements.

Issue 2: Acquisition of Property Out of Proceeds of Crime

• Relevant Legal Framework and Precedents: Section 2(1)(u) of PMLA defines proceeds of crime. The Tribunal considered the money trail and the nature of transactions.
• Court's Interpretation and Reasoning: The Tribunal found that the funds used to purchase the property were linked to the proceeds of crime, as established by the money trail.
• Key Evidence and Findings: The money trail indicated that funds from ABG Shipyard Ltd., obtained through fraudulent means, were used to purchase the property.
• Application of Law to Facts: The Tribunal concluded that the property was acquired using proceeds of crime, justifying the attachment and possession.
• Treatment of Competing Arguments: The appellant's claim of repayment through an assignment deed was rejected due to lack of substantiation and evidence of manipulation.
• Conclusions: The Tribunal upheld the finding that the property was acquired from proceeds of crime, supporting the possession notice.

Issue 3: Adherence to Procedural Requirements

• Relevant Legal Framework and Precedents: The Tribunal referred to procedural requirements under PMLA and relevant judgments, including the Apex Court's guidance on possession as an exception.
• Court's Interpretation and Reasoning: The Tribunal found that the procedural requirements were met, as the notice was issued post-confirmation of attachment.
• Key Evidence and Findings: The respondents demonstrated adherence to statutory provisions and provided exceptional reasons during the challenge.
• Application of Law to Facts: The Tribunal held that the statutory framework was followed, and the notice was procedurally sound.
• Treatment of Competing Arguments: The appellant's procedural challenges were dismissed as the notice complied with statutory requirements.
• Conclusions: The Tribunal concluded that procedural requirements were adhered to, validating the possession notice.

Issue 4: Merit of Appellant's Arguments Against Possession Notice

• Relevant Legal Framework and Precedents: The appellant's arguments were assessed against the backdrop of PMLA provisions and relevant case law.
• Court's Interpretation and Reasoning: The Tribunal found no merit in the appellant's arguments, including humanitarian grounds and alleged procedural lapses.
• Key Evidence and Findings: The Tribunal noted the appellant's failure to substantiate claims and the respondents' reasonable actions.
• Application of Law to Facts: The Tribunal applied legal principles to dismiss the appellant's arguments, finding them unsubstantiated.
• Treatment of Competing Arguments: The appellant's reliance on humanitarian grounds was insufficient to counter the legal justification for possession.
• Conclusions: The Tribunal dismissed the appellant's arguments, upholding the validity of the possession notice.

3. SIGNIFICANT HOLDINGS

• The Tribunal emphasized that "the possession of the attached property should not be taken by invoking Section 8(4) of the Act of 2002 as a rule but can be as an exception."
• The core principle established is that possession post-confirmation of provisional attachment is permissible as an exception, provided exceptional reasons are demonstrated.
• The Tribunal concluded that the property was acquired from proceeds of crime, justifying the possession notice.
• Final determinations included the dismissal of the appellant's application for an interim order and the upholding of the notice for possession.