2024 (6) TMI 451 - AT - Money Laundering

Money Laundering - proceeds of crime - seizure of documents u/s 17(1) of the Prevention of Money Laundering Act, 2002 - no Prosecution Complaint (PC) has been filed against the appellant though a period of 365 days has already expired after the order of the Adjudicating Authority - appellant is not an accused in the FIR or ECIR. The seized documents of property are not proceeds of crime - HELD THAT - In the instant case, serious allegations of fraudulent transactions to the tune of Rs.164.99 crores exists against many accused which includes appellant s grandfather. The appellant s grandfather purchased a property in the year 1988 but it was gifted to the appellant in the year 2020 after registration of the FIR in the year 2017 and even the ECIR. It was by way of gift the property was transferred to the appellant to overcome with the fraud committed by him with the bank and to save the property from seizure and attachment. It was not gifted bonafide but to save the property from seizure and attachment after registration of FIR though it was not obtained out of the proceeds of crime but is for the value thereof in absence of the availability of the total proceeds out of the crime i.e. Rs.164.99 crores. The fact is that the property was originally belonging to the accused Nirmal Kumar Kejriwal, the grandfather of the appellant. A gift was made in the year 2020 in favour of the appellant whereas the FIR was registered in the year 2017 followed by the ECIR in the year 2019. The way property was given to the appellant has been noticed and as it was earlier belonging to one of the accused thus, the documents were seized by the respondent and there are no illegality in it. The words the value of such property does specify it to be earlier to the crime or subsequent and the words thus value of such property would mean the property acquired prior or subsequent to the crime is added. The prosecution complaint against the appellant not filed within 365 days - HELD THAT - It is stated that the prosecution complaint has not been filed against the appellant within 365 days thus, the seizure should lapse in view of Section 8(3)(a) of the Act of 2002. The perusal of the provision aforesaid shows continuance of the order of Adjudicating Authority during investigation for a period not exceeding 365 days or the pendency of the proceedings relating to any offence under this Act before a Court or under the corresponding law of any other country. The provision does not mandate for filing of PC against the person whose property has been attached or seized. The provision requires completion of investigation within a period of 365 days and pendency of the proceedings relating to any offence before the Court. This Tribunal and for that no Court is having competence to add the word in the provision which does not exist. If Section 8(3)(a) is given interpretation to mandate pendency of the proceedings against the person from whom property has been attached or seized then it would become very easy for the accused to commit the offence of money laundering and park the proceeds with a person having no connection with the crime. In that case, a person not connected with the crime may not be subjected to investigation or proceedings in the criminal court and in absence of it the parked property by the accused can be saved from attachment and seizure to frustrate the very object of the Act. It is for that reason only the words accused or person from whom property is attached or seized are not mentioned under the provision for filing of PC against them rather what is required is a prosecution complaint in reference to the offence under the Act of 2002. The appellant is not an accused in the FIR or ECIR - HELD THAT - The object of the Act is to freeze proceeds of crime and as discussed in the preceding paras, the property gifted to the appellant would fall within the realm of proceeds of crime. The use of the terms any person in Section 5(1)(a) read with such proceeds of crime in sub -clause (b) of Section 5(1) includes any person not necessarily an accused. In case, the argument of the appellant is to be accepted, the same would render to defeat intention of the legislature and frustrate the object of the Act - In the instant case, the accused Nirmal Kumar Kejriwal knowing it well that property with him may become subject matter of attachment or seizure gifted it to his grandson much after the registration of FIR and ECIR. The aforesaid cannot be considered to be bonafide rather designed to circumvent the provisions of law and the case registered against the accused. Appeal dismissed.

Summary

Issues Involved:
1. Validity of seizure of documents u/s 17(1) of the Act of 2002.
2. Non-filing of Prosecution Complaint (PC) within 365 days.
3. Appellant not being an accused in FIR or ECIR.

Summary:

Validity of Seizure of Documents u/s 17(1) of the Act of 2002:

The appellant challenged the seizure of documents u/s 17(1) of the Prevention of Money Laundering Act, 2002 (the Act of 2002), arguing that no FIR or ECIR was lodged against him and the seized documents related to a property acquired by his grandfather in 1988, thus not connected to the proceeds of crime. The respondent contended that the seized documents were equivalent in value to the proceeds of crime, as defined u/s 2(1)(u) of the Act, and could be subjected to seizure even if the property was not directly derived from the crime. The Tribunal upheld the seizure, citing the broad definition of "proceeds of crime" and the necessity to prevent money laundering by attaching properties of equivalent value.

Non-filing of Prosecution Complaint (PC) within 365 days:

The appellant argued that the seizure should lapse as no PC was filed against him within 365 days, referencing Section 8(3)(a) of the Act of 2002. The Tribunal clarified that the provision mandates the completion of the investigation within 365 days and the pendency of proceedings relating to any offence under the Act, not necessarily against the person whose property was seized. The Tribunal emphasized that interpreting the provision otherwise would allow offenders to evade the law by parking proceeds of crime with third parties.

Appellant not being an accused in FIR or ECIR:

The appellant claimed that since he was not named in the FIR or ECIR, the documents belonging to him could not be seized. The Tribunal rejected this argument, referencing the Supreme Court's interpretation in Vijay Madanlal Choudhary v. Union of India, which held that the Act's objective is to reach proceeds of crime regardless of whose name they are in. The Tribunal noted that the property was gifted to the appellant after the FIR and ECIR were registered, indicating an attempt to circumvent the law. Thus, the seizure was deemed valid even if the appellant was not an accused.

Conclusion:

The Tribunal dismissed the appeal, holding that the seizure of documents was valid under the Act of 2002, the non-filing of PC within 365 days did not invalidate the seizure, and the appellant's non-accused status in FIR or ECIR did not preclude the seizure of property deemed as proceeds of crime.