2024 (12) TMI 290 - AT - Money Laundering

Money Laundering - proceeds of crime - attachment of properties - Compliance with procedural requirements under Section 8 of PMLA 2002 - HELD THAT - The facts on record reveals that Ashok Yadav was a reckoned criminal against whom as many as 26 cases were registered out of which he has been acquitted in majority of the cases. The orders of acquittal have been submitted but it is not in all the cases. The fact, however, remains that ECIR was recorded against the accused followed by cognizance of offence which has not been set aside by the court thus not only ECIR remains against the accused but cognizance of offence has also been taken. The aforesaid is relevant and reflects that even after the acquittal, the ECIR records a case of money laundering in the hands of the appellant. To come out with the allegation of money laundering, the appellants were having opportunity to disclose the source for acquisition of the properties. The perusal of Section 8(1) of the Act of 2002 would reveal that Adjudicating Authority give notice to call upon the parties to disclose source for acquisition of the properties. In the PMLA investigation, it was revealed that cash was utilized for purchase of all the properties though deposited in the bank first but source to acquire the cash to deposit in the bank has not been disclosed - Perusal of account statement shows irregular cash deposits which do not match with profile of any kind of business activity. Further, he did not appear before the investigation and did not produce any evidence in respect of the source of this cash utilized for making cash deposits and for acquisition of properties. Hence, in view of the charge sheet filed by state police, it is logical to conclude that the cash utilized for acquisition of properties and for making deposits in the bank accounts of Ashok Yadav, are proceeds of crime. The analysis of income by the Income Tax Department would be for charging the tax. They would not analyze as to whether the amount deposited is a proceeds of crime . Thus, the ITR submitted under the Income-Tax Act is for different purpose than to be analyzed under the Act of 2002 to find out whether rightful source of income has been disclosed to acquire the property. It is no doubt true that the source has been disclosed but the minute scrutiny revealed that it was after utilizing cash with deposit of the amount directly in the bank account of Bibha Devi or routing through many persons without giving justification as to why the amount was routed through other persons - the Adjudicating Authority has even made reference of the LPG Dealership in the name of Bibha Devi and even acquisition of benami liquor shop. The appellant tried to disclose the source of income but the way income was generated itself is sufficient to prove the case against them. The cash deposited in bank without disclosure of source would indicate it to be tainted money otherwise no one prevented the appellants to produce documents to show the business transaction coupled with the receipt of payment towards it. It is more so when they produced certain documents along with the rejoinder but failed to produce any document to prove the business transactions in the relevant years to generate sufficient funds which was used for the purchase of the property In the background aforesaid, there are no reason to cause interference in the order. Appeal dismissed.

Issues Involved:

1. Legality of the Provisional Attachment Order under the Prevention of Money Laundering Act, 2002.
2. Validity of the attachment of properties as 'proceeds of crime'.
3. Compliance with procedural requirements under Section 8 of the Act of 2002.
4. Impact of acquittal in criminal cases on the attachment order.
5. Adequacy of evidence regarding the source of income for acquiring properties.
6. Consideration of additional evidence and documents at the appellate stage.
7. Relevance of the judgment in J. Sekar vs. Union of India.

Issue-wise Detailed Analysis:

1. Legality of the Provisional Attachment Order under the Prevention of Money Laundering Act, 2002:

The appeal challenges the order confirming the Provisional Attachment Order dated 31.03.2018, under Section 26 of the Prevention of Money Laundering Act, 2002. The properties, both movable and immovable, were attached following the recording of the Enforcement Case Information Report (ECIR) after multiple FIRs were registered against the main accused. The Tribunal examined whether the attachment was justified given the allegations of money laundering.

2. Validity of the attachment of properties as 'proceeds of crime':

The properties attached were primarily in the names of Bibha Devi and Rajendra Yadav, with some in the names of Ashok Yadav, Birendra Yadav, and Ahilya Devi. The Tribunal evaluated whether these properties constituted 'proceeds of crime' as defined under the Act, considering the lack of evidence provided by the appellants to justify the source of funds used for acquiring these properties.

3. Compliance with procedural requirements under Section 8 of the Act of 2002:

The appellants argued that the 'reasons to believe' were not served on them, violating Section 8 of the Act. The Tribunal scrutinized whether the Adjudicating Authority followed the necessary procedures, including issuing notices to the appellants to disclose the source of income for acquiring the attached properties.

4. Impact of acquittal in criminal cases on the attachment order:

The appellants contended that Ashok Yadav's acquittal in the majority of the cases should negate the attachment, as the properties could not be considered 'proceeds of crime'. The Tribunal noted that despite the acquittals, the ECIR and cognizance of offenses remained, justifying the continuation of the attachment.

5. Adequacy of evidence regarding the source of income for acquiring properties:

The Tribunal examined the appellants' claims about their sources of income, including Ashok Yadav's alleged retail business and Rajendra Yadav's agricultural income. The lack of documentary evidence to substantiate these claims led the Tribunal to conclude that the appellants failed to prove legitimate sources of income for the properties acquired.

6. Consideration of additional evidence and documents at the appellate stage:

Bibha Devi attempted to introduce additional documents at the appellate stage without filing an application for their acceptance. The Tribunal emphasized that such documents could not be considered without giving the respondent an opportunity for rebuttal, highlighting procedural lapses by the appellants.

7. Relevance of the judgment in J. Sekar vs. Union of India:

The appellants referenced the Delhi High Court judgment in J. Sekar vs. Union of India to argue procedural non-compliance. However, the Tribunal noted that the Supreme Court had stayed the operation of that judgment, rendering it inapplicable to the present case.

In conclusion, the Tribunal found no reason to interfere with the order confirming the attachment, except for the property at item No. 17, which was subject to a separate order in a related appeal. The appeals were dismissed, upholding the attachment of the properties as justified under the Act of 2002.

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