2024 (12) TMI 1309 - HC - Money Laundering

Confiscation of properties - Money laundering - scheduled offence - appellant would contend that the Special Court without issuing the notice to the appellant has passed the impugned order confiscating the properties of the appellant - violation of principles of natural justice - Applicability of Criminal Procedure Code (Cr.P.C) provisions to the proceedings under PMLA. Applicability of Criminal Procedure Code (Cr.P.C) provisions to the proceedings under PMLA - HELD THAT - Except as otherwise provided in the P.M.L.A Act, the provision of Cr.P.C., are made applicable to the proceedings before the Special Court. The order of confiscation of the properties of the accused by the Special Court amounts to disposal of properties under section 452 of Cr.P.C. Against the order of said disposal of the properties passed under section 452 of Cr.P.C, the appeal shall lie to this Court under Section 454 of Cr.P.C. The provision of the P.M.L.A Act does not provide for filing of any appeal against the order of confiscation of properties. Therefore, the appeal shall lie under section 454 of Cr.P.C to this Court as appeal against conviction lie to this Court. Confiscation of schedule A properties - HELD THAT - The words such properties involved in money laundering or which has been used for commission of offence of money laundering would indicate that the disproportionate assets acquired by the accused which had been used for money laundering is subject to be confiscated to the Central Government under Sub Section (5) of Section 8 of the P.M.L.A Act. The scheduled offence alleged against late Sri. G.E. Veerabharappa has been tried in Spl. CC. No. 56/2015. Even though the C.B.I had alleged disproportionate assets to the tune of Rs. 2,91,70,984/-, the Court only directed confiscation of disproportionate asset to the extent of Rs. 1,72,40,951/- in favour of the Central Government. Therefore, the proceeds of crime is to the extent of Rs. 1,72,40,951/-. The said disproportionate assets to the extent of Rs. 1,72,40,951/- is alleged to have been used by late Sri. G.E. Veerabharappa in money laundering. Therefore, the properties to the extent of Rs. 1,72,40,951/- requires to be confiscated to the Central Government under Sub Section (5) of Section 8 of the P.M.L.A Act. Late Sri. G.E. Veerabharappa had furnished the fixed deposit receipts to the tune of Rs. 1,72,40,951/- pursuant to the order of the Hon ble Apex Court in VEERBHADRAPPA G.E. 2023 (4) TMI 1332 - SUPREME COURT in favour of C.B.I and E.D. The said fixed deposit receipts in a sum of Rs. 1,72,40,951/- is the properties involved in money laundering and it is said to have been used for commission of the offence of money laundering. The properties worth more than Rs. 1,72,40,951/- cannot be confiscated under Sub Section (5) of Section 8 of the P.M.L.A Act - The option open for the Special Court was to confiscate the fixed deposit to the extent of Rs. 1,72,40,951/- furnished by late Sri. G.E. Veerabharappa with a lien in favour of the C.B.I and E.D. Instead of that, the Special Court has confiscated the properties of the appellant. Therefore, the Trial Court has erred in ordering confiscation of the properties of the appellant which are at Sl.No. 2 of schedule A properties in Spl. CC. No. 359/2019 - the said order of confiscation of properties of the appellant requires to be set-aside. Conclusion - The impugned order dated 24.06.2024 passed in Spl. C.C. No. 359/2019 by the XXXII Additional City Civil and Sessions Judge and Special Judge for C.B.I cases, Bengaluru, sofar as it relates to confiscation of the appellant s properties ie., Sl. No. 2 of the Schedule A properties namely, the land measuring 6 acres 37 guntas, located at Gunjal village, Varthuru Hobli, Bengaluru East Taluk, bearing Survey No.187/3 (28 guntas), Survey No.188/1 (3 acres and 20 guntas) and Survey No. 210/2 (2 acres and 29 guntas) is set-aside - The court recognized the appellant's ownership rights over the properties and ruled that the confiscation order was not justified, as the fixed deposit furnished by late Sri. G.E. Veerabharappa should have been considered the asset involved in money laundering. Appeal allowed.

Summary

Issues Involved:

1. Confiscation of properties under the Prevention of Money-Laundering Act (P.M.L.A).
2. Validity of the sale transaction and ownership rights of the appellant.
3. Applicability of Criminal Procedure Code (Cr.P.C) provisions to the proceedings under P.M.L.A.
4. Legal remedy available to the appellant for challenging the confiscation order.

Detailed Analysis:

1. Confiscation of Properties under P.M.L.A:

The core issue revolves around the confiscation of properties acquired by late Sri. G.E. Veerabharappa, which were deemed to be proceeds of crime under the P.M.L.A. The Special Court ordered the confiscation of these properties, including those purchased by the appellant, to the Central Government as per Section 9 of the P.M.L.A Act. The appellant contended that the confiscation was improper since the properties were legally acquired after the lien was lifted following compliance with a Supreme Court order. The Supreme Court had directed late Sri. G.E. Veerabharappa to furnish a Fixed Deposit receipt with a lien in favor of the C.B.I and E.D as a precondition for lifting the attachment of the properties. The Special Court's decision to confiscate the properties was challenged as it was argued that the fixed deposit served as the appropriate asset for confiscation.

2. Validity of the Sale Transaction and Ownership Rights:

The appellant argued that the properties were purchased legally after the lien was lifted and that they had rightful ownership. The appellant emphasized that the properties were not the subject matter of the criminal proceedings once the lien was lifted, and thus, the confiscation order was unjust. The sale transaction was executed after the attachment was lifted, and the appellant had proceeded to develop the properties. The court found that the Special Court erred in confiscating the appellant's properties without issuing any notice, despite the appellant having acquired a valid title over the properties.

3. Applicability of Cr.P.C Provisions to P.M.L.A Proceedings:

The judgment highlighted that the provisions of the Cr.P.C are applicable to the proceedings before the Special Court under the P.M.L.A, as per Sections 44 and 46 of the P.M.L.A Act. The order of confiscation by the Special Court amounts to the disposal of properties under Section 452 of the Cr.P.C, and the appeal against such an order is maintainable under Section 454 of the Cr.P.C. The court clarified that the P.M.L.A does not provide a specific provision for appealing against confiscation orders, thereby making the Cr.P.C provisions applicable.

4. Legal Remedy for Challenging the Confiscation Order:

The appellant sought to set aside the confiscation order by filing an appeal under Section 454 of the Cr.P.C. The court held that the appellant had the locus standi to file the appeal as they were the rightful owners of the properties, and the confiscation order was akin to a disposal order under the Cr.P.C. The court concluded that the Special Court should have considered the fixed deposit as the asset to be confiscated, rather than the appellant's properties, which were legally acquired after the lifting of the lien.

Conclusion:

The appeal was allowed, and the impugned order of confiscation of the appellant's properties was set aside. The court recognized the appellant's ownership rights over the properties and ruled that the confiscation order was not justified, as the fixed deposit furnished by late Sri. G.E. Veerabharappa should have been considered the asset involved in money laundering. The judgment underscores the importance of adhering to procedural fairness and the applicability of Cr.P.C provisions in proceedings under the P.M.L.A.