2025 (1) TMI 992 - AT - Money Laundering

Confirmation of provisional attachment order - proceeds of crime - lapse of 180 days as stipulated under Section 5(3) of the Prevention of Money Laundering Act 2002 (PMLA) - reasons to believe - HELD THAT - The period intervening was largely effected by Covid-19 started after issuance of PAO on 16.01.2020. The period of Covid-19 from 15.03.2020 till 28.02.2022 and has been eliminated by the Apex Court in COGNIZANCE FOR EXTENSION OF LIMITATION 2022 (1) TMI 385 - SC ORDER for termination of the proceedings under any statute. In the light of the exclusion of the period of Covid-19 for termination of the proceedings the impugned order would not lapse. The issue aforesaid has been dealt with by this Tribunal in many cases where the judgment of the Apex Court not only in the Suo Motto Petition No. 03/20 decided by the order dated 10.01.2022 but also in the judgment in the case of Prakash Corporates vs. Dee Vee Projects Limited 2022 (2) TMI 1268 - SUPREME COURT has been considered. An elaborate judgment was given by Telangana High Court which has been referred by this Tribunal in its order in Bhuneshwar Prasad Verma vs. The Deputy Director Directorate of Enforcement Bhubaneswar 2024 (10) TMI 227 - APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI . It was held in the case that Since the period of Covid19 from 15.03.2020 till 28.02.2022 has been excluded by the Apex Court for termination of proceedings the Telangana High Court took notice to it and held that if period of 180 days was falling during the period eliminated by the Apex Court for termination of proceeding then the provisional attachment would not lapse . It is not necessary that attachment of the property can be only of the person who is accused in the FIR or ECIR. It can be even of a person who is not an accused but holding the property out of proceeds of crime. In that case there cannot be an investigation against the person who is not made an accused. Prosecution complaint is filed against the accused while property can be attached if someone is in possession of proceeds on its transfer settlement or adjustment by the accused in favour of such person. In that case though the person occupying or holding the property may not be accused the property can yet be attached and if such person is not an accused there would be no question of filing prosecution complaint against such a person. The fact on record shows that acquisition of property under attachment was during the check-period from 2007 to 2014 and the respondent have given complete money trail to show purchase of immovable properties out of the proceeds. It was generated after taking loan from the Punjab National Bank apart from other Banks and Financial Institutions by M/s BPSL and thereupon diverted the amount and thereby account of the company was declared to be forged/fraud by the banks after holding it to be Non-Performing Asset. In the light of the aforesaid and looking to the serious allegations against the appellants and others we do not find any reason to cause interference in the impugned order. It is a fact on record that the attachment of the property is pending consideration before the Apex Court in the appeal where an interim orders said to have been passed. Looking the fact aforesaid couple with the facts that subsequent attachment order was passed by the respondent to attach the property which was directly or indirectly the proceeds out of criminal activity related to schedule offence. The appellant s Company purchased the property in question on 09.11.2012 for a consideration of Rs.74, 35, 00, 000/-. It was much subsequent to the year 2007 and between the year 2014. The period of commission of crime cannot be taken from the date the account of BPSL were declared NPA or registration of FIR rather checkperiod involved in this case is from the year 2007 to 2014 when BPSL had taken the loan and started committing default in making the repayment. The amount was diverted to other entities / companies therefore even the case of moneylaundering was found. Conclusion - The period from 15.03.2020 till 28.02.2022 is eliminated for termination of proceedings. The attachment of property can be if any person is in possession of the property as given under Section 5(1)(a) and as per Section 8(3)(a) the continuation of the attachment during the period of investigation for a period of 365 days or pendency of the proceedings relating to any offence under the Act. The attachment orders were upheld - Appeal dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

• Whether the provisional attachment order (PAO) dated 16.01.2020, confirmed on 12.07.2021, is valid given the lapse of 180 days as stipulated under Section 5(3) of the Prevention of Money Laundering Act, 2002 (PMLA).
• Whether properties not directly borrowed from financial institutions but acquired through alleged proceeds of crime can be attached under the PMLA.
• Whether properties acquired before the commission of the alleged crime can be attached under the PMLA.
• Whether the absence of a prosecution complaint within 365 days affects the validity of the attachment order under Section 8(3) of the PMLA.
• Whether the attachment of properties of entities or individuals not named as accused in the FIR or ECIR is permissible under the PMLA.
• Whether the failure to supply "reason to believe" under Section 5(1) of the PMLA affects the legality of the attachment order.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the PAO beyond 180 days

• Legal Framework: Section 5(3) of the PMLA mandates that a PAO ceases to have effect after 180 days unless confirmed.
• Court's Interpretation: The Tribunal considered the impact of the COVID-19 pandemic, referencing the Supreme Court's order excluding the period from 15.03.2020 to 28.02.2022 from statutory timelines.
• Conclusion: The PAO was deemed valid as the intervening period affected by COVID-19 was excluded from the 180-day calculation.

Issue 2: Attachment of properties not directly borrowed from financial institutions

• Legal Framework: The PMLA allows for the attachment of properties deemed "proceeds of crime," irrespective of direct borrowing.
• Court's Interpretation: The Tribunal found that the funds were diverted from M/s BPSL to shell companies, which then acquired properties.
• Conclusion: The properties were rightly attached as they were acquired using diverted funds from M/s BPSL, implicating the appellants.

Issue 3: Attachment of properties acquired before the commission of the crime

• Legal Framework: The PMLA allows attachment of properties equivalent to the value of proceeds of crime if the original proceeds are unavailable.
• Court's Interpretation: The Tribunal noted that properties acquired during the check period (2007-2014) were subject to attachment.
• Conclusion: The attachment was upheld as properties were acquired during the period of alleged criminal activity.

Issue 4: Absence of a prosecution complaint within 365 days

• Legal Framework: Section 8(3) of the PMLA requires a prosecution complaint to be filed within 365 days.
• Court's Interpretation: The Tribunal clarified that attachment can occur even if the individual is not named as an accused, and the absence of a prosecution complaint does not invalidate the attachment.
• Conclusion: The argument was dismissed as the attachment was based on possession of proceeds of crime, not on the status of prosecution.

Issue 5: Attachment of properties of non-accused entities

• Legal Framework: Section 5(1) of the PMLA allows attachment of properties held by any person in possession of proceeds of crime.
• Court's Interpretation: The Tribunal emphasized that attachment can extend to individuals not named as accused if they hold proceeds of crime.
• Conclusion: The attachment was deemed valid as the properties were linked to diverted funds from M/s BPSL.

Issue 6: Non-supply of "reason to believe"

• Legal Framework: Section 5(1) of the PMLA requires recording of "reason to believe" for attachment.
• Court's Interpretation: The Tribunal found no merit in the argument due to the absence of a statutory requirement to serve "reason to believe" to the appellant.
• Conclusion: The argument was dismissed, and the attachment order was upheld.

3. SIGNIFICANT HOLDINGS

• Validity of PAO: "The period from 15.03.2020 till 28.02.2022 is eliminated for termination of proceedings, thus we do not find that the impugned order can be interfered on the first ground."
• Attachment of Properties: "The attachment of property can be if any person is in possession of the property as given under Section 5(1)(a) and as per Section 8(3)(a), the continuation of the attachment during the period of investigation for a period of 365 days or pendency of the proceedings relating to any offence under the Act."
• Attachment of Non-Accused Entities: "The sweep of section 5(1) is not limited to the accused named in the criminal activity relating to a scheduled offence. It would apply to any person (not necessarily being accused in the scheduled offence), if he is involved in any process or activity connected with the proceeds of crime."
• Final Determination: The appeals were dismissed, and the attachment orders were upheld.