2025 (1) TMI 1264 - AT - Money Laundering

Money Laundering - challenge to provisional attachment order - large scale illegal extortion punishable under section 384 read with 120 B of IPC - Non application of mind by the Adjudicating Authority - Absence of predicate offence - No nexus between the appellant and alleged proceeds of crime - appellants are bonafide purchaser of the property attached by the respondents - Absence of reasons to believe in the SCN. Absence of predicate offence - HELD THAT - The Apex Court in Sunil Kumar Agarwal 2024 (5) TMI 1346 - SC ORDER found that the petitioner has already undergone incarceration for a period of 1 year and 7 months and was otherwise not named in the FIR but without expressing any opinion on the issue the interim bail was granted. The efforts of the appellant is to mis-lead the Tribunal by giving an impression of an order of the Apex Court to hold that the predicate offence does not exist and thus the proceedings under PMLA is not tenable. The written arguments also make a reference of it. The perusal of the order for grant of the bail to the accused would reveal it to be on the ground of long period of incarceration in violation of Article 21 of the Constitution. The bail was granted on that ground. It was with the clarification that observation made in the order is for the purpose of grant of bail and not to have any effect on the merit of the complaint. There are no judgement of the Apex Court in favour of the appellant rather detailed judgement of the Supreme Court in the case of Saumya Chaurasia 2023 (12) TMI 685 - SUPREME COURT holds it to be a case of schedule offence. No nexus between the appellant and the alleged proceeds of crime - HELD THAT - In the instant case the syndicate of Suryakant Tiwari has not extorted money overnight but during the period of its operation which was started much prior to the registration of the FIR. It is otherwise settled law of the land that the properties acquired prior to the commission of the crime can also be made subject matter of the attachment if the proceeds are not available or vanished - The appellant may have acquired the property prior to the registration of the FIR but period of operation of crime started much prior to the registration of the FIR and otherwise if the proceeds has been vanished or siphoned off the property of the equivalent value can be attached. It is otherwise submitted that appellants have been named for commission of the offence under the Act of 2002. Appellants are bonafide purchaser of the property - HELD THAT - The appellants have failed to disclose the source to acquire the cash used for acquisition of the properties and illustratively we may refer to 52 properties acquired by M/s. Indermani Minerals (India Pvt. Ltd.), showing it to be through bank channels and based on their financial condition - The statement recorded under section 50 of the Act of 2002 coupled with the documents seized from the custody of Suryakant Tiwari are sufficient to show layering of proceeds of crime and to channelize the same immovable properties were purchased. The appellant Company has not purchased one or two properties rather purchased as many as 52 properties without showing the source and document to prove it. In the appeal filed by them even the Income Tax Return for financial year 2022-2023 was not enclosed. It was submitted later without showing its relevance for purchase of properties prior to it. It is found that merely using the banking channel for purchase of the property by layering the money with deposit of cash in the Bank without disclosing the source with the material and proof the source would not stand proved. Absence of reason to believe - HELD THAT - The appellants submits that no reasons to believe was given by the Adjudicating Authority while issuing show cause notice. It should have been for each appellant separately - There are no contest on the aforesaid before the Adjudicating Authority otherwise it has given reasons to believe for issuance of notice. It is not necessary that for the show cause notice it should be against the person committing the offence under section 3 of the Act of 2002 but can be against the person in possession of crime proceeds. It is not necessary to give reasons to believe separately but can be for the noticee together. The appellants are either the accused or in possession of proceeds of crime and has been indicated in the show cause notice. The appellants are victims of extortion - HELD THAT - The appellants are victims of extortion because they were involved in transportation of the coal and thereby had to pay Rs. 25/- per ton to the main accused. The argument aforesaid has been raised specifically in the appeal preferred by M/s. Indermani Minerals (India Pvt. Ltd.), . This argument endorsed the case of the respondents where serious allegations have been made against syndicate headed by Suryakant Tiwari for extortion of money and if the appellant was also victim it could not be clarified as to why it did not register an FIR against the accused. Conclusion - The appellants failed to provide credible evidence to substantiate their claims of bona fide acquisition and the absence of a nexus with the proceeds of crime. The existence of a predicate offence and the nexus between the appellants and the proceeds of crime is reaffirmed. The confirmation of the provisional attachment order upheld. Appeal dismissed.

Summary

ISSUES PRESENTED and CONSIDERED

The Tribunal considered several core legal issues in the appeals challenging the order under the Prevention of Money Laundering Act, 2002 (PMLA). These issues included:

1. Whether the Adjudicating Authority applied its mind in confirming the provisional attachment order.2. The existence of a predicate offence necessary for proceedings under the PMLA.3. The nexus between the appellants and the alleged proceeds of crime.4. Whether the appellants were bona fide purchasers of the attached properties.5. The adequacy of reasons to believe in the show cause notice issued by the Adjudicating Authority.6. Claims by some appellants that they were victims of extortion by the syndicate led by Suryakant Tiwari.

ISSUE-WISE DETAILED ANALYSIS

I. Non-application of mind by the Adjudicating Authority

The appellants argued that the Adjudicating Authority failed to consider the factual and legal issues raised, particularly the disclosure of the source of funds used to acquire the properties. However, the Tribunal found that the Adjudicating Authority had considered the pleas and confirmed the attachment order based on the evidence presented, indicating that there was no non-application of mind.

II. Absence of Predicate Offence

The appellants contended that the absence of a predicate offence invalidated the proceedings under the PMLA. They argued that the charges under section 384 IPC were dropped, making the ECIR and subsequent proceedings untenable. The Tribunal, referencing a Supreme Court judgment in the case of Saumya Chaurasia, held that the predicate offence was not dropped but transferred to Chhattisgarh State Police, and thus the proceedings under the PMLA were valid.

III. No Nexus between the Appellant and Alleged Proceeds of Crime

The appellants claimed no involvement in the generation or concealment of the proceeds of crime, arguing that they were neither named in the FIR nor the ECIR. The Tribunal found that the involvement of the appellants was evident from the investigation, which revealed their role in layering and integrating proceeds of crime into legitimate assets. The Tribunal emphasized that the properties in question were acquired during the period of the alleged criminal activities.

IV. The Appellants as Bona Fide Purchasers

The appellants argued that they were bona fide purchasers, having disclosed the sources of funds used for property acquisition. The Tribunal noted that despite claims of bona fide acquisition, the appellants failed to provide sufficient evidence to substantiate their claims. The Tribunal highlighted that properties acquired during the period of criminal activity, even if purchased before the registration of the FIR, could be subject to attachment if proceeds of crime were involved.

V. Absence of Reasons to Believe in the Show Cause Notice

The appellants challenged the show cause notice for lacking specific reasons to believe against each appellant. The Tribunal found that the Adjudicating Authority had provided adequate reasons to believe in the notice, applicable to all noticees collectively. It was not necessary to issue separate reasons for each appellant, especially when they were in possession of proceeds of crime.

VI. Appellants as Victims of Extortion

Some appellants claimed to be victims of extortion by the syndicate led by Suryakant Tiwari, arguing that they were coerced into paying illegal levies. The Tribunal found this argument to be inconsistent with the appellants' actions, as no FIR was filed against the alleged extortionists. This claim inadvertently supported the respondents' case of systematic extortion by the syndicate.

SIGNIFICANT HOLDINGS

The Tribunal upheld the confirmation of the provisional attachment order, dismissing the appeals. It reaffirmed the existence of a predicate offence and the nexus between the appellants and the proceeds of crime. The Tribunal emphasized the broad definition of "proceeds of crime" under the PMLA, which includes properties acquired indirectly from criminal activities. It also clarified that properties acquired before the registration of an FIR could still be attached if they were linked to criminal proceeds.

The Tribunal concluded that the appellants failed to provide credible evidence to substantiate their claims of bona fide acquisition and the absence of a nexus with the proceeds of crime. It found the arguments regarding the absence of reasons to believe and claims of extortion unconvincing, leading to the dismissal of the appeals.