2025 (3) TMI 1189 - AT - Money Laundering

Money Laundering - proceeds of crime - Scheduled offences - attachment of bank accounts movable as well as immpovable properties - reasons to believe - When the alleged proceeds of crime already stand seized by another law enforcement authority i.e. the DRI and same are in its possession and therefore wholly outside the control and reach of the appellants how could the respondent Directorate have justifiably entertained the reason to believe under the Second Proviso to section 5(1) that if such property is not attached immediately the non- attachment of the property is likely to frustrate any proceeding under the Act? - HELD THAT - The only offences that have been made out against the appellants are the offences under Sections 135(1)(a)(i)(A) and 135(1)(b)(i)(A) which are in relation to the foreign gold bars and biscuits valued at 13.56 crores which were seized by the DRI. The said value matches exactly with the value of movable properties recovered and seized by DRI. The material on record therefore does not reveal that there are any allegations in respect of any other scheduled offence(s) against any of the appellants herein. Insofar as the offences under Sections 135(1)(a)(i)(A) and 135(1)(b)(i)(A) of the Customs Act 1962 are concerned the property involved in the said offence is already under seizure by the DRI and attachment by the ED. Further the confiscation thereof has also been proposed in the Prosecution Complaint under the PMLA 2002 which remains pending. As held by the Hon ble Supreme Court in Vijay Madanlal Choudhary 2022 (7) TMI 1316 - SUPREME COURT (LB) the respondent Directorate could not have assumed that any other scheduled offence(s) were committed by the appellants and proceeds were derived therefrom and attached property over above the seized gold even if the same were found to out of unexplained sources. Unexplained investment in properties may no doubt be actionable under the Income-tax Act or other laws but no action under PMLA 2002 could have been initiated against the same based on assumption that because they were found to in excess of the known sources of income the same were necessarily derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence. Conclusion - The attachment under PMLA can extend to properties not directly linked to the scheduled offence and properties of non-accused persons if connected to proceeds of crime. However attachment cannot exceed the value of the alleged proceeds without evidence of additional criminal activity. Appeal disposed off.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the attachment of properties under the Prevention of Money Laundering Act, 2002 (PMLA) was justified when the alleged proceeds of crime were already seized by another law enforcement authority, namely the Directorate of Revenue Intelligence (DRI).
Whether bank account transactions not directly related to the alleged proceeds of crime could be attached under PMLA.
Whether properties of individuals not accused in the predicate offence could be attached under PMLA.
Whether the attachment of properties in excess of the value of the alleged proceeds of crime was permissible.
Whether the procedural requirements under PMLA, such as the existence of 'reasons to believe' for attachment, were fulfilled.
Whether the attachment of properties violated constitutional rights, particularly the right to property under Article 300A of the Indian Constitution.

2. ISSUE-WISE DETAILED ANALYSIS

Attachment of Properties Already Seized by Another Authority

Relevant Legal Framework and Precedents: Section 5(1) of PMLA allows for attachment of property if it is believed that the property is likely to be concealed, transferred, or dealt with in a manner that may frustrate proceedings under the Act. The appellants relied on precedents where attachment was deemed unnecessary if the property was already under court custody.
Court's Interpretation and Reasoning: The Tribunal distinguished the present case, noting that the property was in the custody of the DRI, not the court, and the possibility of release by the DRI could not be ruled out.
Conclusion: The Tribunal found no bar on attaching property already seized by another authority under PMLA.

Attachment of Bank Account Transactions

Relevant Legal Framework and Precedents: The definition of "proceeds of crime" under PMLA includes property derived or obtained as a result of criminal activity relating to a scheduled offence, or the value of such property.
Court's Interpretation and Reasoning: The Tribunal referenced the Supreme Court's judgment in Vijay Madanlal Choudhary, which supports a broad interpretation of "proceeds of crime" to include the value of any such property.
Conclusion: The Tribunal upheld the attachment of bank accounts, even if not directly linked to the scheduled offence, as consistent with the legislative intent of PMLA.

Attachment of Properties of Non-Accused Persons

Relevant Legal Framework and Precedents: Section 5(1) of PMLA allows for attachment of property if a person is involved in any process or activity connected with the proceeds of crime, regardless of whether they are accused in the scheduled offence.
Court's Interpretation and Reasoning: The Tribunal cited the Supreme Court's judgment in Vijay Madanlal Choudhary, affirming that the law aims to combat money laundering by reaching the proceeds of crime, irrespective of whose name they are held in.
Conclusion: The Tribunal found no legal basis to exempt properties of non-accused persons from attachment under PMLA.

Attachment in Excess of Alleged Proceeds of Crime

Relevant Legal Framework and Precedents: The appellants argued that the attachment should not exceed the value of the alleged proceeds of crime, specifically the gold seized by DRI.
Court's Interpretation and Reasoning: The Tribunal found that the Directorate could not assume other scheduled offences or attach properties exceeding the seized gold's value without evidence of other criminal activities.
Conclusion: The Tribunal annulled the attachment of properties exceeding the value of the seized gold, as there was no legal sanction for such action.

Procedural Requirements and Constitutional Rights

Relevant Legal Framework and Precedents: The appellants challenged the procedural compliance under PMLA, particularly the existence of 'reasons to believe' for attachment.
Court's Interpretation and Reasoning: The Tribunal found that the Directorate had sufficient reasons to believe based on the information from DRI, and compliance with procedural requirements was upheld.
Conclusion: The Tribunal rejected the appellants' procedural challenges and found no violation of constitutional rights.

3. SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: "The authorities under the 2002 Act cannot resort to action against any person for money-laundering on an assumption that the property recovered by them must be proceeds of crime and that a scheduled offence has been committed, unless the same is registered with the jurisdictional police or pending inquiry by way of complaint before the competent forum."
Core Principles Established: The Tribunal affirmed that attachment under PMLA can extend to properties not directly linked to the scheduled offence and properties of non-accused persons if connected to proceeds of crime. However, attachment cannot exceed the value of the alleged proceeds without evidence of additional criminal activity.
Final Determinations on Each Issue: The Tribunal upheld the attachment of the gold seized by DRI but annulled the attachment of other properties exceeding the value of the seized gold. The procedural and constitutional challenges by the appellants were rejected.

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