2025 (4) TMI 633 - AT - Money Laundering

Money Laundering - Provisional Attachment Order of properties - proceeds of crime - scheduled offence - violation of Environment Protection Act 1986 - Illegal construction of pipelines for wate disposal and joining to the main GIDC pipeline and without following the said measures releasing the hazardous waste in Unn and Gabheni Creeks in contravention of Section 25(1)(A) Water (Prevention and Control of Pollution) Act 1974 - HELD THAT - As is seen from the facts narrated in the impugned order the loan against which the subject property was offered as collateral security had already been substantially repaid and was in the process of being repaid regularly. Accordingly there was every chance of the loan being fully discharged and the property being released from mortgage in the foreseeable future. Furthermore arguably the same was being repaid out of the profits of the company which themselves have been taken to be proceeds of crime. The word immediately occurring in the second Proviso to Section 5 (1) need not be interpreted to mean in the very next moment. A sufficiently senior level of due diligence has been provided for by the said Proviso by way of application of mind by an officer of the level of Deputy Director and above duly authorized by the Director. Therefore no fault can be found in attachment of the property and the same did not cause any prejudice to the appellants. There is no reason to think that attachment of property under the PMLA 2002 cannot co-exist with mortgage thereof to a financial institution. It is next contended that the evidence which would have supported the appellant s case such as manifests/way bills for the receipt of waste by the appellant s units from various industrial units and also for transportation of the fuel prepared from the waste to the end user were seized but have been suppressed by the ED. The ED seized all these documents from various premises during the search and seizure operation conducted as a part of the investigations against the appellants though the same were not seized from the appellant s own premises - it is to be noted that the present proceeding arises out of an OC filed by the respondents after provisional attachment of property and not out of an OA against order of retention of seized documents if any made by the respondents. Moreover there are no pleadings or grounds to this effect in the appeal filed by the appellants. Accordingly there are no merit in these contentions either. It has also been argued that all the documents have to be forwarded to the Adjudicating Authority as per the provisions of law. The respondents have submitted that the defendant has sought directions to Department to place on record internal material collected during the investigation however it is the sole prerogative of investigating Authority which document has to be relied upon to support his case - Even if there is any irregularity in terms of not bringing on record the documents not relied upon the same would not in my view vitiate the entire proceedings particularly in view of the provisions of section 68 which provide that no notice summons order document or other proceeding furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of his Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake defect or omission in such notice summons order document or other proceeding if such notice summons order document or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act. Conclusion - i) The attachment of properties under the PMLA upheld. ii) The procedural requirements under Sections 5 and 8 of the PMLA Are duly followed with reasons to believe and satisfaction recorded appropriately. iii) The non-disclosure of certain documents by the ED do not affect the validity of the attachment order as the relied-upon documents are duly presented. Appeal dismissed.

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

Whether the attachment of properties under the Prevention of Money Laundering Act, 2002 (PMLA) was justified given the alleged violations of the Environment Protection Act, 1986 by M/s Gujarat Enviro Protection and Infrastructure Ltd. (GEPIL).
Whether the properties acquired prior to the alleged period of crime can be attached under the PMLA as "proceeds of crime."
Whether the procedural requirements under sections 5 and 8 of the PMLA regarding the recording of satisfaction and reasons to believe were met in this case.
Whether the non-disclosure of certain documents by the Enforcement Directorate (ED) affects the validity of the provisional attachment order.
Whether the attachment of property mortgaged to a financial institution was appropriate under the circumstances.

2. ISSUE-WISE DETAILED ANALYSIS

Attachment of Properties under PMLA

Relevant Legal Framework and Precedents: The attachment was executed under Section 5 of the PMLA, which allows provisional attachment of property believed to be "proceeds of crime." The definition of "proceeds of crime" under Section 2(1)(u) includes property derived or obtained from criminal activity related to a scheduled offense.
Court's Interpretation and Reasoning: The Tribunal found that the attachment was justified as the properties were considered "proceeds of crime" due to the alleged environmental violations by GEPIL, which constituted a scheduled offense under the PMLA.
Key Evidence and Findings: The Tribunal noted that the ED had conducted investigations revealing that GEPIL had discharged hazardous waste illegally, leading to the attachment of properties equivalent to the profits earned during the relevant period.
Application of Law to Facts: The Tribunal applied the definition of "proceeds of crime" to include properties acquired prior to the crime if they represent the value of the crime proceeds.
Treatment of Competing Arguments: The appellant argued that the properties were acquired before the alleged crime and should not be attached. The Tribunal rejected this, citing precedents that allow attachment of equivalent value properties.
Conclusions: The Tribunal upheld the attachment, emphasizing that it serves as a balancing measure to secure the proceeds of crime until the conclusion of the criminal proceedings.

Properties Acquired Prior to Alleged Crime

Relevant Legal Framework and Precedents: The Tribunal referenced the definition of "proceeds of crime" under the PMLA, which includes property equivalent in value to the crime proceeds.
Court's Interpretation and Reasoning: The Tribunal cited its previous judgment in Sadananda Nayak and other precedents, affirming that properties acquired before the crime can be attached if they represent the value of the proceeds of crime.
Key Evidence and Findings: The Tribunal noted that the properties attached were equivalent in value to the profits earned during the period of the alleged crime.
Application of Law to Facts: The Tribunal applied the legal framework to conclude that the attachment of properties acquired prior to the crime was lawful.
Treatment of Competing Arguments: The appellant's reliance on precedents like Seema Garg was rejected, as subsequent Supreme Court interpretations superseded those decisions.
Conclusions: The Tribunal concluded that the attachment of properties acquired before the crime was valid under the PMLA.

Procedural Requirements under Sections 5 and 8

Relevant Legal Framework and Precedents: Sections 5 and 8 of the PMLA require the recording of satisfaction and reasons to believe before attaching property.
Court's Interpretation and Reasoning: The Tribunal found that the ED had recorded reasons to believe and satisfaction as required by law, citing the detailed reasons provided in the provisional attachment order and the adjudicating authority's order.
Key Evidence and Findings: The Tribunal reviewed the records and found that the procedural requirements were met, including the filing of a complaint and the material presented to the adjudicating authority.
Application of Law to Facts: The Tribunal applied the legal standards for recording reasons to believe and satisfaction, finding no procedural lapses.
Treatment of Competing Arguments: The appellant's argument about inadequate recording of satisfaction was rejected based on the Tribunal's review of the records.
Conclusions: The Tribunal concluded that the procedural requirements under Sections 5 and 8 were duly followed.

Non-Disclosure of Documents

Relevant Legal Framework and Precedents: The Tribunal considered the appellant's claim that certain documents were not disclosed by the ED.
Court's Interpretation and Reasoning: The Tribunal found that the non-disclosure of documents not relied upon by the ED did not vitiate the proceedings, as the relied-upon documents were duly presented.
Key Evidence and Findings: The Tribunal noted that the appellant did not raise this issue in their pleadings or grounds for appeal.
Application of Law to Facts: The Tribunal applied the legal principle that non-disclosure of non-relied documents does not invalidate proceedings.
Treatment of Competing Arguments: The appellant's claim of suppression of evidence was dismissed due to a lack of merit and relevance to the current proceedings.
Conclusions: The Tribunal concluded that the non-disclosure of certain documents did not affect the validity of the attachment order.

Attachment of Mortgaged Property

Relevant Legal Framework and Precedents: The Tribunal considered the appellant's argument that the property was mortgaged and should not be attached.
Court's Interpretation and Reasoning: The Tribunal found that the attachment was justified as the mortgage did not preclude the attachment under the PMLA, which has overriding provisions.
Key Evidence and Findings: The Tribunal noted that the loan against which the property was mortgaged was substantially repaid, and the property was available for attachment.
Application of Law to Facts: The Tribunal applied the legal principle that attachment can coexist with mortgage, especially when the loan is being repaid from alleged proceeds of crime.
Treatment of Competing Arguments: The appellant's argument about the mortgage was rejected, citing the overriding effect of the PMLA.
Conclusions: The Tribunal concluded that the attachment of the mortgaged property was appropriate and did not cause prejudice to the appellant.

3. SIGNIFICANT HOLDINGS

The Tribunal upheld the attachment of properties under the PMLA, emphasizing that attachment serves as a balancing measure to secure the proceeds of crime until the conclusion of the criminal proceedings.
The Tribunal affirmed that properties acquired prior to the alleged crime can be attached if they represent the value of the proceeds of crime, as per the definition under the PMLA.
The Tribunal found that the procedural requirements under Sections 5 and 8 of the PMLA were duly followed, with reasons to believe and satisfaction recorded appropriately.
The Tribunal concluded that the non-disclosure of certain documents by the ED did not affect the validity of the attachment order, as the relied-upon documents were duly presented.
The Tribunal held that the attachment of mortgaged property was justified under the PMLA, given the overriding provisions of the Act.
The appeal was dismissed, with the Tribunal rejecting all contentions raised by the appellant.

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