2018 (7) TMI 341 - AT - Money Laundering

Offence under PMLA - attachment orders - property obtained from the proceeds of crime - Held that - In the facts of the present case the property in question was granted on lease by IDCO, a 100% public sector undertaking of the State of Odisha to Defendant No. 1 and had reverted back to the corporation on account of non compliance by M/s Ignis Technology Solutions Pvt. Ltd. of the conditions of allotment. The adjudicating authority did not appreciate that even in the rejoinder filed to the reply of defendant No. 1. There was no denial of the fact that the present property mentioned at serial no. 2 of the schedule of property was the property of IDCO and the payment of ₹ 1,00,00,000/- (Rupees One Crore only) was made much before the disbursement of the first installment of loan by United Bank of India and hence, the amount of ₹ 1,00,00,000/- (Rupees One Crore only) was not out of the proceeds of crime . There is nothing to show or suggest as to how the provisional allotment dated May, 18, 2009 for ₹ 1,00,00,000/- ( Rupees One Crore only) and its payment on 24.12.2009 which is even much before the application for loan made by M/s Ignis Technology Solution Pvt. Ltd. to the Bank could be the outcome of proceeds of crime justifying provisional attachment and confirmation. The reasoning of the adjudicating authority is perverse and contrary to law and reads as follows; However, the properties in the name of D-1 in whose name loan has been sanctioned and subsequently misused . However, the payment being made out of loan provided to Ignis which has been misutilised is tainted property and cannot be treated as a clean asset . Thus, in view of aforesaid facts and circumstances, both i.e. provisional attachment order as well as confirmation /impugned order dated 01.06.2017 are set-aside with regard to present appellant only in relation to Property No. 2 attached.

Summary

Issues:
1. Appeal against confirmation of Provisional Attachment Order
2. Challenge to Impugned Order and Provisional Attachment Order regarding specific property

Analysis:

Issue 1: Appeal against confirmation of Provisional Attachment Order

The judgment pertains to an appeal filed against the confirmation of a Provisional Attachment Order dated 01.06.2017. The Appellant, defendant no. 6 before the Adjudicating Authority, challenged the Impugned Order and the Provisional Attachment Order related to a specific property described in the schedule. The Tribunal clarified that it was only concerned with the case of the appellant and not with other defendants before the Adjudicating Authority.

Issue 2: Challenge to Impugned Order and Provisional Attachment Order regarding specific property

The case revolved around the property described in the schedule, an area of land in IDCO's Info City, which the Respondent alleged was acquired using proceeds of crime. However, the Tribunal found that the payment for the land was made in 2009, well before the loan application in 2010. The Tribunal highlighted that the property could not be considered proceeds of crime as it was acquired before the alleged criminal activity. The judgment emphasized the lack of valid reasons or material to support the attachment of the property, indicating a failure to establish a connection to proceeds of crime as defined in the PMLA Act, 2002.

The Tribunal criticized the Adjudicating Authority for not recording reasons or applying due diligence before confirming the attachment. It noted that the mandatory requirements of the PMLA Act were not prima facie satisfied and highlighted the lack of evidence to suggest that the property was obtained through criminal activity. The judgment concluded that the attachment of the property was unjustified and set aside both the provisional attachment order and the confirmation/impugned order specifically concerning the appellant and the mentioned property.

In conclusion, the appeal was allowed, and no costs were imposed. The Tribunal refrained from commenting on the properties of other borrowers, leaving their cases to be decided on their own merits.