2019 (12) TMI 802 - HC - Money Laundering

Money Laundering - proceeds of crime - provisional attachment of immovable properties - Section 42 of the Prevention of Money Laundering Act, 2002 - HELD THAT - There is considerable merit in the appellant s contention that it is not necessary that proceeds of crime in the hands of a person can be attached, notwithstanding that the person is not accused of any scheduled crime or the offence of money laundering. Plainly, if an asset which is derived by any person from a criminal activity is entrusted to another person, who is neither complicit in the criminal activity and is oblivious of the means by which the asset was acquired; he would neither be charged of committing a scheduled offence nor the offence of money laundering. Notwithstanding the above, the asset in his possession would be liable to be attached and confiscated in terms of the provisions of PMLA. The allegation against the respondent s husband was that he had amassed assets disproportionate to his sources of income. It was found that as on 10.10.2007 (end of the check period), the respondent s husband (Major Gen. Anand Kumar Kapoor) was in possession of assets to the extent of ₹5,51,92,598/-. These included both movable and immovable assets, either in his own name or in the name of the respondent. Three immovable properties of the respondent which are sought to be attached by the appellant were part of the immovable assets taken into account while calculating the assets held by the respondent s husband as on 10.10.2007. The Trial Court had found that a total income of ₹4,10,35,864/- had been earned during the check period and an expenditure of ₹1,26,52,600/- was incurred during the said period - After accounting for the same, as well as the assets available at the beginning of the check period, the Trial Court concluded that the assets to the extent of ₹2,22,04,290/- were disproportionate to the known sources of the income of respondent s husband. Thus, clearly the remaining assets were acquired from legitimate and known sources of income and therefore, cannot be considered as proceeds of crime. Assets, to the extent of ₹2,22,04,290/-, have been directed to be confiscated and thus, there is no scope for the present proceedings on the basis that any of the remaining assets constitute proceeds of crime. It is relevant to note that no particular assets held by respondent or her husband were identified as an asset derived from any criminal activity. The nature of the charge did not warrant any such inquiry and the extent of disproportionate assets had been determined on the basis of the value of assets at the end of the check period less the value that could be accounted from the known sources of income - the contention that three immovable assets held by the respondent are proceeds of crime, is fundamentally flawed. Appeal dismissed.

Summary

Issues:
Appeal against order under Prevention of Money Laundering Act - Provisional attachment of properties - Allegations under Prevention of Corruption Act - Acquittal of respondent - Confiscation of disproportionate assets - Challenge to attachment order - Interpretation of proceeds of crime under PMLA.

Analysis:
1. The Enforcement Directorate appealed against the Appellate Tribunal's order quashing the Provisional Attachment order dated 04.11.2016 and subsequent confirmation order dated 17.03.2017. The Tribunal had allowed the appeal by the respondent, who was acquitted by the CBI Court, leading to the release of certain properties from attachment.

2. The Provisional Attachment order was based on a case under Section 13(1)(e) of the Prevention of Corruption Act, 1988, against the respondent and her husband. The chargesheet alleged that the husband had amassed disproportionate assets, with the respondent abetting the offense. The husband was convicted, but the respondent was acquitted due to lack of evidence of abetment.

3. The Enforcement Directorate attached properties under PMLA, alleging they were proceeds of crime. The Tribunal released properties not part of the confiscated assets, as the respondent was acquitted. The Union of India challenged this, arguing that the properties constituted proceeds of crime as defined under PMLA, regardless of the respondent's acquittal.

4. The Court held that assets derived from criminal activity can be attached even if the possessor is not accused of a scheduled crime or money laundering. However, in this case, the three immovable properties of the respondent were not proceeds of crime. The assets held by the husband were legitimately acquired, with only a portion found disproportionate.

5. The Court emphasized that the remaining assets were not derived from criminal activity and could not be considered proceeds of crime. As the disproportionate assets were already confiscated, there was no basis for considering the remaining assets as proceeds of crime. The appeal was dismissed, finding no merit in the challenge to the attachment order.

6. The Court concluded that the contention that the three immovable assets held by the respondent were proceeds of crime was fundamentally flawed. The application was disposed of, affirming that the properties in question were not liable for attachment under PMLA.