2020 (7) TMI 532 - AT - Money Laundering

Money Laundering - proceeds of crime - Liquidation/transfer of attached amount before expiry of appeal period - challenge on the ground that the transfer as contrary to the prayer made in the PAO and the consequent confirmation order passed by the Adjudicating Authority - section 26 (3) of the PMLA, 2002 - applicant came to know about it after resuming business - business was closed due to COVID-19 pandemic situation - violation of principles of natural justice. Whether the appellant has made out a prima facie case for grant of order of status quo ante? - HELD THAT - Since the respondent has followed the procedure prescribed, there are no illegality found in getting the amount transferred in the account of ED. The appellant has offered Bank Guarantee for the retransfer of the aforesaid amount is not agreed by the respondent. During the course of hearing, the ld. senior counsel for the appellant submitted that the appellant is economically hard pressed and the aforesaid amount would be utilized by them for their real estate business. The appellant could not make out a prima facie case and there are no merit in the application, hence, the application seeking ad-interim order for reversal of the transfer of funds and restoration of status quo-ante is dismissed. The appeal is already listed on 11th September, 2020.

Issues Involved:
1. Interim stay on the operation of the impugned order.
2. Reversal of the transfer of funds and restoration of status quo-ante.
3. Legality of the transfer of funds by the respondent.
4. Offer of Bank Guarantee by the appellant.

Issue-wise Detailed Analysis:

1. Interim Stay on the Operation of the Impugned Order:
The appellant sought an interim stay on the operation of the impugned order dated 10.01.2020, arguing that the amount of ?6,03,53,579/- had been transferred to the respondent without their knowledge. The Tribunal noted that since the amount had already been transferred, the stay application (MP-PMLA-7104/CHD/2020) had become infructuous and was dismissed. Consequently, the urgent application (MP-PMLA-7103/CHD/2020) was also disposed of as it had no relevance.

2. Reversal of the Transfer of Funds and Restoration of Status Quo-Ante:
The appellant filed an application (MP-PMLA-7145/CHD/2020) seeking an ad-interim order for the reversal of the transfer of funds and restoration of status quo-ante. The appellant argued that the transfer of funds was undertaken before the expiry of the appeal period prescribed under Section 26(3) of the PMLA, 2002. They claimed that the transfer was done without their knowledge due to the COVID-19 pandemic and that they had not been charge-sheeted by the CBI in the predicate offence. The appellant also contended that the proceedings were ultra-vires to Article 20(1) of the Constitution of India, as the predicated offences were not scheduled offences at the time of their alleged commission. They relied on an interim relief granted by the Delhi High Court in a similar case and argued that the attachment was a civil attachment, and any adverse action should be taken only after the statutory appeal period had expired.

3. Legality of the Transfer of Funds by the Respondent:
The respondent opposed the application, arguing that the transfer of funds was legal and justified under Rule 4(5) of the Prevention of Money Laundering (Taking Possession of Attached or Frozen Properties Confirmed by the Adjudicating Authority) Rules, 2013. They contended that the appellant was involved in money laundering, and the attached amount was the proceeds of crime. The respondent also argued that the act of money laundering is a continuing offence and does not involve retrospective application. They maintained that the transfer of funds was done in accordance with the law and that the appellant's reliance on the Delhi High Court's order was not tenable.

4. Offer of Bank Guarantee by the Appellant:
The appellant offered to provide a Bank Guarantee of the same amount to secure the funds and argued that the transfer of funds was unnecessary. They claimed that the funds were needed for their business operations and that the attachment was merely to maintain the balance. The respondent, however, rejected this offer, arguing that such substitution is not legally recognized and that the funds were the proceeds of crime, which could not be allowed to be used by the appellant.

Tribunal's Decision:
The Tribunal examined whether the appellant had made a prima facie case for the grant of an order of status quo-ante. The Tribunal found that the respondent had followed the prescribed procedure under Rule 4(5) of the said Rules and Section 8(4) of the PMLA, 2002, which empowered them to take possession of the attached property. The Tribunal held that there was no illegality in the respondent's action of transferring the funds. The appellant's offer of a Bank Guarantee was also rejected, as the funds were alleged to be the proceeds of crime. Consequently, the application seeking an ad-interim order for the reversal of the transfer of funds and restoration of status quo-ante was dismissed. The appeal was listed for hearing on 11th September 2020.

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