2020 (12) TMI 152 - HC - Money Laundering

Continuation of attachment during the pendency of the appeal - money laundering - siphoning of funds - loss of ₹ 2654.40 crores to a consortium of as many as eleven banks - HELD THAT - It has to be considered that the attachment orders by the Prevention of Money Laundering authorities came to be issued subsequent to the Central Bureau of Investigation having filed the F.I.R. and chargesheet against M/s.DPIL and after thorough investigation. When prima facie case has been made out under the Prevention of Money Laundering Act, attachment of the properties as per the orders passed by the authorities could not be said to be unjustified in law. Section 2(1)(u) of the PML Act, 2002 defines the proceeds of crime as a property derived out of criminal activity or even the value of any such property. The submission on behalf of the appellants was acceptable that Section 71 of the PML Act gives an overriding effect to the provisions of the Act over any other law. The whole object of the law of money laundering is to prevent the money laundering and to confiscate the properties derived from and involved in the money laundering or which are those held incidental thereto. The powers exercised for attachment of the properties by the appellants herein have to be justified in that view. If the attachment is released while the appeal is pending, it would render the appeal virtually meaningless from the backdoor, which cannot be permitted. The order dated 18th June, 2019 passed by the Appellate Tribunal, PMLA, New Delhi, which is impugned in this appeal whereby attachment of the properties of M/s.DPIL is released shall remain stayed till the final outcome of this appeal - Application allowed.

Summary

Issues:
1. Challenge against the judgment of the Appellate Tribunal regarding the release of property attachment under the Prevention of Money Laundering Act.
2. Interpretation of the provisions of the Insolvency and Bankruptcy Code, 2016 in relation to the attachment of properties under the Prevention of Money Laundering Act.
3. Consideration of the overriding effect of the Prevention of Money Laundering Act over other laws.
4. Justification of the attachment of properties during the pendency of legal proceedings.

Analysis:
1. The appeal challenges the Appellate Tribunal's decision to release the attachment over the properties of a company under the Prevention of Money Laundering Act. The Tribunal had confirmed the provisional attachment order issued by the competent authority, which was later set aside. The Court admitted the appeal, emphasizing the importance of the raised legal questions.

2. The appellant argued that the provisional attachment was prior to the initiation of insolvency proceedings under the Insolvency and Bankruptcy Code, 2016. They contended that the moratorium period began after the admission of the insolvency proceedings, not before, and thus, the attachment should continue. On the other hand, the respondent opposed the interim stay, citing provisions of the Insolvency Code and claiming that the attachment should not have been confirmed.

3. The Court considered the overriding effect of the Prevention of Money Laundering Act, stating that the Act aims to prevent money laundering and confiscate properties derived from criminal activities. It noted that the Act provides for the attachment of properties involved in money laundering, and the powers exercised by the authorities must be justified. The Court accepted the appellant's argument that the Act prevails over other laws in cases of money laundering.

4. The Court found the allegations against the company to be serious, involving a significant amount of money and fraudulent activities. It deemed the attachment of the company's properties during legal proceedings to be justified and proper. The Court criticized the Appellate Tribunal for vacating the attachment orders, emphasizing the need to prevent the laundering of proceeds of crime.

5. Consequently, the Court stayed the release of the property attachment pending the final outcome of the appeal. The original attachment order was to remain in effect during the appeal's pendency. The parties were allowed to approach the Court for a final hearing after three months.