2022 (12) TMI 269 - HC - Money Laundering

Money Laundering - scheduled offences - proceeds of crime - allegation is that the property has been acquired by D.Sridhar s family via criminal activities - provisional attachment of properties - HELD THAT - Admittedly, the Pothys had paid Rs.5,30,74,500/- as sale consideration to Kumari and Dhanalakshmi for purchasing the property. It is not the case of the Enforcement Directorate that the Pothys were benamies of Sridhar or Kumari or Dhanalakshmi. The Pothys have disclosed the entire payments that were made for the purchase of the said property. The Enforcement Directorate was not able to trace Rs.5,30,74,500/-, which had gone into the kitty of Kumari and Dhanalakshmi and therefore, they are now holding on to the property of the Pothys. When it is not the case of the Enforcement Directorate that the Pothys had purchased the property for a nominal consideration and that they are benamies of Sridhar and his family, the immovable property in the hands of the Pothys cannot be said to be proceeds of crime . At the risk of repetition, this Court has quashed the prosecution against Ramesh Pothy holding that he was not involved either directly or indirectly in the money laundering offence with Sridhar and his family members. Section 8(7) of the PMLA came up for consideration before a Division Bench of this Court in The Assistant Director v. Canara Bank 2021 (10) TMI 894 - MADRAS HIGH COURT , wherein, this Court has held that Section 8(7) of the PMLA is a stand alone section and is not governed by the proviso to Section 8(8) of the PMLA, as the latter would come into effect only after the culmination of the trial, but, whereas the former could be invoked during the pendency of the trial, if it is found that the trial is not progressing for any other reason . In this case, there was no progress in the trial from 2017 onwards for various reasons - the property in question, which belongs to the Pothys cannot be confiscated in lieu of Rs.5,30,74,500/- in the hands of their vendors, to wit, Kumari and Dhanalakshmi. Of course, it would be open to the Enforcement Directorate to attach other properties of Kumari and Dhanalakshmi, if they are not able to trace the sum of Rs.5,30,74,500/-, but, that can, by no stretch of imagination, empower them to attach the buyers' properties for the sin of having purchased the same for a valid consideration from a tainted seller. Criminal revision allowed.

Issues Involved:
1. Quashing of the order dated 14.07.2022 in Crl.M.P.No.9157 of 2022 in S.C.No.74 of 2017.
2. Provisional attachment of property under the Prevention of Money Laundering Act, 2002 (PMLA).
3. Innocent purchaser defense under PMLA.
4. Compliance with Section 8(7) of PMLA.
5. Release of property from attachment and refund of deposit.

Issue-Wise
Detailed Analysis:

1. Quashing of the Order Dated 14.07.2022:
The petition sought to quash the order dated 14.07.2022 in Crl.M.P.No.9157 of 2022 in S.C.No.74 of 2017. The court reiterated the facts and history of the case, noting that the petitioners had purchased a property from Dhanalakshmi Sridhar, who acquired it from her father Sridhar, a known criminal. The Enforcement Directorate (ED) had attached the property, claiming it was acquired through proceeds of crime. The court emphasized that the petitioner was not aware of the criminal origins of the property and was a bona fide purchaser.

2. Provisional Attachment of Property Under PMLA:
The ED provisionally attached the property under Section 5 of PMLA, suspecting it to be proceeds of crime. The attachment was confirmed by the adjudicating authority but later set aside by the appellate tribunal, which found the petitioners to be bona fide purchasers. The tribunal's decision was challenged, but the High Court upheld the tribunal's findings, noting that the petitioners had no involvement in money laundering.

3. Innocent Purchaser Defense Under PMLA:
The court examined whether the petitioner could be prosecuted under Sections 3 and 4 of PMLA. It highlighted that for a prosecution under these sections, the prosecution must show that the accused knowingly engaged in activities connected with proceeds of crime and projected it as untainted property. The court found no evidence that the petitioner was aware of the criminal origins of the property or that they projected it as untainted. The court noted that the petitioner had made payments through RTGS to Kumari, Dhanalakshmi's mother, which were reflected in the sale deed, thus establishing the bona fides of the transaction.

4. Compliance with Section 8(7) of PMLA:
The court considered the applicability of Section 8(7) of PMLA, which allows for the release of property if the trial cannot be conducted for reasons such as the death of the accused. The court noted that Sridhar, the principal accused, was deceased, and the trial had not progressed since 2017. The court referenced a previous Division Bench ruling that Section 8(7) is a standalone provision and can be invoked during the trial's pendency if it is not progressing.

5. Release of Property from Attachment and Refund of Deposit:
Given the quashing of the prosecution against the petitioner and the lack of progress in the trial, the court directed the trial court to release the attached property and refund the Rs.10,00,000/- deposit made by the petitioners. The court emphasized that the Enforcement Directorate had not appealed the quashing of the prosecution, further supporting the petitioners' claim for the release of the property.

Conclusion:
The court allowed the Criminal Original Petition, quashing the prosecution against the petitioner under Sections 3 and 4 of PMLA. It directed the trial court to release the attached property and refund the deposit, reiterating that the petitioners were bona fide purchasers with no involvement in money laundering activities. The court's decision was based on the lack of evidence showing the petitioner's knowledge of the property's criminal origins and the improper attachment of the property by the Enforcement Directorate.

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