2023 (3) TMI 744 - HC - Money Laundering

Confiscation of property (on death of the accused) - accused had died before the trial could be held - Money Laundering - scheduled offences - criminal conspiracy - cheating - forgery of valuable security - forgery for the purpose of cheating - using as genuine, forged document - criminal misconduct - HELD THAT - Prevention of Money Laundering Act, 2002 is a new Act and is in the process of growth and evolution by way of legislative amendments and Judicial pronouncements. The provision of attachment of crime proceeds in chapter III of the Act is many ways a leap forward in penal law to retrieve the loss caused to the victim, mostly public exchequer, by commission of the scheduled offence. Statement of objects and reasons of Money-Laundering (Amendment) Bill,2011 3 (d), provided to make provision for attachment and confiscation of proceeds of crime even if there was no conviction so long it was proved that money laundering had taken place and property in question was involved in money laundering. In cases involving large scale embezzlement of public fund, if after the death of the principal accused, crime proceeds are released in favour of his heirs and legal representatives, the very object of the Act will be defeated to a large extent. In view of the express provision of confiscation in the event of death of the accused, the argument that there is a general presumption of innocence in favour of the accused and therefore death should be deemed to be acquitted is not tenable in view of the special provisions of the Act. Further, there is a reverse burden of proof against a person accused of an offence under Section 3 and unless the contrary is proved it shall be presumed that such proceeds of crime were involved in money laundering. It has been held in Vijay Madan Lal Choudhary Vs. Union of India 2022 (7) TMI 1316 - SUPREME COURT that the legal presumption in the context of Section 24(b) of the 2002 Act is attracted once the foundational fact of existence of proceeds of crime and the link of such person therewith in the process or activity is established by the prosecution. The stated legal presumption can be invoked in the proceeding before the Adjudicating Authority or the Court, as the case may be. The legal presumption is about the fact that the proceeds of crime are involved in money-laundering which, however, can be rebutted by the person by producing evidence within his personal knowledge. Accused no.2 Dharamveer Bhadoria died on 2.5.2021 during the pendency of the trial before the special court for offences under PMLA Act. He was also an accused before the Special Court CBI, Ranchi in RC 20/2009. The learned court below has noted that sufficient opportunity was given by the adjudicating authority to discharge the burden of proof u/s 24 of PMLA which it failed to discharge. The present petitioner Naveen Singh S/o of B.P. Singh claiming to the Managing Director of M/s Nav Nirman Builders and Developers Pvt Ltd was a third party failed to provide legitimate source of income or the receipts derived by the company from various sources. Accused no.2 was the person principally dealing with and control of the affairs of the company - Admittedly the confiscated properties are not proceeds of crime but are in lieu of the value of crime proceeds. Main contention of the petitioner is that the property in question was not acquired by the proceeds of crime, but was acquired by independent sources of the company. With regard to the plea of the appeal being pending before appellate authority, this Court is in agreement with the position of law as enunciated in Deputy Director, Directorate of Enforcement Vs Axis Bank 2019 (4) TMI 250 - DELHI HIGH COURT wherein it has been held that the jurisdiction to entertain objections to attachment conferred on the appellate tribunal on the one hand and, on the special court on the other may be co-ordinate to an extent. The order of confiscation cannot be set aside merely on the ground that the accused had died before the trial could be held and the accused convicted of the charges. Whether there was merit in the plea for release of attached property is a question of fact which needs to be adjudicated by the Court concerned while hearing the petition under Sections 8(7) or 8(8). This court does not find any infirmity in the impugned order - petition stands dismissed.

Summary

Issues Involved:
1. Quashing of the order dated 15.09.2022 for confiscation of property under Section 8(7) of PMLA.
2. Dismissal of the application under Section 8(8) of PMLA for release of property.
3. Prosecution complaint under Section 45 of PMLA.
4. Charges under Sections 3 and 4 of PMLA.
5. Death of the main accused and its impact on confiscation.
6. Interpretation and application of Sections 8(7), 8(8), and 24 of PMLA.
7. Legal presumption and burden of proof under Section 24 of PMLA.
8. Appeal pending under Section 26 before the appellate authority.

Detailed Analysis:

1. Quashing of the Order dated 15.09.2022:
The petition was filed to quash the order allowing the Enforcement Directorate's (ED) application under Section 8(7) of PMLA for confiscation of property and dismissing the petitioner's application under Section 8(8) of PMLA for release of property. The court found no infirmity in the impugned order and dismissed the petition.

2. Dismissal of Application under Section 8(8) of PMLA:
The petitioner sought the release of confiscated property under Section 8(8) of PMLA. The court noted that the confiscation was permissible even after the death of the accused, as per the special provisions of the Act, and upheld the dismissal of the application for release of property.

3. Prosecution Complaint under Section 45 of PMLA:
The prosecution complaint was filed against a firm and its director under Sections 3 and 4 of PMLA for money laundering and for confiscation of provisionally attached property. The court upheld the prosecution's case and confirmed the confiscation order.

4. Charges under Sections 3 and 4 of PMLA:
The charges were based on the allegation that the firm and its director were involved in money laundering. The court found that the proceeds of crime were credited to the firm's account and laundered, thus justifying the confiscation.

5. Death of the Main Accused and Its Impact on Confiscation:
The main accused died during the trial, leading to the dropping of charges against him. However, the court held that the death of the accused does not preclude confiscation under Section 8(7) of PMLA, as the Act allows for confiscation even if the trial cannot be concluded due to the death of the accused.

6. Interpretation and Application of Sections 8(7), 8(8), and 24 of PMLA:
The court interpreted Section 8(7) to allow confiscation in cases where the trial cannot be conducted due to the death of the accused. Section 8(8) allows for the restoration of confiscated property to a claimant with a legitimate interest, provided they acted in good faith. Section 24 places the burden of proof on the accused to show that the proceeds of crime are not involved in money laundering.

7. Legal Presumption and Burden of Proof under Section 24 of PMLA:
The court emphasized the reverse burden of proof under Section 24, which presumes that proceeds of crime are involved in money laundering unless proven otherwise by the accused. This presumption was upheld in the case of Vijay Madanlal Choudhary Vs. Union of India.

8. Appeal Pending under Section 26 before the Appellate Authority:
The court noted that the appeal was pending before the appellate authority under Section 26. However, it held that the special court has the jurisdiction to entertain objections to attachment and confiscation, and the pending appeal does not affect the confiscation order.

Conclusion:
The court dismissed the criminal miscellaneous petition, upholding the confiscation order and the dismissal of the application for release of property. The court found that the provisions of PMLA, including the reverse burden of proof and the ability to confiscate property even after the death of the accused, were correctly applied. The appeal pending before the appellate authority did not impact the validity of the confiscation order.