2024 (10) TMI 152 - AT - Money Laundering

Money Laundering - retention/seizure/freezing of documents, digital records, and bank accounts by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act, 2002 - HELD THAT - After the completion of investigation, prosecution complaint is already filed by respondent ED, wherein present appellants along with other family members of Ashu Mehra are arrayed as accused persons. Even otherwise, the aforesaid properties are stated to be mentioned in the list of properties for the purpose of confiscation in case of conviction, in prosecution complaint case under PMLA. Therefore, the impugned order passed by Ld. Adjudicating Authority was just an interim order/step to protect the same, till the conclusion of trial. There are no illegality in the impugned order. Therefore, the Ld. Counsel for the appellants not agreed upon and hence, the present appeals are liable to be dismissed being devoid of any merits. However, seeing the fact that prosecution complaint is already filed, the present appellants are entitled to the copies of all relied upon documents/seized material and he has right to apply for release of all un-relied documents (if any), if the same are not required for any further investigation. The present appeals are hereby dismissed.

Issues Involved:

1. Legality of the retention/seizure/freezing of documents, digital records, and bank accounts by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act, 2002.
2. Allegations of fraudulent activities and money laundering involving bank officials and private entities.
3. Legitimacy of the attachment of properties and bank accounts.
4. Rights of the appellants concerning seized materials and documents.

Detailed Analysis:

1. Legality of Retention/Seizure/Freezing by ED:

The appeals were filed under Section 26 of the Prevention of Money Laundering Act, 2002, challenging the order dated 12.09.2017 by the Adjudicating Authority, which permitted the ED to retain, seize, and freeze documents, digital records, and bank accounts. The appellants contended that the search and seizure conducted on their premises were based on an FIR filed by the CBI, which led to the freezing of their properties and bank accounts. The Tribunal upheld the Adjudicating Authority's decision, stating that the order was an interim measure to protect the assets until the trial's conclusion. The Tribunal found no illegality in the impugned order, thereby dismissing the appeals.

2. Allegations of Fraudulent Activities and Money Laundering:

The case involved allegations against bank officials and private entities for causing a loss to the Indian Overseas Bank (IOB) amounting to USD 47.86 million (approximately Rs. 321 crores). The accused, including bank officials, were alleged to have issued fraudulent Letters of Comfort (LOC) and Letters of Undertaking (LOUs) through SWIFT messages, resulting in unauthorized buyers' credit. The Tribunal noted that the fraudulent activities were conducted without any underlying commercial transactions, leading to significant liabilities for the bank. The Directorate of Enforcement registered a case under the Prevention of Money Laundering Act, 2002, and conducted searches to trace the proceeds of crime.

3. Legitimacy of Attachment of Properties and Bank Accounts:

The appellants argued that the properties and bank accounts were acquired before the alleged offenses and should not be seized solely because Ashu Mehra, a key accused, was the Karta of the HUF. The ED contended that the properties and bank accounts were proceeds of crime and were used for money laundering activities. The Tribunal supported the ED's actions, stating that the properties were listed for confiscation in case of conviction under the PMLA. The Tribunal dismissed the appeals, finding no merit in the appellants' arguments regarding the legitimacy of the attachment.

4. Rights of the Appellants Concerning Seized Materials and Documents:

The Tribunal acknowledged the appellants' right to access all documents and materials relied upon by the prosecution. The appellants were entitled to apply for the release of any un-relied documents if not required for further investigation. The Tribunal clarified that its observations would not affect the merits of the prosecution's case under the PMLA.

Conclusion:

The appeals were dismissed, and the Tribunal upheld the Adjudicating Authority's order, allowing the ED to retain and seize the assets in question. The decision emphasized the interim nature of the order, pending the trial's outcome. The appellants' rights to access certain documents were recognized, but the Tribunal found no grounds to overturn the initial order. The judgment reinforced the legal framework for addressing money laundering and protecting financial institutions from fraudulent activities.

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