2024 (10) TMI 387 - AT - Money Laundering

Money Laundering - Proceeds of crime - scheduled offences - respondent ED are allowed to retain/seize/freeze the documents, digital records, bank accounts etc., seized from the premises of various persons including the present appellant company, during the search conducted on 07.04.2017 - Sections 420 120B of the Indian Penal Code, 1860 and Section 13(2) r/w 13(1) (d) of the Prevention of Corruption Act, 1988 - principles of natural justice - HELD THAT - The fact that present appellant is neither named in the CBI/police charge-sheet case, nor in the prosecution complaint filed by respondent ED is no ground to release the said amount, as there is nothing on record that appellant supplied any goods or services against the said amount to M/s Prenda Creations, by way of any invoice/bill. Therefore, the sum of Rs. 6.05 Crores being part of proceeds of crime which were transferred to the aforesaid bank account of M/s RAP Events is correctly seized/frozen by respondent ED. The appellant M/s RAP Events cannot be allowed for unjust enrichment out of the proceeds of crime, simply because, appellant was ignorant about the nature of said remittance. The present appeals are liable to be dismissed being devoid of any merits - Appeal dismissed.

Summary

Issues:
1. Appeal against the order allowing retention/seizure/freeze of documents and bank accounts.
2. Allegations of money laundering and fraud involving bank officials and companies.
3. Freezing of the appellant's bank account by the Enforcement Directorate.
4. Dispute over the release of frozen bank account funds.

Analysis:
1. The appeal was filed against the order permitting the Enforcement Directorate (ED) to retain/seize/freeze documents, digital records, and bank accounts seized during a search conducted on 07.04.2017. The appellant company challenged this order passed by the Adjudicating Authority under the Prevention of Money Laundering Act, 2002.

2. The case involved allegations of money laundering and fraud related to fraudulent swift messages issued by bank officials in collusion with various companies. The accused individuals, including bank officials and company directors, were implicated in causing a loss of USD 47.86 million to the bank. The Enforcement Directorate conducted searches and froze bank accounts, lockers, and properties to trace the proceeds of crime under the Prevention of Money Laundering Act.

3. The appellant, a partnership firm engaged in event management, had its bank account frozen by the Enforcement Directorate based on the FIR filed by the CBI. The appellant argued that the frozen account was essential for the day-to-day operations of the company and requested its release. However, the Enforcement Directorate contended that the funds in the account were part of the proceeds of crime and should remain frozen.

4. The dispute centered around the release of the frozen bank account funds. The appellant received a substantial amount from another firm for investment in commercial activities, but the Enforcement Directorate argued that even if the appellant was an innocent receiver of the funds, the amount should be frozen as it was transferred from proceeds of crime. The appellant failed to provide evidence of supplying goods or services against the received amount, leading to the dismissal of the appeal.

5. The Tribunal dismissed the appeal, upholding the freezing of the appellant's bank account funds. The Tribunal found that the received amount was part of the proceeds of crime and should not be released to prevent unjust enrichment. The decision emphasized that ignorance about the nature of the remittance did not justify retaining the funds. The dismissal was based on the lack of merit in the appellant's arguments.

6. The judgment concluded by dismissing the appeal and disposing of pending applications. It clarified that the decision did not impact the ongoing prosecution case under the Prevention of Money Laundering Act, 2002. The appeal was deemed devoid of merits, leading to its dismissal by the Tribunal.