Case Note & Summary
The case involves three appeals under the Prevention of Money Laundering Act, 2002 (PMLA) arising from a provisional attachment order dated 30th March 2019 passed by the Joint Director, Directorate of Enforcement (ED) attaching properties belonging to Digambar Kamat, his wife Asha Kamat, Churchill Alemao, and his wife Maria Fatima Alemao. The ED alleged that these properties were proceeds of crime linked to a scheduled offence under the Indian Penal Code and the Prevention of Corruption Act, 1988, relating to illegal mining in Goa. The appellants challenged the attachment order before the Adjudicating Authority under PMLA, which confirmed the attachment. Aggrieved, the appellants filed appeals before the Appellate Tribunal under PMLA, which dismissed the appeals. Hence, the present appeals were filed before the High Court of Bombay at Goa. The main legal issue was whether the provisional attachment order under Section 5 PMLA could be sustained when the properties belonged to persons who were not accused of any scheduled offence and the attachment was based solely on the pendency of a scheduled offence against other persons. The appellants argued that the ED had not established any link between the properties and the scheduled offence, and that the attachment was arbitrary. The ED contended that the properties were acquired from the proceeds of illegal mining and that the attachment was valid. The High Court analyzed the provisions of PMLA, particularly Sections 2(1)(u), 3, 5, and 8(3), and held that the provisional attachment order must be based on the satisfaction that the properties are proceeds of crime, not merely on the pendency of a scheduled offence. The Court found that the ED had not provided any material to show that the properties were derived from the scheduled offence. The Court also held that the Adjudicating Authority and the Appellate Tribunal had failed to properly consider the requirements of the Act. Consequently, the High Court allowed the appeals, set aside the attachment order, and directed the release of the properties.
Headnote
A) Prevention of Money Laundering Act, 2002 - Provisional Attachment Order - Section 5 - Requirement of Satisfaction - The provisional attachment order under Section 5 PMLA must be based on the satisfaction of the Director or authorized officer that the properties are proceeds of crime and are likely to be dealt with in a manner to frustrate confiscation. Mere pendency of a scheduled offence against some persons does not justify attachment of properties of others who are not accused of any scheduled offence. Held that the attachment order must be based on independent material linking the properties to proceeds of crime (Paras 10-15). B) Prevention of Money Laundering Act, 2002 - Proceeds of Crime - Section 2(1)(u) - Definition - Proceeds of crime means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence. The property must be linked to the scheduled offence. Held that without such link, attachment is not sustainable (Paras 16-20). C) Prevention of Money Laundering Act, 2002 - Adjudication - Section 8(3) - Confirmation of Attachment - The Adjudicating Authority must independently consider whether the properties are proceeds of crime. Held that the authority cannot merely rely on the provisional attachment order but must apply its mind (Paras 21-25). D) Prevention of Money Laundering Act, 2002 - Appeal - Section 26 - Appellate Tribunal - The Appellate Tribunal under PMLA has jurisdiction to examine the validity of the provisional attachment order. Held that the Tribunal must consider whether the conditions under Section 5 are satisfied (Paras 26-30).
Issue of Consideration
Whether the provisional attachment order under Section 5 of the Prevention of Money Laundering Act, 2002 (PMLA) can be sustained when the properties attached belong to persons who are not accused of any scheduled offence and the attachment is based solely on the pendency of a scheduled offence against other persons.
Final Decision
The High Court allowed the appeals, set aside the provisional attachment order dated 30th March 2019, and directed the release of the properties of the appellants.
Law Points
- Provisional attachment order under PMLA must be based on satisfaction that properties are proceeds of crime
- not merely on pendency of scheduled offence
- Attachment of property of a person not accused of scheduled offence requires independent satisfaction
- Section 5 of PMLA requires recording of reasons in writing
- Section 8(3) of PMLA requires adjudicating authority to consider whether property is proceeds of crime
- Section 3 of PMLA defines money laundering as process of projecting untainted property as untainted
