Case Note & Summary
The Directorate of Enforcement (appellant) filed a Miscellaneous Second Appeal under Section 42 of the Prevention of Money Laundering Act, 2002 (PMLA) against an order dated 11.09.2019 passed by the Appellate Tribunal under PMLA, New Delhi. The Tribunal had set aside the provisional attachment order dated 27.02.2017 passed by the appellant in ECIR No.12/BGZO/2015 and the order of the Adjudicating Authority dated 11.10.2017 in O.C.No.703/2017, which had confirmed the attachment. The respondent was M/s Devas Multimedia Pvt Ltd, represented by the Official Liquidator. The appeal was heard by a Division Bench of the High Court of Karnataka at Bengaluru. The core issue was whether the property attached by the Enforcement Directorate was 'proceeds of crime' derived from a scheduled offence under PMLA. The appellant argued that the respondent company was involved in money laundering and that the attached property was linked to a scheduled offence. However, the respondent contended that no scheduled offence had been committed by the company, and the attachment was without basis. The High Court, after hearing both sides, upheld the Tribunal's order. The Court noted that the Tribunal had correctly found that the Enforcement Directorate had failed to establish that the property was proceeds of crime, as the predicate offence was not committed by the respondent. The Court emphasized that under Section 3 of PMLA, the definition of 'proceeds of crime' requires a direct connection to a scheduled offence. Since no such connection was proved, the attachment could not stand. The Court also observed that the Tribunal's findings of fact were not perverse and did not warrant interference under Section 42. Consequently, the appeal was dismissed, and the Tribunal's order was affirmed.
Headnote
A) Prevention of Money Laundering Act, 2002 - Section 42 - Appeal against order of Appellate Tribunal - The Directorate of Enforcement appealed against the order of the Appellate Tribunal which set aside the provisional attachment of property under Section 5 of PMLA. The High Court dismissed the appeal, holding that the Tribunal had correctly found that the property was not proceeds of crime as the scheduled offence was not committed by the respondent company. (Paras 2-10) B) Prevention of Money Laundering Act, 2002 - Section 3 - Proceeds of Crime - The Court held that for property to be attached as proceeds of crime, there must be a direct nexus between the property and a scheduled offence committed by the person in possession. Mere suspicion or allegation of money laundering without a predicate offence is insufficient. (Paras 5-8) C) Prevention of Money Laundering Act, 2002 - Section 5 - Provisional Attachment - The Court observed that the provisional attachment order must be based on credible material linking the property to a scheduled offence. In this case, the Enforcement Directorate failed to establish such a link, and the Tribunal's finding of fact was not perverse. (Paras 6-9)
Issue of Consideration
Whether the Appellate Tribunal under the Prevention of Money Laundering Act, 2002 was correct in setting aside the provisional attachment order and the adjudicating authority's confirmation order on the ground that the property attached was not proceeds of crime derived from a scheduled offence committed by the respondent company.
Final Decision
The High Court dismissed the appeal, upholding the order of the Appellate Tribunal dated 11.09.2019 which set aside the provisional attachment and the Adjudicating Authority's confirmation order.
Law Points
- Prevention of Money Laundering Act
- 2002
- Section 42
- Section 3
- Section 2(1)(u)
- Section 5
- Section 8
- proceeds of crime
- scheduled offence
- attachment of property
- burden of proof
- appellate tribunal's jurisdiction
