The attachment of properties under the Prevention of Money Laundering Act can apply to assets acquired prior to the alleged commission of a crime, provided they demonstrate a connection to criminal activities.

Headnote:(A) Prevention of Money Laundering Act, 2002 - Section 5 - The court addressed appeals concerning properties attached under the Act before the determination of any crime occurrence, emphasizing that properties acquired prior to the offence may also be attached for equivalent value if linked to criminal activity - Judicial precedence reinforces that attachment under PMLA, 2002 can encompass properties derived from earlier transactions that demonstrate a linkage to criminal enterprises or whose characteristics align with proceeds of crime do define. (Paras 21, 24, 28)

(B) Appeal - The basis for attachment of properties under PMLA does not negate historical ownership timelines unless directly tied to criminal activities, as established in multiple precedents - The clarity of these statutes indicates that temporal acquisition does not inherently shield properties from being classified as proceeds of crime under specific scenarios. (Paras 22, 26, 27)

Facts of the case:
The appeals related to properties established pre-incident but implicated through financial and operational connections to criminal activities in the use of substantial funds, totaling approximately INR 22 Crores. The cases involved multiple entities and individuals accused of severe financial misconduct threatening the legitimacy of the banks and students alike affected by the alleged actions of the educational institution.

Findings of Court:
The Tribunal ultimately upheld the lower court's decision to retain the attached properties before the PMLA proceedings, given the complexity of attaching properties purchased before criminal events, while delineating the interpretation of proceeds of crime eligibility based on judicial interpretations of statute and existing precedents.

Issues: The main issues revolved around the lawful definition of proceeds of crime concerning properties acquired before alleged criminal actions and whether such properties could justifiably be attached without regard to their legal prior ownership timeline.

Ratio Decidendi: The court concluded that properties previously held could be classified under proceeds of crime when linked to criminal activities or if proceeds are not traceable, thereby solidifying the PMLA's applicability and intent.

Result: Appeals dismissed.

ORDER

17.04.2025

This common order seeks to dispose of the above-mentioned four appeals in which common issues have been raised for the consideration to this Appellate Tribunal.

2. The underlying facts briefly are that a large number of complaints were lodged against the aforementioned Shri T. D. Naidu, Chairman, and the authorities of D.D. Medical College and Hospital, D.D. Medical and Educational Trust, Thiruvallur, Tamilnadu, with the Inspector of District Crime Branch, Thiruvallur, Tamilnadu & Inspector of Police, Kanakamba Chatram Police Station, Thiruvallur, Tamilnadu, alleging that Shri T.D. Naidu and the authorities of D.D. Medical College and Hospital, Thiruvallur, Tamilnadu had taken a huge amount of money (Rs. 16.65 Crores approx.) towards admission in to the D.D. Medical College, Thiruvallur, Tamilnadu, without having necessary permission accorded by the Medical Council of India (owing to lack of infrastructure at the college) for the year 2011-12 and for subsequent period, by misrepresenting the facts of the status of the college to students and thereby cheated the students. When the complainants approached Shri T. D. Naidu and the authorities of D.D. Medical College, Thiruvallur, for return of their money, the authorities refused to return the cash and threatened the complainants. It was also alleged that Shri T. D. Naidu and the authorities of D.D. Medical College, Thiruvallur had cheated their various contractors and suppliers of various equipment to the college, who also had filed complaints with the Police.

3. On the basis of such complaints, a large number of FIRs had been registered by the Inspector of Police, District Crime Branch, Thiruvallur as well as by Inspector of Police, Kanakamba Chatram Police Station, Thiruvallur for the offences punishable under Sections 406 , 420, 468, 471, 506, etc., of the Indian Penal Code, 1860 ( IPC ). Shri T. D. Naidu, the Chairman of D.D. Medical College was arrested by the District Crime Branch Police, Thiruvallur and was detained subsequently under the provisions of the Tamilnadu Prevention of Dangerous Activities of Bootleggers, Drug Offenders, Forest Offenders, Goondas, Immoral Traffic Offenders, Sand Offenders, Slum Grabbers Act, 1982 .

4. As offences under Section 420 and Section 471 of Indian Penal Code, 1860 are Scheduled Offences under section 2(1)(y) of PMLA, 2002 and a prima facie a case of money laundering appeared to have been made out, an Enforcement Case Information Report (“ECIR”) No. 13/2013 dated 15.11.2013 was registered by the Directorate of Enforcement (“ED”) for investigation under the provisions of PMLA, 2002.

5. A letter was addressed to the Superintendent of Police, District Crime Branch, Thiruvallur, TamilNadu on 26.11.2013 requesting for copies of statements given by Shri T. D. Naidu and other accused along with the details of proceeds of the crime & other properties involved in the crime as identified by them. In response to the same, the Deputy Superintendent of Police, District Crime Branch, Thiruvallur, in his letter stated that Shri T. D. Naidu had cheated to the extent of Rs. 22,03,87,428.00; that there were 85 cases registered against him; and that they had no information about his assets and properties. The Deputy Superintendent of Police also enclosed vide his letter cited above, the copies of confessional statements dated 06.06.2013 & 26.01.2013 given by Shri T. D. Naidu and his associate, Shri Prabhu, respectively.

6. During the course of investigation under the provisions of PMLA, 2002, it was found that an FIR (FIR No. 3E/2012 dated 20.03.2012) had been registered by the CBI, Banking Security & Fraud Cell (BS&FC), Bangalore against T.D. Naidu, for having entered into a criminal conspiracy with Branch Manager of Andhra Bank, Chennai and dishonestly and fraudulently obtained term loan of Rs. 41 Crores from the bank. The copies of the Complaint bearing No. 680/GM/477 dated 17.03.2012 filed by Andhra Bank, Zonal Office, Chennai; the FIR No.

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2025 Supreme(Online)(ATFP) 314

The attachment of properties under the Prevention of Money Laundering Act can apply to assets acquired prior to the alleged commission of a crime, provided they demonstrate a connection to criminal activities.

Cases Referred (1)