2025 Supreme(Online)(ATFP) 70

APPELLATE TRIBUNAL FOR FORFEITED PROPERTY
SHRI V. ANANDARAJAN, MEMBER
N. K. Industries Limited – Appellant
Versus
Directorate of Enforcement (ED) – Respondent
FPA-PMLA-879/MUM/2015 | FPA-PMLA-855/MUM/2015

The definition of 'proceeds of crime' encompasses both direct and indirect gains from criminal activity and permits attachment of properties of equivalent value when direct proceeds are unavailable.

Headnote:(A) Prevention of Money Laundering Act, 2002 - Sections 2(1)(u), 5(1), 8(1) & 8(2) - Provisional Attachment Order - Appeals against order confirming attachment of properties linked to money laundering - Appellants claimed properties were obtained legitimately prior to alleged crime; however, it was found that funds were derived from proceeds of crime through documented transactions and were thus subject to attachment under PMLA. (Paras 1, 7, 15, 57 and 74)

(B) Proceeds of Crime - Definition and scope - It includes property derived directly or indirectly from criminal activity involving scheduled offenses as well as any property of equivalent value when direct proceeds are unavailable, demonstrating the broad reach of the Act in securing the state’s interests against money laundering activities. (Paras 12-14, 20, 63)

(C) Legal Principles - The courts must not only analyze the nature of the properties but also the financial transactions leading to their acquisition to determine if they originate from criminal activity. Attachments must reflect direct connections or equivalent values to proceeds of crime to be valid under PMLA. (Paras 18, 60-62)

Facts of the case:
The appeals concern the confirmation of provisional attachment orders regarding properties owned by the appellants, based on investigations into fraudulent activities associated with NSEL leading to money laundering claims amounting to several crores. The properties were acquired prior to the alleged criminal activities, which involved complex financial operations that ultimately implicated the appellants in the laundering of illegal gains from the NSEL fraud. (Paragraphs 2, 4)

Findings of Court:
The tribunal held that the appellant companies received substantial funds from a key accused in the NSEL case and that the sequence of financial transactions supports the view that the properties in question are linked to proceeds of crime. Thus, the attachment of the properties is upheld. (Paragraphs 12-14, 24)

Issues: The central issues addressed were whether the properties attached were indeed proceeds of crime under the PMLA, whether the provisional attachment was justified given the ongoing status of similar properties being seized by law enforcement, and whether the failure to establish an independent ground for attachment invalidated the order. (Paragraph 12, 56)

Ratio Decidendi: The court ruled that all properties connected with financial activities reflecting the proceeds of crime, including arrangements where legitimate and illegitimate funds intermingle, can be subject to attachment. Also, the necessity for attachment is justified regardless of the time of acquisition, emphasizing the intent of the legislation to combat money laundering. (Paras 18-19, 76)

Result: Appeals dismissed. (Para 66)