2025 Supreme(Online)(ATFP) 13341

APPELLATE TRIBUNAL FOR FORFEITED PROPERTY
Munishwar Nath Bhandari, Chairman
Abhishek Jha Amita Jha Pooja Singhal M/s Pulse Sanjeevani Pvt. Ltd. vs. The Deputy Director Directorate of Enforcement Ranchi.
FPA-PMLA-6098/RNC/2023

In PMLA proceedings, the burden of proving that attached properties are not proceeds of crime lies on the appellant; mere assertions of legitimate source without credible evidence cannot displace the prima facie case.

Headnote:(A) Prevention of Money Laundering Act, 2002 - Sections 5(1)(b), 26 and 50 - Indian Penal Code, 1860 - Sections 406, 409, 423, 424, 465 and 120B - Prevention of Corruption Act, 1988 - Sections 11, 13(2) and 13(1)(e) - Provisional attachment of properties - Proceeds of crime - The appellant, a former District Collector, along with her husband and others, challenged the confirmation of attachment of properties worth Rs.18 crores, arguing that the proceeds of crime attributable to them were only Rs.90 lakhs (5% commission) and that the attached properties were from disclosed sources including overseas earnings, gifts and bank loans. The Tribunal held that the proceeds of crime were not limited to the commission but included the entire defalcated amount of Rs.18.06 crores, and that the appellants failed to discharge the burden of proving the legitimate source of funds. (Paras 2-6, 19-22)

(B) Provisional attachment - Section 5(1)(b) of PMLA - The provision can be invoked if the property is likely to be concealed, transferred or dealt with so as to frustrate confiscation. The fact that the attached property is a hospital serving the public does not, by itself, preclude the application of the provision. (Para 16)

(C) Burden of proof - In PMLA proceedings, once a prima facie case of money laundering is established based on investigation and statements recorded under Section 50, the onus shifts to the appellant to prove that the attached properties are not proceeds of crime. Mere assertions of legitimate earnings, without credible documentary evidence, are insufficient. (Paras 22-26)

Facts of the case:
The Enforcement Directorate registered an ECIR based on multiple FIRs against a Junior Engineer and others for defalcation of government funds amounting to Rs.18.06 crores in rural development projects. Investigation revealed that the appellant, while serving as District Collector, received 5% commission of the project cost. A provisional attachment order was made against properties of the appellant, her husband, her mother-in-law and a company owned by them. The Adjudicating Authority confirmed the attachment. The appellants challenged the order, contending that the attached properties were disproportionate to the alleged proceeds of crime and that the funds used to acquire them came from disclosed sources such as the husband's overseas employment, gifts, insurance claims and bank loans.

Findings of Court:
The Tribunal found that the proceeds of crime were not limited to the 5% commission but encompassed the entire embezzled amount. The appellants' claims of legitimate source were not supported by credible evidence. Cash deposits of Rs.73.81 lakhs in the appellant's bank account were unexplained and disproportionate to her known sources of income. The husband's alleged overseas earnings, transfers to relatives, and gifts could not be satisfactorily accounted for, especially given the lack of contemporaneous records and the use of cash in transactions. The court held that the respondents had established a prima facie nexus between the attached properties and the proceeds of crime, and the appellants failed to rebut the same.

Issues: (1) Whether the provisional attachment of properties was disproportionate to the proceeds of crime? (2) Whether the appellants had proved that the attached properties were acquired from legitimate sources? (3) Whether there existed a nexus between the properties and the proceeds of crime?

Ratio Decidendi: The burden of proof under PMLA shifts to the person claiming that the property is not proceeds of crime once the investigating agency establishes a prima facie case. In the absence of credible documentary evidence explaining the source of funds, especially where large cash deposits are made and income tax returns are not filed, the attachment is justified.

Result: Appeals dismissed. (Para 29)