2025 Supreme(Online)(ATFP) 13405

APPELLATE TRIBUNAL FOR FORFEITED PROPERTY
V. Anandrajan, Member
Shrradha Sidhwani Sonia Lalwani – Appellant
Versus
The Deputy Director Directorate of Enforcement Delhi – Respondent
FPA-PMLA-1445/DLI/2024

Under PMLA, property acquired before the scheduled offence can be attached as equivalent value of proceeds of crime if the actual proceeds are untraceable, based on the three-limb definition in Section 2(1)(u).

Headnote:(A) Prevention of Money Laundering Act, 2002 (PMLA) - Sections 2(1)(u), 5, 8, 26 - Definition of 'proceeds of crime' - Three limbs: (i) property derived/obtained directly/indirectly from criminal activity relating to scheduled offence; (ii) 'the value of any such property' (equivalent value) when the actual proceeds are not available; (iii) property equivalent in value held within/outside country when proceeds taken/held abroad - Indian Penal Code, 1860 - Sections 120B, 406, 420 - Prevention of Corruption Act, 1988 - Sections 13(2) read with 13(1)(d) - Scheduled offences under PMLA.

(B) Attachment of property - Property acquired prior to commission of scheduled offence can be attached as 'value' of proceeds of crime under the second limb of Section 2(1)(u) - The second limb is not dependent on the first limb; it applies when the directly/indirectly derived proceeds have been siphoned off or are untraceable - Judgment in Vijay Madanlal Choudhary v. Union of India (2022 SCC OnLine SC 929) para 68 clarifies that the definition is wide enough to include value of any such property, not limited to cases where proceeds are taken out of the country - The decision in Pavana Dibbur v. Enforcement Directorate (2023) 15 SCC 91 does not overrule this three-limb interpretation as the issue of the second limb was not argued - The Appellate Tribunal's earlier decisions in Sadananda Nayak and Kumar Sanjit Krishna followed.

(C) Civil dispute over title - The Adjudicating Authority and the Appellate Tribunal are not the appropriate forums to decide civil title disputes; mere attachment does not alter ownership or possession - The matter of ownership being sub judice before a civil court does not bar attachment under PMLA.

(D) Reasons to believe - The requirement of Section 5(1)(b) PMLA (apprehension of concealment/transfer) can be satisfied by the detailed modus operandi showing that proceeds have been exhausted or layered - Mechanical reproduction of statutory language is not sufficient, but in the present case the PAO discussed the trail and concluded that proceeds were not available.

Facts of the case:
A complaint by Union Bank of India led to CBI FIR against M/s Associate High Pressure Technologies Pvt. Ltd. and others for cheating and criminal conspiracy causing loss of approximately Rs. 149.89 crore. The ED registered an ECIR and conducted investigation under PMLA, resulting in a Provisional Attachment Order (PAO) attaching several properties, including 83/100th share of an agricultural land. The appellants, two sisters, claimed ownership of 50% share in that land through a will executed by their father (a director of the accused company) who had purchased the property in 2004. The father died in 2016, prior to the alleged period of offence (2016-2021). The ownership of the property was disputed and was sub judice before a civil court. The Adjudicating Authority confirmed the attachment. Aggrieved, the appellants filed appeals under Section 26 PMLA.

Findings of Court:
The Appellate Tribunal held that the property was attached as 'value' of proceeds of crime under the second limb of Section 2(1)(u) PMLA, not as direct proceeds. Therefore, the fact that the property was acquired before the scheduled offence is irrelevant. The definition of 'proceeds of crime' has three limbs; the second limb ('the value of any such property') allows attachment of equivalent value when the actual proceeds are not available, regardless of when the property was acquired. The Tribunal relied on the three-judge bench decision in Vijay Madanlal Choudhary and the Delhi High Court judgments in Axis Bank and Prakash Industries, rejecting the contrary view in Seema Garg and the Kerala High Court decision in Davy Varghese. The Tribunal also noted that the appellants' ownership dispute is a civil matter not to be decided in PMLA proceedings, and the PAO adequately recorded reasons to believe that the proceeds had been exhausted.

Issues: (1) Whether property acquired prior to the commission of the scheduled offence can be attached under PMLA? (2) Whether the attachment was valid when the appellants were not accused and ownership was disputed? (3) Whether the respondent had sufficient reasons to believe that the property was likely to be concealed or transferred?

Ratio Decidendi: Under the PMLA, the definition of 'proceeds of crime' in Section 2(1)(u) comprises three limbs. The second limb permits attachment of property of equivalent value to the proceeds of crime when the directly/indirectly derived proceeds are not available, irrespective of when the property was acquired. This interpretation furthers the legislative intent to prevent money laundering and does not make the second limb redundant. The Adjudicating Authority is not the proper forum to decide civil title disputes, and mere attachment does not affect title. The requirement of 'reason to believe' under Section 5(1)(b) can be satisfied by material showing that the proceeds have been layered or exhausted.

Result: Appeals dismissed. The impugned order confirming the attachment is upheld. No order as to costs. It is clarified that nothing in the order expresses an opinion on the right or interest of the appellants or other parties in the attached property.