Property Acquired Prior To Commission Of Criminal Activity Cannot Be Attached Under PMLA: Punjab & Haryana HC [Read Judgment]

In a case regarding the attachment of property under the Prevention of Money Laundering Act (PMLA), 2002, the High Court of Punjab & Haryana held that property acquired prior to the commission of criminal activity or the introduction of PMLA cannot be attached unless property obtained or acquired from scheduled offence is held or taken outside the country. The division bench of Justice Jaswant Singh and Justice Sant Prakash said if a property so is attached, " The Director or any other officer authorised by him is bound to record reasons which must be specific and mere reproduction of wording of Section 5 of PMLA is not sufficient." The appeals were filed under Section 42 of the Prevention of Money Laundering Act (PMLA), 2002 to quash the order passed by the Appellate Tribunals wherein the appeals of the Appellants assailing confirmation of provisional attachment order was dismissed. In the present case, an FIR was registered under Section 177, 420, 465, 467, 468, 471 of IPC against M/s Jaldhara Exports alleging fraudulent refund of VAT during February-March 2013. The respondent, Enforcement Directorate registered an Enforcement Case Information Report (ECIR). Thereafter the respondent provisionally attached a plot (property involved in Appeal No.1) and a flat (property involved in Appeal No.2) under Empire Residential Project belonging to the appellants. The Adjudicating Authority confirmed the attachment for a period of 90 days during the pendency of investigation or pendency of the proceeding before the court under the Prevention of Money Laundering Act (PMLA), 2002. The appellant, in this case, raised three questions: (i) whether the investigation was pending at the time of expiry of 90 days from the date of the confirmation order? (ii) whether the property in question was purchased much prior to not the only commission of alleged offence but also the introduction of PMLA? (iii) whether there is non-complaince of the requirement of recording of reasons prior to provisional attachment of property? It was contended that the property involved in Appeal no. 1 was purchased in 1991 and property involved in the Appeal no.2 was purchased in 2012 whereas the alleged scheduled offence was committed in February-March 2013. Thus, the property in question cannot be treated or declared as proceeds of crime. As per the definition of "Proceeds of Crime' under Section 2(1)(u) of the PMLA especially in view of explanation inserted by Section 192 of Finance Act, 2019 says, "proceeds of crime must be directly or indirectly obtained or derived from the scheduled offence unless property derived or obtained from scheduled offence unless property derived or obtained from scheduled offence is held or taken outside the country, in which case property equivalent in value held in India may be attached." Section 5 of PMLA says, " Property may be attached if it's likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to the confiscation of such proceeds of crime." The court noted the three limbs of Section 2(1)(u) of the PMLA which says, " (i) Any property derived or obtained directly or indirectly as a result of criminal activity relating to the scheduled offence; (ii) Value of property derived or obtained from criminal activity; (iii) Property equivalent in value held in India or outside where property obtained or derived from criminal activity is taken or held outside the country." Further, the court examined Sections 5 and 8 of PMLA and said, "As per Section 5 of the PMLA, any property of any person involved in money laundering may be provisionally attached. The attachment may be made after the filing of police report or complaint with respect to the scheduled offence, however where the attachment is immediately required, it may subject to compliance of inbuilt safeguards, be made even prior to the filing of the police report or complaint qua scheduled offence." "As per Section 8 of the PMLA, the Adjudicating Authority shall serve notice upon the person whose property has been attached calling upon him to the indicated source of his income, earnings or assets out of which or by means of which he has acquired attached property. The Adjudicating Authority after considering representation shall record a finding whether properties are involved in money laundering or not. The attachment shall continue during the investigation for a period not exceeding 90 days (amended to 365 days by Act 7 of 2019) or pendency of criminal proceedings relating to offence under PMLA before Competent Court. The provisional attachment shall become final on the conclusion of the trial and confiscation of attached property by Special Court. If on the conclusion of the trial, Court finds that offence ...

Property Acquired Prior To Commission Of Criminal Activity Cannot Be Attached Under PMLA: Punjab & Haryana HC [Read Judgment]

Arabhi Anandan

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