Avinash Bhosale Vs Deputy Director Directorate of Enforcement (Appellate Tribunal Under SAFEMA Delhi)
No Retrospective Laundering: Tribunal Quashes Bulk PMLA Attachments, Retains Only Rs 25 Cr as Proceeds of Crime
The Appellate Tribunal under SAFEMA partly allowed the appeals and significantly curtailed the provisional attachment under PMLA in a case linked to the Yes Bank–DHFL loan diversion scandal, involving alleged layering of funds through entities of Avinash Bhosale.
The Tribunal examined three distinct transactions alleged to be proceeds of crime and held that two major components of attachment were unsustainable.
First, regarding ₹67.85 crore (out of ₹431 crore received under a 2014 agreement), the Tribunal held that the Enforcement Directorate exceeded jurisdiction by questioning a commercial transaction entered four years prior to the alleged crime (2018). There was no allegation in the FIR/ECIR, nor any material to show that the parties anticipated future crime. It held that commercial terms (even if high return) cannot be questioned without jurisdiction, and such pre-offence transactions cannot be retrospectively treated as laundering.
Second, the Tribunal rejected the attachment of ₹71.82 crore treated as bogus consultancy, holding that payments made prior to the commission of offence cannot be treated as proceeds of crime, and no foundational evidence existed to show that consultancy agreements were sham or linked to future illegal activity. Reliance on a single statement ignoring contrary evidence was held insufficient.
However, the Tribunal upheld attachment of ₹25 crore relating to delayed payment in a dairy sale transaction, noting that payment after 3 years without completion of sale lacked commercial justification, and could validly be treated as proceeds of crime or its value.
The Tribunal also clarified that “inter-connected transactions” under Section 23 PMLA cannot be stretched to unrelated commercial dealings predating the offence, and authorities cannot assume future crime to retrospectively taint earlier transactions.
Accordingly, attachment was restricted only to ₹25 crore, and remaining attachments were set aside.
FULL TEXT OF THE ORDER OF APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI
By batch of four appeals under Section 26 of the Prevention of Money Laundering Act, 2002 (in short `the Act of 2002’), a challenge has been made to the order dated 27.01.2023 passed by the Adjudicating Authority confirming the Provisional Attachment Order dated 02.08.2022.
