Pre-Offence Property Can Be Attached as Equivalent Value Under PMLA: SAFEMA

Rajeshwari Kulkarni Vs Deputy Director (Appellate Tribunal under SAFEMA)

Property Bought Before the Crime Can Also Be Attached Under PMLA as “Equivalent Value”; Wife’s Name and Explained Sources Offer No Absolute Protection

Summary: The Appellate Tribunal under SAFEMA has held that property acquired before the alleged commission of the scheduled offence, and even property acquired from legitimate and explained sources, can be attached under the Prevention of Money Laundering Act, 2002 where it represents the “value of” the actual proceeds of crime. The Tribunal also held that property standing in the name of the accused’s wife could be attached where the acquisition was partly or substantially funded by the accused. However, while sustaining the attachment, the Tribunal protected the appellants’ physical possession of the residential properties during the pendency of the prosecution, except in exceptional circumstances.

Background of the Case

The appeals arose from an order confirming the provisional attachment of two residential properties situated at Jogeshwari and Bandra, Mumbai, having an aggregate market value of approximately Rs.8.58 crore. The properties were attached in connection with an investigation against Geodesic Limited and its directors.

Geodesic Limited had raised USD 125 million through Foreign Currency Convertible Bonds in 2008 for investment in and acquisition of overseas subsidiaries. The bonds were due for redemption in October 2013 at a maturity value of approximately USD 157.06 million. The Enforcement Directorate alleged that the company defaulted on repayment and transferred funds to overseas entities through fictitious transactions. It was further alleged that approximately Rs.250 crore was diverted to six shell companies by recording bogus purchases of software. The total alleged proceeds of crime were quantified at approximately Rs.743 crore.