PMLA Attachment Can Cover Property Held by Non-Accused Persons: SAFEMA Tribunal

Richa Dubey Vs Deputy Director (Appellate Tribunal under SAFEMA, New Delhi)

Property Can Be Attached Under PMLA Even If Its Holder Is Not Named as an Accused in FIR or ECIR: Appellate Tribunal

Summary: The Appellate Tribunal under SAFEMA has held that attachment under the Prevention of Money Laundering Act, 2002 is directed against the proceeds of crime and not merely against the person accused of the scheduled offence. Therefore, property held in the name of the wife or other family member of an accused can be attached even when such person is not named in the FIR or ECIR, provided the property represents proceeds of crime.

The Tribunal accordingly upheld the attachment of properties valued at approximately ₹10.12 crore standing in the names of deceased accused Vikas Dubey, his wife, son and others.

Facts of the case

Two FIRs were registered following the incident in which a police team proceeding to arrest Vikas Dubey was attacked, resulting in the death of eight police personnel. During the subsequent investigation, it was alleged that Vikas Dubey was involved in several offences, including organised crime, corruption, embezzlement of funds meant for the Public Distribution System, forcible takeover of businesses and land-grabbing activities.

The Enforcement Directorate registered an ECIR based on the scheduled offences and commenced an independent investigation under the PMLA. It provisionally attached properties valued at ₹10,12,27,216, treating them as having been acquired out of the proceeds of crime.

The properties were held in the names of Vikas Dubey, his wife Mrs. Richa Dubey, his son and certain other persons. The Adjudicating Authority confirmed the provisional attachment. Mrs. Richa Dubey challenged the confirmation order before the Appellate Tribunal.

Contentions of the appellant

The appellant contended that she was neither involved in the commission of any offence nor named in the FIR or ECIR. Therefore, her properties could not be attached merely because she was the wife of the principal accused.

It was further argued that the properties had been acquired from disclosed sources and that some of them were ancestral properties. According to her, the Enforcement Directorate had failed to establish any direct connection between the properties and the alleged criminal activities.

The appellant also relied upon an earlier order passed by the Supreme Court in proceedings involving Vikas Dubey. It was contended that once certain properties attached by the District Magistrate had been directed to be released, those properties could not once again be attached by the Enforcement Directorate as proceeds of crime.

Being an accused is not a precondition for attachment

The Tribunal rejected the contention that a property can be attached only when its holder is named as an accused in the FIR or ECIR.

Relying upon the Supreme Court’s decision in Vijay Madanlal Choudhary v. Union of India, the Tribunal observed that the scope of Section 5(1) of the PMLA is not confined to persons named as accused in the scheduled offence.

The expression used in Section 5 is “any person” and not “accused person”. Therefore, the decisive consideration is whether the person possesses property derived or obtained, directly or indirectly, from criminal activity relating to a scheduled offence.

The object of the PMLA would be defeated if proceeds of crime could escape attachment merely by being transferred to or parked in the names of a spouse, child, relative or any other third party who was not named as an accused.

The Tribunal reiterated that the PMLA is intended to reach the proceeds of crime in whosoever’s name they are kept and by whosoever they are held.

Failure to establish legitimate source

The appellant claimed that the properties had been acquired from disclosed and legitimate sources and that some properties were ancestral. However, according to the Tribunal, no documentary material was produced to establish either contention.

The appellant failed to place evidence showing the legitimate income of Vikas Dubey from which the properties could have been acquired. She also failed to establish her own independent source of income or the source of funds used for acquiring the properties standing in her name.

Although Section 8(1) proceedings gave the appellant an opportunity to explain the sources, the required evidence was not furnished before the Adjudicating Authority or the Tribunal.

The Tribunal noticed that as many as 39 FIRs had been registered against Vikas Dubey involving various alleged criminal activities. In the absence of any proof of legitimate income capable of explaining the acquisition of numerous properties, the Tribunal accepted the Enforcement Directorate’s case that the properties had been acquired from proceeds arising from scheduled offences.

Nexus between property and crime

The appellant’s contention that there was no connection between the alleged crimes and the attached properties was also rejected.

The Tribunal held that the plea of absence of nexus could not be accepted when neither Vikas Dubey’s legitimate source of income nor the appellant’s independent financial capacity had been demonstrated.

It consequently accepted the finding that the properties standing in the names of the accused, his wife and son represented proceeds of crime generated from scheduled offences.

Earlier Supreme Court order did not prevent PMLA attachment

The Tribunal also rejected reliance upon the Supreme Court order passed in the earlier proceedings concerning attachment by the District Magistrate.

It found that the Supreme Court had not directed the release of the properties attached by the Enforcement Directorate under the PMLA. An attachment made under another law or by another authority operates in a different statutory field. Therefore, the earlier order did not invalidate the PMLA attachment.

The appeal was accordingly dismissed and the attachment of the properties was sustained.

Author’s comments

The ruling reiterates the settled principle that attachment under the PMLA is property-centric. The holder of the property need not necessarily be an accused in the predicate offence or named in the ECIR. What is material is whether the property constitutes proceeds of crime or represents its value.

However, the mere relationship of husband and wife cannot, by itself, justify attachment. The Enforcement Directorate must possess material indicating that the property was derived or obtained from criminal activity relating to a scheduled offence. Equally, when a person claims that the attached property was acquired from independent or ancestral sources, proper documentary evidence becomes crucial.

Bank statements, income-tax returns, inheritance documents, purchase deeds, loan records and evidence of the person’s financial capacity should be produced at the earliest stage. A general assertion that the property came from “disclosed sources” may not be sufficient.

The decision also highlights an important distinction: not being an accused may protect a person from prosecution in the absence of involvement, but it does not automatically protect property in that person’s name from attachment if the property is shown to represent proceeds of crime.

Cases Discussed

• Vijay Madanlal Choudhary Vs. Union of India (Supreme Court), 2022 SCC Online SC 929
• Ayush Kejriwal Vs. Directorate of Enforcement, Kolkata (Appellate Tribunal under SAFEMA), Appeal No. 4358/KOL/2021, dated 01.05.2024
• Attorney General for India & Ors. vs. Amratlal Prajivandas & Ors. (Supreme Court), (1994) 5 SCC 54
• Raman Tech. and process Engg. Co. vs. Solanki Traders (Supreme Court)
• Vikas Dubey Vs. State of Uttar Pradesh (Supreme Court), Criminal Appeal No.1308 of 2006

FULL TEXT OF THE JUDGMENT/ORDER OF APPELLATE TRIBUNAL UNDER SAFEMA

This appeal has been preferred by the appellant Mrs. Richa Dubey under Section 26 of the Prevention of Money Laundering Act, 2002 (in short `the Act of 2002’) to challenge the order dated 26.04.2023 passed by the Adjudicating Authority confirming the provisional attachment of the properties vide order dated 31.10.2022.

2. It is a case where FIR bearing Nos.0191/2020 and 0192/2020 were registered by the Police Station Chaubepur of District Kanpur Nagar. It was alleged that when police went to arrest the accused persons led by the Circle Officer, Bilhaur, the road leading to the house of deceased accused Vikas Dubey was purposefully obstructed by parking JCBs. The police party could somehow reach at the residence where they were attacked by Vikas Dubey and others by using automatic and semi-automatic guns. Eight police personnel died in the said incident. Subsequent to the incident reported above, when investigation was transferred, it was found that accused Vikas Dubey was involved in various offences and accordingly multiple FIRs exist against him. His involvement was found in corruption and embezzlement of funds meant for Public Distribution System and forcefully taking over the business. He was found to be a land mafia and involved in organized crime. The accused Vikas Dubey ultimately died in an encounter.

3. The respondents recorded the ECIR finding a predicate offence and accordingly caused independent investigation under the Act of 2002. An order for provisional attachment of the properties was caused to the extent of Rs.10,12,27,216/- finding that the properties have been acquired out of the proceeds of crime. It was confirmed by the Adjudicating Authority after taking note of the facts of the case, apart from the fact that 39 FIRs have been registered against the accused Vikas Dubey. The properties under attachment were either existing in his name or in the name of his wife or son, apart from others. It has been taken to be the proceeds of crime. The Provisional Attachment Order has been challenged by the appellant, who is none other than the wife of main accused Vikas Dubey.

Arguments of counsel for the appellant:

4. The learned counsel submitted that the appellant was neither involved in commission of any crime, nor her name was disclosed in the FIR or ECIR, thus there was no reason to provisionally attach the properties existing in the name of accused Vikas Dubey, her own name and in the name of her son. The respondents failed to take note of the fact aforesaid while causing Provisional Attachment Order and even the Adjudicating Authority failed to consider the aforesaid aspect of the matter. Thus, the impugned order deserves to be set aside on the aforesaid ground itself.

5. The learned counsel for the appellant further submitted that the impugned order causing provisional attachment of the properties and its confirmation has been passed in a mechanical manner without considering the facts relevant to the case. The provisional attachment of properties has been made despite disclosure of the source. It is even for the properties which had no relevance with the crime thus without connecting the properties with the crime, the provisional attachment of the properties becomes illegal.

6. The further argument of the counsel for the appellant was in reference to an order passed by the Apex Court in Criminal Appeal No.1308 of 2006 in the case of Vikas Dubey Vs. State of Uttar Pradesh. The order of the Apex Court was ignored by the Adjudicating Authority, rather a passing remark was made. Once any property attached by the District Magistrate, Kanpur (UP) was ordered to be released, how the same properties could have been attached again as proceeds of crime. The Adjudicating Authority has passed a cryptic order and thereby should not be allowed to stand.

7. The learned counsel did not raise any other argument than referred above, rather closed his argument with a prayer to allow the appeal.

Arguments of counsel for the respondents:

8. The learned counsel for the respondents has contested the appeal on all the grounds urged by the appellant. Elaborate arguments were made on each issue and would be referred while recording finding by this Tribunal. It is to avoid repetition of facts and otherwise for the sake of brevity.

Finding of the Tribunal:

9. I have considered the rival submissions of the parties and scanned the matter carefully.

10. The facts relevant to the case for causing provisional attachment of the properties have been given in the opening paras which are not required to be reiterated. It would, however, be relevant to refer that as many as 39 FIRs were registered against Vikas Dubey showing his involvement in variety of offences. The details of 39 FIRs have been given, which was referred by the counsel for the appellant.

11. It is a case where the accused Vikas Dubey killed eight police personnel while they came to his residence to arrest him. It is otherwise found that Vikas Dubey was involved in variety of the offences which led him to be a land mafia. He ultimately died in a police encounter. The learned counsel for the appellant has not placed on record any material to show source of legitimate income of Vikas Dubey and even the appellant Richa Dubey. The challenge to the provisional attachment of the properties has been made, raising many grounds which are going to be dealt with.

12. The first argument raised by the appellant is that she has not been named in any FIR or ECIR thus there was no reason for the respondents to provisionally attach her properties. The aforesaid argument has been raised in ignorance of the judgment of the Apex Court in the case of Vijay Madanlal Choudhary Vs. Union of India 2022 SCC Online SC 929. Relevant paras 65, 68 and 69 of the judgment (supra) are quoted hereunder:

“65. As aforesaid, in this backdrop the amendment Act 2 of 2013 came into being. Considering the purport of the amended provisions and the experience of implementing/enforcement agencies, further changes became necessary to strengthen the mechanism regarding prevention of money- laundering. It is not right in assuming that the attachment of property (provisional) under the second proviso, as amended, has no link with the scheduled offence. Inasmuch as section 5(1) envisages that such an action can be initiated only on the basis of material in possession of the authorised officer indicative of any person being in possession of proceeds of crime. The precondition for being proceeds of crime is that the property has been derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence. The sweep of section 5(1) is not limited to the accused named in the criminal activity relating to a scheduled offence. It would apply to any person (not necessarily being accused in the scheduled offence), if he is involved in any process or activity connected with the proceeds of crime. Such a person besides facing the consequence of provisional attachment order, may end up in being named as accused in the complaint to be filed by the authorised officer concerning offence under section 3 of the 2002 Act.

68. It was also urged before us that the attachment of property must be equivalent in value of the proceeds of crime only if the proceeds of crime are situated outside India. This argument, in our opinion, is tenuous. For, the definition of “proceeds of crime” is wide enough to not only refer to the property derived or obtained as a result of criminal activity relating to a scheduled offence, but also of the value of any such property. If the property is taken or held outside the country, even in such a case, the property equivalent in value held within the country or abroad can be proceeded with. The definition of “property” as in Section 2(1)(v) is equally wide enough to encompass the value of the property of proceeds of crime. Such interpretation would further the legislative intent in recovery of the proceeds of crime and vesting it in the Central Government for effective prevention of money-laundering.

69. We find force in the stand taken by the Union of India that the objective of enacting the 2002 Act was the attachment and confiscation of proceeds of crime which is the quintessence so as to combat the evil of money laundering. The second proviso, therefore, addresses the broad objective of the 2002 Act to reach the proceeds of crime in whosoever name they are kept or by whosoever they are held. To buttress this argument, reliance has been placed on the dictum in Attorney General of India (supra) and Raman Tech. and process Engg. Co. vs. Solanki Traders”.

13. Apart from the judgment cited above, perusal of Section 5 and 8 of the Act of 2002 would also clarify that for causing provisional attachment of the properties, the word `accused’ has not been used anywhere, rather whosoever is in possession of the proceeds of crime can be dealt with by way of provisional attachment. This Tribunal had also dealt with the issue by a detailed order in the case of Ayush Kejriwal Vs. Directorate of Enforcement, Kolkata (Appeal No. 4358/KOL/2021) dated 01.05.2024. Relevant paras of the order are quoted hereunder:

“The appellant is not an accused in the FIR or ECIR.

23. It is submitted that the appellant is not an accused in the FIR or ECIR thus the documents belonging to him could not have been subjected to seizure. The argument aforesaid has been raised in ignorance of the judgment of the Apex Court in Vijay Madanlal Choudhary (supra). While dealing with the issue in reference to the definition of `proceeds of crime’, it was categorically held that the second proviso addresses the broad object of the Act of 2002 to reach the proceeds of crime in whosoever name they are kept or by whosoever they are holding it. Reference of the judgment in the case of Attorney General for India & Ors. vs. Amratlal Prajivandas & Ors. (1994) 5 SCC 54 has been given. In this regard, Paras 65, 68 and 69 of the judgment of the Apex Court in the case of Vijay Madanlal Choudhary (supra) are quoted hereunder:

“65. As aforesaid, in this backdrop the amendment Act 2 of 2013 came into being. Considering the purport of the amended provisions and the experience of implementing/enforcement agencies, further changes became necessary to strengthen the mechanism regarding prevention of money- laundering. It is not right in assuming that the attachment of property (provisional) under the second proviso, as amended, has no link with the scheduled offence. Inasmuch as section 5(1) envisages that such an action can be initiated only on the basis of material in possession of the authorised officer indicative of any person being in possession of proceeds of crime. The precondition for being proceeds of crime is that the property has been derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence. The sweep of section 5(1) is not limited to the accused named in the criminal activity relating to a scheduled offence. It would apply to any person (not necessarily being accused in the scheduled offence), if he is involved in any process or activity connected with the proceeds of crime. Such a person besides facing the consequence of provisional attachment order, may end up in being named as accused in the complaint to be filed by the authorised officer concerning offence under section 3 of the 2002 Act.

68. It was also urged before us that the attachment of property must be equivalent in value of the proceeds of crime only if the proceeds of crime are situated outside India. This argument, in our opinion, is tenuous. For, the definition of “proceeds of crime” is wide enough to not only refer to the property derived or obtained as a result of criminal activity relating to a scheduled offence, but also of the value of any such property. If the property is taken or held outside the country, even in such a case, the property equivalent in value held within the country or abroad can be proceeded with. The definition of “property” as in Section 2(1)(v) is equally wide enough to encompass the value of the property of proceeds of crime. Such interpretation would further the legislative intent in recovery of the proceeds of crime and vesting it in the Central Government for effective prevention of money-laundering.

69. We find force in the stand taken by the Union of India that the objective of enacting the 2002 Act was the attachment and confiscation of proceeds of crime which is the quintessence so as to combat the evil of money laundering. The second proviso, therefore, addresses the broad objective of the 2002 Act to reach the proceeds of crime in whosoever name they are kept or by whosoever they are held. To buttress this argument, reliance has been placed on the dictum in Attorney General of India (supra) and Raman Tech. and process Engg. Co. vs. Solanki Traders”.

The object of the Act is to freeze proceeds of crime and as discussed in the preceding paras, the property gifted to the appellant would fall within the realm of proceeds of crime. The use of the terms “any person” in Section 5(1)(a) read with “such proceeds of crime” in sub -clause (b) of Section 5(1) includes any person not necessarily an accused. In case, the argument of the appellant is to be accepted, the same would render to defeat intention of the legislature and frustrate the object of the Act. In light of the above, the argument that the appellant has not been named as an accused in the FIR or ECIR would not be of any consequence as ultimately what is relevant is the property that was seized being `proceeds of crime’. An example in reference to it has been given in preceding paras. If the argument of the appellant is accepted, then it would become very convenient for the accused to park the `proceeds of crime’ with third person not involved in the crime and in that case, the third person being not accused would always raise a plea that property with him could not have been subjected to attachment. In the instant case, the accused Nirmal Kumar Kejriwal knowing it well that property with him may become subject matter of attachment or seizure gifted it to his grandson much after the registration of FIR and ECIR. The aforesaid cannot be considered to be bonafide rather designed to circumvent the provisions of law and the case registered against the accused. In view of the above, we are unable to accept the last argument raised by counsel for the appellant”.

14. In the light of the judgment and order cited above, I do not find any substance in the first argument raised by the appellant. It is more so when the provisional attachment of the properties has been caused finding appellant to be recipient of the proceeds of crime. Accordingly, the first ground raised by the appellant cannot be accepted.

15. The counsel for the appellant further submitted that the properties under provisional attachment were acquired from the disclosed sources. It includes ancestral properties. The argument has been raised without showing or referring to the document to prove the source to acquire the properties or otherwise an ancestral property. The provisional attachment of the properties has been caused in reference to the deeds of the accused Vikas Dubey who had acquired the properties out of scheduled offences. The appellant has failed to disclose the source of the properties purchased by Vikas Dubey or her own source to acquire the properties. It was called upon by the Adjudicating Authority as per Section 8(1) of the Act of 2002.

16. The counsel for the respondents on the other hand submitted that the properties were acquired by Vikas Dubey in his own name, in the name of his wife and the son out of the proceeds of crime and, therefore, the legitimate source to acquire the properties could not be disclosed. The appellant could not even disclose any business or the source of the accused Vikas Dubey so as to acquire number of properties. The fact aforesaid is relevant because as many as 39 FIRs were registered against the accused Vikas Dubey who is said to be involved in multiple offences which remain the source to possess the properties. In the light of the facts given above, I am unable to accept the argument raised by the appellant to submit that the properties were acquired by their own sources. It is when no proof for it has been submitted.

17. The counsel for the appellant submitted that there is no link between the crime and the properties under attachment. The argument has been raised in ignorance of the fact that no source to acquire the properties could be disclosed and otherwise the accused Vikas Dubey was involved in commission of crime for which as many as 39 FIRs were registered. The properties under provisional attachment were acquired out of the scheduled offences committed by Vikas Dubey. Vikas Dubey was not having legitimate source of income, otherwise it would have been submitted by the appellant.

18. The next question raised by the appellant was in reference to the order passed by the Apex Court in Appeal No.1308 of 2006 on a petition filed by Vikas Dubey. The reference of the order has been given without showing its relevance. The Apex Court had not ordered to release the properties under provisional attachment and, therefore, the Adjudicating Authority rightly analyzed the issue denying release of the properties by causing interference in the order.

19. In the light of the discussion made above, the prayer made by the appellant for release of the properties cannot be accepted, rather I do not find any merit in the appeal. Accordingly, it fails and is dismissed.