In the recent case of Francis Chakkalamathaom Peter[1], the Hon’ble Appellate Tribunal under Prevention of Money Laundering Act, 2002 (‘PMLA Tribunal’) has held that in the absence of the direct proceeds of crime, the Enforcement Directorate (‘ED’) has the rights to attach any other property equivalent to the value of proceeds of crime.
Background
In this case, a criminal complaint was filed by UCO Bank Limited with the Central Bureau of Investigation, Anti-Corruption Branch, Chennai (‘CBI’) wherein it was alleged that certain officials of UCO Bank had conspired with some individuals to fraudulently provide overdraft facility to one entity against insufficient security and the money borrowed from UCO Bank was diverted for various unauthorised purposes. The CBI filed a chargesheet alleging commission of various offences under the Indian Penal Code, 1860 and the Prevention of Corruption Act, 1988.
Thereafter, the ED registered an ECIR and conducted investigation under PMLA. During the investigation, the ED discovered that that the alleged proceeds of crime were transferred by the accused persons to various parties including the Appellant. The ED passed a provisional attachment order attaching the bank account of the Appellant on the ground that some portion of the alleged proceeds of crime was transferred to the Appellant.
The Appellant contended that the amount received from one of the accused represented repayment of loan and was not in nature of proceeds of crime. Further, it was contended that the alleged proceeds of crime received from the accused were exhausted towards various purposes and therefore, no longer available for attachment. In these circumstances, the amount lying in the bank account at the time of attachment, received from an unconnected source, viz. from Sree Gokulam Chit and Finance Company Pt. Ltd as final settlement, cannot be attached as proceeds of crime.
Order passed by the Hon’ble Tribunal
The PMLA Tribunal held that the Appellant was not able to prove through documentary evidence that the amount attached by the ED was in fact the return of loan amount. Therefore, in absence of documentary evidence, the amount received by the Appellant from the accused can be presumed to be proceeds of crime.
It was also held by the Hon’ble PMLA Tribunal that in the absence of direct proceeds of crime, the ED is well within their rights to attach the amount in question as ‘value’/’value equivalent’ of proceeds of crime.
LKS Comments:
The present case does not examine whether the amount lying with the Appellant represented direct proceeds of crime or its converted form. Considering the fact that the alleged proceeds of crime was money, a question worth considering is whether money can change its form.
Further, an issue which needs further examination is whether the ED has power to attach equivalent value in the hands of the persons accused of the scheduled offence only or even in the hands of a third person who is not an accused (like the Appellant in the present case)
[1] FPA-PMLA-2368/CHN/2018