PMLA Attachment on Mere Suspicion Set Aside by SAFEMA Appellate Tribunal

The Appellate Tribunal under SAFEMA at New Delhi, in Urmila Devi Vs Deputy Director (Appellate Tribunal Under SAFEMA Delhi), has annulled a provisional attachment made under the Prevention of Money Laundering Act, 2002 (PMLA). The attachment related to a modest residential plot alleged to be linked with proceeds of crime arising from a large-scale cooperative bank fraud.

The Tribunal concluded that in the absence of credible evidence demonstrating that the assessee had actually received Rs. 10 lakhs from the alleged proceeds of crime, the provisional attachment could not stand. The Tribunal emphasized that suspicion, unsupported by cogent material, is insufficient to sustain action under PMLA.

Background of the Case

Initiation of Proceedings under PMLA

  1. A criminal case was registered alleging commission of offences under Section 409, Section 419, Section 420, Section 467, Section 468, Section 469 and Section 471 of the IPC, based on a complaint lodged by the Deputy General Manager of Fatehpur, District Cooperative Bank Limited.
  2. The allegation was that four officials/employees of the cooperative bank orchestrated a fraud causing a loss of Rs. 598.33 lakhs to the bank.
  3. The modus operandi involved:
    • Wrongful withdrawal of Rs. 573.61 lakhs, and
    • Embezzlement of Rs. 24.72 lakhs through transfers to various fictitious current and savings accounts.
  4. An FIR and an ECIR were registered in relation to the alleged offences.

Despite the magnitude of the alleged fraud, the appellants, Urmila Devi and Jaishankar Prasad, were not named as accused in either the FIR or the ECIR.

Property Subject to Attachment

  • The disputed asset was a residential plot admeasuring 117 square meters situated at Village Bairagi ka Purva in Fatehpur.
  • The plot had been purchased on 21.12.2006 for a consideration of Rs. 50,000.
  • At the time of provisional attachment, the value of the plot was assessed at Rs. 2,92,500.

The Enforcement Directorate alleged that the property represented part of the proceeds of crime, on the footing that the appellant was said to have received Rs. 10 lakhs from the bank fraud.

Proceedings Before the Adjudicating Authority

The provisional attachment order dated 15.11.2021 was subsequently confirmed by the Adjudicating Authority through order dated 22.08.2022. This led the appellants to file an appeal under Section 26 of the Prevention of Money Laundering Act, 2002 before the Appellate Tribunal under SAFEMA.

The Adjudicating Authority had proceeded to confirm the attachment mainly based on the assertion that the assessee had received Rs. 10 lakhs from the proceeds of crime and, therefore, the residential plot (purchased for Rs. 50,000) was liable to be attached as property involved in money laundering.

Grounds Urged by the Appellants

Lack of Nexus with the Predicate Offence

Counsel for the appellants highlighted the following:

  • The appellants were never named in the FIR or the ECIR as accused or suspects in the bank fraud.
  • No material, documentary or oral, was produced to demonstrate that the assessee had any role in the commission of the scheduled offences.

Absence of Evidence of Receipt of Rs. 10 Lakhs