SAFEMA Tribunal Quashes PMLA Attachment Order — Rules That Funds Received Before Crime Period Do Not Qualify as Proceeds of Crime
Background and Overview
The Appellate Tribunal under SAFEMA at New Delhi delivered a significant ruling in the matter of Sahana Builders and Developers Private Limited (Director) Vs Deputy Director (Appellate Tribunal Under SAFEMA Delhi), setting aside a provisional attachment order that had been confirmed by the Adjudicating Authority. At the heart of the dispute was whether a fixed deposit of approximately ₹16.13 crore could be validly attached under the Prevention of Money Laundering Act, 2002 on the ground that the assessee company had received ₹10 crore from M/s Unitech Ltd. back in 2004 — a full two years before the alleged crime period commenced.
The ruling carries considerable weight for assessees facing attachment proceedings under the Prevention of Money Laundering Act, 2002, particularly where the financial transactions sought to be characterized as "proceeds of crime" predate the alleged criminal activity by several years.
The Unitech Homebuyers Fraud — Setting the Context
Scale of the Alleged Fraud
Multiple First Information Reports were registered by the CBI and Economic Offences Wing between 2015 and 2023 against the promoters of M/s Unitech Ltd. Initially 24 FIRs were filed, which subsequently rose to 50. The core allegation was that M/s Unitech Ltd. had collected approximately ₹14,270 crore from over 29,800 homebuyers, promising assured returns on their investments. Forensic investigation revealed that roughly ₹5,063.50 crore — constituting nearly 40% of the collected funds — was diverted for non-mandated purposes, resulting in a failure to deliver residential units to buyers.
The criminal charges framed included offences under Section 34, Section 406, Section 409, Section 120-B, and Section 420 of the Indian Penal Code, along with violations under the Prevention of Corruption Act, 1988.
Supreme Court Intervention
Given the magnitude of the fraud and the large number of aggrieved homebuyers, the matter came before the Hon'ble Supreme Court in Civil Appeal No. 10856/2016 (Bhupinder Singh Vs. M/s Unitech Ltd.). The Supreme Court appointed M/s Grant Thornton India LLP to conduct a forensic audit of 74 residential projects of the Unitech Group. The audit, completed in July 2022, confirmed that approximately ₹5,063.05 crore had been laundered out of the ₹14,270 crore collected from homebuyers. Pursuant to the Supreme Court's directions, the Enforcement Directorate was set into motion and proceeded to cause provisional attachment orders against various entities and individuals connected to the alleged fraud.
Facts of the Present Case
The ₹10 Crore Transaction and FD Attachment
The Enforcement Directorate, in the course of its investigation, identified that M/s Unitech Ltd. had transferred ₹10 crore to the appellant company — M/s Sahana Builders and Developers Pvt. Ltd. — in two instalments of ₹5 crore each on 04.10.2004 and 29.10.2004. The stated purpose of the transfer was towards the proposed purchase of 11 commercial shops to be developed by the appellant company.
However, the transaction never reached completion. The 11 shops were never transferred to M/s Unitech Ltd., and the ₹10 crore was never returned. Over time, the amount came to be recorded as a credit balance in the appellant company's books — initially treated as a capital contribution by M/s Unitech Ltd. towards a joint venture project, and subsequently carrying interest with TDS deductions duly reflected in the ledger.