The Appellate Tribunal under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act (SAFEMA) has set aside a provisional attachment involving properties valued at more than ₹161.21 crore, holding that proceedings under the Prevention of Money Laundering Act, 2002 cannot continue when the scheduled offences forming their foundation no longer survive.

A batch of 12 appeals was decided by Justice Munishwar Nath Bhandari (Chairman) has ultimately quashed both the Provisional Attachment Order and its subsequent confirmation, observing that attachment of alleged proceeds of crime cannot continue in the absence of a surviving scheduled offence.

The proceedings originated from multiple FIRs registered by the Economic Offences Wing of Delhi Police and the Haryana Police against Brahma City Private Limited, formerly known as Krrish Buildtech Private Limited, Krrish Realtech Private Limited, Angle Infrastructures Private Limited and their directors and executives.

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The FIRs alleged the commission of offences under Sections 34, 120B, 406, 409, 420, 467, 468 and 471 of the Indian Penal Code. Eight FIRs registered between 2013 and 2022 were relied upon for initiating the money-laundering investigation.

According to the allegations recorded in the proceedings, Krrish Realtech began collecting money from prospective plot buyers during the financial year 2010-11. The company allegedly received ₹103.05 crore as advances during that financial year, with the amount progressively increasing in subsequent years.

By the financial year 2020-21, advances received from plot buyers allegedly stood at ₹503.09 crore. The Enforcement Directorate treated this amount as proceeds of crime allegedly generated through the misappropriation of buyers’ funds.

The case against the accused was that money collected for the development and allotment of 466 plots in Gurugram was diverted to the promoters, associated companies and other real estate ventures instead of being used for the intended project.

The authorities alleged that substantial funds were transferred to companies such as Mahadev Infratech Private Limited, Jasmine Buildmart Private Limited and Angle Infrastructure Private Limited. It was also alleged that more than ₹205 crore was invested through Mahadev Infratech in One Transworks Colombo Private Limited, which was undertaking a luxury real estate project in Sri Lanka.

The Adjudicating Authority further recorded allegations concerning the rotation and layering of funds through related entities and certain alleged shell companies. On the basis of the investigation, the ED provisionally attached movable and immovable properties valued at ₹1,61,21,94,504 on August 6, 2024.

The appellants argued that the Adjudicating Authority had failed to properly consider the orders passed by different courts in relation to the eight FIRs relied upon by the ED.

It was submitted that the FIRs or related criminal proceedings had either been quashed, closed or otherwise interfered with by competent courts. In some cases, the appellants had been discharged, while in others the cognisance or summoning orders had been set aside.

The appellants consequently maintained that no scheduled offence survived on the date the Adjudicating Authority confirmed the attachment. In the absence of an existing scheduled offence, the properties could not continue to be treated as proceeds of crime under the PMLA, they argued.

The Tribunal noted that there was no substantial dispute regarding the judicial orders relied upon by the appellants. In relation to one FIR, a closure report had been filed but no formal order accepting that report was placed on record. The matter had reportedly been consigned to the record after summons could not be served upon the complainant.

The Tribunal nevertheless accepted the broader contention that the scheduled offences relied upon while passing the original attachment order had ceased to survive.

A significant issue before the Tribunal concerned FIR No. 439 of 2024, which was registered after the Provisional Attachment Order had already been passed.

The Tribunal noted that this subsequent FIR was not mentioned in the August 6, 2024 attachment order, the “reasons to believe” recorded by the ED or the Original Complaint filed before the Adjudicating Authority seeking confirmation of the attachment. It was also not part of the show-cause notice issued during the adjudication proceedings.

Despite this, the Adjudicating Authority referred to the subsequent FIR while confirming the attachment.

The Tribunal held that an FIR registered after the provisional attachment could not be relied upon to validate or confirm an attachment that had already been made on the basis of different scheduled offences.

Justice Bhandari observed that even if the ED had issued an addendum to the Enforcement Case Information Report, the subsequent FIR could, at the highest, furnish a fresh cause of action to the agency. It could not retrospectively cure the absence of a surviving scheduled offence underlying the earlier attachment.

“The addendum may give cause to the respondent to issue a separate order for provisional attachment of the properties but it could not have been considered by the Adjudicating Authority for confirmation of the PAO passed prior to FIR No. 439 of 2024,” the Tribunal observed.

The subsequent FIR, the Tribunal said, could be acted upon separately in accordance with law if the legal requirements for fresh action were satisfied.

The appellants also contended that FIR No. 439 of 2024 had subsequently been clubbed with FIR No. 30 of 2019 by the Supreme Court for the purpose of investigation. They argued that since the cognisance order relating to the offence under Section 420 of the IPC in the earlier FIR had been set aside, the allegations in the subsequent FIR could no longer constitute a scheduled offence.

The Tribunal did not accept this contention.

It held that the clubbing of two FIRs for a common investigation would not automatically make an earlier judicial order applicable retrospectively to a subsequent FIR, except perhaps in exceptional circumstances.

Accordingly, while the Tribunal held that FIR No. 439 of 2024 could not be used to confirm the pre-existing attachment, it declined to hold that the subsequent FIR itself had become legally ineffective merely because it was clubbed with the earlier FIR.

Another submission made by the appellants was that they were attempting to settle the claims of the complainants. They contended that continued attachment of the properties would prevent the companies from settling the remaining disputes.

The Tribunal took note of the stated intention but clarified that a proposed or completed settlement, by itself, could not constitute a legal ground for releasing provisionally attached properties.

The relief was instead granted because the scheduled offences on which the attachment had originally been founded no longer survived and because the subsequently registered FIR could not retrospectively validate the earlier attachment.

The Tribunal reiterated that although money laundering is prosecuted as a separate offence, the existence of a scheduled or predicate offence remains an indispensable foundation for proceedings under the PMLA.

Where the scheduled offence is quashed, the accused is discharged or a competent court concludes that no criminal offence has been committed, the corresponding attachment of property alleged to represent proceeds of crime cannot ordinarily continue.

The Tribunal relied upon the Delhi High Court’s decision in Rajiv Chanana v. Deputy Director, Directorate of Enforcement, which held that attachment must be lifted when the scheduled offence forming its basis does not exist. Without a scheduled offence, the question of proceeds being generated from such an offence would not arise.

Reliance was also placed on Prakash Industries Limited v. Directorate of Enforcement. In that decision, the Delhi High Court explained that describing money laundering as a standalone offence means that it must be separately tried and established under the PMLA. It does not mean that a money-laundering charge can survive after the predicate offence has been quashed or the accused has been discharged.

Applying these principles, the Tribunal held that the scheduled offences constituted the very foundation of the attachment proceedings. Once that foundation was extinguished, the attachment and its confirmation could not legally remain in force.

Consequently, the Tribunal allowed the batch of appeals and set aside the August 6, 2024 Provisional Attachment Order as well as the January 29, 2025 order of the Adjudicating Authority confirming it.

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