The Chhattisgarh High Court has held that in money laundering cases, the absence of verifiable legitimate income can establish a nexus between a person’s property and the proceeds of crime. The Division Bench of Chief Justice Ramesh Sinha and Justice Bibhu Datta Guru made this observation while dismissing a batch of appeals challenging the Enforcement Directorate’s attachment of properties in a coal levy extortion case under the Prevention of Money Laundering Act, 2002 (PMLA).
Background
The appeals under Section 42 of the PMLA were filed by various individuals and entities, including Sourabh Modi, Shanti Devi Chaurasia, Anurag Chaurasia, M/s Indermani Minerals India Pvt. Ltd. (IMIPL), M/s KJSL Coal and Power Pvt. Ltd., and bureaucrat Sameer Vishnoi. These appeals challenged the common final order dated 5 December 2024 passed by the Appellate Tribunal under SAFEMA, New Delhi, which had upheld the confirmation of the ED’s provisional attachment order (PAO) dated 9 December 2022.
The ED’s investigation stemmed from an FIR registered by the Karnataka Police in July 2022, which was later transferred to the Economic Offences Wing (EOW), Chhattisgarh, in January 2024. The case alleged that a syndicate led by Suryakant Tiwari collected illegal levies of Rs 25 per ton of coal transported in the state. The proceeds of the alleged extortion were then laundered through a network of associates, companies, and benami transactions.
Legal Issues
The primary issues before the High Court were:
- Whether the ED could sustain the attachment orders in the absence of cognizance of a scheduled offence (Section 384 IPC) in the original charge sheet.
- Whether the appellants’ properties could be treated as proceeds of crime under Section 2(1)(u) of the PMLA.
- Whether the ED had established “reason to believe” and followed due process under Sections 5 and 8 of the Act.
- Whether the principles of natural justice were violated in the adjudication proceedings.
The appellants argued that no scheduled offence existed at the time of charge sheet, rendering the ECIR and subsequent attachments illegal. They also submitted that the attached properties were either acquired before the alleged offence or through legitimate banking channels, and thus could not qualify as proceeds of crime. It was further contended that the Adjudicating Authority and the Appellate Tribunal had failed to consider their replies and explanations in a reasoned manner.
Court’s Observations
The court rejected these contentions and upheld the ED’s stand.
On the issue of absence of direct evidence, the Bench noted:
“In cases of money-laundering, as the modus operandi often involves circuitous and opaque financial transactions which makes direct evidence inherently difficult to obtain, the absence of verifiable legitimate income can lead the Court to hold that there exists a nexus between the property sought to be attached and the proceeds of crime.”
The court further held that merely because transactions were made through banking channels does not exclude the possibility of them being tainted. It observed that in the presence of unexplained wealth, and the failure of the appellants to provide cogent justification for the source of funds, the ED was right in invoking the presumption under Section 24 of the PMLA.
The Bench also rejected the contention regarding the absence of a scheduled offence, holding that Section 384 IPC was part of the FIR at the time of ECIR registration, and the ED was not required to await final cognizance before initiating proceedings under the PMLA.
Decision
The High Court dismissed all the appeals and upheld the Appellate Tribunal’s decision confirming the attachment orders. It concluded that the ED had acted in accordance with the statutory mandate and had provided sufficient material to justify the provisional and confirmed attachments.
The ruling reinforces the principle that where there is no legitimate explanation for the acquisition of property, and the factual background involves unlawful activity, courts can infer that the property is connected to criminal proceeds—even in the absence of direct tracing.
