Coal Levy Extortion Scam: Chhattisgarh HC Upholds PMLA Property Attachment Orders citing Property Direct Nexus with PoC [Read Order]

The Chhattisgarh High Court has dismissed a batch of appeals upholding the property attachment orders passed by the Adjudicating Authority of Enforcement Department ( ED ) and later confirmed by the Appellate Tribunal under SAFEMA stating that there is direct nexus between the properties and the proceeds of the crime.

The court observed that “It is not essential for the enforcement authority to establish by direct evidence that the property in question is proceeds of crime. In a money laundering case, the modus operandi often involves circuitous and opaque financial transactions, making direct evidence inherently difficult to obtain. Based on the material produced, including financial analysis, property acquisition timelines, and the absence of verifiable legitimate income, this Court is satisfied that there exists a prima facie nexus between the property and the PoC. The PAO is therefore in consonance with the statutory scheme under PMLA and is liable to be upheld.”

The decision comes in the backdrop of the ED’s investigation into a high-profile coal levy extortion scam allegedly involving senior bureaucrats and political functionaries in Chhattisgarh.

The ED had initiated action under PMLA alleging that illegal levies were collected on each tonne of coal transported in Chhattisgarh, resulting in large-scale money laundering. The extorted amounts were alleged to have been layered and integrated through real estate investments, cash transactions, and shell companies.

Properties owned by individuals and entities linked to the alleged network were provisionally attached in 2022 and subsequently confirmed by the Adjudicating Authority. The confirmation orders were challenged before the Appellate Tribunal, New Delhi, which upheld the ED’s actions in a common order. Dissatisfied by this, the appellants approached the High Court.

The appellants, including Mr. Sourabh Modi, raised several objections before the High Court. It was argued that the Adjudicating Authority was not validly constituted in the absence of a judicial member, thereby violating Section 6(5) of the PMLA and the principle of separation of powers enshrined under Article 50 of the Constitution.

The appellants further contended that the confirmation orders were mechanical, non-speaking, and merely echoed the ED’s version without independent reasoning or evaluation of the documents submitted.

They challenged the invocation of the reverse burden of proof under Section 24, stating that the ED had not established the foundational facts such as the commission of a scheduled offence or nexus between the properties and proceeds of crime.

It was also alleged that the ED had failed to provide copies of critical documents and denied requests for cross-examination of witnesses whose statements were relied upon.

A Division Bench comprising Chief Justice Ramesh Sinha and Justice Bibhu Dutta Guru after examining the material on record and the scope of judicial review under Section 42 of PMLA, rejected all contentions raised by the appellants.

The bench held that the challenge to the composition of the Adjudicating Authority was not sufficient to nullify the proceedings, especially when the appellants had not demonstrated any real prejudice caused.

The Appellate Tribunal had applied its mind and passed reasoned orders. The argument that it passed omnibus findings without evaluating individual roles was held to be unsubstantiated.

The court noted that “There exists a reasonable belief, duly recorded and supported by material evidence, that the attached properties are involved in money laundering and further, the appellants have failed to rebut the statutory presumption under Section 24 of the PMLA. We do not find that any question of law arises in these appeals to be answered.”

The appellants had failed to establish any substantial question of law warranting interference under Section 42 of PMLA. The High Court as a result dismissed all the appeals, confirming the validity of the Appellate Tribunal’s order and the underlying property attachments.

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