Allowed

FPA-PMLA-1665/MUM/2017 of Dilip Khaire v. The Deputy Director. Directorate of Enforcement, Mumbai

ATFP9 Sept 2024FPA-PMLA-1665/MUM/2017

Case brief

AI extract

What is this about?

This batch appeal challenged confirmation of provisional attachment orders against appellants and their companies. The tribunal held that since all accused in the predicate corruption case were discharged, the competent court order attained finality. Consequently, the purported 'proceeds of crime' definition fails, and attachment proceedings under PMLA cannot continue.

What did the court decide?

Impugned orders of provisional attachment and its confirmation are set aside.

FPA-PMLA-1665/MUM/2017 of Dilip Khaire Vs. The Deputy Director… — Money Laundering | ATFP (2024)

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APPELLATE TRIBUNAL UNDER SAFEMAAT NEW DELHI

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1. MP-PMLA-1573/MUM/2024 (Exemp.) FPA-PMLA-703/MUM/2024

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Growth Infrastructure Pvt. Ltd … Ap	pellant
2. MP-PMLA-1574/MUM/2024 (Exemp.) FPA-PMLA-704/MUM/2024
M/s Armstrong Pure Water Services Pvt. Ltd. …	Appellant
3. MP-PMLA-1575/MUM/2024 (Exemp.) FPA-PMLA-705/MUM/2024
M/s Parvesh Constructions Pvt. Ltd. …	Appellant
4. MP-PMLA-1576/MUM/2024 (Exemp.) FPA-PMLA-706/MUM/2024 Bhujbal Wines Pvt. Ltd. …	Appellant
5. MP-PMLA-1577/MUM/2024 Exemp. FPA-PMLA-707/MUM/2024
HirabaiMaganBhujbal …	Appellant
6. MP-PMLA-1578/MUM/2024 Exemp. FPA-PMLA-708/MUM/2024
M/s Armstrong Energy Pvt. Ltd. …	Appellant
7. MP-PMLA-1579/MUM/2024 Exemp. FPA-PMLA-709/MUM/2024
Vishaka Pankaj Bhujbal …	Appellant
8. MP-PMLA-1580/MUM/2024 Exemp. FPA-PMLA-710/MUM/2024
M/s Nice Infrastructure Pvt. Ltd …	Appellant
9. MP-PMLA-1581/MUM/2024 Exemp. FPA-PMLA-711/MUM/2024 MeenaChhaganBhujbal …	Appellant
10.MP-PMLA-10271/MUM/2022(Misc.)

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FPA-PMLA-703 to 711/MUM/2024, FPA-PMLA-1665-66&1682/MUM/2017

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Page 1 of 12

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MP-PMLA-5308/MUM/2018(Misc.)
MP-PMLA-3887/MUM/2027(Stay) MP-PMLA-3194/MUM/2027(Stay) FPA-PMLA-1666/MUM/2017
Pankaj Bhujbal …. Appellant
11.MP-PMLA-10272/MUM/2022(Misc.) MP-PMLA-6993/MUM/2020(Misc.) MP-PMLA-3238/MUM/2017(Stay) FPA-PMLA-1682/MUM/2017
Chhagan Bhujbal …. Appellant
12.MP-PMLA-10270/MUM/2022(Misc.) MP-PMLA-3193/MUM/2017(Stay) FPA-PMLA-1665/MUM/2017
Dilip Khaire …. Appellant
Versus
The Deputy Director.
Directorate of Enforcement, Mumbai … Respondent

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Advocates/Authorized Representatives who appeared

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For the appellants : Ms. Manali Singhal, Adv. Mr. Santosh Sachiv, Adv. Mr. Deepak Singh Rawat, Adv. For the respondent : Mr. Priyank Khattar, Adv.

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CORAM:

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JUSTICE MUNISHWAR NATH BHANDARI : CHAIRMAN SHRI BALESH KUMAR : MEMBER

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FINAL ORDER 09.09.2024

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FPA-PMLA-703 to 711/MUM/2024, FPA-PMLA-1665-66&1682/MUM/2017

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By batch of these appeals under section 26 of the Prevention of Money Laundering Act, 2002 (in short, the Act of 2002), a challenge has been made to the order dated 20-01-2017 passed

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FPA-PMLA-703 to 711/MUM/2024, FPA-PMLA-1665-66&1682/MUM/2017

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Page 2 of 12

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by the Adjudicating Authority confirming the provisional attachment order(PAO No. 15/2016) dated 11-08-2016.

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Brief facts of the case

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It is a case where an FIR was registered by Anti-Corruption Bureau, Mumbai vide FIR bearing number 35/2015 on 11.06.2015 for the offence under section 13(1) (c), 13 (1) (d) and 13 (2) of Prevention of Corruption Act, 1988 and section 109, 406, 420, 465, 468, 471, read with section 109 ,120 (B) and 34 of the Indian Penal Code.

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The FIR was registered against MrChhagan C. Bhujbal, the then PWD Minister, Government of Maharashtra, his sons, M/s K.S. Chamankar Enterprises and its partners, PWD officials and others. The FIR alleges that cash was generated out of illegal gratification which was then channelized into various companies of Bhujbal group and integrated into the business activities.

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It was alleged that public servants misused their position and entered into the criminal conspiracy to cheat and cause financial loss to the Government and undue gain to the Developer, M/s K.S Chamankar Enterprises. The developer put bogus/ fabricated financial statement before the Infrastructure Facility Committee of the Maharashtra Government for obtaining sanction in respect of Development of RTO office in Andheri, Mumbai. Based on the FIR, ECIR was recorded on 11.06.2015 against the accused persons.

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FPA-PMLA-703 to 711/MUM/2024, FPA-PMLA-1665-66&1682/MUM/2017

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Page 3 of 12

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It is submitted that in pursuance of FIR No. 35/2015, a charge sheet was filed before the Special Court, ACB on 27.02.2016. However, subsequent to charge sheet, the accused (appellants) were discharged by the order dated 09.09.2021. The operating part of the discharge order is quoted hereunder for ready reference: -

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“

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1. The application Exh. 340 of accused No. 14 Tanvir Ismail Shaikh, accused No.15 Smt. IramTanvir Shaikh, accused No.16 Sanjay Diwakar Joshi and accused No.17 Smt. Geeta Sanjay Joshi, the application Exh. 342 of accused No.12 Pankaj ChhaganBhujbal and accused No.13 Sameer MaganBhujbal, the application Exh.346 of accused No.1 ChhaganChandrakantBhujbal and application Exh.347 of accused No.4 DeodattaGangadharMarathe are allowed.

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2. Accused No.1 ChhaganChandrakantBhujbal and accused No.4 are DeodattaGangadharMarathe,

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discharged u/s.227 of the Code of Criminal Procedure for the offences punishable u/secs.13 (2) r/w 13(1)(c) and 13 (1)(d) of the Prevention of Corruption Act, 1988 and under sections 120- B, 406, 420, 465, 468 and 471 r/w. 109 and 34 of the Indian Penal Code in connection with Crime No.35/2015, registered with Anti-Corruption Bureau, Mumbai Division, Mumbai.

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3. Accused No.12 Pankaj ChhaganBhujbal, accused No.13 Sameer MaganBhujbal, accused No. 14 Tanvir Ismail Shaikh, accused No.15 Smt. IramTanvir Shaikh, accused No.16 Sanjay Diwakar Joshi, and accused No.17 Smt. Geeta Sanjay Joshi, are discharged u/s.227 of the Code of Criminal Procedure for the offences punishable under sections 120-B, 420, r/w. 109 and 34 of the Indian Penal Code in. connection with Crime No.35/2015, registered with Anti-Corruption Bureau, Mumbai Division, Mumbai.

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The perusal of the discharge order is not only in favour of

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the main accused but in favour of the others who were accused in

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FPA-PMLA-703 to 711/MUM/2024, FPA-PMLA-1665-66&1682/MUM/2017

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Page 4 of 12

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the FIR number 35/2015. The order aforesaid was passed in the year 2021 and has not been challenged by the predicate agency, thus it has attained finality.

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The learned counsel for the appellant submitted that when no predicate offence remains against the appellant, the continuance of the proceedings under the provision of the Act of 2002 are not tenable and on the strength of the aforesaid itself, prayer was made to set aside the order of the attachment and its confirmation.

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It is, however, a fact that the common prosecution complaint in pursuance of the ECIR No. 7/2015 dated 17.06.2015 has been filed. The subject properties were attached for the crime purportedly to be the “proceeds of crime” whereas according to the appellant, no crime was committed. The accused having been discharged from the predicate offence, the continuance of the proceedings under the Act of 2002 for attachment of the property would not be sustainable in view of the judgement of the Apex Court in the case of Vijay Madan Lal Chaudhary Versus Union of India reported in 2022 SCC Online SC 929.

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The learned counsel for the appellant made reference of section 2 (1) (u) of the Act of 2002 defining the “proceeds of crime” and even section 2 (1) (v) of the Act of 2002 to explain the definition of “scheduled offence”. The learned counsel further made a reference of section 3 of the Act of 2002 to canvass an argument that the “proceeds of crime” is to be an outcome of the

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FPA-PMLA-703 to 711/MUM/2024, FPA-PMLA-1665-66&1682/MUM/2017

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Page 5 of 12

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criminal activity of a scheduled offence and the scheduled offence has been defined under section 2 (i) (b).

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In the light of the aforesaid, the offence under the Act of 2002 rest on the predicate offence and in case there is no predicate offence, proceedings under the Act of 2002 cannot continue. The accused having been discharged from the predicate offence, therefore, impugned order deserves to be set-aside.

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The learned counsel for the appellant made reference to the allegations against the accused holding the companies and an analysis of it by the Special Court, ACB, to discharge the appellant from the predicate offence.

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The learned counsel for the appellant cited several judgements of the Apex Court and different High Courts to emphasize that proceedings under the Act of 2002 can continue only if there exists a scheduled offence. If the accused has been discharged from a predicate offence or acquitted, the proceedings under the Act of 2002 cannot continue.

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At this stage, the learned counsel for the appellant was fair to state that an application was moved before the Special Court under the Act of 2002 for dropping the proceedings but it has been dismissed on the ground that the Special Court is not vested with the power to drop the proceedings, which can be exercised by the High Court under section 482 Cr.PC. The accused have already moved to the High Court.

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FPA-PMLA-703 to 711/MUM/2024, FPA-PMLA-1665-66&1682/MUM/2017

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Page 6 of 12

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However, Special Court, PMLA passed the order for want of jurisdiction to drop the proceedings but in the light of the Judgement of the Apex Court, the proceedings under the Act of 2002 cannot continue. The prayer was accordingly made to set aside both the orders and allow the appeal.

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The appeal has been contested by the counsel for the respondent. It is submitted that though the accused have been discharged from predicate offence but the proceedings pursuant to the ECIR for the offence of money laundering are still pending with the Special Court. The application moved by the accused to drop the proceeding under the Act of 2002 has been rejected by the Special Court, PMLA.

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The learned counsel for the respondent, however, admitted that the predicate agency has not challenged the order dated 09.09.2021 passed by the ACB Court, Mumbai and thus orders may have attained finality. However, prayer was made not to cause interference with the impugned order, rather to dismiss the appeal.

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We have considered the rival submissionsof the learned counsel for the parties and perused the record. The brief facts of the case have been given and need not required to be elaborated further. It is for the reason that the accused have been discharged from the predicate offence for which an FIR was registered bearing number 35/2015 followed by ECIR 7/15. The main issue for our consideration is the consequences of the

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FPA-PMLA-703 to 711/MUM/2024, FPA-PMLA-1665-66&1682/MUM/2017

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Page 7 of 12

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discharge of the accused from predicate offence. Considering the short legal issue, we need not refer to the facts of the case, which have otherwise been considered in detail by the ACB Court for the discharge of the accused from the offences under the IPC Act, the Prevention of Corruption Act, 1988. The learned counsel for the appellant cited the Judgement of the Apex Court in the case of Vijay Madan Lal Chaudhary (Supra). It was to emphasize that the proceedings under the Act of 2002 rest on the predicate offence and if no predicate offence remains against the person named for the criminal activity due to discharge, acquittal or quashing the criminal case,the proceeds for the offence of money laundering against such a person cannot continue. Para 253 and 467(d) of the Judgement in the case (supra) are quoted hereunder:-

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“253. Tersely put, it is only such property which is derived or obtained, directly or indirectly as a result of criminal activity FPA-PMLA2396/MUM/2018, Page 7 of 10 FPA-PMLA-603437/MUM/2023 relating to a scheduled offence can be regarded as proceeds of crime. The authorities under the 2002 Act cannot resort to action against any person for money ¬laundering on an assumption that the property recovered by them must be proceeds of crime and that a scheduled offence has been committed, unless the same is registered with the jurisdictional police or pending inquiry by way of complaint before the competent forum. For, the expression “derived or obtained” is indicative criminal to a of activity relating scheduled offence already Criminal Appeal No.2779 of 2023 Page 12 of 31 accomplished. Similarly, in the event the person named in the criminal activity relating to a scheduled offence is finally absolved by a Court of competent jurisdiction owing to an order of discharge, acquittal or because of quashing of the criminal

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FPA-PMLA-703 to 711/MUM/2024, FPA-PMLA-1665-66&1682/MUM/2017

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Page 8 of 12

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case (scheduled offence) against him/her, there can be no action for money laundering against such a person or person claiming through him in relation to the property linked to the stated scheduled offence. This interpretation alone can be countenanced on the basis of the provisions of the 2002 Act, in particular Section 2(1)(u) read with Section 3. Taking any other view would be rewriting of these provisions and disregarding the express language of definition clause “proceeds of crime”, as it obtains as of now.

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467(d). The offence under Section 3 of the 2002 Act is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. It is concerning the process or activity connected with such property, which constitutes the offence of money-laundering. The Authorities under the 2002 Act cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal complaint before the competent forum. If the person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by the Court of competent jurisdiction, there can be no offence of money-laundering against him or any one claiming such property being the property linked to stated scheduled offence through him.”

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Further, reference of the judgement of the Apex Court in the

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case of Parvathi Kollur&Anr. Versus Directorate of

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Enforcement, Appeal no. 1254/22 is given where the view taken by the Apex Court in the case of Vijay Madan Lal Choudhary (supra) has been reiterated. The same view has been expressed by the Apex Court in the case of Indrani PatnaikVs. Enforcement Directorate , Writ Petition No. 368/2021 decided vide the order dated 03.11.2022. The relevant para of the said judgement is quoted hereunder for readyreference:-

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“187.……..(d) The offence under Section 3 of the 2002 Act is dependent on illegal gain of property as a result of

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FPA-PMLA-703 to 711/MUM/2024, FPA-PMLA-1665-66&1682/MUM/2017

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Page 9 of 12

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criminal activity relating to a scheduled offence. It is concerning the process or activity connected with such property, which constitutes the offence of moneylaundering. The Authorities under the 2002 Act cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed, unless it is so registered with the jurisdictional police and /or pending enquiry/trial including by way of criminal complaint before the competent forum. If the person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by the Court of competent jurisdiction, there can be no offence of moneylaundering against him or any one claiming such property being the property linked to stated scheduled offence through him.” Learned senior counsel has submitted that in the present case, prosecution of the petitioners in relation to the scheduled offence, on which the proceedings under the Prevention of Moneylaundering Act, 2022 (PMLA) were based, have already come to an end with the petitioners having been discharged from V.G.R. Case No. 59 of 2009(T.R. Case No. 80 of 2011) by the order dated 27.11.2020, as passed by the High Court of Orissa in Criminal Revision No. 831 of 2018. Learned counsel would submit that in the given state of facts and the law declared by this Court, there cannot be any prosecution for the alleged offence of money-laundering in relation to the said offence for which, the petitioners have already been discharged”.

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The facts on record shows that the FIR was registered against ChhaganBhujbal and his sons, apart from the associates. The attachment of the properties was made even for the entities in light of the fact that they belong to the accused involved in the crime. The fact now remains that the accused to whom the entities belong have been discharged by the Competent Court and the order passed in the year 2021 has attained finality in absence of its challenge. Therefore, the attachment of the properties has been questioned not only by the individual but also the entities

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FPA-PMLA-703 to 711/MUM/2024, FPA-PMLA-1665-66&1682/MUM/2017

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Page 10 of 12

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belonging to them. We find substance in the argument of the appellant in reference to the facts of the case. The accused involved in this case have been discharged. Thus, we find reasons to accept the argument of the learned counsel for the appellant.

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In the light of the legal issues raised by the appellant and supported by the Judgement of the Supreme Court, we are unable to accept the arguments raised by the counsel for the respondent. The respondent has contested the argument in reference to an order passed by the Special Court, PMLA, to deny the dropping of proceedings despite the discharge of the accused from the predicate offence.

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We have carefully perused the order dated 27.10.2023 passed by the Special Court, PMLA, Bombay in PMLA special case 2/ 26 and 3/28. The application moved by the accused to drop the proceedings under the PMLA has been rejected for want of jurisdiction of the Special Court. In any case, the order of the special court cannot prevail over the Judgement of the Supreme Court wherein it has been held that proceedings under the Act of 2002 rest on the predicate offence and once the accused is discharged or acquitted, the proceeding under the Act of 2002 cannot continue.

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In the instant case, the specific allegation exists against the accused for the commission of a predicate offence. The offence under the Act of 2002 is in reference to their alleged criminal acts pertaining to the scheduled offence wherethey have been

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FPA-PMLA-703 to 711/MUM/2024, FPA-PMLA-1665-66&1682/MUM/2017

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Page 11 of 12

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discharged. Hence, when the accusedhaving been discharged from the scheduled offence, the impugned orders cannot sustain. 23. In the light of the aforesaid, the orders of the provisional attachment so as its confirmation are set aside. The appeal is allowed with the aforesaid.

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(Justice MunishwarNath Bhandari) Chairman

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(Balesh Kumar) Member

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New Delhi,

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9^th day of Sept, 2024

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`M’

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FPA-PMLA-703 to 711/MUM/2024, FPA-PMLA-1665-66&1682/MUM/2017