[SAFEMA Appellate Tribunal] Property Attachment Upheld Following Illegal Call Interception at NSE

Introduction

This appeal in iSec Services (P.) Ltd. v. Deputy Director, Directorate of Enforcement[i], filed under s. 26 of the Prevention of Money Laundering Act, 2002 (‘PMLA’), challenges the order dated 21.02.2023 (‘Impugned Order’), passed by the PMLA Adjudicating Authority, (‘AA’), upholding the provisional attachment of immovable assets belonging to iSec Services Pvt. Ltd. (‘Appellant Company’). The present matter stems from the alleged unauthorized interception of telephone calls by the Appellant, which were masked as part of a contract with the National Stock Exchange of India Ltd (‘NSE’), whereby the Appellant allegedly derived financial benefits from the interception, causing corresponding loss to NSE. In the aforementioned factual scenario, the Appellate Tribunal, SAFEMA (‘Tribunal’) was tasked with determining whether the elements of s. 420 of the Indian Penal Code, 1860 (‘IPC’) and s. 3 of the PMLA were met to justify the attachment under s. 5 of the PMLA.

Brief Facts

• A former police officer’s immediate family member incorporated the Appellant Company. The Appellant Company had entered into several agreements with the NSE to conduct periodic cybersecurity assessments. However, as alleged, the Appellant Company, instead of performing the agreed cybersecurity duties, secretly and in an unauthorized manner, installed surveillance equipment to intercept four PRI telephone lines used by NSE employees, without having obtained any prior approval for the same, as warranted under s. 5 of the Indian Telegraph Act, 1885 (‘ITA’), thereby violating both statutory and constitutional privacy protections with respect to NSE.

• The intercepted communications were allegedly transcribed and sent regularly to senior personnel at NSE. Between 2009 and 2017, payments totalling Rs. 4.54 crores were made to the Appellant Company, reportedly for such surveillance work.

• Upon discovery of the aforementioned mala fide activities, an FIR was lodged against the Appellant Company, alleging the commission of the following offences under IPC - ss. 120B, 409 and 420, ss. 20, 21, 24 and 26 of the ITA, s. 72 of the Information Technology Act, 2000 (‘IT Act’), and s. 13(2) read with s. 13(1)(d) of the Prevention of Corruption Act, 1988. Subsequent to the initiation of an investigation into the predicate offence, the Enforcement Directorate (‘ED’) proceeded to investigate and thereafter attached the properties belonging to the Appellant Company under the PMLA, thus giving rise to the present matter.

Held

• The Tribunal concluded that there was a prima facie case of cheating under s. 420 of the IPC and rejected the Appellant Company’s argument that the work order provided immunity from criminal prosecution, asserting that the fraudulent intent at the inception of the contract was sufficient to invoke the provisions of s. 420 of the IPC.

• The Tribunal further observed that the structure and execution of the contract, coupled with alleged collusion with senior NSE officials, indicated a dishonest scheme designed to cause wrongful loss to NSE and wrongful gain to the Appellant.

• The Tribunal also held that the Rs. 4.54 crores paid to the Appellant were proceeds of crime, arising from scheduled offences, and thus fell under the definition of ‘proceeds of crime’ as provided under  s. 2(1)(u) of the PMLA. The use and receipt of these funds, falsely presented as legitimate income, invoked the provisions of s. 3 of the PMLA.

• Additionally, the Tribunal clarified that the absence of a formal charge sheet or the Delhi High Court’s decision to grant bail to a co-accused (Sanjay Pandey) did not affect the attachment, as such procedural developments were not conclusive in determining whether scheduled offences had been committed under the PMLA.

Our Analysis

The Tribunal’s decision reinforces the principle that fraudulent conduct cloaked in contractual formality will not shield the perpetrators from penal consequences either under the IPC or the PMLA. The judgment affirms that where a contract is conceived and executed with dishonest intent and results in quantifiable wrongful loss and gain, the offence of cheating under s. 420 of the IPC is prima facie established. By citing K.S. Puttaswamy v. Union of India[ii], the Tribunal also emphasized the importance of informational and communicational privacy and held that unauthorized private call monitoring is a blatant violation of a. 21 of the Constitution.

Regarding the PMLA, the ruling clarifies that a charge sheet is not required to establish a reasonable belief under s. 5, which aligns with the Supreme Court’s observations in Vijay Madanlal Choudhary v. Union of India[iii], regarding the preventive nature of attachment proceedings. The case highlights significant governance lapses within financial institutions, particularly the complicity of NSE officials in facilitating illegal surveillance. This judgment stresses the need for stronger institutional accountability and reinforces the PMLA’s role in addressing sophisticated economic crimes that masquerade as legitimate business transactions. It further underscores the importance of holding corporate entities accountable for illegal actions, especially when they involve institutional corruption, and strengthens the PMLA as a critical tool in combating financial misconduct.

End Notes

[i] [2025]173 taxmann.com 169.

[ii] (2017) 10 SCC 1.

[iii] (2022) 10 SCC 744.

Authored by Aishwarya Pawar, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.