Proceeds of crime under PMLA require material linking property to criminal activity; clean funds cannot be provisionally attached.

Properties can be attached under the Prevention of Money Laundering Act, 2002 only if they are shown to be derived or obtained, directly or indirectly, from criminal activity relating to a scheduled offence, and the authorised officer has material to form reasons to believe under the attachment provision. On the stated facts, the funds traced to the appellants were treated as clean money from Shapoorji Pallonji, not proved to be proceeds of crime, and the dispute was essentially civil in character. The record did not justify treating all dealings with a person facing a scheduled offence as proceeds of crime, so the provisional attachment was unsustainable.

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Issues: Whether the attached properties could be treated as proceeds of crime under the Prevention of Money Laundering Act, 2002 and whether the provisional attachment was sustainable in the absence of material showing that the appellants were in possession of property derived from criminal activity relating to a scheduled offence.

Analysis: The money traced to the appellants was found to have originated from Shapoorji Pallonji and was treated as clean money. The attachment under the Prevention of Money Laundering Act, 2002 could stand only if the property sought to be attached was derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence, and the authorised officer had material to form the requisite reasons to believe under Section 5(1). On the facts, the properties of the appellants were acquired from funds that were not shown to be proceeds of crime, and the dispute was essentially a civil dispute regarding the character of the funds and their deployment. The record also did not justify treating all transactions with a person facing a scheduled offence as proceeds of crime.

Conclusion: The attachment was unsustainable and the appellants succeeded.

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