Proceeds of crime under PMLA must be legally linked to the alleged activity before discharge is refused.

Proceedings under the Prevention of Money Laundering Act must rest on a legally sustainable nexus between the alleged criminal activity and identifiable proceeds of crime. Where the complaint's foundation shifted during investigation and the material ultimately relied upon was only the cost of uninstalled pollution control equipment, the court held that the trial court should have examined whether that amount could properly constitute proceeds of crime before refusing discharge. The rejection of discharge was therefore unsustainable, the order was set aside, and the matter was remanded for fresh consideration on the existing record.

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Issues: Whether the amount of Rs. 2 lakh, being the cost of pollution control equipment not installed in the factory, could be treated as "proceeds of crime" under the Prevention of Money Laundering Act, 2002 and justify continuation of proceedings after the discharge application.

Analysis: The complaint initially proceeded on the basis that the alleged activity generated value exceeding the statutory threshold and was connected with a scheduled offence. During investigation, however, the Enforcement Directorate obtained only the cost of the uninstalled equipment, namely Rs. 2 lakh, and treated that amount as the proceeds of crime. The earlier allegation regarding larger turnover was not sustained in the final complaint. The Court found that the trial court did not examine this shift in the foundation of the prosecution and did not properly consider whether the value of an uninstalled device could, on the facts of the case, be treated as proceeds of crime within the meaning of the Act.

Conclusion: The rejection of discharge was unsustainable. The order was set aside and the matter was remanded for fresh consideration.

Final Conclusion: The prosecution was not finally affirmed on the existing record, and the trial court was required to reconsider the matter afresh in light of the Court's observations.

Ratio Decidendi: A complaint under the Prevention of Money Laundering Act must rest on a legally sustainable nexus between the alleged criminal activity and the identified proceeds of crime, and a court must examine whether the material relied upon actually satisfies that statutory link before refusing discharge.

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