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Issues: (i) Whether the Enforcement Directorate could sustain provisional attachment on the basis of allegations regarding preferential allotment of shares and share-price manipulation when those allegations did not form part of the FIR, chargesheet, ECIR or the complaint; (ii) Whether the coal block allocation itself, or the alleged gains from preferential shares, constituted 'proceeds of crime' so as to attract Sections 3 and 5 of the Prevention of Money Laundering Act, 2002.
Issue (i): Whether the Enforcement Directorate could sustain provisional attachment on the basis of allegations regarding preferential allotment of shares and share-price manipulation when those allegations did not form part of the FIR, chargesheet, ECIR or the complaint.
Analysis: The statutory power of provisional attachment is conditioned on material showing possession of proceeds of crime linked to criminal activity relating to a scheduled offence. The Court held that the Enforcement Directorate cannot assume jurisdiction to investigate or adjudge a predicate offence on its own, and cannot rest attachment on allegations that never formed part of the registered predicate proceedings. The proviso and emergency power in Section 5 do not authorise the agency to bypass the statutory scheme or to treat unregistered allegations as a completed scheduled offence. Section 66(2) reinforces that if material suggests contravention of another law, the information must be shared with the competent agency rather than converted into an independent basis for attachment.
Conclusion: The attachment could not be sustained on allegations outside the predicate proceedings and was invalid in favour of the petitioner.
Issue (ii): Whether the coal block allocation itself, or the alleged gains from preferential shares, constituted 'proceeds of crime' so as to attract Sections 3 and 5 of the Prevention of Money Laundering Act, 2002.
Analysis: The Court reiterated that 'proceeds of crime' requires property derived or obtained as a result of criminal activity relating to a scheduled offence, and that the offence under Section 3 is dependent on such proceeds. A coal block allocation by itself is not property or proceeds of crime; only later illegal gains, if lawfully linked to a scheduled offence and actually pleaded in the predicate case, can fall within the Act. The Court found that the gains from preferential share allotment were not part of the FIR, the chargesheet or the ECIR, and no competent agency had investigated or registered them as a scheduled offence. On the material before the Court, the provisional attachment therefore lacked the necessary statutory foundation.
Conclusion: Neither the coal block allocation nor the preferential-share allegations sustained attachment under the Act, and this issue was decided in favour of the petitioner.
Final Conclusion: The provisional attachment and the connected complaint were set aside because the impugned action exceeded the permissible scope of the money-laundering statute and was not supported by a legally cognisable predicate offence basis.
Ratio Decidendi: For provisional attachment under the Prevention of Money Laundering Act, 2002, the attached property must be shown on the existing record to be proceeds of crime derived from a scheduled offence, and the Enforcement Directorate cannot found attachment on unregistered or extraneous allegations or itself assume jurisdiction to determine a predicate offence.
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