PMLA attachment cannot survive compounding of the scheduled offence, as the predicate basis for proceeds of crime disappears.

Attachment under the Prevention of Money Laundering Act, 2002 cannot continue once the scheduled offence has ended in compounding and consequent acquittal, because "proceeds of crime" under Section 2(1)(u) depends on a subsisting predicate offence and money-laundering under Section 3 requires property derived from such criminal activity. Where the foundational offence no longer survives, there is no basis to treat the attached property as proceeds of crime. The restoration mechanism under Rule 3-A of the 2016 Rules was held inapplicable to alter that result, and the attached properties were directed to be released.

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Issues: Whether, after the predicate criminal case ended in compounding and consequent acquittal, the attachment of properties under the Prevention of Money Laundering Act, 2002 could continue.

Analysis: Composition of a compoundable offence under Section 320(8) of the Code of Criminal Procedure, 1973 has the effect of acquittal. The expression "proceeds of crime" under Section 2(1)(u) of the Prevention of Money Laundering Act, 2002 is inseparably linked to a scheduled offence and the offence of money-laundering under Section 3 depends upon property derived or obtained as a result of criminal activity relating to such scheduled offence. Where the scheduled offence has come to an end by acquittal on composition, there is no surviving predicate offence and, therefore, no foundation for treating the attached property as proceeds of crime. The restoration mechanism under Rule 3-A of the Prevention of Money Laundering (Restoration of Property) Rules, 2016 was treated as inapplicable to defeat this consequence.

Conclusion: The attachment could not be continued and the appellants were entitled to release of the attached properties.

Final Conclusion: The writ appeal succeeded, the order of the Single Judge was set aside, and the writ petition was allowed with a direction to release the attached properties.

Ratio Decidendi: Money-laundering proceedings cannot survive once the scheduled offence has ended in final acquittal or compounding, because the existence of proceeds of crime derived from a subsisting predicate offence is a precondition for action under the Act.

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