Money-laundering attachment can rest on equivalent value, without re-investigating the predicate offence, where statutory conditions are met.

In money-laundering proceedings, the Enforcement Directorate is not required to re-investigate the predicate offence; its role is limited to examining the existence of the scheduled offence, proceeds of crime, and possible laundering, while only glaring defects in the predicate investigation may be noticed. The statutory preconditions for provisional attachment under the second proviso to Section 5(1) were found satisfied on the recorded material showing reason to believe that the properties were proceeds of crime and likely to be concealed or transferred. Even where a specific asset is claimed to have been acquired from lawful income, equivalent-value attachment may still be made where direct attachment of tainted property is impracticable.

---

---

Issues: (i) Whether the attachment was liable to be set aside on the ground that the Enforcement Directorate had not conducted any independent investigation into the predicate offence; (ii) Whether the attachment failed for non-compliance with the conditions in the second proviso to Section 5(1) of the Prevention of Money Laundering Act, 2002; (iii) Whether properties acquired from alleged lawful income could still be attached where the public servant was found in possession of disproportionate assets.

Issue (i): Whether the attachment was liable to be set aside on the ground that the Enforcement Directorate had not conducted any independent investigation into the predicate offence?

Analysis: The material before the Authority showed that the role of the Enforcement Directorate is confined to examining the existence of a predicate offence, the generation of proceeds of crime, and the laundering or likely laundering of such proceeds. The investigation into the scheduled offence remains with the police or CBI, and the Enforcement Directorate is not required to re-investigate the predicate offence or reach an independent conclusion on that offence. It may only notice glaring mistakes or lacunae in the predicate investigation for the purpose of its own proceedings under the money-laundering law.

Conclusion: The contention was rejected and the issue was decided against the appellant.

Issue (ii): Whether the attachment failed for non-compliance with the conditions in the second proviso to Section 5(1) of the Prevention of Money Laundering Act, 2002?

Analysis: The record showed that there was material supporting a reason to believe that the appellant was in possession of proceeds of crime and that the properties were likely to be concealed, transferred, or otherwise dealt with so as to frustrate confiscation proceedings. The Authority held that the statutory pre-conditions for provisional attachment were satisfied and that the safeguards in the second proviso were met on the facts proved before it.

Conclusion: The issue was decided against the appellant.

Issue (iii): Whether properties acquired from alleged lawful income could still be attached where the public servant was found in possession of disproportionate assets?

Analysis: The Authority held that even where a particular asset is traced to a lawful source, it may still be attached as property of equivalent value if direct attachment of the tainted property is not practicable. The definition of proceeds of crime is wide enough to include the value of such property, and the object of the statute permits attachment of equivalent value to prevent dissipation of the proceeds of crime.

Conclusion: The issue was decided against the appellant and in favour of the respondent.

Final Conclusion: The attachment order was sustained and the appeal failed on all substantive grounds, with no interference granted to the confirmed provisional attachment.

Ratio Decidendi: In proceedings under the money-laundering law, the Enforcement Directorate need not re-investigate the predicate offence, and property of equivalent value may be attached where proceeds of crime are involved, even if the particular asset is claimed to have been acquired from lawful income.

---