Proceeds of crime definition permits attachment of equivalent-value property where tainted assets are dissipated, subject to bona fide secured claims.

The note addresses validity of provisional attachment under the Prevention of Money Laundering Act over immovable property subject to prior mortgage or pari-passu charge, holding that the statutory definition of proceeds of crime permits attachment of property 'to the value thereof' where tainted property cannot be traced. It emphasises formation of a recorded reasonable belief based on material of diversion and conversion, requires assessment of wrongful gain before confirmation, and states such attachments operate subject to bona fide secured creditor rights, which may stake claims and be preserved under a harmonious construction with secured-debt remedies.

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Issues: Whether the provisional attachment under Section 5(1) and the definition of "proceeds of crime" (Section 2(1)(u)) of the Prevention of Money Laundering Act, 2002 is valid in respect of immovable property subject to prior mortgage/pari-passu charge, including attachment as "value thereof", and how such attachment coexists with the rights of a secured creditor under SARFAESI and related statutes.

Analysis: The material in possession showing diversion of funds, conversion into proceeds of crime and the inability to trace the actual tainted property supports formation of a recorded reasonable belief under Section 5(1) of PMLA. The definition of "proceeds of crime" in Section 2(1)(u) includes the "value thereof", permitting attachment of property of equivalent value where actual tainted property is not available. Binding and persuasive authorities interpret the definition to cover (i) tainted property derived from the scheduled offence, (ii) property equivalent in value where proceeds have been dissipated, and (iii) property held abroad with equivalent value domestically; safeguards and assessment of wrongful gain are required before confirmation. Where a secured creditor has a bona fide prior interest, the PMLA attachment remains valid but operates subject to the secured creditor's claim, with entitlement to stake its claim under Section 8(8) of PMLA and statutory safeguards protecting bona fide third-party rights. The statutory scheme (including Section 71 of PMLA and Section 35 of SARFAESI Act) and judicial precedents require harmonious construction to secure proceeds of crime while preserving bona fide secured interests to the extent of their claims; courts can examine existence of material and nexus for reasonable belief but not the sufficiency of investigative material.

Conclusion: The provisional attachment and its confirmation under the Prevention of Money Laundering Act, 2002 are valid in the facts of this case, including attachment as value equivalent, subject to the secured creditor's right to claim and satisfaction of its bona fide charge. The appeal by the secured creditor is dismissed and the secured creditor may pursue its claim under Section 8(8) of PMLA before the Special Court.

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