2026 (3) TMI 1451 - AT - Money Laundering

Provisional attachment under PMLA can reach equivalent-value property, even if acquired before the check-period, when proceeds of crime are not traceable.

Provisional attachment under the Prevention of Money Laundering Act, 2002 may extend to property of equivalent value when the actual proceeds of crime are ... Provisional Attachment Order (‘PAO’) - properties acquired prior to the check-period - determination of the assets disproportionate to known source of income - definition of “proceeds of crime” - Attachment of property of equivalent value - deemed tainted property - statutory interpretation - literal construction. Proceeds of crime - Attachment of property of equivalent value - Property acquired prior to commission of crime - HELD THAT:- The definition of “proceeds of crime” which has three limbs and also clarified recently by the Punjab and Haryana Court in the case of Dilbag Singh @ Dilbag Sandhu [2024 (11) TMI 833 - PUNJAB AND HARYANA HIGH COURT]. The first limb is applicable when property is derived or acquired directly or indirectly out of the scheduled offence. However, if such property is not available having been laundered, then the Enforcement Directorate may invoke second limb of the definition to attach the property of equivalent value. The third limb is when the property is taken out of the country than the property of equivalent value in India thereof can be attached. The respondent have invoked second limb to provisionally attached two properties acquired prior to commission of crime which would also fall in the definition of ‘proceeds of crime’ though not in first limb definition but in the second limb of the definition. The appellant has confused itself by the check-period for determination of the assets disproportionate to known source of income and the period taken by the respondent for provisional attachment of the property which has no nexus with the check-period of the crime. The Tribunal held that once the disproportionate assets were quantified, that amount constituted the proceeds of crime, and provisional attachment could extend to properties of equivalent value for securing the claim till conclusion of trial. Interpreting the definition of proceeds of crime, it held that the expression covers not only property directly or indirectly derived from the scheduled offence, but also the value of such property where the actual tainted property is not available. On that construction, even properties acquired prior to the commission of crime would fall within the second limb of the definition when attached only as equivalent-value properties. The appellants' reliance on the check-period was held to be misplaced, since the check-period was relevant for determining disproportionate assets, whereas attachment of equivalent-value property was not confined to assets acquired during that period. As the value of the attached immovable properties was still below the quantified proceeds of crime, attachment of the two earlier-acquired properties was not illegal. [Paras 7, 8, 9, 10, 11] The challenge to attachment of the two properties acquired before the check-period was rejected, and the confirmation of provisional attachment was upheld. Final Conclusion: The Tribunal held that the definition of proceeds of crime permits attachment of property of equivalent value even if such property was acquired before the commission of the scheduled offence, provided the actual proceeds of crime are not available. As the quantified proceeds of crime exceeded the value of the attached properties, no interference with the impugned order was warranted and the appeals were dismissed. Issues: Whether properties acquired before the check-period or before the commission of the scheduled offence could be provisionally attached as equivalent value property under the Prevention of Money Laundering Act, 2002.Analysis: The attachment was challenged only in relation to two immovable properties acquired prior to the check-period. The Tribunal held that the check-period used for determining disproportionate assets under the Prevention of Corruption Act, 1988 was not determinative of the scope of provisional attachment under the Prevention of Money Laundering Act, 2002. Relying on the wide definition of 'proceeds of crime' under Section 2(1)(u) of the Prevention of Money Laundering Act, 2002 and the distinction between tainted property and property of equivalent value, it held that where the actual proceeds of crime are not available, the enforcement agency may attach other property of equivalent value, even if such property was acquired earlier, so long as the attachment is to secure the alleged proceeds till trial conclusion.Conclusion: The challenge to provisional attachment of the two properties failed, and the attachment was upheld in favour of the Revenue.Ratio Decidendi: Under Section 2(1)(u) of the Prevention of Money Laundering Act, 2002, provisional attachment is not confined to property directly or indirectly derived from the scheduled offence and may extend to property of equivalent value when the proceeds of crime are not traceable.