High Court Upholds Provisional Attachment Under PMLA Where Property Remained in Possession and Use After Law Came Into Force

A Division Bench of Justices C. Hari Shankar and Om Prakash Shukla heard the Directorate of Enforcement’s appeal against a Single Judge’s order that quashed a provisional attachment under Section 5(1) of the Prevention of Money Laundering Act, 2002 (PMLA). The narrow issue before the Court was whether property purchased from proceeds of a scheduled offence before the PMLA came into force could be attached if the purchaser continued to possess and use the property after the Act became effective.

The Court allowed the appeal, quashed the Single Judge’s judgment and held that provisional attachment under Section 5(1) could be sustained where the property itself constituted “proceeds of crime” and the respondent continued in possession and use of it after the PMLA’s commencement. The Bench emphasized that “Section 5 of the PMLA cannot be read in isolation and is a part of an integrated scheme which includes Sections 3, 5 and 8.” The Court, in its reasoning, observed: “Viewed thus, so long as the person is in possession or in use of the proceeds of crime, which would include, in the present case, the subject property — the offence of money laundering continues.” The judges further noted that the definition of “proceeds of crime” in Section 2(1)(u) was wide enough to include property directly or indirectly obtained from criminal activity and that mere possession or use fell within the inclusive scope of Section 3.

Background The dispute arose from a CBI FIR (dated 8 May 2009) alleging fraudulent high-seas sugar sales by officials of NAFED and related entities. The prosecution contended that funds tracing from those transactions reached M/s Mahanivesh Oils & Foods Pvt. Ltd., where Alka Rajvansh was a director, and were used to purchase a residential property at E-14/3, Vasant Vihar by sale deed dated 18 March 2005. The Directorate of Enforcement issued a Provisional Attachment Order dated 24 January 2014 under Section 5(1) PMLA attaching the property as “proceeds of crime.” The respondent challenged that order by way of writ petition (WP(C) 1925/2014), and the Single Judge quashed the attachment on the ground that the alleged laundering and acquisition had been completed before the PMLA came into force and that the Act could not be given retrospective effect.

On appeal, the Division Bench treated the facts stated in the provisional attachment order as correct for the limited certiorari review and addressed purely legal questions. The Court held that the PMLA was not being applied retrospectively: it punished the independent offence of money-laundering, not the predicate scheduled offence, and the relevant date was when the respondent “indulged in the process or activity connected with such proceeds of crime.” Relying on the inclusive language of Section 3 and the Explanations thereto, the Bench concluded that possession and use of property that constituted proceeds of crime, continuing after 1 July 2005, sustained proceedings under the PMLA. The Court rejected the Single Judge’s view that integration of funds into the economy necessarily ended the offence. The Division Bench therefore upheld the provisional attachment dated 24 January 2014 and dismissed the writ petition; it allowed the appeal with no orders as to costs.

Case Details: Case No.: LPA 144/2016 Case Title: Directorate of Enforcement v. M/s Mahanivesh Oils & Foods Pvt. Ltd. Appearances: For the Petitioner(s): Mr. Zoheb Hossain and Mr. Anupam Sharma, Special Counsel; with Mr. Vivek Gurnani, Panel Counsel; Mr. Satyam, Ms. Riya Sachdev and Mr. Pranjal Tripathi, Advs. For the Respondent(s): Mr. Parag Tripathi, Senior Advocate; with Mr. D.S. Kohli, Ms. Rini Mehra, Mr. Yash Kadyan and Ms. Mannat Kohli, Advs.