Property Purchased Before PMLA Can Be Attached If Derived From "Proceeds Of Crime": Delhi High Court

The Delhi High Court on Monday 16 March, held that the offence of money laundering is a continuing offence, and property purchased from “proceeds of crime” can be attached under the Prevention of Money Laundering Act, 2002 (PMLA), even if it was acquired prior to the Act coming into force.

A Division Bench comprising Justice C Hari Shankar and Justice Om Prakash Shukla upheld the provisional attachment order issued by the Enforcement Directorate (ED). The Bench 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 case originated from a CBI FIR dated 8 May 2009 alleging that Homi Rajvansh, then Additional Managing Director of National Agricultural Marketing Cooperative Federation Ltd (NAFED), had, in conspiracy with private entities, caused wrongful loss to NAFED through irregular High Seas Sale transactions.

Pursuant to the alleged transactions, Rs. 1.5 crore was routed through intermediary companies to Mahanivesh Oils and Foods Pvt Ltd, in which Alka Rajvansh, Homi's wife, was a Director. The funds were used to purchase a property at Vasant Vihar, New Delhi, vide sale deed dated 18 March 2005.

Following investigation and filing of the charge-sheet, the ED, on 24 January 2014, provisionally attached the said property as “proceeds of crime” under Section 5(1) of the PMLA.

Mahanivesh Oils and Foods, challenged the attachment, and the Single Judge quashed it on the ground that the property had been acquired prior to the coming into force of the PMLA. Aggrieved, the ED approached the Division Bench.

The ED contended that under Section 5(1) of the PMLA, property purchased from proceeds of crime can be attached so long as it continues to remain in the possession of the person concerned. It argued that the Single Judge erred in restricting “proceeds of crime” to the money alone, overlooking that the property purchased from the said money also falls within its scope.

The respondent, on the other hand, contended that the interpretation advanced by the ED would render Sections 3 and 5 of the PMLA retrospectively applicable, thereby violating Article 20(1) of the Constitution.

The Bench identified three errors in the impugned judgment. First, the Single Judge incorrectly confined “proceeds of crime” to the money alone, ignoring that property derived from such proceeds is also covered. Second, it erroneously treated “coming into possession” as constituting money laundering, whereas Section 3 uses the term “possession”. Third, it failed to appreciate the scope of the word “includes” in Section 3(1), which brings within its ambit acts such as possession and use of proceeds of crime.

Observing that the subject property continued to remain in possession of the respondent even after the PMLA came into force, the Bench held:

“Use and possession of proceeds of crime, by virtue of the post- “including” part of Section 3, independently constitute the offence of money laundering. Any person who, therefore, uses, or is in possession of, proceeds of crime, ipso facto commits the offence of money laundering. Inasmuch as the subject property also constitutes “proceeds of crime”, and the respondent was in possession of the subject property, and continued to remain in possession thereof, and was using the subject property till the issuance of the Provisional Attachment order, the respondent was, even on the date of passing the said order, committing the offence of “money laundering” within the meaning of Section 3 of the PMLA.”

It further clarified that the "offence of money laundering does not, therefore, end on the date when the person comes into possession of the proceeds of crime. It continues so long as the person remains in possession of the proceeds of crime.”

The Court observed that on 1 July 2005, when the PMLA came into force, the respondent was in possession and use of the subject property, and was therefore committing the offence of money laundering.

Emphasising the object of the statute, the Bench held:

“If the person continues to remain in possession of, or continues to use, the proceeds of crime, which would include properties directly or indirectly obtained or received from proceeds of crime, he would certainly be guilty of the offence of money laundering immediately on the PMLA coming into force. This is in tune with the intent and purpose of the PMLA as a statute which is intended to curb serious economic offences, which tarnish the fiscal fabric of the country.”

On the issue of retrospectivity, the Court clarified that the PMLA punishes the offence of money laundering and not the scheduled offence, and therefore does not violate Article 20(1).

Accordingly, the Court allowed the appeal, set aside the judgment of the Single Judge and upheld the provisional attachment order.

For Appellant: Advocates Zoheb Hossain, Anupam Sharma, Vivek Gurmani, Satyam, Riya Sachdev and Pranjal Tripathi

For Respondent: Senior Advocate Parag Tripathi, Advocates D.S Kohli, Rini Mehra, Yash Kadyan and Mannat Kohli