JSA successfully represented Petitioner in an important judgement wherein, the Kerala High Court held that property acquired prior to commission of the scheduled offence will not constitute “proceeds of crime”. Consequently, provisional attachment of such property under Section 5 of the Prevention of Money Laundering Act, 2002 (“PMLA”) is unjustified.
The scheduled offence was under Section 406/420/34 of the Indian Penal Code, 1860 (“IPC”). An FIR was registered on the allegations of cheating and inducing people to raise funds under the guise of fraudulent schemes. The Petitioner was not named in the FIR. On the strength of the FIR and scheduled offence therein, the Enforcement Directorate registered an ECIR and Petitioner was summoned to join the investigation. Subsequently, debit freeze orders were passed with respect to Petitioner’s bank accounts under Section 17 of the PMLA.
The Petitioner filed a writ petition challenging the debit freeze order. During pendency of the writ petition, Enforcement Directorate passed provisional attachment order under Section 5 PMLA and attached the Petitioner’s bank accounts as well as his residential property. Accordingly, an amended writ was filed challenging the provisional attachment under Section 5. It was contended that the Petitioner’s immovable property was acquired in the year 2004. However, the predicate offence is alleged to have been committed between 27.01.2021 to 14.11.2022.
Relying on the Supreme Court’s judgement of Vijay Madanlal Choudhary and Ors. v. Union of India (2022) SCC Online 929 and Pavana Dibbur v. Directorate of Enforcement (2023) SCC Online 1586, it was contended that property in question had no link with the predicate offence. Considering the rival contentions, the Hon’ble High Court held the following:
- Proceeds of crime will not include property which has been acquired prior to predicate offence.
- Such attachment of property will not be justifiable considering constitutional and provisions of fairness and reasonableness.
- If the attachment is to be affected to the extent of the monetary worth of a property which was not derived out of the predicate offence, then PMLA mandates that the property derived out of such criminal activity be taken out of India or is held outside the country.
In so far as the attachment of bank accounts is concerned, the Petitioner was relegated to alternate remedy under PMLA.
Enforcement Directorate provisionally attached property of the Petitioner which has no connection with the “proceeds of crime” and was acquired much prior to commission of scheduled offence.
The JSA Team was lead by Partners – Mr. Manish Jha and Kumar Kislay and instructed by External Counsel Mr. Abhijeet Pandey.
Kumar Kislay has been practicing law since the year 2013 and focuses on Infrastructure practice, Corporate-Commercial Litigations, and White-Collar Offences.