Can Ancestral Property Of Accused Be Attached Under PMLA Act? Supreme Court Issues Notice In SLP

Can ancestral property of the accused be attached under the Prevention of Money-laundering Act, 2002 ?  Can a property which is in no way connected to "proceeds of crime" be attached ?

The Supreme Court has issued notice in the Special Leave Petition filed by the Directorate of Enforcement challenging a judgment of the Karnataka High Court.

The expression "proceeds of crime" is defined in Section 2(1)(u) of the Act as 'any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property or where such property is taken or held outside the country, then the property equivalent in value held within the country.'

The accused had challenged before the Karnataka High Court the order attaching their ancestral properties. The High Court, rejecting the ED's contention that 'any such property' means any property held by the offenders which could be appropriated towards the value of "proceeds of crime", had observed thus: The expression 'any such property', in my view, could only relate to such property which is tainted by "proceeds of crime". A property which is in no way connected to "proceeds of crime" cannot fall within the ambit of Section 2(1)(u) of the Act. The expression, 'any such property' used in the definition cannot be given such a wider meaning, so as to confer right on the adjudicating authority to proceed against all and every assets standing in the name of the alleged offenders.

Assailing this judgment, Additional Solicitor General SV Raju submitted before the Apex Court that the High Court has committed manifest error and the same is contrary to the very definition of "proceeds of crime" in Section 2(1)(u) of the 2002 Act.

The bench comprising Justices AM Khanwilkar and CT Ravikumar, therefore, issued notice in the SLP.

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