Properties Not Connected With 'Proceeds Of Crime' Cannot Be Subject To Attachment Under PMLA: Kerala High Court

In the present case, the petitioner approached the High Court under Article 226 challenging the freezing of bank accounts and an order of provisional attachment made against an immovable property during the investigations under the Prevention of Money Laundering Act, 2002.

Justice Bechu Kurian Thomas quashed the order of provisional attachment made against an immovable property acquired by the petitioner in 2004, which was at least half a decade before the offences alleged under the PMLA were committed.

“...the properties that can be proceeded against, exercising the powers of attachment must be those that have been acquired utilising the proceeds of crime. The contention of the learned counsel for the respondents that the term proceeds of crime will also include the value of the property which had been acquired even earlier is, according to me, too far-fetched and will not be justifiable in the light of the constitutional provisions of fairness and reasonableness. It is also necessary to observe at this juncture that the purpose of the PMLA is to remove tainted money and also to initiate proceedings against the proceeds of crime which have been transformed or converted into other property or intermingled with legitimate sources and then the value of the intermingled gain will assume the colour of proceeds of crime. Such a provision cannot be used to enable the authorities to proceed against properties that are unconnected with any of the criminal activity in question.”

The Court stated that PMLA was enacted as a preventive and punitive measure to combat the evil of money laundering. It noted that Sections 3 and 4 makes money laundering a punishable offence under the PMLA. It further noted that Section 5 enables authorities to provisionally attach properties which are 'proceeds of crime'.

The Court interpreted the term 'proceeds of crime' defined under the PMLA to state that there were three types of proceeds of crime. “(i). property derived or obtained from a criminal activity, (ii) value of any such property and, (iii) if the property is taken or held outside India, then a property equivalent in value held within India.”

Relying upon the Apex Court decisions in Vijay Madanlal Choudhary and Others v. Union of India and Others (2022) and Pavana Dibbur vs. Directorate of Enforcement (2023), it stated powers of attachment under the PMLA could only be exercised against properties acquired through proceeds of crime.

It thus noted that provisionally attaching a property purchased in 2004 was ex-facie, ultra vires the powers of the statute and totally illegal and arbitrary to the extent of the said attachment.

The Court thus quashed the provisional order of attachment. It further granted liberty to the petitioner to evoke alternative remedies against attachments made relating to the amount in the bank accounts.

Thus, the Writ petition was allowed in part.

Counsel for Petitioner: Advocates Vinay Mathew Joseph, Manish K.Jha, Abhijeet Panday, Kislay Kumar

Counsel for Respondents: Advocates Jaishankar V Nair, Anuj Udupa

Citation: 2024 LiveLaw (Ker) 400

Case Title: Satish Motilal Bidri v Union Of India

Case Number: WP(CRL.) NO. 406 OF 2024

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