Introduction
In a recent judgment titled Satish Motilal Bidri vs Union of India,[i] the Kerala High Court (‘HC’) addressed the critical issue regarding property attachment under the Prevention of Money Laundering Act, 2002 (‘PMLA’), holding that the same is only permissible if the property so attached has directly been acquired through proceeds of crime.
Brief Facts
The enforcement directorate (‘ED’) froze the petitioner's bank accounts in connection with the investigation into M/s. Masters Finserv and its proprietor; the adjudication was pending before the HC.
However, during the pendency of the said case, the ED provisionally attached the property belonging to the Petitioner under s. 5(1) of the PMLA and the aforementioned frozen bank accounts.
Subsequent to the issuance of the provisional attachment order, the Petitioner amended the writ petition and challenged the provisional attachment order issued under s. 5(1) of the PMLA, and the freezing of his bank account.
Held
The HC, while setting aside the provisional attachment order issued by the ED, held that the attachment of the property belonging to the Petitioner was arbitrary and illegal, especially considering that the attached property was purchased several years before the alleged commission of the predicate offence. The HC explained that s.5 of the PMLA only allows for the attachment of properties that have been identified as 'proceeds of crime,' i.e., they have been derived from criminal activities related to scheduled offences. Considering that the immovable property in the present case was acquired long before the commission of the alleged offences, it did not fall under the PMLA's purview.
Regarding the provisional attachment of bank accounts, the HC stated that the petitioner must exhaust alternative remedies under the PMLA before seeking judicial review under a. 226 of the Constitution, leaving this part of the attachment order intact. Hence, the writ petition was allowed in part.
Our Analysis
Through this judgment, the HC examined the scope of the powers under the PMLA, particularly concerning the attachment of properties as ‘proceeds of crime’ under s. 5 of the PMLA.
The definition of 'proceeds of crime' as articulated in s. 2(1)(u) of the PMLA encompasses three categories: (i) any property derived or obtained, directly or indirectly, from criminal activities connected to scheduled offences, (ii) the value of any such property, and (iii) any equivalent property located within India if the original property is held outside India.
HC highlighted that for an attachment order to be valid, the property in question must fall within the aforementioned definition, i.e., the property must be linked to the criminal activity to justify its attachment, either as the original property or its equivalent value held within the jurisdiction of India. It was found that the immovable property in question had been acquired in 2004, a period that predates the alleged criminal offences of 2021-2022, and HC underscored that the PMLA’s provisions could not be applied retroactively. This decision aligns with established judicial precedents.
End Note
[i] 2024 SCC OnLine Ker 3410.
Authored by Shreya Manchanda, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.
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