Can Property Acquired Before PMLA Be Attached as ‘Proceeds of Crime’? Delhi High Court Examines

The Delhi High Court has delivered a significant ruling on the scope of the Prevention of Money Laundering Act, 2002 (PMLA), addressing whether properties acquired from alleged criminal proceeds before the law came into force can be attached under its provisions. A Division Bench comprising Justice C. Hari Shankar and Justice Om Prakash Shukla has observed that Sections 3 (offence of money laundering), 5 (attachment), and 8 (adjudication and confiscation) of the PMLA form an integrated statutory scheme. The definition of “proceeds of crime” extends to property derived from illicit funds, not just the original money. The offence of money laundering includes “possession” and “use” of such proceeds, not merely the initial act of acquisition. The law does not support the view that money laundering ends once funds are integrated into the economy. The case arises from an alleged financial irregularity involving the National Agricultural Cooperative Marketing Federation of India (NAFED). According to the prosecution, officials of NAFED entered into dubious agreements for the sale of imported raw sugar, resulting in significant financial loss to the organization. Investigators alleged that proceeds from these transactions were routed through a chain of companies before being transferred to M/s Mahanivesh Oils & Foods Pvt Ltd. These funds were then used to purchase a residential property in Delhi in 2005. In 2014, the ED provisionally attached the property under Section 5(1) of the PMLA, claiming it constituted “proceeds of crime.” The company challenged this action, leading to a Single Judge ruling in its favour in 2016. At the heart of the dispute lies a critical legal question: can a property purchased using alleged proceeds of crime before the PMLA came into force be attached under the Act if the accused continues to possess or use it after the law’s commencement? The Single Judge had ruled against the ED, holding that the PMLA cannot be applied retrospectively to acts completed before its enforcement. The alleged “money-laundering” activity — including acquisition and integration of funds — had concluded before the Act came into force in 2005. Treating continued possession of property as a “continuing offence” would effectively give retrospective effect to a penal statute, violating Article 20(1) of the Constitution. Since the offence of money laundering was not established post-enactment, the attachment under Section 5 could not stand. Challenging the ruling, the ED contended that “Proceeds of crime” under the PMLA includes not just the original funds but also property purchased from those funds. The offence of money laundering is a continuing one, and continued possession or use of such property falls within its ambit. The law permits attachment even if the property is held by a person not directly accused of the scheduled offence. The ED also argued that the Single Judge had wrongly assumed that the offence was complete before the Act came into force, ignoring ongoing possession and enjoyment of the alleged tainted property. The Court emphasized that the interpretation of “possession” plays a crucial role in determining whether the offence continues beyond the enactment of the law. The court held that continuing to possess proceeds of crime or retaining possession of proceeds of crime or using proceeds of crime until they are fully exhausted amounts to money laundering. The court clarified that the relevant date for determining when the offence has been committed is the date when the person indulges in the process or activity connected with the proceeds of crime. Inasmuch as usage and possession of the proceeds of crime is also covered under the definition of “money laundering”, the fact that the subject property was in the possession of and continued to be used by, the respondent on and after the date when the PMLA came into force, ipso facto makes the PMLA applicable. Case Details Case Title: ED Versus M/S Mahanivesh Oils & Foods Pvt Ltd Citation: JURISHOUR-494-HC-2026(DEL) Case No.: LPA 144/2016 Date: 16 March 2026 Counsel For Petitioner: Zoheb Hossain Counsel For Respondent: Parag Tripathi, Sr. Adv. Click Here To Read Order Read More: Govt. Subsidies Not Directly Attributable To Acquisition Of Specific Capital Assets, Taxable As Income: ITAT

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