Delhi High Court - Property bought from crime proceeds BEFORE the PMLA can still be attached under Section 5(1) if the accused CONTINUES to possess or use it after the Act came into force.

The Hon'ble High Court of Delhi (Division Bench) in Directorate of Enforcement v. M/s Mahanivesh Oils & Foods Pvt. Ltd. [LPA 144/2016, 2026:DHC:2147-DB] dated March 16, 2026 held that property purchased from proceeds of crime prior to the coming into force of the Prevention of Money Laundering Act, 2002 can be provisionally attached under Section 5(1) thereof, if the offender continues to remain in possession of, and continues to use, such property even after the PMLA came into force. The Court held that the subject property itself constitutes "proceeds of crime" within the meaning of Section 2(1)(u) of the PMLA, and that mere possession and use of proceeds of crime independently constitute the offence of money laundering under Section 3 of the Act, which is a continuing offence so long as such possession or use persists.

FACTS OF THE CASE

On the basis of a written complaint filed by Mr. S.K. Maggu, Deputy Director of the National Agricultural Marketing Cooperative Federation Ltd. (NAFED), the Central Bureau of Investigation lodged a First Information Report dated May 8, 2009 at New Delhi alleging that Homi Rajvansh, the Additional Managing Director of NAFED, had, in connivance with M.K. Agri International Ltd. (MKAIL), executed, on behalf of NAFED, certain Memoranda of Understanding for import of raw sugar on a High Seas Sale basis through three HSS Agreements with M.K. International Ltd. (MIL), a sister concern of MKAIL, without charging any cost. Pursuant to these agreements, raw sugar was sold by NAFED to MIL, which was subsequently sold by MIL in the open market.

On February 10, 2005, MIL issued cheques aggregating ₹1.5 crores in favour of its two holding companies, Duroroyale Enterprises Ltd. and Sri Radhey Trading Pvt. Ltd. (SRTPL). Duroroyale and SRTPL, in turn, issued two cheques of ₹75 lakhs each in favour of the Respondent, M/s Mahanivesh Oils & Foods Pvt. Ltd., of which Alka Rajvansh, wife of Homi Rajvansh, was a Director. The Respondent then issued cheques dated February 16, 2005 for ₹1,32,00,000 and February 17, 2005 for ₹10.81 lakhs in favour of Uppal Agencies Pvt. Ltd. for the purchase of an immovable property being the entire basement and ground floor of a house at E-14/3, Vasant Vihar, New Delhi (the subject property), vide sale deed dated March 18, 2005.

The FIR alleged commission of offences by Alka Rajvansh under Sections 403, 409 and 420 read with Section 120B of the Indian Penal Code, 1860. A charge-sheet was subsequently filed and criminal proceedings proceeded before the learned Chief Metropolitan Magistrate, New Delhi.

On January 24, 2014, the Deputy Director, Directorate of Enforcement passed Provisional Attachment Order No. 01/2014 under Section 5(1) of the PMLA provisionally attaching the subject property. The Respondent challenged the said Provisional Attachment Order before this Court by way of WP(C) No. 1925/2014. The learned Single Judge, by the impugned judgment dated January 25, 2016, quashed the Provisional Attachment Order and allowed the writ petition, holding that since the scheduled offence was committed and the property was purchased using its proceeds prior to the coming into force of the PMLA, the offence of money laundering had been completed before the Act came into effect, and accordingly the ED could not invoke the PMLA against the Respondent. The Directorate of Enforcement, being aggrieved by the impugned judgment, filed the present Letters Patent Appeal.

ISSUE

Whether property purchased from proceeds of crime prior to the coming into force of the Prevention of Money Laundering Act, 2002, which continues to remain in possession of the purchaser and is used by the purchaser even after the Act came into force, can be provisionally attached and confiscated under Section 5(1) of the PMLA.

HELD BY THE COURT

The Hon'ble High Court of Delhi (Division Bench) in LPA 144/2016 [2026:DHC:2147-DB] held that:

The Court held that Sections 3, 5 and 8 of the PMLA constitute an integrated scheme and Section 5 cannot be read in isolation. It agreed with the general proposition laid down by the learned Single Judge to this extent, that if no offence of money laundering can prima facie be said to have taken place, there can be no question of invoking Section 5 to attach any property. However, the Court identified three fundamental errors in the impugned judgment which rendered its ultimate conclusion unsustainable. First, the learned Single Judge erroneously treated only the money received by Alka Rajvansh as "proceeds of crime", whereas the definition of "proceeds of crime" in Section 2(1)(u) of the PMLA expressly includes any property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence, and therefore the subject property itself, having been purchased using the funds tracing back to the scheduled offence, also constituted "proceeds of crime". Second, the learned Single Judge conflated the expression "coming into possession" with "possession" as used in Section 3, whereas the statute envisages the latter; it is the factum of possession of proceeds of crime, not the date of coming into possession, which constitutes the offence. Third, the impugned judgment ignored the significance of the word "includes" in Section 3, which by established canons of statutory interpretation widens the definition of money laundering to encompass, independently, mere concealment, possession, acquisition, and use of proceeds of crime, irrespective of whether the proceeds are projected as untainted property.

The Court observed that the definition of money laundering in Section 3 of the PMLA is inclusive in nature. The first limb of Section 3, preceding the word "including", covers persons who directly or indirectly attempt to indulge, knowingly assist, knowingly are a party to, or are actually involved in any process or activity connected with the proceeds of crime. The post-"including" limb independently includes concealment, possession, acquisition and use of proceeds of crime. Any one of these acts, standing alone, suffices to constitute the offence of money laundering, and the use of the coordinating conjunction "or" between these terms makes clear that they are to be read disjunctively. The Court opined that projecting or claiming the proceeds of crime to be untainted is not a mandatory element of the offence, as both Explanation (i) and Explanation (ii) to Section 3 make it clear that each of the activities enumerated therein — concealment, possession, acquisition, use, projection, or claiming as untainted — independently constitute the offence. Explanation (ii), in particular, expressly clarifies that the process or activity connected with proceeds of crime is a continuing activity, which continues till such time as the person is directly or indirectly enjoying the proceeds of crime by any of the said modes.

The Court further observed that inasmuch as the subject property also constitutes "proceeds of crime" within the meaning of Section 2(1)(u) of the PMLA, the Respondent was in possession of, and was using, proceeds of crime on the date the PMLA came into force on July 1, 2005, and continued to remain in possession and use of the same till the Provisional Attachment Order was passed. The offence of money laundering under Section 3 was therefore being committed on and after July 1, 2005, and was a continuing offence so long as such possession and use persisted. Since only a part of the ingredients of the offence — namely the commission of the scheduled offence and the acquisition of the property — antedated the PMLA, while the possession and use of the subject property, which itself constituted proceeds of crime, continued post-PMLA, there was no question of retrospective application of the statute. The Court held that this position is squarely in conformity with the principle in Queen v. Inhabitants of St. Mary, Whitechapel (1848) 12 QB 120, that a statute whose direct operation is prospective is not rendered retrospective merely because a part of the requisites for its application is drawn from a period antecedent to its passing.

The Court further held that the Respondent's argument, and the finding of the learned Single Judge, that the offence of money laundering stood completed once the proceeds of crime were "integrated" into the economy upon purchase of the subject property, is legally unsustainable. Since Section 3, by virtue of the word "includes", independently covers mere possession and mere use of proceeds of crime, the offence does not conclude once the money is expended in the purchase of property. The property itself becomes proceeds of crime and the offence of money laundering continues so long as the offender remains in possession of, or continues to use, such property. The Court relied on para 134 and 135 of Vijay Madanlal Choudhary v. Union of India [2022 SCC OnLine SC 929] and paras 21, 22, 24 and 25 of Pradeep Nirankarnath Sharma v. Enforcement Directorate [2025 SCC OnLine SC 560] to fortify its conclusions, noting that the Supreme Court had unequivocally held that continuing to possess or use proceeds of crime is a continuing offence and that the relevant date is the date on which the person indulges in the process or activity connected with the proceeds of crime, not the date of the scheduled offence.

The Court also held that Article 20(1) of the Constitution of India is not violated by this interpretation, since the PMLA does not punish for the commission of the scheduled offence but for the commission of the distinct and independent offence of money laundering. The punishment inflicted under Section 4 of the PMLA for the money laundering offence cannot be compared with the punishment for the scheduled offence, and no infraction of Article 20(1) arises. On the question of whether the ingredients of clause (b) of Section 5(1) were satisfied — i.e., whether there was reason to believe that the property was likely to be concealed or transferred — the Court held that the subjective satisfaction of the Deputy Director was not open to challenge in certiorari jurisdiction under Article 226 of the Constitution in the absence of the decision being completely baseless or without any material. Given the elaborate and deliberate trail of transactions traced from the scheduled offence through multiple shell entities to the eventual purchase of the subject property, the Court found that the satisfaction recorded in the Provisional Attachment Order could not be said to be perverse or without basis.

Accordingly, the impugned judgment of the learned Single Judge was quashed and set aside. The Provisional Attachment Order dated January 24, 2014 was upheld and WP(C) No. 1925/2014 stood dismissed. The appeal was allowed with no orders as to costs.

RELEVANT SECTIONS

Section 3 of the Prevention of Money Laundering Act, 2002 — "Offence of money-laundering"

Section 5(1) of the Prevention of Money Laundering Act, 2002 — "Attachment of property involved in money-laundering"

Section 2(1)(u) of the Prevention of Money Laundering Act, 2002 — "Proceeds of crime"

Section 2(1)(v) of the Prevention of Money Laundering Act, 2002 — "Property"

Section 2(1)(y) of the Prevention of Money Laundering Act, 2002 — "Scheduled offence"

Section 8 of the Prevention of Money Laundering Act, 2002 — "Adjudication"

Section 120B of the Indian Penal Code, 1860 — "Punishment of criminal conspiracy"

Section 420 of the Indian Penal Code, 1860 — "Cheating and dishonestly inducing delivery of property"

Section 409 of the Indian Penal Code, 1860 — "Criminal breach of trust by public servant, or by banker, merchant or agent"

Article 20(1) of the Constitution of India — "Protection in respect of conviction for offences"

Article 226 of the Constitution of India — "Power of High Courts to issue certain writs"

PARI MATERIA / CASES REFERRED

Vijay Madanlal Choudhary v. Union of India [2022 SCC OnLine SC 929] — The Supreme Court of India, in this landmark Constitution Bench judgment, held that the offence of money laundering under Section 3 of the PMLA is an independent offence concerning the process or activity connected with the proceeds of crime. The Supreme Court held that such process or activity can be in any form — concealment, possession, acquisition, use, or projecting the proceeds of crime as untainted property — and that involvement in any one such process or activity constitutes the offence of money laundering. The Court further held that money laundering is a continuing offence, irrespective of the date of commission of the scheduled offence, and that the relevant date is the date on which the person indulges in the process or activity connected with the proceeds of crime. Continuing to possess, conceal, or use the proceeds of crime until fully exhausted amounts to money laundering.

Pradeep Nirankarnath Sharma v. Enforcement Directorate [2025 SCC OnLine SC 560] — The Supreme Court of India held that offences under the PMLA are of a continuing nature and the act of money laundering does not conclude with a single instance but extends so long as the proceeds of crime are concealed, used, or projected as untainted property. The Court held that an offence is deemed continuing when the illicit act or its consequences persist over time, thereby extending the liability of the offender, and that Section 3 of the PMLA, covering direct or indirect attempts to indulge in, knowingly assist, or actually be involved in any process or activity connected with the proceeds of crime, constitutes a continuing offence if such involvement is prolonged.

Tarun Kumar v. Enforcement Directorate [(2024) 13 SCC 788] — Relied upon by the Appellant for paras 15 and 23.

Anand Kumar Kapur v. Union of India [2025 Cri LJ 26] — Judgment of a learned Single Judge of the Delhi High Court, relied upon by the Appellant.

Syed Yakoob v. K.S. Radhakrishnan [AIR 1964 SC 477] — The Supreme Court of India held that the writ of certiorari is a supervisory jurisdiction and the High Court exercising it is not entitled to act as an appellate court. Findings of fact recorded by the inferior court or tribunal cannot be reopened in writ proceedings. Only an error of law apparent on the face of the record can be corrected by a writ of certiorari, and not an error of fact however grave.

Rao Shiv Bahadur Singh v. State of Vindhya Pradesh [AIR 1953 SC 394] — Relied upon by the Respondent on the question of double jeopardy and continuing offences.

Queen v. Inhabitants of St. Mary, Whitechapel [(1848) 12 QB 120] — The Court held that a statute which in its direct operation is prospective cannot be properly called a retrospective statute merely because a part of the requisites for its action is drawn from a time antecedent to its passing. Relied upon both by the learned Single Judge and by the Division Bench.

Enforcement Directorate through D.N. Poddar, Deputy Director v. Papia Rozario [2026 SCC OnLine Cal 471] — A learned Single Judge of the High Court of Calcutta, relied upon by the Appellant in rejoinder.

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