Gauhati High Court
Page No.# 1/28 vs The Directorate Of Enforcement on 27 March, 2026
Author: M. Zothankhuma
Bench: Michael Zothankhuma
Page No.# 1/28
GAHC010255322025
2026:GAU-AS:4426-DB
THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
Case No. : Crl.A(PMLA)/1/2025
KUMAR SANJIT KRISHNA
SON OF LATE UMA CHARAN BANIA,
UMA TIRTHA, HOUSE NO 51
KACHARI BASTI, ULUBARI,
PALTAN BAZAR,
DISTRICT KAMRUP (M), ASSAM
VERSUS
THE DIRECTORATE OF ENFORCEMENT
GOVT OF INDIA,
GUWAHATI ZONE -1,
MANIK TOWER, 6TH FLOOR, CHRISTAN BASTI, GS ROAD, GUWAHATI -
781005, THROUGH SHRI SHEETI KANTHA DAS DEPUTY DIRECTOR
2:SHRI SHEETI KANTHA DAS
OFFICER IN CHARGE
DEPUTY DIRECTOR
DIRECTORATE OF ENFORCEMENT
GOVT. OF INDIA
GUWAHATI ZONE - 1
MANIK TOWER
6TH FLOOR
CHRISTAN BASTI
GS ROAD
GUWAHATI - 781005
Advocate for the appellant : Dr. P. Agarwal ...Advocate.
Advocates for the respondents : Ms. L. Devi, ...SC, ED
Page No.# 2/28
:::BEFORE:::
HON’BLE MR. JUSTICE MICHAEL ZOTHANKHUMA
HON’BLE MR. JUSTICE KAUSHIK GOSWAMIDate on which judgment is reserved : 26.02.2026
Date of pronouncement of judgment : 27.03.2026
Whether the pronouncement is of the : N/A
operative part of the judgment ?
Whether the full judgment has been : Yes
pronounced?
JUDGMENT AND ORDER (CAV)
(M. Zothankhuma, J)
1. Heard Dr. P. Agarwal, learned counsel for the appellant. Also heard Ms. L.
Devi, learned Standing Counsel, Enforcement Directorate.
2. The appellant has prayed for setting aside the final order dated 13.08.2025
passed by the Appellate Tribunal under SAFEMA, New Delhi, in FPA-PMLA-
1341/GWH/2024, by which the appellant’s challenge to the order dated
27.05.2024, passed by the Adjudicating Authority, confirming the provisional
attachment of the appellant’s residential house vide order dated 20.12.2023 has
been rejected.
3. The challenge to the impugned final order dated 13.08.2025 is on the
ground that there is no evidence or money trail established by the respondents
in support of their allegation that the appellant had received an amount of Rs.
Page No.# 3/28
40 lakhs in the cash for leak of question paper scam. Further, the provisional
attachment order dated 20.12.2023 does not show that the same had been
made under Section 2(1)(u) of the Act, i.e., that the attached property was a
part of the proceeds of crime. The reasons subsequently given for issuing the
provisional attachment order having been explained by subsequent reasons, the
provisional attachment order could not have any public effect. In this respect,
the learned counsel for the appellant has relied upon the judgement of the
Hon’ble Supreme Court in the case of Mohinder Singh Gill & Anr. Vs. Chief
Election Commissioner, New Delhi & Ors., reported in (1978) 1 SCC 405,
which in Para 8 has held as follows:-
“8. The second equally relevant matter is that when a statutory
functionary makes an order based on certain grounds, its validity must be
judged by the reasons so mentioned and cannot be supplemented by
fresh reasons in the shape of affidavit or otherwise. Otherwise, an order
bad in the beginning may, by the time it comes to court on account of a
challenge, get validated by additional grounds later brought out. We may
here draw attention to the observations of Bose J. In Gordhandas Bhanji
case :
“Public orders publicly made, in exercise of a statutory authority
cannot be construed in the light of explanations subsequently given
by the officer making the order of what he meant, or of what was in
his mind, or what he intended to do. Public orders made by public
authorities are meant to have public effect and are intended to
affect the actings and conduct of those to whom they are addressed
and must be construed objectively with reference to the language
Page No.# 4/28used in the order itself”.
Orders are not like old wine becoming better as they grow older.”
4. The appellant’s further case is that the Enforcement Directorate could not
have attached the residence of the appellant, inasmuch as, the same had been
purchased by the appellant by making payments between 2008 and 2011, vide
payment receipts annexed to the appeal. The said property was registered in
the name of the appellant on 25.06.2019. As the appellant is alleged to have
received Rs.40 lakhs from the crime proceeds of Rs.6,13,74,440/-, for a crime
that took place between 11.04.2018 to 19.09.2020, the respondents could not
have attached the property of the appellant having the approximate value of
Rs.16.60 lakhs, which was bought prior to 11.04.2018, as the same was not
permissible as per the Prevention of Money Laundering Act, 2002 (hereinafter
referred to as the “Act”).
5. The learned counsel for the appellant submits that the attachment of the
property is not permissible in terms of Section 2(1)(u) read with Section 2(1)(v)
of the Act. She also submits that the judgment of the Supreme Court in the case
of Pavana Dibbur Vs. Directorate of Enforcement , reported in (2023) 15
SCC 91, has clearly held that properties which were bought prior to the
commission of the crime are not covered by the Section 2(1)(u) of the Act,
inasmuch as, they cannot be said to have any connection with the proceeds of
crime, as the scheduled offence took place after the purchase of the property.
“Scheduled Offence” is defined in Section 2(y) of the Act to mean:-
(i) the offences specified under Part A of the Schedule; or
(ii) the offences specified under Part B of the Schedule if the total value
Page No.# 5/28involved in such offences is [one crore rupees] or more; or
(iii) the offences specified under Part C of the Schedule.
6. Para 13 of the above judgment in Pavana Dibbur (supra) states as
follows:-
“13. Clause (v) of sub-section (1) of Section 2 PMLA defines “property” to
mean any property or assets of every description, whether corporeal or
incorporeal, movable or immovable, tangible or intangible. To constitute
any property as proceeds of crime, it must be derived or obtained directly
or indirectly by any person as a result of criminal activity relating to a
scheduled offence. The Explanation clarifies that the proceeds of crime
include property, not only derived or obtained from scheduled offence but
also any property which may directly or indirectly be derived or obtained
as a result of any criminal activity relatable to the scheduled offence.
Clause (u) also clarifies that even the value of any such property will also
be the proceeds of crime. Thus, the existence of “proceeds of crime”
is sine qua non for the offence under Section 3 PMLA.”
7. Section 2(1)(u) and 2(1)(v) of the Act states as follows:-
“2(1)(u) “proceeds of crime” means 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] [or abroad].
[Explanation.- For the removal of doubts, it is hereby clarified that
Page No.# 6/28“proceeds of crime” include property not only derived or obtained from
the scheduled offence but also any property which may directly or
indirectly be derived or obtained as a result of any criminal activity
relatable to the scheduled offence.]“2(1)(v) “property” means any property or assets of every description,
whether corporeal or incorporeal, movable or immovable, tangible or
intangible and includes deeds and instruments evidencing title to, or
interest in, such property or assets, wherever located.
Explanation: For the removal of doubts, it is hereby clarified that the term
“property” includes property of any kind used in the commission of an
offence under this Act or any of the scheduled offences .”
8. Dr. P. Agarwal, learned counsel for the appellant submits that the learned
Tribunal had upheld the attachment order on the basis of the 3 rd limb of Section
2(1)(u) of the Act, even though there was nothing to show that any property
had been taken or held outside India, which allowed for an equivalent value of
some other property to be attached within the India. She accordingly submits
that unless there is a finding that the proceeds of the crime are taken or held
outside India, property equivalent in value cannot be attached in India. In the
present case, the property in question having been bought prior to the
occurrence of the alleged crime, there was no ground to attach the property of
the appellant or the equivalent value of the proceeds of the crime even under
the 2nd limb or 3rd limb of Section 2(1)(u) of the Act. She further submits that
the attachment order does not indicate that any part of Section 2(1)(u) of the
Page No.# 7/28
Act had been applied, while passing the impugned provisional attachment order.
9. Ms. L. Devi, learned Standing Counsel, Enforcement Directorate on the
other hand submits that the 2 nd limb of Section 2(1)(u) of the Act provides for
attachment of an equivalent value of the property which is a part of the
proceeds of crime and which have been put into hiding by the appellant. She
accordingly submits that there is no infirmity with the impugned final order
dated 13.08.2025 passed by the learned Appellate Tribunal, inasmuch as, the
attachment of the appellant’s property has been made on the basis of 2 nd limb
of Section 2(1)(u) of the Act. Further, though an attached property may not
have been purchased with the money received from a crime, the same did not
disqualify or bar the attachment of property under Section 2(1)(u) of the Act.
She accordingly submits that the appeal should be dismissed. She submits that
the appellant had purchased the attached property on 25.06.2019, i.e., during
the currency of the commission of the offence.
10. We have heard the learned counsels for the parties.
11. The case of the appellant is that a case under the Act was initiated against
the appellant, pursuant to FIR No.21/2020 dated 20.09.2020 registered by the
CID, Assam Police, for offences under Section 120B, 119,120, 166, 201, 204,
212, 406, 409, 420, 461, 506 and 34 IPC read with Section 66(B) of the
Information Technology Act, apart from offences under the local laws applicable
in the State of Assam and offences under the Prevention of Corruption Act,
1988. Charge-sheet and supplementary charge-sheet in the case were also filed
by the CID, Assam. Charge-sheet reveals that a written test for recruitment of
Page No.# 8/28
597 posts of Sub-Inspector of Police (UB) of Assam Police scheduled on
20.09.2020 had to be cancelled due to the leak of the question paper/s on
WhatsApp. The appellant was one amongst the 42 persons named as an
accused in the case. The cash for question papers scam apparently resulted in
the generation of crime proceeds amounting to Rs.6,13,74,440/-, out of which
Rs.40.00 lakhs was the share of the appellant. The commission of the crime was
between 11.04.2018 to 10.09.2020. However, the property that had been
attached by the respondents under Section 2(1)(u) of the Act had been
purchased by the appellant between 2008-2011 for an amount of approximately
Rs.16.60 lakhs, though it is the case of the respondents that the said property
had been purchased by the appellant on 25.06.2019, i.e, during the currency of
the commission of the offence. In view of the stand of the appellant, i.e, the
property had been purchased by the appellant prior to the commission of the
offence, the question arises as to whether attachment of the said property could
have been done under Section 2(1)(u) of Act.
12. With regard to the first contention of the appellant’s counsel that there was
nothing to show that the provisional attachment order dated 20.12.2023 had
been made in terms of Section 2(1)(u) of the Act, we find that the same has
been answered by the provisional attachment order itself, inasmuch as, it has
been stated in Para 9.3 “That the aforesaid immovable property being the value
of proceeds of crime, as defined under section 2(1)(u), is likely to be transferred
or dealt with by way of sale, alienation or transfer, or creating of a third party
interest, in a manner which may result into frustrating the proceedings relating
to confiscation of such value of proceeds of crime under Chapter III of PMLA,
2002 and thus this immovable properties is liable for immediate provisional
attachment as provided under section 5 (1) of PMLA, 2002 (first provisio).”
Page No.# 9/28
Thus, we are of the view that the decision of the Hon’ble Supreme Court in
the case of Mohinder Singh Gill & Anr. (supra) is not attracted to the facts
of this case.
13. In the case of Vijay Madanlal Choudhary & Ors. Vs. Union of India &
Ors., reported in (2023) 12 SCC 1, the Hon’ble Supreme Court while reading
down the definition “Proceeds of Crime” in Section 2(1)(u) of the Act, has held
that for property to be regarded as proceeds of crime, it must be derived or
obtained, directly or indirectly, as a result of criminal activity relating to a
scheduled offence. Possession of unaccounted property acquired by legal means
may be actionable as a tax violation. However, it will not be regarded as
proceeds of crime unless the relevant tax legislation prescribes such a violation
as an offence, and such offence is included in the Schedule to the Act. The
Supreme Court further held that to be classified as proceeds of crime, the
property associated with the scheduled offence must have been derived or
obtained as a result of criminal activity relating to that offence. It further held
that the authorities under the Act cannot resort to action against any person for
money laundering based on an assumption that the property recovered by them
must be proceeds of crime, or that a scheduled offence has been committed,
unless the same is registered with the jurisdictional police or is pending inquiry
by way of a complaint before the competent forum.
14. The Supreme Court further held that a plain reading of Section 5(1) of the
Act indicates that where the officer concerned has reason to believe, on the
basis of material in his possession that any person: “(a) is in possession of any
proceeds of crime; and (b) that such proceeds are likely to be concealed,
transferred or dealt with in any manner that may frustrate any proceedings
Page No.# 10/28
relating to confiscation of such proceeds of crime under this Chapter”, he may
make an order for provisional attachment of “such property”. The use of the
word ‘such’ clearly indicates that the reference is to the property mentioned in
the preceding portion of Section 5(1) of the Act, that is, proceeds of crime. It
thus held that a conjoint reading of Section 5(1) read with Section 2(u) of the
Act clearly indicates that the power to attach is only with respect to the 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 such property.
15. In the case of Pavana Dibbur (Supra), the Supreme Court held that the
existence of proceeds of crime is sine qua non for an offence under Section 3 of
the Act and that the condition precedent for the existence of proceeds of crime
is the existence of a scheduled offence.
16. The Supreme Court further held that on considering whether the tainted
properties of the appellant in Pavana Dibbur (Supra) could be linked with the
proceeds of crime regarding the scheduled offense, would require evidence to
be adduced. Further, the first property of the appellant in Pavana Dibbur
(Supra) cannot be said to have any connection with the proceeds of the crime,
as the acts constituting the scheduled offense were committed after the
property was acquired.
17. On considering the Judgments of the Supreme Court in Pavana Dibbur
(Supra) and Vijay Madanlal Choudhary (Supra), it is clear that the
attached property is required to have a connection with the crime in question.
The enforcement authority has to be able to trace the attached property to the
criminal act relating to the scheduled offense, in terms of Section 2(1)(u) of the
Act. Thus, in our view, only a property which is connected with the proceeds of
Page No.# 11/28
the crime can be attached and the only exception to the above, is when the
property derived out of criminal activity is taken out of India and held outside
India. This is clear from paragraph No. 109 of Vijay Madanlal Choudhary
(Supra), which is also reflected in the decision of the Supreme Court in
Pavana Dibbur (Supra), which is as follows:
“109. Tersely put, it. is only such property which is derived or
obtained, directly or indirectly, as a result of criminal activity relating to
a scheduled offence that can be regarded as proceeds of crime. The
authorities under the 2002 Act cannot resort to action against any
person for money laundering on an assumption that the property
recovered by them must be proceeds of crime and that a scheduled
offence has been committed, unless the same is registered with the
jurisdictional police or pending inquiry by way of complaint before the
competent forum. For, the expression “derived or obtained” is
indicative of criminal activity relating to a scheduled offence already
accomplished. Similarly, in the event the person named in the criminal
activity relating to a scheduled offence is finally absolved by a court of
competent jurisdiction owing to an order of discharge, acquittal or
because of quashing of the criminal case (scheduled offence) against
him/her, there can be no action for money laundering against such a
person or person claiming through him in relation to the property
linked to the stated scheduled offence. This interpretation alone can be
countenanced on the basis of the provisions of the 2002 Act, in
particular Section 2(1)(u) read with Section 3. Taking any other view
would be rewriting of these provisions and disregarding the express
language of the definition clause “proceeds of / crime”, as it obtains as
of now.”
18. Having stated the above, the issue to be decided is to whether the
property which has been attached had been acquired by the appellant prior to
the scheduled offense (crime). The stand of the appellant is that the said
attached property had been purchased by making payments between 2008 to
2011, though the sale deed for the said property had been made on 17.07.2019
and the same registered on 25.06.2019. On the other hand, it is the case of the
Page No.# 12/28
respondents that the property had been purchased by the appellant on
25.06.2019, i.e., during the currency of the commission of the scheduled
offense.
19. Ms. L. Devi, learned Standing Counsel, Enforcement Directorate on the
other hand submits that the 2nd limb of Section 2(1)(u) of the Act provides for
attachment of an equivalent value of the property, which may not be a part of
the proceeds of crime and which has been put into hiding by the appellant. She
accordingly submits that there is no infirmity with the impugned final order
dated 13.08.2025 passed by the learned Appellate Tribunal, inasmuch as, the
attachment of the appellant’s property has been made on the basis of 2 nd limb
of Section 2(1)(u) of the Act. Further, though the attached property had not
been purchased by the appellant with the money the appellant received from
the crime, the same did not disqualify or bar the respondents from attaching the
property in question, inasmuch as, Section 2(1)(u) of the Act allowed for the
same. She accordingly submits that the appeal should be dismissed.
20. On perusing the official records and the “reason to believe for issuance of
provisional attachment order No.03/2023 in ECIR No.GWZO/02/2021 dated
17.12.2021, attaching the property in the name Sh. Kumar Sanjit Krishna (under
sub-Section (1) of Section 5 of the Prevention of Money Laundering Act,
2002 [as amended] )” shows that the said property had been attached, as it
represented the value of the property in terms of Section 2(1)(u) of the PMLA
Act, 2002.
21. A reading of the reasons for attachment of the said property shows that
the property had been attached in terms of the 2 nd limb of Section 2(1)(u) of
Page No.# 13/28
the PMLA Act. Though the provisional attachment order has used the word
“equivalent”, while attaching the property of the appellant, the official records
show that the attachment had been made in terms of the 2 nd limb of Section
2(1)(u) of the Act. The attachment had not been made in terms of the 3 rd limb
of Section 2(1)(u) of the Act, just because it has used the word “equivalent” in
the provisional attachment order. Though the respondents could attach property,
which was equivalent to the value of the crime proceeds, it is seen that the
property that has been attached is apparently valued @Rs.16.60 lakhs, while
the crime proceeds alleged to have been received by the appellant from the
total amount of Rs.6,13,74,440/- is alleged to be Rs.40 lakhs.
22. In the case of Abdullah Ali Balsharaf & Anr. Vs. Directorate of
Enforcement & Ors., reported in 2019 SCC OnLine Del 6428, the Hon’ble
Supreme Court held that the power to provisionally attach or seize or freeze a
property can be exercised only (a) if the specified officer has material in his
possession, which provides him reason to believe that the property sought to be
attached or seized is proceeds of crime or related to a crime and (b) after
recording the reasons in writing.
23. In the case of M/s Mahanivesh Oils & Foods Pvt. Ltd. Vs.
Directorate of Enforcement, reported in 2016 SCC Online Del 475, the
Delhi High Court at Para 23 & 25 has held as follows:-
“23. In the present case, the impugned order has been made
under Section 5(1) of the Act. A plain reading of Section 5(1) of the Act
indicates that where the officer concerned has reason to believe, on the
basis of material in his possession that any person: “(a) is in possession of
Page No.# 14/28any proceeds of crime; and (b) that such proceeds are likely to be
concealed, transferred or dealt with in any manner that may frustrate any
proceedings relating to confiscation of such proceeds of crime under this
Chapter”, he may make an order for provisional attachment of “such
property”. The use of the word ‘such’ clearly indicates that the reference
is to the property mentioned in the preceding portion of Section 5(1) of
the Act, that is, proceeds of crime.
25. Thus, a conjoint reading of Section 5(1) read with Section 2(u) of the
Act clearly indicates that the power to attach is only with respect to the
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
such property.”
24. In the case of Omar Ali Obaid Balsharaf Vs. Deputy Director
Directorate of Enforcement, Delhi, reported in 2019 SCC Online ATPMLA
49, the Appellate Tribunal for Prevention of Money Laundering Act, Delhi has
held that in the definition of proceeds of crime, only the following properties can
be categorized as proceeds of crime and consequently attached:
a) property derived or obtained, directly or indirectly, by any person
as a result of criminal activity relating to a scheduled offence
b) value of any such property
c) property equivalent in value held within the country, where such
property is taken or held outside the countryThe learned Tribunal held that the attached property being value of such
Page No.# 15/28property’, has to have a link or nexus with the actual property derived from
criminal activity and it cannot merely be a ‘property equivalent in value’,
attachment of which is only permissible if the proceeds of crime is taken or held
outside India.
Therefore, when the case of the ED falls under equivalent in Value of any
such property’, it cannot take any unrelated property which has no nexus or link
with the actual proceeds of crime and attach the same as ‘property equivalent in
value’ in the absence of evidence.”
25. In the case of Pavana Dibbur (Supra), the Hon’ble Supreme Court in
Para 13, 15, 19 & 31.3 has held as follows:-
“13. Clause (v) of sub-section (1) of Section 2 PMLA defines “property” to
mean any property or assets of every description, whether corporeal or
incorporeal, movable or immovable, tangible or intangible. To constitute
any property as proceeds of crime, it must be derived or obtained directly
or indirectly by any person as a result of criminal activity relating to a
scheduled offence. The Explanation clarifies that the proceeds of crime
include property, not only derived or obtained from scheduled offence but
also any property which may directly or indirectly be derived or obtained
as a result of any criminal activity relatable to the scheduled offence.
Clause (u) also clarifies that even the value of any such property will also
be the proceeds of crime. Thus, the existence of “proceeds of crime”
is sine qua non for the offence under Section 3 PMLA.
15. The condition precedent for the existence of proceeds of crime is the
existence of a scheduled offence. On this aspect, it is necessary to refer to
Page No.# 16/28
the decision of this Court in Vijay Madanlal Choudhary [Vijay Madanlal
Choudhary v. Union of India, (2023) 12 SCC 1] . In para 109 of the said
decision [Vijay Madanlal Choudhary v. Union of India, (2023) 12 SCC 1] ,
this Court held thus : (SCC p. 166)
“109. Tersely put, it is only such property which is derived or
obtained, directly or indirectly, as a result of criminal activity relating to
a scheduled offence that can be regarded as proceeds of crime. The
authorities under the 2002 Act cannot resort to action against any
person for money laundering on an assumption that the property
recovered by them must be proceeds of crime and that a scheduled
offence has been committed, unless the same is registered with the
jurisdictional police or pending inquiry by way of complaint before the
competent forum. For, the expression “derived or obtained” is indicative
of criminal activity relating to a scheduled offence already
accomplished. Similarly, in the event the person named in the criminal
activity relating to a scheduled offence is finally absolved by a court of
competent jurisdiction owing to an order of discharge, acquittal or
because of quashing of the criminal case (scheduled offence) against
him/her, there can be no action for money laundering against such a
person or person claiming through him in relation to the property
linked to the stated scheduled offence. This interpretation alone can be
countenanced on the basis of the provisions of the 2002 Act, in
particular Section 2(1)(u) read with Section 3. Taking any other view
would be rewriting of these provisions and disregarding the express
language of definition clause “proceeds of crime”, as it obtains as of
now.”
Page No.# 17/28
26. In the case of Davy Varghese & Anr. Vs. Deputy Director,
Directorate of Enforcement, Department of Revenue & Ors., reported in
2024 SCC OnLine Ker 7343, the Kerala High Court held that the definition of
the term ‘proceeds of crime’ explicitly states that when the proceeds of a crime
is a property, such property must have been obtained or derived directly or
indirectly as a result of any criminal activity relating to a scheduled offence. No
doubt, even if the property was obtained indirectly, it can still be regarded as
proceeds of crime. Assuming that a property derived out of a criminal activity
mentioned is not available, still, attachment can be effected to the extent of the
equivalent value of such property. The term ‘value’ in S. 2(1)(u) can only mean
the monetary worth of the property that was derived from the criminal activity.
This is evident from the words ‘value of any such property’. The only method,
when a property, which is unconnected with the proceeds of crime, can be
attached, is when the property derived out of the criminal activity was taken out
of India or is held outside the country. Under no other circumstance does the
statute mandate attaching a property unconnected with the proceeds of crime.
The Kerala High Court further held in Para 22 and 23 as follows:
“22. The statute never intends to attach or confiscate all properties of a
person connected with the crime. Moreover, the consequences of a crime
cannot have a retroactive implication. Arbitrariness will loom large if the
implication of a crime is extended to anything done before the crime itself
was committed. The principle of ex post facto law, enshrined in
Article 20 of the Constitution of India, protects against punishment or
penalty for anything which was not an offence at the time it was
committed. Though the said principle may not have application stricto
Page No.# 18/28senso in relation to proceeds of crime, still the philosophy behind the
concept cannot be brushed aside.
23. Further, the Supreme Court had, in Pavana Dibbur v. Directorate of
Enforcement [2023 SCC OnLine SC 1586], specifically considered the
question of attaching property acquired prior to the commission of the
crime and held, in the negative.”
27. As can be seen, Section 2(1)(u) of the Act is divided into 3 (three)
parts/limbs. The decisions mentioned above, especially the Supreme Court
Judgment in Pavana Dibbur (Supra) and Vijay Madanlal Choudhary
(Supra), go to show that the attached property have to have some connection
with the crime/proceeds of crime. However, in the present case, the learned
AppellateTribunal has held that in terms of paragraph No. 68 (which is
paragraph No. 172), the Judgment of the Supreme Court in Vijay Madanlal
Choudhary (Supra) and the decisions of the Delhi High Court in Enforcement
Directorate vs. Axis Bank, 2019 SCC Online DEL-7854 and Prakash
Industries Ltd. vs. Directorate of Enforcement, 2022 SCC Online DEL-
2087, Section 2(1)(u) of the Act would include within its ambit the property of
the appellant, even if it did not have any connection with the crime in question.
In other words, even if the property was acquired prior to the crime, then also
the said property was liable to be attached, if the proceeds of crime had
vanished could not be traced.
28. In the case of Deputy Director, Directorate of Enforcement, Delhi
Vs. Axis Bank & Ors., reported in 2019 0 Supreme (Del) 930, the Delhi
High Court has held that Section 2(1)(u) of the Act is in three parts, which are
as follows:-
Page No.# 19/28
“(i). property derived or obtained (directly or indirectly) as
a result of criminal activity relating to scheduled offence; or
(ii). the value of any such property as above; or
(iii). if the property of the nature first above mentioned has been “taken
or held” abroad, any other property “equivalent in value” whether held in
India or abroad.”
The Delhi High Court held that while the first part of the said section deals
with tainted property, which had been acquired through tainted money, the
second and third part of the section would ordinarily deal with untainted
properties. They could have been acquired legitimately, without any connection
with criminal activity or it’s result. The same were however intended to fall in
the net, because their owner was involved in the proscribed criminal action and
the tainted assets held by him were not traceable or could not be reached.
While some of the properties could be held in India or abroad, a rider was put
by law, insisting on equivalent in value in the property to be attached. It was
this inclusive definition of proceeds of crime in respect of property of the second
and third kind mentioned in Section 2(1)(u) of the Act that the equivalent value
of those properties of the second and third category could be attached, even
though the use of the word “equivalent in value” had not been used in the
second part/limb of Section 2(1)(u) of the Act. It thus held in Para 109 and 110
as follows-
“109. The inclusive definition of “proceeds of crime” respecting property of
the second above-mentioned nature – i.e. “the value of any such property”
– gives rise (as it has done so in these five appeals) to potential multi-
Page No.# 20/28
layered conflicts between the person suspected of money-laundering (the
accused), a third party (with whom such accused may have entered into
some transaction vis-a-vis the property in question) and the enforcement
authority (the State). Since the second of the above species of “proceeds
of crime” uses the expression “such property”, the qualifying word being
“such”, it is vivid that the “property” referred to here is equivalent to the
one indicated by the first kind. The only difference is that it is not the
same property as of the first kind, it having been picked up from among
other properties of the accused, the intent of the legislature being that it
must be of the same “value” as the former. The third kind does use the
qualifying words “equivalent in value”. Though these words are not used
in the second category, it is clear that the said kind also has to be
understood in the same sense.
110. Thus, it must be observed that, in the opinion of this court, if the
enforcement authority under PMLA has not been able to trace the “tainted
property” which was acquired or obtained by criminal activity relating to
the scheduled offence for money-laundering, it can legitimately proceed to
attach some other property of the accused, by tapping the second (or
third) above-mentioned kind provided that it is of value near or equivalent
to the proceeds of crime. But, for this to be a fair exercise, the
empowered enforcement officer must assess (even if tentatively), and re-
evaluate, as the investigation into the case progresses, the quantum of
“proceeds of crime” derived or obtained from the criminal activity so that
proceeds or other assets of equivalent value of the offender of money-
laundering (or his abettor) are subjected to attachment to such extent,
the eventual order of confiscation being always restricted to take over by
Page No.# 21/28
the Government of illicit gains of crime, the burden of proving facts to the
contrary being on the person who so contends.”
It also held that in cases where the enforcement authority seeks to attach
other properties, suspecting them to be “proceeds of crime”, not on the basis of
the fact that they are actually “derived or obtained” from criminal activity, but
because they are of equivalent “value” as to the proceeds of crime which cannot
be traced, it is essential that there be some nexus or link between such property
on one hand and the person accused of or charged with the offence of money-
laundering on the other hand. Para 160 of the said judgment provides as
follows:-
“160. But, in cases where the enforcement authority seeks to attach other
properties, suspecting them to be “proceeds of crime”, not on the basis of
fact that they are actually “derived or obtained” from criminal activity but
because they are of equivalent “value” as to the proceeds of crime which
cannot be traced, it is essential that there be some nexus or link between
such property on one hand and the person accused of or charged with the
offence of money-laundering on the other. In cases of this nature, the
person accused of money-laundering must have had an interest in such
property at least till the time of engagement in the proscribed criminal
activity from which he is stated to have derived or obtained pecuniary
benefit which is to be taken away by attachment or confiscation. It is with
this view that PMLA provides for a possible presumption to be drawn,
under Section 24(b) using the expression “may presume”, about a
property being “involved in money-laundering” in the case of person other
than the one who is charged with the offence of money-laundering. There
Page No.# 22/28is no doubt that such presumption, if drawn, may also be rebutted by
evidence showing facts to the contrary.”
29. In the case of Prakash Industries Ltd. and Another vs. Directorate
of Enforcement, 2022 SCC Online DEL-2087, the Delhi High Court held
that in a situation where a property which may be said to have a direct or
indirect link to proceeds to crime is untraceable, property equivalent in value
may also be attached.
30. The learned Appellate Tribunal in the case of Shri Sadananda Nayak
(Supra), held that Section 2(1)(u) of the Act being in 3(three) parts, the second
part/limb of Section 2(1)(u) could not be made dependent on the first part, as
the second limb was in respect of a separate scenario altogether, not connected
with the first part of the section.
The learned Tribunal in Shri Sadananda Nayak (Supra), held in paragraph
No. 15 as follows:
“15. The argument has been made in reference to the judgment of Kerala
High Court in the case of Satish Motilal Bidri (supra) and the judgment of
Apex Court in Pavana Dibur (supra) to hold that the properties acquired
prior to commission of crime would not fall in the definition of “proceeds
of crime”. We are unable to accept the arguments which may otherwise
make second part of the definition of “proceeds of crime” to be
redundant. It would be for the reason that if the definition is taken only in
two parts leaving the middle part, then it would be difficult for the
enforcement agencies to protect the property till completion of the crime
to save the victim from crime committed by the accused. It would be for
the reason that if the property acquired prior to commission of crime
Page No.# 23/28would not fall in the definition of “proceeds of crime”, then the accused
would commit the crime and immediately proceeds would be siphoned off
or vanished so that it may not remain available for attachment. In fact,
the word “the value of any such property” was inserted by the legislature
to attach the property of equivalent value, if the proceeds out of
commission of crime is not available or vanished. If the second limb of the
definition is made dependent on the first limb, it would be literally re-
writing the provision or making it redundant to a great extent and for this,
jurisdiction does not lie with any court of law which includes even the
Constitutional Court. They can declare any provision to be unconstitutional
but till then there remains presumption of constitutional validity.”
31. The decision in Shri Sadananda Nayak (Supra), was reached by the
learned Appellate Jurisdiction by taken into consideration paragraph No. 68 of
the Judgment of the Supreme Court in Vijay Madanlal Choudhary (Supra). It
may be stated here that this Court on going through the decision of Vijay
Madanlal Choudhary (Supra), found that paragraph No. 68 of the Judgment
in Vijay Madanlal Choudhary (Supra), which is reproduced in the decision of
Shri Sadananda Nayak (Supra), is actually at paragraph No. 172, which is as
follows:
“172. It was also urged before us that the attachment of property must be
equivalent in value of the proceeds of crime only if the proceeds of crime
are situated outside India. This argument, in our opinion, is tenuous. For,
the definition of “proceeds of crime” is wide enough to not only refer to
the property derived or obtained as a result of criminal activity relating to
a scheduled offence, but also of the value of any such property. If the
Page No.# 24/28property is taken or held outside the country, even in such a case, the
property equivalent in value held within the country or abroad can be
proceeded with. The definition of “property” as in Section 2(1)(u) is
equally wide enough to encompass the value of the property of proceeds
of crime. Such interpretation would further the legislative intent in
recovery of the proceeds of crime and vesting it in the Central
Government for effective prevention of money-laundering.”
32. The learned Tribunal in Shri Sadananda Nayak (Supra), held that a
perusal of paragraph No. 68/172 of Vijay Madanlal Choudhary (Supra)
clarified that attachment can be only of the proceeds of crime and that the
definition of the proceeds of crime included the value of the property, which
were not traceable. The learned Tribunal held that if the definition of the
proceeds of crime did not include of the value of the property which was not
related to a criminal activity, the second paragraph/limb of Section 2(1)(u)
would become redundant, as otherwise, an accused would commit a crime and
simply make the proceeds of crime vanish, so that it was not made available for
attachment. The learned Tribunal also held that the decision of Vijay Madanlal
Choudhary (Supra) was made by a 3 Judges Bench and as the same was in
conflict with the 2 Judges Bench of the Supreme Court in Pavana Dibbur
(Supra), the decision of the larger bench would have to be followed.
33. The present appeal is with regard to the impugned Final Order dated
13.08.2025, passed by the learned Tribunal in FPA-PMLA-1314/GWH/2024,
wherein it has followed the earlier decision of the Appellate Tribunal in FPA-
PMLA-5612/BBS/2023 and paragraph No. 68/172 of the Judgment of the
Supreme Court in Vijay Madanlal Choudhary (Supra) and the 2 Delhi High
Page No.# 25/28
Court judgments is Axis Bank (Supra) and Prakash Industries Ltd.
(Supra).
34. On a consideration of paragraph No. 68/172 in Vijay Madanlal
Choudhary (Supra), it appears that the Supreme Court has defined proceeds
of crime to not only cover the property derived or obtained as a result of
criminal activity relating to a scheduled offence, but also of the value of any
such property which is acquired prior to the commission of the offence. The 3 rd
part of the definition of proceeds of crime no doubt includes attachment of
property of equivalent value in India, if the property is taken or held outside the
country. Thus, what is clear from the above is that when the property is
relatable to a scheduled offence, the property can be attached. In both the
cases, there is a prior requirement of identifying and coming to a finding that
the property attached is part of the proceeds of crime. The problems arises with
the second part of the definition of proceeds of crime where it only speaks of
“or the value of any such property” in Section 2(1)(u) of the Act. It is no doubt
true that if an accused commits a crime and wipes out all traces of the proceeds
of crime, then there would be nothing left to attach, if the proceeds of crime
has been made untraceable. However, the fact remains that the definition of
proceeds of crime, as defined by the Hon’ble Supreme Court in Vijay Madanlal
Choudhary (Supra) has been followed in paragraph No. 15 of Pavana Dibbur
(Supra).
35. Though the learned counsel for the respondent has relied upon paragraph
No. 68/172 of Vijay Madanlal Choudhary (Supra), in support of her
submission that when the proceeds of crime is untraceable, the value of any
property of an accused can be attached, we find that the said paragraph has to
Page No.# 26/28
be read in conjunction with other paragraphs, such as paragraph Nos. 105 –
109, 169 and 170 of the said Judgment, wherein it has been held that the pre-
condition for being proceeds of crime is that the property has been derived or
obtained directly or indirectly, by any person, as a result of criminal activity
relating to a scheduled offence. The attachment must be only in respect of
property which appears to be proceeds of crime and not all the property
belonging to the person concerned who would eventually face the action of
confiscation of proceeds of crime, including prosecution for the offence of
money laundering. Also, paragraph No. 109 has specifically stated that it is only
such property which is derived or obtained, directly or indirectly, as a result of
criminal activity relating to a scheduled offence, that can be regarded as
proceeds of crime.
Further, paragraph No. 169 of the Judgment is reproduced as follows:-
“169. As aforesaid, in this backdrop Amendment Act 2 of 2013 came into
being. Considering the purport of the amended provisions and the
experience of implementing/enforcement agencies, further changes
became necessary to strengthen the mechanism regarding prevention of
money laundering. It is not right in assuming that the attachment of
property (provisional) under the second proviso, as amended, has no link
with the scheduled offence. Inasmuch as Section 5(1) envisages that such
an action can be initiated only on the basis of material in possession of
the authorised officer indicative of any person being in possession of
proceeds of crime. The precondition for being proceeds of crime is that
the property has been derived or obtained, directly or indirectly, by any
person as a result of criminal activity relating to a scheduled offence. The
sweep of Section 5(1) is not limited to the accused named in the criminal
Page No.# 27/28activity relating to a scheduled offence. It would apply to any person (not
necessarily being accused in the scheduled offence), if he is involved in
any process or activity connected with the proceeds of crime. Such a
person besides facing the consequence of provisional attachment order,
may end up in being named as accused in the complaint to be filed by the
authorised officer concerning offence under Section 3 of the 2002 Act.”
36. Though paragraph No. 68/172 of Vijay Madanlal Choudhary (Supra),
appears to support the interpretation given by the learned Tribunal with regard
to the definition of proceeds of crime, the Judgments as a whole shows that
there is no conflict between the decision in Vijay Madanlal Choudhary
(Supra) and Pavana Dibbur (Supra), where only property which has been
derived or obtained, directly or indirectly, as a result of criminal activity relating
to a scheduled offence can be attached. As such, we are of the view that
attachment of property, acquired prior to the commission of the crime, would
not fall within the definition of the proceeds of crime.
37. In view of the above reasons and the fact that the Supreme Court in
Pavana Dibbur (Supra), has clearly held that the decision in Vijay Madanlal
Choudhary (Supra) has held that only such property which is derived or
obtained, directly or indirectly, as a result of criminal activity, relating to a
scheduled offence can be regarded as proceeds of crime, we hold that
properties which have no nexus to a criminal activity relating to a scheduled
offence cannot be regarded as proceeds of crime. For example, if an accused
had bought a house 20 years earlier, and the scheduled offence had
commenced 20 years later, it would be unreasonable to consider the 20 year old
house to be proceeds of crime.
Page No.# 28/28
38. The above being said, there is a factual dispute with regard to whether the
attached property of the appellant had been acquired prior to the commission of
the crime, inasmuch as, the crime had occured between 11.04.2018 and
19.09.2020. As per the stand taken by the appellant, he had bought the
attached property and paid the cost of the property between 2008 and 2011.
However, the said property was registered in the name of the appellant only on
25.06.2019. On the other hand, the respondents stand is that the property had
been purchased by the appellant on 25.06.2019, i.e., during the currency of the
commission of the offence.
39. In view of there being a disputed question of fact with regard to when the
property had been purchased and keeping in mind the fact that the property
had allegedly being registered in the name of the appellant only during the
period of commission of the crime, the said disputed question of fact would
have to be proved by way of evidence. Till the time it is proved that the
property had been bought prior to the commission of the crime/offence, we are
not inclined to allow the present petition.
40. The appeal is accordingly dismissed.
JUDGE JUDGE
Digitally signed
Anupam by Anupam
Chutia
Chutia Date: 2026.03.27
17:08:28 -07'00'
Comparing Assistant
