The Delhi High Court ruled that any increase in the value of assets or shares derived from criminal activities can be treated as “proceeds of crime” under the Prevention of Money Laundering Act (PMLA) and attached by the Enforcement Directorate.
New Delhi: The Delhi High Court determined that any increase in the value of shares or assets derived from criminal activities can be classified as “proceeds of crime” under the Prevention of Money Laundering Act (PMLA).
This ruling empowers the Enforcement Directorate (ED) to attach such gains, regardless of whether the appreciation results from market dynamics or legitimate economic circumstances.
A Division Bench comprising Justice Anil Kshetarpal and Justice Harish Vaidyanathan Shankar issued this ruling while addressing a case involving Prakash Industries Limited (PIL) and Prakash Thermal Power Limited (PTPL).
These companies were accused of manipulating financial data to secure a coal block allocation and subsequently profiting from preferential share allotments following public announcements.
The ED had targeted properties valued over Rs 122 crore, asserting that the increased worth was connected to proceeds of crime.
Previously, a single judge had annulled the ED’s provisional attachment order, asserting that the transactions in question were not specifically mentioned in the FIR or the chargesheet.
However, the Division Bench reversed that decision, clarifying that the ED’s authority under Section 5 of the PMLA to attach properties is independent and not constrained by the details of the underlying criminal allegations.
The Court remarked that when funds acquired through illegal means are invested in shares, and those shares appreciate, the entire increased amount remains tainted and is subject to attachment. It emphasized that such appreciation cannot be dissociated from the original illicit source.
The Bench also warned against the frequent filing of writ petitions to contest provisional attachments, labeling such actions as an abuse of the legal process.
This judgment is anticipated to bolster the ED’s capacity to trace and confiscate illicit wealth that is funneled through investment avenues and masked as legitimate earnings.
Case Title: Directorate of Enforcement v M/s Prakash Industries Ltd