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by Admin
05 December 2025 4:19 PM
"The allocation of the coal block, obtained by fraud, is not a dormant administrative act—it is a legal instrument that conferred commercial value, enabled mining, and led to illicit enrichment. It is 'property' under the PMLA", declared the Delhi High Court while restoring a massive provisional attachment by the Enforcement Directorate (ED) in the alleged misrepresentation-led allocation of the Chotia Coal Block.
Division Bench of Justice Anil Kshetrapal and Justice Harish Vaidyanathan Shankar set aside the earlier judgment of a Single Judge who had quashed ED’s attachment under the Prevention of Money Laundering Act, 2002, holding that coal block allocation could not constitute either “property” or “proceeds of crime”.
In a legally transformative ruling, the Court reaffirmed the dynamic scope of the PMLA, ruling that fraudulent allocation of a resource—even if intangible—becomes property once used to generate financial benefits.
“Money Laundering Is a Continuing Offence That Outlives the Original Fraud”: Court Slams Restriction of ED’s Powers to Pre-Allocation Events
Rejecting the attempt by Prakash Industries Ltd. (PIL) to restrict ED’s jurisdiction to pre-2003 misrepresentations, the Court observed that:
“The offence of money laundering does not terminate at the origin of the fraud. It is a continuing process, persisting as long as the proceeds of crime are possessed, used, or projected as untainted.”
The Court found fault with the Learned Single Judge's conclusion that the ED could not look beyond the events culminating in the September 4, 2003 allocation. That approach, the Bench held, misconstrued the core of Section 3 of the PMLA:
“Section 3 criminalises every stage of money laundering—from concealment, possession, acquisition, and use, to projection as untainted. Each act is independently punishable, and none is frozen in time.”
The Court drew strength from the Supreme Court’s authoritative ruling in Vijay Madanlal Chaudhary v. Union of India (2022) which declared that “money laundering is a standalone, continuing offence, independent of the scheduled offence.”
"The Economic Chain Triggered by a Fraudulent Allocation Cannot Be Cut Off Arbitrarily at the Date of Allotment"
The Bench categorically rejected PIL's theory that any post-allocation financial gain should be treated as a lawful commercial activity. The Court emphasized:
“The extraction of over 84 lakh metric tonnes of coal was not a separate act—it was the direct economic fruit of an illegally obtained resource. The allocation letter is the root. The coal is the fruit. Together, they define the laundering process.”
The Directorate’s calculation of ₹951.77 crores, based on coal extracted from 2006 to 2015, was held to be justified as proceeds of crime. The Court highlighted that “value”—even when detached from the original property—is attachable under Section 2(1)(u) and Section 5 of the PMLA.
Responding to PIL’s claim that it incurred over ₹1100 crore in operational costs and duties (thus allegedly nullifying any profit), the Court issued a firm rebuke:
“The focus of PMLA is not on net financial outcome but on the origin of the asset. Once tainted, proceeds of crime remain tainted. Money laundering law is not defeated by operational losses.”
“Allocation Letters Are Not Mere Permissions—They Are Economic Rights That Translate Into Tangible Gains”
Referring to Section 2(1)(v) of the PMLA, which defines “property” expansively to include both tangible and intangible assets, the Court said:
“An allocation letter may be intangible, but it has legal teeth. It enabled the holder to secure a lease, extract coal, generate revenue, and convert the illegal allocation into commercial advantage. It is property.”
The Court relied upon both the statutory definition and commercial realities of coal block allocation:
“Modern law recognises that economic value is often created through instruments, licences, and digital rights. The allocation letter fits squarely within that modern understanding of property.”
The Bench rejected the Single Judge’s narrow interpretation which treated the allocation letter as a mere permission with no asset value.
“Writ Petition Challenged Executive Action—Not Judicial Supervision. Intra-Court Appeal Maintainable”
The Court also dealt at length with the preliminary objection raised by PIL that the ED's intra-court appeal was not maintainable under Clause X of the Letters Patent because the Writ Petition had invoked Article 227.
The Division Bench firmly held that:
“The Learned Single Judge exercised original jurisdiction under Article 226 while examining an executive action—the Provisional Attachment Order under Section 5 of the PMLA. Therefore, intra-court appeal is maintainable.”
It emphasized that the petition challenged the legality of executive action, not supervisory control over subordinate courts or tribunals.
Citing Whirlpool v. Registrar of Trademarks, the Court observed:
“Where statutory action is being impugned on grounds of illegality, arbitrariness, or absence of jurisdiction, the High Court is acting under Article 226. Maintainability is unquestionable.”
"Fraud Taints Everything It Touches—Including Economic Derivatives of the Allocation"
On the core question of whether financial gains derived from a cancelled allocation can still be targeted under PMLA, the Court answered with clarity:
“The fact that the Supreme Court later cancelled the coal block allocations does not cleanse the earlier fraud. The illicit benefit already extracted continues to wear the stain of illegality.”
It rejected the argument that payment of levies or taxes after extraction nullified the crime, observing:
“A thief cannot return the stolen object and claim innocence. Payment of levies does not erase the illegality of acquiring the resource in the first place.”
Court Reinstates ED’s Attachment, Holds That Tainted Economic Rights Are Punishable Assets
Summing up its findings, the Division Bench concluded:
“The Directorate has satisfied all jurisdictional and legal requirements under the PMLA. The misrepresented allocation was property. The gains from it are proceeds of crime. The continued use of such gains is money laundering.”
Accordingly, the Court:
Allowed both LPAs filed by the Directorate of Enforcement
Set aside the Judgment of the Learned Single Judge
Reinstated the Provisional Attachment Order of December 1, 2021
Directed that further proceedings under the PMLA may now continue
It concluded with a note of restraint:
“The present findings are confined to the scope of the appeal. They shall not affect subsequent adjudications before any other forum in accordance with law.”
Date of Decision: 17 October 2025
