PMLA | Properties Acquired Before Predicate Offence Can Be Attached As 'Equivalent Value' Of Proceeds Of Crime: Kerala High Court

Kerala High Court, in a significant ruling, held that properties acquired prior to the commission of a predicate offence can be provisionally attached under the Prevention of Money Laundering Act (PMLA).

A bench of Justice G. Girish observed that when the actual proceeds of crime are exhausted or consumed, investigating agencies are fully empowered to attach properties of "equivalent value" to ensure the objectives of the PMLA are not frustrated.

The writ petition was filed by the mother-in-law, wife, and brother-in-law of one M.K. Chandran, who served as an Accountant for the Kerala Advocates’ Welfare Fund Trust Committee. Chandran was booked by the CBI under the Prevention of Corruption Act, 1988, for allegedly misappropriating Rs. 6.07 crores between 2007 and 2017. Following this, the Enforcement Directorate (ED) registered an ECIR and provisionally attached the petitioners' immovable properties, which they claimed were purchased in 2003 and 2005, well before the alleged crime commenced.

The primary question before the court was whether immovable property acquired before the commission of a predicate offence could be attached under Section 5 of the PMLA. The court was also called upon to determine whether such attachment proceedings could be challenged directly under Article 226 of the Constitution of India, bypassing the alternative statutory remedies provided under the PMLA.

Attachment Of Properties Acquired Before Predicate Offence

The court extensively examined the scope of provisional attachment under Section 5 of the PMLA, specifically concerning assets purchased long before the scheduled offence occurred. The petitioners had vehemently argued that under the Supreme Court's ruling in Pavana Dibbur v. Directorate of Enforcement, properties acquired before the crime could not be attached unless the proceeds were taken out of India. Rejecting this proposition, the High Court relied on the authoritative three-judge bench decision in Vijay Madanlal Choudhary v. Union of India.

'Equivalent Value' Concept Under PMLA

The bench noted that the Enforcement Directorate's investigation revealed that misappropriated funds had been diverted to the bank account of the second petitioner (the wife). The central agency contended that since the actual proceeds of the crime were either already consumed or exhausted by the petitioners, failing to attach properties of equivalent value would entirely frustrate the legislative intent of the PMLA. The High Court found substantial merit in this argument.

"The definition of 'property' as in Section 2(1)(v) 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..."

Binding Precedents On Constitutional Validity

Relying on the Supreme Court's pronouncement in Vijay Madanlal Choudhary, Justice Girish reiterated that dealing with the proceeds of crime is an independent and continuing offence. The court observed that the definition of "proceeds of crime" is expansive enough to include not just the exact property derived from criminal activity, but also the equivalent value of any such property. The bench noted that this position holds true even if the criminal activity was committed before it was officially notified as a scheduled offence.

Rejection Of Similar Challenges By Division Benches

The High Court further noted that the contentions raised by the petitioners were no longer res integra. The court pointed out that coordinate Division Benches of the Kerala High Court, in recent cases like Samsuddin A.K v. Union of India and Abdul Rashid @ Dr. A.R. Babu v. Deputy Director, had already rejected identical arguments raised by similarly situated persons by strictly following the dictum laid down in Vijay Madanlal Choudhary.

Failure To Exhaust Alternative Remedies

Beyond the substantive legal questions, the High Court identified a fatal procedural flaw in the petitioners' approach to the constitutional court. The court observed that specific inputs pointed to the channelling of misappropriated funds into the wife's bank account, a fact partially admitted by her. In light of these factual complexities, the court held that it was not possible to invoke its extraordinary jurisdiction under Article 226 to overturn the proceedings.

"The petitioners did not avail the alternative remedy available to them by approaching the Adjudicating Authority and the Appellate Tribunal as per the relevant provisions of the PML Act."

The Kerala High Court concluded that the writ petition was entirely devoid of merits, both on substantive legal grounds and due to the failure to exhaust available statutory remedies. Consequently, the court dismissed the petition, allowing the Enforcement Directorate's provisional attachment of the properties to stand.

Date of Decision: 15 July 2026