Property Bought From Crime Proceeds Before PMLA Came Into Force Can Still Be Attached If Possessed After: Delhi High Court Overturns Single Judge

"The Offence of Money Laundering Does Not End On The Date When The Person Comes Into Possession Of The Proceeds of Crime — It Continues So Long As The Person Remains In Possession", In a landmark ruling that decisively settles a long-contested question of law under the Prevention of Money-Laundering Act, 2002, the Delhi High Court on March 16, 2026 held that property purchased from proceeds of crime prior to the enactment of the PMLA is fully liable to provisional attachment under Section 5(1) of the Act, if the person concerned continues to remain in possession of and use that property after the statute came into force on July 1, 2005.

A Division Bench of Justice C. Hari Shankar and Justice Om Prakash Shukla, allowing the appeal filed by the Directorate of Enforcement, set aside the 2016 judgment of a learned Single Judge of the same Court which had quashed the Provisional Attachment Order dated January 24, 2014 against a Vasant Vihar property in New Delhi. The Court held that the Single Judge committed three fundamental errors of law in reading the PMLA, and that the Supreme Court's binding pronouncements in Vijay Madanlal Choudhary v. Union of India left no doubt that money laundering is a continuing offence so long as the proceeds of crime remain in the accused's possession or use.

Background of the Case

The genesis of the matter lies in a criminal conspiracy unearthed by the Central Bureau of Investigation. An FIR was registered on May 8, 2009 at New Delhi, on the basis of a complaint by the Deputy Director of the National Agricultural Marketing Cooperative Federation Ltd. (NAFED). The FIR alleged that Homi Rajvansh, the Additional Managing Director of NAFED, in connivance with M.K. Agarwal of M.K. International Ltd., executed Memoranda of Understanding for import of raw sugar on High Seas Sale basis through NAFED — without charging the cost of the commodity — causing a wrongful loss of over Rs. 42 crores to NAFED and corresponding wrongful gain to the conspirators.

The tainted money flowed through a trail of entities: M.K. International Ltd. issued cheques of Rs. 1.5 crores to its holding companies Duroroyale Enterprises Ltd. and Sri Radhey Trading Pvt. Ltd., which in turn issued cheques of Rs. 75 lakhs each to the respondent-company, Mahanivesh Oils & Foods Pvt. Ltd., whose Director was Alka Rajvansh, wife of Homi Rajvansh. Using these funds, Alka Rajvansh purchased the subject residential property at E-14/3, Vasant Vihar, New Delhi by a sale deed executed on March 18, 2005 — before the PMLA came into force.

In January 2014, the Deputy Director, Directorate of Enforcement passed the Provisional Attachment Order under Section 5(1) PMLA, provisionally attaching the Vasant Vihar property. The respondent-company challenged this order by way of a writ petition under Article 226. The Single Judge allowed the petition and quashed the attachment, holding that since the entire process of obtaining the proceeds of crime and using them to purchase the property was complete before July 1, 2005, no offence of money laundering could be said to have been committed after the PMLA came into force. The Directorate of Enforcement appealed, and it is this appeal that the Division Bench has now decisively allowed.

Legal Issues and Court's Observations

On Whether Sections 3, 5 and 8 Constitute an Integrated Scheme

Both parties agreed, and the Court confirmed, that Section 5 of the PMLA cannot be read in isolation. Provisional attachment under Section 5 is a step-in-aid of adjudication under Section 8, which may culminate in confiscation. If no offence of money laundering under Section 3 can be said to exist even prima facie, there can be no question of invoking the attachment power under Section 5. The Court affirmed this integrated reading as the correct approach.

On the Three Fundamental Errors of the Single Judge

The Division Bench identified three specific and fundamental errors in the impugned judgment, each independently fatal to the conclusion reached.

The first error was the Single Judge's treatment of the tainted money alone — the Rs. 1.5 crores received by Alka Rajvansh — as the "proceeds of crime", to the exclusion of the subject property itself. The Court held that this was contrary to the express definition in Section 2(1)(u) of the PMLA, which defines "proceeds of crime" to mean any property derived or obtained "directly or indirectly" as a result of criminal activity relating to a scheduled offence. The Explanation to Section 2(1)(u) further clarifies that proceeds of crime include any property "which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence." The Court held unequivocally that the subject property, purchased directly using the tainted funds, was itself "proceeds of crime" within this definition. The Single Judge's reasoning that the proceeds were exhausted upon purchase of the property thus rested on a premise that was legally untenable.

The second error concerned the Single Judge's conflation of "possession" with "coming into possession." The impugned judgment had reasoned that the offence of money laundering stood committed and concluded when the respondent first came into possession of the funds and used them to buy the property. The Division Bench corrected this with precision: "Section 3 does not use the expression 'coming into possession'. It uses the word 'possession'. Possession of proceeds of crime amounts to money laundering. The offence of money laundering does not, therefore, end on the date when the person comes into possession of the proceeds of crime. It continues so long as the person remains in possession of the proceeds of crime." This distinction, the Court held, goes to the heart of the PMLA's design.

The third error was the Single Judge's failure to appreciate the significance of the word "includes" in Section 3 of the PMLA and the legislative consequences of the 2013 Amendment. Section 3, as amended, provides that the offence of money laundering includes concealment, possession, acquisition or use of proceeds of crime. The Court drew upon a rich body of interpretive authority — from Craies on Statute Law to a series of Supreme Court decisions — to hold that when a definition clause uses the word "includes", it widens the scope beyond the literal or ordinary meaning of the preceding words. Applying this to Section 3, the Court held that mere possession and mere use of proceeds of crime are independently sufficient to constitute the offence of money laundering — regardless of whether the person projects the property as untainted. The Single Judge's "integration theory" — that the offence concludes once laundered money enters the mainstream economy — was thus squarely rejected as incompatible with the statutory text.

On the Continuing Nature of the Offence of Money Laundering

The Court gave detailed and powerful reasons for holding that money laundering under Section 3 is a continuing offence. Explanation (ii) to Section 3, which was inserted by the Finance (No. 2) Act, 2019, though clarificatory, expressly states that "the process or activity connected with proceeds of crime is a continuing activity and continues till such time a person is directly or indirectly enjoying the proceeds of crime by its concealment or possession or acquisition or use or projecting it as untainted property or claiming it as untainted property in any manner whatsoever."

The Court held that this Explanation far from enlarging the scope of Section 3 merely clarified what was always implicit in the statutory language. As a result, on the date PMLA came into force on July 1, 2005, the respondent was actively committing the offence of money laundering by being in possession of and using the subject property, which constituted proceeds of crime. "Inasmuch as the subject property also constitutes 'proceeds of crime', and the respondent was in possession of the subject property, and continued to remain in possession thereof, and was using the subject property till the issuance of the Provisional Attachment Order, the respondent was, even on the date of passing the said order, committing the offence of 'money laundering' within the meaning of Section 3 of the PMLA."

On Article 20(1) — No Retrospective Application

The Single Judge had held that treating continued possession as the offence would amount to giving the PMLA retrospective application, thereby violating Article 20(1) of the Constitution which prohibits conviction for acts that were not offences at the time they were committed. The Division Bench rejected this reasoning in its entirety.

The Court held that the PMLA does not punish the commission of the scheduled offence. It punishes an independent offence — the offence of money laundering — which consists of the process or activity connected with the proceeds of crime. Since the respondent was in possession of and using the proceeds of crime on and after July 1, 2005, the offence of money laundering was being committed prospectively from that date, not retrospectively. The date of the scheduled offence is wholly irrelevant for the purposes of the PMLA. "We are unable to regard the date of commission of the scheduled offence as of any relevance whatsoever", the Court stated bluntly. Article 20(1) was therefore not infracted in any manner, since no punishment was being visited upon the respondent for conduct that was not an offence when committed — the offence in question was being committed in real time after the PMLA came into force.

The Court further added with clarity: "If the person continues to remain in possession of, or continues to use, the proceeds of crime, which would include properties directly or indirectly obtained from proceeds of crime, he would certainly be guilty of the offence of money laundering immediately on the PMLA coming into force. This is in tune with the intent and purpose of the PMLA as a statute intended at curbing serious economic offences, which tarnish the fiscal fabric of the country."

On the Requirement of "Reason to Believe" Under Section 5(1)

The Single Judge had additionally held that the Provisional Attachment Order was vitiated because there was no material to support the belief that the respondent was likely to transfer or conceal the property in a manner likely to frustrate confiscation proceedings. The Division Bench disagreed, holding that the satisfaction of the officer passing the order is essentially subjective in nature. Given the elaborate web of transactions — from the MOUs executed by Homi Rajvansh on behalf of NAFED, through the transfers to Duroroyale and SRTPL and then to the respondent-company controlled by Alka Rajvansh — the Deputy Director was fully justified in entertaining the belief that non-attachment might frustrate confiscation. A writ court exercising certiorari jurisdiction is not sitting in appeal and cannot substitute its own view for the subjective satisfaction of the competent authority, unless the decision is completely baseless or based on no material whatsoever.

On the Binding Authority of Vijay Madanlal Choudhary

The Court noted that the Single Judge's 2016 judgment was rendered before the Supreme Court's authoritative pronouncements in Vijay Madanlal Choudhary v. Union of India and Pradeep Nirankarnath Sharma v. Enforcement Directorate. Paras 134 and 135 of Vijay Madanlal Choudhary leave no room for doubt: money laundering is an independent offence dealing with the process or activity connected with proceeds of crime; involvement in any one of the activities — concealment, possession, acquisition or use — constitutes the offence; and the offence, in a given case, may be a continuing offence irrespective of the date and time of commission of the scheduled offence. "Continuing to possess proceeds of crime or retaining possession of proceeds of crime or using proceeds of crime until they are fully exhausted, amounts to money laundering", the Supreme Court had held. The Delhi High Court applied this dictum to uphold the attachment order in its entirety.

The Division Bench allowed the appeal, quashed the Single Judge's judgment, and upheld the Provisional Attachment Order dated January 24, 2014. The writ petition filed by the respondent-company stands dismissed. No order as to costs was made.

Date of Decision: March 16, 2026