[SAFEMA] Upholds Attachment of Pre-Offence Acquired Property as 'Proceeds of Crime'

Introduction

In a recent case of SKS Ispat & Power Ltd. v. Deputy Director Directorate of Enforcement[i], the Appellate Tribunal SAFEMA, New Delhi, adjudicated on a frequently litigated question under the Prevention of Money Laundering Act, 2002 (‘PMLA’): whether attachment of properties acquired before a scheduled offence can be sustained as ‘proceeds of crime’ when the benefit is derived from future criminal activity. This case, arising out of alleged coal block allocation fraud, also examines the timeline of the predicate offence, procedural and substantive objections concerning limitation, retrospective application of scheduled offences, nexus of attached properties, and the overlapping jurisdiction of Special Courts and the Adjudicating Authority (‘AA’).

Brief Facts

• Three FIRs were lodged against the SKS Ispat & Power Ltd. (‘Appellant’) and its promoters for commission of offence under s. 120B read with s. 420 of the Indian Penal Code (‘IPC’) and s. 13(2) read with s. 13(1)(d) of the Prevention of Corruption Act, 1988 (‘PC Act’), alleging misrepresentation to secure coal block allocations.

• Subsequently, on the basis of the aforesaid FIRs, an enforcement case information report (‘ECIR’) was registered for commission of an offence under the PMLA by the Enforcement Directorate (‘ED’). Thereafter, a provisional attachment order (‘PAO’) was passed by the ED, thereby attaching the Appellant’s properties under s. 5 of the PMLA on 06.05.2021, which was later confirmed by the AA on 06.12.2021.

• The Appellant, being aggrieved by the order passed by the AA, challenged the confirmation order before the Appellate Tribunal under s. 26 of the PMLA.

Held

The Tribunal upheld the AA’s order confirming the attachment made by the ED  and observed as follows:

• The Tribunal rejected the arguments of the Appellant, who contended that the offences (s. 420 of IPC and ss. 13(2), 13(1)(d) of the PC Act) were not scheduled offences in 2007 when the alleged acts occurred and held that the relevant date for PMLA is the date when the offence of money laundering is ‘detected or revealed,’ not the date of the predicate offence. It further observed that since these offences were included in the PMLA schedule from 01.06.2009, and since both the FIRs (2014) and ECIR (2014) post-dated this amendment, PMLA proceedings were held valid.

• On the issue of Limitation under s. 5(3) of the PMLA and COVID Period Exclusion, the Tribunal placed reliance upon the decision of Supreme Court in Cognizance for Extension of Limitation, In re[ii], and held that due to exclusion of limitation periods during COVID-19 (15.03.2020 to 28.02.2022) by the Supreme Court, the order passed by the AA was within the limitation period of 180 days.

• Regarding the attachment of property of equivalent value, the Tribunal relied on the case of Sadananda Nayak v. ED decided by it on 14.10.2024 and reaffirmed that property acquired before the commission of proceeds of crime can be attached if the actual ‘proceeds of crime’ are unavailable, under the second limb of the definition of ‘proceeds of crime’ in s. 2(1)(u) PMLA. It accepted the ED’s argument that the company received capital at a premium based on misrepresented future prospects of coal block allocation, and this was rightly treated as proceeds of crime. 

• Lastly, the Tribunal found that the confirmation order considered material facts, such as receipt of premium capital linked to the coal block allocation, and thus it was not mechanically passed. It, however, clarified that findings by the AA are only prima facie, and not binding on the Special Court conducting the trial.

Our Analysis

The Tribunal’s ruling is an instructive precedent in understanding the application of PMLA to offences committed in earlier years but revealed and prosecuted post-notification of the relevant offences as scheduled offences. The key takeaway is that what matters under PMLA is not when the original (predicate) offence was committed, but when the activity related to money laundering came to light. This view is in line with the Supreme Court’s decision in Vijay Madanlal Choudhary v. Union of India[iii].

The Tribunal emphasized the preventive, remedial and penal objectives of the PMLA framework, which targets not just the proceeds of the predicate crime but also the downstream effects such as accumulation of disproportionate wealth through deceitful inducements like inflated capital premiums. Furthermore, the Tribunal’s acceptance of attachment of properties of ‘equivalent value’ reflects a pragmatic approach towards ensuring the effectiveness of money laundering investigations. By affirming that assets acquired before the commission of the predicate offence can be attached if they are equivalent in value to proceeds that have dissipated, the ruling strengthens the enforcement mechanism of PMLA against strategic asset shielding.

End Notes

[i] [2025] 172 taxmann.com 839 (SAFEMA - New Delhi).

[ii] [2022] 134 taxmann.com307/441 ITR 722 (SC).

[iii] 2022 INSC 757.

Authored by the Metalegal Editorial Board, the views expressed are personal and do not constitute legal advice or opinion.