Kerala High Court says PMLA does not attach or confiscate all properties connected with criminal activities
In a significant ruling, the Kerala High Court has set aside the provisional attachment of properties acquired by a senior citizen and his wife before the commission of a crime, observing that the Prevention of Money Laundering Act (PMLA) does not allow for the attachment of properties that were purchased prior to the criminal activity.
The case involves a petition filed by the couple, who sought to quash an order of provisional attachment issued under the PMLA. The petitioners had purchased properties in 1987, 1997, and 1999, well before the alleged crime took place in 2014. The Court, led by Justice Bechu Kurian Thomas, ruled that the PMLA, which came into existence in 2002, does not intend to attach properties acquired before the crime was committed.
The Court emphasized that the statute is not meant to confiscate all properties connected to a crime, especially those acquired before the offense occurred. Justice Thomas pointed out that extending the consequences of a crime to actions taken before the crime would be arbitrary and violate the principle of ex post facto law, which is protected under Article 20 of the Constitution of India. This principle safeguards individuals from being penalized for actions that were not offenses when they were committed.
The Enforcement Directorate (ED), which had attached the properties under the PMLA, argued that the petitioners had obtained loans using fraudulent means, including fake addresses and alterations in bank software. The ED claimed that the loans were used to purchase the properties in question, and therefore, they were proceeds of crime. The ED further stated that the petitioners could seek alternative remedies under the PMLA, and the writ petition was not maintainable.
However, the Court ruled that a writ petition is maintainable when an attachment order is issued without jurisdiction or is invalid in law. The Court noted that five properties were attached, including those purchased in 1987, 1997, and 1999, as well as two properties bought in 2015. The alleged crimes were committed between 2014 and 2020.
The Court explained that under Section 5 of the PMLA, authorities can attach properties that are “proceeds of crime,” which includes property derived from criminal activity, the value of such property, or property equivalent in value held outside India. The Court clarified that properties unconnected to the criminal activity can only be attached if they were taken out of India or are held outside the country.
The Court referred to previous rulings, including N Vijay Madanlal Choudhary v. Union of India (2022) and Pavana Dibbur v. Directorate of Enforcement (2023), to conclude that properties acquired before the commission of the crime cannot be attached under the PMLA unless they are connected to the proceeds of crime taken out of India.
As a result, the Court quashed the provisional attachment of the properties purchased before 2014, declaring the attachment null and void. However, the Court allowed the petitioners to seek alternative remedies for the properties purchased in 2015.
