Page No.# 1/28

GAHC010255322025

2026:GAU-AS:4426-DB

THE GAUHATI HIGH COURT

(HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)

Case No. : Crl.A(PMLA)/1/2025

KUMAR SANJIT KRISHNA

SON OF LATE UMA CHARAN BANIA,

UMA TIRTHA, HOUSE NO 51

KACHARI BASTI, ULUBARI,

PALTAN BAZAR,

DISTRICT KAMRUP (M), ASSAM

VERSUS

THE DIRECTORATE OF ENFORCEMENT

GOVT OF INDIA,

GUWAHATI ZONE -1,

MANIK TOWER, 6TH FLOOR, CHRISTAN BASTI, GS ROAD, GUWAHATI -

781005, THROUGH SHRI SHEETI KANTHA DAS DEPUTY DIRECTOR

2:SHRI SHEETI KANTHA DAS

OFFICER IN CHARGE

DEPUTY DIRECTOR

DIRECTORATE OF ENFORCEMENT

GOVT. OF INDIA

GUWAHATI ZONE - 1

MANIK TOWER

6TH FLOOR

CHRISTAN BASTI

GS ROAD

GUWAHATI - 781005

Advocate for the appellant : Dr. P. Agarwal ...Advocate.

Advocates for the respondents : Ms. L. Devi, ...SC, ED

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:::BEFORE:::

HON’BLE MR. JUSTICE MICHAEL ZOTHANKHUMA

HON’BLE MR. JUSTICE KAUSHIK GOSWAMI

Date on which judgment is reserved : 26.02.2026

Date of pronouncement of judgment : 27.03.2026

Whether the pronouncement is of the : N/A

operative part of the judgment ?

Whether the full judgment has been : Yes

pronounced?

JUDGMENT AND ORDER (CAV)

(M. Zothankhuma, J)

1. Heard Dr. P. Agarwal, learned counsel for the appellant. Also heard Ms. L.

Devi, learned Standing Counsel, Enforcement Directorate.

2. The appellant has prayed for setting aside the final order dated 13.08.2025

passed by the Appellate Tribunal under SAFEMA, New Delhi, in FPA-PMLA-

1341/GWH/2024, by which the appellant’s challenge to the order dated

27.05.2024, passed by the Adjudicating Authority, confirming the provisional

attachment of the appellant’s residential house vide order dated 20.12.2023 has

been rejected.

3. The challenge to the impugned final order dated 13.08.2025 is on the

ground that there is no evidence or money trail established by the respondents

in support of their allegation that the appellant had received an amount of Rs.

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40 lakhs in the cash for leak of question paper scam. Further, the provisional

attachment order dated 20.12.2023 does not show that the same had been

made under Section 2(1)(u) of the Act, i.e., that the attached property was a

part of the proceeds of crime. The reasons subsequently given for issuing the

provisional attachment order having been explained by subsequent reasons, the

provisional attachment order could not have any public effect. In this respect,

the learned counsel for the appellant has relied upon the judgement of the

Hon’ble Supreme Court in the case of Mohinder Singh Gill & Anr. Vs. Chief

Election Commissioner, New Delhi & Ors., reported in (1978) 1 SCC 405,

which in Para 8 has held as follows:-

“8. The second equally relevant matter is that when a statutory

functionary makes an order based on certain grounds, its validity must be

judged by the reasons so mentioned and cannot be supplemented by

fresh reasons in the shape of affidavit or otherwise. Otherwise, an order

bad in the beginning may, by the time it comes to court on account of a

challenge, get validated by additional grounds later brought out. We may

here draw attention to the observations of Bose J. In Gordhandas Bhanji

case :

"Public orders publicly made, in exercise of a statutory authority

cannot be construed in the light of explanations subsequently given

by the officer making the order of what he meant, or of what was in

his mind, or what he intended to do. Public orders made by public

authorities are meant to have public effect and are intended to

affect the actings and conduct of those to whom they are addressed

and must be construed objectively with reference to the language

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used in the order itself".

Orders are not like old wine becoming better as they grow older.”

4. The appellant’s further case is that the Enforcement Directorate could not

have attached the residence of the appellant, inasmuch as, the same had been

purchased by the appellant by making payments between 2008 and 2011, vide

payment receipts annexed to the appeal. The said property was registered in

the name of the appellant on 25.06.2019. As the appellant is alleged to have

received Rs.40 lakhs from the crime proceeds of Rs.6,13,74,440/-, for a crime

that took place between 11.04.2018 to 19.09.2020, the respondents could not

have attached the property of the appellant having the approximate value of

Rs.16.60 lakhs, which was bought prior to 11.04.2018, as the same was not

permissible as per the Prevention of Money Laundering Act, 2002 (hereinafter

referred to as the “Act”).

5. The learned counsel for the appellant submits that the attachment of the

property is not permissible in terms of Section 2(1)(u) read with Section 2(1)(v)

of the Act. She also submits that the judgment of the Supreme Court in the case

of Pavana Dibbur Vs. Directorate of Enforcement, reported in (2023) 15

SCC 91, has clearly held that properties which were bought prior to the

commission of the crime are not covered by the Section 2(1)(u) of the Act,

inasmuch as, they cannot be said to have any connection with the proceeds of

crime, as the scheduled offence took place after the purchase of the property.

“Scheduled Offence” is defined in Section 2(y) of the Act to mean:-

(i) the offences specified under Part A of the Schedule; or

(ii) the offences specified under Part B of the Schedule if the total value

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involved in such offences is [one crore rupees] or more; or

(iii) the offences specified under Part C of the Schedule.

6. Para 13 of the above judgment in Pavana Dibbur (supra) states as

follows:-

“13. Clause (v) of sub-section (1) of Section 2 PMLA defines “property” to

mean any property or assets of every description, whether corporeal or

incorporeal, movable or immovable, tangible or intangible. To constitute

any property as proceeds of crime, it must be derived or obtained directly

or indirectly by any person as a result of criminal activity relating to a

scheduled offence. The Explanation clarifies that the proceeds of crime

include property, not only derived or obtained from scheduled offence but

also any property which may directly or indirectly be derived or obtained

as a result of any criminal activity relatable to the scheduled offence.

Clause (u) also clarifies that even the value of any such property will also

be the proceeds of crime. Thus, the existence of “proceeds of crime”

is sine qua non for the offence under Section 3 PMLA.”

7. Section 2(1)(u) and 2(1)(v) of the Act states as follows:-

“2(1)(u) “proceeds of crime” means any property derived or obtained,

directly or indirectly, by any person as a result of criminal activity relating

to a scheduled offence or the value of any such property [or where such

property is taken or held outside the country, then the property equivalent

in value held within the country] [or abroad].

[Explanation.- For the removal of doubts, it is hereby clarified that

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“proceeds of crime” include property not only derived or obtained from

the scheduled offence but also any property which may directly or

indirectly be derived or obtained as a result of any criminal activity

relatable to the scheduled offence.]

“2(1)(v) “property” means any property or assets of every description,

whether corporeal or incorporeal, movable or immovable, tangible or

intangible and includes deeds and instruments evidencing title to, or

interest in, such property or assets, wherever located.

Explanation: For the removal of doubts, it is hereby clarified that the term

“property” includes property of any kind used in the commission of an

offence under this Act or any of the scheduled offences.”

8. Dr. P. Agarwal, learned counsel for the appellant submits that the learned

Tribunal had upheld the attachment order on the basis of the 3

rd

limb of Section

2(1)(u) of the Act, even though there was nothing to show that any property

had been taken or held outside India, which allowed for an equivalent value of

some other property to be attached within the India. She accordingly submits

that unless there is a finding that the proceeds of the crime are taken or held

outside India, property equivalent in value cannot be attached in India. In the

present case, the property in question having been bought prior to the

occurrence of the alleged crime, there was no ground to attach the property of

the appellant or the equivalent value of the proceeds of the crime even under

the 2

nd

limb or 3

rd

limb of Section 2(1)(u) of the Act. She further submits that

the attachment order does not indicate that any part of Section 2(1)(u) of the

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Act had been applied, while passing the impugned provisional attachment order.

9. Ms. L. Devi, learned Standing Counsel, Enforcement Directorate on the

other hand submits that the 2

nd

limb of Section 2(1)(u) of the Act provides for

attachment of an equivalent value of the property which is a part of the

proceeds of crime and which have been put into hiding by the appellant. She

accordingly submits that there is no infirmity with the impugned final order

dated 13.08.2025 passed by the learned Appellate Tribunal, inasmuch as, the

attachment of the appellant’s property has been made on the basis of 2

nd

limb

of Section 2(1)(u) of the Act. Further, though an attached property may not

have been purchased with the money received from a crime, the same did not

disqualify or bar the attachment of property under Section 2(1)(u) of the Act.

She accordingly submits that the appeal should be dismissed. She submits that

the appellant had purchased the attached property on 25.06.2019, i.e., during

the currency of the commission of the offence.

10. We have heard the learned counsels for the parties.

11. The case of the appellant is that a case under the Act was initiated against

the appellant, pursuant to FIR No.21/2020 dated 20.09.2020 registered by the

CID, Assam Police, for offences under Section 120B, 119,120, 166, 201, 204,

212, 406, 409, 420, 461, 506 and 34 IPC read with Section 66(B) of the

Information Technology Act, apart from offences under the local laws applicable

in the State of Assam and offences under the Prevention of Corruption Act,

1988. Charge-sheet and supplementary charge-sheet in the case were also filed

by the CID, Assam. Charge-sheet reveals that a written test for recruitment of

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597 posts of Sub-Inspector of Police (UB) of Assam Police scheduled on

20.09.2020 had to be cancelled due to the leak of the question paper/s on

WhatsApp. The appellant was one amongst the 42 persons named as an

accused in the case. The cash for question papers scam apparently resulted in

the generation of crime proceeds amounting to Rs.6,13,74,440/-, out of which

Rs.40.00 lakhs was the share of the appellant. The commission of the crime was

between 11.04.2018 to 10.09.2020. However, the property that had been

attached by the respondents under Section 2(1)(u) of the Act had been

purchased by the appellant between 2008-2011 for an amount of approximately

Rs.16.60 lakhs, though it is the case of the respondents that the said property

had been purchased by the appellant on 25.06.2019, i.e, during the currency of

the commission of the offence. In view of the stand of the appellant, i.e, the

property had been purchased by the appellant prior to the commission of the

offence, the question arises as to whether attachment of the said property could

have been done under Section 2(1)(u) of Act.

12. With regard to the first contention of the appellant’s counsel that there was

nothing to show that the provisional attachment order dated 20.12.2023 had

been made in terms of Section 2(1)(u) of the Act, we find that the same has

been answered by the provisional attachment order itself, inasmuch as, it has

been stated in Para 9.3 “That the aforesaid immovable property being the value

of proceeds of crime, as defined under section 2(1)(u), is likely to be transferred

or dealt with by way of sale, alienation or transfer, or creating of a third party

interest, in a manner which may result into frustrating the proceedings relating

to confiscation of such value of proceeds of crime under Chapter III of PMLA,

2002 and thus this immovable properties is liable for immediate provisional

attachment as provided under section 5 (1) of PMLA, 2002 (first provisio).”

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Thus, we are of the view that the decision of the Hon’ble Supreme Court in

the case of Mohinder Singh Gill & Anr. (supra) is not attracted to the facts

of this case.

13. In the case of Vijay Madanlal Choudhary & Ors. Vs. Union of India &

Ors., reported in (2023) 12 SCC 1, the Hon’ble Supreme Court while reading

down the definition “Proceeds of Crime” in Section 2(1)(u) of the Act, has held

that for property to be regarded as proceeds of crime, it must be derived or

obtained, directly or indirectly, as a result of criminal activity relating to a

scheduled offence. Possession of unaccounted property acquired by legal means

may be actionable as a tax violation. However, it will not be regarded as

proceeds of crime unless the relevant tax legislation prescribes such a violation

as an offence, and such offence is included in the Schedule to the Act. The

Supreme Court further held that to be classified as proceeds of crime, the

property associated with the scheduled offence must have been derived or

obtained as a result of criminal activity relating to that offence. It further held

that the authorities under the Act cannot resort to action against any person for

money laundering based on an assumption that the property recovered by them

must be proceeds of crime, or that a scheduled offence has been committed,

unless the same is registered with the jurisdictional police or is pending inquiry

by way of a complaint before the competent forum.

14. The Supreme Court further held that a plain reading of Section 5(1) of the

Act indicates that where the officer concerned has reason to believe, on the

basis of material in his possession that any person: "(a) is in possession of any

proceeds of crime; and (b) that such proceeds are likely to be concealed,

transferred or dealt with in any manner that may frustrate any proceedings

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relating to confiscation of such proceeds of crime under this Chapter", he may

make an order for provisional attachment of "such property". The use of the

word 'such' clearly indicates that the reference is to the property mentioned in

the preceding portion of Section 5(1) of the Act, that is, proceeds of crime. It

thus held that a conjoint reading of Section 5(1) read with Section 2(u) of the

Act clearly indicates that the power to attach is only with respect to the property

derived or obtained directly or indirectly by any person as a result of criminal

activity relating to a scheduled offence or the value of such property.

15. In the case of Pavana Dibbur (Supra), the Supreme Court held that the

existence of proceeds of crime is sine qua non for an offence under Section 3 of

the Act and that the condition precedent for the existence of proceeds of crime

is the existence of a scheduled offence.

16. The Supreme Court further held that on considering whether the tainted

properties of the appellant in Pavana Dibbur (Supra) could be linked with the

proceeds of crime regarding the scheduled offense, would require evidence to

be adduced. Further, the first property of the appellant in Pavana Dibbur

(Supra) cannot be said to have any connection with the proceeds of the crime,

as the acts constituting the scheduled offense were committed after the

property was acquired.

17. On considering the Judgments of the Supreme Court in Pavana Dibbur

(Supra) and Vijay Madanlal Choudhary (Supra), it is clear that the

attached property is required to have a connection with the crime in question.

The enforcement authority has to be able to trace the attached property to the

criminal act relating to the scheduled offense, in terms of Section 2(1)(u) of the

Act. Thus, in our view, only a property which is connected with the proceeds of

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the crime can be attached and the only exception to the above, is when the

property derived out of criminal activity is taken out of India and held outside

India. This is clear from paragraph No. 109 of Vijay Madanlal Choudhary

(Supra), which is also reflected in the decision of the Supreme Court in

Pavana Dibbur (Supra), which is as follows:

“109. Tersely put, it. is only such property which is derived or

obtained, directly or indirectly, as a result of criminal activity relating to

a scheduled offence that can be regarded as proceeds of crime. The

authorities under the 2002 Act cannot resort to action against any

person for money laundering on an assumption that the property

recovered by them must be proceeds of crime and that a scheduled

offence has been committed, unless the same is registered with the

jurisdictional police or pending inquiry by way of complaint before the

competent forum. For, the expression "derived or obtained" is

indicative of criminal activity relating to a scheduled offence already

accomplished. Similarly, in the event the person named in the criminal

activity relating to a scheduled offence is finally absolved by a court of

competent jurisdiction owing to an order of discharge, acquittal or

because of quashing of the criminal case (scheduled offence) against

him/her, there can be no action for money laundering against such a

person or person claiming through him in relation to the property

linked to the stated scheduled offence. This interpretation alone can be

countenanced on the basis of the provisions of the 2002 Act, in

particular Section 2(1)(u) read with Section 3. Taking any other view

would be rewriting of these provisions and disregarding the express

language of the definition clause "proceeds of / crime", as it obtains as

of now.”

18. Having stated the above, the issue to be decided is to whether the

property which has been attached had been acquired by the appellant prior to

the scheduled offense (crime). The stand of the appellant is that the said

attached property had been purchased by making payments between 2008 to

2011, though the sale deed for the said property had been made on 17.07.2019

and the same registered on 25.06.2019. On the other hand, it is the case of the

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respondents that the property had been purchased by the appellant on

25.06.2019, i.e., during the currency of the commission of the scheduled

offense.

19. Ms. L. Devi, learned Standing Counsel, Enforcement Directorate on the

other hand submits that the 2nd limb of Section 2(1)(u) of the Act provides for

attachment of an equivalent value of the property, which may not be a part of

the proceeds of crime and which has been put into hiding by the appellant. She

accordingly submits that there is no infirmity with the impugned final order

dated 13.08.2025 passed by the learned Appellate Tribunal, inasmuch as, the

attachment of the appellant's property has been made on the basis of 2

nd

limb

of Section 2(1)(u) of the Act. Further, though the attached property had not

been purchased by the appellant with the money the appellant received from

the crime, the same did not disqualify or bar the respondents from attaching the

property in question, inasmuch as, Section 2(1)(u) of the Act allowed for the

same. She accordingly submits that the appeal should be dismissed.

20. On perusing the official records and the “reason to believe for issuance of

provisional attachment order No.03/2023 in ECIR No.GWZO/02/2021 dated

17.12.2021, attaching the property in the name Sh. Kumar Sanjit Krishna (under

sub-Section (1) of Section 5 of the Prevention of Money Laundering Act,

2002 [as amended] )” shows that the said property had been attached, as it

represented the value of the property in terms of Section 2(1)(u) of the PMLA

Act, 2002.

21. A reading of the reasons for attachment of the said property shows that

the property had been attached in terms of the 2

nd

limb of Section 2(1)(u) of

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the PMLA Act. Though the provisional attachment order has used the word

“equivalent”, while attaching the property of the appellant, the official records

show that the attachment had been made in terms of the 2

nd

limb of Section

2(1)(u) of the Act. The attachment had not been made in terms of the 3

rd

limb

of Section 2(1)(u) of the Act, just because it has used the word “equivalent” in

the provisional attachment order. Though the respondents could attach property,

which was equivalent to the value of the crime proceeds, it is seen that the

property that has been attached is apparently valued @Rs.16.60 lakhs, while

the crime proceeds alleged to have been received by the appellant from the

total amount of Rs.6,13,74,440/- is alleged to be Rs.40 lakhs.

22. In the case of Abdullah Ali Balsharaf & Anr. Vs. Directorate of

Enforcement & Ors., reported in 2019 SCC OnLine Del 6428, the Hon’ble

Supreme Court held that the power to provisionally attach or seize or freeze a

property can be exercised only (a) if the specified officer has material in his

possession, which provides him reason to believe that the property sought to be

attached or seized is proceeds of crime or related to a crime and (b) after

recording the reasons in writing.

23. In the case of M/s Mahanivesh Oils & Foods Pvt. Ltd. Vs.

Directorate of Enforcement, reported in 2016 SCC Online Del 475, the

Delhi High Court at Para 23 & 25 has held as follows:-

“23. In the present case, the impugned order has been made

under Section 5(1) of the Act. A plain reading of Section 5(1) of the Act

indicates that where the officer concerned has reason to believe, on the

basis of material in his possession that any person: "(a) is in possession of

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any proceeds of crime; and (b) that such proceeds are likely to be

concealed, transferred or dealt with in any manner that may frustrate any

proceedings relating to confiscation of such proceeds of crime under this

Chapter", he may make an order for provisional attachment of "such

property". The use of the word 'such' clearly indicates that the reference

is to the property mentioned in the preceding portion of Section 5(1) of

the Act, that is, proceeds of crime.

25. Thus, a conjoint reading of Section 5(1) read with Section 2(u) of the

Act clearly indicates that the power to attach is only with respect to the

property derived or obtained directly or indirectly by any person as a

result of criminal activity relating to a scheduled offence or the value of

such property.”

24. In the case of Omar Ali Obaid Balsharaf Vs. Deputy Director

Directorate of Enforcement, Delhi, reported in 2019 SCC Online ATPMLA

49, the Appellate Tribunal for Prevention of Money Laundering Act, Delhi has

held that in the definition of proceeds of crime, only the following properties can

be categorized as proceeds of crime and consequently attached:

a) property derived or obtained, directly or indirectly, by any person

as a result of criminal activity relating to a scheduled offence

b) value of any such property

c) property equivalent in value held within the country, where such

property is taken or held outside the country

The learned Tribunal held that the attached property being value of such

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property', has to have a link or nexus with the actual property derived from

criminal activity and it cannot merely be a 'property equivalent in value',

attachment of which is only permissible if the proceeds of crime is taken or held

outside India.

Therefore, when the case of the ED falls under equivalent in Value of any

such property', it cannot take any unrelated property which has no nexus or link

with the actual proceeds of crime and attach the same as 'property equivalent in

value' in the absence of evidence."

25. In the case of Pavana Dibbur (Supra), the Hon’ble Supreme Court in

Para 13, 15, 19 & 31.3 has held as follows:-

”13. Clause (v) of sub-section (1) of Section 2 PMLA defines “property” to

mean any property or assets of every description, whether corporeal or

incorporeal, movable or immovable, tangible or intangible. To constitute

any property as proceeds of crime, it must be derived or obtained directly

or indirectly by any person as a result of criminal activity relating to a

scheduled offence. The Explanation clarifies that the proceeds of crime

include property, not only derived or obtained from scheduled offence but

also any property which may directly or indirectly be derived or obtained

as a result of any criminal activity relatable to the scheduled offence.

Clause (u) also clarifies that even the value of any such property will also

be the proceeds of crime. Thus, the existence of “proceeds of crime”

is sine qua non for the offence under Section 3 PMLA.

15. The condition precedent for the existence of proceeds of crime is the

existence of a scheduled offence. On this aspect, it is necessary to refer to

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the decision of this Court in Vijay Madanlal Choudhary [Vijay Madanlal

Choudhary v. Union of India, (2023) 12 SCC 1] . In para 109 of the said

decision [Vijay Madanlal Choudhary v. Union of India, (2023) 12 SCC 1] ,

this Court held thus : (SCC p. 166)

“109. Tersely put, it is only such property which is derived or

obtained, directly or indirectly, as a result of criminal activity relating to

a scheduled offence that can be regarded as proceeds of crime. The

authorities under the 2002 Act cannot resort to action against any

person for money laundering on an assumption that the property

recovered by them must be proceeds of crime and that a scheduled

offence has been committed, unless the same is registered with the

jurisdictional police or pending inquiry by way of complaint before the

competent forum. For, the expression “derived or obtained” is indicative

of criminal activity relating to a scheduled offence already

accomplished. Similarly, in the event the person named in the criminal

activity relating to a scheduled offence is finally absolved by a court of

competent jurisdiction owing to an order of discharge, acquittal or

because of quashing of the criminal case (scheduled offence) against

him/her, there can be no action for money laundering against such a

person or person claiming through him in relation to the property

linked to the stated scheduled offence. This interpretation alone can be

countenanced on the basis of the provisions of the 2002 Act, in

particular Section 2(1)(u) read with Section 3. Taking any other view

would be rewriting of these provisions and disregarding the express

language of definition clause “proceeds of crime”, as it obtains as of

now.”

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26. In the case of Davy Varghese & Anr. Vs. Deputy Director,

Directorate of Enforcement, Department of Revenue & Ors., reported in

2024 SCC OnLine Ker 7343, the Kerala High Court held that the definition of

the term ‘proceeds of crime’ explicitly states that when the proceeds of a crime

is a property, such property must have been obtained or derived directly or

indirectly as a result of any criminal activity relating to a scheduled offence. No

doubt, even if the property was obtained indirectly, it can still be regarded as

proceeds of crime. Assuming that a property derived out of a criminal activity

mentioned is not available, still, attachment can be effected to the extent of the

equivalent value of such property. The term ‘value’ in S. 2(1)(u) can only mean

the monetary worth of the property that was derived from the criminal activity.

This is evident from the words ‘value of any such property’. The only method,

when a property, which is unconnected with the proceeds of crime, can be

attached, is when the property derived out of the criminal activity was taken out

of India or is held outside the country. Under no other circumstance does the

statute mandate attaching a property unconnected with the proceeds of crime.

The Kerala High Court further held in Para 22 and 23 as follows:

“22. The statute never intends to attach or confiscate all properties of a

person connected with the crime. Moreover, the consequences of a crime

cannot have a retroactive implication. Arbitrariness will loom large if the

implication of a crime is extended to anything done before the crime itself

was committed. The principle of ex post facto law, enshrined in

Article 20 of the Constitution of India, protects against punishment or

penalty for anything which was not an offence at the time it was

committed. Though the said principle may not have application stricto

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senso in relation to proceeds of crime, still the philosophy behind the

concept cannot be brushed aside.

23. Further, the Supreme Court had, in Pavana Dibbur v. Directorate of

Enforcement [2023 SCC OnLine SC 1586], specifically considered the

question of attaching property acquired prior to the commission of the

crime and held, in the negative.”

27. As can be seen, Section 2(1)(u) of the Act is divided into 3 (three)

parts/limbs. The decisions mentioned above, especially the Supreme Court

Judgment in Pavana Dibbur (Supra) and Vijay Madanlal Choudhary

(Supra), go to show that the attached property have to have some connection

with the crime/proceeds of crime. However, in the present case, the learned

AppellateTribunal has held that in terms of paragraph No. 68 (which is

paragraph No. 172), the Judgment of the Supreme Court in Vijay Madanlal

Choudhary (Supra) and the decisions of the Delhi High Court in Enforcement

Directorate vs. Axis Bank, 2019 SCC Online DEL-7854 and Prakash

Industries Ltd. vs. Directorate of Enforcement, 2022 SCC Online DEL-

2087, Section 2(1)(u) of the Act would include within its ambit the property of

the appellant, even if it did not have any connection with the crime in question.

In other words, even if the property was acquired prior to the crime, then also

the said property was liable to be attached, if the proceeds of crime had

vanished could not be traced.

28. In the case of Deputy Director, Directorate of Enforcement, Delhi

Vs. Axis Bank & Ors., reported in 2019 0 Supreme (Del) 930, the Delhi

High Court has held that Section 2(1)(u) of the Act is in three parts, which are

as follows:-

Page No.# 19/28

“(i). property derived or obtained (directly or indirectly) as

a result of criminal activity relating to scheduled offence; or

(ii). the value of any such property as above; or

(iii). if the property of the nature first above mentioned has been "taken

or held" abroad, any other property "equivalent in value" whether held in

India or abroad.”

The Delhi High Court held that while the first part of the said section deals

with tainted property, which had been acquired through tainted money, the

second and third part of the section would ordinarily deal with untainted

properties. They could have been acquired legitimately, without any connection

with criminal activity or it’s result. The same were however intended to fall in

the net, because their owner was involved in the proscribed criminal action and

the tainted assets held by him were not traceable or could not be reached.

While some of the properties could be held in India or abroad, a rider was put

by law, insisting on equivalent in value in the property to be attached. It was

this inclusive definition of proceeds of crime in respect of property of the second

and third kind mentioned in Section 2(1)(u) of the Act that the equivalent value

of those properties of the second and third category could be attached, even

though the use of the word “equivalent in value” had not been used in the

second part/limb of Section 2(1)(u) of the Act. It thus held in Para 109 and 110

as follows-

“109. The inclusive definition of "proceeds of crime" respecting property of

the second above-mentioned nature - i.e. "the value of any such property"

- gives rise (as it has done so in these five appeals) to potential multi-

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layered conflicts between the person suspected of money-laundering (the

accused), a third party (with whom such accused may have entered into

some transaction vis-a-vis the property in question) and the enforcement

authority (the State). Since the second of the above species of "proceeds

of crime" uses the expression "such property", the qualifying word being

"such", it is vivid that the "property" referred to here is equivalent to the

one indicated by the first kind. The only difference is that it is not the

same property as of the first kind, it having been picked up from among

other properties of the accused, the intent of the legislature being that it

must be of the same "value" as the former. The third kind does use the

qualifying words "equivalent in value". Though these words are not used

in the second category, it is clear that the said kind also has to be

understood in the same sense.

110. Thus, it must be observed that, in the opinion of this court, if the

enforcement authority under PMLA has not been able to trace the "tainted

property" which was acquired or obtained by criminal activity relating to

the scheduled offence for money-laundering, it can legitimately proceed to

attach some other property of the accused, by tapping the second (or

third) above-mentioned kind provided that it is of value near or equivalent

to the proceeds of crime. But, for this to be a fair exercise, the

empowered enforcement officer must assess (even if tentatively), and re-

evaluate, as the investigation into the case progresses, the quantum of

"proceeds of crime" derived or obtained from the criminal activity so that

proceeds or other assets of equivalent value of the offender of money-

laundering (or his abettor) are subjected to attachment to such extent,

the eventual order of confiscation being always restricted to take over by

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the Government of illicit gains of crime, the burden of proving facts to the

contrary being on the person who so contends.”

It also held that in cases where the enforcement authority seeks to attach

other properties, suspecting them to be “proceeds of crime”, not on the basis of

the fact that they are actually “derived or obtained” from criminal activity, but

because they are of equivalent “value” as to the proceeds of crime which cannot

be traced, it is essential that there be some nexus or link between such property

on one hand and the person accused of or charged with the offence of money-

laundering on the other hand. Para 160 of the said judgment provides as

follows:-

“160. But, in cases where the enforcement authority seeks to attach other

properties, suspecting them to be "proceeds of crime", not on the basis of

fact that they are actually "derived or obtained" from criminal activity but

because they are of equivalent "value" as to the proceeds of crime which

cannot be traced, it is essential that there be some nexus or link between

such property on one hand and the person accused of or charged with the

offence of money-laundering on the other. In cases of this nature, the

person accused of money-laundering must have had an interest in such

property at least till the time of engagement in the proscribed criminal

activity from which he is stated to have derived or obtained pecuniary

benefit which is to be taken away by attachment or confiscation. It is with

this view that PMLA provides for a possible presumption to be drawn,

under Section 24(b) using the expression "may presume", about a

property being "involved in money-laundering" in the case of person other

than the one who is charged with the offence of money-laundering. There

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is no doubt that such presumption, if drawn, may also be rebutted by

evidence showing facts to the contrary.”

29. In the case of Prakash Industries Ltd. and Another vs. Directorate

of Enforcement, 2022 SCC Online DEL-2087, the Delhi High Court held

that in a situation where a property which may be said to have a direct or

indirect link to proceeds to crime is untraceable, property equivalent in value

may also be attached.

30. The learned Appellate Tribunal in the case of Shri Sadananda Nayak

(Supra), held that Section 2(1)(u) of the Act being in 3(three) parts, the second

part/limb of Section 2(1)(u) could not be made dependent on the first part, as

the second limb was in respect of a separate scenario altogether, not connected

with the first part of the section.

The learned Tribunal in Shri Sadananda Nayak (Supra), held in paragraph

No. 15 as follows:

“15. The argument has been made in reference to the judgment of Kerala

High Court in the case of Satish Motilal Bidri (supra) and the judgment of

Apex Court in Pavana Dibur (supra) to hold that the properties acquired

prior to commission of crime would not fall in the definition of "proceeds

of crime". We are unable to accept the arguments which may otherwise

make second part of the definition of "proceeds of crime" to be

redundant. It would be for the reason that if the definition is taken only in

two parts leaving the middle part, then it would be difficult for the

enforcement agencies to protect the property till completion of the crime

to save the victim from crime committed by the accused. It would be for

the reason that if the property acquired prior to commission of crime

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would not fall in the definition of "proceeds of crime", then the accused

would commit the crime and immediately proceeds would be siphoned off

or vanished so that it may not remain available for attachment. In fact,

the word "the value of any such property" was inserted by the legislature

to attach the property of equivalent value, if the proceeds out of

commission of crime is not available or vanished. If the second limb of the

definition is made dependent on the first limb, it would be literally re-

writing the provision or making it redundant to a great extent and for this,

jurisdiction does not lie with any court of law which includes even the

Constitutional Court. They can declare any provision to be unconstitutional

but till then there remains presumption of constitutional validity.”

31. The decision in Shri Sadananda Nayak (Supra), was reached by the

learned Appellate Jurisdiction by taken into consideration paragraph No. 68 of

the Judgment of the Supreme Court in Vijay Madanlal Choudhary (Supra). It

may be stated here that this Court on going through the decision of Vijay

Madanlal Choudhary (Supra), found that paragraph No. 68 of the Judgment

in Vijay Madanlal Choudhary (Supra), which is reproduced in the decision of

Shri Sadananda Nayak (Supra), is actually at paragraph No. 172, which is as

follows:

"172. It was also urged before us that the attachment of property must be

equivalent in value of the proceeds of crime only if the proceeds of crime

are situated outside India. This argument, in our opinion, is tenuous. For,

the definition of "proceeds of crime" is wide enough to not only refer to

the property derived or obtained as a result of criminal activity relating to

a scheduled offence, but also of the value of any such property. If the

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property is taken or held outside the country, even in such a case, the

property equivalent in value held within the country or abroad can be

proceeded with. The definition of "property" as in Section 2(1)(u) 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 and vesting it in the Central

Government for effective prevention of money-laundering."

32. The learned Tribunal in Shri Sadananda Nayak (Supra), held that a

perusal of paragraph No. 68/172 of Vijay Madanlal Choudhary (Supra)

clarified that attachment can be only of the proceeds of crime and that the

definition of the proceeds of crime included the value of the property, which

were not traceable. The learned Tribunal held that if the definition of the

proceeds of crime did not include of the value of the property which was not

related to a criminal activity, the second paragraph/limb of Section 2(1)(u)

would become redundant, as otherwise, an accused would commit a crime and

simply make the proceeds of crime vanish, so that it was not made available for

attachment. The learned Tribunal also held that the decision of Vijay Madanlal

Choudhary (Supra) was made by a 3 Judges Bench and as the same was in

conflict with the 2 Judges Bench of the Supreme Court in Pavana Dibbur

(Supra), the decision of the larger bench would have to be followed.

33. The present appeal is with regard to the impugned Final Order dated

13.08.2025, passed by the learned Tribunal in FPA-PMLA-1314/GWH/2024,

wherein it has followed the earlier decision of the Appellate Tribunal in FPA-

PMLA-5612/BBS/2023 and paragraph No. 68/172 of the Judgment of the

Supreme Court in Vijay Madanlal Choudhary (Supra) and the 2 Delhi High

Page No.# 25/28

Court judgments is Axis Bank (Supra) and Prakash Industries Ltd.

(Supra).

34. On a consideration of paragraph No. 68/172 in Vijay Madanlal

Choudhary (Supra), it appears that the Supreme Court has defined proceeds

of crime to not only cover the property derived or obtained as a result of

criminal activity relating to a scheduled offence, but also of the value of any

such property which is acquired prior to the commission of the offence. The 3

rd

part of the definition of proceeds of crime no doubt includes attachment of

property of equivalent value in India, if the property is taken or held outside the

country. Thus, what is clear from the above is that when the property is

relatable to a scheduled offence, the property can be attached. In both the

cases, there is a prior requirement of identifying and coming to a finding that

the property attached is part of the proceeds of crime. The problems arises with

the second part of the definition of proceeds of crime where it only speaks of

“or the value of any such property” in Section 2(1)(u) of the Act. It is no doubt

true that if an accused commits a crime and wipes out all traces of the proceeds

of crime, then there would be nothing left to attach, if the proceeds of crime

has been made untraceable. However, the fact remains that the definition of

proceeds of crime, as defined by the Hon’ble Supreme Court in Vijay Madanlal

Choudhary (Supra) has been followed in paragraph No. 15 of Pavana Dibbur

(Supra).

35. Though the learned counsel for the respondent has relied upon paragraph

No. 68/172 of Vijay Madanlal Choudhary (Supra), in support of her

submission that when the proceeds of crime is untraceable, the value of any

property of an accused can be attached, we find that the said paragraph has to

Page No.# 26/28

be read in conjunction with other paragraphs, such as paragraph Nos. 105 –

109, 169 and 170 of the said Judgment, wherein it has been held that the pre-

condition for being proceeds of crime is that the property has been derived or

obtained directly or indirectly, by any person, as a result of criminal activity

relating to a scheduled offence. The attachment must be only in respect of

property which appears to be proceeds of crime and not all the property

belonging to the person concerned who would eventually face the action of

confiscation of proceeds of crime, including prosecution for the offence of

money laundering. Also, paragraph No. 109 has specifically stated that it is only

such property which is derived or obtained, directly or indirectly, as a result of

criminal activity relating to a scheduled offence, that can be regarded as

proceeds of crime.

Further, paragraph No. 169 of the Judgment is reproduced as follows:-

“169. As aforesaid, in this backdrop Amendment Act 2 of 2013 came into

being. Considering the purport of the amended provisions and the

experience of implementing/enforcement agencies, further changes

became necessary to strengthen the mechanism regarding prevention of

money laundering. It is not right in assuming that the attachment of

property (provisional) under the second proviso, as amended, has no link

with the scheduled offence. Inasmuch as Section 5(1) envisages that such

an action can be initiated only on the basis of material in possession of

the authorised officer indicative of any person being in possession of

proceeds of crime. The precondition for being proceeds of crime is that

the property has been derived or obtained, directly or indirectly, by any

person as a result of criminal activity relating to a scheduled offence. The

sweep of Section 5(1) is not limited to the accused named in the criminal

Page No.# 27/28

activity relating to a scheduled offence. It would apply to any person (not

necessarily being accused in the scheduled offence), if he is involved in

any process or activity connected with the proceeds of crime. Such a

person besides facing the consequence of provisional attachment order,

may end up in being named as accused in the complaint to be filed by the

authorised officer concerning offence under Section 3 of the 2002 Act.”

36. Though paragraph No. 68/172 of Vijay Madanlal Choudhary (Supra),

appears to support the interpretation given by the learned Tribunal with regard

to the definition of proceeds of crime, the Judgments as a whole shows that

there is no conflict between the decision in Vijay Madanlal Choudhary

(Supra) and Pavana Dibbur (Supra), where only property which has been

derived or obtained, directly or indirectly, as a result of criminal activity relating

to a scheduled offence can be attached. As such, we are of the view that

attachment of property, acquired prior to the commission of the crime, would

not fall within the definition of the proceeds of crime.

37. In view of the above reasons and the fact that the Supreme Court in

Pavana Dibbur (Supra), has clearly held that the decision in Vijay Madanlal

Choudhary (Supra) has held that only such property which is derived or

obtained, directly or indirectly, as a result of criminal activity, relating to a

scheduled offence can be regarded as proceeds of crime, we hold that

properties which have no nexus to a criminal activity relating to a scheduled

offence cannot be regarded as proceeds of crime. For example, if an accused

had bought a house 20 years earlier, and the scheduled offence had

commenced 20 years later, it would be unreasonable to consider the 20 year old

house to be proceeds of crime.

Page No.# 28/28

38. The above being said, there is a factual dispute with regard to whether the

attached property of the appellant had been acquired prior to the commission of

the crime, inasmuch as, the crime had occured between 11.04.2018 and

19.09.2020. As per the stand taken by the appellant, he had bought the

attached property and paid the cost of the property between 2008 and 2011.

However, the said property was registered in the name of the appellant only on

25.06.2019. On the other hand, the respondents stand is that the property had

been purchased by the appellant on 25.06.2019, i.e., during the currency of the

commission of the offence.

39. In view of there being a disputed question of fact with regard to when the

property had been purchased and keeping in mind the fact that the property

had allegedly being registered in the name of the appellant only during the

period of commission of the crime, the said disputed question of fact would

have to be proved by way of evidence. Till the time it is proved that the

property had been bought prior to the commission of the crime/offence, we are

not inclined to allow the present petition.

40. The appeal is accordingly dismissed.

JUDGE JUDGE

Comparing Assistant