New Delhi: In a significant judgment with wide implications for financial crime investigations, the Delhi High Court has ruled that any increase in the value of assets or shares derived from criminal proceeds will be deemed “proceeds of crime” under the Prevention of Money Laundering Act (PMLA).
This ruling empowers the Enforcement Directorate (ED) to attach not only the original tainted assets but also any subsequent appreciation in their value, even if such growth occurs due to market forces or legitimate economic factors.
Case Background: Prakash Industries and Prakash Thermal Power Case
The Division Bench comprising Justice Anil Kshetarpal and Justice Harish Vaidyanathan Shankar delivered the verdict while hearing petitions filed by Prakash Industries Limited (PIL) and Prakash Thermal Power Limited (PTPL).
The two companies were accused of using falsified financial data to obtain a coal block allocation, and later profiting through preferential allotment of shares following public announcements.
The Enforcement Directorate (ED) had attached properties worth over ₹122 crore, arguing that the increase in share value was directly linked to the proceeds of crime.
Lower Court Order Overturned
Previously, a single-judge bench had set aside the ED’s provisional attachment, reasoning that the transactions in question were not explicitly mentioned in the FIR or chargesheet.
However, the Division Bench reversed that decision, stating that the ED’s authority under Section 5 of the PMLA to attach assets is independent and autonomous—not bound by the specifics of the predicate offence documents.
The Court emphasized that the PMLA’s scope extends to any property derived or obtained, directly or indirectly, from criminal activity, including its subsequent transformation or appreciation.
Court’s Observations
The Bench noted that:
“When funds generated through illegal means are invested in shares and those shares appreciate in value, the entire enhanced amount remains tainted and is liable for attachment. Such appreciation cannot be separated from its original illicit source.”
In essence, even if the rise in asset value stems from market growth, it remains inseparable from the crime-linked origin and is thus subject to seizure under the PMLA.
Warning Against Misuse of Writ Petitions
The High Court also cautioned against the growing trend of filing writ petitions to challenge provisional attachments, describing it as an abuse of the legal process that could hamper the ED’s investigations.
This observation is expected to deter premature challenges to ED actions and reinforce the agency’s operational independence.
Legal and Financial Implications
Legal experts believe this judgment will strengthen the ED’s ability to trace and seize illicit wealth—especially in white-collar crimes, where illegal funds are often routed through legitimate investment channels.
The ruling clarifies that economic gains cannot cleanse criminal taint, setting a strong precedent for future money laundering and financial fraud cases.
Key Takeaways:
- Any value appreciation of assets derived from criminal proceeds is still considered tainted.
- ED can attach both original and appreciated value under Section 5 of PMLA.
- The Division Bench overturned an earlier ruling that limited ED’s powers.
- Writ petitions challenging provisional attachments may now face stricter scrutiny.
- Strengthens India’s anti-money laundering enforcement framework.