Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(ATFP) 192

APPELLATE TRIBUNAL FOR FORFEITED PROPERTY
Munishwar Nath Bhandari, Chairman, Gopal Chandra Mishra, Member
Shri G. Sevakumaran & Smt. R. Jayanthi – Appellant
Versus
The Deputy Director Directorate of Enforcement Chennai – Respondent
FPA-PMLA-6580/CHN/2023 & FPA-PMLA-6581/CHN/2023

Advocates:
For the Appellants/Petitioners: Counsel appeared
For the Respondents: Aditya Singla

Properties acquired before the commission of a scheduled offence can be attached under PMLA as 'proceeds of crime' under the second limb of Section 2(1)(u) if the actual proceeds are not traceable, to secure equivalent value.

Headnote:(A) Prevention of Money Laundering Act, 2002 - Section 2(1)(u) - Definition of “proceeds of crime” - Three limbs - First limb: property derived or obtained directly or indirectly from scheduled offence - Second limb: “the value of any such property” - property of equivalent value when actual proceeds are not traceable or have been siphoned off - Third limb: property taken or held outside the country - Provisional attachment - Properties acquired prior to commission of scheduled offence - Check-period for determining disproportionate assets under Prevention of Corruption Act - Whether such properties can be attached under PMLA - Held: Yes, under second limb as “deemed tainted property” - Interpretation by Supreme Court in Vijay Madanlal Chaudhary and Delhi High Court in Axis Bank and Prakash Industries - Distinguishing contrary views in Pavana Dibbur and Satish Motilal Bidri - Attachment of properties of equivalent value to protect proceeds of crime until conclusion of trial - Appeal dismissed. (Paras 7-11)

(B) Check-period for determining disproportionate assets under PC Act is not the same as the period for attachment under PMLA - Attachment can extend to properties acquired before the check-period if the actual proceeds of crime are not available or insufficient - Object of PMLA to prevent siphoning off of illicit gains. (Paras 8-10)

Facts of the case:
FIR under Prevention of Corruption Act against a public servant for possessing disproportionate assets during check-period 01.04.2012 to 31.03.2019. Disproportionate assets valued at Rs.3,31,79,560/-. Enforcement Directorate provisionally attached several properties including two immovable properties acquired before the check-period (house site and agricultural land). Appellant argued those properties could not be ‘proceeds of crime’ as they had no nexus with the scheduled offence. The Adjudicating Authority confirmed the attachment. The Appellate Tribunal upheld the attachment under the second limb of the definition.

Findings of Court:
The definition of ‘proceeds of crime’ under Section 2(1)(u) comprises three limbs. The first limb covers property directly or indirectly derived from criminal activity. The second limb, introduced by the word ‘or’, covers ‘the value of any such property’ - i.e., any other property of equivalent value when the actual proceeds are not traceable or have been laundered. The third limb covers property taken abroad. In the present case, the total value of the proceeds of crime (Rs.3,31,79,560/-) far exceeded the value of the attached immovable properties (Rs.1,61,78,897/-). Since the actual proceeds were not fully available, the authorities rightly invoked the second limb to attach properties of equivalent value, even those acquired before the check-period. The check-period is relevant only for determining the quantum of disproportionate assets, not for restricting the scope of attachment. To hold otherwise would allow an accused to siphon off proceeds and render the attachment provisions futile. The interpretation follows the Supreme Court’s ruling in Vijay Madanlal Chaudhary and the Delhi High Court’s analysis in Axis Bank and Prakash Industries, which clarify that untainted properties can be attached as ‘deemed tainted property’ under the second limb. (Paras 7-11)

Issues: (i) Whether property acquired prior to the commission of the scheduled offence (or prior to the check-period) can fall within the definition of ‘proceeds of crime’ under Section 2(1)(u) of PMLA? (ii) Whether such property can be provisionally attached when the actual proceeds of crime are not traceable or insufficient?

Ratio Decidendi: The definition of ‘proceeds of crime’ under Section 2(1)(u) includes not only property directly or indirectly derived from the scheduled offence (first limb) but also any other property of equivalent value (second limb) when the actual proceeds are not available. This second limb is independent and does not require the property to have any temporal or causal nexus with the crime. Therefore, properties acquired before the check-period or before the commission of the offence can be attached to secure the value of the proceeds of crime, provided the total value of attached properties does not exceed the value of the proceeds. Such interpretation furthers the legislative intent of preventing money laundering and recovering illicit gains. (Paras 10-11) Result : Appeals dismissed.

ORDER

12.03.2026

By these appeals filed under Section 26 of the Prevention of Money Laundering Act, 2002 ( in short “the Act of 2002”), a challenge has been made to the order dated 04.08.2023 passed by the Adjudicating Authority confirming the Provisional Attachment Order (‘PAO’) dated 23.02.2023.

Brief facts of the case:

2. It is a case where an FIR was registered by the Directorate of Vigilance and Anti-Corruption, Salem, Tamil Nadu for the offence under Section 13 (2) read with Section 13(1)(e) and Section 13(1)(b) of the Prevention of Corruption Act, 1988 (in short the “the Act of 1988”). Shri G. Sevakumaran, appellant, was found to be in possession of the proceeds disproportionate to his known source of income to the tune of Rs.3,31,79,560/-. The appellant joined the Government service as Assistant Engineer sometime in the year 1997 and worked at various places and found to have assets disproportionate to his known source of income. The check-period therein was taken from 01.04.2012 to 31.03.2019. He acquired the assets worth of Rs.2,07,90,330/- during the check-period, while his total income to the tune of Rs.1,17,00,000/- and his total expenditure to the tune of Rs.2,40,89,230/-.

Arguments of the Ld. Counsel for the appellants:

3. Ld. Counsel for the appellants has challenged the PAO limited to the properties acquired prior to the check-period for determination of the assets disproportionate to known source of income. It was submitted that the proprieties acquired before the check-period could not have been provisionally attached when it was not even taken into consideration to determine the assets disproportionate known source of income. It was, otherwise, purchased prior to alleged commission of crime and therefore it could not have nexus to the crime. The respondent could have provisionally attached the property falling in the definition of “proceeds of crime” i.e. the properties derived or obtained directly or indirectly out of the scheduled offence. The properties purchased prior to the check-period could not have been reckoned to be properties derived or acquired directly or indirectly out of the proceeds of crime. The prayer was accordingly made to cause interference in the impugned order to the extent of two properties i.e. House Site Survey No. 48/1, 48/1B4, 48/1B4A1, Ayyamperumampatty Village in Salem and Agricultural Land Survey No. 117/1 in Nadupatti Village, Salem.

4. Ld. Counsel for the appellants did not raise any other argument for the reason that a Discharge Petition has been filed by the appellant. Ld. Counsel for the appellants was asked to raise any other legal or factual issues than referred to above even if a Discharge Petition has been filed. Ld. Counsel for the appellants restricted his arguments to the extent referred to above and closed his argument with the aforesaid.

Arguments of the Ld. Counsel for the respondent:

5. The appeals were seriously contested by the Ld. Counsel for the respondent. Elaborate arguments were raised to justify attachment of the properties including the properties acquired even prior to the check-period. It would be referred while recording finding to the arguments raised by the Ld. Counsel for the appellants.

Findings of the Tribunal:

6. A short issue raised by the appellants is as to whether the property acquired prior to commission of crime can fall within the definition of “proceeds of crime” under the Act of 2002 and furthermore whether the property acquired prior to check- period to determine property disproportionate to the known source of income could have been provisionally attached.

7. To answer the issue framed above, it would be relevant to view the facts of the case. It is no doubt that the respondent determined the assets disproportionate known source of income taking check period from 01.04.2012 to 31.03.2019. The amount of disproportionate assets was found to be of a sum of Rs.3,31,79,560/- and on the aforesaid no argument was raised. The amount of disproportionate

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2026 Supreme(Online)(ATFP) 192

APPELLATE TRIBUNAL FOR FORFEITED PROPERTYMunishwar Nath Bhandari, Chairman, Gopal Chandra Mishra, MemberShri G. Sevakumaran & Smt. R. Jayanthi – AppellantVersusThe Deputy Director Directorate of Enforcement Chennai – RespondentFPA-PMLA-6580/CHN/2023 & FPA-PMLA-6581/CHN/2023

Properties acquired before the commission of a scheduled offence can be attached under PMLA as 'proceeds of crime' under the second limb of Section 2(1)(u) if the actual proceeds are not traceable, to secure equivalent value.

APPELLATE TRIBUNAL FOR FORFEITED PROPERTY
Munishwar Nath Bhandari, Chairman, Gopal Chandra Mishra, Member
Shri G. Sevakumaran & Smt. R. Jayanthi – Appellant
Versus
The Deputy Director Directorate of Enforcement Chennai – Respondent
FPA-PMLA-6580/CHN/2023 & FPA-PMLA-6581/CHN/2023