Pre-Crime Property Can Be Attached for Equivalent Value Under PMLA: SAFEMA Delhi

Sadananda Nayak Vs Deputy Director Directorate of Enforcement (Appellate Tribunal under SAFEMA, Delhi)

Summary: The Appellate Tribunal under SAFEMA, Delhi dismissed Sadananda Nayak’s appeal challenging confirmation of attachment of four properties under the Prevention of Money Laundering Act, 2002. The appellant confined his challenge to three properties acquired before the alleged criminal activity, contending that they had no nexus with the scheduled offence and therefore could not constitute “proceeds of crime” under Section 2(1)(u) of PMLA. The Tribunal rejected this contention by interpreting the definition of “proceeds of crime” as containing three limbs. It held that apart from property directly or indirectly derived from criminal activity, the expression “the value of any such property” permits attachment of property of equivalent value when the actual proceeds of crime are unavailable, siphoned off or have vanished. Consequently, property acquired even before commission of the scheduled offence may, in appropriate circumstances, be attached as equivalent-value property.

The Tribunal relied principally upon Vijay Madanlal Choudhary Vs Union of India and the Delhi High Court decisions in Directorate of Enforcement Vs Axis Bank & Ors. and Prakash Industries Ltd. v. Directorate of Enforcement. It observed that treating pre-crime property as invariably outside Section 2(1)(u) would effectively render the middle limb—“the value of any such property”—redundant. The Tribunal reasoned that the provision enables authorities to secure property of equivalent value where property actually derived from criminal activity cannot be traced or has been dissipated.