PMLA: Possession or use of proceeds of crime is a continuing offence attracting provisional attachment.

The National Agricultural Marketing Cooperative Federation Ltd (NAFED) lodged a complaint with the Central Bureau of Investigation (CBI) alleging that Homi Rajvansh, Additional Managing Director of NAFED, in connivance with M.K. Agri International Ltd (MKAIL), executed Memoranda of Understanding for raw sugar import under High Seas Sale (HSS) agreements without charging cost.

This led to subsequent sales by MKAIL's sister concern, M.K. International Ltd (MIL), in the open market.

On February 10, 2005, MIL issued cheques for ₹1.5 crores to its holding companies, Duroroyale Enterprises Ltd (Duroroyale) and Sri Radhey Trading Pvt Ltd (SRTPL).

Duroroyale and SRTPL then issued two cheques of ₹75 lakhs each to the respondent, M/s Mahanivesh Oils & Foods Pvt Ltd, of which Alka Rajvansh, Homi Rajvansh's wife, was a Director.

The respondent subsequently issued cheques on February 16 and 17, 2005, totaling ₹1.428 crores, to purchase the subject property, E-14/3, Vasant Vihar, New Delhi, via a sale deed dated March 18, 2005.

The CBI's FIR and charge-sheet alleged offences under Sections 403, 409, and 420 read with 120B of the Indian Penal Code, 1860, against Alka Rajvansh as Director of the respondent company.

On January 24, 2014, the Deputy Director, Directorate of Enforcement (DoE), issued a Provisional Attachment Order under Section 5(1) of the PMLA for the subject property, reasoning it represented "proceeds of crime" likely to be concealed or transferred.

The respondent challenged this order, and a learned Single Judge of the Delhi High Court set aside the attachment, prompting this Letters Patent Appeal.

The court applied Section 5(1) of the PMLA, which allows provisional attachment of property believed to be "proceeds of crime" if there is reason to believe it is likely to be concealed or transferred.

It considered Section 2(1)(u) defining "proceeds of crime" to include property derived or obtained, directly or indirectly, from criminal activity relating to a scheduled offence.

Section 3 of the PMLA, defining the "offence of money-laundering," was central, particularly its inclusive nature that covers concealment, possession, acquisition, or use of proceeds of crime.

The court also relied on the Explanation (ii) to Section 3, clarifying that the process or activity connected with proceeds of crime is a continuing activity.

Article 20(1) of the Constitution of India, concerning retrospective penal laws, was considered.

Precedent from the Supreme Court in Vijay Madanlal Choudhary v. Union of India was used to establish that money laundering is a distinct, independent, and continuing offence, not linked to the date of the scheduled offence.

Precedent from the Supreme Court in Pradeep Nirankarnath Sharma v. Enforcement Directorate was used to establish that money laundering is a distinct, independent, and continuing offence, not linked to the date of the scheduled offence.

The court found that the Single Judge erred by narrowly interpreting "proceeds of crime" to only include the money received by Alka Rajvansh, rather than also the subject property purchased with it.

By virtue of Section 2(1)(u), the subject property itself constitutes "proceeds of crime" as it was indirectly obtained from criminal activity.

The court observed that the Single Judge incorrectly conflated "possession" with "coming into possession" under Section 3 of the PMLA.

The PMLA's inclusive definition of money laundering, encompassing "concealment, possession, acquisition or use," means that merely being in possession of or using the proceeds of crime (the subject property) after the PMLA's enactment constitutes the offence.

The Explanations to Section 3 reinforce that money laundering is a continuing activity as long as the person enjoys the proceeds of crime through concealment, possession, acquisition, or use.

Therefore, the respondent, by continuing to possess and use the subject property after the PMLA became effective (July 1, 2005), was committing the offence of money laundering, making the Act applicable without retrospective effect.

The court rejected the argument that applying PMLA to continuing possession violates Article 20(1), clarifying that the PMLA punishes money laundering, not the scheduled offence, and a longer or different punishment for money laundering is permissible.

Following Vijay Madanlal Choudhary and Pradeep Nirankarnath Sharma, the court established that money laundering is an independent, continuing offence, whose commission is determined by the date of indulgence in process/activity connected with proceeds of crime, not the date of the scheduled offence.

Regarding Section 5(1)(b), the court held that the Deputy Director's subjective belief that the property was likely to be concealed or transferred was reasonable given the facts, and interference under certiorari jurisdiction was unwarranted.

It held that the subject property constitutes "proceeds of crime" and its continued possession and use after July 1, 2005, means the PMLA applies without retrospective effect.

The court found no infringement of Article 20(1) of the Constitution.

Consequently, the impugned judgment of the learned Single Judge was quashed and set aside.

The Provisional Attachment Order dated January 24, 2014, was upheld, and WP (C) 1925/2014 filed by the respondent was dismissed.

The appeal was allowed with no orders as to costs.