Probe Agency Can Attach Share Value Gained From Crime-Link Funds: Delhi High Court

The Delhi High Court has ruled that any increase in the value of shares or assets derived from criminal proceeds can be considered as "proceeds of crime" under the Prevention of Money Laundering Act (PMLA). The judgment allows the Enforcement Directorate (ED) to attach such gains, even if the appreciation occurs due to market forces or legitimate economic factors.

A Division Bench of Justice Anil Kshetarpal and Justice Harish Vaidyanathan Shankar delivered the ruling while hearing a case concerning Prakash Industries Limited (PIL) and Prakash Thermal Power Limited (PTPL). The companies were accused of using falsified financial data to obtain a coal block allocation and later profited through preferential allotments of shares after public announcements. The ED had attached properties worth over Rs 122 crore, claiming the increased value was linked to proceeds of crime.

Earlier, a single judge had set aside the ED's provisional attachment order, stating that the transactions in question were not explicitly mentioned in the FIR or chargesheet. However, the Division Bench overturned that order, clarifying that the ED's power under Section 5 of the PMLA to attach properties is independent, autonomous, and not limited by the contents of the predicate offence documents.

The Court observed 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. It added that such appreciation cannot be separated from the original illicit source.

The Bench also cautioned against the frequent filing of writ petitions to challenge provisional attachments, calling such actions an abuse of the legal process. The judgment is expected to strengthen the ED's ability to trace and seize illicit wealth that is routed through investment channels and disguised as legitimate profits.