In a significant legal clarification regarding money laundering statutes, the Delhi High Court has ruled that ancestral or inherited properties do not enjoy automatic immunity from attachment under the Prevention of Money Laundering Act (PMLA). The court emphasized that the Enforcement Directorate (ED) maintains the authority to seize “equivalent value” assets when direct proceeds of crime are unavailable.
The Delhi High Court recently dismissed an appeal that sought to protect a residential property from being seized by the Directorate of Enforcement. The division bench, comprising Justice Navin Chawla and Justice Ravinder Dudeja, clarified that the current legal framework does not provide any specific exemptions for properties simply because they were inherited or considered ancestral.
Understanding the “Equivalent Value” Clause
The core of the dispute rested on whether the ED could target a property that was not involved in the original alleged offense. Under Section 2(1)(u) of the PMLA, the definition of “proceeds of crime” is notably broad. It includes not only the assets directly derived from criminal activity but also the “value of such property” if the original tainted assets are no longer reachable.
The court’s decision reinforces the principle that if a suspect has moved “tainted” money abroad or hidden it effectively, the law allows authorities to attach any other “untainted” property held by the individual within India, provided its value matches the alleged proceeds of crime.
Precedent Set by the Supreme Court
The High Court Bench heavily relied on the landmark Supreme Court judgment in Vijay Madanlal Choudhary v. Union of India. This apex court ruling established that the PMLA’s reach is intended to be expansive to curb financial crimes effectively.
By interpreting the term “proceeds of crime” broadly, the judiciary has ensured that accused individuals cannot shield their wealth by claiming a specific asset—like a family home—was purchased with “clean” money decades prior. If the debt to the state (the criminal proceeds) exists, any equivalent asset is fair game for provisional attachment.
Details of the Pitam Pura Case
The specific case involved a residential property located at 255, Sainik Vihar, Pitam Pura, Delhi. The appellant challenged a 2025 order by the Appellate Tribunal which had upheld a 2017 provisional attachment notice. The appellant’s primary defense was that his father had purchased the house in 1991 using legitimate personal income, long before any alleged criminal activity occurred.
The appellant argued that because he did not use “crime money” to buy the house, the ED had no right to seize it. However, the ED countered that the actual proceeds of crime—consisting of foreign exchange—had been remitted outside India and were thus “untraceable.”
Legal Implications for Property Owners
The High Court found no “illegality or perversity” in the actions of the Adjudicating Authority. By dismissing the appeal, the court sent a clear message: the origin of the specific property being attached (whether it is a gift, an inheritance, or a pre-existing asset) is secondary to the total value of the crime being investigated.
“The law does not carve out any exception for ancestral properties. If the original proceeds of crime are not traceable, authorities are empowered to attach an untainted property of equivalent value,” the Bench noted.
Judicial Oversight and Fair Process
While the ruling strengthens the ED’s hand, it also operates within a statutory framework. Under Section 5 of the PMLA, the attachment is initially “provisional” and must be confirmed by an Adjudicating Authority. This ensures that while ancestral property not immune to PMLA attachment is the rule, there are still layers of judicial review to prevent the arbitrary misuse of power.
In this instance, the court satisfied itself that the authorities had applied their minds to the material on record and acted within their legal mandate.
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