Delhi High Court Rules ED Can Attach Appreciated Share Value Linked to Criminal Proceeds Under PMLA

A Division Bench comprising Justice Anil Kshetarpal and Justice Harish Vaidyanathan Shankar has delivered a significant ruling in the Delhi High Court.

New Delhi:

The Delhi High Court has established that any appreciation in share or asset value derived from proceeds of criminal activities falls under the definition of "proceeds of crime" according to the Prevention of Money Laundering Act (PMLA). This landmark judgment enables the Enforcement Directorate (ED) to attach such appreciated values, regardless of whether the increase resulted from market dynamics or legitimate economic factors.

The ruling was issued by a Division Bench consisting of Justice Anil Kshetarpal and Justice Harish Vaidyanathan Shankar while adjudicating a case involving Prakash Industries Limited (PIL) and Prakash Thermal Power Limited (PTPL). These companies allegedly utilized falsified financial information to secure a coal block allocation and subsequently profited through preferential share allotments following public announcements. The ED had attached properties valued at over Rs 122 crore, asserting that the increased valuation was connected to proceeds of criminal activity.

Previously, a single judge had invalidated the ED's provisional attachment order, ruling that the transactions in question were not specifically referenced in either the FIR or chargesheet. However, the Division Bench reversed this decision, clarifying that the ED's authority under Section 5 of the PMLA to attach properties operates independently and autonomously, not constrained by the contents of predicate offence documentation.

The Court noted that when illicitly generated funds are invested in shares that subsequently appreciate in value, the entire enhanced amount remains contaminated and subject to attachment. It further emphasized that such appreciation cannot be distinguished from its original unlawful source.

Additionally, the Bench warned against the prevalent practice of filing writ petitions to challenge provisional attachments, characterizing such actions as abuse of the legal process. This judgment is anticipated to enhance the ED's capability to track and confiscate illicit wealth channeled through investment vehicles and disguised as legitimate profits.