Ancestral Property Not Immune From Attachment As Equivalent Value Of Proceeds Of Crime Under PMLA: Delhi High Court
The High Court held that the statutory scheme of the Prevention of Money Laundering Act does not exempt inherited or ancestral property from attachment where it represents value equivalent to proceeds of crime, and upheld the attachment confirmed by statutory authorities.
The Delhi High Court held that ancestral or inherited property does not enjoy automatic immunity from attachment under the Prevention of Money Laundering Act, observing that the statute does not carve out any exception for such property and permits attachment even of untainted assets where they represent value equivalent to proceeds of crime.
The Court was hearing an appeal under Section 42 of the PMLA challenging an order of the Appellate Tribunal which had upheld confirmation of a Provisional Attachment Order issued by the Directorate of Enforcement.
A Division Bench of Justice Navin Chawla and Justice Ravinder Dudeja observed: “The plea of the property being ancestral does not ipso facto grant immunity from attachment under the PMLA. The statute does not carve out an exception for ancestral or inherited properties, and thus, they are not immune from attachment. The argument that ancestral property cannot be attached unless purchased from illicit funds is misconceived and contrary to the scheme of PMLA”.
Advocate Shubail Farook appeared for the appellant; Anupam S. Sharma, Special Counsel, appeared for the Enforcement Directorate.
Background
The appeal concerned the attachment of a residential property situated in Delhi, which the appellant claimed had been purchased in 1991 by his father from his own funds and held jointly in their names. The appellant contended that he had contributed no amount towards its acquisition and that his interest arose only by inheritance after his father’s death.
On this basis, it was argued that the property could not be treated as “proceeds of crime” under Section 2(1)(u) of the PMLA since it was neither purchased by the appellant nor derived from any alleged criminal activity attributable to him. The appellant relied on judicial precedents to contend that only tainted property obtained from criminal activity relating to a scheduled offence could be attached.
The Enforcement Directorate, however, submitted that proceeds of crime had been remitted abroad and were unavailable for attachment, and therefore, property belonging to the appellant within India was attached as equivalent value under Section 5 read with Section 2(1)(u) of the Act.
Court’s Observation
The Delhi High Court first examined the statutory framework governing attachment under the PMLA and noted that competent authorities are empowered to provisionally attach property believed to represent proceeds of crime. It relied on the Supreme Court’s decision in Vijay Madanlal Choudhary v. Union of India (2022), which clarified that the offence of money laundering is linked not to the date of the scheduled offence but to the date on which a person engages in processes connected with proceeds of crime.
Interpreting the statutory definition of “proceeds of crime,” the Court emphasised that the expression is wide and includes not only property directly derived from criminal activity but also the value of such property. Where tainted property is held outside the country or cannot be traced, authorities may proceed against property of equivalent value held within or outside India.
The Bench referred to earlier Delhi High Court decisions, including Prakash Industries Ltd. v. Directorate of Enforcement (2022) and Deputy Director v. Axis Bank (2019), which recognised that even untainted property may be attached if it represents the equivalent value of proceeds of crime that are unavailable.
Applying these principles, the Court held that the appellant’s central argument, that ancestral property cannot be attached unless purchased from illicit funds, was fundamentally flawed and inconsistent with the statutory scheme. It noted that the Adjudicating Authority had recorded a factual finding, based on evidence, that the property represented value equivalent to proceeds of crime generated from scheduled offences.
The Court also stressed that merely because a property was inherited or acquired before enactment or enforcement of the statute does not automatically grant immunity from attachment proceedings under the Act.
“The expression 'proceeds of crime' envisages both tainted property as well as untainted property, with it being permissible to proceed against the latter provided it is being attached as equivalent to the 'value of any such property' or 'property equivalent in value held within the country or abroad’, provided the actual tainted property cannot be traced or found, …Thus, where the respondent is unable to discover the tainted property, it may proceed to attach even an untainted property equivalent in value”, the Court concluded.
Conclusion
The Court concluded that the findings of the Adjudicating Authority and the Appellate Tribunal were based on proper appreciation of evidence, adherence to statutory requirements, and due application of mind.
Finding no illegality or perversity warranting interference, it upheld the attachment and dismissed the appeal along with pending applications.
Cause Title: Arun Suri v. Directorate of Enforcement (Neutral Citation: 2026:DHC:1391-DB)
Appearances
Appellant: Advocates Shubail Farook, Kshitij Kumar
Respondent: Anupam S. Sharma, Special Counsel for Enforcement Directorate.
