Kerala HC rules ED can’t attach properties bought before commission of offence

High Court says only properties acquired using the ‘proceeds of crime’ can be attached.
Kerala High Court.
Kerala High Court.(File photo)

KOCHI: Amid the Enforcement Directorate (ED) provisionally attaching properties of several high-profile individuals and political parties, including the CPM in Kerala, under the Prevention of Money Laundering Act (PMLA), the Kerala High Court has dealt a setback to the agency. The court ruled that property purchased before the commission of a scheduled offence does not qualify as ‘proceeds of crime.’ It clarified that only properties acquired using the ‘proceeds of crime’ can be attached.

The court’s ruling came while quashing the ED’s provisional attachment of immovable property belonging to a resident of Maharashtra. The property was purchased on January 5, 2004, and was attached in connection with a crime committed between January 27, 2021, and November 14, 2022. The court noted that the immovable property provisionally attached had been acquired more than a decade and a half before the alleged offence occurred. It emphasised that the provisions of the Act cannot be used to proceed against properties that are unconnected with the criminal activity in question.

Justice Bechu Kurian Thomas passed the landmark order on a petition filed by Satish Motilal Bidri of Solapur, Maharashtra, seeking to quash the provisional attachment of his property. The ED had registered a case against Masters Finserv, a Kochi-based investment firm, where complainants from Kerala alleged embezzlement exceeding Rs 73 crore.

According to ED, the accused induced complainants to make deposits by promising substantial profits on investments with false assurances of high interest rates, subsequently embezzling over Rs 73 crore. The probe revealed that the petitioner, not accused in any FIRs, had arranged two accounts under M/s Prashant Traders and M/s Model Traders. These accounts received credits of Rs 85.50 lakh and Rs 3.98 crore from the accused’s bank accounts and related entities for use in online casinos. In return, the petitioner received Rs 33 lakh, with Rs 15 lakh deposited in his bank account and Rs 18 lakh in cash from local hawala operators. Consequently, the ED provisionally attached his property on May 22, 2024.

The court emphasised that PMLA aims to prevent and penalise money laundering, focusing on proceeds directly linked to specific criminal activities. The definition of ‘proceeds of crime’ explicitly requires property obtained or derived from criminal activities related to scheduled offences.

Recently, the ED also attached some assets of the CPM in Kerala, including 18 immovable properties valued at Rs 28.65 crore, consisting of lands and buildings linked to beneficiaries of the scam. Among these assets is an immovable property valued at Rs 10 lakh registered in the name of the Thrissur CPM district secretary for building its party office. M M Varghese, CPM Thrissur district secretary, stated that they would study the merits of the order and legally contest the case.

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