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Delhi News: The Delhi High Court has ruled that any increase in share prices resulting from illegal activities will be considered proceeds of crime under the Prevention of Money Laundering Act (PMLA), 2002. The court held that money laundering includes any process or activity involving illicit gains and such assets can be confiscated by the Enforcement Directorate (ED).

Bench Allows ED’s Appeal, Restores Rs 122-Crore Asset Attachment

A division bench comprising Justices Anil Kshetrapal and Harish Vaidyanathan Shankar made the observation while allowing the ED’s appeal against an earlier ruling that had quashed a provisional attachment order (PAO) issued against Prakash Industries Limited (PIL) and its group company Prakash Thermal Power Limited (PTPL). The order had involved the attachment of assets worth over Rs 122 crore.

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‘Proceeds of Crime’ Include All Gains From Unlawful Activities, Says Court

The bench overturned the single judge’s January 2023 order, terming it legally flawed. It stated that the concept of “proceeds of crime” extends to all gains derived from unlawful actions, regardless of how they are reinvested or transformed.

Court Explains Example Of Bribe Money Invested In Stock Market

To clarify, the bench gave an example, if a public servant accepts a bribe and invests the money in real estate, drug trading, or shares, the illegality of the source persists. Therefore, all resulting profits remain subject to attachment. Similarly, if bribe money is used in the stock market and the value of shares increases later, the entire enhanced amount, irrespective of market forces will still qualify as proceeds of crime.

The judges also criticised the growing trend of using Article 226 of the Constitution to challenge provisional attachment orders, calling it an “abuse of legal process.”

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Prakash Industries Accused Of Misrepresentation In Coal Block Allocation

PIL was accused of misrepresenting its net worth in 2007 to secure the Fatehpur coal block in Chhattisgarh. Before the formal allocation, the company allegedly informed the Bombay Stock Exchange (BSE) that it already owned the coal block, causing a sharp rise in share prices. The promoters then sold shares, allegedly generating illegal profits.

While a single judge had earlier ruled that the ED lacked jurisdiction since the CBI’s FIR did not include the share issue, the High Court said this interpretation was erroneous. It observed that the proceeds generated through such actions clearly fall under money laundering offences.

Setting aside the single judge’s order, the court restored the ED’s right to attach the assets, reinforcing that profits earned from unlawful acts cannot be separated from their tainted origins.

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