Kerala High Court Quashes PMLA Attachment of Immovable Property Acquired Prior to the Scheduled Offence

The interpretation of "proceeds of crime" under the Prevention of Money Laundering Act, 2002, has frequently been a subject of intense judicial scrutiny. A fundamental question that repeatedly arises is whether enforcement agencies possess the authority to attach assets acquired by an assessee long before the alleged commission of a scheduled offence.

In the landmark judgment of Satish Motilal Bidri Vs Union of India (Kerala High Court), the judiciary provided critical clarity on this issue. The Court adjudicated on the legality of a provisional attachment order targeting an immovable property purchased more than a decade and a half prior to the alleged predicate offence. By setting aside the attachment of the pre-offence property while upholding the procedural mandate for movable assets, the High Court reinforced the constitutional safeguards against arbitrary administrative actions under the anti-money laundering framework.

1. Factual Matrix of the Dispute

The legal controversy stems from an investigation initiated under the Prevention of Money Laundering Act, 2002, against a proprietary entity known as M/s. Masters Finserv, alongside its proprietor, Sri. Ebin Varghese, and other associated individuals.

The Alleged Predicate Offence

As per the documents on record, multiple First Information Reports (FIRs), including F.I.R No. 1156/2022, were registered against the accused parties. The core allegations suggested that the accused had committed offences punishable under Section 406, Section 420, and Section 34 of the Indian Penal Code, 1860. The period during which these alleged criminal activities transpired was identified as being between 27.01.2021 and 14.11.2022.

The investigation indicated that the accused individuals allegedly lured investors with false promises of exorbitant interest rates and substantial profits, ultimately embezzling an amount exceeding Rs. 73 crores from various complainants.

Involvement of the Assessee

The petitioner (assessee), a businessman operating an electronics shop in Sholapur, Maharashtra, maintained that he had no direct nexus with the business operations of M/s. Masters Finserv. However, the enforcement directorate's investigation alleged that the assessee, despite not being named as an accused in the primary FIRs, facilitated the laundering process.

According to the allegations reported in the order, the assessee arranged two "mule accounts" under the names of M/s. Prashant Traders and M/s. Model Traders. It was claimed that these accounts received credits amounting to Rs. 85.50 lakhs and Rs. 3.98 crores from the bank accounts associated with the accused entities. These funds were allegedly routed for use in online casinos. In exchange for facilitating this arrangement, the assessee allegedly received a commission of Rs. 33 lakhs. As per the enforcement agency's claims, this commission was split into two components: Rs. 15,00,000 was routed through his bank account, while the remaining Rs. 18,00,000 was received in cash via local hawala operators.