Money laundering: SC to examine if ED can attach ancestral assets as 'proceeds of crime'

New Delhi: The Supreme Court has agreed to examine the legal issue of whether the Enforcement Directorate can attach ancestral properties of the accused under the Prevention of Money Laundering Act (PMLA) as "proceeds

of crime".

The question came up for consideration before the top court on an appeal filed by the Enforcement Directorate (ED) challenging an order of the Karnataka High Court which observed that action under the Prevention of Money Laundering Act, 2002 cannot proceed in respect of the ancestral property.

The high court had also quashed the proceedings against two accused in the case.

An apex court bench of Justices A M Khanwilkar and C T Ravikumar in its October 8 order issued notice to the accused on the appeal of the ED and sought their response within four weeks.

Additional Solicitor General S V Raju, appearing for ED, submitted that the high court has committed manifest error in observing that action under the PMLA cannot proceed in respect of ancestral property of the writ petitioners.

The ASG said the observation of the high court is contrary to the very definition of "proceeds of crime" in Section 2(1)(u) of the 2002 Act.

As per this definition, "proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property or where such property is taken or held outside the country, then the property equivalent in value held within the country.

The high court in its order had dismissed proceedings initiated against the first accused noting that he died during the pendency of the petitions and quashed the prosecution instituted against the second accused pending before Principal Civil and Sessions Judge, Bangalore.

It had also set aside attachment proceedings in respect of family properties belonging to petitioners in the Mysore district.

A charge sheet was filed against accused No.1 for the offences punishable under Sections 406 (criminal breach of trust.) and 420 (cheating) of the Indian Penal Code alleging that under two agreements he agreed to supply 50,000 metric tonnes of iron ore to a Government Undertaking (M/s.Mysore Sales International Limited).