The Prevention of Money-Laundering Act, 2002 (PMLA) empowers the Enforcement Directorate (ED) to attach and confiscate proceeds of crime. Its power to attach instruments of crime, however, remains unclear and the statute’s drafting allows for confusion and executive over-reach.
The difference between crime proceeds and instruments is straightforward. A firearm and a getaway car used in a bank robbery are instruments of a scheduled offence. The money stolen and any assets purchased with it are crime proceeds. Dummy bank accounts used to route cash for these purchases, real estate bought and sold at inflated rates, and legitimate funds commingled to conceal crime proceeds are instruments of money-laundering. Although instruments are ‘property’ under the PMLA, they are evidence of crime to be seized rather than crime proceeds to be attached.
An overbroad 2013 amendment to the PMLA confuses the scope of the ED’s powers. The amended second proviso to Section 5(1) allows the ED to attach “…any property of any person…” if non-attachment would frustrate PMLA proceedings. It appears to enlarge the main provision contrary to DMRC v. Tarun Pal Singh 2017 INSC 1119 and also blurs the line between attachment under Section 5 and seizure under Section 17.
The statute clearly contemplates confiscation of instruments of money-laundering only at the conclusion of trial (Sections 8(5), 8(8), and 60(2-A)). These provisions align with general criminal procedure under which courts dispose of instruments as case property.
Attachment and seizure serve distinct purposes. Attachment is in aid of confiscation at the end of trial, while seizure is in aid of preserving evidence for trial. Functionally, both dispossess and preserve property till a trial concludes. Yet the ED frequently treats instruments as it they were proceeds and attaches both, leaving courts to untangle the conflation.
In K. Sowbaghya 2016 SCC OnLine Kar 282 the Karnataka High Court extended ‘proceeds of crime’ to instruments by reading the definition of ‘property’ into the definition of ‘proceedings of crime’. This construction has limited textual support and is practically unnecessary given the ED’s powers of seizure.
Conversely, in Himachal EMTA Power 2018 SCC OnLine Del 11078 and in Vijay Madanlal Choudhary (2023) 12 SCC 1 it was held that ‘proceeds of crime’ excludes instruments used in committing the offence; the former vacating attachment of property used to commit a scheduled offence.
When attachments of instruments are vacated, property reverts to individuals who may dispose of crucial evidence. The ED may attempt fresh seizure under Section 17, but this invites further litigation and allegations of mala fides. If the instrument relates to the predicate offence, timely inter-agency coordination under Section 66 becomes even more important; failure to secure the evidence can jeopardise both prosecutions.
The ED should, therefore, seize instruments of money-laundering and alert the predicate-offence agency to seize the case property. This approach aligns with the statutory scheme, the ‘foundation and superstructure’ relationship between scheduled and PMLA investigations, and avoids the pitfalls of overbroad attachment.
To strengthen India’s anti-money-laundering regime, the ED must start focusing on what it should do for effective enforcement, rather than what it can do on an overgenerous interpretation of the PMLA. That shift will strengthen—not weaken—India’s anti-money-laundering framework.
