The Supreme Court will consider whether property acquired before the alleged commission of scheduled offenses under the Prevention of Money Laundering Act (PMLA) can be termed as proceeds of crime, which can be attached by the Enforcement Directorate (ED). 

A bench of Justice Abhay S Oka and Justice Pankaj Mittal has issued notice on the petition of the Union Finance Ministry challenging the order of the Patna High Court. Along with this, the Supreme Court has ordered to attach the petition for hearing with another petition already pending on this issue.

Patna High Court has canceled the temporary attachment of some properties mortgaged by ED to HDFC Bank. Another important issue involved in this case is whether the PMLA will supersede the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act and the Recovery of Debts of Banks and Financial Institutions Act.

In this case, Patna High Court has said that property obtained from legitimate source cannot be attached on the ground that property obtained from scheduled crime is not available for attachment. The High Court had said that the value of property derived from criminal property is limited to the value of the criminal property and not to any property of the person alleged to be involved in money laundering.

The High Court held that otherwise the legislature would not have defined the proceeds of crime as liable to confiscation under Section 5 of the PMLA. The High Court said this in its decision on a petition raising concerns about HDFC Bank's claim on mortgaged properties under Section 31B of the Loan Recovery and Bankruptcy Act 1993.

The High Court in this case analyzed Section 2(1)(u) of PMLA by dividing it into three parts which defines the proceeds of crime. The High Court divided it into three parts: the first part is the property obtained directly or indirectly as a result of criminal activity related to a scheduled offence, the second is the value of the property obtained or derived from the criminal activity and the third is where the property obtained from the criminal activity is taken or taken outside the country. Has been kept.

The High Court said that property purchased before the commission of a scheduled offense does not fall within the scope of the first part of the definition. It also said that the second part is limited to the value of property derived from criminal activity and does not include any property owned by the person involved in money laundering.

Apart from this, the High Court also differentiated between the SARFAESI Act and the Bankruptcy Act on the one hand and PMLA on the other. The High Court had canceled the attachment, against which the government has approached the Supreme Court.