Possession Is The Crime: Money Laundering Never Stops Ticking, PMLA Attachment Of Pre-Act Property

Article by Vijay Pal Dalmia, Advocate, Supreme Court of India and Delhi High Court, Partner & Head of Intellectual Property Laws Division, Vaish Associates Advocates, India

A 10-year-old property dispute in Delhi’s upscale Vasant Vihar has led to an important and clarifying judgment on how the Prevention of Money Laundering Act (PMLA), 2002, actually works. In the case Directorate of Enforcement v. M/s Mahanivesh Oils & Foods Pvt Ltd (2026:DHC:2147-DB), a Division Bench of the Delhi High Court overturned a 2016 single judge order that had blocked the Enforcement Directorate (ED) from attaching a modest basement-and-ground-floor property. The long-pending appeal (LPA 144/2016) was finally decided on 16 March 2026.

The case stems from a CBI complaint filed in 2009 accusing Homi Rajvansh, then Additional Managing Director of NAFED, of colluding with a private firm to sell raw sugar without recovering costs, causing losses of several crores to the federation. The proceeds allegedly flowed through a chain of companies and, in two tranches of ₹75 lakh each, reached Mahanivesh Oils & Foods Pvt Ltd, where Alka Rajvansh (Homi’s wife) was a director. In March 2005, she used these funds to purchase the Vasant Vihar property months before the PMLA came into force on 1 July 2005.

An FIR was registered against her under IPC provisions for cheating, criminal breach of trust, misappropriation, and conspiracy all scheduled offences under the PMLA. In January 2014, the Enforcement Directorate provisionally attached the property as proceeds of crime. Mahanivesh challenged the attachment, and in January 2016, a Single Judge of the Delhi High Court quashed it, holding that attaching the property would amount to retrospective application of the PMLA, violating Article 20(1) of the Constitution.

The Single Judge had reasoned that money laundering follows a three-stage process placement, layering, and integration. Once the dirty money is used to buy an asset and gets “integrated” into the legitimate economy, the offence is complete. In this case, that happened in 2005, well before the PMLA came into force. Simply continuing to hold the property after that date, the judge believed, was not a fresh offence it was just possessing an asset.

The Bench's textual analysis of Section 3 is the crux of the judgment. It observed that the provision is deliberately inclusive: everything before the word "including" covers a person who indulges in, assists, or is a party to any process connected with proceeds of crime, while everything after the word extends the offence separately to concealment, possession, acquisition, use, or the projection or claiming of the property as untainted each of these read disjunctively, so that any single one of them suffices.

"The offence of money laundering does not, therefore, end on the date when the person comes into possession of the proceeds of crime. It continues so long as the person remains in possession of the proceeds of crime."

On this reading, the Explanations added to Section 3 by the 2019 amendment which describe the process or activity connected with proceeds of crime as a "continuing activity" were not new law at all, but merely a clarificatory restatement of what the provision, inclusively worded since 2013, already meant. The Bench drew heavily on the Supreme Court's 2022 decision in Vijay Madanlal Choudhary v. Union of India, which had already held that a person who continues to possess, retain or use proceeds of crime after the criminal activity is notified as a scheduled offence can be prosecuted for money laundering, regardless of when the predicate crime occurred.

The Division Bench was equally clear on the constitutional question. It accepted that a penal law like the PMLA cannot punish acts completed before it existed. However, it clarified that the PMLA punishes the offence of money laundering, not the original scheduled offence. Since Alka Rajvansh continued to possess and use the Vasant Vihar property after 1 July 2005, the offence of money laundering was being committed on the day the Act came into force and continued thereafter. This, the Bench held, was not retrospective application of the law it was addressing ongoing conduct that persisted after the law was enacted.

The Division Bench agreed with one important part of the Single Judge’s reasoning: that Sections 3, 5 and 8 of the PMLA form an integrated scheme, and that a provisional attachment under Section 5 cannot survive if no offence of money laundering exists at all. However, the two benches differed sharply on whether such an offence had actually been committed in this case. The Single Judge took the view that the offence had ended before the PMLA came into force, while the Division Bench held that it was a continuing offence because the tainted property continued to be possessed and used.

On the core issues, the Division Bench held that the Vasant Vihar property purchased with tainted funds itself qualifies as “proceeds of crime” under Section 2(1)(u) of the PMLA. It further ruled that Section 3 is an inclusive provision meaning that mere possession or use of proceeds of crime is sufficient to constitute the offence of money laundering. The court clarified that money laundering is a continuing offence. It does not stand completed the moment tainted money is converted into an asset, but persists for as long as the person continues to hold or use that asset. Applying this to the facts, the Bench held that because the respondent continued to possess and use the property after 1 July 2005, the offence of money laundering was being committed on the very day the PMLA came into force. There was, therefore, no question of retrospective application. Finally, the Court ruled that since money laundering is a distinct offence, Article 20(1) is not violated merely because the punishment under PMLA may be stricter than that for the underlying scheduled offence.

Finding the Single Judge’s judgment unsustainable on all counts and noting that it was delivered without the benefit of the Supreme Court’s later rulings in Vijay Madanlal Choudhary and Pradeep Nirankarnath Sharma the Division Bench set aside the 2016 order entirely. It restored the Enforcement Directorate’s Provisional Attachment Order dated 24 January 2014 and dismissed Mahanivesh’s writ petition.

By reversing the Single Judge’s 2016 order, the Court has made it clear that money laundering is not a one-time event that ends the moment dirty money is used to buy an asset. As long as the tainted property remains in someone’s possession or use, the offence continues. This interpretation effectively means that the “clock” under PMLA does not stop ticking merely because the purchase happened years ago.

For the Enforcement Directorate, this is a significant win. It strengthens their ability to go after assets linked to financial crimes, regardless of when those assets were acquired, as long as they continue to be held by the accused or their associates. At its core, the judgment sends a strong message that converting black money into a house or property does not automatically wash away its illegal origins. The taint travels with the asset and the law can still catch up.

By
Vijay Pal Dalmia, Advocate
Supreme Court of India & Delhi High Court
Email id: vpdalmia@gmail.com   
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AND
Rudraa Sharma,
B.BA, LL.B.
Vivekananda Institute of Professional Studies (VIPS), GGSIPU, Delhi

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