Money Laundering : Coal Allocation letter constitutes "property" and “Proceeds of Crime”
Delhi High Court Reinstates Provisional Attachment Order Against Hi-Tech Mercantile in Money Laundering Case. Court clarifies allocation of coal block as 'property' under PMLA, paves way for Enforcement Directorate's action against M/s Hi-Tech Mercantile India Pvt Ltd.
In a significant judgment, the Delhi High Court overturned a previous single judge's decision, reinstating the Provisional Attachment Order (PAO) against M/s Hi-Tech Mercantile India Pvt Ltd. in a high-profile money laundering case involving fraudulent coal block allocations. This landmark ruling affirms the Directorate of Enforcement's (ED) authority to attach assets under the Prevention of Money Laundering Act, 2002 (PMLA), highlighting the allocation of coal blocks through misrepresentation as constituting 'property' and the resultant financial gains as 'proceeds of crime.'
The division bench, comprising Justices Anil Kshetarpal and Harish Vaidyanathan Shankar, delivered the judgment on October 17, 2025, in response to appeals filed by the ED challenging the single judge's order that had quashed the PAO. The court held that the allocation letter, obtained through misrepresentation, indeed constitutes 'property' under Section 2(1)(v) of the PMLA, and that illegal financial gains from this allocation qualify as 'proceeds of crime' under Section 2(1)(u).
The case originates from the allocation of the Chotia Coal Block to M/s Prakash Industries Limited, which was declared illegal by the Supreme Court in Manohar Lal Sharma v. Union of India. The ED initiated proceedings under the PMLA after the Central Bureau of Investigation (CBI) filed two chargesheets against the company, citing fraudulent activities and misrepresentation in obtaining the coal block.
The High Court's recent decision underscores the continuing nature of the offence of money laundering, as defined under Section 3 of the PMLA, and allows the ED to attach assets equivalent to the value of coal extracted, approximately Rs. 951.77 crores. The court emphasized that the offence of money laundering persists as long as the proceeds of crime are possessed, used, or projected as untainted, rejecting the notion of an artificial cut-off date for the Directorate’s jurisdiction.
This ruling not only validates the ED's actions but also clarifies the interpretation of 'property' and 'proceeds of crime' under the PMLA, providing a precedent for future cases involving economic offences. The decision highlights the judiciary's role in supporting legislative intent to combat money laundering and ensure accountability for economic offences.
Bottom Line:
Allocation of coal block through misrepresentation constitutes "property" under Section 2(1)(v) of PMLA - Illegal financial gains derived from the allocation qualify as "proceeds of crime" under Section 2(1)(u) of PMLA - Continued possession and utilization of such proceeds establish the offence of money laundering under Section 3 of the PMLA.
Statutory provision(s): Prevention of Money Laundering Act, 2002 Sections 2(1)(v), 2(1)(u), 3, 5
