Bombay High Court Finds No Basis to Continue Attachment of Properties Where Transactions Were Not Proceeds of Crime

The Bombay High Court considered cross-appeals against an Appellate Tribunal order continuing provisional attachment of two properties to the extent of Rs. 25 crore in proceedings involving the Directorate of Enforcement. The Court examined whether the transactions relied upon by the ED could be treated as proceeds of crime under the Prevention of Money-Laundering Act, 2002 (PMLA). On the material before it, the Court found that the relevant transactions were legal banking/business transactions and were not shown to constitute proceeds of crime. It therefore found no basis to continue attachment of the two properties. The appeal by Avinash Bhosale and others was allowed, while the ED's appeal was dismissed. (Paras 1–24)

Key Proposition: The continuation of attachment under the PMLA cannot be sustained where the transactions relied upon by the enforcement authority are not shown, on the material before the Court, to constitute proceeds of crime.

• PMLA – Section 2(u) – Proceeds of crime – Whether property arising from the transactions examined by the Court could be treated as proceeds of crime – Held, no, on the material placed before the Court. (Paras 6–8, 22–24)
• PMLA – Section 3 – Money laundering – Connection with proceeds of crime – Whether the challenged transactions established such a connection – Held, no sufficient basis was shown. (Paras 7–8, 22–24)
• SAFEMA – Provisional attachment – Whether attachment could continue after the underlying transactions were found not to constitute proceeds of crime – Held, no. (Paras 1–2, 23–24)

Background / Synopsis :

• The ED's original complaint alleged proceeds of crime of about Rs. 3,983 crore originating from YES Bank and involving financing/investments connected with DHFL. (Para 5)
• The Appellate Tribunal's order dated 1 April 2026 continued provisional attachment to the extent of Rs. 25 crore over specified Pune and Nagpur properties. (Paras 1–2)
• Criminal Appeal No. 478 of 2026 was filed by Avinash Bhosale and others; Criminal Appeal No. 816 of 2026 was filed by the ED against the release of the attached properties. (Para 3)
• The Court examined the alleged financial links and the material relied upon to characterize the transactions as proceeds of crime. (Paras 11–22)

Issues For Consideration :

• Whether the properties could continue to remain attached on the basis that the underlying transactions represented proceeds of crime.
• Whether the Appellate Tribunal's continuation of attachment was sustainable on the material before it.

Submissions Of Parties :

Appellants in Criminal Appeal No. 478 of 2026:

• The transactions relied upon by the ED were legitimate banking/business transactions and could not be linked to proceeds of crime.
• The alleged amounts and dates did not establish the necessary connection between the transactions and the alleged scheduled offence.
• The attachment of the properties therefore lacked a sufficient legal and factual basis.

Directorate of Enforcement:

• The ED challenged the release of the attached properties and contended that the transactions had sufficient linkage with the alleged proceeds of crime.
• The ED relied on the investigation material and the alleged financial transactions forming part of the money-laundering case.

Court's Observations & Analysis :

Re: Meaning and scope of proceeds of crime

• The Court reproduced Section 2(u) PMLA and noted that proceeds of crime cover property derived or obtained from a scheduled offence, including property obtained directly or indirectly as a result of criminal activity relating to a scheduled offence. (Paras 6–8)
• The Court also reproduced Section 3 PMLA concerning the offence of money laundering and its connection with processes or activities involving proceeds of crime. (Para 7)
• On the facts, the Court examined the alleged proceeds and the timing and nature of the transactions relied upon by the ED. (Paras 11–22)

Re: Continuation of attachment

• The Court found the arguments advanced against the impugned order to be without substance and held that the Appellate Tribunal had considered the parties' submissions and analysed the matter properly. (Para 22)
• At the same time, the Court found no basis for continuing attachment of the two properties because it had concluded that the relevant transactions were legal transactions and could not be construed as proceeds of crime. (Paras 23–24)
• Held: There was no basis to continue attachment of the two properties. (Paras 23–24)

Notable Observations: Notable Observations: None.

Decision & Directions :

• Criminal Appeal No. 478 of 2026 was allowed in terms of prayer clause (a).
• Criminal Appeal No. 816 of 2026 filed by the ED was dismissed.
• The Court found no basis for continuation of attachment of the two properties because the transactions were not proceeds of crime.
• Separate costs direction: Not stated in the operative portion.
• Legal Provisions Discussed & Precedents Cited :
• PMLA, 2002 – Section 2(u): Defines 'proceeds of crime' and links it to property derived or obtained from a scheduled offence or criminal activity relating to a scheduled offence.
• PMLA, 2002 – Section 3: Defines the offence of money laundering and covers processes or activities connected with proceeds of crime.
• PMLA, 2002 – Section 2(1)(y): Definition of 'scheduled offence' was referred to in the judgment.
• SAFEMA, 1976: The appeals arose from the Appellate Tribunal proceedings under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976.
• None separately discussed by case name in the judgment