Inherited, ancestral property can be attached under PMLA: Delhi HC

Ruling clarifies that assets can be seized if illicit funds are sent abroad, effectively ending the immunity previously assumed for family-held assets

The Delhi High Court has said that ancestral or inherited property is not automatically protected from attachment under the money laundering law, clarifying that the statute does not provide an exception for such assets if they represent the “equivalent value” of alleged proceeds of crime.auti

 

What “equivalent value” really means

“Proceeds of crime” includes not only the tainted property itself but also property of equivalent value, according to Section 2(1)(u) of the Prevention of Money Laundering Act, 2002 (PMLA).

 

The Enforcement Directorate (ED) can attach an accused person’s domestic property that matches the value of illicit funds sent abroad or is untraceable, said Nikhil Varshney, partner at Cyril Amarchand Mangaldas.

 

 This position was upheld by the Supreme Court in Vijay Madanlal Choudhary v. Union of India and reaffirmed by the Delhi High Court in the Arun Suri case.

 

PMLA Sections 2(1)(u) and 5 empower the ED to proceed against domestic assets when actual tainted assets are untraceable or held overseas, said Tushar Agarwal, founder and managing partner at C.L.A.P. Juris. This ensures that shifting funds abroad does not frustrate the law’s objective.

 

Rohan Dakshini, managing partner at Rashmikant and Partners, clarifies that attachment of “equivalent value” is triggered when proceeds are untraceable or taken outside India. In such cases, property in India can be attached even if it was acquired before the alleged offence.

 

Madhav A Chitale, partner at Chitale & Chitale Partners, said the ruling reinforces that once the equivalent value clause is invoked, the source of funds for the attached property becomes irrelevant.

 

Impact on co-owners and heirs

The judgment is significant for families holding property jointly. 

Varshney said “innocent co-owners or heirs” can appear before the Adjudicating Authority to show their share was legitimately acquired and unconnected to any alleged crime. They can appeal to the Appellate Tribunal and then to the High Court under Section 42 if necessary.

 

Agarwal noted that affected parties may also seek restoration under Section 8(8) if they can establish bona fide interest and lack of involvement.

 

However, B Shravanth Shanker, managing partner at B Shanker Advocates LLP, cautioned that proving innocence alone may not suffice; one must also demonstrate that the asset should not be treated as equivalent value.

 

Himesh Thakur, associate partner at PSL Advocates & Solicitors, emphasised that attachment must be backed by a reasoned finding, but lawful ancestral title is not an automatic bar.

 

Estate planning under scrutiny

 

Experts say the ruling sends a clear message for estate planning.

 

Shravanth Shanker noted that the court rejected the idea that ancestral property cannot be attached unless purchased with illicit funds. Dakshini adds that the ruling is especially relevant where there is potential exposure to money laundering allegations.

 

Chitale said that estate planning may need to shift from simple joint holding to more defensive structuring, as joint ownership can expose family wealth to enforcement action.