Entire Project Does Not Become 'Proceeds Of Crime' Under PMLA Merely Because Of A Tainted Investment: J&K&L High Court

The Jammu and Kashmir and Ladakh High Court clarified that a property does not become “proceeds of crime” merely because funds tainted under PMLA were invested in its development.A bench of Justice Rahul Bharti, while deciding a petition concerning the Golden Palms real estate project in Jaipur, observed that only the tainted money itself or the property representative of that amount can be attached under PMLA, not the entire project developed for a lawful object under a valid contract.The case arose out of a development agreement between the petitioner company and M/s ABEL entered into in 2013 for construction of the Golden Palms project. In 2018, the Enforcement Directorate (ED) alleged that M/s ABEL had invested proceeds of crime in the project, leading to attachment of part of the superstructure. The ED's own investigation had quantified the tainted investment at ₹47.16 crore.The court noted that this computation by the ED was itself “an acknowledgment” that the Golden Palms project as a whole was not a proceeds of crime product from the perspective of the petitioner or the prospective buyers. “If the contractual partner's investment is subsequently traced to proceeds of crime, the construction created from that investment is not per se illegal and attachable under PMLA,” the court held.Drawing an analogy, the court explained that if the same amount had been parked in a bank account, the ED would attach the account or the money — not the bank building itself. “The situation here is no different,” the judge remarked.The court further noted that the petitioner had voluntarily paid ₹47.16 crore, the amount corresponding to the alleged proceeds of crime, through a demand draft to the ED. This payment, Justice Bharti ruled, “purged the Golden Palms project of the taint of proceeds of crime,” and the attached portion of the project must now be replaced by the seized sum.Consequently, the court dismissed as “misconceived” the ED's application seeking vacation of an earlier order directing payment of the quantified amount. It directed the Deputy Director of ED, Jaipur, to place the ₹47.16 crore before the Special PMLA Court, Jaipur, as the attached property subject to confiscation.The court made it clear that with this substitution, the Golden Palms project — in its current or future form “shall be free from the effects of PMLA” in reference to M/s ABEL's tainted investment.The order underscores a key principle: mere infusion of tainted funds does not render an entire property as proceeds of crime, and attachment under PMLA must correspond strictly to the tainted value.Case Title: M/s Pee Bee Associates Narwal v. UT of J&K & Ors, 2025Click Here To Read/Download Order

Entire Project Does Not Become 'Proceeds Of Crime' Under PMLA Merely Because Of A Tainted Investment: J&K&L High Court

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Entire Project Does Not Become 'Proceeds Of Crime' Under PMLA Merely Because Of A Tainted Investment: J&K&L High Court

Aleem Syeed

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