Profit from bribe money invested in shares is proceeds of crime, says Delhi High Court

The Delhi High Court has clarified that profits earned from bribe money after investing it in the share market will still be treated as proceeds of crime under the Prevention of Money Laundering Act (PMLA). While this interpretation may appear obvious, the ruling settles the legal position on whether appreciation in value of illegally obtained funds changes their character. The court said the illegal origin of the money continues to “taint” the gains, and therefore the offence of money laundering persists.

A division bench of Justice Anil Kshetarpal and Justice Harish Vaidyanathan Shankar observed that money laundering is a continuing offence , covering not just the initial acquisition of illicit funds but also their subsequent movement, layering through transactions, and conversion into seemingly legitimate assets.

“Appreciation in value does not cleanse or purify the tainted origin, since the augmented value is inextricably and indirectly derived from the original illicit source,” the bench noted.

The judgment was delivered in the case arising out of the Fatehpur Coal Block allocation, involving Prakash Industries Limited (PIL). The Enforcement Directorate (ED) had provisionally attached properties worth ₹122.74 crore, claiming the company benefited from misrepresentation that allegedly led to an artificial rise in its share prices, followed by preferential share sales.

A single judge had earlier questioned ED’s jurisdiction and set aside the attachment. However, the division bench reversed that decision, stating that the provisional attachment is only an interim measure and does not violate principles of natural justice. It added that the commercial advantage gained through the allocation of the coal block qualifies as intangible property and falls within the definition of proceeds of crime.

The ruling reinforces that any profit, growth or increase in value of money obtained illegally, irrespective of the nature of investment, remains subject to PMLA action and attachment.