Ancestral or inherited properties can also be attached under the Prevention of Money Laundering Act, 2002
Feb 23, 2026
Synopsis
Ancestral properties are not exempt from attachment under the Prevention of Money Laundering Act, 2002, the Delhi High Court has ruled. The court clarified that the law doesn't create exceptions for inherited assets, stating they can be seized if they represent the equivalent value of crime proceeds. This decision impacts family-owned properties in money laundering cases.
On February 16, 2026, the Delhi High Court ruled in an interim judgement that ancestral or inherited property isn’t exempt from being attached under the Prevention of Money Laundering Act, 2002 (PMLA). The high court said that the law doesn’t make any exceptions for ancestral or inherited properties, meaning they can be attached just like any other assets.
Delhi High Court also said: “The argument that ancestral property cannot be attached unless purchased from illicit funds, is misconceived and contrary to the scheme of PMLA.”
What was the dispute about?
The Enforcement Directorate (ED) has an ongoing money laundering case against this property owner. The ED informed the court that he had taken all his crime proceeds out of India and they are all overseas. So, ED attached this property that he co-owned with his father via a provisional attachment order on July 28, 2017.
When he challenged this provisional attachment order, the PMLA appellate tribunal confirmed the Provisional Attachment of his property on November 27, 2025, based on the July 28, 2017 order from ED. He then filed an appeal in Delhi High Court because he was unhappy with the tribunal’s decision.
The property owner’s counsel told the Delhi High Court that their property in Pitam Pura, Delhi was never bought by him. It was actually purchased by his father using his own income back in 1991, in both their names. His counsel also said that the property has been with their family since 1991 and he never contributed any money towards buying it.
His counsel argued before the high court that the property shouldn’t have been attached as “value thereof” in terms of Section 2(1) (u) of PMLA, 2002, since he actually never bought it yourself.
His lawyer argued: “His right in the property has flown through his deceased father and thus, it was wholly impermissible to rely upon Section 2(1) (u) of PMLA to attach the said property.”
The lawyer also cited a Karnataka High Court judgement and said that only tainted properties, which are obtained directly or indirectly as a result of criminal activity relating to scheduled offence, can be termed as “proceeds of crime”, which isn’t the case here, as the property wasn’t bought with his money but was instead purchased by his father with his own funds.
ED’s special counsel submitted before the high court that the proceeds of crime acquired by him in the form of foreign exchange, had been remitted abroad and were not available and therefore the property belonging to him was attached as “equivalent value” by an order passed under Section 5 of PMLA read with Section 2(1) (u) of PMLA and such action is within statutory framework.
Delhi High Judgement
The main argument put forward on behalf of the appellant is that the property wasn’t acquired or purchased from criminal proceeds and is actually ancestral, so it shouldn’t have been attached.
The Delhi High Court said that the competent authority under Section 5 of the PMLA is empowered to provisionally attach property suspected to be proceeds of crime.
The Supreme Court in the case of Vijay Madanlal Choudhary and Ors. Vs. Union of India and Ors. (2022 SCC OnLine SC 929), held that the crime of money laundering isn’t linked to the date on which the scheduled offence/predicate offence took place. Instead, the key date is when the individual engages in activities related to those proceeds of crime.
Section 2(1)(u) of PMLA is being reproduced below for ready reference:- “(u) “proceeds of crime” means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property [or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad.”
While interpreting the word “value thereof”, the Supreme Court in the case of Vijay Madanlal Choudhary case, clarified that the definition of “proceeds of crime” is wide enough to not only refer to the property derived or obtained as a result of criminal activity relating to a scheduled offence, but also of the value of any such property.
If a property is owned or held outside the country, it’s still possible to take action on a property of equivalent value that’s either domestically or internationally.
Delhi High Court precedent exists
In the case of Prakash Industries Ltd. Vs. Directorate of Enforcement (2022) SCC OnLine Del. 2087, the Delhi High Court ruled that properties before the Act came into force might not be entirely safe from action under the Act.
In Prakash Industries (supra), Delhi High Court reiterated the observations made in the Deputy Director, Directorate of Enforcement of Delhi Vs. Axis Bank & Ors. (2019) SCC Online Del 7854 case that the expression “proceeds of crime” envisages both tainted property as well as untainted properties. It’s allowed to take action against the latter as long as it’s attached as equivalent to the “value of any such property” or “property equivalent in value held within the country or abroad”, provided the actual tainted property cannot be traced or found.
Delhi High Court thus said that where the respondent (ED) is unable to discover the tainted property, it may proceed to attach even an untainted property equivalent in value.
Delhi High Court order
The Delhi High Court said that the Adjudicating Authority, upon appreciation of evidence, recorded a finding that the property represents value equivalent to proceeds of crime generated from scheduled offences.
Delhi High Court said: “The plea of the property being ancestral does not ipso facto grants immunity from attachment under the PMLA. The statute does not carve out an exception for ancestral or inherited properties, and thus, they are not immune from attachment.”
The Delhi High Court also said that the argument that ancestral property cannot be attached unless purchased from illicit funds, is misconceived and contrary to the scheme of PMLA.
Order:
Delhi High Court found no perversity or illegality in the findings of the Adjudicating Authority. The Appellate Tribunal, while upholding the attachment, has exercised jurisdiction vested in it under the statute and the impugned order reflects due application of mind, adherence to statutory requirements and consideration of the material on record.
In view of the foregoing, the present appeal is dismissed along with the pending application(s), if any.
[The Economic Times]
