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Delhi High Court Expands ED’s Reach by Declaring Fraudulent Coal Allocations as “Property”

Delhi High Court Rules Fraudulent Coal Block Allocations as Property, Strengthening ED's Powers.

In a significant judgment, the Delhi High Court has ruled that coal block allocations obtained through deceit or false representation constitute "property" under the Prevention of Money Laundering Act (PMLA). This decision, delivered by a division bench of Justices Anil Kshetarpal and Harish Vaidyanathan Shankar, overturns a 2022 single-judge ruling that had previously deemed allocation letters as lacking the status of property. The verdict strengthens the Enforcement Directorate’s (ED) authority to treat such allocations and their resulting profits as proceeds of crime.

The ruling stems from the Chotia coal block case, where Prakash Industries Limited (PIL) secured an allocation in 2003. The ED alleged that PIL used false claims to obtain the allocation and subsequently profited by diverting extracted coal. In 2021, the agency attached some of PIL’s assets, suspecting that earnings from coal sales were funneled into immovable properties. The court clarified that an allocation granting rights to a mining lease and coal extraction holds measurable economic value, qualifying as "property" under the PMLA if acquired dishonestly.

The bench emphasized that profits or gains from such illicitly obtained rights are classified as "proceeds of crime," empowering the ED to attach or value such assets. This interpretation broadens the scope of "property" under the PMLA, encompassing both tangible assets and rights with financial value. Legal experts view the judgment as a pivotal step in enhancing the ED’s ability to investigate fraudulent allotments in natural resource and infrastructure cases.

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The ruling sets a precedent for addressing similar cases, reinforcing the legal framework to combat money laundering through fraudulent allocations. It underscores the judiciary’s commitment to ensuring accountability in the allocation of valuable public resources.

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