The Enforcement Directorate can attach legitimate assets of equivalent value available within the country against properties created abroad through criminal activities as part of a money laundering investigation and in economic interest of the country, the Madras High Court has ruled.

The court was hearing a petition filed by three Chennai-based companies which argued that they cannot be held "vicariously liable" for alleged offences committed by individuals and shareholders linked to them and that their properties attached by the federal probe agency were purchased "long before" an alleged bank loan fraud crime linked to them was committed.

A division bench of justices S M Subramaniam and V Sivagnanam issued an order on Tuesday saying it was "amply clear" under section 2(1)(u) of the Prevention of Money Laundering Act (PMLA) that the value of any such property or the property equivalent in value "held within the country or abroad" is also to be construed as "proceeds of crime".

Therefore, the circumstances indicated under the said section are that any property derived by a person, in result of criminal activity relating to a scheduled offence, can be treated as proceeds of crime, it said.

"The value of any such property or if such property is taken or held outside the country, then the property equivalent in value held within the country can be construed as proceeds of crime.

"Therefore, some properties, in result of criminal activity, is held outside the country, then the property equivalent in value held within the country can be attached by the Enforcement Directorate," the high court said in its 14-page order.

It said "the very object of the provision would be to protect the economic interest of the country." The court said that the properties attached within the country "need not be" the properties purchased from and out of the proceeds of crime or criminal activity.

"The very purpose of the provision is to ensure that the property acquired in result of criminal activity held outside India," it said.

Even properties purchased prior to the scheduled offence under PMLA, the court ruled, can be attached if the criminal activity relating to scheduled offence is taken or held outside the country.

The court also rejected the claim of the companies that they cannot be held "vicariously liable" for the acts of their promoters or shareholders under section 70 of the anti-money laundering law even as it asked them to approach the Appellate Tribunal of PMLA and "establish their defence on merits and on documents and evidences".

The court dismissed their petition but added that the trial in the case will be "uninfluenced" by these observations.

The ED informed the court that the funds (bank loan amount) were transacted through various companies and money laundering was identified by it in this 2018 registered case, filed after taking cognisance of a CBI FIR.

Except for the headline, this story has not been edited by The Telegraph Online staff and has been published from a syndicated feed.