PMLA • Section 2(1)(u) • Composite FIR • Mixed Contracts • Proceeds Quantification

One Transaction Contains Scheduled and Non-Scheduled Allegations: How Should Alleged Proceeds of Crime Be Apportioned?

A single transaction does not necessarily have a single legal character. One contract may contain genuine consideration, alleged scheduled-offence proceeds, unrelated wrongdoing and disputed amounts. The PMLA question is therefore not simply how much money moved, but what identifiable property was actually derived or obtained as a result of criminal activity relating to a scheduled offence.

Current legal review: 18 August 2026

Direct Answer

If a single FIR, contract, invoice stream or business transaction contains both scheduled and non-scheduled allegations, the entire transaction value does not automatically become proceeds of crime merely because one scheduled offence appears somewhere in the case.

The starting point is Section 2(1)(u) PMLA. The prosecution must identify property derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence.

The proper enquiry is therefore:

SCHEDULED CRIMINAL ACTIVITY → PROPERTY CAUSED BY THAT ACTIVITY → VALUE OF THAT PROPERTY → ALLEGED PROCEEDS OF CRIME.

Amounts independently earned through genuine contractual performance, unrelated commercial receipts or value attributable only to non-scheduled wrongdoing should not automatically enlarge the proceeds figure merely because they share the same invoice, company, bank account, accused or FIR.

At the same time, “apportionment” does not mean that an accused can always deduct business expenses and call only accounting profit proceeds of crime. Where the entire receipt itself is alleged and ultimately established to have been obtained as a result of scheduled criminal activity, the statutory analysis can potentially extend to that entire receipt.

The decisive distinction is:

SEGREGATING VALUE THAT WAS NEVER GENERATED BY THE SCHEDULED CRIME IS DIFFERENT FROM DEDUCTING EXPENSES AFTER TAINTED PROPERTY HAS ALREADY BEEN OBTAINED.

Quick Navigation

1. Start with Section 2(1)(u), not the headline FIR amount
2. Vijay Madanlal: crime-connected property is not automatically POC
3. Composite FIR and multiple penal sections
4. Pavana Dibbur and the limits of non-scheduled allegations
5. Four-bucket causal attribution model
6. Mixed invoices
7. Partly genuine contracts
8. Gross receipt vs net profit
9. Mixed bank accounts
10. Double counting and repeated movement
11. Direct and indirect derivation
12. POC quantum vs equivalent-value property
13. Section 24 burden
14. Section 5 and Section 8
15. POC computation audit
16. Document checklist
17. Frequently asked questions

Start With Section 2(1)(u)—Not the Headline FIR Amount

Financial-crime cases generate many large numbers. The FIR may describe victim loss. The charge-sheet may refer to contract value. A forensic report may total bank credits. A company's books may show turnover. An ED complaint may state an alleged POC figure.

These figures perform different functions.

If the causal chain breaks before the “property derived or obtained” stage, the size of the transaction cannot repair that defect by itself.

Vijay Madanlal: Not Every Property Connected With Criminal Activity Is Proceeds of Crime

A foundational proposition from Vijay Madanlal Choudhary v. Union of India is that the authorities cannot simply assume that property recovered or identified in connection with an accused must constitute proceeds of crime.

The property must answer the statutory description: it must be derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence.

That distinction is especially powerful in a composite commercial case.

Consider a business receiving:

• genuine customer payments;
• security deposits;
• loans;
• tax refunds;
• capital contributions;
• payments under the disputed contract;
• an allegedly fraudulent invoice differential.

The fact that all of those amounts appear in the books or account of a person under investigation does not itself establish that every amount was generated by the scheduled criminal activity.

Composite FIR: Separate the Penal Sections Before Calculating the Money

A composite FIR may allege several offences arising from the same factual episode.

The PMLA analysis should begin with an offence-by-offence classification.

The charge-sheet must then be checked again

The FIR is only the beginning of the predicate case. For PMLA analysis, examine whether the scheduled section actually survives investigation.

• Was a scheduled provision removed?
• Was another scheduled provision added?
• Was a closure report accepted?
• Was one allegation quashed?
• What offences were ultimately charge-sheeted?
• What offences did the competent court take cognizance of?

A POC computation based on the FIR should not be treated as immutable if the legal foundation of the predicate case materially changes.

Pavana Dibbur: Why Non-Scheduled Wrongdoing Cannot Simply Be Pulled Into PMLA

Pavana Dibbur v. Directorate of Enforcement is especially important for composite FIR analysis because the Supreme Court confronted multiple FIRs containing multiple penal provisions.

The Court emphasised that existence of a scheduled offence is a condition precedent for the existence of proceeds of crime.

It also rejected a construction of Section 120B IPC that would have effectively turned conspiracy to commit every non-scheduled crime into a PMLA scheduled offence.

The structural lesson extends beyond conspiracy:

THE PMLA SCHEDULE CANNOT BE RENDERED MEANINGLESS AT THE QUANTIFICATION STAGE.

Suppose the predicate case alleges:

• Scheduled Offence A generated ₹5 crore;
• Non-Scheduled Offence B caused another ₹3 crore dispute;
• ₹2 crore represents genuine contractual payment.

The presence of Scheduled Offence A does not automatically answer why the ₹3 crore connected only to Offence B or the genuine ₹2 crore should be treated as property derived from Scheduled Offence A.

The prosecution may have a wider factual theory—for example that the entire arrangement was one integrated scheduled fraud—but that causal theory has to be articulated and supported. It should not simply be presumed from coexistence.

The Four-Bucket Causal Attribution Model

Mixed Invoices: Separate the Genuine Value From the Allegedly Criminal Differential

Invoice cases are particularly susceptible to gross-value inflation.

Illustration

Invoice face value: ₹10 crore.

Independent records establish:

Actual goods/services: ₹8 crore.
Allegedly fictitious/inflated component: ₹2 crore.

If the scheduled offence alleged by the predicate agency concerns only the fabricated ₹2 crore component, an important question arises:

WHY SHOULD THE ₹8 CRORE VALUE OF ACTUAL SUPPLY BE TREATED AS PROPERTY GENERATED BY THAT FRAUD?

Relevant evidence may include:

• quantity supplied;
• rate;
• market price;
• transport documentation;
• stock register;
• GST reporting;
• customer receipt confirmation;
• inspection report;
• payment certificate;
• independent expert measurement.

But change the facts and the result may change.

If the prosecution alleges that the invoice was wholly fictitious and no goods or services were supplied, the entire payment may potentially be alleged as property obtained through the scheduled fraud.

The face value of the invoice therefore does not answer the question. The factual theory does.

A Contract Can Be Partly Genuine—or the Entire Contract Can Be the Alleged Fraud

Mixed-contract cases require lawyers to identify the level at which the criminality allegedly operates.

Model 1 — Genuine Contract, Fraudulent Variation

Original contract legitimately awarded.
Original work performed.
Later variation order allegedly fabricated for ₹5 crore.

The potential POC enquiry may focus on the value generated by the alleged fraudulent variation.

Model 2 — Genuine Contract, Inflated Quantity

Work worth ₹70 crore genuinely performed.
₹10 crore additional quantity allegedly fabricated.

The alleged incremental fraudulent value requires specific quantification.

Model 3 — Entire Contract Allegedly Procured by Scheduled Fraud

Eligibility documents allegedly fabricated.
Tender allegedly obtained through scheduled cheating/corruption.
The prosecution alleges there was no lawful entitlement to receive the contract payments at all.

Here ED may advance the theory that a much larger portion—or on the particular prosecution case, potentially the whole receipt—was obtained as a result of scheduled criminal activity.

Causal Segregation Is Not the Same as a “Net Profit Only” Theory

This distinction is essential.

Section 2(1)(u) asks what property was derived or obtained as a result of the scheduled criminal activity.

It does not define POC as accounting profit.

Therefore:

GROSS TURNOVER IS NOT AUTOMATIC POC.

NET PROFIT IS NOT AUTOMATIC POC EITHER.

THE STATUTORY NEXUS CONTROLS.

One Bank Account Can Contain Lawful, Non-Scheduled and Allegedly Tainted Money

Suppose a company's account contains:

Opening lawful balance: ₹2 crore
Genuine customer receipts: ₹6 crore
Loan disbursement: ₹1 crore
Alleged scheduled-offence receipt: ₹1 crore

Total: ₹10 crore.

The existence of an allegedly tainted ₹1 crore credit does not logically erase the documented provenance of the remaining ₹9 crore.

Build an account-source table

Commingling can make tracing more difficult and later transfers may have relevance under Section 3. But difficulty of tracing should not itself become a rule that every independent source becomes criminally generated property.

Repeated Movement of One Corpus Should Not Automatically Multiply the POC Quantum

Suppose ₹5 crore of alleged proceeds moves:

Account A → Account B → Account C → Account D.

Each transfer is ₹5 crore.

Aggregate banking entries may therefore display ₹15 crore or more of movement.

That does not necessarily establish the generation of three independent ₹5 crore proceeds.

The later movements can be critically relevant to:

• concealment;
• possession;
• use;
• layering;
• Section 3 role attribution.

But the financial analyst should distinguish:

ORIGINAL GENERATION OF PROPERTY
from
LATER MOVEMENT OF THE SAME PROPERTY.

Double-counting audit

• Match UTRs.
• Match value dates.
• Identify same-day pass-through entries.
• Identify reversals.
• Identify own-account transfers.
• Identify circular entries.
• Separate conversion into a new asset from generation of fresh proceeds.

“Directly or Indirectly” Allows Tracing Beyond the First Receipt—but Causation Still Matters

Section 2(1)(u) does not stop at the first account.

Consider:

Scheduled-crime-generated ₹2 crore
↓
Account A
↓
Company B
↓
Asset C

Asset C may potentially represent property indirectly derived from the originally identified proceeds.

Therefore the defence cannot insist that only the original cash or first bank credit can ever matter.

But “directly or indirectly” still requires a traceable factual relationship.

It does not convert the concept into:

ANY PROPERTY BELONGING TO ANY PERSON CONNECTED WITH THE CASE.

Do Not Confuse the Amount of POC With the Property Chosen for Equivalent-Value Action

Two related but separate questions exist.

Suppose the established POC theory is ₹5 crore and the original property is no longer available.

A statutory value-based property question may arise in relation to other assets.

But that does not logically convert the underlying POC from ₹5 crore to ₹25 crore merely because the accused owns ₹25 crore of property.

The first calculation concerns the criminally generated corpus. The second concerns the reach of the property-restraint mechanism.

Section 24: Do Not Let the Reverse Burden Replace the Definition of POC

Section 24 creates a special statutory burden/presumption framework in proceedings relating to proceeds of crime.

But before asking whether the statutory presumption applies, the alleged proceeds must be identified.

The analytical sequence should therefore be:

1. What property does ED call proceeds of crime?
2. What scheduled offence is relied upon?
3. What criminal activity generated the property?
4. What is the transaction-by-transaction causal link?
5. What factual material supports the classification?
6. Only then examine the operation of Section 24 at the relevant stage.

Why POC Quantification Matters Under Sections 5 and 8

Section 5 attachment operates upon a statutory proceeds-of-crime/property theory. An inflated POC computation can therefore affect the number and value of properties selected for provisional attachment.

The Section 8 stage is the natural place for a property owner or noticee to place source evidence, transaction records and other material before the Adjudicating Authority.

A mixed-transaction Section 8 reply should use schedules

Schedule A — ED's alleged POC

Reproduce the exact figure and identify where it appears in the PAO/OA.

Schedule B — Scheduled-offence-linked disputed receipts

Identify the transactions actually alleged to have arisen from the scheduled conduct.

Schedule C — Genuine commercial receipts

Attach invoices, delivery records, GST, contracts and payment evidence.

Schedule D — Non-scheduled allegation amounts

Explain why those amounts do not automatically enlarge the Section 2(1)(u) figure.

Schedule E — Duplicate / recycled amounts

Identify same-corpus movements and reversals.

Schedule F — Property source

Establish the acquisition source of every attached asset.

The POC Computation Audit: Rebuild ED's Figure From Zero

Do not merely write:

“The alleged POC is arbitrary and excessive.”

Demonstrate where the calculation changes.

Twelve questions for the ED computation

1. What exact scheduled offence generated this amount?
2. Which paragraph of the FIR or charge-sheet explains the criminal activity?
3. Is the stated amount victim loss, turnover, contract value or traced property?
4. What amount was actually received?
5. Was any part supported by genuine performance?
6. Is any part attributable only to a non-scheduled allegation?
7. Has the same corpus been counted at more than one layer?
8. Have own-account transfers been included?
9. Have reversals/refunds been removed?
10. Is group-level turnover being attributed identically to every accused?
11. Is the alleged original POC being confused with equivalent-value property?
12. What primary document supports every component of the final number?

Document Checklist for a Mixed Scheduled / Non-Scheduled Transaction

Six Numerical Scenarios

Scenario 1 — Genuine Work + Inflated Billing

Contract receipt: ₹100 crore.
Documented genuine work: ₹92 crore.
Alleged scheduled fraudulent inflation: ₹8 crore.

The defence should require the prosecution to explain why the entire ₹100 crore, rather than the allegedly criminally generated differential, falls within Section 2(1)(u).

Scenario 2 — Entire Payment Obtained Through Fraud

Payment: ₹100 crore.
Prosecution theory: entire contractual entitlement was procured through scheduled fraud.

The prosecution may therefore assert that the entire receipt was property obtained as a result of the scheduled criminal activity. Subsequent expenditure does not automatically produce a net-profit deduction.

Scenario 3 — Composite FIR

₹5 crore generated by Scheduled Offence A.
₹3 crore connected only to alleged Non-Scheduled Offence B.
₹2 crore ordinary commercial revenue.

One ₹10 crore headline FIR figure does not itself explain how all three categories satisfy Section 2(1)(u).

Scenario 4 — Same Corpus Moves Repeatedly

₹5 crore A → B → C → D.

Aggregate transfers = ₹15 crore.

The money trail may strongly support an alleged laundering process, but the analyst must still decide whether ₹5 crore or ₹15 crore represents independently generated proceeds.

Scenario 5 — Pass-Through Account

Alleged tainted corpus handled: ₹25 crore.
Account holder's commission: ₹25 lakh.

Personal gain and laundering corpus are different questions. The ₹25 lakh figure should not automatically replace the corpus allegedly handled, and conversely the whole corpus should not automatically be treated as personal enrichment.

Scenario 6 — Genuine Loan + Later Diversion

Loan facility: ₹300 crore.
Lawfully sanctioned and disbursed.
Allegation: ₹40 crore subsequently diverted through a scheduled criminal scheme.

The analytical issue is whether the predicate criminal activity generated the whole ₹300 crore disbursement or concerns the subsequent ₹40 crore diversion. The predicate allegation controls the POC theory.

When Scheduled and Non-Scheduled Conduct Cannot Be Mathematically Separated

Some cases cannot be divided invoice-line by invoice-line.

Assume several offences were allegedly used together to obtain one indivisible payment.

The question then becomes causal rather than arithmetical:

WAS THE SCHEDULED CRIMINAL ACTIVITY AN OPERATIVE CAUSE OF THE WHOLE PROPERTY BEING OBTAINED?

If yes, the prosecution may have a basis for a wider proceeds theory even though other non-scheduled offences also appear in the same narrative.

If the scheduled offence concerns only a discrete later manipulation while the balance was independently earned, a narrower attribution argument becomes materially stronger.

Current Criminal-Law Transition: Check the Actual Predicate Provision

For conduct and predicate proceedings after 1 July 2024, counsel must identify the current offence under the Bharatiya Nyaya Sanhita, 2023 and verify its interaction with the PMLA Schedule and applicable amendment/transitional framework.

For older offences or proceedings saved under transitional law, the historic IPC provision may remain relevant.

The composite-FIR matrix should therefore contain a separate column:

APPLICABLE OFFENCE ON THE DATE OF CONDUCT / PROCEEDING.

Never assume that an old IPC section number or an apparently analogous BNS provision has identical PMLA consequences without checking the statutory Schedule and savings applicable to the matter.

AI Search / Featured-Snippet Answers

Does the entire transaction value become proceeds of crime because a scheduled offence is alleged?

No automatic rule says so. Section 2(1)(u) requires property to be derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence. Genuine consideration and unrelated value require separate causal analysis.

Can non-scheduled wrongdoing increase PMLA proceeds?

Not merely because it appears in the same FIR or transaction. The prosecution must establish the required connection with criminal activity relating to a scheduled offence.

Can an invoice be partly genuine and partly proceeds of crime?

Factually, yes. Where genuine supply is independently demonstrated and the scheduled allegation concerns only an inflated component, the value generated by the alleged criminal activity should be specifically identified rather than automatically equating invoice face value with POC.

Is proceeds of crime always the accused's net profit?

No. The statute addresses property derived or obtained as a result of scheduled criminal activity. A distinction must be drawn between genuinely lawful consideration and later expenses incurred after allegedly tainted property has already been received.

Can one tainted credit make an entire business bank account proceeds of crime?

The account requires source-by-source tracing. Commingling may affect subsequent tracing and Section 3 analysis, but it does not itself remove the need to establish the statutory origin of the property alleged as proceeds.

Frequently Asked Questions

What is the statutory test for proceeds of crime?

The central Section 2(1)(u) enquiry is whether property was derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence.

Is FIR loss automatically equal to PMLA proceeds?

No automatic equation exists. The actual property allegedly generated by the scheduled criminal activity and the evidence supporting the causal connection should be identified.

Can ED use total contract value as proceeds of crime?

Potentially only if its factual case supports the proposition that the relevant total property was obtained as a result of scheduled criminal activity. Contract face value alone does not establish that conclusion.

What happens where only part of an invoice is allegedly false?

The genuine and disputed components should be tested through quantities, rates, delivery, GST, payment and other contemporaneous records. The alleged scheduled-offence-generated differential becomes a central issue.

What if the whole contract itself was obtained by fraud?

The prosecution may contend that a much wider portion of the contract receipts was generated by the scheduled criminal activity. Whether that theory succeeds depends upon the predicate allegation and evidence.

Can a non-scheduled offence generate PMLA proceeds by itself?

The PMLA definition requires criminal activity relating to a scheduled offence. A separate non-scheduled wrong does not automatically satisfy that requirement merely because it shares an FIR or accused.

Can Section 120B make any non-scheduled offence a PMLA predicate?

Pavana Dibbur rejected such a universal approach. The Supreme Court held in the statutory context before it that conspiracy under Section 120B was relevant as a scheduled offence where the conspiracy concerned an offence otherwise included in Parts A, B or C of the Schedule.

Is POC always net profit?

No. There is no universal net-profit-only formula. The property actually generated by the scheduled criminal activity is the central question.

Can business expenses be deducted from POC?

Not automatically. Expenses incurred after property was allegedly criminally obtained are conceptually different from proving that part of the original receipt was independently lawful consideration.

Does one allegedly tainted deposit contaminate every rupee in the account?

No universal rule of that breadth should be assumed. Complete source and fund-flow analysis is necessary.

Can the same ₹5 crore become ₹15 crore POC because it passed through three accounts?

Repeated transfers may be significant evidence of laundering activity, but movement of one corpus should be distinguished from generation of fresh independent proceeds.

What does “directly or indirectly” mean?

It permits examination beyond the initial property to assets or value subsequently derived through a traceable chain. It does not dispense with the scheduled-crime causal nexus.

Is equivalent-value attachment the same as saying another asset is the original POC?

No. Original proceeds quantification and the statutory reach of value-based attachment are related but distinct questions.

Does Section 24 allow ED to presume total turnover is proceeds?

Section 24 creates a special burden framework concerning proceeds of crime; it does not remove the need to identify the property asserted to constitute such proceeds and the relevant statutory foundation.

What is the best document to challenge an inflated POC figure?

A transaction-level Proceeds-of-Crime Reconciliation Statement supported by predicate papers, contracts, invoices, delivery records, bank statements, GST/accounting material and source documents is often the most useful starting tool.

What is the strongest question to ask about ED's POC calculation?

“For every amount included in the alleged POC figure, identify the scheduled criminal activity said to have generated that amount and the primary evidence establishing the causal connection.”

Official Legal Sources

• India Code — Prevention of Money-Laundering Act, 2002
• Supreme Court of India — Pavana Dibbur v. Directorate of Enforcement, 2023 INSC 1029
• Supreme Court of India

Related Detailed Research on AdvocateAnkitKumarSingh.in

• Gross Transaction Value vs Real Illegal Gain under PMLA
• Tracing Legitimate and Allegedly Tainted Funds in One Account under PMLA
• Section 24 PMLA Presumption: What Must ED Prove Before the Reverse Burden Applies?
• Proceeds of Crime under PMLA 2026

Professional Consultation for PMLA, ED and Proceeds-of-Crime Quantification

Advocate Ankit Kumar Singh

Supreme Court of India | Patna High Court | Allahabad High Court at Prayagraj | Jharkhand High Court at Ranchi | Calcutta High Court | Delhi High Court and Delhi Courts/Tribunals | Matters concerning Bhopal, Madhya Pradesh | Multiple District Courts

Subject to the facts, jurisdiction and accepted professional engagement, professional analysis may include:

• scheduled vs non-scheduled offence classification;
• Section 2(1)(u) analysis;
• POC quantification;
• composite FIR audit;
• invoice and contract reconciliation;
• genuine commercial-receipt segregation;
• money-trail and bank analysis;
• double-counting objections;
• Section 3 ingredient analysis;
• Section 5 attachment;
• Section 8 adjudication;
• Section 24 issues;
• Appellate Tribunal and High Court remedies where maintainable.

Phone: 8294431232
Email: ankitsingh.legum@gmail.com
Website: advocateankitkumarsingh.in

Subject to accepted professional engagement, territorial jurisdiction, applicable procedure and local-counsel coordination where required.

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Legal Disclaimer: This is a general legal research and awareness publication and is not case-specific legal advice. “Apportionment” and the four-bucket model are forensic and litigation-analysis tools, not statutory mathematical formulas. The legally relevant proceeds figure depends upon the exact scheduled offence, predicate charge-sheet, causal theory, contractual structure, invoice and performance evidence, money trail, applicable statutory version, attachment theory and current binding precedent. Non-scheduled wrongdoing may remain criminal, civilly actionable, regulatory or otherwise unlawful even where it does not independently satisfy the PMLA proceeds-of-crime requirement. No result concerning attachment, de-freezing, bail, discharge, quashing, trial or confiscation is guaranteed.