Disproportionate Assets Case Against a Public Servant

What is a disproportionate assets case?

After the 2018 amendment, section 13(1)(b) of the Prevention of Corruption Act 1988 makes it criminal misconduct for a public servant to intentionally enrich himself illicitly during the period of his office. Explanation 1 supplies the presumption that makes these cases work: a person is presumed to have intentionally enriched himself illicitly if he, or anyone on his behalf, is in possession of or has at any time during his office been in possession of pecuniary resources or property disproportionate to his known sources of income, which he cannot satisfactorily account for. Explanation 2 defines 'known sources of income' as income received from any lawful sources.

The punishment under section 13(2) is imprisonment of not less than four years, which may extend to ten years, and fine. The old provision, section 13(1)(e), covered the same ground before 2018 and still applies to check periods before the amendment, with an older definition of known sources that also required the income to have been intimated under the rules applicable to the public servant.

Unlike a bribery case, a disproportionate assets case does not need proof of any particular corrupt act. It is enough to show that the wealth cannot be explained by lawful income. That is why these cases are often brought where the agency suspects corruption but cannot pin it to a transaction, and why the defence is so heavily about numbers.

How is disproportion calculated?

The agency chooses a check period, usually a stretch of years within the officer's service, often ending around the date of a search or complaint. It then works out four figures: the value of assets held by the officer and family at the start of the period (A), the value at the end (B), the income from known lawful sources during the period (I), and the expenditure during the period (E).

The assets acquired during the period are B minus A. Add the expenditure, because money spent had to come from somewhere, and you get the total outflow, (B minus A) plus E. Subtract income, and the result is the disproportionate assets: (B minus A plus E) minus I. The agency usually also states it as a percentage of income during the period. A figure of 40 or 60 per cent will be pleaded as clearly disproportionate.

Every one of these four figures is open to challenge. The starting assets are often understated because old records are poor, the closing assets overstated by valuing property at market rates, income understated by leaving out a spouse's earnings or family gifts, and expenditure inflated by estimates. A change of a few lakh in each head can turn a large disproportion into a small one.

The four heads of a DA calculation, and where disputes arise

This table shows what investigators usually include under each head and the points the defence most often contests.

What counts as a known source of income?

Under Explanation 2, any lawful source. Salary and allowances, interest, dividends, rent, pension, sale proceeds of property, gifts from relatives, loans from banks or relatives, inheritance and agricultural income are all lawful sources if they are genuine and can be proved. The question is not whether income was taxed or declared in the officer's service records, but whether it actually came from a lawful source. The 2018 amendment dropped the old requirement that the income must have been intimated under the applicable service rules.

That does not make declarations irrelevant. An officer who filed annual property returns under the conduct rules, reported a gift or a property purchase when it happened, and showed the income in tax returns has contemporaneous proof. An officer who first mentions a large cash gift from an uncle after the FIR is registered has only his word, and courts treat explanations raised late with suspicion. Courts have also said that showing income in tax returns does not by itself prove that it came from a lawful source, especially where it was declared for the first time after an investigation began.

For check periods before the 2018 amendment, the older definition can still apply, and the question of whether income had been intimated may come up. Your advocate will need to work out which version governs each part of the check period.

How does a DA case start?

Most cases begin with source information or a complaint, sometimes from a colleague, a contractor or a family member in a dispute. Some arise from a trap case, where the search after the arrest finds cash or property documents and a separate DA case follows. Others come from data: income tax information, property registration records, or a reference from the Lokpal, which can ask the CBI to conduct a preliminary enquiry into complaints against public servants.

The CBI usually starts with a confidential preliminary enquiry, collecting property and bank records without the officer's knowledge. If it finds a prima facie disproportion, it registers a regular case and often searches the officer's home, office and lockers the same day. The search is where most closing assets are listed, and the inventory made then becomes the basis of the case. Section 17A, which needs prior approval before investigating decisions taken in official functions, is generally understood not to apply to a DA case, because the case concerns wealth rather than any official decision.

Who investigates DA cases in Delhi NCR?

For employees of the central government, central public sector undertakings and public sector banks, the CBI is the usual agency. Employees of the Delhi government are generally investigated by the Anti-Corruption Branch of the Delhi government, subject to the jurisdictional limits that have been the subject of litigation. Employees of the Uttar Pradesh government, including those posted in Noida and Ghaziabad, are investigated by the UP Vigilance Establishment and other state bodies. Haryana has its own anti-corruption bureau for Gurugram and Faridabad.

The agency matters for practical reasons: the court where the case will be tried, the authority that grants sanction, and the manuals and procedures the investigators follow. CBI cases in Delhi go to the special CBI courts at Rouse Avenue. Cases from the Delhi ACB also go to special judges at Rouse Avenue. UP cases go to the special anti-corruption courts designated for that region.

Are your wife's and children's assets counted?

Often, yes. Explanation 1 covers assets held by the public servant 'or any person on his behalf', and agencies routinely include property in the names of a spouse, children and sometimes parents or in-laws, on the theory that they were bought with the officer's money. But inclusion is not automatic. If a family member has independent income, such as a salary, a business, a profession or a pension, their assets bought from that income are theirs, and their income must be counted alongside if their assets are included.

Family members who hold assets for the officer can themselves be prosecuted as abettors. That is why the spouse's records matter so much: tax returns, salary slips, business books and bank statements that show their own earnings. Where property is in the name of a relative who has no apparent income, the agency will treat it as benami, and our post on benami property claims explains how benami arrangements are assessed. A point Advocate B.K. Singh makes early in these cases is that the family's records should be collected together, because the answer for one person's asset often lies in another person's bank statement.

Building your explanation: the asset-by-asset method

This is the method that works in most DA defences. It takes weeks, and it should start long before the chargesheet.

1. Get the agency's figures

   If an FIR is registered, it usually states the check period and the four figures. After the chargesheet, you receive the statements and documents, including the asset and income tables. Before that, work from the FIR and what was seized in the search.

2. Prepare your own four tables

   Make separate tables for assets at the start, assets at the end, income and expenditure, for each family member whose assets are included. List every item with its date, amount, source and supporting document.

3. Match each asset to its money

   For every asset acquired during the check period, trace where the money came from: which bank account, which loan, which gift, which sale. An asset you can link to a lawful credit in a bank statement is the strongest kind of answer.

4. Correct the valuations

   Replace estimated values with actual acquisition cost from sale deeds, invoices and receipts. Challenge construction cost estimates with bills and your own valuer's report where the agency's valuer has overstated them.

5. Recompute the disproportion

   Apply the same formula to your corrected figures. Show the difference item by item, so that a court can see exactly where the agency went wrong.

6. Put it in writing early

   Give the investigating officer a written explanation with documents when you are asked, or offer one. An explanation on record before the chargesheet carries far more weight than one first produced at trial.

This work is usually done with a chartered accountant. The advocate's job is to decide which documents can be proved in court, which explanations are legally sound, and how the corrected figures will be presented at the stages that follow.

Gifts, loans, agricultural income and cash: what holds up

Gifts from close relatives are lawful income, but they need proof that the giver had the money and that it actually passed. A cheque or bank transfer from the parent's account, a gift deed, the parent's own tax return or sale deed showing where the money came from, and an entry in the officer's property return together make a strong explanation. A claimed cash gift of several lakhs from a relative who had no visible means is weak.

Loans from banks are easy to prove from the sanction letter and statements. Loans from relatives and friends need the same proof as gifts, plus evidence of repayment if they were repaid. Agricultural income is a frequent explanation and is often disbelieved, because it is easy to claim and hard to verify. Khasra and khatauni records, crop details, sale receipts from mandis, and bank credits help; a round figure claimed every year without records does not.

Cash found in a search is the hardest asset to explain. Withdrawals from bank accounts shortly before, proceeds of a recent sale, or a family occasion can account for some of it, but only if the bank record supports the timing and amount. Courts have in some cases given an officer the benefit of a small disproportion, of around ten per cent, as within a reasonable margin, but there is no fixed safe harbour, and an officer should never rely on it.

Valuation disputes: cost, not market value

Assets should be valued at what the officer actually paid, not at what they are worth at the end of the check period. A flat bought for ₹30 lakh in 2015 does not become disproportionate wealth because it would sell for ₹80 lakh today. Investigators sometimes use circle rates, current market estimates or valuers' reports in place of the price on the sale deed, and each of these needs to be challenged where it inflates the figure.

Construction is a special problem. Where an officer has built or renovated a house, the agency usually gets an engineer to estimate the cost from the building as it stands. These estimates often assume rates and specifications higher than those actually used. Bills for cement, steel and labour, contractor agreements, bank payments to suppliers and your own engineer's report can bring the figure down substantially. Jewellery is valued by weight and purity; check whether old family jewellery or stridhan has been counted as a new acquisition.

Sanction for prosecution under section 19

A court cannot take cognizance of a Prevention of Corruption Act offence against a public servant without the previous sanction of the authority competent to remove him from office, under section 19. The sanctioning authority must apply its mind to the material, and a sanction granted mechanically, without seeing the evidence or the officer's explanation, can be challenged. Section 19(3) limits the effect of defects in sanction: an error or irregularity in sanction does not overturn a finding unless it has caused a failure of justice, so the challenge should be raised early.

The 2018 amendment widened the sanction provision to refer to the time of the alleged offence. Whether sanction is needed for an officer who has retired before cognizance has been debated, and the answer depends on current case law, so check it for your case. Sanction is also an opportunity: the officer can make a representation to the department with the corrected figures before sanction is decided, though the authority is not bound to hear him.

Discharge, trial and the burden of proof

At trial, the prosecution must first prove each head of the calculation: that the assets existed and belonged to the officer or were held on his behalf, their values, the income and the expenditure. Only then does the burden shift to the officer to account satisfactorily for the excess. The officer does not have to prove the explanation beyond reasonable doubt; it is enough to show, on a preponderance of probabilities, that the assets came from lawful sources.

Before charges are framed, the officer can apply for discharge if the prosecution's own material does not make out a case, for example where the alleged disproportion disappears once the documents in the chargesheet itself are read properly. The court at this stage generally looks only at the prosecution's material, not the defence documents, so discharge works best where the agency's own papers show the error. Our post on discharge applications in criminal cases explains the stage. At trial, the defence proves its documents through its own witnesses, including family members, bank officials and chartered accountants, and the officer explains the figures when examined under section 351 of the BNSS.

Attachment of property and money laundering exposure

Section 18A of the Prevention of Corruption Act, added in 2018, applies the Criminal Law Amendment Ordinance 1944 to attachment and forfeiture of property in corruption cases. The agency can ask the special judge to attach property believed to have been acquired through the offence while the case is pending. The officer can contest the attachment and show the property's lawful source.

Offences under the Prevention of Corruption Act are scheduled offences under the PMLA, so a DA case can also lead to the Enforcement Directorate registering a money laundering case and provisionally attaching property. That second case runs on its own track, with its own rules on statements and bail. Our posts on challenging ED provisional attachment and rights during an ED search cover that side.

Suspension, departmental action and pension

A DA case usually brings departmental consequences. An officer may be suspended after a search or the registration of the case, and a departmental inquiry on the same facts can run alongside the criminal case. The two are independent, and the standard of proof in the inquiry is lower. Our posts on suspension rules for government employees and replying to a departmental charge sheet explain those processes, and our page on service law and CAT practice covers challenges before the Central Administrative Tribunal.

For officers close to retirement, the case may delay pension and gratuity, which are often withheld in part while proceedings are pending. Keep the service side and the criminal side consistent: an explanation given in the departmental inquiry will be read by the prosecution, and an admission made to save a pension can damage the criminal defence.

Mistakes officers make in DA cases

• Accepting the agency's figures as a starting point. Every head is an estimate built from incomplete records. Rebuild your own tables from documents.
• Late explanations. A gift, loan or agricultural income mentioned for the first time at trial is treated with suspicion. Put explanations on record during investigation.
• Ignoring the spouse's income. If a spouse's assets are counted, their income must be too. Many cases are overstated simply because it was left out.
• Creating documents after the event. A back-dated gift deed or a fresh 'loan agreement' is easy to expose and adds forgery to the case.
• Transferring property after the FIR. Moving assets to relatives once a case is registered looks like concealment and can lead to attachment.
• Not filing property returns. Officers still in service should keep annual property returns accurate and complete. They are the best contemporaneous evidence there is.
• Treating the departmental and criminal cases separately. Inconsistent explanations in the two proceedings damage both.

Documents to collect for a DA defence

Collect these for the officer and every family member whose assets are included, for the whole check period and a year or two before it.

What to do this week if a DA case is likely or registered

• Get a copy of the FIR if registered, and note the check period and the agency's figures
• Collect the search list and seizure memos, every page
• Start four tables: assets at start, assets at end, income, expenditure
• Ask each family member to collect their own income tax returns and bank statements
• Retrieve your annual property returns from the department
• Engage a chartered accountant to work alongside your advocate
• Do not transfer, sell or gift any property without advice
• Do not prepare any new document describing an old transaction
• Discuss with your advocate whether anticipatory bail or a representation before sanction is needed

Getting advice in a DA case

A disproportionate assets case rewards early, patient work on documents more than anything said in court. The calculation done in the first months, the explanation placed on record before the chargesheet and the way the family's records are presented often shape the case for years. Our page on CBI case defence describes how CBI investigations run in Delhi, and the profile of Advocate B.K. Singh lists the courts the firm appears in.

If you want an advocate to look at the FIR and the agency's figures and tell you where the calculation is open to challenge, you can send the papers through our online enquiry page. Include the FIR, the search list and any tables or notices the agency has given you.