Conundrum over attachment proceedings under the anti-money laundering law


The challenge to the constitutional validity of various sections of The Prevention of Money Laundering Act 2002 (PMLA) in Vijay Madanlal Choudhary versus Union of India is done and dusted. The Supreme Court has spoken and spoken in a manner which gives more supremacy to the ED in its investigation and attachment proceedings under the PMLA.
As implied in the statement of objects and reasons, the primary objective of PMLA, 2002 is to confiscate the proceeds of crime generated out of scheduled offences and projected as untainted money so that no criminal can benefit from his crime. The said objective is achieved by adopting procedures for the identification, provisional attachment, confirmation of attachment and finally, confiscation of the “proceeds of crime” after conviction of the offender by a Special Court set up under the PMLA. Chapter III of the PMLA relates to attachment and confiscation. Section 5 empowers the authorised officer under the PMLA to provisionally attach the properties derived from “proceeds of crime” based on reasons to believe that the same is likely to be concealed, transferred, or dealt with in any manner resulting in frustration of the confiscation procedure. Thereafter, the officer shall forward a complaint to Adjudicating Authority (AA) (appointed under Section 6) to confirm the said provisional attachment, who will issue notice to the parties concerned under Section 8(1) and only after hearing the parties and considering the relevant materials on record, confirm the provisional attachment under Section 8(2).
Considering the provisions above, the Supreme Court held that Sections 5 and 8 provide sufficient safeguards as preconditions and, therefore, cannot be termed unconstitutional. Be that as it may, the Supreme Court may be correct to affirm the purport of the sections, as the same is only in the nature of attachment, confined to a limited period and subject to confirmation by the AA or the Special Court as the case may be.
However, the safeguards enunciated under PMLA have a glaring breach, where the conundrum starts. Admittedly, Section 8 also provides for various inbuild safeguards. Some of them are in the form of confining the period of final attachment order so that a person is not deprived of his constitutional right to property without following the due process of law. For example, Section 8(3)(a) stipulates that the attachment of the seized property shall continue during the pendency of the proceedings relating to any scheduled offence before a court and 8(3)(b) provides that the attachment shall become final only after the guilt of the person is established in the trial court. And the order of such trial court attains finality.
However, the subsequent provision, i.e., Section 8(4), contradicts the said safeguard under Section 8(3)(a) and 8(3)(b) by stipulating that as soon as the provisional attachment order under sub-section (1) of Section 5 has been confirmed under Section 8(3), the authorised officer shall forthwith take the possession of the attached property. The word “shall” in the section, in a way, makes it mandatory. Therefore, on the one hand, Section 8(3)(a) and 8(3)(b) ensures that property will remain under attachment subject to either conviction or acquittal of the person by the special court. However, on the other hand, Section 8(4) mandates the authorised officer to take possession of the property as soon as the order under Section 8(3) is passed, disregarding the overall safeguards and that too without any confirmation of the guilt by the Special Court.
It is not as if the legislature or the courts are oblivious to the said concern. This issue was raised before the Supreme Court in Choudhary’s case, and the Supreme Court, while refusing to strike down the said provision, accepted the problem by observing that “it is unfathomable as to how the action of confiscation can be resorted to in respect of property in the event of his acquittal or discharge in connection with the scheduled offence”. However, the provision was still not struck down by providing a via media that the provision under Section 8(4) could be resorted to only by way of an exception and not as a rule. The issue was again raised before the Supreme Court, and the erstwhile CJI N.V. Ramana observed that the interpretation of Section 8(4) of the anti-money laundering law in Choudhary’s case had left much scope for arbitrary application. The interpretation, as it stands now, upon confirmation of the attachment order under Section 8(3), gives discretion to the ED to decide whether to take possession of the property under Section 8(4) or not. The factors guiding such discretion are prone to misuse.
The misuse of Section 8(4) is not a fanciful exaggeration, and the reality is felt on the ground. Recently, in a case before the High Court of J&K and Ladakh in the matter of one Syed Akeel Shah (LPA No.203/2022), the appellants were being evicted from the attached property by taking action under Section 8(4) even before their statutory appeal under Section 26 could be heard. However, while relying on Choudhary’s case, the court refused to protect the parties by observing that there is no scope to interpret the provisions, to hold that the authorised officer has to wait till the expiry of the limitation period before acting under Section 8(4) of the PMLA.
Apart from other lacunae, it seems that the safeguards provided under Section 8 protect a person only on paper and miserably fail for practical purposes. There is an urgent need to look into this issue at legislative and judicial levels and rectify the lacuna by making necessary amends, or it will keep providing arbitrary power to the authorities, which is prone to misuse.
Akhilesh Sheshmani Dubey is an advocate and solicitor practising in the Bombay High Court.