PMLA

PMLA doesn’t prevent authorised officer from passing provisional attachment order: SC

provisional attachment order

The Supreme Court recently on 14th February, 2022 declared that there exists no provision under the Prevention of Money Laundering Act, 2002 (PMLA)  restricting an authorized officer from passing a provisional attachment order under section 5(1) once a complaint has been filed with the adjudicating authority. 

What is provisional attachment order under section 5(1) of PMLA?

Section 5(1) of the PMLA states that if any person is found to be in possession of any of the proceeds of crime and such proceeds of crime are likely to be transferred, concealed or dealt with in manner which may result in frustrating any proceedings relating to confiscation of proceeds of crime, then an authorised officer may provisionally attach such property.     

Facts of order on provisional attachment order

A division bench of the honourable Supreme Court comprising of Justice A.M. Khanwilkar and Justice C.T. Ravikumar reaffirmed the fact that though the accused has successfully persuaded the High Court in quashing the order of provisional attachment passed by the appropriate authority under section 5(1) of PMLA, this would in no way impact the adjudication process which has been initiated before the adjudicating authority. The case must proceed on its own merits in accordance with the law.

A Special Leave Petition (SLP[1]) was filed before the honourable Supreme Court which has been preferred by the court. The present petition was made challenging the order passed by the High Court where the matter was remanded back to the adjudicating authority under PMLA. A request was made to pass a fresh order under section 5(1) of the PMLA.

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The petition was made by Kaushalya Infrastructure (petitioner) that since High Court acceded to their contention that the provisional attachment order served on the petitioner did not disclose any proper reason and also failed to provide any tangible reason for the said provisional attachment and only reproduced the provisions of the Act, the honourable High Court should not have remanded back the matter to the concerned authority for the petitioners for recording of reasons before the concerned authority.

Submissions by the petitioner   

The counsels for the petitioners submitted that the provisional attachment order is the trigger of adjudication proceedings and as the honourable High Court has set aside the order of provisional attachment, so no adjudication proceedings can be initiated further against the petitioner.

Observations made by the Supreme Court  

The honourable Supreme Court after taking into account the scheme of section 5 and section 8 of the PMLA found the aforementioned argument put forward by the petitioners to be misplaced. The court held that just because the petitioner has succeeded before the honourable High Court does not per se results in nullifying the proceedings before the adjudication authority which nevertheless can be proceeded and taken to its logical end by the concerned appropriate adjudicating authority in accordance with the scheme of Act.

Explanation of scheme of Section 5 by SC

The honourable Supreme Court went on to explain section 5 of PMLA. It said for an authorised officer, satisfaction is recorded in two respects.

  • The first thing to be satisfied with is that the property in question must be acquired through proceeds of crime and also involved in the offence of money laundering.
  • The second satisfaction that is done by the authorised officer is that the owner or the occupant who is in possession of the property is likely to conceal, transfer or deal with the property in any manner.
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This satisfaction of the authorised officer is recorded for the purpose of the interim arrangement during the pendency of the adjudication proceedings for keeping the property in question secured.

Triggering of Adjudication proceedings

The adjudication proceedings get triggered once the complaint under section 5(5) has been filed before the adjudication authority or on an application under section 17(4) and section 18(10) of the Act. The court found that the there exists no provision within the scheme of PMLA to indicate that once the complaint has been filed before the adjudicating authority, the authorised officer is prevented from passing a provisional attachment of order under section 5(1) of PMLA.

The adjudication under section 8 of PMLA provides for finally confiscation of the tainted property or release of that.

Order of the Court

The honourable court opined that the order passed by the honourable High Court to send back the matter to the appropriate adjudicating authority for passing a fresh order does not seem to be objectionable. The court also pointed the fact that petitioner has been successful on a limited ground that the order by the adjudicating authority does record proper satisfaction and instead merely reproduced the provision of the Act. Hence, the honourable Supreme Court declined to interfere in this Special Leave Petition. The petition was accordingly dismissed by the honourable court.

The court, however, made it clear that the dismissal of the SLP will not be a roadblock in the pursuit of the petitioner in availing other legal remedies including to question the validity of the fresh order of provisional attachment under section 5(1) of PMLA if it is passed by the appropriate authority.

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The honourable Supreme Court also made it clear that the said of order of the court is not an opinion on the merits of the issues in the given case. The merits of the same will be dealt by the adjudicating authority or any other appropriate authority as the case may be.   

Conclusion

In simple words the honourable court concluded that the fact that the petitioner succeeded in persuading the High Court to quash the proceeding of provisional attachment order passed by the High Court under section 5(1) of PMLA does in no way adversely impact the adjudication process initiated by the adjudicating authority. The Adjudication Authority must proceed on its own merits in accordance with law.  

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