Provisional Property Attachment under PMLA Expires After 90/365 Days - Appellants Benefit

The court held that provisional attachment of property under PMLA ceases to exist after the prescribed 90 or 365 days, benefiting appellants not accused in the pending investigation. Property acquired pre-PMLA can be attached only if equivalent to crime proceeds held abroad. "Value of such property" in "proceeds of crime" refers to crime-linked property only. Specific reasons, not mere statutory wording, must justify provisional attachment. The court allowed the appeals, setting aside the Tribunal's order and emphasizing the importance of following legal requirements for property attachment.

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Issues Involved:

1. Sustainability of provisional attachment after the expiry of 90 or 365 days.
2. Provisional attachment of property acquired prior to the enactment of PMLA.
3. Interpretation of the phrase "value of such property" in the definition of "proceeds of crime."
4. Requirement for recording reasons for provisional attachment of property.

Detailed Analysis:

1. Sustainability of Provisional Attachment After the Expiry of 90 or 365 Days:

The court examined whether the provisional attachment of property is sustainable after the expiry of 90 or 365 days from the date of the order passed by the adjudicating authority. It was noted that as per clause (a) of Sub-Section (3) of Section 8 of the PMLA, the provisional attachment shall continue during investigation for a period not exceeding 90 days, which was later amended to 365 days. The court found that the appellants were entitled to the benefit of the time cap prescribed by Section 8(3)(a) of PMLA. Since the investigation was still pending and the appellants were not arrayed as accused in the criminal complaint, the provisional attachment order ceased to exist by operation of law after the expiry of the prescribed period.

2. Provisional Attachment of Property Acquired Prior to the Enactment of PMLA:

The court addressed whether property acquired before the enactment of PMLA could be provisionally attached. It was determined that property purchased prior to the commission of the scheduled offense does not fall within the first limb of the definition of "proceeds of crime," but it may fall under the third limb if the property derived from the scheduled offense is taken or held outside India. The court emphasized that the phrases "value of such property" and "property equivalent in value held within the country or abroad" are not synonymous and must be given distinct meanings. Thus, property acquired before the enactment of PMLA cannot be attached unless it is equivalent in value to property held or taken outside the country.

3. Interpretation of the Phrase "Value of Such Property":

The court analyzed the phrase "value of such property" within the definition of "proceeds of crime" under Section 2(1)(u) of PMLA. It was concluded that "value of such property" refers to property that has been converted into another form or obtained based on property derived from the commission of a scheduled offense. The court rejected the interpretation that any property, irrespective of its source, could be attached as "proceeds of crime." This interpretation aligns with the legislative intent and ensures that only property directly or indirectly linked to the criminal activity is subject to attachment.

4. Requirement for Recording Reasons for Provisional Attachment:

The court examined whether the officer attaching the property is required to record specific reasons that the property is likely to be concealed, transferred, or dealt with in a manner that may frustrate proceedings relating to confiscation. It was emphasized that the authority must record reasons based on material in possession, and mere reproduction of the wording of Section 5 of PMLA is insufficient. The court found that in the present case, the respondent failed to provide specific reasons for the attachment, which indicated a lack of application of mind and rendered the attachment order invalid.

Conclusion:

The appeals were allowed, and the impugned order dated 09.08.2019 passed by the Tribunal was set aside. The court summarized its findings as follows:

1. Filing of a complaint against others is not sufficient to deprive any person of the benefit of the 365-day time cap if the investigation is pending.
2. Property acquired before the commission of the scheduled offense or the introduction of PMLA cannot be attached unless the property derived from the scheduled offense is held or taken outside the country.
3. The Director or authorized officer must record specific reasons for the attachment, and mere reproduction of the statutory wording is not sufficient.

The court directed that a copy of the order be placed on the files of connected appeals.

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