Section 26(4) PMLA allows appellate tribunal to set aside, remand attachment orders for fresh adjudication, ensures natural justice

HC held that under Section 26(4) PMLA, the Appellate Tribunal has wide powers to pass "such orders as it deems fit," which includes setting aside and remanding matters for fresh adjudication. An order of remand is implicit in the power to "set aside," especially where there is breach of natural justice. The HC rejected a narrow interpretation that would render the Tribunal powerless after finding procedural defects. It upheld the Tribunal's order setting aside the confirmation of provisional attachment and remanding the case, directing expeditious disposal by the adjudicating authority.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the Appellate Tribunal under Section 26(4) of the Prevention of Money Laundering Act, 2002 (PMLA) has jurisdiction to remand a matter to the adjudicating authority after setting aside the impugned order.

1.2 Whether, upon setting aside the confirmation order, the provisional attachment automatically lapses so as to permit the affected parties to freely deal with the attached property, and whether adjudication can continue notwithstanding the expiry or non-continuance of provisional attachment.

1.3 Whether, pending fresh adjudication on remand, the concerned parties can be restrained from creating third-party interests in the subject properties so as to preserve the efficacy of the remand proceedings.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Power of the Appellate Tribunal under Section 26(4) PMLA to remand the matter

Legal framework

2.1 Section 26(4) PMLA empowers the Appellate Tribunal, upon receipt of an appeal, after hearing the parties, to "pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against".

2.2 Section 26(4) PMLA is pari materia to unamended Section 128-A of the Customs Act, 1962, which conferred power on the appellate authority to pass such orders as it deemed fit "confirming, modifying or annulling the decision appealed against".

2.3 The Court relied on the interpretation of Section 128-A of the Customs Act in a decision of the Supreme Court, which held that the appellate authority's power to "annul" and to "pass such order as it deems fit" necessarily includes the power to remand.

Interpretation and reasoning

2.4 The contention advanced was that the Appellate Tribunal, being a creature of statute, can only exercise powers expressly conferred, and that Section 26(4) does not explicitly confer a power of remand.

2.5 The Court held that the expressions "pass such orders as it thinks fit" and "setting aside the order appealed against" are of wide amplitude and are materially similar to the language in Section 128-A of the Customs Act, which has been judicially interpreted to include a power to remand.

2.6 It was reasoned that an order of remand necessarily involves setting aside or annulling the order under appeal; thus, the power to set aside read with the power to pass such orders as the Tribunal thinks fit implies the power to remand the matter for fresh adjudication.

2.7 The Court observed that any contrary interpretation would lead to a paradoxical situation where, after setting aside an order on grounds such as breach of natural justice, the Tribunal would be rendered powerless to remit the matter for reconsideration on merits, thereby defeating the statutory appellate scheme.

Conclusions

2.8 The Appellate Tribunal under Section 26(4) PMLA possesses the jurisdiction to remand a matter to the adjudicating authority after setting aside the impugned order.

2.9 The order of the Appellate Tribunal setting aside the confirmation order and remanding the matter for fresh consideration in accordance with law was within its jurisdiction and stands justified.

Issue 2: Effect of setting aside confirmation order and continuity of proceedings vis-à-vis provisional attachment

Legal framework

2.10 Section 5(3) PMLA stipulates that a provisional attachment order has a limited duration and loses force by efflux of time unless followed and supported by further proceedings as contemplated by the Act.

2.11 The Court referred to a decision of the Supreme Court holding that adjudication proceedings may continue notwithstanding the expiry of a provisional attachment order.

Interpretation and reasoning

2.12 It was argued that once the confirmation order is set aside, the provisional attachment does not automatically revive, and that there is no embargo on dealing with the property.

2.13 The Court noted that, while provisional attachment under Section 5(3) is of limited life and can lapse by efflux of time, it is not the case before the Court that the confirmation order itself had lapsed by efflux of time.

2.14 Relying on the Supreme Court pronouncement that adjudication proceedings can continue despite the expiry of provisional attachment, the Court accepted the validity of continuing adjudication and remand proceedings independent of the subsistence or expiry of provisional attachment.

Conclusions

2.15 Setting aside of the confirmation order does not, in the circumstances of the present case, render the adjudication proceedings non est, nor does it automatically entitle the parties to freely deal with the property in a manner that would frustrate the pending adjudication.

2.16 Adjudication on remand may validly continue notwithstanding any question regarding the temporal life of the provisional attachment, particularly as it is not alleged that the confirmation order has lapsed by efflux of time.

Issue 3: Restraint on creation of third-party interests pending remand

Legal framework

2.17 The Court referred to a Supreme Court decision interpreting Sections 5(4) and 8(4) PMLA, wherein it was held that, until possession of the property is taken over in terms of Section 8(4), any transfer creating civil consequences in favour of third parties ought to be avoided.

Interpretation and reasoning

2.18 The respondent argued that, if third-party interests are created in the property during the pendency of proceedings on remand, the purpose and object of such proceedings before the adjudicating authority would be frustrated.

2.19 The Court, following the Supreme Court's enunciation, held that to ensure effective adjudication and to prevent frustration of the statutory process, transfers or transactions creating third-party interests ought to be restrained until the adjudicatory process is completed.

Conclusions

2.20 The Court injuncted the appellants from creating any third-party interest in the properties in question until disposal of the proceedings before the adjudicating authority, clarifying that persons interested may continue to enjoy the property themselves as per law.

2.21 The adjudicating authority was requested to dispose of the remanded adjudication proceedings at the earliest, without granting unnecessary adjournments, so that the interim restraint remains proportionate and the adjudicatory purpose is promptly fulfilled.

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