Provisional attachment under PMLA Sections 5 and 8 upheld against third parties holding proceeds of crime

The AT under SAFEMA upheld the provisional attachment of property linked to money laundering, rejecting the appellant's contention that attachment is permissible only against accused persons. It held that under Sections 5 and 8 of the PMLA 2002, attachment can be made against "any person" in possession of proceeds of crime, including third parties. The appellant, though not named in the FIR or prosecution complaint, controlled companies that received proceeds from the predicate offence. The attachment of Rs.11.35 crores was found justified as matching the laundered amount transferred to entities under appellant's control. Since the trial is pending, confiscation was not considered. The appeal was dismissed for lack of merit, affirming the legality of the provisional attachment.

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ISSUES:

Whether provisional attachment of properties under Section 5 of the Prevention of Money Laundering Act, 2002 ("the Act of 2002") can be sustained against a person not named as an accused in the FIR, ECIR, or Prosecution Complaint.Whether continuation of provisional attachment beyond 180 days without filing a Prosecution Complaint against the person in whose hands the property is attached is permissible under Sections 5 and 8 of the Act of 2002.Whether the absence of an order of confiscation affects the validity or duration of the provisional attachment of property under the Act of 2002.Whether the provisional attachment of properties matching the value of proceeds of crime transferred to companies controlled by the appellant is justified under the Act of 2002.

RULINGS / HOLDINGS:

The Court held that Section 5(1)(a) of the Act of 2002 permits provisional attachment of property in the possession of "any person," not limited to an accused, if such property is proceeds of crime. The attachment in the hands of a person not named as an accused is sustainable.The continuation of provisional attachment beyond 180 days is governed by Section 8(3)(a), which allows attachment during investigation for up to 365 days or pendency of proceedings relating to the offence under the Act, regardless of whether a Prosecution Complaint has been filed against the person whose property is attached.The absence of an order of confiscation does not invalidate the provisional attachment; confiscation occurs only upon conclusion of trial under Section 8(5), and until then, attachment remains subject to the trial's outcome.The provisional attachment of properties to the extent of Rs.11.35 Crores, corresponding to proceeds of crime transferred to companies controlled by the appellant, is justified and lawful under the Act of 2002.

RATIONALE:

The Court applied the statutory framework of Sections 5 and 8 of the Prevention of Money Laundering Act, 2002, emphasizing that the term "any person" in Section 5(1)(a) extends the scope of attachment beyond those formally accused, to prevent frustration of confiscation proceedings.The Court relied on the authoritative interpretation from the Apex Court in Vijay Madanlal Choudhary v. Union of India, which rejected the argument that attachment must be limited to accused persons, clarifying that attachment can be made against third parties involved in the process or activity connected with proceeds of crime.The Court clarified that the continuation of attachment under Section 8(3)(a) is linked to the pendency of proceedings relating to the offence under the Act, not necessarily against the person whose property is attached, thereby allowing attachment to continue without a Prosecution Complaint against that person.The Court noted that confiscation under Section 8(5) occurs only after trial conclusion, and provisional attachment pending trial is consistent with the legislative intent to protect the proceeds of crime from dissipation.The Court rejected the appellant's interpretation that attachment without naming the person as accused or filing a Prosecution Complaint within 365 days is impermissible, as such an interpretation would frustrate the object of the Act by allowing easy diversion of proceeds of crime to third parties.

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