2025 (11) TMI 1712 - HC - Money Laundering

Provisional PMLA Attachment Under Section 5(1) Lapses After 180 Days; COVID Limitation Orders Not Applicable

Mr. Naresh T. Jain, M/s Aparajita Mercantile Pvt. Ltd., Epitome Multitrade Pvt. Ltd. & Anr., Versus The Union of India, Directorate of Enforcement, Zone -I Maharashtra.

HC held that the 180-day validity period for provisional attachment orders under Section 5(1) PMLA is strictly governed by the statute and its Third ... Money Laundering - time limitation - reasons to believe - impact of the Hon’ble Supreme Court’s orders dated 23 March 2020 and 10 January 2022, [2022 (1) TMI 385 - SC ORDER], on the PMLA timelines - HELD THAT:- The provisions of Section 5 of the PMAL are quite clear. Section 5(1) empowers the authorised officer, by an order in writing, to provisionally attach such property for a period not exceeding 180 days from the date of the order in such manner as may be prescribed. The Third Proviso to Section 5(1) provides that for the purposes of computing the period of one hundred and eighty days, the period during which the proceedings under this section are stayed by the High Court shall be excluded, and a further period not exceeding thirty days from the date of the order of vacation of such stay order shall be counted. Thus, the manner of computation of the period of 180 days or the period that could be excluded for computing this period of 180 days has also been specified by the legislature in the Third Proviso to Section 5(1) of the PMLA. Admittedly, para 5(IV) of the Hon’ble Supreme Court’s order dated 10 January 2022, [2022 (1) TMI 385 - SC ORDER], does not mention PMLA. Instead, it refers to specific provisions of the Arbitration and Conciliation Act, 1996, the Commercial Courts Act, 2015, and the Negotiable Instruments Act, 1881. Even these provisions relate to initiating proceedings, setting outer limits for court or tribunal discretion regarding delay, and terminating proceedings. The issuance of a provisional attachment order, at least prima facie, would be an administrative act. However, even if we were to hold that such an act has some quasi-judicial underpinnings, simply because the adjudication proceedings before the adjudicating authority would amount to quasi-judicial proceedings, still, from the language and tenor of the orders, it is thought that they could be made to apply to exclude the time-limits prescribed under PMLA regarding the shelf-life of a provisional attachment order. It is declared that the impugned PAO dated 27 November 2020 has ceased to have any effect after 180 days, i.e., from 26 May 2021, under Section 5(1), read with Section 5(3), of the PMLA. As the impugned PAO (which has since lapsed) is now of no effect, none of the Respondents can continue to detain the Petitioners’ properties, which are the subject of the impugned PAO. The attachment is therefore declared to have been lifted and to have been without legal effect from 26 May 2021. The Respondents are restrained from taking any action pursuant to the impugned PAO, which has expired or ceased to be effective from 26 May 2021. A writ is issued to that effect. This Petition and the Interim Application therein are disposed of. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the general exclusion of limitation ordered by the Supreme Court in Suo Motu Writ Petition (C) No. 3 of 2020 during the COVID-19 period applies to and extends the statutory 180-day validity of a provisional attachment order under Section 5(1) and 5(3) of the Prevention of Money Laundering Act, 2002 (PMLA). 1.2 Whether, notwithstanding the above, the impugned provisional attachment order issued under Section 5(1) PMLA stood lapsed upon expiry of 180 days and, if so, the legal consequences for the attached properties. 1.3 Whether the lapsing or setting aside of a provisional attachment order under Section 5(1) PMLA affects the competence or continuance of adjudication proceedings under Section 8 PMLA. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Applicability of Supreme Court's COVID-19 Suo Motu limitation orders to the 180-day period under Section 5 PMLA Legal framework 2.1 Section 5(1) PMLA authorises provisional attachment of property 'for a period not exceeding one hundred and eighty days from the date of the order'. The third proviso to Section 5(1) mandates exclusion only of 'the period during which the proceedings under this section is stayed by the High Court' and allows 'a further period not exceeding thirty days from the date of order of vacation of such stay' to be counted. 2.2 Section 5(3) PMLA provides that every order of attachment under Section 5(1) 'shall cease to have effect' after expiry of the period specified in that sub-section or on the date of an order under Section 8(3), whichever is earlier. 2.3 The Supreme Court's final order dated 10 January 2022 in the Suo Motu Writ Petition directed that the period from 15 March 2020 till 28 February 2022 'shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi judicial proceedings' and, in para 5(IV), expressly identified specific provisions of the Arbitration and Conciliation Act, Commercial Courts Act, Negotiable Instruments Act and 'any other laws, which prescribe period(s) of limitation for instituting proceedings, outer limits (within which the court or tribunal can condone delay) and termination of proceedings.' 2.4 The Supreme Court in a subsequent decision (S. Kasi) interpreted the scope of the Suo Motu limitation orders and held that they do not extend the time-limits prescribed in Section 167(2) CrPC, emphasising that those orders were intended to protect litigants from being time-barred in initiating proceedings, not to enlarge statutory periods that embody substantive safeguards, particularly those linked to personal liberty or similar rights. Interpretation and reasoning 2.5 The Court held that Section 5 PMLA creates a substantive 'shelf-life' for a provisional attachment order, capped at 180 days, with the mode of computation and the only permissible exclusion (High Court stay plus up to 30 days post-vacation) expressly and exhaustively provided in the third proviso to Section 5(1). The provision is couched in negative form ('not exceeding') and is reinforced by Section 5(3) which stipulates the consequence that such order 'shall cease to have effect' upon expiry of that period or upon adjudication, whichever is earlier. 2.6 The Court relied on the Supreme Court's decision upholding the constitutional validity of PMLA (Vijay Madanlal Chaudhary), where the 180-day cap and the ceasing-to-have-effect clause under Sections 5(1) and 5(3) were specifically recognised as crucial safeguards against arbitrary deprivation of property and as a foundation for upholding the scheme of provisional attachment. 2.7 The Court noted that the Suo Motu limitation order of 10 January 2022 does not mention PMLA or Section 5 at all, while expressly identifying other enactments and confining the exclusion to laws that prescribe limitation periods for instituting proceedings, outer limits for condonation of delay, and termination of proceedings. Section 5(1) PMLA does not prescribe a period of limitation for initiating any 'proceedings' before a court or tribunal; it sets a maximum duration for the subsistence of an executive attachment order. 2.8 Referring to S. Kasi, the Court held that the Supreme Court has itself authoritatively explained the object and scope of the Suo Motu orders: they were intended (a) to address the difficulties faced by litigants in filing petitions/suits/appeals and other proceedings during the pandemic, and (b) to obviate the need for physical presence for filing. Those orders were not intended to extend or dilute statutory timelines which protect fundamental or significant legal rights, such as personal liberty or property. 2.9 The Court rejected the contention that S. Kasi is distinguishable on the ground that it concerned Article 21 liberty, noting that: (a) PMLA itself contains drastic provisions impacting personal liberty; and (b) even assuming Section 5 relates primarily to 'property rights', the right to property is recognised as a constitutional and human right, and any deprivation must be strictly in accordance with law and within express statutory limits. 2.10 Relying on Supreme Court pronouncements on the right to property (Mukesh Kumar and Harikrushna Mandir Trust), the Court observed that interference with property must be expressly authorised; any power to deprive property cannot be implied or derived by expansive interpretation of external orders. 2.11 The Court emphasised that when the Supreme Court has itself interpreted its Suo Motu orders in S. Kasi, that explanation is binding; lower courts cannot adopt a different or broader construction by characterising S. Kasi as limited only to CrPC or Article 21 cases. 2.12 On the nature of the act, the Court observed that issuance of a provisional attachment order under Section 5(1) is, at least prima facie, an administrative act of the enforcement authority. Even if regarded as having some quasi-judicial attributes, the Suo Motu orders, read textually and contextually, were aimed at limitation for initiation and prosecution of proceedings before courts/tribunals, not at extending the internal 'life span' of executive orders like PAOs. 2.13 The Court also relied on the fact that the Enforcement Directorate had itself moved an interlocutory application in the Suo Motu proceedings seeking clarification that PMLA timelines be treated as covered; that application was disposed of without any relief or clarification. Applying principles analogous to res judicata (particularly Explanation V to Section 11 CPC), the Court held that a requested relief not granted must be deemed refused; ED cannot indirectly secure from the High Court what it failed to obtain directly from the Supreme Court. 2.14 The Court further noted that Parliament had separately enacted the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act (TOLA) to relax timelines in eight specified fiscal statutes during COVID-19, including statutes related to benami and black money laws, but conspicuously omitted PMLA. If the Suo Motu orders were already intended to cover all such statutory timelines, there would have been no need for TOLA; the omission of PMLA in TOLA is a material indication that neither Parliament nor the Supreme Court extended PMLA timelines through those measures. 2.15 The contention that it was impossible for ED to function during the COVID period was rejected both on principle (in light of S. Kasi, where a similar plea by the State was denied) and on facts: in this very case, during the COVID window the ED issued the PAO, filed the complaint before the adjudicating authority, the adjudicating authority issued a show cause notice and even heard applications, demonstrating that effective functioning was in fact possible. 2.16 The Court aligned itself with the reasoning of the Calcutta High Court, which had held that the 180-day period in Section 5(1), read with Section 5(3), is sacrosanct and not extendable by the Suo Motu limitation orders, and expressly declined to follow the contrary view of the Delhi High Court, noting inter alia that the Delhi decision did not consider the earlier Calcutta ruling and that there was no indication that the Calcutta decision had been overturned. Conclusions 2.17 The Suo Motu limitation orders of the Supreme Court, including the order dated 10 January 2022, do not apply to or extend the 180-day statutory period prescribed for the validity of a provisional attachment order under Section 5(1) PMLA, nor do they affect the consequence prescribed in Section 5(3) that such order 'shall cease to have effect' upon expiry of that period or earlier adjudication. 2.18 The only exclusion permissible in computing the 180-day period is that expressly provided in the third proviso to Section 5(1) PMLA (High Court stay plus up to 30 days after its vacation). No further extension/exclusion can be implied from the Suo Motu orders or otherwise judicially engrafted. Issue 2: Whether the impugned provisional attachment order stood lapsed after 180 days and the legal consequences Legal framework 2.19 Section 5(1) PMLA: provisional attachment 'for a period not exceeding one hundred and eighty days from the date of the order'. 2.20 Third proviso to Section 5(1): exclusion of period of stay by the High Court 'in proceedings under this section' and allowance of a further period not exceeding thirty days after vacation of such stay. 2.21 Section 5(3) PMLA: every attachment 'shall cease to have effect' after the expiry of the period specified in Section 5(1) or on the date of an order under Section 8(3), whichever is earlier. Interpretation and reasoning 2.22 The impugned provisional attachment order was issued on 27 November 2020. On a plain reading of Section 5(1), the maximum period of its subsistence was 180 days from that date. Absent any applicable High Court stay on 'proceedings under this section' prior to the expiry of 180 days, there was no statutory basis to exclude any time under the third proviso. 2.23 The Court examined the timeline and noted: (a) The 180-day period from 27 November 2020 expired on 26 May 2021. (b) The stay granted by the High Court on the PAO was by an order dated 19 June 2021, i.e., after the 180-day period had already expired. (c) The subsequent stay granted by the Supreme Court on the adjudication proceedings (03 September 2021) also came into force after the 180-day period had lapsed. 2.24 Since the statutory period of 180 days had already run its course on 26 May 2021, any later stay order could not revive or retrospectively elongate the life of the provisional attachment; nor does Section 5 contain any such revival mechanism. 2.25 Applying Section 5(3), the Court held that, as no confirming order under Section 8(3) was passed within the period of 180 days, the provisional attachment 'shall cease to have effect' on the expiry of that period. The language of Section 5(3) is mandatory and automatic, and does not contemplate any discretion or saving once that period is over. 2.26 The Court underscored that this strict temporal limit is not a mere procedural timeline but a substantive safeguard integral to the constitutional validity of the PMLA scheme and therefore cannot be relaxed in the absence of express legislative intervention. Conclusions 2.27 The impugned provisional attachment order dated 27 November 2020 stood lapsed by operation of law upon expiry of 180 days, i.e., with effect from 26 May 2021, under Section 5(1) read with Section 5(3) PMLA. 2.28 Upon such lapsing, the order ceased to have any legal effect; consequently, the respondents were not entitled to continue detaining or treating as attached the properties covered by the PAO after 26 May 2021. 2.29 The Court therefore declared that the attachment stood lifted and was without legal effect from 26 May 2021, and issued a writ restraining the respondents from taking any action pursuant to the impugned PAO. Issue 3: Effect of lapsing/setting aside of provisional attachment on adjudication proceedings under Section 8 PMLA Legal framework 2.30 Under Section 5(5) PMLA, the authorised officer must, within 30 days of provisional attachment, file a complaint before the adjudicating authority. Under Section 8, the adjudicating authority issues show-cause notice, conducts adjudication, and may confirm attachment and order confiscation or release. 2.31 The Supreme Court in Kaushalya Infrastructure held that success in a challenge to a provisional attachment order under Section 5(1) does not nullify or terminate adjudication proceedings under Section 8; the latter must proceed to their logical end on their own merits. Interpretation and reasoning 2.32 The Court applied the ratio of Kaushalya Infrastructure, emphasising the distinction between: (a) the provisional, interim, executive measure under Section 5(1), founded on dual satisfaction (proceeds of crime and likelihood of concealment/transfer); and (b) the independent adjudicatory process under Section 8, triggered by a complaint under Section 5(5) or applications under Sections 17(4) or 18(10), resulting ultimately in confiscation or release. 2.33 The fact that the PAO has lapsed or is quashed does not vitiate the jurisdiction or competence of the adjudicating authority to proceed on the complaint already filed, nor does the PMLA provide that continuance of adjudication is contingent on the subsistence of the PAO. 2.34 The Court also noted the concession by counsel for the petitioners that the lapsing of the PAO would not affect the adjudication proceedings and that such proceedings may continue in terms of the Supreme Court's pronouncement. 2.35 The Court recorded that the Enforcement Directorate's interests are not irreparably prejudiced by the lapsing of the PAO because: (a) adjudication under Section 8 can continue, and (b) under Section 17 PMLA, the ED retains power to trace and proceed against properties related to the offence even if they are transferred to third parties during pendency of proceedings. Conclusions 2.36 The lapsing of the provisional attachment order under Section 5(1) PMLA does not affect the validity, competence, or continuance of adjudication proceedings under Section 8 initiated on the basis of the complaint filed under Section 5(5). 2.37 The earlier stay on adjudication proceedings, granted in view of the pending writ petition, was vacated. The adjudicating authority is free to proceed and dispose of the adjudication proceedings in accordance with law and on their own merits, with all substantive contentions of the parties kept open.