2025 (11) TMI 1801 - HC - Money Laundering

Wide Section 26(4) PMLA powers allow Tribunal to remand Section 8 attachment orders; provisional attachment remains valid

Sarwa Zahoor, Zahoor Ahmad Shah Versus Deputy Director, Directorate of Enforcement and another.

HC held that under Section 26(4) PMLA, the Appellate Tribunal's power to 'pass such orders as it thinks fit' is of wide amplitude and necessarily includes ... Money Laundering - power of appellate Tribunal defined u/s 2 (b) of PMLA 2002 to remand the matter back to the Adjudicating Authority after setting aside the order of confirmation passed by the latter confirming the provisional attachment made by the authorized officer u/s 5 of the Act - HELD THAT:- From a plain reading of Section 26, in particular sub-section (4) thereto, it is abundantly clear that the words “may pass such orders thereon as it thinks fit” are of the widest amplitude and would vest in the Appellate Tribunal powers of remand as consequential to the power to set aside the order appealed against. The Hon’ble Supreme Court in case of Union of India vs Umesh Dhaimode [1997 (2) TMI 140 - SC ORDER] was confronted with a similar provision i.e Section 128(2) of the Customs Act 1962, as it then stood, which also vested the Appellate Authority under the said Act with powers to pass such orders as it deemed fit confirming, modifying or annulling the decision appealed against. In the aforesaid case, the Hon’ble Supreme Court has clearly held that an order of remand necessarily annuls the decision which is under appeal before the Appellate Authority and, therefore, the Appellate Authority cannot be said to have been divested of power to order remand. The judgment of the Division Bench of Calcutta High Court in Partha Chakraborti’s case [2025 (2) TMI 1274 - CULCUTTA HIGH COURT] applies on all fours to the facts of instant case. In the case on hand, the appeals have been allowed by the Appellate Tribunal and order of confirmation passed by the Adjudicating Authority has been set aside for breach of natural justice. The order of confirmation passed by the Adjudicating Authority under Section 8 of the Act of 2002 has not been set aside by the Appellate Tribunal on merits, but on the ground that the appellants have not been conveyed “reasons to believe” while serving upon them the notice of show cause, and such omission has deprived them of a reasonable opportunity to submit an adequate reply. Thus, it is beyond pale of any discussion that the power of remand is an important postulate of any authority exercising appellate jurisdiction and vested with the power to confirm, modify or set aside the order appealed against. Such power is a necessary concomitant to the powers of the Appellate Authority to pass the orders like the order of confirmation, modification or setting aside. Absent such power, the power to set aside or annul the order appealed against, that too, on the technical grounds, like non compliance with the principle of natural justice, would render the power itself illusory and ineffective. It is thus settled law that the power to set aside an order by the Appellate Tribunal includes the power to remand, which is a necessary attribute or concomitant of the power to annul or set aside the order under appeal, unless such power is expressly, or by necessary implication or intendment, taken away by the statute which creates the appellate tribunal. In the instant case, it is nobody’s case that the confirmation order, which was set aside by the appellate Tribunal has lapsed by efflux of time. The Appellate Tribunal has only set aside the confirmation order, not the proceedings before the Adjudicating Authority under Section 8 of the Act of 2002. The Appellate Tribunal, by setting aside the confirmation order and remanding the matter back to the Adjudicating Authority, has merely restored the proceedings to the stage at which the Adjudicating Authority had passed the confirmation order. It is also not the case of the appellants that, as on the date on which the confirmation order was passed by the Adjudicating Authority, the provisional attachment order had lapsed by efflux of time. There are no merit in these appeals and the same are, accordingly, dismissed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the Appellate Tribunal under the Prevention of Money Laundering Act, 2002, exercising jurisdiction under Section 26, has the power to remand a matter to the Adjudicating Authority after setting aside an order confirming provisional attachment under Section 8. 1.2 Whether, upon such remand, adjudication proceedings and possible confirmation of provisional attachment can lawfully continue when the initial provisional attachment under Section 5(1) has, according to the appellants, lapsed by efflux of time. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Power of the Appellate Tribunal under Section 26(4) to remand Legal framework 2.1 The Court set out Section 26 of the Prevention of Money Laundering Act, 2002, particularly Section 26(4), which provides that on receipt of an appeal, the Appellate Tribunal may, after hearing the parties, 'pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against.' 2.2 The Court examined analogous appellate provisions previously interpreted by the Supreme Court and High Courts, including Section 128(2) of the Customs Act, 1962; Section 254(1) and Section 251 of the Income Tax Act, 1961; and Section 52(3) of the Foreign Exchange Regulation Act, 1973. Interpretation and reasoning 2.3 The Court held that the expression 'may...pass such orders thereon as it thinks fit' in Section 26(4) is of the 'widest amplitude' and must be read as vesting in the Appellate Tribunal all ancillary and consequential powers necessary to give effect to its appellate jurisdiction, including the power of remand as a concomitant of setting aside or annulling the order under appeal. 2.4 Relying on the Supreme Court's decision interpreting Section 128(2) of the Customs Act, the Court noted that an order of remand 'necessarily annuls' the decision under appeal, and when the appellate authority is empowered both to annul and to pass such order as it deems fit, the power to remand is implicit in that grant. 2.5 The Court adopted the reasoning of a Division Bench of the Calcutta High Court interpreting Section 26(4) of the same Act, which held that the phrases 'such orders as it thinks fit' and 'setting aside' necessarily encompass the power to remand, especially where the impugned order is vitiated on account of breach of natural justice. 2.6 The Court also relied on the Supreme Court's interpretation of the words 'as it thinks fit' in Section 254(1) of the Income Tax Act, which were held wide enough to include the power of remand, and on the Delhi High Court's view that the power to remand is an 'important postulate' and 'necessary concomitant' of appellate jurisdiction, required to render such jurisdiction effective and not illusory. 2.7 While accepting the general proposition that statutory tribunals are creatures of statute and lack inherent powers beyond those conferred by the statute, the Court found that the power of remand in this context is not an extraneous or inherent power but is embedded in, and flows directly from, the statutory power to set aside or annul an order coupled with the power to pass such orders as the Tribunal thinks fit. 2.8 The Court rejected the contention that recognising a power of remand would amount to adding words to Section 26(4), holding instead that such recognition is necessary to give full and practical effect to the express statutory language and to avoid a paradoxical outcome where an order is set aside on technical or procedural grounds, but the Tribunal is rendered powerless to direct fresh consideration. 2.9 The Court declined to follow the contrary view of the Division Bench of the Karnataka High Court, holding that it had not properly appreciated that an order of remand is an aspect of the power to annul and that remand is a necessary postulate of effective appellate jurisdiction; consequently, that decision was not treated as laying down good law on this point. Conclusions 2.10 The Court concluded that the Appellate Tribunal under Section 26(4) of the Act has the jurisdiction to remand matters to the Adjudicating Authority as an incident of its power to set aside or annul orders under appeal. 2.11 The remand direction issued by the Appellate Tribunal, after setting aside the confirmation order for breach of natural justice (non-communication of 'reasons to believe'), was within its statutory competence and legally valid. Issue 2 - Effect of alleged lapse of provisional attachment under Section 5(1) on remand and further adjudication Legal framework 2.12 The Court referred to Section 5(1) of the Act, under which a provisional attachment order remains in force for a period not exceeding 180 days, subject to specified exclusions, and to Section 8, which governs adjudication and confirmation of attachment by the Adjudicating Authority. 2.13 The Court relied on the Supreme Court's decision in Kaushalya Infrastructure Development Corporation Ltd. v. Union of India, which interpreted the scheme of Sections 5 and 8 and held that adjudication proceedings may continue notwithstanding the setting aside or expiry of provisional attachment. Interpretation and reasoning 2.14 The appellants contended that even if a power of remand is assumed, the Adjudicating Authority cannot now confirm the provisional attachment because the original attachment order has lapsed by efflux of time under Section 5(1) and is non est. 2.15 The Court noted that in Kaushalya Infrastructure, the Supreme Court rejected a similar argument and held that the success of a party in proceedings challenging provisional attachment does not, by itself, nullify the pending adjudication; such adjudication may and must proceed to its logical conclusion. 2.16 Applying this reasoning, the Court held that the setting aside of the confirmation order by the Appellate Tribunal did not extinguish or nullify the adjudication proceedings under Section 8; rather, the remand only restored the proceedings to the position they occupied when the confirmation order was originally passed. 2.17 The Court observed that it was not asserted by the appellants that, on the date the Adjudicating Authority originally passed the confirmation order, the provisional attachment had already lapsed. Accordingly, there was no basis to contend that the confirmation could not have been validly made at that time. 2.18 The Court clarified that the Appellate Tribunal had set aside only the confirmation order and not the entire adjudication proceedings under Section 8. Consequently, on remand, the Adjudicating Authority resumes jurisdiction from the same stage, with the obligation to supply 'reasons to believe' and afford a proper opportunity of hearing. Conclusions 2.19 The Court held that the alleged lapse of the provisional attachment by efflux of time under Section 5(1) does not bar continuation or revival of adjudication proceedings upon remand, nor does it prevent the Adjudicating Authority from reconsidering confirmation of attachment. 2.20 The contention that the provisional attachment has outlived its life and cannot now be confirmed was rejected as devoid of substance. 2.21 Consequently, the order of the Appellate Tribunal setting aside the confirmation and remanding the matter to the Adjudicating Authority for de novo proceedings, with proper communication of 'reasons to believe' and opportunity to reply, was upheld, and the appeals were dismissed.