Provisional attachment and frozen funds: Adjudicating Authority is the forum for determination; limited salary payments may be permitted.

The court clarified that adjudication whether frozen assets constitute proceeds of crime lies with the Adjudicating Authority and that that Authority lacks power to grant interim partial defreeze orders under the Section 8 procedure; provisional attachment, freezing and seizure operate within the PMLA scheme and proceedable property must be derived from scheduled offences. It upheld the Single Judge's exercise of discretion in relegating the respondent to the statutory remedy while permitting an incidental limited salary payment, holding that the order was not perverse. The appeal was dismissed and the High Court order stands.

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Issues: Whether the learned Single Judge erred in directing payment of salaries from amounts frozen under Section 17(1A) of the Prevention of Money Laundering Act, 2002 and in relegating the respondent to seek remedy before the Adjudicating Authority; and whether the appeal by the Authority should be allowed.

Analysis: The Court reviewed the scheme of the PMLA including the definitions of "proceeds of crime" and the statutory provisions governing provisional attachment, search, seizure and freezing of property (notably Sections 2(1)(u), 3, 5, 17, 20 and Section 8 procedure). The Apex Court's guidance that property can be regarded as "proceeds of crime" only if it is derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence was applied. The Court noted that the Adjudicating Authority is the forum for adjudication of whether frozen property amounts to proceeds of crime and that the Adjudicating Authority has no power under Section 8 to grant interim directions for partial defreeze to make payments from frozen amounts. The Single Judge's order relegated the respondent to the statutory remedy before the Adjudicating Authority while directing limited payment of salaries; the High Court considered whether that exercise of judicial discretion was perverse in view of the statutory scheme and binding precedents and concluded it was not.

Conclusion: The appeal is dismissed and the exercise of discretion by the learned Single Judge in relegating the respondent to its statutory remedy and in the incidental direction regarding payment of salaries is upheld; the High Court's order stands.

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