Summary
The Court interpreted Section 8 of the PMLA and held that the Special Court cannot decide an application for confiscation under Section 8(7) while an appeal against the Adjudicating Authority's confirmation order under Section 8(3) is pending; the confirmation order must first become final. The confiscation order passed during the pendency of the appellant's appeal was set aside and the appeal before the Appellate Tribunal was restored. The appellant's restoration claim under Section 8(8) was held not maintainable.
Issues
- Whether the Special Court can decide an application under Section 8(7) of the PMLA while an appeal against the confirmation order under Section 8(3) is pending before the Appellate Tribunal.
- The scope of the expression 'material before it' in Section 8(7) of the PMLA.
- Who may claim restoration of property under Section 8(8) of the PMLA and its second proviso, and whether the appellant qualified.
Provisions considered
- Section 2(1)(u), Prevention of Money-Laundering Act, 2002'Proceeds of crime' includes the value of property derived from criminal activity relating to a scheduled offence, so property of equivalent value may be attached where the proceeds themselves are not available. (¶¶ 18, 19)
- Section 8(1), (2) and (3), Prevention of Money-Laundering Act, 2002The Adjudicating Authority may issue notice to any person and must hear any other person claiming the property before deciding whether it is involved in money-laundering. Under Section 8(3)(b), the confirmed attachment becomes final only when a confiscation order is passed, so confirmation lasts only until confiscation. (¶¶ 20, 21, 22, 23, 24, 25)
- Section 8(7), Prevention of Money-Laundering Act, 2002A self-contained provision for confiscation or release where the trial cannot be held because of the accused's death, proclamation as offender, or a like reason, read ejusdem generis. A confirmation order under Section 8(3) is a precondition, and the application can be decided only once that order has become final. 'Material before it' is limited to showing the contingency and entitlement to possession; the Special Court cannot review the Section 8(3) order. (¶¶ 27, 28, 29, 30, 31, 32, 36, 37, 46, 47, 48, 52)
- Section 8(8) and its second proviso, Prevention of Money-Laundering Act, 2002Restoration after confiscation under Section 8(5) is confined to a claimant with a legitimate interest who has suffered a quantifiable loss from the money-laundering, acted in good faith and is not involved in it. The second proviso allows a claim during trial only as prescribed by Rules 2(b) and 3A of the 2016 Rules. (¶¶ 38, 39, 40, 49, 52, 53)
- Rule 2(b) and Rule 3A, Prevention of Money-laundering (Restoration of Confiscated Property) Rules, 2016A 'claimant' must meet the Rule 2(b) definition, so only a third party who is not an accused can claim. A Rule 3A application lies only after charges are framed under Section 4 and requires newspaper publication, with the claimant establishing a legitimate interest. (¶¶ 39, 40, 41, 42, 52)
- Section 9, Prevention of Money-Laundering Act, 2002On a confiscation order under Section 8(5) or 8(7), Section 58B or Section 60(2A), the property vests absolutely in the Central Government free from encumbrances, and third-party rights are extinguished. (¶ 43)
- Sections 25, 26 and 35 (with Section 12 of SAFEMA, 1976), Prevention of Money-Laundering Act, 2002The Appellate Tribunal, constituted under Section 12 of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976, is headed by a present or former Supreme Court or High Court Judge, has civil-court powers and is expected to decide appeals within about six months. This structure shows that a Section 8(3) decision is meant to be scrutinised in appeal, not by the Special Court. (¶¶ 33, 34, 35)
Held
- The definition of 'proceeds of crime' in Section 2(1)(u) is wide enough to cover property equivalent in value to property derived from criminal activity relating to a scheduled offence, and such property can be attached if the proceeds are not otherwise available. (¶ 19)
- Section 8(7) is a stand-alone provision triggered only by a contingency such as the death of the accused or his being declared a proclaimed offender. A confirmation order under Section 8(3) is its precondition, and the application can be decided only after that order has become final. (¶¶ 27, 28, 52)
- The expression 'material before it' in Section 8(7) has a limited import: showing the contingency and the entitlement to possession. A third party who was not before the Adjudicating Authority may invoke Section 8(7). A party that suffered an adverse Section 8(3) order may do so only on new material not considered by the Adjudicating Authority or higher forums; otherwise the Special Court would be reviewing the Section 8(3) order. (¶¶ 29, 30, 31, 52)
- When an order under Section 8(3) is challenged before the Appellate Tribunal or a higher forum, the appellate order replaces it under the doctrine of merger. Until the confirmation order becomes final, there is a deemed embargo on concluding proceedings under Section 8(7), and the Special Court must await the outcome of the appeal. (¶¶ 36, 37, 46)
- By allowing the Section 8(7) application on merits while the appellant's Section 26 appeal was pending, the Special Court effectively made that appeal infructuous; this was impermissible, and the High Court erred in upholding it. (¶¶ 47, 48)
- A claim under the second proviso to Section 8(8) can be made only by a 'claimant' as defined in Rule 2(b), who must be a third party not arraigned as an accused, and only after charges are framed, in the manner set out in Rule 3A. The appellant had appealed against the Section 8(3) order and did not show a quantifiable loss caused by money-laundering, so its application under Section 8(8) failed. (¶¶ 41, 42, 49, 53)
- Since the Appellate Tribunal dismissed the appellant's appeal as infructuous without going into the merits, through no fault of the appellant, that order was also set aside and the appeal restored. (¶¶ 50, 51)
Result
Appeal allowed. The Special Court's order allowing the Section 8(7) application, as affirmed by the High Court, was set aside, and the appellant's Section 8(8) application was held not maintainable. The Appellate Tribunal was directed to restore the Section 26 appeal and decide it on merits within four weeks, and the Section 8(7) application is to be kept pending until the challenge to the Section 8(3) order is decided. The Court's factual observations are prima facie.