Uneven Implementation And Executive Discretion: Rethinking Restitution Under Section 8(8) Of PMLA
As per Section 8(8) of the Prevention of Money Laundering Act, 2002 (“PMLA”), the Special Court is empowered to direct the Central Government to restore property that has been confiscated under the Act to a person or claimant who has a legitimate interest in it, upon conclusion of the trial. To qualify, the claimant must demonstrate that they acted in good faith, were not involved in the money-laundering offence, took reasonable precautions, and suffered a quantifiable loss. This provision seeks to balance the objective of enforcement with fairness towards innocent third parties. The second proviso to Section 8(8), however, allows such restoration even during the trial, subject to the conditions prescribed under the PMLA and its Rules. Rule 3A of the Prevention of Money Laundering (Restoration of Property) Amendment Rules, 2019 further elaborates the manner of restoration of property after the framing of charge under Section 4 of the PMLA. Read together, Section 8(8) and Rule 3A permit restoration of property to bona fide claimants after framing of charge or during the course of trial.
However, the uneven implementation of Section 8(8), PMLA has exposed a growing tension between legislative intent and constitutional fairness. Though the provision ostensibly enables the restoration of attached properties to innocent claimants, in practice it operates unevenly, sometimes allowing restitution where the Enforcement Directorate (“ED”) consents, and denying it where the ED objects, even in cases of manifest bona fides. This article examines how this selective and inconsistent application of the law, read with Rule 3A, has effectively transformed a judicial remedy into an executive concession. It argues that the current framework, by making restoration contingent upon the ED's approval and by delaying relief until the framing of charge, imposes an unconstitutional barrier to property rights and due process under Articles 14 and 300A of the Constitution.
The PMLA was conceived to prevent offenders from enjoying the fruits of criminal proceeds and to ensure that the benefits of illicit assets are not reaped by those involved in money laundering. Yet, the statute was never intended to punish or dispossess innocent third parties who have acquired property through legitimate means and have no connection with any alleged offence. By delaying restoration until after the framing of charge, the law inadvertently penalises such bona fide claimants. This procedural rigidity translates into prolonged deprivation, with properties remaining attached for years, often half a decade or more, before the proceedings before the Special Court even reach the stage of charge. In the meantime, such assets lose value, deteriorate, or remain under the control of the accused or the ED itself. What emerges is not a temporary regulatory measure but an unconstitutional deprivation of property without adjudication or timely remedy, violating both fairness and proportionality.
Compounding this structural flaw is an extra-statutory practice that has taken root in the implementation of the PMLA. It has become customary for the Special Courts to entertain applications for restoration before charge-framing only when the ED grants its “no objection.” Where the ED refuses, such applications are dismissed as “premature.” Neither Section 8(8) of the PMLA nor Rule 3A of the 2019 Rules vests the ED with any such veto or pre-approval authority. Nevertheless, this informal requirement has evolved into a de facto rule, vesting the investigating agency with unregulated discretion over a matter that lies within the judicial domain. This practice effectively transforms the ED into a gatekeeper of judicial access, subordinating the independence of the Special Court to executive consent.
The result of this framework is a procedural deadlock for innocent property owners. Appeals under Section 26 of the PMLA, which lie before the Appellate Tribunal against the confirmation of provisional attachment, remain pending for years due to systemic delays. Meanwhile, applications for restoration under Section 8(8) cannot be entertained by the Special Court until the charge is framed unless accompanied by the ED's consent. The claimant thus finds themselves trapped in a procedural limbo, unable to obtain relief from the Tribunal and barred from seeking restoration before the Special Court. This system creates a Kafkaesque situation where the right to property is reduced to an illusion: the owner remains dispossessed for an indefinite period, without any judicial finding of guilt or innocence.
The Supreme Court's recent order dated 10 October 2025 in “Udaipur Entertainment World Pvt. Ltd. v. Union of India & Ors.” (Special Leave to Appeal (C) No. 10734/2025)[1] illustrates both the potential and the limits of restitution under the current regime. In that case, the Supreme Court, invoking the second proviso to Section 8(8) of the PMLA, partially set aside the ED's attachment and directed restoration of certain properties to the successful resolution applicant for the benefit of innocent home buyers. The Supreme Court appreciated the ED's cooperation and clarified that the order was passed with consent, on the peculiar facts of the case, and would not operate as a precedent. While the outcome was just, it highlights a fundamental structural concern: restitution became possible not only because of judicial recognition of a constitutional right, but because the ED did not oppose it. Where the ED objects, similarly placed bona fide owners remain without remedy. This dynamic indicates that, in practice, the process of restitution under the PMLA often depends on the ED's stance, thereby limiting the effective exercise of judicial discretion.
Recent developments also underscore the central role of executive discretion in enabling restitution. In its press release dated 5 November 2025[2], the ED announced a coordinated mechanism with the Insolvency and Bankruptcy Board of India for the release of attached assets in IBC matters contingent upon applications filed under Sections 8(7) and 8(8) of the PMLA and subject to safeguards formulated by the agency. This development demonstrates that restoration becomes feasible and efficient when the ED chooses to support the process. However, no analogous mechanism exists for similarly placed bona fide third-party owners outside the IBC framework, reinforcing the concern that the availability of restitution continues to depend on the ED's policy preferences rather than a uniform statutory standard.
ED's commitment to tracing illicit proceeds and protecting victims of economic offences deserves acknowledgment. Yet, the current framework transforms restitution from a matter of right into a matter of privilege, contingent upon the agency's discretion. Such a system erodes the rule of law and undermines faith in the impartial administration of justice. The delay in charge-framing further exacerbates this imbalance, prolonging the deprivation of innocent owners and reducing judicial oversight to a distant formality.
In light of these concerns, the expressions “during the trial” in Section 8(8) and “after framing of the charge” in Rule 3A must be judicially reinterpreted in a manner consistent with constitutional principles. They should be read down to allow bona fide claimants to seek restoration immediately upon confirmation of the provisional attachment by the Adjudicating Authority, provided that the Court is satisfied as to the claimant's ownership and innocence. Such an interpretation would align the statute with the doctrines of reasonableness, proportionality, and non-arbitrariness that are integral to Articles 14 and 300A.
While the Court's facilitation of settlement in that matter is laudable, the broader systemic issue persists that access to restitution continues to depend on executive discretion rather than judicial right. If the purpose of the PMLA is to prevent wrongdoers from benefiting from crime, it cannot simultaneously punish those who are not wrongdoers at all. Unless the second proviso and rule are read down or reformed, restitution will remain an uphill, uncertain and unequal pursuit that, while acknowledging the ED's efforts, continues to perpetuate constitutional infirmity. The balance between enforcement and equity must now tilt decisively in favour of fairness, for only then can the PMLA's noble intent coexist with the Constitution's higher mandate of justice.
Author is an Advocate, Delhi High Court. Views Are Personal.