PMLA | Special Court Can't Order Confiscation U/ S.8(7) When Appeal Against Attachment Confirmation U/S 8(3) Is Pending : Supreme Court

In an important judgment interpreting Section 8 of the Prevention of Money Laundering Act (PMLA), the Supreme Court on Friday (February 6) ruled that once an appeal against the confirmation of the attachment order is pending before the Appellate Tribunal, the Special Court cannot decide upon the confiscation proceedings. “…once an order under Section 8(3) of the PMLA is challenged before a higher forum (under Section 26 of PMLA), a deemed embargo operates on the conclusion of the proceedings under Section 8(7) of the PMLA. Hence, the Special Court cannot go into the issues which the higher forums have been entrusted with. When an appeal is provided for under the statute, it gives a vested right to any aggrieved person to exhaust the same.” observed a bench of Justices MM Sundresh and N Kotiswar Singh.The bench stated that "there is a deemed stay on the proceedings under Section 8(7) of the PMLA until the confirmation order attains finality."In essence, the Court held that once a confirmation of attachment under Section 8(3) of the PMLA is carried in appeal before the Appellate Tribunal under Section 26, any application seeking confiscation under Section 8(7) cannot be adjudicated while the appeal remains pending. The power to proceed with confiscation under Section 8(7) arises only after the appellate proceedings under Section 26 attain finality."When an appeal or a further challenge is pending before the Appellate Tribunal or the concerned higher forum against an order passed under Section 8(3) of the PMLA, the Special Court is expected to refrain from dealing with an application filed under Section 8(7) of the PMLA, without awaiting the disposal of such appeal or further challenge," the Court stated.PMLA Provisions Involved Section 8(3) of PMLA empowers the Adjudicating Authority (special court) to confirm the attachment, seizure, or freezing of property involved in money laundering. Section 8(7) of PMLA empowers the Special Court to order the confiscation of the property, or the release of the property to a claimant entitled to it, if the trial of the offence could not be completed due to the death of the accused, or the absconding of the accused or due to any other reason.Section 8(8) emplowers the Court to order that the confiscated property be restored to a person who has suffered losses due to the offence.Section 26 PMLA provides for appeals to the Appellate Tribunal against orders of the Adjudicating Authority or the Director. It allows any person aggrieved by such orders to challenge them, typically within 45 days, following procedures for attachment and confiscation of property derived from criminal activity. Background The Enforcement Directorate (ED) had provisionally attached certain properties of the appellant under Section 5(1) of the PMLA, followed by confirmation of attachment by the Adjudicating Authority under Section 8(3). While the appellant's appeal against the confirmation order was pending before the Appellate Tribunal under Section 26, proceedings were initiated before the Special Court under Section 8(7) on the ground that the trial could not be concluded. Aggrieved by the High Court's decision to uphold the Special Court's continuation of proceedings under Section 8(7), the Appellant appealed to the Supreme Court. Issue The central question before the Supreme Court was whether the Special Court could proceed under Section 8(7) despite the pendency of the statutory appeal against the confirmation order. Decision Setting aside the impugned order, the judgment authored by Justice Sundresh found that the Special Court had erred in continuing with the confiscation proceedings under Section 8(7), despite an appeal against the attachment order was pending before the Appellate Court.“Instead of deferring the application filed under Section 8(7) of the PMLA, and awaiting the adjudication by the Appellate Tribunal under Section 26 of the PMLA, the Special Court has allowed the said application, for which exhaustive reasons have been given independently on merits. The Special Court has, in effect, rendered the appeal under Section 26 of the PMLA infructuous. The said action at the instance of the Special Court is totally impermissible in law.”, the court said.The Bench strongly disapproved of the approach adopted by the Special Court, noting that by proceeding to confiscate the property on merits, it effectively rendered the pending statutory appeal infructuous.ConclusionsThe conclusions of the judgment were summarised as follows :• Section 8(7) and Section 8(8) of the PMLA are stand-alone provisions. • Section 8(7) of the PMLA gets attracted only in case of a contingency and an application under the said provision can be decided by the Special Court only once the confirmation order attains finality. • The expression “material before it” occurring in Section 8(7) of the PMLA has a limited import to the extent of showing the contingency and the entitlement to possession as...

PMLA | Special Court Can't Order Confiscation U/ S.8(7) When Appeal Against Attachment Confirmation U/S 8(3) Is Pending : Supreme Court

Yash Mittal

There is a deemed stay on the proceedings under S 8(7) PMLA until the confirmation order attains finality.

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