Guest Post: Per Incuriam and the Appellate Tribunal's Reading of Section 8(3) PMLA

(This is a guest post by Riddhi Alok Puranik)

A May 2026 order of the Appellate Tribunal constituted under the PMLA 2002 (“ATPMLA”), disposing of four appeals in the NSEL investigation, does something I argue that a Tribunal is not permitted to do. Confronted with a Delhi High Court Division Bench judgment going against how the Directorate of Enforcement read the PMLA, the Tribunal neither followed that authority nor distinguished it on the facts. It held the judgment — Directorate of Enforcement v. Rajesh Kumar Agarwal — to be per incuriam and declined to follow it.

The underlying dispute is narrow. Section 17 of the PMLA allows an authorised officer to search and seize or freeze property. Section 20 allows an authorised officer, on fresh recorded reasons, to retain that property for up to 180 days. Section 8(3) allows the Adjudicating Authority (also constituted under the PMLA) to confirm a retention. Rajesh Kumar Agarwal reads these as sequential i.e. without a Section 20 order the retention is void, and there is nothing for section 8(3) to confirm. The Directorate's case, which the Tribunal accepted, is that Section 8(3) carries an independent power to order retention on a Section 17(4) PMLA application, so that Section 20 may be bypassed altogether.

That interpretive question is contested and is now before the Supreme Court. The Tribunal was entitled to think the Delhi High Court wrong about it. What it could not have done, in my respectful submission, was to declare a Division Bench judgment as per incuriam. This is for two independent reasons: the doctrine does not fit a judgment that construed the very provision said to have been overlooked, and a Tribunal subject to a High Court’s superintendence cannot invoke this rule to avoid a judgment it disagrees with. This piece takes both objections in turn, then sets out why the ED’s reading of section 8(3) fails on the ordinary tools of construction, and finally what is at stake institutionally if the Tribunal’s approach stands.

The Interpretive Question

Three provisions of PMLA govern what happens to property after an ED search:

• Section 17(1) empowers authorised officers to search and seize, or where seizure is impracticable, freeze property, on a recorded reason to believe. Section 17(2) requires the officer to forward those reasons and material to the Adjudicating Authority immediately. Section 17(4), inserted by the 2013 amendments, requires the officer, within thirty days, to file an application before the Authority "requesting for retention of such record or property seized....or for continuation of the order of freezing."
• Section 20 is titled "Retention of property". Section 20(1) provides that where property has been seized or frozen under Section 17, an officer authorised by the Director who has recorded fresh reasons to believe that the property "is required to be retained for the purposes of adjudication under Section 8" may retain or continue the freeze for up to 180 days. Section 20(2) requires that retention order and accompanying material to be forwarded to the Authority. Section 20(3) mandates return of property on expiry of 180 days unless the Authority permits continuation. Section 20(4) requires the Authority, before permitting such continuation, to satisfy itself that the property is prima facie involved in money-laundering and required for adjudication.
• Section 8(3) provides that where the Adjudicating Authority decides under Section 8(2) that property is involved in money-laundering, it shall, "by an order in writing, confirm the attachment of the property made under sub-section (1) of section 5 or retention of property or record seized or frozen under section 17 or section 18" whereupon the attachment or retention may continue during investigation for up to 365 days, or the pendency of proceedings.

The dispute here is about the "or" in Section 8(3) PMLA and the operative verb. Does "confirm" distribute across both objects, so that the Authority confirms either a Section 5 PMLA attachment or a Section 17/18 PMLA retention that must first exist under Section 20? Or, does "or" introduce a separate, verb-free power for the Authority to directly order retention on a section 17(4) application, bypassing section 20 entirely?

What the Delhi High Court Held, and What has Followed

In Rajesh Kumar Agarwal, the Delhi High Court read the PMLA scheme as sequential, where Section 17 supplies the seizure/freeze power, Section 20 supplies the executive-layer retention authority for up to 180 days, and Section 8(3) supplies quasi-judicial confirmation for any continuation beyond that. Section 17(4) PMLA is the procedural mechanism through which the officer brings the matter before the Authority and is not an independent retention mechanism [Rajesh Kumar Agarwal (41)–(60)]. Retention not founded on a Section 20 order is void ab initio, incapable of being cured by later confirmation [Anirudh Pratap Agarwal (88)].

This decision is, for now, settled law in the Delhi High Court. Anirudh Pratap Agarwal v. Enforcement Directorate called Section 20 "the crucial link" between seizure and adjudication [Anirudh Pratap Agarwal (34)]. Directorate of Enforcement v. Poonam Malik followed. Ravi Aggarwal v. Deputy Director, Enforcement Directorate treated Rajesh Kumar Agarwal as binding precedent and held that section 8(3) "only governs confirmation."

Why the Per Incuriam Label Fails

The doctrine does not fit on its own terms

A decision is per incuriam when rendered in ignorance or forgetfulness of an inconsistent statutory provision or a binding authority. The AT-PMLA itself quoted Morelle v. Wakeling and Municipal Corporation of Delhi v. Gurnam Kaur to this effect [M/s N K Proteins (58), (60)], correctly stating that decisions given "in ignorance of the terms of a statute" may be treated as per incuriam. But Rajesh Kumar Agarwal was not rendered in ignorance of section 8(3): it construed that provision exhaustively alongside Sections 17 and 20. 

The ATPMLA held that Rajesh Kumar Agarwal is in conflict with the Supreme Court's judgment in Vijay Madanlal Choudhary v. Union of India. This claim has a structural problem though which the ATPMLA did not confront: Vijay Madanlal Choudhary was a constitutional challenge to the PMLA's enforcement architecture, not a case where the precise sequencing of Sections 20 and 8(3) was in issue. Paragraph 84 of that judgment describes the Section 17(2) and 17(4) safeguards in general terms, noting that the Authority "passes an order of retention" following a show-cause process, as part of the Supreme Court's analysis that the overall scheme contains inbuilt safeguards rendering it constitutionally valid.

It does not decide, because it was not asked to decide, whether a Section 20(1) order is a mandatory precondition to the Authority's section 8(3) power. A constitutional imprimatur on the overall architecture is not a specific holding on a sequencing question within that architecture. A court that subsequently decides that sequencing question does not thereby "ignore" the constitutional approval judgment. The Tribunal treated these as interchangeable when they are not.

Nor does the supposed conflict with Vijay Madanlal Choudhary sustain the per incuriam label even on its own terms. There is a fundamental difference between saying that a judgment is inconsistent with, or departs from, Paragraph 84 and saying that it is per incuriam because paragraph 84 was overlooked. Per incuriam requires ignorance of a binding, applicable ratio; it does not require agreement with every prior holding on a general scheme. The ATPMLA conflated disagreement with a precedent and holding that the precedent was per incuriam, which are entirely different propositions.

A lower adjudicatory body may disagree with a High Court's reasoning, but it lacks the institutional authority to treat that precedent as non-binding on that basis alone.

A Tribunal cannot in any case apply the label to a High Court

Even if the doctrine technically applied, the ATPMLA cannot invoke it against a judgment of the Delhi High Court. This is directly settled. In Union of India v. Chand Singh, the Delhi High Court held that "it is not open to the Tribunal to characterise a judgment of a High Court as per incuriam." [Chand Singh (7)]. One narrow latitude was recognised: where a tribunal has before it Supreme Court judgments that state the law differently from a High Court, it may follow the Supreme Court in preference. That is not a licence to call the High Court wrong on the statute; it is a duty, in cases of genuine conflict, to follow the higher court. That latitude is unavailable here because the claimed conflict with Vijay Madanlal Choudhary does not exist. 

What we have is a statutory tribunal substituting its own reading of section 8(3) for that of the High Court. The constitutional architecture forecloses this. The Supreme Court in East India Commercial Co. v. Collector of Customs held that a tribunal subject to a High Court's superintendence cannot ignore the law that court has declared and proceed in violation of it; if it could, the entire logic of supervisory jurisdiction collapses [East India Commercial Co Ltd (14), (31)]. L. Chandra Kumar v. Union of India placed High Court superintendence over tribunals within the basic structure of the Constitution [L. Chandra Kumar (79), (92)].

Why the ED's Interpretation Cannot Hold: A Convergence of Methods

The foundational error does not depend on the underlying interpretation being wrong. But it is worth examining why multiple orthodox techniques converge against the ED's position, because the Tribunal treated the grammar point as sufficient without considering what it does to the rest of the Act.

Grammar and the distribution of "confirm"

The subject-verb-object structure of section 8(3) is: "he shall, by an order in writing, confirm the attachment... or retention... under section 17 or section 18". "Confirm" is the operative verb, governing a single object list connected by "or." On the ED's reading, "or retention" introduces a power to originate retention, i.e. a power for which there is no verb in the sentence and no source in Section 8's architecture.

The Tribunal read "or" as disjunctive and derived from it a new, separate power. But "or" being disjunctive establishes only that there are two distinct objects; it does not supply a second, different verb [M/s N K Proteins (37)]. Filling that gap requires reading words into Section 8(3) that Parliament did not write, which is precisely what the Supreme Court in Vijay Madanlal Choudhary itself said constitutes rewriting the statute [Vijay Madanlal Choudhary [33)].

The Section 5 PMLA Structural Argument

The most telling textual point comes from a direct comparison with Section 5 of the PMLA. Section 5(1) reads: "he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and eighty days from the date of the order". This language is self-contained. It grants the Director an executive power of attachment directly, sets its own duration, and requires no separate provision to authorise retention. Section 8(3) then "confirms the attachment... made under sub-section (1) of section 5" and it confirms a prior executive order that Section 5 itself generates.

Section 17’s drafting rationale clearly departs from section 5. It could have, in order for it to be construed as a similar self-containing code, included language providing that the seizing officer may, by order in writing, retain such property for a period not exceeding 180 days. It does not thus, replicate the logic of section 5. Section 17 authorises officers to seize or freeze and contains no self-standing retention authority whatsoever. The officer who seizes under Section 17(1) has no power under section 17 to retain. Section 17(4)'s language confirms this: the officer files "an application requesting for retention", the language of petition to another body, not the language of independent executive order.

The retention authority for Section 17 PMLA property was placed, deliberately and separately, in Section 20. Section 20(1) mirrors section 5(1) in structure and provides that property "may, if seized, be retained... for a period not exceeding one hundred and eighty days". That is the executive retention order. Section 8(3) then confirms it, in the same manner that it confirms the section 5 attachment in the attachment track.

The expressio unius (Latin: expression of one thing is exclusion of another) inference is straightforward.  Parliament clearly enacted two enforcement tracks in the same statute. Under the attachment framework in Section 5, the authority to act and the authority to retain the property for 180 days are contained within a single provision. By contrast, under the search-and-seizure framework, Parliament distributed those functions across Sections 17 and 20, with Section 17 authorising the initial seizure and Section 20 governing subsequent retention. This structural choice reflects deliberate legislative design, where both tracks converge at section 8(3) for quasi-judicial confirmation but both require a prior executive order.

The ED’s argument effectively treats a seizure under Section 17 PMLA as the functional equivalent of an attachment under Section 5 for the purposes of Section 8(3). On this view, the Adjudicating Authority may confirm the seizure itself, even in the absence of a prior order under Section 20. Such an interpretation collapses the distinction that the statute deliberately maintains between the attachment and seizure mechanisms. If a seizure under Section 17 were by itself sufficient to attract Section 8(3), Section 20 would cease to perform any independent role within the search-and-seizure framework. The result would be to render Section 20 redundant, which is a consequence that the statutory scheme does not support.

Differential predicates

Section 20(1) PMLA obliges the authorised officer to record reasons showing that the property must be retained for the purposes of adjudication under Section 8. Section 8(2), which serves as the basis for any order under Section 8(3), requires the Adjudicating Authority to make a substantive finding that the property is involved in money laundering. These are materially different standards operating at different stages in the procedural machinery. The Section 20(1) determination is only a preliminary, executive-level judgement about investigative need while the Section 8(2) determination is a quasi-judicial finding on merits.

If the Section 17(4) PMLA application goes directly to the Adjudicating Authority without any section 20 order, the Authority is asked to make a full-blown section 8(2) money-laundering determination at the earliest possible post-seizure stage, before investigation is substantially complete, basis only the material forwarded under section 17(2). Parliament's decision to give the ED 180 days under section 20 exists precisely because that determination cannot responsibly be made immediately. Collapsing these tiers forces the Adjudicating Authority into an adjudication on merits at a stage for which the statutory scheme provides no adequate procedural preparation.

The Convention architecture

The PMLA's Statement of Objects and Reasons, reproduced in the Solicitor General's Note II, names the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances 1988 as one of the international instruments calling for prevention of laundering of drug proceeds and confiscation of proceeds derived from such offences. Chapter VA of the Narcotic Drug and Psychotropic Substances Act, 1985 (“NDPS Act”) was enacted to implement the same Convention's Article 5 on confiscation, and its seizure-confirmation architecture under Section 68F is a two-step structure where the investigating officer seizes or freezes under section 68F(1), and the quasi-judicial competent authority confirms within 30 days under section 68F(2), failing which property is returned.

That confirmation power is precisely a power of confirmation, not an original power of seizure. PMLA was enacted to address the money laundering which the NDPS regime had left uncovered, extending the Convention's framework to the full range of scheduled offences. If the ED's reading of Section 8(3) as an original retention power were correct, that expanded statute would provide fewer executive-layer accountability steps in its search-and-seizure track than the narrower NDPS regime it was designed to go beyond. That outcome can’t be reconciled with the Centre's own framing of PMLA as giving effect to India's Convention obligations.

The Institutional Stakes

The Tribunal’s interpretive disagreement with the Delhi High Court can very well be legitimate. The question remains contested, and with both Rajesh Kumar Agarwal and Anirudh Pratap currently pending before the Supreme Court, awaiting the Apex’s resolution on interpretation. The difficulty lies not in the Tribunal’s disagreement, but in the institutional consequences it drew from it.

The ATPMLA sits in a legal order where it is subject to Delhi High Court jurisdiction under Articles 226 and 227 of the Constitution and, hears appeals that travel to the High Court under Section 42 of PMLA, and has before it a consistent body of Division Bench authority directly on point. If it disagrees with that authority, the remedies open to it are narrow and well-defined, which are to follow the High Court while recording the difficulty and distinguish on facts where facts genuinely differ. Declaring a Division Bench judgment per incuriam is not one of those remedies.

The practical consequences of the Tribunal's approach, left unchallenged, are that Section 20 protections become effective only for those who can afford to litigate back to the High Court under Section 42. The Adjudicating authority cites the ATPMLA and thus it has immunised itself from High Court correction. Property seized without a Section 20 PMLA order stays seized, and Article 300A operates at the Tribunal's discretion rather than as a function of law. That is not a procedural quibble. It is the difference between a safeguard that functions and one that exists only on paper.

Guest Post: Attachment without Safeguards? Section 107 of the BNSS

(This is a guest post by Dhruvika P)

Recently various High Courts across the country have clarified that the Bharatiya Nagarik Suraksha Sanhita (“BNSS”) does not permit unilateral police action under Section 107 of BNSS. In Headstar Global Pvt Ltd v. State of Kerala, the Kerala High Court held that the attachment of property cannot circumvent procedural safeguards and judicial scrutiny. In this case the move to freeze bank accounts under Section 107 of the BNSS without referring it to a magistrate was held to be clearly impermissible. The High Court also distinguished between Section 106 (seizing of property by police) and Section 107, affirming that under Section 107 attachment can only be ordered by a magistrate. Similar concerns have been addressed by the Delhi and Bombay High Courts. Following the reasoning of the Kerala High Court observing “blanket freezing” of bank accounts violates fundamental rights under Article 19 and 21. Seemingly, these rulings appear to reinforce procedural safeguards by judicial oversight. However, they raise a deeper and more troubling question: does involvement of a magistrate in attachment reasonably constraint exercise of arbitrary authority, or does it merely formalise a weakly regulated framework?

This post argues that Section 107 of the BNSS, despite requiring Magistrate approval, continues to enable broad and less regulated powers of attachment. In fact, compared to the much criticised Prevention of Money Laundering Act, 2002 (“PMLA”), the BNSS attachment regime lacks comparable safeguards and accountability mechanisms. Further leading to a paradox of how general procedural law is permitting attachment with fewer safeguards than a specialised penal statute. By examining Section 107 through the lens of the PMLA, this piece contends that judicial involvement alone does not cure the underlying defects in the BNSS framework. Instead, the statute allows exercise of excessive discretion thereby raising serious concerns about constitutional guarantees of fairness, proportionality, and due process.

Attachment: From CrPC to BNSS

The Code of Criminal Procedure (“CrPC”) contained limited provisions for property attachment. Section 83 dealt with attachment of property of proclaimed offenders and Section 102 allowed for seizures of movable property and bank accounts. As compared to CrPC provisions, Section 107 of BNSS introduces broader powers for attachment of proceeds of crime.

However, the BNSS does not clearly define the term "proceeds of crime" within the operative provision itself. Instead, reference must be made to Section 111 which appears in a different chapter dealing with reciprocal arrangements and procedures for attachment and forfeiture of property. According to this, “proceeds of crime” encompasses property derived directly or indirectly from criminal activities. This structural displacement creates interpretive ambiguity, as it is unclear whether the definition is intended to apply uniformly across the statute. The absence of an explicit and clear definition under Section 107 creates gaps in the definition and authorises for a broader application of this definition by investigating officers.

This ambiguity becomes significant when contrasted with the PMLA definition. PMLA is a special statute for serious economic offences and provides clear definition under Section 2(1)(u) which defines proceeds of crime comprehensively to include property derived from or generated from criminal activity related to scheduled offences (and includes property of equivalent value). 

Despite their different purposes, both the BNSS and the PMLA empower the State to attach property at the pre-trial stage. While the underlying objectives may differ in both the statutes, the means through which this power is exercised, that is the procedural framework governing attachment are structurally similar. This similarity of provisions has also been argued in Pay 10 Services Private Limited v. Union of India to prove consequences of attachment under BNSS. It is this convergence in procedure that provides a room for comparative analysis between BNSS and the PMLA provisions on attachment.

Procedural Safeguards: A Comparative Analysis

According to Section 5(1) of the PMLA property can be attached where the Director or any other officer not below the rank of Deputy Director authorised by the Director believes it to be proceeds of crime. The reason to believe has to be based on material in their possession. In contrast, according to Section 107(1) of the BNSS a police officer investigating with the approval of the Superintendent of Police or Commissioner of Police, may make an application to the Court or the Magistrate exercising jurisdiction to take cognizance of the offence or commit for trial or try the case, for attachment of proceeds of crime. Further according to Section 107(2) if the Court or Magistrate has reasons to believe, whether before or after taking evidence, that all or any of such properties are proceeds of crime, it may issue a notice upon such person calling upon him to show cause within a period of fourteen days as to why an order of attachment shall not be made.

Procedurally, Section 5 (1) PMLA provides more safeguards as compared to BNSS 107(1) & (2). According Section 5(1) of PMLA, the reasons for attachment have to be in writing and only an officer not below the rank of deputy director can attach. BNSS provision lacks explicit mention of written explanation and allows the magistrate to attach if they have reasons to believe. There are two concerns in BNSS. First, absence of explicit mention of written explanation. The Supreme Court in Kranti Associates Private Limited v. Masood Ahmed Khan has reiterated that “reason is the soul of justice”. It was also noted that reasoning should not be done merely for the sake of procedure but it must be done to serve the wider principles of justice. Second, the procedure to seek approval is unclear. It merely states that approval must be sought from the Superintendent of Police or Commissioner of Police but does not prescribe the manner, standard, or material basis for such approval. The vagueness of this requirement may result in approvals being treated as a mere formality.

Concerns with Adjudication of Attached Property

With regards to adjudication of attachment, PMLA under Section 8 empowers an adjudicating authority to decide these issues. BNSS empowers the court and the magistrate to decide such matters. Under PMLA there is a period of provisional attachment of 180 days. If the adjudication is not completed under 180 days the provisional attachment order becomes void. However in BNSS, there is only a period of 14 days to reply to the show cause notice if issued by the court or the magistrate, post the 14 days period an ex parte attachment or seizure of such property can follow, and it shall remain in force till a distribution order under 107(6) is passed.

Both the statutes deprive an individual’s right to enjoy property. In PMLA it is temporarily for a period of 180 days without any justification. The BNSS does not specify any time limits or mandatory review mechanisms. It is unclear and arbitrary in BNSS. PMLA’s framework includes specific provisions for modification or revocation of attachment orders. Section 5(5) allows affected persons to apply for order modification. BNSS lacks at least similar provisions, leaving remedies to general appellate mechanisms under the code.

In this light, the BNSS attachment provisions seem relatively ambiguous and underdeveloped in terms of procedural safeguards when contrasted with the PMLA framework. This procedural ambiguity regarding adjudication under BNSS also hampers judicial decisions that have established practical guidelines for the custody and disposal of property seized during criminal proceedings under CrPC regime.

Constitutional Standards and the Draconian Risk

The constitutional validity of Section 107 must be seen against the guarantees of Article 14 and 21 along with constitutional right to property. As established in EP Royappa v. State of Tamil Nadu, arbitrariness is antithetical to equality, and any arbitrary state action necessarily violates Article 14. This principle was subsequently strengthened in Maneka Gandhi and its just fair and reasonable standard. Section 107 BNSS, when tested against this standard, raises three at least concerns. First, absence of a mandatory requirement to record reasons at the investigative stage creates a risk of arbitrariness. Second, lack of clear thresholds guiding approvals, resulting in an open-ended and weakly-structured check. Third, lack of review mechanisms allowing for prolonged and disproportionate deprivation of property. Hence, these deficiencies also dilute the quality of judicial scrutiny itself.

The decision in Vijay Madanlal Choudhary v. Union of India further strengthens the case against Section 107. The Supreme Court’s reasoning to uphold the constitutionality of the PMLA attachment provisions, despite its severity rested on the structured safeguards within the PMLA framework. Section 107 BNSS, by contrast, replicates the coercive effects of attachment without incorporating equivalent safeguards even that of PMLA. As a general procedural provision, it cannot rely on the same exceptional rationale that underpinned the Court’s reasoning in Vijay Madanlal.

Conclusion

A more balanced attachment framework under Section 107 of the BNSS may be developed that requires states to ensure attachment of proceeds of crimes are complemented by adequate procedural safeguards. International scholarship suggests that these concerns are not unique to India. Modern attachment regimes struggle to harmonise between asset recovery and guarantees under rule of law. In AGOSI v. UK, the European Court of Human Rights held that in the confiscatory process, authorities must maintain a “fair balance” between public interest in combating crimes and protection of individual property rights. 

Legal developments in India indicate a need for attachment frameworks to retain sufficient procedural safeguards along with their effectiveness in attaching “proceeds of crime”. By explicitly mentioning recorded reasons, ensuring adequate judicial review, and providing meaningful opportunities to challenge attachment, the new BNSS attachment regime can avoid structural weaknesses that render a general criminal procedural law draconian.

Restoration of Properties under PMLA pending Trial - Quite the Quagmire

Efforts to 'restore' monies to victims of large-scale frauds using the Prevention of Money Laundering Act 2002 [PMLA] have received some attention in 2024. Simply put, the scheme works as follows (at least in most cases). Usually at the start of PMLA cases, properties allegedly involved in money laundering are frozen or attached by the authorities to prevent their dissipation. This is called a 'provisional attachment' that subsists for the duration of the trial for the alleged crime of money laundering if an Adjudicating Authority agrees with this decision in parallel proceedings (which, it almost always does). These assets are then sold off by the government, and the sale proceeds are distributed amongst victims on a pro-rata basis. Everyone goes home happy, and the law delivers justice for a change. Well, at least that is what you are supposed to be left thinking after reading about these exercises in the news.

At first, this news appeared a little strange to me. This is because I was labouring under a misconception about what the PMLA regime allowed in respect of properties attached by authorities. Till 2019, the law under Section 8 of the PMLA said that while attachments would subsist the life of the criminal trial, confiscation i.e., the actual transfer of title in the property to the government, happened only after the trial resulted in a conviction for offences of money laundering involving the assets in question. And Section 8(8) said that where the property stood confiscated, a court could consider a claim for restoration of property to a claimant who suffered a loss due to the offence. 

In this 2019 framework, then, no sales and pro-rata distributions could happen without convictions. This is not an ideal scenario in a legal system where trials take an eternity to conclude. What made it even more problematic, was that the global body responsible for reviewing anti-money-laundering compliance — the FATF — had consistently viewed this conviction-based confiscation framework as suboptimal.   

Enter amendments to the relevant regulatory regime in 2019. Section 8(8) of the PMLA was amended in 2018 and the following proviso—the legalese for a condition or exception to the norm—was inserted: "Provided further that the Special Court may, if it thinks fit, consider the claim of the claimant for the purposes of restoration of such properties during the trial of the case in such manner as may be prescribed." In other words, the restoration to claimants could happen even before conviction. The power was operationalised in 2019, through an amendment to the Prevention of Money Laundering (Restoration of Confiscated Property) Rules 2016, with insertion of Rule 3A. It lays out the procedure by which a court can exercise these powers of considering claims, and in addition to procedural compliances requires that (i) the case should have progressed to the framing of charges, and (ii) owners of the properties in question be heard before passing any orders. 

Here is the catch. The law, by which I mean Section 8 of the PMLA, still only provides for confiscation in the event of conviction at trial. And Section 9 of the PMLA further specifies that "all the rights and title" in such property shall vest in the government only after confiscation. Section 8(8) itself says that the idea of restoration flows after confiscation. So, of confiscation and transfer of title itself remains glued to the end of trials, how on earth is Section 8 conferring powers on the court to direct sale of assets for some kind of restoration to claimants pending trial? 

There are many questions which may spring to mind making this seem problematic. Let me run through a few. First, charge is meant to be a sieve through which 90% of the cases percolate onwards to trials, since the sieve is made entirely from the story crafted by the prosecution. So, in effect, there is no filter to make sure that only cases which may genuinely result in convictions are being opened up for pre-conviction sale of assets. Second, in line with this first issue, what about the very likely outcome of a case ending in an acquittal or it being quashed? Third, what about the pendency of an appeal against the attachment and its effect on any claim by the claimant? All of these questions beget no real answers from within the statute itself. 

Beyond these problems of logic and implementation, the justice-delivery proviso to Section 8(8) also brings us face to face with an old legal maxim, that the scope of an exception to the rule cannot be broader than the rule itself. In this case, it would seem that this principle is clearly violated. The rule here is the text of Section 8 PMLA, which links transfer of title to confiscation. The exception to this rule, in the form of this 2018 proviso to Section 8(8), permits transfer without confiscation. Probably this is why High Courts (here, and here) have expressed doubts about the legal soundness of the proviso in passing already. If anything, the legally proper course of action may have been to amend Section 8(7), which caters to a few situations where a trial cannot conclude due to death or the accused absconding and permits passing an order for confiscation in such cases also, to allow for a wider set of scenarios.  

Who cares, though? 

(While this post is restricted to the restoration to claimants pending a trial for money laundering, and by no means should one assume that the regime post confiscation is ideal either)

Prakash Industries and Interpreting the PMLA

The Delhi High Court has passed a detailed judgment in the matters of Hi-Tech Mercantile and Prakash Industries [Order dated 19.07.2022 in WP(C) No. 14999 of 2021 ("Prakash Industries"], touching on issues pertaining to the Prevention of Money Laundering Act 2002 [“PMLA”]. Holding in favour of the Petitioners and terminating the PMLA proceedings, the High Court considered four critical issues: (i) the interplay between a scheduled offence and the PMLA proceeding; (ii) the scope of the phrase “proceeds of crime”; (iii) the breadth of attachment powers, and; (iv) the application of Article 20(1) of the Constitution of India to the PMLA context. The first two issues were held in favour of the Petitioner, the third arose due to a purported conflict between earlier orders of courts, and the fourth was decided in favour of the Respondent. 

This post is not seriously concerned with the second issue of whether an allocation of a coal block could be seen as being proceeds of crime for the PMLA. Rather, the focus here is how Prakash Industries engages with the links between PMLA proceedings and the scheduled offence, while also elaborating on the purported conflict on understanding the scope of attachment powers. It is argued here that the Court’s conclusions on the attachment powers issue are ultimately correct. However, in respect of the latter issue,  the Court has created a curious contradiction by concluding that PMLA actions and scheduled offence proceedings are inextricably linked, but Article 20(1) would sever that link. The distinctions drawn are more an exercise in sophistry, looking to the form rather than substance of the matter, and do not do justice to the scope and ambit of the constitutional guarantee of Article 20(1). 

A Quick Background

The PMLA punishes practically anything to do with “proceeds of crime”, and it defines this concept in Section 2(1)(u):

“proceeds of crime” means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad;

Explanation. — For the removal of doubts, it is hereby clarified that “proceeds of crime” include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence

If the PMLA relies on proceeds of crime to come into action, then proceeds of crime in turn rely upon the commission of a scheduled offence, which is defined in Section 2(1)(y) as referred to the offences that are specified in the schedules to the PMLA.

The Axis Bank - Seema Garg Controversy on Understanding "Proceeds of Crime" [Paras 66-81]

If we return to the proceeds of crime definition, it can be separated into three limbs — (i) property that is "derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence" (read with the explanation); (ii) the "value of any such property"; (iii) where "such property is taken or held outside the country" then property "equivalent in value held within the country or abroad".

In Prakash Industries, the Court observed that there appeared to be a conflict in how the second and third limbs of the proceeds of crime definition were being interpreted by courts. It noted the Punjab & Haryana High Court's decision in Seema Garg [Order dated 06.03.2020 in PMLA O&M No. 1 of 2019] as having read the statute in a manner contrary to the Delhi High Court's earlier decision in Axis Bank [Order dated 02.04.2019 in Crl. A. 143/2018].

What had Seema Garg done? It had held that the second limb (value of any such property) bore a live link with the first limb (property derived or obtained from a scheduled offence), to the degree that it must be borne from the first limb. So, if the proceeds of crime generated from committing the scheduled offence are cash, and that cash is invested towards building a house, then that house is the kind of property that the second limb covers. As against this, the third limb could cover any property of the defendant, acquired before or after commission of the offence, which was of equivalent value to proceeds of crime identified by the prosecution. If both the second and third limbs covered any property of equivalent value, this meant that one of the two was redundant, which could not be the correct way to read the statute. 

Axis Bank differed from Seema Garg by rejecting the view that the second limb only covers property that is birthed from the first limb. Instead, it held that both the second and third limbs could cover any property which was of equivalent value. There was no redundancy because the third limb only covered cases where the proceeds of crime were taken out of India, which was beyond the scope of the second limb. Noticing the possible hardship resulting from this reading, the Delhi High Court in Axis Bank had insisted upon requiring the prosecution to give reasons why it was going past the first limb and demonstrate that the proceeds of crime derived or obtained from commission of the scheduled offence were not available.     

In Prakash Industries, the Delhi High Court agreed with its earlier orders in Axis Bank, emphasising that the view taken in Seema Garg would amount to deleting the second limb altogether. Further, it held that such a view would limit the scope of attachment powers in a manner contrary to the legislative intent behind enacting the PMLA, as the statute imagined scenarios where proceeds of crime would be layered by sophisticated means rendering them untraceable for attachment. The Court re-emphasised the safeguard of requiring the prosecution to demonstrate why it had to resort to attach anything other than the proceeds of crime so identified. 

Limiting the second limb of Section 2(1)(u) to only cover property which was birthed from the proceeds of crime generated from the scheduled offence might appear too limited a view of the law considering its intent and the ease with which the proceeds of crime might be layered in the financial system — cash can get invested in a host of financial instruments, held in the names of various persons. Moreover, it is next to impossible to prove the level of causation demanded by Seema Garg where proceeds of crime go into a bank account and merge with existing balances — if INR 5,00,000/- alleged to be proceeds of crime hits an account which already had INR 5,00,000/-, then how do we establish that the watch bought from the bank account was due to the proceeds of crime and not existing balances? Which is why the more relaxed view adopted in Axis Bank is preferable. But, the cost of adopting this view is that it brings with it the very real risks of the Enforcement Directorate simply not making the effort to trace the proceeds of crime and instead attaching legitimate assets causing undue hardship to defendants and innocent third parties. To its credit, the PMLA does provide for an agency in the form of the Adjudicating Authority to exercise oversight over what the Enforcement Directorate does and ensure that this doesn't happen. That this Authority might not be doing its job is, arguably, not a valid reason to erect limits within the statute itself.         

The Scheduled Offence and PMLA: A Peculiar Relationship

It was contended by the Enforcement Directorate in Prakash Industries (as it is contended by this agency in many other cases) that the offence of money laundering is an independent offence and unconnected to the fate of the scheduled offence. Thus, it sought to argue that even if a court discharges / acquits the accused or quashes proceedings relating to the scheduled offence, that would not affect the PMLA proceeding since the latter was an independent offence. This argument is sought to be anchored in Section 44 of the statute which provides that PMLA proceedings are not 'dependent' on the scheduled offence. 

A cursory reading of Section 2(1)(u) and the definition of the money laundering offence would be enough to reject this contention — since proceeds of crime, the beating heart of the PMLA, are expressly linked to a scheduled offence, a finding that there was no scheduled offence would naturally entail that no proceeds of crime were generated, and thus the PMLA cause of action would not lie. A finding to this effect came to be passed recently by the Supreme Court in a peculiar fact context [J. Sekar v. Directorate of Enforcement, Crl. A. No. 738 of 2022 (Order dated 05.05.2022) — not cited in Prakash Industries]. But the language of the High Court in Prakash Industries in rejecting this argument of the Directorate is more expansive and hopefully marks the end to this particular contention being raised [Paras 36-65] (till the day the statute de-links "proceeds of crime" from the scheduled offence altogether).     

While on the one hand the Delhi High Court in Prakash Industries characterised the relationship between the PMLA cause of action and a scheduled offence as 'inextricable', it curiously did not find any problems in viewing these two as stand-alone processes when it came to application of the constitutional guarantee under Article 20(1) against retrospective punishment.  

"Article 20(1):— No person shall be convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence."

The issues of retrospective penalisation before the High Court in Prakash Industries were straightforward. If the PMLA itself had come into force from 2005, then could it apply to cases emanating from scheduled offences registered prior in time? And, if a specific offence itself came to be added to the schedule on date X, then could a PMLA prosecution lie in respect of the proceeds of crime for cases registered prior to X date notifying the offence as a "scheduled offence"? 

The High Court concluded that allowing a PMLA prosecution to run in both these scenarios would not violate the bar against retrospective penalisation under Article 20(1). This is because the cause of action did not stand completed on the date of the commission of the scheduled offence and generation of any proceeds of crime, since the PMLA went beyond this and punished possession or use of such proceeds at any point of time. Thus, it was more like a situation where some elements for the cause of action were being drawn from a point of time prior to the legislation coming into effect, rather than the entire cause of action having been complete before that date and its character being changed retrospectively. 

Holding that the PMLA proceedings can subsist even in cases where the underlying scheduled offence was either prior in time to the PMLA coming into force, or the offence being incorporated into the schedule, is a conclusion which comes under some difficulty when scrutinised. Especially, if one is of the view — as the Court in Prakash Industries is — that the scheduled offence is inextricably linked to the PMLA cause of action. This is because before the coming into force of the PMLA, or Date X, the property generated by committing the crime could not be proceeds of crime, since the offence was not a scheduled offence. If the Act goes back in time to a point when the scheduled offence did not exist, it means that the properties in question were not proceeds of crime, and therefore it would not attract the terms of Section 3, PMLA. To place this in the language of Article 20(1) which prohibits punishment "for a violation of law in force at the time of the commission of the act charged as an offence", it is clear that the "act charged" in the PMLA context will always have to be read together with the concept of a "scheduled offence" which is what can lead to any proceeds of crime arising in the first place.

The second limb of Article 20(1) is also attracted here, something which the Court did not fully appreciate in Prakash Industries. Giving the PMLA retrospective effect is problematic because it would alter the nature of events completed in the past, rather than simply rely upon an acquired status or characteristic of persons or things to give the law effect. The commission of a scheduled offence which led to generation of some property is an event which, through a separate law, is sought to be saddled with additional liability.  This is unlike, say, the following scenarios:

• A law is passed requiring persons to obtain a license for keeping alcohol at home. D has alcohol at home prior to the law being passed, and refuses to get a license. The law would, rightly, punish D for failing to get a license in respect of this alcohol which she had acquired prior to the law coming into force. The infraction here is the failure to get a license, and it would continue for each day that the person refuses to get a license. 
• Possession of items already criminalised by an existing law is made more severely punishable by a new law. This new law would certainly apply to items possessed at a date that is prior to the law being enforced. However, it could not apply to cases already registered prior to the law coming into force. This scenario is akin to the one before the Supreme Court in Mohan Lal [(2015) 6 SCC 222] which in my view correctly noted that the NDPS Act would cover cases in which possession continued from a time prior to that Act coming into force, but incorrectly applied the Act to that specific case which had been registered prior to the NDPS Act coming into force and thus should have been governed by the Opium Act instead. 

The PMLA might be criminalising possession or use of certain items, but it is not analogous to issues of possessing alcohol without license or drugs after a law criminalises possession. This is because the PMLA relates back to a set of events (commission of scheduled offence) which when they were committed did not attract the additional penalty of inviting criminal proceedings under the PMLA against an individual. It is no better than a law which says that all persons convicted of any offence in the past will now be open to suffering additional prosecutions for having possessed or used property derived as a result of that offence. 

This issue of Article 20(1) would also prevent invoking PMLA for its attachment processes, because just how there is an inextricable link between the scheduled offence and PMLA prosecution, there is such a link between the PMLA prosecution and the attachment process. Unlike, say, the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act 1976 ["SAFEMA"] where forfeiture proceedings may use the fact of a prior prosecution but work entirely independent of such a prosecution, the proceedings of attachment and confiscation under the PMLA cannot exist independent of a criminal proceeding under the PMLA. Which is why relying on cases which term forfeiture under these parallel regimes as not being "penalties" for purposes of Article 20(1) — such as Biswanath Bhattacharya [AIR 2014 SC 1003] would be inappropriate for the PMLA context.

Conclusion

In a judgment where the High Court emphasised on the inextricable link between the scheduled offence and the money laundering offence, it has ultimately undone its own finding by enabling retrospective operation of the money laundering offence by, somehow, concluding that this link is perhaps not so inextricable after all. The latter is an erroneous view, which fails to give full import to a constitutional mandate carried in Article 20(1), and may expose countless persons to harassment by re-opening closed transactions on the strength of untested allegations by an agency. Since it has come at a time when the Supreme Court is also poised to deliver a judgment on various aspects of the PMLA, the observations of the Delhi High Court in Prakash Industries may end up having a rather short shelf life. In some respects, such an outcome might not be for the worst. Unless, of course, this judgment presages what is yet to come.

Attachment of Property, Freezing Orders, and PMLA Investigations: The Need for Reasonable Exclusions

In almost any prosecution, the property used to commit a crime becomes case property (a murder weapon). In some kinds of prosecutions, this extends to locking down the site of criminal acts (a brothel or a gaming house). There are also other prosecutions, such as those for money laundering, where a major focus is on identifying the property generated from criminal acts (flat bought by public servant from bribe money). 

Countries across the world take the view that for effective deterrence of crime, law enforcement must also have powers to take away the proceeds of crime besides prosecuting the criminal act itself. In India, this translates into empowering law enforcement agencies with ability to pass orders for attachment / freezing of assets, to restrain anyone from altering / transferring property that is identified as part of the proceeds of crime. The pre-eminent example of this attachment / freezing order regime in India is the Prevention of Money Laundering Act 2002 ["PMLA"]. 

Broad Powers 

Currently, Section 5 of the PMLA confers upon investigating officers a power to provisionally (for upto 6 months) attach property which is believed to be "proceeds of crime" [Or property that is "involved in money laundering", which may or may not be understood to mean a different thing]. To appreciate the breadth of this power, take a look at how Section 2(u) of the PMLA defines the phrase "proceeds of crime"

"Proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad;

Explanation. — For the removal of doubts, it is hereby clarified that "proceeds of crime" include property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence;

[Emphasis mine] 

 

Keeping aside the fact that the exact scope of this definition is still uncertain even to courts and is almost infinitely broad, there are three key takeaways from the definition: (i) Proceeds of crime can either be the actual property obtained through criminal activity or its value; (ii) The criminal activity itself need only be relatable to a scheduled offence [the list of predicate offences which allow invoking the PMLA].

What we have, then, is a power conferred upon investigating officers to take away almost any asset or property that they can show as having links to the alleged acts of criminality in a case. For example, it means the agency can issue warrants of attachment of a house, as the accused would have invested some money in building / buying the house which will be shown to bear a link to the alleged acts of criminality that are connected to the scheduled offence. And where the property itself is not identifiable, then it would probably trigger an attachment order qua certain amounts lodged in bank accounts.  

 

Safeguards

The breadth of provisional attachment powers under the PMLA necessitates the existence of some legal safeguards to prevent undue hardship at the hands of executive officers. Enter, the three-step logic of the PMLA. The argument, essentially, is that the PMLA contains a multi-level system of safeguards to prevent abuse:*

1. First level — Provisional Attachment: Provisional attachment orders are time-barred and can only be issued if there are "reasons to believe" that property is the proceeds of crime / involved in money laundering. These reasons must be in writing. Further, such orders cannot interfere with enjoyment of immovable property;
2. Second level — Confirmation: Within thirty days of issuing a provisional attachment order, a complaint must be sent to the Adjudicating Authority which then decides whether or not to confirm the provisional order. This is an independent tribunal which operates totally separately from the criminal court. At this stage, everyone interested in the property has the chance to make their case to show why it shouldn't be attached, and a reasoned order must be passed by the Authority to justify its conclusions. This process is, again, time-bound.
3. Third level — Appeal: A right of statutory appeal before an Appellate Tribunal for Money Laundering exists for all persons aggrieved by the orders of the Adjudicating Authority.

In almost any writ petition challenging attachment orders, this is a standard response on behalf of the law enforcement agencies to argue that the matter should remain within the PMLA system and not be taken up by the court. 

The Need for Reasonable Exclusions

The three-step logic of the PMLA does offer some safeguards, in theory at least. But even so, this setup has critical design flaws. 

The broad attachment powers of the PMLA exist in a system where eventual confiscation of the proceeds of crime requires a prior criminal conviction for money laundering offences. Therefore, almost every attachment order will likely subsist for the several years that it takes for any prosecution to complete. It also means that once a person fails to secure any relief through the three-step PMLA process, she will not be entitled to any enjoyment of her own property.

While this might not be a problem for small, replaceable items, such as a watch or a laptop, it becomes an unimaginable problem where the property is a house. Or, far worse, is the situation where the property attached is money lying in bank accounts. Here, the three-step safeguards come to nought as all access to the property is gone the moment a provisional attachment order is passed. What this means, then, is that a person is rendered penniless, and crippled in her ability to sustain the long legal battle required to prove her case first before the tribunals and then later in the criminal trial. 

This is not the only drastic scenario that I can imagine. Consider, for instance, a case where money in bank accounts is attached as the actual proceeds of crime have since been sold. But now, these monies are held in the accounts of a company that has nothing to do with any money laundering allegation and offers gainful employment to hundreds of people. 

These routine examples from the world of PMLA prosecutions show just how unfair this legal regime is.  It is also squarely unconstitutional. This complete deprivation of property by passing attachment orders for the entire asset is by no means a reasonable or proportionate manner to secure state interests. If anything, it is a classic case of pursuing state interests by trampling upon the most basic rights of affected persons. 

A way to make this regime more palatable would be to start recognising reasonable exclusions from the scope of any attachment orders. For instance, allowing persons to remain in possession upon payment of rent; or allowing certain limited withdrawals to continue running a business and paying salaries; or paying lawyers' fees. These are not revolutionary ideas and are in fact already part of the law in other countries [See, e.g., Section 303Z5 of the U.K. Proceeds of Crime Act, 2002; Luis v. United States, 136 S. Ct. 1083]. By engrafting a process of recognising reasonable exclusions within the PMLA statutory framework — at the stage of provisional attachment orders for movable property and at the confirmation stage for immovable property — the core fairness and proportionality concerns would be answered to some extent. Moreover, it would also help save judicial time, as currently such reliefs are sought either through writ proceedings in High Courts or through interim orders before the Appellate Tribunal.  

Conclusions

The PMLA has not been a statute shy of legislative tinkering. Often, this has been a response to some or the other gaps being pointed out in the scheme of the Act. The absence of any reasonable exclusions from the attachment regime is as big a gap as there can be. It leads to a disproportionate deprivation of the basic rights (and needs) of innocent persons, and also wastes valuable judicial time and effort. Ergo, a happy ending? Remember, it is the hope that kills you. 

* The Three-level logic can also be used as a reference to the relief structure that exists besides the need under Section 5 for the officer to record reasons to believe. Here, the first step would be the Confirmation hearing, the second step the Appellate Tribunal, and the third would be the statutory right to move the High Court under Section 42 of the PMLA.

[This post was updated on 29.05.2020 to add a note on the three-step logic for reliefs within the PMLA]

Update: Delhi High Court Decision on Section 82 and Proclaimed Offenders

A couple of years ago, this Blog discussed the legal position on Section 82(4) Cr.P.C. and the legal issue of how do we interpret the term "proclaimed offenders" used therein. The earlier post described the problem thus: 

Section 82(4) was inserted in 2006 to state that failure to appear after a proclamation entitles a court to pronounce the person a "Proclaimed Offender" and make a declaration to that effect. Importantly though, 82(4) is limited to proclamations in respect of persons accused of offences punishable under Sections 302, 304, 364, 382, 392, 393, 394, 395, 396, 397, 398, 399, 400, 402, 436, 449, 459 or 460 of the Indian Penal Code. The consequences of a proclamation are twofold. One, a proclamation triggers Section 83 Cr.P.C., enabling a court to attach any property belonging to the proclaimed person which may be sold upon continued absence. Two, Section 174-A of the IPC (also inserted in 2006 by the same amending statute) makes it an offence to not appear following proclamations under Section 82 Cr.P.C. In 174-A IPC a distinction was made: disobeying a Section 82(1) proclamation was punishable with imprisonment upto 3 years or fine or both, but where a declaration under Section 82(4) was made a person could be punished with imprisonment upto 7 years with a mandatory fine. 

...

... Section 82 today creates two separate classes of proclamations: those for persons accused of offences specified under Section 82(4), and all other proclamations. This is supplemented by Section 174-A IPC, which reiterates that a higher punishment may be inflicted upon those declared Proclaimed Offenders under 82(4). There is no such declaration for disobeying the other proclamations issued under Section 82(1), which brings us to the issue at hand. Can persons other than those accused of offences listed under Section 82(4) be declared Proclaimed Offenders?

Further, the post mentioned how the Punjab and Haryana High Court had considered the issue in a 2012 decision titled Deeksha Puri v. State of Haryana, where it concluded that persons other than those mentioned under Section 82(4) were also proclaimed offenders. In the 2016 post, it was argued that this conclusion was incorrect, not least because of it being completely unsupported by the text.

Yesterday, i.e. on July 31, 2018, a Single Judge Bench of the Delhi High Court in Sanjay Bhandari v. State [Crl Revision Petition No. 223 of 2018] specifically disagreed with the Punjab and Haryana High Court, and concluded that "Proclaimed Offender" is a term of art, that can only be used in respect of the categories of offences covered by Section 82(4), Cr.P.C. Persons who disobey proclamation notices in cases involving other offences are "Proclaimed Persons". For such persons, law enforcement cannot resort to the aggravated punishment clauses of Section 174-A of the Indian Penal Code. As an aside, the other question posed in the earlier blog post - why is this list of offences used in Section 82(4) - remains unanswered. The Delhi High Court in Sanjay Bhandari only engages with that list of offences to assert that it contains "serious offences" [Para 14], without telling us why these serious offences are part of the list, which excludes Section 376 IPC that punishes rape.

With this conflict between different High Courts, will the matter reach the Supreme Court, or can the Parliament be suggested (wisely) to intervene and clarify the text? 

Amendments to the Prevention of Corruption Act: Attachment and Forfeiture

The 2018 amendments to the Prevention of Corruption Act [PC Act] promise to bring major changes to how corruption offences will be prosecuted in India. The previous posts discussed the creation of a new offence under Section 8 for giving bribes, reforms to corporate liability under the PC through a new Section 9, and major changes to how the regime prosecutes public servants. In this post, I take up the insertion of a new chapter to the PC Act, which will make it possible for law enforcement to target the unlawful gains allegedly made from corrupt conduct. Since this is the last post in this stock-taking exercise, some general observations follow the more specific discussion.

Attachment and Forfeiture: The Text and the 1944 Ordinance

The 2018 amendments have added Chapter IV-A to the PC Act titled "Attachment and Forfeiture of Property". The idea being that persons should not be allowed to profit from corrupt acts, making it necessary for law enforcement to have powers to recover all the tainted assets one procured through PC Act offences. The new Chapter IV-A contains only one provision, Section 18-A, which says:

Section 18-A.(1) Save as otherwise provided under the Prevention of Money Laundering Act, 2002, the provisions of the Criminal Law Amendment Ordinance, 1944 shall, as far as may be, apply to the attachment, administration of attached property and execution of order of attachment or confiscation of money or property procured by means of an offence under this Act. 

(2) For purposes of this Act, the provisions of the Criminal Law Amendment Ordinance, 1944 shall have effect, subject to the modification that the references to "District Judge" shall be construed as references to "Special Judge".

As this straightforward provision suggests, all that Section 18-A does is to apply the Criminal Law Amendment Ordinance, 1944 [1944 Ordinance] to "attachment, administration of attached property and execution of order of attachment or confiscation of money or property" which is the result of PC Act offences. So the procedure under the 1944 Ordinance will be used to govern how the government goes after fruits of corrupt acts. What is this 1944 Ordinance? It was part of a wave of anticorruption measures introduced by an irked British Raj at a time when black-marketing and petty corruption were rife during the times of World War II. It mainly sought to recover money / property that persons gained by cheating Her Majesty's government or misappropriating such property. These were not the only kinds of criminal conduct imagined, and a Schedule to the 1944 Ordinance states the offences to which the procedure applies. Since existing criminal procedures did not clearly envisage this kind of action, the colonial regime fashioned a new process to allow for this recovery. Due to some judicial gymnastics by the Indian Supreme Court [discussed previously on this Blog], a colonial Ordinance (not statute) remains valid in independent India and for several years was the main legal basis for any attempts by the Indian government to seize criminal gains.

The broad outlines of that process are as follows. The process is triggered by law enforcement filing an application, which can be filed even before any criminal case is filed in court [Section 3, 1944 Ordinance]. This is filed before a "District Judge", who has powers to attach the allegedly tainted assets, or an amount equal to the criminal gains made, in the manner prescribed under the Civil Procedure Code 1908 [Section 3, 1944 Ordinance]. The attachment order can be made without hearing the accused if the District Judge is convinced there is some merit in the allegations [Section 4, 1944 Ordinance]. But for such an interim order to be made absolute, a chance to be heard must be given, not only to the accused but to other persons interested in the property too [Section 5, 1944 Ordinance]. If the District Judge is convinced that the application was bogus, she can revoke the order, but if she doesn't then the order will continue to run [Section 5, 1944 Ordinance]. For attachment - a temporary arrangement - to result in transfer of property / money, a criminal case must be filed and end in a conviction [Sections 10 and 13, 1944 Ordinance].               

The Problems with Chapter IV-A

Should persons convicted of corruption be permitted to benefit from their corruptly obtained gains? Arguably not. But, that is only the start of the matter. In this part, I argue that Chapter IV-A is hardly free of problems. The procedure applies to money or property procured by means of an offence. But procured is not defined anywhere. How would it work for public servants? Would "procure" target only the immediate gains made by the corrupt public servant in the form of bribes, or could it apply to the offence of being found in possession of assets disproportionate to your salary? And what about private persons. If the government alleges I bribed my way to get a government license, would this provision enable a seizure of my entire business built on that basis? The choice of having "procure" in Section 18-A stems from the fact that it is part of the language under the 1944 Ordinance. Which brings me to the other, broader aspects of problems with Chapter IV-A. The first of these is a problem of sheer redundancy. As mentioned above, the 1944 Ordinance has a Schedule which details the different offences to which this procedure applies. Item 4-A of that Schedule states that the Ordinance already applied to cases under the PC Act. So what was the need for Section 18-A in the 2018 amendments? Frankly, I haven't the faintest idea. There is then the issue of perpetuating the 1944 Ordinance itself: a procedure that is, in fact, the subject of pending legal challenges before the Supreme Court. I find it difficult to accept that India's Parliament still cannot come up with a new statutory process on the subject and is forced to retain a colonial era ordinance, passed during an emergency, based on arguably tenuous judicial reasoning? 

What makes the decision to retain the 1944 Ordinance for PC Act cases all the more puzzling is the proliferation of attachment and forfeiture provisions across recent statutes. Successive governments have become more enchanted with having these powers to enforce laws. Today, similar provisions are part of the Narcotics, Drugs and Psychotropic Substances Act 1985, Prevention of Money Laundering Act 2002, Benami Transactions (Prohibition) Act 1988 (since 2016), Lokpal and Lokayuktas Act 2014, and most recently the Fugitive Economic Offenders Ordinance 2018. Multiplication of such laws means each statute creates a new authority that will hear such cases before which the concerned law enforcement agency must file a claim. This only adds to the confusion, since it is common for a criminal transaction to be prosecuted under different statutes. Why not streamline the entire process and let one authority blossom from that muck, to consider all cases where the government seeks attachment and forfeiture of allegedly criminal gains? Not only does it help reduce government expenditure in creating and staffing more tribunals and bodies, but it will also help reduce potential conflicts of jurisdiction, and of conflicting legal interpretations coming about. Of course, a single authority will make life a lot easier for the accused persons as well.

Conclusions and Summing Up: New Act, Old Problems

These four posts have managed to take stock of the various key features of the 2018 amendments to the PC Act. What does one make of the changes which will soon become law? Media outlets have broadly been discussing whether or not the bribe-giving offence makes sense, and whether the PC Act now stands diluted in respect of cases against public servants. I think those questions have been answered to some degree through the posts. The bribe-giving offence makes sense, but the benevolent exceptions carry far too many loopholes to be effectively implemented without judicial support. The provisions of the PC Act have certainly been diluted - supposedly to protect honest officers - and this dilution is not as serious if we look at the offences, but more so when we look at the new provisions on getting prior sanctions. In addition to these issues, I also discussed the new regime on corporate criminal liability, which I am surprised has not been the subject of greater attention in the media yet.

But all this is what the new statutory regime is going to be on paper. None of which redresses what is a bigger set of problems with anticorruption measures in India: shoddy enforcement. I have talked about this before on this Blog and I apologise for being repetitive, but at the end of the day all these changes will end up as little more than political brownie points unless serious consideration is given on improving enforcement of the law. Can we really expect major changes to the scene if India's main anticorruption agencies - the CBI and the ED - remain subservient to vested political interests? Can we imagine the government winning cases in court if prosecutors have minimal resources, are poorly paid, grossly overworked, and rarely continue with a case from start to finish? Bringing about those changes requires more than printing new copies of statutes. It requires considerable political effort to generate consensus and then invest serious resources in reforming the legal process. But this is effort that no government is willing to bear as it does not translate into guaranteed political gains. If the new PC Act regime continues to operate without any changes on that structural level, the new legislation will continue to be plagued by some very old problems.

Coercive Investigations - New Limits?

This Blog has been on its annual vacation hiatus, and in that time precious little seems to have been going on in the realm of criminal law and evidence in India. One proposed change that was floated in this time was the Fugitive Economic Offenders Bill 2017. The Finance Ministry released a draft for comments in May and it is likely that some version of the Bill will be presented for consideration in the upcoming session of the Indian parliament. If passed, the law would empower authorities to seize and confiscate the properties of persons involved in financial crimes of large value (this is pegged in the Draft Bill at 100 Crore Rupees or above). 

This forfeiture of properties will trigger if one does not appear before investigative authorities within a specified time period after warrants / summons have been issued seeking her cooperation. So, effectively, it authorises an additional method of coercing the persons who will potentially become 'Accused' to cooperate with investigations. This post covers some ground on exploring the limits of this strategy. Like most issues having a policy element, I am afraid the contours of the post and the argument will remain hazy, and request the reader to bear with this constraint.

Criminal Law, Coercion, and the Accused

Historically, it was not unnatural for criminal justice to follow a policy of "punish now, prove later". Confessions carried an unrivalled evidentiary quality, and also signified spiritual repentance, and thus it was quite regular to subject the Accused to physical pain to this end. Foucault does not discuss coercion by forfeiture of property in  Discipline and Punish, but considering the historical analysis by Professor Levy in License to Steal, it seems forfeiture through Deodands was not used for this aim.

The 19th Century reformation of penal systems across Europe resulted in redrawing the ideas of the acceptable limits of coercion that persons could be subjected to in the criminal process. In large measure, this was because from the Accused became a subject and participant in the process from merely being the object upon which responsibility for an incident was fastened. Physical pain did not magically disappear, of course, but it became possible to question the validity of evidence secured through these means since an Accused also had rights and some legal representation (although it would take more time for an Accused to be allowed to depose as a witness). 

Through the 19th Century, then, we find different jurisdictions draw several limits at the involvement of an Accused person based on the idea of the Accused as a willing participant in the process (but, as Foucault suggests, the wrongfulness of using pain to prove guilt was not eliminated but regulated through the codification exercises). History then lends us fresh perspective for reading the criminal procedure and evidence codes of today. Think of the Accused as being at the heart of a process, as an individual with full-bodied rights in society. The criminal process then regulates how those rights are chipped off to serve the interests of law enforcement. Perusing the Indian codes, one basic conclusion would seem that the law does not wish to support the logic that lets punishment precede guilt. Indeed, the codes make it prohibitive to force the Accused to prove anything beyond un-contestable evidence of a comparable nature such as bodily samples. 

I argue that this shift in focus, from the Accused being an object to a subject and participant affirming the legality of the criminal process, is what explains the law continuing to invest maximum coercive power for ensuring the presence of an Accused. While the law can pass judgment on fugitives and find them guilty, the absence of a subject naturally places the legitimacy of the process under doubt. It denies society the chance to express opprobrium and subject an individual to sanction, which remains (theoretically at least) the most important feature of the criminal process. Ensuring that an accused is present, therefore, is of paramount importance. This is why the law authorises pre-trial detention in such cases, a measure of the highest severity reserved for those found guilty at the end of trial. Which is why it also authorises forfeiture of property, which is what we move to next.

The Fugitive Economic Offenders Bill - A Step Too Far?

All of what I have argued above supports the logic behind the draft Fugitive Economic Offenders Bill 2017 that was circulated. The current system in the Criminal Procedure Code 1973 ups the ante against persons wilfully avoiding the course of law by anointing them 'Proclaimed Offenders' and attaching their property [Sections 82, 83 Cr.P.C.]. Property serves as a substitute for the person, and the inability to deal in property is sought to coerce fugitives from participating in the criminal process. Unfortunately, the Proclaimed Offender process is far too time-consuming to be of any material benefit, where proclamations tend to take at least a year and then there is the added difficulty of enforcing the attachment order. Therefore, a Bill seeking to hasten this process for ensuring the presence of persons would certainly have rule of law benefits.

But at what cost? This is where the cracks appear in the Government proposals. The Draft Bill does not stop at attaching properties - i.e. preventing persons from dealing with them till they appear. It authorises confiscation - not appearing means your property can and will be sold - which will happen at the end of six weeks. And confiscation not only of properties that one allegedly acquired from fraudulent activities, but any property located in India. Can the Government utilise the rule of law logic to justify these drastic means? There are no simple answers, of course. Especially given what we are told about the role of certain individuals and companies in the current banking crisis that has gripped the country. My position is that this Bill is, nonetheless, beyond the acceptable limits of coercion in criminal investigations. The link drawn between the allegations and nature of properties seized and confiscated certainly suggests a harking back to "punish now, prove later" regime that had been condemned. Remember that this is the investigation stage - the judge has little basis to second-guess what the police represent as their case and nor are judges expected to second-guess too much at this stage. Moreover, placing such importance on the Accused during investigations seems to ignore the movement of law in the direction of decreasing this importance for proving guilt. After all, even if a person was to be apprehended using this process, the law clothes her with enough protection to remain silent throughout custody placing the value addition to the government case at nearly nothing.

Conclusions

It is not that there are no alternatives. The Government could perhaps initiate civil in rem actions the properties themselves and then forfeit them, a common (and controversial) practice in the US. It could also, perhaps, speed up the trial itself and then forfeit the assets if it secures a conviction. Or it could do nothing and resort to the very broad (and hyper-active) PMLA regime which could cover most of these situations already. Each of these alternatives would, in fact, be more effective than the current proposal which would achieve little more than good publicity and public catharsis at seeing the big-bad affluent person being in the clutches of law.