In a pivotal ruling, the Supreme Court of India addressed the interpretation of Section 8(3)(a) of the Prevention of Money Laundering Act (PMLA), focusing on the conditions under which seized property may be retained during legal proceedings. The Court clarified that for the continuation of retention of seized property, it is not mandatory for the individual from whom the property was seized to be named as an accused in the complaint. Instead, the existence of a pending complaint alleging the commission of an offense under Section 3 of the PMLA suffices to justify the retention.
The case in question involved an Enforcement Case Information Report (ECIR) registered against the respondent and others in 2017. During the investigation, the Enforcement Directorate (ED) conducted searches and seized various electronic items, documents, and cash. Subsequently, an order under Section 17(4) of the PMLA, which pertains to the retention of seized or frozen property, was issued. The Adjudicating Authority confirmed this order on April 4, 2018, under Section 8(3) of the PMLA. A complaint was then filed under Section 44 of the PMLA, and the Special Court took cognizance of it on February 19, 2018. The respondent challenged the retention of the seized items, leading to appeals before the Appellate Authority and the High Court. Both forums opined that the retention order under Section 17(4), confirmed on April 4, 2018, would lapse after 90 days, as stipulated in the amended Section 8(3)(a) of the PMLA. This interpretation was based on the amendment that introduced a 90-day limitation for such retention orders. Dissatisfied with this outcome, the appellant-authority escalated the matter to the Supreme Court.
Before the Supreme Court, the appellant contended that the version of Section 8 applicable at the time—from May 14, 2015, to April 18, 2018—did not impose any time limit on retention orders. This version stipulated that the Adjudicating Authority's order of seizure would remain effective during the pendency of proceedings related to any offense under the PMLA before a court. Alternatively, the appellant argued that even if the amended Section 8, effective from April 19, 2018, to March 19, 2019, were applied, the retention order would still be valid during the continuation of proceedings.
The Supreme Court examined the language and intent of Section 8(3)(a) of the PMLA. The Court observed that the provision allows for the continuation of retention of seized property during the pendency of proceedings related to an offense under the PMLA before a court. Importantly, the Court clarified that for this clause to apply, it is sufficient that a complaint alleging the commission of an offense under Section 3 of the PMLA is pending. There is no requirement for the individual affected by the retention order to be explicitly named as an accused in the complaint. The Court emphasized that the cognizance taken by the court pertains to the offense itself, not necessarily to specific individuals as accused at that stage.
This interpretation underscores the legislative intent to prevent the laundering of proceeds of crime by ensuring that property suspected to be involved in money laundering remains under the control of authorities during legal proceedings. By not necessitating the naming of the individual from whom the property was seized as an accused, the law aims to address scenarios where the property's involvement in the offense is under scrutiny, irrespective of the direct culpability of the possessor at that juncture.
The Supreme Court's ruling aligns with previous judicial interpretations aimed at balancing the powers of enforcement agencies with individual rights. For instance, in a related context, the Delhi High Court, in the case of Mahender Kumar Khandelwal v. Directorate of Enforcement & Anr., held that documents or property seized under the PMLA are liable to be returned if no proceedings under the Act are pending after 365 days. This decision emphasized that prolonged retention of seized property without ongoing proceedings violates constitutional rights under Article 300A, which protects individuals from being deprived of property without the authority of law.
Moreover, the Supreme Court has previously acknowledged concerns regarding the potential for arbitrary application of the PMLA's provisions. In an earlier judgment, the Court noted that certain interpretations of the Act could leave room for misuse, thereby affecting individuals' rights adversely. The Court emphasized the need for a balanced approach that allows enforcement agencies to function effectively while safeguarding citizens' constitutional protections.
In conclusion, the Supreme Court's clarification that the retention of seized property under Section 8(3)(a) of the PMLA does not require the individual from whom the property was seized to be named as an accused in the complaint reinforces the Act's objective to combat money laundering effectively. This interpretation ensures that enforcement agencies can retain control over suspected assets during legal proceedings, thereby preventing the dissipation of assets potentially linked to criminal activities. Simultaneously, the judiciary continues to play a crucial role in interpreting these provisions to prevent potential misuse and to protect individual rights, ensuring that the enforcement of the PMLA aligns with constitutional principles and the rule of law.
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