Provisional Attachment Under PML Act Ceased to Have Effect After 180 Days

Authored by Ajay Monga & Ateev Mathur, Partner at SNG & Partners

The Hon’ble High Court of Delhi recently in the matter of Vikas WSP Ltd. & Ors. vs. Directorate of Enforcement settled one of the legal conundrums related to the Prevention of Money Laundering Act, 2002 (PMLA). PMLA was enacted to combat money laundering in India and the major objectives of the Act were to prevent & control money laundering and to confiscate and seize the properties obtained from the laundered money. In order to achieve these objectives, the Authorities have been given wide powers by the Statute. Section 5 of the PML Act empowers the Director or any other officer not below the rank of Deputy Director to pass any order provisionally attaching the property of a person. The attachment is for a period not exceeding 180 days from the date of order. Under certain circumstances, as prescribed under the proviso of Sub-Section (1) of Section 5, this time period can be extended by 30 days. Under the Scheme of the PML Act, once a Provisional Attachment is passed under Section 5(1) of the PML Act, the Adjudicating Authority is required to confirm the Attachment Order within a period of 180 days.

The issue before the Hon’ble High Court came under the context, where the Provisional Attachment Order was passed by the Department and a formal complaint in terms of provisions of Section 5 was made before the Adjudicating Authority. Before the Adjudicating Authority could take any decision on the validity of the Provisional Attachment Order, the country was put under lockdown by the Government on account of the pandemic of Covid-19. The complete lockdown remained in force from 24.03.2020 to 20.04.2020. The High Court took the date as 20.04.2020 when the partial operation of the Department started. However, the case in hand could be taken up by the Department only at later in time and was scheduled to be heard on 16.06.2020. The argument raised was that by the date of 16.06.2020, 180 days had clearly expired even if the benefit of lockdown was to be granted to the Department and thus, the complaint could not proceed further.

The High Court examined the matter and relied upon various judgments passed by the Hon’ble Supreme Court of India on the legal propositions canvassed by the Department. It was observed that the effect of an order under Section 5(1) of the PMLA is deprivation of the right of a person to enjoy his property and, therefore, a strict interpretation of the provisions of law is to be carried out. The Hon’ble High Court also agreed that if a law provides that it is incumbent upon the Department and on the Courts as well to strictly interpret the provisions of law and there is no scope of any discretion left in terms of the language used under the PMLA. The second limb of the discussion before the High Court was whether the Department is entitled to seek the benefit of extension/suspension of the limitation as granted by the Hon’ble Supreme Court in suo moto writ petition bearing WP (C) No. 3 of 2020. However, the Hon’ble Court agreed that although the Hon’ble Supreme Court vide the aforesaid order has extended the period of limitation to file petitions under the general or special laws including the Arbitration and Conciliation Act, 1996, Negotiable Instruments Act and various other enactments recorded in the order. However, the prohibition of PMLA has not been extended under the said order. The legal proposition in this regard was reiterated and quoted by the Hon’ble Court to state that the Statutes, which encroach upon the rights, whether as regards person or property, are subject to strict construction in the same way as penal Act.

Thus, after discussing the legal proposition, it was held that the limit of 180 days being the outer limit, the Adjudicating Authority becomes functus officio after the expiry of the said limit. There is no power with the Authority or even to the Courts to relax or extend the validity of the Provisional Attachment Order.

The discretion expressed by the Hon’ble Supreme Court in suo moto writ petition (supra) was also explained by the Hon’ble High Court by recording that the order of the Supreme Court was only in relation to the period of limitation and did not extend the period of limitation required under the Statute or the validity of period of order as in the case of Enforcement Directorate and, therefore, denied the Enforcement Directorate benefit of all the ordinances of Government of India being the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 as enacted on 31.03.2020.

While the court has not decided as to whether the period of lockdown would be included or excluded while computing the 180 days, yet this decision, in view of the author, would clearly be a guiding principle not only for the Adjudicating Authority, Enforcement Directorate but also for the people, whose properties are lodged under the Provisional Attachment Order by the Enforcement Directorate. There may be many causes, which skipped the attention of the Enforcement Directorate and Adjudicating Authority of there being a lockdown period and there may be many cases, where 180 days expired. The position, as explained by the judgment aforesaid, would clearly come to the benefit of such people and considering the situation, as it exists today, the Provisional Attachment Orders in many cases now cease to have effect in terms of the dictat of the Hon’ble High Court clarifying the legal position in the present judgment.

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