PMLA - Quashing Of Provisional Attachment Will Not Impact Adjudication Proceedings Before Adjudicating Authority : Supreme Court

The Supreme Court has observed that High Court's order of setting aside the provisional attachment order does not per se nullify the adjudication proceedings under Prevention of Money Laundering Act, 2002 ("PMLA") and that the Adjudicating Authority can proceed for taking it to its logical end in accordance with law.

The bench of Justices AM Khanwilkar and CT Ravikumar was considering a Special Leave Petition assailing Jharkhand High Court's order dated October 26, 2021 in which the High Court had remanded the matter to the concerned authority under the Prevention of Money Laundering Act, 2002 ("PMLA"), to pass a fresh order under Section 5(1), in light of the observations made in the impugned judgment.

While declining to interfere in the SLP, the bench in M/S Kaushalya Infrastructure Development Corporation Limited V. Union Of India & Anr. observed that,

"Going by the scheme of Sections 5 and 8 of the PMLA, we have no hesitation in observing that the aforenoted argument is misplaced. The fact that the petitioner has succeeded before the High Court, does not per se result in nullifying the adjudication proceedings, which, nevertheless, can proceed and need to be taken to its logical end by the Adjudicating Authority in accordance with law.

In other words, the fact that the petitioner has succeeded in persuading the High Court to quash the provisional attachment order passed by the appropriate authority under Section 5(1) of the Act, will in no way impact the adjudication process initiated before the adjudicating authority, which must proceed on its own merits in accordance with law."

The petitioner had contended that the High Court, after acceding to the petitioner's arguments that the provisional attachment order served on the petitioner did not disclose proper reason, much less tangible reason and only reproduced the provisions of the Act, ought not to have relegated the petitioner before the concerned authority for recording of reasons. It was also contended that the provisional attachment order triggered adjudication proceedings and as the High Court had set aside the order, no adjudication proceedings could continue further against the petitioner.

To adjudicate on the issue the bench while discussing the respects in which the authorised officer has to record the satisfaction u/s 5 of the PMLA said,

"The satisfaction to be recorded by the authorised officer in terms of Section 5 of the PMLA is in two respects. The first is that the property in question had been acquired through proceeds of crime and involved in an offence of money laundering; and the second satisfaction specific in terms of Section 5(1) of the Act is that the owner/occupant of the property, who is in possession, is likely to conceal, transfer or deal with the same in any manner. This satisfaction is recorded for the purpose of interim arrangement during the pendency of the adjudication proceedings for securing the property in question."

On the issue of triggering of adjudication the bench said,

"The adjudication, on the other hand, gets triggered after the complaint under Section 5(5) is filed before the adjudicating authority or on an application under Section 17(4) and also 18(10) of the Act. There is no express provision in the Act, at least brought to our notice, to indicate that once a complaint is filed before the Adjudicating Authority, the authorized officer is prevented from passing a provisional attachment order under Section 5(1) of the Act. As a matter of fact, the power to provisionally attach tainted property is only of the authorized officer upon being satisfied about the existence of circumstances referred to in Section 5(1). The adjudication under Section 8 entails finally confiscation of the tainted property or release thereof."

While dismissing the SLP the bench said, "In our opinion, therefore, the challenge to the order as passed by the High Court to send back the matter to the appropriate authority to pass a fresh order, if so advised, is unexceptionable. For, the petitioner has succeeded before the High Court on the limited argument that the stated order does not record proper satisfaction as required under Section 5(1) of the Act, but merely reproduces the provisions of the Act. Hence, we decline to interfere in this special leave petition. The special leave petition is accordingly dismissed."

Case Title: M/S Kaushalya Infrastructure Development Corporation Limited V. Union Of India & Anr.| Special Leave to Appeal (Crl.) No(s). 565/2022

Coram: Justices AM Khanwilkar and CT Ravikumar

Citation : 2022 LiveLaw (SC) 161

Counsels For Petitioner: Senior Advocate Siddhartha Dave and Advocate(s) Indrajit Sinha, Anusuya Sadhu Sinha, Shubhankar, Pallavi Pratap

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