2022 (3) TMI 497 - SCH - Money Laundering

Violation of principles of natural justice - provisional attachment of bank accounts - provisional attachment order served on the petitioner did not disclose proper reason - HELD THAT - 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. 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. As a matter of fact, the power to provisionally attach tainted property is only of the authorised officer upon being satisfied about the existence of circumstances referred to in Section 5(1). The adjudication under Section 8 entails finally in confiscation of the tainted property or release thereof - 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 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 - SLP dismissed.

Summary

Issues:
1. Challenge to the High Court's order remanding the matter under the Prevention of Money Laundering Act, 2002.
2. Impact of quashing provisional attachment order on adjudication proceedings.
3. Authority to pass provisional attachment order under Section 5(1) of the Act.

Analysis:
1. The petitioner challenged the High Court's decision remanding the matter under the Prevention of Money Laundering Act, 2002, to pass a fresh order under Section 5(1). The petitioner argued that the provisional attachment order lacked proper reasons and only reproduced provisions of the Act. However, the Supreme Court observed that the High Court's decision did not nullify the adjudication proceedings triggered by the provisional attachment order. The adjudication must continue until its logical end by the Adjudicating Authority in accordance with the law.

2. The Court clarified that the satisfaction required under Section 5 of the Act is twofold: first, that the property was acquired through proceeds of crime and involved in money laundering, and second, that the owner/occupant is likely to conceal, transfer, or deal with the property. The provisional attachment order is an interim arrangement during adjudication proceedings. Even if the provisional attachment order is set aside, the adjudication process must proceed independently on its merits as per the law.

3. The Court emphasized that the power to provisionally attach tainted property lies with the authorized officer upon being satisfied with the circumstances under Section 5(1) of the Act. The adjudication under Section 8 leads to the confiscation or release of the tainted property. The petitioner's success in quashing the provisional attachment order does not impact the ongoing adjudication process. Therefore, the Court upheld the High Court's decision to remand the matter for a fresh order, as the original order lacked proper satisfaction as required under Section 5(1) of the Act.

In conclusion, the Supreme Court dismissed the special leave petition, stating that the rejection does not prevent the petitioner from seeking other appropriate remedies. The Court clarified that its decision does not reflect on the merits to be decided by the adjudicating or appropriate authority. All pending applications were disposed of accordingly.