Confiscation Under PMLA Cannot Proceed While Appeal Against Attachment Is Pending: Supreme Court

The Supreme Court on Friday (February 6) held that confiscation proceedings under the Prevention of Money Laundering Act (PMLA) cannot be taken forward while an appeal against the confirmation of attachment is pending before the Appellate Tribunal.

The Court clarified that once an attachment order passed under Section 8(3) of the PMLA is challenged under Section 26, a “deemed embargo” operates, preventing the Special Court from deciding confiscation proceedings under Section 8(7) until the appellate process is completed.

A bench comprising Justice M.M. Sundresh and Justice N. Kotiswar Singh held, “Once an order under Section 8(3) of the PMLA is challenged, a deemed embargo operates on the conclusion of the proceedings under Section 8(7) of the PMLA. Thus, there is a deemed stay on the proceedings under Section 8(7) of the PMLA until the confirmation order attains finality.”

The court further stated that the pendency of a statutory appeal bars the Special Court from proceeding with confiscation. “When an appeal is provided for under the statute, it gives a vested right to any aggrieved person to exhaust the same,” the Bench said.

The court held that confirmation of attachment under Section 8(3) is subject to appellate scrutiny and that confiscation proceedings under Section 8(7) can be concluded only after the appeal attains finality. Until then, the Special Court must refrain from adjudicating such applications.

The court also held that proceeding with confiscation during the pendency of an appeal would result in the Special Court deciding issues falling within the jurisdiction of the Appellate Tribunal.

The case arose from the provisional attachment of certain properties by the Enforcement Directorate under Section 5(1) of the PMLA, which was later confirmed by the Adjudicating Authority under Section 8(3). While the affected entity's appeal against the confirmation order was pending before the Appellate Tribunal, proceedings were initiated before the Special Court under Section 8(7) on the ground that the criminal trial could not be concluded. The Special Court proceeded to allow the confiscation application, a decision later upheld by the High Court, prompting the appellant to approach the Supreme Court.

Setting aside both orders, the Supreme Court held that the Special Court erred in proceeding with confiscation while the statutory appeal remained pending. The Court noted that by deciding the Section 8(7) application on merits, the Special Court had rendered the appeal infructuous, which it described as “totally impermissible in law.”

The judgment also clarified that Sections 8(7) and 8(8) of the PMLA operate independently and are triggered only upon specified contingencies. It held that the expression “material before it” in Section 8(7) has a limited scope and that a party who has suffered an adverse order under Section 8(3) can invoke Section 8(7) only on the basis of new material not previously considered.

The appeal was allowed.