Provisional Attachment of property
Section 5 of the Prevention of Money Laundering Act, 2002 (‘Act’ for short) provides for the provisional attachment of properties of any person if it is satisfied that such person is in possession of proceeds of crime. If such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter, he may, by order in writing, provisionally attach such property for a period not exceeding 180 days from the date of the order.
Confiscation of property
Section 8(5) of the Act provides that where on conclusion of a trial of an offence under this Act, the Special Court finds that the offence of money-laundering has been committed, it shall order that such property involved in the money-laundering or which has been used for commission of the offence of money-laundering shall stand confiscated to the Central Government. Such properties shall vest in the Central Government.
Restoration of the property
Section 8(8) of the Act provides that where a property stands confiscated to the Central Government under section 8(5), the Special Court, in such manner as may be prescribed, may also direct the Central Government to restore such confiscated property or part thereof of a claimant with a legitimate interest in the property, who may have suffered a quantifiable loss as a result of the offence of money laundering.
The Special Court shall not consider such claim unless it is satisfied that the claimant has acted in good faith and has suffered the loss despite having taken all reasonable precautions and is not involved in the offence of money laundering.
The Special Court may, if it thinks fit, consider the claim of the claimant for the purposes of restoration of such properties during the trial of the case in such manner as may be prescribed.
Procedure
The Central Government, for the purpose of restoration of the confiscated properties to the original owner framed a rule called as ‘Prevention of Money Laundering (Restoration of Confiscated Properties) Rules, 2016 which came into effect from 26.09.2016.
According to this Rule, the Central Government shall publish a notice in two daily newspapers, one in English and one in vernacular language having sufficient circulation in the locality where the property is situated calling upon the claimants, who claim to have a legitimate interest in such property or part thereof, to submit and establish their claims, if any, for obtaining restoration of such property or part thereof. Such notice shall be issued within 45 days from the date of issue of confiscation order.
If the confiscated property is insufficient to meet the loss suffered by the claimants as a result of the offence of money-laundering, the Special Court, as it thinks fit, may pass an order of restoration of property on a pro-rata basis in accordance with the share of loss suffered by each claimant.
No claimant shall be entitled to claim restoration of confiscated property before the Special Court beyond thirty days from the date of publication of the notice. The Special Court may entertain any claim not exceeding further 30 days, upon the satisfaction that the claimant was prevented by sufficient cause.
If the confiscated property is insufficient to meet the loss suffered by the claimant as a result of the offence of money-laundering, the Special Court, as it thinks fit, may pass an order of restoration of property directing the Central Government, if necessary, to auction such property and disburse on a pro-rata basis in accordance with the share of loss suffered by each claimant and may give custody thereof to such claimant on his executing a bond undertaking to produce such restored property before the Special Court as and when required for the purposes of Section 8 of the Act.
No restoration order shall be passed by the Special Court, without giving an opportunity of being heard to the owner of the property or in the event of his death, the legal representatives of such person or official assignee or official receiver, as the case may be.
If any question arises relating to the interpretation of these rules, the matter shall be referred to the Central Government.
Attachment by multiple agencies
The attachment of properties by multiple agencies poses a significant challenge in restoring the property to the rightful claimants. In ‘Lemon Seeds Hospitality Private Limited’ – Misc. Application No. 583 of 2019 in MPID Special Case No. 1 of 2014, certain properties were attached by different entities i.e.,
- By the Competent Authority under Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999 (‘MPID Act’ for short);
- by Economic Offences Wing, Crime Branch, Mumbai (‘EoW’ for short); and
- by Competent Authority under PMLA.
The Competent Authority under MPID Act conducted an auction of the properties, and the Applicant became the auction purchaser. However, due to continuing attachments by EOW and PMLA, the Applicant was unable to obtain a clear title to the properties.In response, the ED stated that the restoration of the property should follow Rule 3-A of the PMLA, and since the charges in the case had not yet been framed, the property cannot be restored to the Applicant. However, the Special Court held that the Applicant was entitled to receive the property under section 8(7) of the Act, considering the lengthy duration expected for the trial due to the substantial number of accused persons involved and taking into account the objectives of the MPID Act.
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