AT-PMLA Clarifies Limits of Attachment: Seizure and Attachment Can Coexist, But Cannot Exceed Scheduled Offence Proceeds

Introduction

The Appellate Tribunal, SAFEMA’s (‘Tribunal’) decision in Barik Biswas v. Joint Director, Enforcement Directorate[i] marks a significant development under the Prevention of Money Laundering Act, 2002 (‘PMLA’). Arising from a Department of Revenue Intelligence (‘DRI’) investigation into gold and cattle smuggling, the case involved allegations of laundering illicit proceeds through layered transactions, leading to the attachment of various movable and immovable properties by the Enforcement Directorate (‘ED’).

The Tribunal reaffirmed that the ED may attach property even if it has already been seized by another agency, may attach properties of equivalent value when proceeds of crime (‘POC’) are unavailable, and may attach assets held by non-accused persons if they are linked to the POC. However, it also drew an important line – while affirming the ED’s broad powers, the Tribunal clarified that properties cannot be attached under the PMLA unless specifically linked to criminal activity, and that the value of such attachment cannot exceed the amount attributable to the underlying scheduled offence.

Brief Facts

• The case originated from a 2014 DRI investigation, which intercepted a vehicle occupied by the Appellant and recovered approximately 44 kg of foreign-origin gold, a Beretta pistol, 14 live rounds, and other contraband. It was alleged that this gold, valued at about Rs. 13.56 crore, had been purchased using proceeds from illegal cattle smuggling. As a result, the Appellant was arrested under s. 104 of the Customs Act, 1961 (‘Customs Act’) and later detained under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA Act).

• The DRI’s investigation further revealed that between April 2012 and March 2013, 16 bank accounts were opened in the names of the Appellant, his relatives, and his employees – all linked to a single mobile number found in the Appellant’s possession. These accounts recorded over Rs. 109 crore in cash transactions and were closed by July 2013. The source of these funds remained unexplained.

• Based on this investigation, the ED registered a case under the PMLA. It was alleged that the Appellant had laundered POC generated through gold smuggling by channelling the funds through these accounts and acquiring immovable properties. Statements recorded under s. 50 of the PMLA from the Appellant, his relatives, and associates corroborated the movement and use of illicit funds. Accordingly, the ED provisionally attached assets suspected to have been acquired from the POC. The Adjudicating Authority (‘AA’) confirmed the provisional attachment order (‘PAO’).

• The attached properties included 18 bank accounts (Rs. 1.09 crore), gold and cash (Rs. 13.56 crore), a pistol, and 34 immovable properties (Rs. 4.46 crore), collectively valued at approximately Rs. 19 crore. The Appellant challenged the confirmation of the PAO and argued that the gold already seized by the DRI could not be attached by the ED, as seizure eliminates the risk of concealment under s. 5(1) of the PMLA. It was contended that POC must stem from criminal activity linked to a scheduled offence, and the attached bank accounts and properties were not linked to the seized gold, which was the only identifiable POC.

• The Appellant further argued that the value of the attached properties (about Rs. 19 crore) exceeded the alleged smuggling value (Rs. 13.56 crore). Attachment beyond the value of the alleged POC was impermissible. The Appellant also argued that the ED wrongly relied on revised income-tax returns (ITRs) and unrelated tax payments to infer money laundering, which went beyond the Customs Act predicate offence.

• Additionally, the Appellant argued that properties of persons not accused or even named in the predicate offence were attached without justification, violating a. 14 and a. 300A of the Constitution of India (Constitution), and that the ED failed to record ‘reasons to believe’ under s. 5(1), and the AA failed to do so under s. 8 – a mandatory prerequisite for attachment.

• On the other hand, the Respondent argued that due process and the principles of natural justice have been followed, and the Appellant failed to discharge the burden under s. 24 of the PMLA. They contended that the revised ITRs and unexplained cash payments supported the ED’s case, as an attempt to legitimize tainted funds. The ED further argued that reliance on DRI statements was justified due to inter-agency coordination under the PMLA and that ‘reasons to believe’ were duly recorded under ss. 5 and 8.

Held

• The Tribunal modified the impugned order by confirming the attachment of the gold seized by the DRI while quashing the attachment of properties beyond the value of Rs. 13.56 crore, which was the only quantified POC in the predicate offence. It rejected the Appellants’ argument that the ED could not attach gold already seized by the DRI, clarifying that seizure and attachment are distinct actions. It was noted that seizure involves taking physical possession, whereas attachment under the PMLA is a legal restraint on dealing with the property and does not require actual custody. It further observed that there is no legal bar on the ED attaching properties already seized by another agency, since the property could still be released by that agency and thus re-enter the hands of the accused.

• The Tribunal also held that the ED and the AA duly complied with the procedural prerequisites, including the recording of ‘reasons to believe’ under ss. 5 and 8 of the PMLA. It clarified that under s. 8(1), unlike s. 5(1), the AA is not required to independently record ‘reasons to believe’ and may proceed based on subjective satisfaction drawn from the ED’s complaint under s. 5(5).

• The Tribunal rejected the Appellant’s broader contention that bank accounts and immovable assets not directly linked to the seized gold could never be attached. It emphasized that the definition of ‘POC’ under s. 2(1)(u) of the PMLA includes not only property derived from criminal activity but also properties of equivalent value, citing the Supreme Court’s ruling in Vijay Madanlal Choudhary v. Union of India[ii]. However, the Tribunal found that in the present case, the ED has not shown a sufficient nexus between the additional properties and any POC beyond the gold, and therefore, annulled the attachment of these additional properties.

• The Tribunal held in this regard that the extent of attachment must be restricted to the value of POC linked to the predicate offence. It noted that while the PMLA allows attachment of property of equivalent value, it does not permit attachment beyond the value of the criminal proceeds arising from the predicate offence.

• The Tribunal also held that under the PMLA, the focus is on the tainted nature of the property rather than the identity of its owner. Therefore, even if the property holder is not accused under the scheduled offence, attachment is permissible if the property is traceable to POC. It rejected arguments alleging constitutional violations, clarifying that affected parties may object before the AA and the Tribunal.

Conclusion

This case raises several crucial aspects under the PMLA framework. Firstly, it clarifies that seizure and attachment are distinct legal concepts, allowing the ED to attach property already seized by another agency. While this interpretation supports administrative continuity, it risks undermining the core rationale behind s. 5 of the PMLA.

Notably, s. 5 of the PMLA stipulates that a PAO may be passed only if two conditions are cumulatively satisfied:

(a)  the person is in possession of POC; and

(b)  the property is likely to be concealed or transferred, frustrating eventual confiscation.

The conjunctive requirement means that mere possession is not enough. When a property is already under seizure, the risk of concealment or transfer is arguably absent, rendering a second restraint excessive. The Tribunal’s dismissal of the Appellant’s objection here conflicts with the statutory purpose of s. 5 and raises questions under s. 66 of the PMLA, on inter-agency cooperation.

Second, the Tribunal reiterates the doctrine of ‘equivalent value’ attachment. Though useful in combating laundering tactics, this doctrine often leads to the attachment of untainted or pre-existing assets, diluting the required nexus and raising constitutional concerns under a. 14 and a. 300A. The Tribunal rightly drew a line here by disallowing attachment beyond Rs. 13.56 crore due to a lack of linkage with any scheduled offence.

Third, the Tribunal upheld attachment of assets held by third parties, reinforcing the PMLA’s focus on property, not persons. However, this exposes bona fide asset holders to disproportionate hardship, particularly in light of the reverse burden under s. 24, where they must prove that their property is not tainted – a burden difficult to discharge without access to investigative materials.

A Silver Lining in the Reaffirmation of the Overarching Principles of the PMLA: While most of the Tribunal’s reasoning endorses the wide operational scope of the PMLA, its express holding that attachment cannot exceed the value of the alleged POC offers an important course correction. The decision affirms that unexplained wealth, tax discrepancies, or presumptions cannot justify attachment beyond what is alleged under the predicate offence. This protects individuals from speculative or excessive action by the ED, and limits PMLA attachment to a case-specific, offence-linked foundation.

Moreover, by cautioning the ED against relying on income tax returns or proceedings to infer new offences or expand the scope of PMLA proceedings, the Tribunal has laid down a boundary that reaffirms the need for precision and proportionality in PMLA enforcement.

End Notes

[i] [2025] 172 taxmann.com 490 (SAFEMA - New Delhi).

[ii] 2022 SCC ONLINE SC 929.

Authored by Shivam Mishra, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.