Prevention of Money Laundering Act, 2002
The Adjudicating Authority: Sections 6 to 11
A provisional attachment by the ED is only an officer's order. Before it can continue, an independent body must decide whether the property really is involved in money laundering. That body is the Adjudicating Authority, constituted under Section 6. Under Section 8, it issues notice, hears the affected persons, and confirms or releases attachments, seizures and freezing orders. It has civil court powers under Section 11, and its proceedings are judicial proceedings. This note covers its constitution, the adjudication process, and the fate of property through to confiscation, vesting and management.
The adjudication loop from provisional order to final fate, with the Authority's powers and the rules on duration and fairness
1. Constitution: Sections 6 and 7
Aspect | The position |
|---|---|
Appointment | The Central Government appoints an Adjudicating Authority to exercise jurisdiction, powers and authority under the Act |
Composition | A Chairperson and two other Members |
Qualifications | One Member from the field of law, qualified to be a District Judge or a member of the Indian Legal Service in Grade I; others from finance, accountancy or administration with prescribed qualifications |
Benches | Jurisdiction may be exercised by Benches of one or more Members, as the Chairperson constitutes |
Staff, s. 7 | The Central Government provides officers and employees to assist |
2. Adjudication: Section 8
§ The steps • Receipt. On a complaint under Section 5(5), or an application under Section 17(4) or 18(10) after seizure or freezing. • Show-cause notice, s. 8(1). If it has reason to believe that a person has committed an offence under Section 3 or is in possession of proceeds of crime, the Authority serves a notice of not less than thirty days, calling on the person to indicate the sources of income, earning or assets by which the property was acquired, the evidence relied on, and to show cause why the property should not be declared involved in money laundering and confiscated. Where property is held on behalf of another, notice goes to that person too. • Hearing, s. 8(2). After considering the reply, hearing the aggrieved person and the Director, and taking into account all relevant material, the Authority records a finding whether the property is involved in money laundering. A third party claiming the property is also heard. • Confirmation, s. 8(3). If so, it confirms the attachment, the retention of seized property or records, or the freezing order, by order in writing. |
§ Duration of confirmed attachment During investigation, the confirmed attachment continues for a period not exceeding 365 days, excluding any period of stay by a court. During proceedings, it continues while proceedings relating to any offence under the Act are pending before a court. It becomes final when an order of confiscation is passed by the Special Court. |
3. Possession, Confiscation, Release and Restoration
Provision | What it provides |
|---|---|
s. 8(4): possession | On confirmation, the Director may take possession of the property; the Supreme Court in Vijay Madanlal Choudhary (2022) held this should be resorted to only in exceptional situations, ordinarily after a confiscation order |
s. 8(5): confiscation | On conclusion of the trial, if the Special Court finds money laundering was committed, it orders the property confiscated to the Central Government |
s. 8(6): release | If the Special Court finds no money laundering, or the property not involved, it releases the property to the person entitled |
s. 8(7): no trial possible | Where trial cannot proceed because of death, the accused being a proclaimed offender, or other reason, the Special Court passes orders on confiscation or release on application |
s. 8(8): restoration | The Special Court may direct restoration of confiscated property to a claimant with a legitimate interest who suffered a quantifiable loss from the laundering, and may consider such claims even during trial |
4. Vesting and Management: Sections 9 and 10
i. Section 9: vesting. On an order of confiscation, all rights and title in the property vest absolutely in the Central Government, free from encumbrances.
ii. Section 10: management. The Central Government may appoint an officer as Administrator to receive and manage the confiscated property, and to dispose of it as the Government directs.
5. Powers: Section 11
Power | The same as a civil court under the Code of Civil Procedure |
|---|---|
Discovery and inspection | Requiring disclosure of documents and their inspection |
Summoning and examining persons | Enforcing the attendance of any person, including an officer of a reporting entity, and examining him on oath |
Production of records | Compelling the production of records |
Evidence by affidavit | Receiving evidence on affidavits |
Commissions | Issuing commissions for the examination of witnesses and documents |
Judicial proceedings | Proceedings are deemed judicial proceedings for the purposes of the offences of false evidence and insulting or interrupting a public servant: s. 11(2) |
6. Natural Justice, Cross-Examination and the Civil Nature of the Proceedings
§ Fairness before the Authority • Natural justice. The affected person must receive notice, disclosure of the material relied on, a real opportunity to be heard, and a reasoned order. • Cross-examination. Proceedings before the Authority are summary and civil, and cross-examination is not an absolute right; but where the finding turns on disputed facts and the testimony of particular persons, fairness may require it. • Civil in nature. Attachment proceedings concern property, not guilt, and are independent of the criminal prosecution in their conduct; but their final outcome depends on the result of the trial under Section 8(5) to (7). • Appeals. An appeal lies to the Appellate Tribunal under Section 26 within forty-five days, and from the Tribunal to the High Court under Section 42. |
7. Frequently Asked Questions
What does the Adjudicating Authority do?
It decides whether property provisionally attached, seized or frozen is involved in money laundering, and confirms or releases it under Section 8.
How much notice must the Authority give?
Not less than thirty days, under Section 8(1), calling on the person to disclose the sources of the property and show cause.
How long does a confirmed attachment last?
During investigation for up to 365 days, excluding stays, or while proceedings under the Act are pending; it becomes final on confiscation.
Can the ED take possession after confirmation?
Section 8(4) allows it, but the Supreme Court in Vijay Madanlal Choudhary held that it should be done only in exceptional situations, ordinarily after confiscation.