§ Section 5(1), in substance

Where the Director, or any officer not below the rank of Deputy Director authorised by him, has reason to believe, the reason for such belief to be recorded in writing, on the basis of material in his possession, that:

(a) any person is in possession of any proceeds of crime; and (b) 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,

he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and eighty days from the date of the order.

First proviso. No such order shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate, or a complaint filed before a court, or a similar report or complaint made under the corresponding law of another country.

Second proviso: emergency attachment. Notwithstanding the first proviso, any property of any person may be attached if the officer has reason to believe, recorded in writing, that if it is not attached immediately, the non-attachment is likely to frustrate any proceeding under the Act.

§ The safeguards built into Section 5

• Reason to believe is more than suspicion. It must be the belief of a reasonable person, based on material, not a mere formality.

• Material in possession. The belief must rest on material actually in the officer's possession at the time, which is forwarded to the Adjudicating Authority.

• Recorded in writing. The reasons must be recorded before the order, so that the Authority and the courts can test whether the belief was genuine and rational.

• Both limbs. The officer must believe both that the property is proceeds of crime and that it is likely to be concealed or transferred so as to frustrate confiscation.

• Vijay Madanlal Choudhary (2022). The Supreme Court upheld Section 5, pointing to these safeguards: the officer's rank, recorded reasons, the time limit, and independent confirmation by the Adjudicating Authority.

Proceeds of crime

In the hands of the accused or any other person

Equivalent value property

Where the proceeds are abroad, untraceable or dissipated, property of equivalent value in India or abroad

Third-party property

Proceeds held by relatives, associates or companies; a bona fide purchaser for value without notice may contest

Property purchased from alleged proceeds

The asset acquired, in whole or in the proportion funded by proceeds

Bank accounts

Balances, deposits and lockers, by order to the bank

Shares and securities

Through the depository or the company, restraining transfer

Immovable property

By order communicated to the registering authority, so that no transfer can be registered

Business assets

Plant, stock and receivables; the courts have cautioned against attachment that needlessly destroys a running business

Before the prosecution complaint

Attachment may be made before any complaint under the PMLA is filed; what the first proviso requires is a report or complaint on the SCHEDULED offence

Emergency attachment

Under the second proviso, even without such a report, where immediate attachment is necessary to prevent frustration of proceedings

Duration

Not more than 180 days from the order; a period of stay by a court is excluded, with a further thirty days after the stay is vacated

Forwarding

A copy of the order and the material is forwarded immediately to the Adjudicating Authority in a sealed envelope: s. 5(2)

Complaint

Within thirty days of the attachment, a complaint stating the facts must be filed before the Adjudicating Authority: s. 5(5)

Lapse

The order ceases to have effect on the expiry of the period, or on the Adjudicating Authority's order under s. 8(3), whichever is earlier: s. 5(3)

§ Section 5(4)

Nothing in Section 5 prevents a person interested in the enjoyment of attached immovable property from such enjoyment. 'Person interested' includes all persons claiming or entitled to claim any interest in the property.

Consequence. A family may continue to live in an attached house; a tenant may continue to occupy.

Possession by the ED comes only after confirmation, under Section 8(4), and in Vijay Madanlal Choudhary the Supreme Court said that taking possession before a confiscation order should be the exception, not the rule.

Provisional attachment, s. 5

A prohibition on transfer or dealing; the owner keeps possession and title

Seizure, ss. 17, 18

Physical custody taken during search

Freezing, s. 17(1A)

A prohibition on dealing where seizure is not practicable, typically of accounts

Confiscation, s. 8(5)

Final vesting of title in the Central Government, on conviction