Enlarged powers of Indian courts to attach property under BNSS in comparison to PMLA and FEOA

Asset recovery at a trans-national level has gained “high priority” in India due to the presence of fugitives’ properties in foreign jurisdictions outside India. Fueled by the need for timely attachment and recovery of disposable assets, the Prevention of Money Laundering Act, 2002 (PMLA) and the Fugitive Economic Offenders Act, 2018 (FEOA) have been enacted to combat economic offences and safely recover the foreign assets of a fugitive. 

However, now, an overlap of the judicial powers for attachment of foreign assets can be witnessed with the advent of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), which came into force on July 1, 2024 to replace the Code of Criminal Procedure (CrPC). The BNSS, which is a general law, has enlarged the powers of Indian courts to attach property beyond what is available under the PMLA and FEOA.

Comparative analysis of PMLA, FEOA, and BNSS vis-à-vis attachment of property of accused

Whereas PMLA has been enacted to prevent money laundering and to provide for confiscation of property derived from, or involved in, money laundering, the FEOA provides for measures to deter fugitive economic offenders (involved in offences exceeding ₹100 crores) from evading the process of law in India by staying outside the jurisdiction of Indian courts. The BNSS, on the other hand, is the primary legislation on the procedure for administering substantive criminal law.

While the meaning of the phrase, ‘confiscation’ has not been defined in either of the three laws, the term, ‘attachment’ has only been defined in the PMLA under Section 2(d). It means the “prohibition of transfer, conversion, disposition or movement of property” by an order issued under Chapter III which relates to ‘Attachment, Adjudication, and Confiscation’. 

Attachment of property is envisaged under Section 5, PMLA and Section 4 and Section 5, FEOA. Now, the BNSS provides for the attachment of property under the newly added Section 107 within the territory of India and under Section 115 (which replaces Section 105C, CrPC) for property outside India. A comparative analysis of the said provisions is given below.

1. Definition of property: The definition of “proceeds of crime” (PoC) is identical in both the PMLA [Section 2(1)(u)] and FEOA [Section 2(1)(k)]. It includes any property that is taken or held outside the country or any property of equivalent value kept abroad. Further, there is special focus on foreign property as it includes the phrase “wherever located” within the definition of “property” [Section 2(1)(v)].

However, in the BNSS, although there is no specific mention of foreign property, the meaning of “PoC” and “property” are expansive. Property under Section 107 includes “any property” derived/obtained from the commission of “any offence” – irrespective of where the property is taken or held. This wide definition is replicated in Chapter VIII dealing with ‘Reciprocal arrangements for assistance in certain matters and procedure for attachment and forfeiture of property’ [Section 111], further demonstrating that the BNSS includes foreign property. Hence, all three laws have provisions for the attachment of property stationed outside India.

In fact, recently in Rajesh Sachdeva v. The State (Govt. of NCT of Delhi), the Delhi High Court set aside an order directing the release of certain funds of the accused which were frozen by the investigating agency owing to the absence of any show-cause notice or a finding that the amount lying in seized amount is PoC. Hence, now a finding by the Court that property constitutes PoC is mandatory for the property to be attached.

2. Authority to attach: PMLA authorises the Director or anyone not below the rank of Deputy Director acting under the aegis of the Enforcement Directorate (ED), to directly attach any property by passing an order writing, commonly known as a ‘Provisional Attachment Order (PAO)’ [Section 5]. However, this PAO must be confirmed by the Adjudicating Authority [Section 8(3)]. However, as an exception to this prerequisite, the Director can pass an order for the immediate attachment of property if he believes that non-attachment can “frustrate” the proceedings under PMLA [2^nd Proviso, Section 5].

On the other hand, FEOA mandates the Director to first apply to the special court to attach the specifically defined foreign property of a fugitive, and only upon receiving its permission the Director can pass an order to attach the said property [Section 4]. However, like the PMLA, as an exception to this prerequisite, the Director can directly pass an order of attachment if he believes that the said property is being or is likely to be dealt with in a manner that would make it “unavailable for confiscation” [Section 5(2)]. 

However, unlike the PMLA and FEOA, BNSS prescribes multiple conditions that must be satisfied to attach property, including: (i) The concerned police officer must seek the consent of a Superintendent of Police or Commissioner of Police; (ii) thereafter, the police officer must file an application to the court or the magistrate exercising jurisdiction; (iii) the court or the magistrate must send a ‘show cause notice’ to the accused to answer/respond within 14 days as to why the property should not be attached; and (iv) after giving an opportunity to be heard, the court or the magistrate may pass an order to attach the property that qualifies as PoC [Section 107].

3. Threshold for attachment: To attach property under PMLA [Section 5] or FEOA [Section 4], the Director must have a “reason to believe” which is “recorded in writing” that too based on “material in his possession”. However, under BNSS [Section 107], the concerned police officer investigating is not required to record any reasons in writing based on any material in his possession to explain why he is of the belief that the property is PoC and as such should be attached.

4. Scope of offences: PMLA and FEOA only permit the attachment of such property that is obtained, directly or indirectly, by any accused as a result of a criminal activity relating to a ‘scheduled offence’. [Himachal EMTA Power Ltd. v. Union of India]. However, unlike PMLA and FEOA, BNSS allows the attachment of any property which is obtained or derived from any “criminal activity” under the legislation without any specific list of offences. Further, the list of scheduled offences in PMLA and FEOA need to be amended to incorporate offences under the new Bharatiya Nyaya Samhita, 2023, which has replaced the Indian Penal Code (IPC).

5. Conditions for attachment: FEOA is the most straightforward in terms of laying down only one condition based on which a person’s foreign property can be attached. The accused must be believed to be a “fugitive economic offender”, who is someone who (i) has an arrest warrant issued against him under a scheduled offence; and (ii) has left India, or is not returning to India, to avoid criminal prosecution [Section 2(f)]. However, to attach foreign property under PMLA, ED must have a reason to believe that (i) the accused is in possession of POC and (ii) the same is likely to be concealed, transferred or dealt with in a manner which may frustrate proceedings relating to confiscation under PMLA.

Although PMLA and FEOA prescribe these conditions for attachment, BNSS is very vague and generic as it specifies no such condition and only requires the police to believe that the property sought to be attached is derived or obtained, directly or indirectly, as a result of any criminal activity or offence [Section 107(1)].

6. Right to be heard: Under PMLA, the Adjudicating Authority must give a 30-day notice to the accused to disclose how they acquired the property sought to be attached [Section 8(1)]. However, under BNSS, the court is only mandated to give a 14-day notice to the accused to show cause as to why an order of attachment should not be made. Furthermore, the court can pass an interim ex-parte order of attachment if the accused fails to appear within the said 14 days [Proviso to Section 107(4)]. This broad power is further expanded under Section 107(5) to situations where the court believes that sending a show cause notice would defeat the objective or purpose of the attachment. Hence, BNSS has limited the right of an accused to be heard to prevent the attachment of its property.

7. Period of attachment: The maximum period for which the property can be provisionally attached is 180 days from the date of PAO under PMLA [Section 5(1)] and FEOA [Section 4(3)] or until the same is confirmed by the Adjudicating Authority or extended by the special court, respectively.

However, no such period is stipulated under the BNSS. Under BNSS, the district magistrate is bound to “rateably distribute” the PoC amongst the victims within 60 days from the order passed by the court/magistrate directing him to do so [Section 107(6) and (7)]. Notably, BNSS also fails to provide any explanation or illustration of what is meant by “rateable distribution”.

A comparative analysis of the three laws gravely limits the relevance of PMLA and FEOA, considering that now, under BNSS, courts can order the attachment of foreign as well as domestic property for all criminal offences. In sum, the BNSS, acting as an umbrella legislation insofar as attachment of assets is concerned, makes the operation of the PMLA and FEOA redundant to that extent. Hence, if given a choice, state agencies are more likely to pursue any predicate offence under the BNS to create undue pressure on the accused to cooperate.

Further, the laxity in BNSS can be exploited as an accused has no right to produce any material in his support at the time of framing of charges against him [State of Gujarat v. Dilipsingh Kishorsinh Rao] and there is no requirement in law to give reasons in an order framing charges [Bhawna Bai v. Ghanshyam]. Considering that Section 107, BNSS does not stipulate any stage at which the property could be attached, an accused would have limited rights to oppose the attachment of his properties under BNSS.

A legislative overhaul of the three laws, insofar as powers of attachment are concerned, is imperative to ensure that PMLA and FEOA do not lose their relevance with the advent of the BNSS. Further, BNSS should be amended to limit the powers vested with the Indian courts to attach the domestic and foreign property of an accused.

Nitin Saluja and Shivani Luthra Lohiya are Managing Partners, and Ishita Soni is a Senior Associate at SLL Law Chambers.