Ratio of PMLA judgment as regards Section 8(4) leaves scope for arbitrary application: Supreme Court

In what could be the first sign of judicial disagreement with the Supreme Court's recent judgment upholding the validity of the Prevention of Money Laundering Act (PMLA), the top court on Tuesday said that the ratio of that verdict with regard to Section 8(4) of PMLA has left scope for arbitrary application..A bench of Chief Justice of India NV Ramana and Justices Krishna Murari and Hima Kohli said that the ratio concerning Section 8(4) laid down by the PMLA judgment in Vijay Madanlal Choudary & Ors v. Union of India would need further expounding to prevent arbitrary application."In Vijay Madanlal Choudary & Ors v. Union of India, SLP (Civ.) No. 4634 of 2014 and others, this Court dealt with confiscation proceedings under Section 8 of the Prevention of Money Laundering Act, 2002 (“PMLA”) and limited the application of Section 8(4) of PMLA concerning interim possession by authority before conclusion of final trial to exceptional cases. The Court distinguished the earlier cases in view of the unique scheme under the impugned legislation therein. Having perused the said judgment, we are of the opinion that the aforesaid ratio requires further expounding in an appropriate case, without which, much scope is left for arbitrary application," the Court said.The observations regarding PMLA verdict were made in a judgment striking down various provisions of the Benami Transactions (Prohibition) Act of 1988 and the 2016 amendments to the 1988 Act as unconstitutional..The PMLA judgment was rendered on July 29 by a Bench of Justices AM Khanwilkar, Dinesh Maheshwari and CT Ravikumar. The Court in that judgment had upheld the validity of various provisions of the PMLA including Section 8(4) of the PMLA, which empowers the ED to take possession of the attached property at the stage of confirmation of provisional attachment made by the Adjudicating Authority.Section 8(4) states:"Where the provisional order of attachment made under sub-section (1) of section 5 has been confirmed under sub-section (3), the Director or any other officer authorised by him in this behalf shall forthwith take the possession of the attached property.".The top court while upholding the provision had cautioned that this provision ought to be invoked only in exceptional situations."Merely because the provisional attachment order passed under Section 5(1) is confirmed, it does not follow that the property stands confiscated; and until an order of confiscation is formally passed, there is no reason to hasten the process of taking possession of such property," the Court had said in the judgment.Once the possession of the property is taken in terms of sub-section (4) and the finding in favour of the person is rendered by the Special Court thereafter and during the interregnum if the property changes hands and title vest in some third party, it would result in civil consequences even to third party, the Court had observed."That is certainly avoidable unless it is absolutely necessary in the peculiar facts of a particular case so as to invoke the option available under sub-section (4) of Section 8," the judgment had said.The bench had also stated that it is possible that the special court in a trial concerning a money-laundering offence may eventually decide the issue in favour of the person in possession of the property as not being proceeds of crime.Before the special court passes such order, it would be a case of serious miscarriage of justice, if not abuse of process, to take physical possession of the property held by such person, the PMLA judgment had stated.Besides, the bench had noted that it would serve no purpose by hastening the process of taking possession of the property and then returning the same back to the same person at a later date pursuant to the order passed by the court of competent jurisdiction..The top court today, however, opined that the above safeguards might not be sufficient and further elucidation might be required..Read more about PMLA judgment here. .[Read judgment on Benami Transactions (Prohibition) Act]