R Sampath Vs Deputy Director (Appellate Tribunal under SAFEMA, New Delhi)
Background of the Appeals
The appellants approached the Tribunal under section 26 of the Prevention of Money Laundering Act, 2002, challenging an order dated 10 March 2025 by which the Adjudicating Authority had confirmed provisional attachment of their properties.
During the hearing, however, they narrowed the relief sought. Their counsel submitted, on instructions, that they would not press the challenge to attachment and its confirmation if possession of the properties was protected until conclusion of the trial.
They requested an order maintaining status quo, contending that no exceptional reason existed for taking possession. The ultimate treatment of the properties could remain subject to the trial’s outcome and the provisions of sections 8(5) to 8(8).
The Tribunal accepted this approach, leaving the attachment intact while protecting the existing possession subject to specified conditions.
Attachment and Taking Possession Were Treated Separately
The Enforcement Directorate submitted that, since the appellants were no longer contesting the attachment orders, the Tribunal could pass an appropriate order concerning possession.
The Department nevertheless insisted that the properties should neither be alienated nor transferred during the pendency of the criminal trial.
The Tribunal accordingly distinguished between continuation of attachment and an immediate change in possession. Protection of possession did not require setting aside the attachment, nor did it permit the appellants to deal freely with the properties.
This distinction shaped the final order: attachment continued, but the parties were directed to preserve the existing possession.
Exceptional Reasons Required for Taking Possession
The Tribunal relied on the Supreme Court’s judgment in Vijay Madanlal Choudhary & Others v. Union of India & Others, (2022) SCC OnLine SC 929.
Applying that decision, it observed that possession could be taken where exceptional reasons existed. It therefore disposed of the appeals without interfering with either the provisional attachment orders or their confirmation.
At the same time, the parties were directed to maintain status quo regarding possession as it existed on the date of the Tribunal’s order.
The protection was not absolute. The ED was expressly given liberty to apply in the disposed appeals for possession if it could establish a case of an exceptional nature. Thus, the Department retained a route to seek further relief on an appropriate factual foundation.
Properties Could Not Be Sold or Transferred
The appellants were prohibited from alienating or transferring the properties until conclusion of the trial.
The order therefore preserved possession without removing the restraint created by attachment. The appellants could not treat the protection as an unrestricted restoration of their ability to dispose of the assets.
Subject to the trial’s outcome, the Tribunal stated that appropriate orders could be sought under sections 8(5) to 8(8), provided the relevant case was made out and accepted by the Special Court.
The Tribunal did not itself direct final release or confiscation. Those consequences remained dependent on the statutory process and the Special Court’s determination.
Rental Income Had to Be Preserved
The Tribunal separately addressed properties already on lease or rent, as well as properties that might be leased or rented in future.
Such arrangements were to be governed by the Prevention of Money-laundering (Taking Possession of Attached or Frozen Properties Confirmed by the Adjudicating Authority) Rules, 2013.
The lease or rental amounts had to be accounted to the ED and kept in fixed deposits earning reasonable interest. Those deposits would remain subject to the final outcome of the trial.
The appellants were also required to furnish an affidavit every three months stating whether the properties had been rented or leased.
The ED could verify those affidavits. If an affidavit was found incorrect, it could move an application in the disposed appeals for an appropriate order. Protection of possession therefore operated alongside continuing disclosure and supervision.
Special Court Required to Decide Independently
The Tribunal expressly clarified that its order should not be treated adversely to the appellants.
It further stated that observations in the impugned orders would not bind the court conducting the trial. That court was required to decide independently on the basis of the evidence led before it.
This clarification is significant because the appellants had elected not to pursue the attachment challenge. The Tribunal did not treat that election as determining their criminal liability or the final fate of the properties.
Both appeals were disposed of on these terms.
Author’s Comments
Attachment, possession and final confiscation are distinct stages with different consequences. This order demonstrates that an attachment may remain operative while the person presently in possession receives protection pending trial.
The relief was granted in a specific procedural setting: the appellants did not press their challenge to attachment and sought protection of possession instead. It should therefore be described as a conditional disposal, rather than a decision invalidating the attachment.
Equally, retaining possession did not allow unrestricted enjoyment of rental income. The direction to preserve rent in interest-bearing deposits protected that income until the trial determined the appropriate result.
For practitioners, the order illustrates a focused form of interim protection where retaining possession is the immediate concern. Its value lies in the combination of status quo, prohibition on transfer, preservation of rental receipts and independent adjudication by the Special Court, while leaving the ED free to demonstrate exceptional grounds for taking possession.
Cases Discussed
- Vijay Madanlal Choudhary & Others v. Union of India & Others, (2022) SCC OnLine SC 929 — Supreme Court ruling relied upon concerning exceptional circumstances for taking possession of attached property (link to a TaxGuru discussion of the ruling).
FULL TEXT OF THE ORDER OF APPELLATE TRIBUNAL UNDER SAFEMA
The Appeal has been preferred under Section 26 of the Prevention of Money Laundering Act, 2002 (in short ‘the Act of 2002’) against the order dated 10.03.2025 passed by the Adjudicating Authority. By the impugned order, the Adjudicating Authority has confirmed provisional attachment of the properties.
2. The learned counsel for the Appellants, on instructions, submits that he needs not to press the Appeal against the attachment of the property if possession of the property is not taken till conclusion of the trial. It is submitted that an order to maintain status quo may be passed by this Tribunal. It is for the reason that no exceptional reason for taking possession exists. The release of property may be kept subject to the outcome of the trial and as per Section 8(5) to 8(8) of the Act of 2002.
3. The Learned Counsel for the Respondent submits that if the provisional attachment of the property and its confirmation are not questioned rather Appellant is not pressing the Appeal to question those orders, and would be satisfied only if the possession is not taken, this Tribunal may pass an appropriate order on possession but property would be neither alienated nor transferred during the pendency of the trial in the criminal case.
4. I have heard the counsels for the parties. The Appeal has been preferred to challenge the provisional attachment order and its confirmation by the impugned order. The Counsel for the Appellant, on instructions, submits that his client is not inclined to press the Appeal for challenge to the impugned order if the possession of the property is not taken. A reference to the similar orders passed by the Tribunal has been given and accordingly prayer is made that subject to the outcome of the trial in pursuance to ECIR, the attached property may be dealt with under Section 8(5) to 8(8) of the Act of 2002.
5. In view of the judgment of the Apex Court in the case of Vijay Madanlal Choudhary and Others vs. Union of India & Ors. reported in (2022) SCC OnLine SC 929, the possession can be taken if exceptional reason exists. Accordingly, the Appeal is disposed of without causing interference in the provisional attachment order so as the order of its confirmation. The parties would, however, maintain status-quo in regard to the possession as is existing today. The Appellant would not alienate or transfer the property till conclusion of the trial. Subject to the outcome of the trial, the Appellant would be entitled for an order under Section 8(5) to 8(8) of the Act of 2002 if a case is made out and accepted by the Special Court.
6. It is made clear that this order would not be taken adverse to the Appellant and any observation in the impugned orders would not be binding on the court rather it would pass the order independently and based on the evidence led before it. If any of the property is on lease/ rent, or is given on lease/ rent in future then it would be governed as per Prevention of Money- laundering (Taking Possession of Attached or Frozen Properties Confirmed by the Adjudicating Authority) Rules, 2013. The amount of lease/ rent would be accounted to the ED and is to be kept in the FD to earn reasonable interest. The FD would remain subject to final outcome of the trial. The appellant would furnish an affidavit to the ED periodically in every three months to show status of the property whether it has been rented/ leased out or not. The ED would be at liberty to verify the veracity of the affidavit and if it is found to be incorrect, to make an application in the disposed appeal for an appropriate order.
7. The Respondent would however be at liberty to file an application in this disposed-of Appeal seeking possession of the property, if a case of exceptional nature is made out.
With the aforesaid, the Appeals are disposed of.
