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Attachments Galore: Protocol missing to regulate interplay!

THE POLICY LAB (TPL) - 42
MARCH 27, 2024

By J B Mohapatra

THE underlying intent behind many existing civil and criminal provisions in many laws which provide for attachment/ provisional attachment/ seizure/disposal of attached property is three-fold: first, pre-empt any effort to alienate the subject property in the pendency of a statutory proceeding and thereby prevent any effort either to frustrate a likely proceeding leading up to confiscation of the property or recovery of likely demand through disposal of the property; second, statutorily render any sale, mortgage, exchange, gift of the subject property in the pendency of certain statutory proceeding under the law as void and; third, in a manner, pressure an accused who is generally regarded as a recalcitrant to join the proceedings in a case instituted against him.

A: Examples are :

(a) Section 28BA of the Customs Act, 1962:

"Provisional attachment to protect revenue in certain cases. - (1) Where, during the pendency of any proceeding under section 28 or section 28AAA or section 28B, the proper officer is of the opinion that for the purpose of protecting the interests of revenue, it is necessary so to do, he may, with the previous approval of the Principal Commissioner of Customs or Commissioner of Customs, by order in writing, attach provisionally any property belonging to the person on whom notice is served under sub-section (1) or sub-section (4) of section 28 or sub-section (3) of section 28AAA or sub-section (2) of section 28B, as the case may be, in accordance with the rules made in this behalf under section 142."

(b) Section 18A of the Prevention of Corruption Act, 1988:

"Provisions of Criminal Law Amendment Ordinance, 1944 to apply to attachment under this Act.-(1) Save as otherwise provided under the Prevention of Money Laundering Act, 2002 (15 of 2003), the provisions of the Criminal Law Amendment Ordinance, 1944 (Ord. 38 of 1944) shall, as far as may be, apply to the attachment, administration of attached property and execution of order of attachment or confiscation of money or property procured by means of an offence under this Act.

(2) For the purposes of this Act, the provisions of the Criminal Law Amendment Ordinance, 1944 (Ord. 38 of 1944) shall have effect, subject to the modification that the references to "District Judge" shall be construed as references to "Special Judge."

(c) Section 83 of CGST Act, 2017:

"Provisional attachment to protect revenue in certain cases.- (1) Where during the pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or section 73 or section 74, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue, it is necessary so to do, he may, by order in writing attach provisionally any property, including bank account, belonging to the taxable person in such manner as may be prescribed.

(2) Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order made under sub-section (1)"

(d) Section 281B of the Income Tax Act (ITA):

"Provisional attachment to protect revenue in certain cases.

(1) Where, during the pendency of any proceeding for the assessment of any income or for the assessment or reassessment of any income which has escaped assessment 72[or for imposition of penalty under section 271AAD where the amount or aggregate of amounts of penalty likely to be imposed under the said section exceeds two crore rupees], the Assessing Officer is of the opinion that for the purpose of protecting the interests of the revenue it is necessary so to do, he may, with the previous approval of the Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Principal Director General or Director General or Principal Director or Director, by order in writing, attach provisionally any property belonging to the assessee in the manner provided in the Second Schedule.

(2) Every such provisional attachment shall cease to have effect after the expiry of a period of six months from the date of the order made under sub-section (1) :

Provided that the Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Principal Director General or Director General or Principal Director or Director may, for reasons to be recorded in writing, extend the aforesaid period by such further period or periods as he thinks fit, so, however, that the total period of extension shall not in any case exceed two years or sixty days after the date of order of assessment or reassessment, whichever is later."

(e) Section 5 of the PMLA, 2002:

"Attachment of property involved in money-laundering.-(1)Where the Director or any other officer not below the rank of Deputy Director authorised by the Director for the purposes of this section, 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 of such proceeds of crime under this Chapter, 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, in such manner as may be prescribed:

Provided that no such order of attachment shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person authorised to investigate the offence mentioned in that Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or a similar report or complaint has been made or filed under the corresponding law of any other country:

Provided further that, notwithstanding anything contained in first proviso, any property of any person may be attached under this section if the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section has reason to believe (the reasons for such belief to be recorded in writing), on the basis of material in his possession, that if such property involved in money-laundering is not attached immediately under this Chapter, the non-attachment of the property is likely to frustrate any proceeding under this Act.

Provided also that for the purposes of computing the period of one hundred and eighty days, the period during which the proceedings under this section is stayed by the High Court, shall be excluded and a further period not exceeding thirty days from the date of order of vacation of such stay order shall be counted."

(f) Section 5 of the Fugitive Economic Offenders Act, 2018:

"(1) The Director or any other officer authorised by the Director, not below the rank of Deputy Director, may, with the permission of the Special Court, attach any property mentioned in the application under section 4 by an order in writing in such manner as may be prescribed.

(2) Notwithstanding anything contained in sub-section (1) or section 4, the Director or any other officer, not below the rank of Deputy Director, authorised by the Director, may, by an order in writing, at any time prior to the filing of the application under section 4, attach any property-

(a) for which there is a reason to believe that the property is proceeds of crime, or is a property or benami property owned by an individual who is a fugitive economic offender; and

(b) which is being or is likely to be dealt with in a manner which may result in the property being unavailable for confiscation:

Provided that the Director or any other officer who provisionally attaches any property under this sub-section shall, within a period of thirty days from the date of such attachment, file an application under section 4 before the Special Court.

(3) The attachment of any property under this section shall continue for a period of one hundred and eighty days from the date of order of attachment or such other period as may be extended by the Special Court before the expiry of such period."

(g) Section 24 of the Prohibition of Benami Property Transaction Act, 1988 (PBPT Act, 1988) :

"(1) Where the Initiating Officer, on the basis of material in his possession, has reason to believe that any person is a benamidar in respect of a property, he may, after recording reasons in writing, issue a notice to the person to show cause within such time as may be specified in the notice why the property should not be treated as benami property.

(2) Where a notice under sub-section (1) specifies any property as being held by a benamidar referred to in that sub-section, a copy of the notice shall also be issued to the beneficial owner if his identity is known.

(3) Where the Initiating Officer is of the opinion that the person in possession of the property held benami may alienate the property during the period specified in the notice, he may, with the previous approval of the Approving Authority, by order in writing, attach provisionally the property in the manner as may be prescribed, for a period not exceeding ninety days from the last day of the month in which the notice under sub-section (1) is issued"

Section 84 of the Black Money (Undisclosed Income and Assets) and Imposition of Tax Act, 2015 contains similar procedure of provisional attachment of property in the manner laid down in section 281B of the Income Tax Act. Under section 68F of NDPS Act, 1985, where it appears to the authorised officer that the illegally acquired property is likely to be concealed, transferred or dealt with in a manner which will result in frustrating any proceeding relating to forfeiture of the property, the said officer may pass an order for seizing or freezing of the illegally acquired property.

B: Leaving apart the fiscal laws discussed above, attachment of property under extant commercial and mercantile laws is equally permissible. Section 13 of the SARFAESI Act, 2002 (an Act to regulate securitisation and reconstruction of financial assets and enforcement of security interest) allows Indian banks and financial institutions to put on notice any credit defaulter and thereafter sell or auction its assets and properties without any intervention of courts. Section 14 of IBC 2016 stipulates a moratorium at the very commencement of CIRP proceeding on all matters relating to "transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein"

C. It is always permissible for the authorities administering various legislations that contain powers of attachment/ provisional attachment of property to apply that power from the perspective of the specific legislation that is being administered without the necessity to consider the effect and consequence of such attachment on any other action that has been or is being considered under any other legislation. Meaning, there is no legal or statutory bar against attachment/ provisional attachment of a specific property under the various laws at the same time. While it is not uncommon to have noticed the friction arising from the interplay between the purely commercial and mercantile laws such as the SARFAESI Act or the IBC, 2016 with the specific fiscal laws, so far as powers of attachment of property is concerned and which of the legislations hold the primacy over that power of attachment, less publicised is the interplay of the powers of attachment inter se among the purely fiscal laws. In the difficult-to-recover demand compilation of Income Tax Department for FY 20-21 amounting to Rs 14.85 lakh crore, it has been noted that ITD has secured some level of assurance against a demand of Rs 96,851 crores through recourse to joint attachment with other agencies. While the attachment/ provisional attachment of the same property by various agencies/ departments is a reality, the level of administrative and/or statutory ease or unease that operation of multiple attachments under the various enactments does and will trigger, some of the scenarios listed below, remains a matter much less discussed.

D. One, whether the consequential actions following an attachment/ provisional attachment under one law is fully permissible under that law without any fetters imposed under any other law when a subject property is under joint attachment. For example, a property under an attachment under section 132(9B) or under 281B of the ITA whether can be applied to satisfy a resultant demand under the ITA or must wait for confirmation of the provisional attachment order by the Adjudicating Officer u/s 8(3) and/or the final order of confiscation by the Special Court under section 8(5) of the PMLA, 2002, if the property is under attachment both under the ITA and under the PMLA, 2002. Or, whether orders of a Special Court constituted under PMLA, 2002 allowing restoration of the attached property in the pendency of an ongoing trial in favour of eligible claimants under the second proviso to section 8(8) of PMLA, 2002 have any consequence under the Income Tax Act, if the very same property has also been provisionally attached under section 132(9B) and there exists no provision in ITA for applying those assets for purposes other than those specified in section 132B of ITA.

Two, section 71 of the PMLA, 2002 reads as follows;

"71. Act to have overriding effect.- The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force."

In case of joint attachment of the same property, there could be a legitimate view in support of primacy of the provisions of attachment/ provisional attachment under PMLA, 2002 over any such provision under any other law. The view has the possibility of getting extended to a position where the very invocation of attachment provisions under PMLA, 2002 has the effect of extinguishing the said powers available under any other law.

Three, section 67 of PBPT Act, 1988 reads as follows:

"Act to have overriding effect.

67. The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force."

In case of joint attachment of same property under PMLA 2002 and PBPT Act, 1988, from a reading of the 2 statutes, which of the 2 enactments would have primacy in matters concerning attachment/provisional attachment remains unclear.

Four, many State legislations also provide for attachment of property. Section 4 of Maharashtra Protection of Interest of Depositors (In Financial Establishment) Act, 1999 (MPID Act) provides for attachment of properties on default of return of deposits in case of infraction by ‘financial establishments'. Section 14 of that Act through a non-obstante clause as reproduced below, makes a case for primacy of the provisions of that Act in case there is a conflict with any other enactment:

"Save as otherwise provided in this Act, the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any custom or usage or any instrument having effect by virtue of any such law."

Disputes have arisen on MPID court's decisions for release of assets, when the very same assets have either been seized or attached under provisions contained in ITA or other such central legislation.

E. There is no known protocol either statutorily established or administratively determined to regulate the interplay of attachment/ provisional attachment provisions under various central and State enactments which leaves open the possibility of a natural evolution of certain jurisprudence around the aforementioned issues rendered on the basis of judicial pronouncements. Whether that jurisprudence will be in line with larger legislative intent underlying the individual enactments is a matter to be keenly watched.


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