Interplay Between Powers Of Attachment, Forfeiture And Retention Under BNSS And Special Statutes Analysis Of Section 107 BNSS Vis-A-Vis PMLA

Introduction

The enactment of the Bharatiya Nagarik Suraksha Sanhita (“BNSS”) in 2023 signals a paradigm shift in India’s criminal procedural framework, aimed to enhance the efficiency, integrity, and responsiveness of the criminal justice system. Effective from 1 July 2024, the BNSS replaces the previously governing Code of Criminal Procedure (“CrPC”) of 1973. This new legislation introduces a range of reforms, including the integration of technology in trial processes, the provision for trial in absentia, zero FIR, and e-FIR, all aimed at streamlining the criminal justice procedures.

Among the key changes brought about by BNSS is the introduction of Section 107, which empowers Magistrates and Criminal Courts with the authority to attach, forfeit, or restore property linked to the proceeds of crime. Until recently, this term was known by its mention either in the Prevention of Money Laundering Act (“PMLA”), 2002 or in the chapter, ‘Reciprocal Arrangements for Assistance in Certain Matters and Procedure for Attachment and Forfeiture of Property’, under the erstwhile CrPC.

A Bold Step or a Dangerous Overreach?

The concept of attachment and forfeiture of properties derived from criminal activity is not new in criminal law. One of the earliest examples of such a provision is found in the Criminal Law Amendment Ordinance of 1944. This ordinance was introduced to safeguard government assets, specifically targeting properties obtained through the embezzlement of government money or property. Under the ordinance, attachment was limited to specific offences under the Indian Penal Code, 1860 (“IPC”), identified as scheduled offences.

Chapter VI of the erstwhile CrPC provided for the attachment and forfeiture of properties, primarily for the purpose of compelling the attendance or appearance of accused persons. Chapter VIIA provided for attachment and confiscation of property related to cross-border crimes, with Section 105A explicitly defining a 'contracting state' as any country or place in respect of which arrangements have been made by the Central Government with the Government of such country through a treaty or otherwise.

While BNSS introduces a series of promising reforms aimed at strengthening the efficiency and integrity of the criminal justice system, certain provisions within the Sanhita harbor significant flaws that, if left unaddressed, could alter the entire dynamics of the system. Section 107 of BNSS seeks to provide for attachment of properties derived from commission of any offence under the Bharatiya Nyaya Sanhita, 2023 (“BNS”) and in respect of any property located in India. The use of the phrase “a criminal activity or from the commission of any offence” under Section 107 read with the definition of “proceeds of crime” given under Section 111(c) of BNSS makes it clear that the power of attachment has been expanded to potentially cover all offences under the BNS. This is in stark contrast to the scheme followed under previous legislations such as the 1944 Ordinance, PMLA, etc. wherein attachment of properties has been allowed only when they are generated as a result of certain limited category of offences (classified as scheduled offences). Expanding the scope of Section 107 of BNSS to all offences under BNS and that too without having any regard to the nature and gravity of such offences has the effect of making the provision overbroad in its application, without any rational basis for the same.

(I) Potential Dangers of Unrestricted Power

Section 107 of BNSS grants sweeping authority to a police officer carrying out an investigation, to attach a property by making an application to the concerned magistrate if he has reason to believe that any property is derived or obtained, directly or indirectly, as a result of a criminal activity or from the commission of any offence. While PMLA provides a similar power, it mandates that this belief be based on solid material evidence in the possession of the officer carrying out the investigation. PMLA stipulates that a provisional attachment order is only valid for a period of 180 days. Absence of such safeguards in Section 107 coupled with the overbroad application of Section 107 makes the provision prone to a constitutional challenge.

One of the most concerning aspects of Section 107 of BNSS is its lack of clarity regarding the rank or qualifications of the police officer empowered to investigate and execute property attachments. Unlike the Prevention of Money Laundering Act (PMLA), which explicitly designates officers to be at least of the rank of Deputy Director or higher, the BNSS does not specify such a requirement. This omission raises significant concerns about the officer's expertise in handling complex financial crimes, potentially leading to wrongful decisions and improper attachment of property.

(II) Procedural fairness: A glaring gap

Subsection (2) of the BNSS grants a Magistrate the discretion to issue a notice before or after taking evidence. A key feature of Section 107 is the power to issue ex-parte attachment orders under Subsection (5), which allows the Magistrate or Criminal Court to direct the attachment of property believed to be proceeds of crime, if issuing a notice to the affected parties would undermine the purpose of the attachment or seizure. However, this provision fails to provide clear guidance on the circumstances under which such an extreme ex-parte interim attachment order should be issued. In contrast, under the PMLA, the Adjudicating Authority serves a notice of not less than thirty days on such persons requiring them to indicate the sources of his income, earnings or assets, out of which or by means of which he has acquired the property attached. explain the source of income used to acquire the property allegedly linked to criminal activity. Additionally, if the property is claimed by a person other than the person to whom the notice had been issued, such person shall also be given an opportunity of being heard to prove that the property is not involved in money-laundering. Section 107 BNSS does not prescribe a similar procedure.

(III)  Attachment & Liquidation of Property at a Pre-Trial Stage

A distinguishing feature of Section 107 is that it not only allows for the attachment of proceeds of crime but also enables their liquidation and distribution among victims, all before the conclusion of the trial. While evidence is presented in Subsection (2), it is only to decide whether to issue a show-cause notice to the affected party. Subsection (4) further confirms that the attachment order is independent of the trial's outcome. Once the Magistrate determines that the property is “proceeds of crime,” subsection (6) authorizes the liquidation and disbursement of the property. The power to forfeit and liquidate property before a conviction challenges the presumption of innocence, a fundamental principle in criminal law. Unlike the PMLA, which only allows confiscation post-trial in case of conviction, Section 107 could potentially conflict with the proportionality requirements under Articles 14 and 21 of the Constitution unless interpreted narrowly. The drastic power to provide for permanent deprivation of a property in the form of forfeiture and liquidation at a pre-conviction stage has the effect of turning the cardinal principle of criminal law on its head i.e., presumption of innocence. This is particularly significant because even legislation like PMLA, which operates on a reverse burden of proof, does not allow for confiscation before the conclusion of the trial for money laundering offences.

(IV)  Silence on Restoration of Attached Property

Section 107 of BNSS mentions the objectives of “attachment,” “forfeiture,” and “restoration.” While it addresses the first two—attachment and forfeiture—it remains silent on the process of restoration. The provision does not specify when or how an attached property should be restored if, after trial, the Magistrate or Criminal Court concludes that the property is not proceeds of crime. This omission constitutes a significant gap in the law, potentially requiring an amendment for clarity. In contrast, the 1944 Ordinance and PMLA include detailed provisions for the release or withdrawal of attachment orders, ensuring a clear process for property restoration.

Interplay with Special Statutes – Battle between BNSS and PMLA

The expansion of attachment powers under Section 107 raises a critical question as to how it interacts with other specialized laws such as the PMLA.

An Enforcement Case Information Report (“ECIR”) is triggered by the registration of an FIR for a scheduled offence. If, during the investigation, it is found that the proceeds of the scheduled offence have been laundered, an ECIR is registered. For example, if a person commits kidnapping for ransom and later launders or embezzles the ransom money, an ECIR would be registered. The High Court of Madras in Vijayraj Surana vs Assistant Director, Enforcement Directorate¹ held that once an ECIR is born, the umbilical cord that connects the FIR and ECIR disconnects. Our Constitutional Courts are yet to determine as to at what stage will the umbilical cord between the provisions of attachment under Section 107 BNSS and PMLA snap. What happens when there is a conflict in these provisions? Although Section 5 of BNSS states that, “Nothing contained in this Sanhita shall, in the absence of a specific provision to the contrary, affect any special or local law for the time being in force, or any special jurisdiction or power conferred, or any special form of procedure prescribed, by any other law for the time being in force”, the air needs to be cleared of ambiguity.

While it is clear that in the case of a conflict between SARFEASI and PMLA², when ED establishes money trail and discovers that a certain property is secured/mortgaged with a Bank or finance company, the Adjudicating Authority, before confirming the provisional attachment order, sends a notice to the bank/ finance company to file its objections, if any, to the confirmation of attachment. With the enactment of Section 107 of the BNSS, a significant conundrum arises when the Enforcement Directorate (“ED”) discovers that a property is under the custody of the Magistrate. The central issue is the dilemma that occurs if, before the ED

has an opportunity to notify the concerned court, the sixty-day period as mentioned in Subsection (7) lapses and the District Magistrate proceeds to dispose of the property. Section 107 BNSS remains silent on whether the Magistrate is obligated to release the property held in its custody to ED after being notified about their involvement. The matter becomes further convoluted if the property has already been distributed at the pre-trial stage, with the Magistrate having determined it to be the proceeds of crime.

Given the current uncertainty, the legal community eagerly awaits a definitive ruling from our constitutional courts to clarify the relationship between Section 107 of the BNSS and the powers vested in the ED. Although BNSS states that special procedures under special law would prevail over the provisions of BNSS, the overlapping provisions under BNSS are wider and sometimes without the necessary checks and balances which are otherwise provided under special laws. This gap necessitates the intervention by our constitutional courts, whose interpretation will undoubtedly guide the future application of these provisions. Their rulings will provide much-needed clarity on how conflicts between these laws should be addressed, ensuring alignment with constitutional principles.

Footnotes

^{1 Vijayraj Surana vs Assistant Director, Enforcement Directorate, W.P.Nos.14782, 14786 & 14787 of 2024}

^{2 https://www.livelaw.in/law-firms/law-firm-articles-/conflict-of-laws-pmla-sarfaesi-act-224760}

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