INTRODUCTION

The Hon’ble Supreme Court’s decision in M/s Nav Nirman Builders & Developers Pvt. Ltd. v. Union of India[1] constitutes an important development in the jurisprudence surrounding the Prevention of Money Laundering Act, 2002 (“PMLA”). The Hon’ble Apex Court was called upon to interpret Section 8 of the PMLA, particularly Sections 8(7) and 8(8), which govern confiscation and restoration of property where trial proceedings cannot be completed.

The judgment addresses a fundamental procedural question: whether the Special Court may order confiscation of property under Section 8(7) while an appeal against confirmation of attachment under Section 8(3) remains pending before the Appellate Tribunal.

The decision contributes significantly to the evolving jurisprudence on the attachment and confiscation of proceeds of crime, while simultaneously safeguarding the integrity of the statutory appellate mechanism.

FACTUAL BACKGROUND

The dispute originated from allegations of financial irregularities concerning a government infrastructure contract executed by a partnership firm known as M/s Nav Nirman Builders.

The firm was established in 1993 with Dharamveer Bhadoria as its Managing Partner.In 2007, the firm secured a government contract requiring the procurement of bitumen from government oil companies. Upon completion of the project, the firm received a payment of approximately Rs. 79,11,559/-. Subsequently, a company named Nav Nirman Builders & Developers Pvt. Ltd., the appellant in the present case, was incorporated with the same partners as shareholders, and Bhadoria became its Managing Director.

However, in 2009, an FIR was registeredand followed by a consequential chargesheet in 2010, against the Executive Engineer (who secured the work order), the firm and unknown others, alleging that the firm had fraudulently submitted forged invoices showing procurement of bitumen from Indian Oil Corporation. It was alleged that public officials colluded with the firm to clear the bills despite the absence of genuine procurement.To cover up this fraudulent act, the firm submitted 37 invoices, claiming to have procured bitumen from Indian Oil Corporation Limited Depot, Tatanagar, of which 6 were forged and fabricated, and the remaining pertained to some other work.The FIR invoked the following offences:

• Sections 120B, 420, 467, 468 and 471 of the Indian Penal Code
• Sections 13(1)(d) and 13(2) of the Prevention of Corruption Act

These offences constituted the predicate offences for initiating proceedings under the PMLA against the firm and Dharamveer Bhadoria in 2012.

During the course of investigation, the Directorate of Enforcement (“ED”) alleged that the funds obtained through the fraudulent scheme were subsequently layered and invested in immovable properties purchased in the name of the appellant company.

Accordingly, the ED issued a Provisional Attachment Order (PAO) in 2017 under Section 5(1) of the PMLA, attaching two immovable properties purchased by the appellant in 2012 and 2014.The ED contended that these properties represented the “value of the proceeds of crime.”

PROCEDURAL HISTORY

The proceedings under the PMLA followed the statutory sequence contemplated under Chapter III of the Act.

After the issuance of the Provisional Attachment Order, the Directorate filed a complaint before the Adjudicating Authority, initiating proceedings under Section 8(1).

Since the attached properties belonged to the appellant company, the appellant sought impleadment before the Adjudicating Authority. The application was allowed and the appellant was made a party to the proceedings.

After hearing the parties, the Adjudicating Authority confirmed the attachment under Section 8(3) of the PMLA.Aggrieved by this confirmation order, the appellant filed an appeal under Section 26 before the Appellate Tribunal.

Meanwhile, the ED filed a Prosecution Complaint under Section 45 of the PMLA before the Special Court.During the pendency of the criminal proceedings, the principal accused, Dharamveer Bhadoria, passed away. Consequently, the ED invoked Section 8(7) of the PMLA, seeking confiscation of the attached properties on the ground that the trial could not be completed.The appellant responded by filing an application under Section 8(8) claiming restoration of the properties.

The Special Court allowed the application under Section 8(7) and ordered confiscation of the attached properties while dismissing the appellant’s claim for restoration.The appellant challenged this order before the Hon’ble High Court under Section 482 of the CrPC, but the Hon’ble High Court affirmed the Special Court’s decision.The matter was subsequently brought before the Hon’ble Supreme Court.

Additionally, the appeal under Section 26 of the PMLA was dismissed as infructuous on 23.08.2023, during the pendency of the appeal before the Hon’ble Supreme Court.

ISSUES BEFORE THE SUPREME COURT

The case raised several important legal issues concerning the interpretation of the PMLA:

1. Whether the Special Court can order confiscation under Section 8(7) of the PMLA while an appeal against confirmation of attachment under Section 8(3) is pending before the Appellate Tribunal.
2. What is the scope of the expression “material before it” used in Section 8(7).
3. Whether Section 8(7) permits the Special Court to examine the merits of the attachment confirmed under Section 8(3).
4. Whether the appellant was entitled to restoration of property under Section 8(8) of the PMLA.
5. How the doctrine of merger operates in relation to appellate proceedings under Section 26 of the PMLA.

ARGUMENTS OF THE PARTIES

Arguments of the Appellant

• It was submitted that the attached properties belonged to the appellant company, which was an independent entity and had not been arraigned as an accused.
• The appellant contended that the fact that the appeal against the confirmation order passed by the Adjudicating Authority under Section 8(3) of the PMLA was pending before the Appellate Tribunal for a long time due to want of coram, was brought to the notice of the Special Court. Yet, the Special Court decided the application under Section 8(7) of the PMLA on merits.
• It was further submitted that even as per the case of the respondent, the properties attached were not the proceeds of crime, and were only alternate property in value thereof. Despite the sources and the bank trail for the purchase of the said properties having been clearly furnished, the Special Court had not engaged with the same in substance.

Arguments of the Respondent

• The respondent contended that the facts as noted by the Special Court and the High Court revealed that the proceeds of crime to the tune of Rs. 79,11,559/- were first placed in the banking system by the firm and, thereafter, layered and laundered by investing in immovable properties on behalf of the appellant which shared the same name and address as that of the firm.
• The respondent argued that it was discovered during the course of investigation that the entire share capital of the appellant was owned and controlled by the partners of the firm, who were either the Managing Director, Director, or Shareholder in the appellant company.
• It was further submitted that Section 2(1)(u) of the PMLA is expansive enough to deal with such a situation, as discussed in Vijay Madanlal Choudhary and Ors. v. Union of India and Ors.[2].
• The respondent further submitted that the appellant had failed to discharge the burden of proof under Section 24 of the PMLA, as it failed to show the legitimate source for purchasing the attached properties.

STATUTORY FRAMEWORK

Definition of “Proceeds of Crime”

The Hon’ble Supreme Court examined Section 2(1)(u) of the PMLA, which defines “proceeds of crime” as property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence.The definition also extends to the value of such property, thereby enabling authorities to attach equivalent property when the original proceeds cannot be located.

The Hon’ble Supreme Court emphasised that the definition is intentionally broad and designed to ensure that the State can effectively trace and secure assets linked to criminal activity. The provision also includes property that may be indirectly derived from criminal activity, thereby recognising the layered nature of money laundering transactions.

The Hon’ble Supreme Court referred to its earlier decision in Vijay Madanlal Choudhary v. Union of India& Ors.[3], which clarified that the definition of proceeds of crime encompasses property that can be linked, directly or indirectly, to criminal activity associated with a scheduled offence. The Hon’ble Supreme Court reiterated that the legislative objective of the PMLA is to ensure that property generated from criminal activity is identified, attached and ultimately confiscated by the State.

Scheme of Section 8 of the PMLA

The Hon’ble Supreme Court emphasised that Section 8 forms part of a structured statutory scheme governing attachment and confiscation of property.

The sequence under Section 8 is as follows:

1. Section 8(1): Issuance of notice
2. Section 8(2): Adjudication proceedings before the Adjudicating Authority.
3. Section 8(3): Confirmation of attachment.
4. Section 8(5): Confiscation upon conclusion of trial.
5. Section 8(7): Confiscation where trial cannot be conducted.
6. Section 8(8): Restoration of property to a legitimate claimant.

The Hon’ble Supreme Court held that these provisions operate sequentially and must be interpreted harmoniously.

Section 9 – Vesting of Property in the Central Government

Section 9 provides that once an order of confiscation has been passed under Section 8, the property vests absolutely in the Central Government free from all encumbrances.

The Hon’ble Supreme Court noted that this provision reflects the final stage in the statutory scheme under Chapter III, whereby confiscated property becomes the property of the State. At this stage, any prior rights or interests of private parties stand extinguished unless restoration is permitted under Section 8(8).

COURT’S ANALYSIS AND REASONING

Nature and Scope of Section 8(7)

The Hon’ble Supreme Court clarified that Section 8(7) is a stand-alone provision enabling confiscation when a trial cannot be conducted due to circumstances such as:

• death of the accused
• declaration of the accused as a proclaimed offender
• other similar contingencies.

However, the Hon’ble Supreme Court held that the provision can be invoked only after the confirmation order under Section 8(3) has attained finality.

Thus, confiscation under Section 8(7) presupposes that the attachment order is no longer under challenge.

Interpretation of “Material Before It”

The Hon’ble Supreme Court observed that this expression must be understood in the context of persons who were not parties to the proceedings before the Adjudicating Authority under Section 8(3). Since an order passed in the absence of such persons does not necessarily bind them, they may invoke Section 8(7), provided they demonstrate both the existence of the contingencies contemplated under the provision and their entitlement to possession of the property. In such cases, the Special Court is required to consider the material placed before it by such parties.

However, the Hon’ble Supreme Court introduced an important limitation in respect of persons who had already suffered an adverse order under Section 8(3). Such persons cannot invoke Section 8(7) as a matter of right. Relief under this provision may be sought only on the basis of new material placed for the first time before the Special Court, which had not been considered earlier by the Adjudicating Authority or any appellate forum. This interpretation ensures that Section 8(7) does not operate as a mechanism to indirectly review or reopen the confirmation order passed under Section 8(3). The Hon’ble Supreme Court further reiterated that a confiscation order passed under Section 8(7) ultimately gives finality to the confirmation of attachment under Section 8(3).

Role of the Appellate Tribunal

An appeal against an order of the Adjudicating Authority under Section 8(3) lies before the Appellate Tribunal under Section 26 of the PMLA. By virtue of Section 25, the Appellate Tribunal constituted under Section 12 of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (SAFEMA) functions as the appellate body for matters arising under the PMLA. The Tribunal is headed by a Chairperson who is or has been a Judge of the Supreme Court or a High Court.

Under Section 26, any aggrieved person may file an appeal within 45 days from receipt of the order, with a limited power of condonation of delay. Upon hearing the parties, the Tribunal may confirm, modify or set aside the impugned order and is required to endeavour to dispose of the appeal expeditiously, ideally within six months.

The Hon’ble Supreme Court further noted that under Section 35 of the PMLA, the Appellate Tribunal is guided by the principles of natural justice and is not strictly bound by the procedure prescribed under the Code of Civil Procedure. However, it enjoys powers similar to those of a civil court, including summoning witnesses, receiving evidence, and reviewing its decisions. Orders passed by the Tribunal are executable as civil court decrees, and proceedings before it are deemed to be judicial proceedings.

Additionally, any person aggrieved by the Tribunal’s decision may file a further appeal before the High Court under Section 42 of the PMLA. Permitting the Special Court to proceed under Section 8(7) while an appeal under Section 26 remains pending would effectively defeat the statutory right of appeal.

Doctrine of Merger

The Hon’ble Supreme Court applied the doctrine of merger to explain the relationship between orders passed under Section 8(3) and appellate proceedings.

Once an order of the Adjudicating Authority is challenged before the Appellate Tribunal, the final order becomes the order passed by the appellate forum.

Therefore, the original confirmation order cannot be considered final until the appellate proceedings are concluded.

Consequently, a deemed embargo operates on proceedings under Section 8(7) until the appeal against the confirmation order is decided.

Restoration of Property under Section 8(8)

The Hon’ble Supreme Court also examined the appellant’s claim for restoration of property under Section 8(8).

Section 8(8) allows restoration of confiscated property to a claimant who:

1. has a legitimate interest in the property,
2. has suffered quantifiable loss due to the offence, and
3. acted in good faith without involvement in money laundering.

The burden of proving these requirements lies heavily on the claimant.The second proviso to Section 8(8) creates an exception by permitting restoration even during the pendency of trial, subject to rules prescribed by the Central Government. These procedures are governed by the Prevention of Money-laundering (Restoration of Confiscated Property) Rules, 2016, which define a “claimant” as a person who has suffered quantifiable loss due to money laundering, acted in good faith, and is not involved in the offence.

Under Rule 3A of the 2016 Rules, restoration during trial can be considered only after charges have been framed under Section 4 of the PMLA. The Special Court may invite claims through public notice and must determine whether the claimant has established a legitimate interest in the property, which is essentially a question of fact. Thus, claims for restoration under Section 8(8) must be assessed in conjunction with Rule 2(b) and Rule 3A of the 2016 Rules.

The Hon’ble Supreme Court held that the appellant had failed to demonstrate the essential conditions required under Section 8(8).Accordingly, the Special Court was correct in rejecting the restoration application.

RATIO DECIDENDI

The Hon’ble Supreme Court’s decision established several key legal principles:

1. Section 8(7) and Section 8(8) are stand-alone provisions.
2. Section 8(7) gets attracted only in case of a contingency and an application under the said provision can be decided by the Special Court only once the confirmation order attains finality.
3. The expression “material before it” occurring in Section 8(7) has a limited import to the extent of showingthe contingency and the entitlement to possession as regards the Director or any third party.
4. The Special Court cannot proceed with an application under Section 8(7) when an appeal against theconfirmation order under Section 8(3) is pending before the Appellate Tribunal or higher forums.
5. The doctrine of merger applies to orders under Section 8(3), and once an order is challenged before a higherforum, a deemed embargo operates on the conclusion of proceedings under Section 8(7).
6. An application under the second proviso to Section 8(8) can only be filed subject to satisfying the essential conditions laid down by Rules 2(b) and 3A of the 2016 Rules.

FINAL DIRECTIONS

The Hon’ble Supreme Court set aside the orders of the Special Court and the High Court that had permitted confiscation under Section 8(7).

The Hon’ble Supreme Court also set aside the Appellate Tribunal’s order dismissing the appeal as infructuous and directed that the appeal be restored and decided on merits within four weeks.

Additionally, theHon’ble Supreme Court directed that the application under Section 8(7) should remain pending until the appellate challenge to the attachment order is finally resolved.

CONCLUSION

The Hon’ble Supreme Court’s ruling clarifies an important procedural aspect of the PMLA regime. By holding that confiscation under Section 8(7) cannot proceed while an appeal against the attachment order remains pending, the Court reinforced the integrity of the statutory appellate framework.

The judgment ensures that the powers of confiscation under the PMLA are exercised within the structured procedural safeguards established by the Act. At the same time, it reaffirms the legislative objective of enabling authorities to trace and confiscate proceeds of crime.

In balancing these considerations, the Hon’ble Supreme Court has strengthened procedural fairness while preserving the effectiveness of the anti-money laundering regime.

[1] 2026 INSC 130

[2](2023) 12 SCC 1

[3] (2023) 12 SCC 1