A Sub-Registrar cannot record a PMLA attachment without a valid provisional attachment order.

The petitioner claimed ownership of Residential Apartment No.1086 in “Azure the Oceanic,” Chennai, purchased under a sale deed dated 19 January 2024 for valuable consideration.

When he attempted to execute a settlement deed in favour of his son, he learned that the Sub-Registrar had recorded an attachment against the property in the encumbrance certificate, as Document No.3/2024 dated 26 June 2024, based on communications from the Enforcement Directorate (“ED”) concerning ECIR/MDSZO/2/2018/2013.

The petitioner contended that no provisional attachment order had been passed under Section 5 of the Prevention of Money Laundering Act, 2002 (“PMLA”), and that the entry unlawfully prevented him from dealing with the property, violating Article 300A of the Constitution.

The ED acknowledged that no attachment order was subsisting and stated that its earlier communication had merely related to searching property records during investigation.

Whether an entry reflecting attachment could lawfully be made in the encumbrance certificate on the basis of an ED communication seeking or facilitating a search of property records, when no provisional attachment order had been passed under Section 5(1) of the PMLA?

Whether the petitioner was entitled to removal or correction of the encumbrance entry so as to enable him to deal with the property?

Whether the Court’s directions would prevent the ED from initiating fresh attachment proceedings in accordance with the PMLA in the future?

The Court primarily applied Section 5 of the PMLA, under which the Director or an authorised officer not below the rank of Deputy Director may provisionally attach property only upon recording reasons to believe, based on material in possession, that the property constitutes proceeds of crime and is likely to be concealed, transferred, or dealt with so as to frustrate confiscation proceedings.

Such attachment is ordinarily limited to 180 days, subject to the statutory procedure, and the order and supporting material must be forwarded to the Adjudicating Authority; a complaint must also be filed within thirty days under Section 5(5).

Under Section 5(3), the attachment ceases upon expiry of the statutory period or upon an order under Section 8(3), whichever is earlier.

The Court also recognised the petitioner’s constitutional right to deal with property under Article 300A, holding that an encumbrance restricting that right cannot be sustained without a valid statutory attachment.

The Court distinguished between an investigative communication seeking access to or search of registration records and a provisional attachment order under Section 5(1) of the PMLA.

Although the ED had investigated an ECIR relating to alleged mining activities and suspected that the petitioner’s property represented proceeds of crime, it had not passed any provisional attachment order, recorded or produced the requisite statutory reasons, or initiated the confirmation process before the Adjudicating Authority.

The Sub-Registrar therefore acted beyond the legal effect of the ED’s communication by recording it as an attachment in the encumbrance certificate.

Since no valid or subsisting attachment existed, the entry falsely represented the property as attached and unlawfully restricted the petitioner’s ability to deal with it.

The Court accepted the ED’s undertaking to issue a corrective communication while preserving its statutory power to commence fresh proceedings in accordance with the PMLA.

The writ petition was disposed of with directions that: (i) the Deputy Director, ED, issue a communication to the Sub-Registrar within four weeks confirming that no provisional attachment order was subsisting and that the property was not subject to attachment; (ii) the Sub-Registrar record that communication in the encumbrance certificate and clarify that the property was free from attachment by the ED; and (iii) upon such entry, the petitioner be permitted to deal with the property as its lawful owner.

The Court clarified that the order would not prevent the ED from initiating appropriate future proceedings under the PMLA.

No order as to costs was made, and the connected miscellaneous petition was closed.