J&K High Court Affirms Appellate Tribunal's Remand Power Under PMLA Section 26(4)

Introduction

In a pivotal ruling that strengthens the procedural framework of the Prevention of Money Laundering Act, 2002 (PMLA), the High Court of Jammu & Kashmir and Ladakh has held that the Appellate Tribunal possesses the inherent authority to remand matters back to the Adjudicating Authority after setting aside a confirmation order. This decision, delivered in a batch of appeals involving allegations of fund transfers linked to separatist activities, underscores the wide amplitude of Section 26(4) PMLA, which empowers the Tribunal to "pass such orders thereon as it thinks fit." The bench, comprising Hon'ble Mr. Justice Sanjeev Kumar and Hon'ble Mr. Justice Sanjay Parihar, dismissed challenges to the Tribunal's remand order, emphasizing that denying such power would render appellate jurisdiction ineffective, especially in cases marred by procedural infirmities like violations of natural justice.

The case centers on Sarwa Zahoor and Zahoor Ahmad Shah, promoters associated with M/s Trison Farms and Construction Pvt. Ltd., whose property was provisionally attached by the Directorate of Enforcement (ED) amid investigations into illicit funding. Although the Tribunal set aside the confirmation of this attachment due to the failure to provide "reasons to believe" to the appellants, it remanded the matter for fresh proceedings. The appellants contested this remand before the High Court, arguing that the Tribunal lacked explicit statutory power for it and that the provisional attachment had lapsed by efflux of time. The court's rejection of these contentions clarifies a key ambiguity in PMLA adjudication, ensuring that technical errors do not derail anti-money laundering efforts. This ruling, pronounced on November 20, 2025, in RFA (OS) Nos. 1/2025, 2/2025, and 3/2025, carries significant implications for enforcement agencies and legal practitioners handling economic offenses.

As reported in contemporary legal analyses, the decision aligns with the broader objectives of PMLA to combat money laundering while safeguarding procedural fairness. By upholding the remand, the High Court prevents a "paradoxical situation" where parties could benefit from mere technical lapses, thereby bolstering the Act's efficacy in sensitive cases involving national security concerns, such as funding to separatist elements in Kashmir.

Case Background

The roots of this litigation trace back to investigations into financial conduits allegedly linking Pakistan-based sources to separatist activities in Kashmir. Zahoor Ahmad Shah, son of Gh. Nabi Shah and a promoter of M/s Trison Farms and Construction Pvt. Ltd.—a company incorporated under the Indian Companies Act, 1956—was arrested by the National Investigation Agency (NIA) in New Delhi. The allegations centered on Shah acting as an intermediary for transferring funds received from Pakistan and the Pakistan High Commission in Delhi to various individuals involved in separatist movements. During searches at the residence of one Gh. Mohd. Bhat, the NIA seized documents indicating that Shah had received Rs. 1,64,10,000 during 2015-16 from illegitimate sources and disbursed these funds to recipients engaged in such activities.

Despite Sarwa Zahoor—Shah's wife and appellant No. 1—not being named in any First Information Report (FIR), Enforcement Case Information Report (ECIR), or criminal complaint, the Deputy Director of the Directorate of Enforcement (ED), New Delhi (respondent No. 1), issued a provisional attachment order on March 11, 2019. This order targeted an immovable property—the basement and ground floor of a building in DLF Phase-II, Gurgaon, Haryana—registered in Zahoor's name. The attachment was initiated under Section 5 of PMLA, which allows authorized officers to provisionally attach properties believed to be proceeds of crime for up to 180 days, pending confirmation.

Subsequently, the NIA filed Original Complaint (OC) No. 1114 of 2019 before the Adjudicating Authority, jointly against the appellants. On April 16, 2019, the appellants received a show-cause notice, to which they replied on July 2, 2019. However, the Adjudicating Authority confirmed the provisional attachment on August 26, 2019, under Section 8 of PMLA, which mandates a hearing and reasoned decision for such confirmations.

Aggrieved, the appellants appealed to the Appellate Tribunal under Section 25 of PMLA. On September 24, 2024, the Tribunal allowed the appeals, setting aside the confirmation order on the grounds that the Adjudicating Authority had failed to convey the "reasons to believe" required under Section 5—essential for enabling a meaningful defense. This omission was deemed a violation of principles of natural justice. Rather than quashing the proceedings entirely, the Tribunal remanded the matter to the Adjudicating Authority for de novo proceedings, directing it to issue a fresh notice accompanied by the "reasons to believe" to afford the appellants an adequate opportunity to respond.

The remand provision sparked the instant appeals under Section 42 PMLA before the High Court, filed by Sarwa Zahoor (RFA(OS) No. 1/2025), and Zahoor Ahmad Shah in two connected matters (RFA(OS) Nos. 2/2025 and 3/2025). The appellants, represented by Senior Advocate R.A. Jan assisted by Advocate Shahid Habib, challenged the Tribunal's jurisdiction to remand. The respondents—ED and others—were represented by Deputy Solicitor General of India (DSGI) Tahir Shamsi, assisted by Central Government Counsel (CGC) Faizan Ahmad. The appeals were reserved on November 10, 2025, and pronounced on November 20, 2025. This timeline highlights the protracted nature of PMLA proceedings, often intertwined with national security probes, and underscores the need for clear appellate mechanisms to avoid undue delays.

Arguments Presented

The appellants' counsel, Senior Advocate R.A. Jan, mounted a robust challenge rooted in the statutory limits of the Appellate Tribunal's powers. Emphasizing that the Tribunal is a creature of statute under Section 25 PMLA, Jan argued it possesses only expressly conferred powers, devoid of inherent jurisdiction akin to civil or constitutional courts. Under Section 26(4), the Tribunal is authorized solely to "confirm, modify or set aside" orders, with the phrase "pass such orders thereon as it thinks fit" interpreted narrowly as limited to these options. Remand, he contended, is not explicitly mentioned and thus impermissible, as statutory bodies cannot assume unvested powers. Jan drew on Supreme Court precedents like Central Bureau of Investigation v. V.C. Shukla (1998) 3 SCC 410 and Babu Verghese v. Bar Council of Kerala (1999) 3 SCC 422, which stress strict construction of conferred powers, and Meera Sahni v. Lt. Governor of Delhi (2009) 9 SCC 177, reinforcing that tribunals lack equity-based remands.

Further, Jan highlighted the provisional attachment's limited lifespan under Section 5(1) PMLA—180 days, extendable only by excluding High Court stay periods per the third proviso. With the attachment order dated March 11, 2019, and appeals pending beyond this, he argued it had lapsed by efflux of time, rendering any remand futile and the underlying proceedings non est. Citing Aslam Mohammad Merchant v. Competent Authority (2008) 14 SCC 186 and a recent Karnataka High Court Division Bench in Joint Director v. M/s Devas Multimedia Pvt. Ltd. (Misc. 2nd Appeal No. 24/2020, September 25, 2025), Jan posited that post-lapse, the Adjudicating Authority could not confirm a defunct attachment, making remand an exercise in futility.

In opposition, DSGI Tahir Shamsi, assisted by CGC Faizan Ahmad, urged a broader interpretation of Section 26(4). The phrase "pass such orders thereon as it thinks fit" confers wide amplitude, inherently including ancillary powers like remand to effectuate setting aside, particularly for technical grounds such as natural justice breaches. Denying remand, Shamsi argued, would defeat appellate purpose, allowing appellants to exploit procedural errors without correction. He relied on Commissioner of Income Tax, Shillong v. Assam Travels Shipping Service (1993) Supp (4) SCC 206, where the Supreme Court held "as it thinks fit" encompasses remand, and a Delhi High Court single bench in V.K. Modi v. Director, Enforcement Directorate (2009 SCC OnLine Del 24), affirming remand as a necessary postulate of appellate jurisdiction.

On the attachment lapse, Shamsi countered that the Tribunal set aside only the confirmation, not the adjudication proceedings under Sections 5 and 8. Drawing from Supreme Court wisdom in Kaushalya Infrastructure Development Corporation Ltd. v. Union of India , he noted that provisional attachments trigger but do not limit adjudication, which can proceed to its logical end independently. Thus, remand restores proceedings to the pre-confirmation stage, unaffected by time bars, ensuring continuity in combating money laundering.

These rival contentions framed the central legal questions: the scope of Tribunal powers under Section 26(4) and the survivability of PMLA proceedings post-attachment expiry.

Legal Analysis

The High Court, in a detailed exposition penned by Justice Sanjeev Kumar, meticulously dissected Section 26 PMLA, particularly subsection (4), to affirm the Tribunal's remand authority. A plain reading, the bench observed, reveals "may pass such orders thereon as it thinks fit" as words of widest amplitude, vesting consequential powers like remand upon setting aside. This interpretation avoids rendering appellate jurisdiction nugatory, especially where orders fall due to procedural flaws rather than merits.

Central to the reasoning was the inherent nature of remand in appellate hierarchies. The court invoked Union of India v. Umesh Dhaimode (1997) 10 SCC 223, where the Supreme Court, interpreting a parallel provision in the Customs Act, 1962, held that remand necessarily annuls the impugned decision and flows from "as it deems fit." Similarly, in Assam Travels Shipping Service (supra), the apex court expanded "as it thinks fit" under Income Tax Act provisions to include remand, enabling lower authorities to rectify errors post-annulment. The bench distinguished this from appellants' cited cases, noting they address general limits on statutory powers but do not negate ancillary remands implied in express ones.

Aligning with a Calcutta High Court Division Bench in Partha Chakraborti v. Directorate of Enforcement (CRA 168/2024), the court rejected a narrow view, warning of paradoxes: setting aside for natural justice breaches (e.g., non-supply of "reasons to believe") without remand would let parties "reap fruits of procedural lapses." The Delhi High Court's V.K. Modi (supra) reinforced this, positing remand as an "important postulate" for effective appellate justice, absent which powers become "illusory."

On attachment lapse, the bench clarified the Tribunal's action: it set aside only the confirmation under Section 8, restoring proceedings to the show-cause stage without quashing the entire process. Relying on Kaushalya Infrastructure (supra), the court held adjudication under Sections 5 and 8 survives attachment expiry, as the latter merely triggers but does not delimit the former. "The fact that the provisional attachment order has a limited life does not, by itself, nullify the adjudication proceedings," the Supreme Court had underscored, a principle the High Court applied to mandate fresh hearings with proper notices.

The ruling distinguishes remand from quashing: the former corrects and continues, the latter terminates, suitable only for substantive flaws. It balances PMLA's stringent regime—aimed at tracing crime proceeds—with audi alteram partem (hear the other side), ensuring "reasons to believe" are furnished to uphold fairness without diluting enforcement.

The Karnataka High Court decision in Devas Multimedia (supra), relied on by appellants, was critiqued for overlooking remand's annulment implication, deeming it unpersuasive. Overall, the analysis cements remand as integral to PMLA appeals, harmonizing statutory text with judicial pragmatism.

Key Observations

The judgment is replete with incisive observations that illuminate the court's rationale. Key excerpts include:

• On the breadth of Section 26(4): “From a plain reading of Section 26, in particular subsection (4) thereto, it is abundantly clear that the words ‘may pass such orders thereon as it thinks fit’ are of the widest amplitude and would vest in the Appellate Tribunal powers of remand as consequential to the power to set aside the order appealed against.” This underscores the interpretive lens applied to empower effective appellate oversight.

• Addressing the paradox of limited powers: “If we were to concede that the appellate Tribunal can only confirm, modify or set aside the order of Adjudicating Authority appealed against and cannot remand the matter, it would present a paradoxical situation where the Tribunal, after setting aside an order on the ground of procedural error or a technicality, would be left helpless and allow the appellants to reap the fruits of procedural error or of a mere technicality.” Here, the court highlights the practical necessity of remand to prevent injustice.

• On remand's inherent role: “The power to set aside or annul an order appealed against would necessarily carry with it the power to pass such ancillary and concomitant orders as may be necessary to give effect to the order of annulment or setting aside of the order appealed against.” This quote, drawing from precedents, affirms remand as non-alien to statutory appeals.

• Regarding attachment and proceedings: “The Appellate Tribunal has only set aside the confirmation order and not quashed the proceedings before the Adjudicating Authority under Section 8 of the Act of 2002. The Appellate Tribunal, by setting aside the confirmation order and remanding the matter back to the Adjudicating Authority, has merely restored the proceedings to the stage at which the Adjudicating Authority had passed the confirmation order.” This clarifies the limited scope of the Tribunal's intervention.

These observations, properly attributed to the judgment, emphasize procedural integrity without compromising PMLA's objectives.

Court's Decision

The High Court conclusively dismissed all three appeals, finding no merit in the challenges to the Appellate Tribunal's order. "Viewed thus, we find no merit in these appeals and the same are, accordingly, dismissed. Interim orders, if any, shall stand vacated. Consequently, the order of Appellate Tribunal is upheld," the bench declared in para 27 for RFA (OS) No. 1/2025, with the ruling extended mutatis mutandis to the connected appeals. The Adjudicating Authority was directed to proceed afresh, supplying the "reasons to believe" to the appellants for a fair hearing.

Practically, this mandates de novo adjudication, potentially leading to re-confirmation if merits support it, while vacating any interim stays on the property. The decision's implications are profound: it equips Tribunals with tools to rectify natural justice lapses efficiently, averting dismissals on technicalities and ensuring PMLA cases—often probing terrorism financing—reach substantive resolution. For future litigation, it sets a precedent that remand is not an add-on but embedded in Section 26(4), guiding similar statutes like the Foreign Exchange Regulation Act or Income Tax appeals.

In the broader justice system, this enhances ED's prosecutorial continuity, reducing evasion via procedural delays, while mandating transparency in "reasons to believe." Legal practitioners must now prioritize compliance in notices, as remands will invite deeper scrutiny. Ultimately, the ruling fortifies PMLA's balance between stringent enforcement and due process, potentially influencing appellate practices across economic crime domains and contributing to a more robust anti-money laundering ecosystem in India.