INDIA Law and Practice Contributed by: Vijayendra Pratap Singh, Asif Ahmed, Bhanu Jindal and Jitesh Lakra, AZB & Partners
properties could only be attached under the narrow third limb exception under Section 2 (1)(u) and that “value of such property” refers to the monetary worth of property derived from the offence, not to assets acquired bona fide. The Court further warned against retroactive application of attachment powers, hold - ing that this would offend the constitutional principle against ex post facto penal consequences under Arti - cle 20 of the Constitution. If, upon completion of trial, the offence of money laundering is proved, such property forms part of the proceeds of crime and stands confiscated by the cen - tral government, vested free from all encumbrances. If, however, the trial results in an acquittal, the prop - erty is released to the persons entitled to receive it. Regardless, the special court trying the offence of money laundering is entitled to direct the govern - ment to restore the confiscated property to a bona fide claimant, who has suffered loss due to the offence of money laundering, at any point during or after the trial. The Foreign Exchange Management Act, 1999 In 2015, Section 37A of the Foreign Exchange Man - agement Act (FEMA) was introduced authorising the ED to seize equivalent assets within India where a resident holds foreign exchange, foreign securities or immovable property outside India in contravention of Section 4 of FEMA. The ED has recently invoked these powers in multiple cases to seize equivalent assets in India in cases where assets are allegedly held outside India in contravention of FEMA. Notably, the Karna - taka High Court has recently held that this provision introduced in 2015 is not retrospectively applicable. 1.6 Rules of Pre-Action Conduct Criminal Proceedings In the case of a criminal complaint relating to fraudu - lent acts, there are no rules of pre-action conduct. The complainant should approach the magistrate or, where the offence is cognisable, the police authorities in order to initiate investigation into the offence. Civil Law Proceedings Where a claimant files a civil claim relating to a fraud under a contract, they should issue a legal notice (usu - ally a demand notice) or comply with any pre-action
steps as prescribed under the dispute resolution clause of the contract. Moreover, specific legislation or provisions may have their own particular rules of pre-conduct action. For example, under the Commercial Courts Act, 2015 (the “CC Act”), parties must undergo pre-institution media - tion where no urgent interim relief is sought. Similarly, a civil action against the government or a public offi - cial may be instituted after serving a written notice two months in advance, unless waived by the court. Failure to comply with such pre-conduct action may be fatal to the claim where the statute so provides. 1.7 Prevention of Defendants Dissipating or Secreting Assets A victim of fraud pursuing civil claims may apply for a temporary injunction to prevent a party from alienat - ing assets during adjudication. The application must satisfy the common law requirements for grant of an injunction: • a prima facie case in favour of the claimant; • the balance of convenience lies in favour of the claimant; and • irreparable injury would be caused to the claimant if such an injunction is not granted. Such injunction is in personam, but may also extend to third parties, where they interfere with or obstruct the course of justice. Where a suit is instituted for seeking damages/per - manent injunction, the court fees payable are com - puted as per the Court Fees Act, 1870 and the rules governing that specific court, which may be ad valo - rem (with or without caps, depending on where the action takes place). However, the fees for seeking an ad interim injunction are typically nominal and vary across courts. A similar remedy is available under Section 9 of the Arbitration and Conciliation Act, 1996 (the “A&C Act”), which permits parties to seek an ad interim injunc - tion for preservation of assets or the substratum of an arbitration, before, during or after the constitution of an arbitral tribunal but before execution of an arbitral award.
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