Attachment of property
Also written Attachment
A legal order preventing a person from dealing with property or bank accounts — up to 90 days by SEBI under Section 11(4) of the SEBI Act, up to 180 days under Section 5 of the PMLA, and a recovery mode under the SCRA.
In plain language
If a person suspected of a securities fraud or money laundering can simply move money out of a bank account the day a notice arrives, any penalty, disgorgement or confiscation ordered later will be worth nothing. Attachment freezes the position: the property stays where it is, owned by the same person, but it cannot be sold, transferred or otherwise dealt with while the attachment lasts.
The III-A workbook meets attachment in three different laws, each with its own purpose, its own authority and its own time limit. Mixing them up is the commonest error.
How it works
1. SEBI Act, Section 11(4) — an interim protective measure (Chapters 2 and 4). In the interest of investors or the securities market, SEBI may, among other measures, attach, for a period not exceeding 90 days, bank accounts or other property of any intermediary or any person associated with the securities market involved in violating the SEBI Act, rules or regulations. It sits alongside the other Section 11(4) powers: suspending trading in a security, restraining persons from the market, suspending office-bearers of an exchange or SRO, impounding and retaining proceeds or securities relating to a transaction under investigation, and directing that assets forming part of such a transaction not be disposed of.
2. PMLA, Section 5 — provisional attachment of proceeds of crime (Chapter 9). Where the Director, or an officer not below the rank of Deputy Director authorised by him, has reason to believe, on material in his possession, that:
- a person is in possession of proceeds of crime; and
- those proceeds are likely to be concealed, transferred or dealt with so as to frustrate confiscation proceedings,
he may order attachment of the property for not exceeding 180 days from the date of the order. The Adjudicating Authority appointed by the Central Government may then serve a notice of not less than 30 days calling on the person to show the sources of income or assets from which the attached property was acquired, and why it should not be declared involved in money laundering and confiscated by the Central Government.
3. SCRA, Section 23JB — recovery of unpaid dues (Chapter 5). Where a penalty imposed by an adjudicating officer, a refund, or a disgorgement order is not paid, SEBI's Recovery Officer may recover through one or more modes: attachment and sale of movable property; attachment of bank accounts; attachment and sale of immovable property; arrest and detention in prison; and appointing a receiver to manage the person's properties.
| SEBI Act s. 11(4) | PMLA s. 5 | SCRA s. 23JB | |
|---|---|---|---|
| Purpose | Protect investors during investigation | Preserve proceeds of crime for confiscation | Recover an amount already due |
| Who orders | SEBI | Director / Deputy Director or above | Recovery Officer |
| Time limit | Up to 90 days | Up to 180 days | Until recovery |
| What follows | Final directions or orders | Adjudicating Authority notice (30+ days), confiscation | Sale, arrest, receiver |
A worked example
Illustrative facts. Rahul, a trader, is under three separate actions.
SEBI investigation. SEBI finds prima facie evidence that Rahul circulated planted news and dumped shares, crediting Rs 3.2 crore to his bank account. On 1 March, it attaches the account under Section 11(4).
Latest end of the SEBI attachment = 90 days from 1 March = 30 May
It also impounds the Rs 3.2 crore — a separate Section 11(4) power that retains the proceeds themselves.
Enforcement Directorate. The same money is believed to include Rs 1.8 crore from a scheduled offence, and there is material that Rahul is moving funds abroad. A Deputy Director, authorised by the Director, attaches a flat worth Rs 1.8 crore on 10 March under Section 5 of the PMLA.
Latest end of the PMLA provisional attachment = 180 days from 10 March = 6 September
The Adjudicating Authority serves a notice giving Rahul at least 30 days to explain the source of the funds used to buy the flat.
Old SCRA penalty. Separately, Rahul never paid a Rs 15 lakh penalty imposed under the SCRA two years ago. The Recovery Officer attaches his second bank account and, if it holds less than Rs 15 lakh, may proceed to attach and sell his car, or appoint a receiver.
Three attachments, three laws, three clocks — and none of them transfers ownership by itself.
Why NISM asks about it
Chapter 2 (Regulatory Framework – General View), 9% of the paper, and Chapter 4 (Securities and Exchange Board of India Act, 1992), 7%, set out Section 11(4); Chapter 9 (Prevention of Money Laundering Act, 2002), 7%, sets out Section 5; Chapter 5 (Securities Contracts (Regulation) Act and Rules) sets out Section 23JB.
The discriminating numbers are 90 days (SEBI) and 180 days (PMLA), and the rank Deputy Director for PMLA attachment. Expect a question that swaps them.
Common exam traps
- 90 days under the SEBI Act; 180 days under the PMLA. They are different statutes with different purposes.
- PMLA attachment needs two beliefs together: possession of proceeds of crime and likelihood of concealment or transfer that would frustrate confiscation.
- The PMLA officer must be not below Deputy Director, authorised by the Director.
- The Adjudicating Authority's notice is not less than 30 days.
- Attachment ≠ impounding. Under Section 11(4), SEBI may separately impound and retain proceeds or securities of a transaction under investigation.
- Attachment ≠ confiscation. Under the PMLA, confiscation by the Central Government comes only after the Adjudicating Authority process.
- SCRA recovery modes include arrest and detention and a receiver, not only attachment.
Where this is taught
Free preparation for NISM Series III-ARelated terms
- Securities Appellate TribunalThe statutory tribunal established under the SEBI Act that hears appeals from orders of SEBI and of its adjudicating officers, which must be filed within 45 days of receipt of the order.
- Adjudicating AuthorityThe quasi-judicial body constituted by the Central Government under Section 6 of the PMLA that issues notices, adjudicates attachments of property and confirms confiscations.
- Directorate of EnforcementThe multi-disciplinary agency that investigates the offence of money laundering and foreign exchange violations, enforcing the PMLA, FEMA, the Fugitive Economic Offenders Act and sponsoring COFEPOSA cases.
- Money launderingTurning the proceeds of a crime into money that looks legitimate — classically in three stages, placement, layering and integration — and a standalone offence under section 3 of the PMLA.
- Minimum public shareholdingThe minimum share of a listed company that must be held by the public — 25% under Rule 19A of the SCRR, a continuous listing requirement rather than a condition met only at listing.