Money laundering is, almost by definition, a borderless enterprise: the predicate crime happens in one country, the layering routes funds through a second, and the integration parks the proceeds in real estate, shell companies or bank balances in a third. A purely territorial confiscation regime would be useless against such mobility. Chapter IX of the Prevention of Money-Laundering Act, 2002 (Sections 55 to 61) is India's answer — a reciprocal-assistance framework that lets Indian courts reach out to a contracting State to freeze and confiscate assets abroad, and lets foreign courts ask India to do the same for property located here. This chapter explains how that machinery works, how it interlocks with the attachment regime of Chapter III, and how the Fugitive Economic Offenders Act, 2018 supplies a parallel track for absconders like Nirav Modi.
The Cross-Border Problem and the Treaty Solution
Confiscation is the ultimate sanction of anti-money-laundering law: it strips the offender of the economic fruit of crime and so removes the incentive to launder in the first place. But confiscation power is an exercise of sovereign authority, and sovereignty stops at the national frontier. An Indian Special Court cannot, by its own fiat, sell a flat in London or freeze a bank account in Dubai; it can only request the competent authority of that jurisdiction to act. Conversely, India cannot ignore a foreign court's request to attach proceeds of crime parked in Mumbai without undermining the very reciprocity it depends on when its own offenders flee abroad.
This is why the global standard-setter, the Financial Action Task Force (FATF), devotes two of its Forty Recommendations to the point. Recommendation 4 requires every country to empower its authorities to identify, trace, freeze, seize and confiscate property that is the proceeds or instrumentality of crime, including provisional measures to prevent dealing or disposal; Recommendation 38 requires that countries be able to take expeditious action in response to foreign requests to identify, freeze, seize and confiscate such property. These standards rest on a treaty bedrock: the Vienna Convention (1988) on narcotic drugs, the Palermo Convention (2000) against transnational organised crime, and the United Nations Convention against Corruption (UNCAC, 2003), whose Chapter V is devoted entirely to asset recovery. The PMLA was enacted, as its preamble recites, to give effect to these instruments — a lineage explored in our note on the FATF recommendations and genesis of the Act.
Chapter IX: Architecture of Reciprocal Assistance
Chapter IX of the PMLA is headed "Reciprocal Arrangement for Assistance in Certain Matters and Procedure for Attachment and Confiscation of Property." It runs from Section 55 to Section 61 and breaks into three functional blocks. The first is definitional and enabling: Section 55 supplies the special vocabulary and Section 56 authorises the Central Government to enter treaties. The second is the outbound limb — India seeking help abroad — captured chiefly in Section 57 (letter of request to a contracting State for evidence) and the outbound part of Section 60(1) (letter of request to enforce an Indian attachment or confiscation order abroad). The third is the inbound limb — India assisting a foreign State — in Section 58 (executing a foreign request for investigation and evidence), Section 58B (foreign request for confiscation or release of property where trial cannot proceed abroad), Section 59 (service of processes and transfer of accused persons) and the inbound part of Section 60(2) (executing a foreign confiscation request against property in India).
Two structural points deserve emphasis at the outset. First, the chapter does not create a free-standing confiscation procedure; it borrows. Section 60(6) expressly states that the provisions of Chapter III (attachment, adjudication, confiscation and vesting) and Chapter V (survey, searches and seizures) "shall apply" to property covered by a letter of request. So the substantive machinery — provisional attachment, confirmation by the Adjudicating Authority, and final confiscation — is exactly the domestic machinery, simply triggered by a cross-border request. Second, the entire chapter is keyed to the existence of a contracting State; without that treaty relationship, the assistance machinery does not engage.
The Building Blocks: Section 55 Definitions
Section 55 defines the terms that give the chapter its reach. A "contracting State" means "any country or place outside India in respect of which arrangements have been made by the Central Government with the Government of such country through a treaty or otherwise." The phrase "or otherwise" is significant: assistance need not flow only from a formal bilateral Mutual Legal Assistance Treaty (MLAT). It may rest on a multilateral convention to which both States are party — UNCAC being the workhorse — on a memorandum of understanding, or on a case-specific assurance of reciprocity.
A "corresponding law" means "any law of any foreign country corresponding to any of the provisions of this Act or dealing with offences in that country corresponding to any of the scheduled offences." This is the conceptual bridge that lets an Indian authority treat a foreign predicate offence as if it were a domestic scheduled offence for the limited purpose of cross-border assistance. "Identifying" includes "establishment of a proof that the property was derived from, or used in the commission of, an offence under section 3" — i.e. the offence of money-laundering. "Tracing" means "determining the nature, source, disposition, movement, title or ownership of property." Tracing and identifying are the investigative spadework that must precede any freeze or confiscation, and Section 60(3)-(4) hard-wires those steps into the inbound process.
Section 56: The Treaty-Making Power
Section 56 is the enabling provision for the whole chapter. Sub-section (1) empowers the Central Government to enter into an agreement with the Government of any country outside India for (a) enforcing the provisions of the PMLA and (b) exchanging information for the prevention of any offence under the Act or under the corresponding law in force in that country. Sub-section (2) allows the Government, by notification in the Official Gazette, to direct that the application of Chapter IX in relation to a contracting State with which reciprocal arrangements have been made shall be subject to such conditions, exceptions or qualifications as may be specified.
In practice the operative instruments are the network of MLATs India has concluded (with the United States, the United Kingdom, the UAE, Switzerland and dozens of others) read together with multilateral conventions. The Ministry of Home Affairs is the designated Central Authority for transmitting and receiving most criminal-matter requests, and the Enforcement Directorate is the executing agency on the PMLA side. The treaty does not itself confiscate anything; it merely creates the channel through which Sections 57 to 60 operate.
Outbound Requests: Section 57 and Section 60(1)
When the proceeds of an Indian money-laundering offence have been moved abroad, India must ask the host State for help. Section 57 deals with evidence: notwithstanding anything in the Code of Criminal Procedure, if in the course of an investigation or proceeding under the Act it appears to a Special Court (on an ED application, or otherwise) that evidence may be available in a contracting State, the court may issue a letter of request to a competent court or authority in that State to examine witnesses, produce documents or take such other steps as the court specifies, and to forward the resulting evidence. The letter is transmitted in the manner the Central Government specifies, and the evidence so received is admissible.
The confiscation counterpart is Section 60(1). Where the Director has made an attachment order under Section 5, or a freezing order under Section 17(1A), or the Adjudicating Authority has made an order under Section 8, or a Special Court has made a confiscation order under Section 8(5) or (6), and the property is suspected to be in a contracting State, the Special Court — on the application of the Director or the Administrator appointed under Section 10(1) — may issue a letter of request to a court or authority in that contracting State for execution of the order. This is the mechanism by which an Indian confiscation order is projected outward, asking the foreign forum to enforce it against the asset sitting on its soil. Whether the foreign court actually enforces it then depends on that State's own law and the terms of the applicable treaty.
Inbound Assistance: Sections 58, 58B and 59
The mirror image is India acting on a foreign request. Section 58 provides that where a letter of request is received by the Central Government from a court or authority in a contracting State seeking investigation into an offence and the forwarding of connected evidence, the Central Government may forward that letter to the Special Court or to any authority under the Act for execution "in accordance with the provisions of this Act or any other applicable law." The phrase is important — the foreign request is not executed mechanically; it is filtered through India's own statutory safeguards.
Section 58B, inserted to plug a gap, deals with the situation where the trial under the corresponding law of the foreign country cannot be conducted there (for instance because the accused has died or absconded beyond that State's reach). It allows the Central Government, on a letter of request from the contracting State, to forward the matter for confiscation or release of the property in India. Section 59 rounds out the procedural toolkit: it lets a Special Court send a summons or warrant it has issued to a contracting State for service or execution, lets India serve or execute processes received from a contracting State, and provides for the transfer of accused persons and prisoners between the jurisdictions. Together these provisions ensure that the absence of a live foreign trial does not become a permanent shelter for laundered assets located in India.
Section 60(2) and (2A): Confiscating Foreign Proceeds Located in India
The heart of inbound cross-border confiscation is Section 60(2). Where the Central Government receives a letter of request from a court or authority in a contracting State requesting "attachment, seizure, freezing or confiscation" of property in India that was derived or obtained, directly or indirectly, by any person from the commission of an offence under a corresponding law committed in that contracting State, the Central Government may forward the request to the Director for execution in accordance with the Act. The 2013 amendment (Act 2 of 2013) deliberately broadened the verb from "attachment or confiscation" to the fuller "attachment, seizure, freezing or confiscation," and expanded the trigger from "an offence under section 3" to "an offence under a corresponding law" — recognising that the predicate was committed abroad, not in India.
The 2013 amendment also inserted Section 60(2A), which addresses the endgame. Where, on closure of the criminal case or conclusion of trial in a criminal court outside India under the corresponding law, that foreign court finds that the offence of money-laundering has been committed, the Special Court in India shall — on receipt of an application from the Director for execution of confiscation under sub-section (2), and after notice to affected persons — order that the property involved in money-laundering, or used for committing it, stand confiscated to the Central Government. Sub-sections (3) to (5) require the Director to direct authorities to trace and identify the property through inquiries, investigations and surveys, and sub-section (6) imports the Chapter III and Chapter V machinery wholesale. The net effect is a complete inbound pipeline: foreign request, tracing in India, attachment and adjudication under domestic law, and final confiscation vesting the asset in the Indian Government.
What Happens to the Money: Section 60(7) and Asset Sharing
Confiscation is not the end of the cross-border story; the asset still has to be disposed of, and the requesting State will usually want its money back. Section 60(7), inserted by Act 21 of 2009 with effect from 1 June 2009, addresses this. When any property in India is confiscated as a result of executing a request from a contracting State, the Central Government may either return the property to the requesting State or compensate that State by disposing of the property "on mutually agreed terms that would take into account deduction for reasonable expenses incurred in investigation, prosecution or judicial proceedings leading to the return or disposal of confiscated property."
This codifies the asset-sharing principle that UNCAC Chapter V and FATF Recommendation 38 promote. It recognises two competing equities: the requesting State's claim to recover proceeds of a crime committed on its territory, and the executing State's legitimate cost of doing the work. By making the return or sharing depend on "mutually agreed terms," the provision leaves room for the bilateral asset-sharing agreements that increasingly accompany large transnational recoveries. Section 61 then supplies the plumbing: every letter of request, summons or warrant to or from a contracting State under Chapter IX must be transmitted in the form and manner the Central Government specifies by notification.
The Reach of 'Proceeds of Crime': Property Held Outside India
Cross-border confiscation would be hollow if "proceeds of crime" stopped at India's coastline. It does not. Section 2(1)(u) defines proceeds of crime in three limbs: (i) any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence; (ii) the value of any such property; and (iii) crucially, where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad. The third limb is the "equivalent value" or "value of any such property" concept that allows the ED to attach untainted Indian assets up to the value of proceeds spirited abroad, precisely because the original proceeds are beyond easy reach.
In The Deputy Director, Directorate of Enforcement, Delhi v. Axis Bank & Ors., 2019 SCC OnLine Del 7854, the Delhi High Court parsed these three limbs and held that the value-equivalent power is a deliberate legislative device to ensure that a launderer who has hidden the actual proceeds abroad cannot defeat confiscation; substitute property of equivalent value, whether in India or abroad, may be reached. A Finance Act, 2019 Explanation later clarified that proceeds of crime include property derived from any criminal activity relatable to the scheduled offence, not merely the scheduled offence narrowly construed. The contours of this definition are developed further in our note on the statutory definitions under the Act.
Constitutional Foundation: Vijay Madanlal Choudhary
The entire attachment-to-confiscation edifice, including its cross-border extensions, rests on a constitutional foundation that was comprehensively tested in Vijay Madanlal Choudhary v. Union of India, (2022) 10 SCC 1 (also reported as 2022 SCC OnLine SC 929). Disposing of over 240 petitions, a three-judge bench led by Khanwilkar J. upheld the core PMLA machinery — provisional attachment under Section 5, confirmation and confiscation under Section 8, the ED's powers, the twin bail conditions of Section 45, and the reverse burden under Section 24 — holding that these provisions bear a reasonable nexus with the legitimate object of combating money-laundering, an offence the Court characterised as a threat to the financial system and sovereignty of nations.
For cross-border purposes the case matters because it confirms two things. First, attachment and confiscation under the PMLA are civil-in-rem in character, running parallel to the criminal prosecution — a characterisation that makes them workable in the assistance context where a foreign criminal trial may be ongoing or impossible. Second, the Court located the PMLA squarely within India's international obligations under the Vienna and Palermo Conventions and the FATF framework, reinforcing that Chapter IX is not an optional add-on but part of the Act's treaty-implementing core. The broader confiscation regime is examined in our note on punishment for money-laundering.
Procedural Safeguards: A Foreign Request Is Not Self-Executing
A recurring concern is that a foreign letter of request might be rubber-stamped, with Indian assets frozen on a bare assertion from abroad. Indian courts have firmly rejected mechanical execution. The Delhi High Court, in proceedings before Justice Prathiba M. Singh in 2021, held that on receiving a letter of request under Section 60, the ED cannot freeze or seize property at face value; the request must have a reasonable basis, and the freezing or attachment of assets in India must conform to the PMLA's own procedure — the same "reasons to believe" discipline that governs purely domestic action.
That discipline traces to Opto Circuit (India) Ltd. v. Axis Bank, (2021) 6 SCC 707, where the Supreme Court held that before freezing a bank account under Section 17, the authorised officer must record in writing the "reasons to believe" that an offence of money-laundering has been committed and that the property represents proceeds of crime, and must forward that material to the Adjudicating Authority. Because Section 60(6) imports the Chapter III and Chapter V machinery, these safeguards apply equally to property frozen pursuant to a foreign request. The principle was reiterated in cases such as Rama Luthra v. Directorate of Enforcement (Delhi High Court, 10 February 2021), where the Court modified provisional attachment orders for want of cogent recorded reasons. The cross-border channel thus carries with it the full weight of India's procedural protections.
The Parallel Track: Fugitive Economic Offenders Act, 2018
Chapter IX is not the only route to cross-border confiscation. For high-value absconders, Parliament enacted the Fugitive Economic Offenders Act, 2018 (FEOA), which works in tandem with the PMLA. Under Section 4, the Director may apply to a Special Court (the same Special Court designated under the PMLA) to declare an individual a "fugitive economic offender" — a person against whom a warrant has issued for a scheduled offence involving at least Rs. 100 crore, who has left India and refuses to return to face prosecution. Once that declaration is made under Section 12, the Special Court may order that any property of the fugitive — proceeds of crime, benami property, and even other property, whether located in India or abroad — stand confiscated to the Central Government, free of all encumbrances.
The FEOA's confiscation reach is therefore wider than the PMLA's: it is not confined to proceeds of crime and expressly extends to property abroad. The Act was deployed against Nirav Modi in the Punjab National Bank fraud: on 5 December 2019 the Special Court declared him a fugitive economic offender, and his properties — flats in Worli's Samudra Mahal, a farmhouse and land in Alibaug, a windmill in Jaisalmer, a London flat and UAE apartments, plus shares and bank deposits — were confiscated under Section 12. Constitutional challenges to the FEOA, including by Vijay Mallya and Sanjay Bhandari, have largely foundered on the threshold point that a person who deliberately evades Indian jurisdiction cannot simultaneously invoke its protective writ, though courts continue to scrutinise the proportionality of confiscating property beyond proceeds of crime.
Practical Challenges in Recovering Assets Abroad
For the exam and in practice, it is worth understanding why cross-border recovery remains slow even with this framework. First, dual criminality: the foreign State will usually act only if the conduct is also an offence under its corresponding law, which is why Section 55's "corresponding law" definition is doing heavy lifting. Second, evidentiary standards differ — a freezing order acceptable in a civil-in-rem Indian framework may require a higher showing in a common-law jurisdiction that treats confiscation as quasi-penal. Third, the layering of ownership through trusts, shell companies and nominee structures in secrecy jurisdictions means tracing under Section 60(3)-(4) can take years before any property is even "identified."
Fourth, enforcement of an Indian confiscation order abroad under Section 60(1) is not automatic; the host State enforces it through its own courts and on its own terms, and may insist on its own proceedings. Finally, asset-sharing under Section 60(7) introduces a negotiation over costs and proportions that can stall repatriation. The practical lesson is that Chapter IX provides the legal channel, but successful recovery depends on diplomatic spadework, treaty coverage and patient mutual legal assistance — which is why provisional measures (freezing early, before assets move again) are so heavily emphasised by FATF Recommendation 4 and built into Section 60(2). Readers should study this chapter alongside the domestic attachment of property regime and the role of the Adjudicating Authority, and may return to the PMLA notes hub for the full sequence of topics.
Frequently asked questions
What is a 'contracting State' under the PMLA?
Under Section 55, a contracting State is any country or place outside India in respect of which the Central Government has made arrangements with that country's government "through a treaty or otherwise." The phrase "or otherwise" means cooperation can rest not only on a bilateral Mutual Legal Assistance Treaty but also on a multilateral convention such as UNCAC, a memorandum of understanding, or a case-specific assurance of reciprocity. Chapter IX's assistance machinery only engages where this contracting-State relationship exists.
How does India confiscate proceeds of crime located in a foreign country?
Section 60(1) is the outbound route. Where the Director has made an attachment order (Section 5), a freezing order (Section 17(1A)), the Adjudicating Authority has passed an order under Section 8, or a Special Court has ordered confiscation under Section 8(5)/(6), and the property is suspected to be in a contracting State, the Special Court — on the Director's or Administrator's application — may issue a letter of request to a court or authority in that State to execute the order. Actual enforcement then depends on the foreign State's own law and the applicable treaty.
Can a foreign country ask India to confiscate property situated in India?
Yes. Section 60(2) lets the Central Government forward to the Director, for execution under the Act, a foreign letter of request seeking attachment, seizure, freezing or confiscation of property in India derived from an offence under a corresponding law committed in that contracting State. Section 60(2A) provides that once the foreign court concludes its trial and finds money-laundering established, the Indian Special Court shall, on the Director's application and after notice to affected persons, order the property confiscated to the Central Government. Section 60(6) imports the Chapter III and Chapter V machinery.
Does 'proceeds of crime' include assets held outside India?
Yes. Section 2(1)(u) has three limbs: the property derived from a scheduled offence, the value of such property, and — where the property is taken or held outside the country — property of equivalent value held within the country or abroad. In Deputy Director, Directorate of Enforcement v. Axis Bank (2019 SCC OnLine Del 7854) the Delhi High Court confirmed that this value-equivalent limb lets the ED reach substitute property so that hiding the actual proceeds abroad does not defeat confiscation.
Is a foreign letter of request executed automatically in India?
No. Sections 58 and 60 require execution "in accordance with the provisions of this Act," so India's own safeguards apply. The Delhi High Court (Justice Prathiba M. Singh, 2021) held that a request to freeze or seize assets under Section 60 must have a reasonable basis and follow the PMLA's procedure. Per Opto Circuit (India) Ltd. v. Axis Bank, (2021) 6 SCC 707, the officer must record "reasons to believe" in writing and place the material before the Adjudicating Authority — a discipline that, via Section 60(6), applies to inbound requests too.
How does the Fugitive Economic Offenders Act, 2018 differ from PMLA cross-border confiscation?
The FEOA is a parallel, wider track for absconders. Under Section 4 the Director seeks a declaration that an individual is a fugitive economic offender (scheduled offence of at least Rs. 100 crore, who has fled India and refuses to return). Once declared under Section 12, the Special Court may confiscate any property of the fugitive — not just proceeds of crime, and including benami property and assets abroad — free of encumbrances. It was used to confiscate Nirav Modi's Indian and overseas assets after his December 2019 declaration. Unlike PMLA Section 60, FEOA confiscation is not limited to proceeds of crime.