Forfeiture of Proceeds of Terrorism (Sections 24–34)

Chapter V of the Unlawful Activities (Prevention) Act, 1967 (Sections 24 to 34) is the financial spine of India's anti-terror architecture. It works on a deceptively radical premise: terror finance can be choked off before anyone is convicted, and even where no one is ever convicted at all. By empowering an investigating officer to seize property, a Designated Authority to confirm that seizure, and a court to forfeit it to the Government, the chapter treats money and assets as the oxygen of terrorism rather than merely as evidence of a crime. For the judiciary and CLAT-PG aspirant, the chapter is a study in how India fused a property-confiscation regime borrowed from narcotics and money-laundering law onto a security statute, and in the procedural safeguards courts have insisted upon to stop a draconian power from becoming arbitrary.

The Scheme and Genesis of Chapter V

Chapter V, headed "Forfeiture of Proceeds of Terrorism or any Property intended to be used for Terrorism," was inserted into the UAPA by the Unlawful Activities (Prevention) Amendment Act, 2004, which absorbed the substance of the lapsed Prevention of Terrorism Act, 2002 (POTA) into the parent statute after POTA's repeal. The forfeiture architecture was then substantially recast and strengthened by the Amendment Act of 2008 (in the wake of the Mumbai attacks) and again by the Amendment Act of 2012, which broadened the definition of "proceeds of terrorism" and aligned Indian law with the recommendations of the Financial Action Task Force (FATF). India had secured FATF membership in 2010 on the assurance that it would suitably amend its counter-terror-financing law, and the 2012 amendment was the direct consequence.

The design borrows heavily from two earlier confiscation regimes: Chapter VA of the Narcotic Drugs and Psychotropic Substances Act, 1985 and the corresponding TADA/POTA provisions. The result is a self-contained code: Section 24 (now read with Section 24A) declares proceeds of terrorism liable to forfeiture; Section 25 creates the seizure-and-confirmation machinery; Sections 26 to 32 govern court forfeiture, notice, appeal and protection of bona fide holders; and Sections 33 and 34 add a parallel trial-court power to attach and forfeit an accused's property. For the constitutional and historical backdrop to the statute as a whole, see our note on the introduction, object and constitutional background of the UAPA, and for the building-block terms used throughout this chapter, the note on definitions.

What Counts as 'Proceeds of Terrorism'

The forfeiture power is only as wide as the definition that triggers it. "Proceeds of terrorism" is defined in Section 2(1)(g) of the Act and is expressly carried into Chapter V by Section 24, which provides that in this chapter all references to "proceeds of terrorism" shall include any property intended to be used for terrorism. The statutory definition captures two distinct categories: property derived or obtained from the commission of any terrorist act, and property used in, or intended to be used for, a terrorist act or for the purposes of a terrorist organisation or terrorist gang. The 2012 amendment significantly widened this by adding property "intended to be used" for terrorism, so that the State need not wait for the money to be spent before it can be frozen.

Crucially, the definition also reaches the value of any proceeds, whether held within or outside India, and high-quality counterfeit Indian currency, which Section 2 deems to be a proceed of terrorism. This last inclusion reflects the legislative concern, reflected in Section 33(3), with the circulation of fake currency as an instrument of economic warfare. Because the definition is the gateway to a stringent confiscatory power, courts construe it together with the strict-construction principle laid down for forfeiture statutes in Aslam Mohd. Merchant v. Competent Authority, discussed below.

Forfeiture Without Conviction: The Core Principle

The single most important feature of Chapter V is that forfeiture of proceeds of terrorism does not depend on a criminal conviction. Section 24A declares that no person shall hold or be in possession of any proceeds of terrorism, and that such proceeds, whether held by a terrorist organisation or terrorist gang or by any other person, and whether or not such person is prosecuted or convicted for any offence under Chapter IV or Chapter VI, shall be liable to be forfeited to the Central Government or the State Government. Section 26 reinforces this by empowering the court to order forfeiture of property confirmed under Section 25 "whether or not the person from whose possession it is seized or attached is prosecuted in a court for an offence."

This is a deliberate departure from the ordinary criminal-law model, in which confiscation usually follows conviction. The model is closer to civil or in rem forfeiture: the proceeding targets the tainted property rather than the guilt of the owner. The rationale is pragmatic. Terror networks deliberately layer assets through proxies and shell holders so that conviction of the actual holder is often impossible; tying forfeiture to conviction would let the money survive every acquittal. The trade-off is a heightened risk to innocent owners, which is why the procedural safeguards in Sections 25, 27 and 28, and the bona-fide-transferee protection, do the heavy lifting of constitutional balance. Compare the conviction-dependent power in Section 33(2), which operates only after a finding of guilt; the two routes coexist within the same chapter.

Seizure and Attachment: Section 25 Machinery

Section 25 is the operative engine of the chapter. Where an officer investigating an offence under Chapter IV or Chapter VI has reason to believe that any property in relation to which the investigation is being conducted represents proceeds of terrorism, he must, with the prior approval in writing of the Director General of Police of the State in which the property is situated (or, where the investigation is by the National Investigation Agency, the Director General of the NIA), make an order seizing such property. Where seizure is not practicable, he may instead make an order of attachment directing that the property shall not be transferred or otherwise dealt with except with the prior permission of the officer or the Designated Authority.

The two-fold safeguard built into sub-section (1) is the requirement of (a) a genuine "reason to believe" and (b) prior written approval of a senior officer. The "reason to believe" must be more than a bald assertion. Although Section 25 itself is the controlling provision, courts read the requirement in light of the Supreme Court's exposition in Aslam Mohd. Merchant v. Competent Authority (2008) 14 SCC 186, where, construing the analogous NDPS forfeiture machinery, the Court held that the reasons must appear on the face of the order or be available on the materials placed before the authority, and that an order of confiscation, being a stringent order, must be construed strictly and the statute strictly complied with. Once seizure or attachment is effected, the officer must inform the Designated Authority within forty-eight hours, and the property is then produced before that authority for adjudication.

The Designated Authority and the 60-Day Confirmation

The Designated Authority is the quasi-judicial fulcrum of the chapter. Section 25 requires that the property seized or attached be produced before the Designated Authority, who must, after giving the affected person an opportunity of making a representation, either confirm or revoke the order of seizure or attachment within a period of sixty days from the date of such production. Section 31 invests the Designated Authority with all the powers of a civil court for the purpose of making a full and fair inquiry, so the confirmation is not a rubber stamp but an adjudicatory step.

The sixty-day limit is jurisdictional and unforgiving. In a 2023 decision, the High Court of Jammu & Kashmir and Ladakh (per Justice Wasim Sadiq Nargal) held that the Appellate Authority cannot, by remanding a matter, "infuse jurisdiction in the Designated Authority to act beyond the statutorily prescribed time limit"; once the period lapses, the appellate body must itself decide the appeal on merits under the statute rather than send it back to revive a dead jurisdiction. The court emphasised that where the law prescribes a thing to be done in a particular manner, it must be done in that manner alone. This strict reading protects the citizen against indefinite freezing of property by procedural ping-pong between authorities. It also mirrors the rigour the Supreme Court demanded of accusation-based satisfaction in NIA v. Zahoor Ahmad Shah Watali (2019) 5 SCC 1, where the Court explained how a court must evaluate material under Chapters IV and VI.

Cash, Bearer Instruments and Perishable Property

Section 25 contains special, tighter timelines for movable wealth that is liable to dissipate or be spent. Where cash, bullion, jewellery or other valuables or bearer instruments are seized, the freezing power is hedged with shorter periods so that ordinary commerce is not paralysed: cash seizures cannot be retained beyond the short statutory window unless the Designated Authority extends the retention, and the authority's power to keep such property frozen is calibrated to the perishable or fungible nature of the asset. The legislative concern is to prevent the seizure power from being used to lock up a person's liquid funds indefinitely on mere suspicion.

The same protective logic explains why the chapter distinguishes seizure (taking physical custody) from attachment (a prohibition on dealing with the property while it stays where it is). Immovable property and a running business are typically attached rather than seized, so that the asset continues to exist and generate value pending adjudication, whereas cash and instruments capable of vanishing are taken into custody. The Designated Authority's civil-court powers under Section 31 extend to appointing arrangements for the management and preservation of attached property, ensuring that the value the State ultimately forfeits, or returns, is not eroded during the proceedings.

Court Forfeiture Under Section 26

Confirmation by the Designated Authority is not the end of the road; it is the gateway to forfeiture by a court. Section 26 provides that where any property is seized or attached on the ground that it constitutes proceeds of terrorism, and the order has been confirmed, the court may order forfeiture of that property to the Central or State Government, irrespective of whether the person from whose possession it was taken is prosecuted. The forfeiture is to the Government "free from all encumbrances" in the parallel route under Section 33(2), reflecting the legislative intent that tainted property pass to the State unburdened.

Because forfeiture extinguishes property rights, the court's power under Section 26 is bounded by the show-cause and bona-fide-holder safeguards in Section 27. The Supreme Court's reasoning in Aslam Mohd. Merchant is again instructive: a forfeiture order cannot stand unless the foundational procedure has been scrupulously followed, the link or nexus between the property and terrorism has been established, and the affected party has had a genuine opportunity to rebut. A practical illustration of forfeiture of terror funds, albeit under the predecessor POTA regime, is the Parliament-attack prosecution (State v. Mohd. Afzal), where a sum recovered from the accused was forfeited to the State under the POTA forfeiture provision that Chapter V now substantially reproduces.

Show-Cause Notice and Natural Justice: Section 27

Section 27 is the chapter's natural-justice clause. Before an order of forfeiture is made, written notice must be served on the person holding the property, calling upon him to indicate the source of his income, earnings or assets out of which, or by means of which, he acquired the property, the evidence on which he relies, and any other relevant information, and to show cause why the property should not be forfeited. The person must be given a reasonable opportunity of being heard.

The mandatory character of this notice is the procedural keystone of the whole scheme. In Aslam Mohd. Merchant v. Competent Authority, the Supreme Court, dealing with the cognate NDPS provision, held that "issuance of a notice to show cause is essential so as to fulfil the requirements of natural justice" and that a forfeiture made without a valid notice founded on recorded reasons is liable to be set aside. The principle translates directly to Section 27: a defective or reason-less notice vitiates the forfeiture. Section 27 also embodies a burden-shifting design familiar from anti-money-laundering law: once the State shows a prima facie link to terrorism, the holder must satisfactorily account for the lawful source of the property, failing which forfeiture follows. Courts have nonetheless insisted that this shift operates only after the State discharges its initial evidentiary burden, preserving the presumption of innocence as far as the confiscatory context allows.

Appeal Against Forfeiture: Section 28

Section 28 confers a statutory right of appeal against a forfeiture order to the High Court, to be filed within one month from the date of receipt of the order (the High Court retaining power to entertain a delayed appeal on sufficient cause). On appeal, where the order of forfeiture is modified or annulled, or where the person is finally acquitted, the appellate court may direct return of the property or, where return is not possible, payment of its value together with such compensation and interest as may be appropriate. This is the chapter's restitutionary safety valve: because forfeiture can precede or even occur without conviction, the law must provide a route to undo an erroneous deprivation.

The appellate scheme also explains why courts insist that the statutory remedies be exhausted rather than bypassed. In Yasir Ahmad Bhat v. Union Territory of Jammu & Kashmir 2025 SCC OnLine J&K 955, a Division Bench held that Section 21 of the NIA Act cannot be invoked to override the "complete mechanism" provided under Section 25 UAPA in seizure matters; since the UAPA itself supplies a graded remedy from seizure through the Designated Authority to statutory appeal, an aggrieved person cannot leapfrog that machinery to invoke the High Court's jurisdiction under the NIA Act, and an order refusing release of seized property was held to be an interlocutory order not appealable under Section 21. The decision underscores that Chapter V is intended to be a closed, self-sufficient code.

Protection of Bona Fide Holders and Third Parties

A confiscatory power that swept up genuinely innocent owners would be constitutionally fragile. Chapter V therefore carves out protection for bona fide transferees. Section 27 shields a person who acquired the property for valuable consideration and without knowledge that it was proceeds of terrorism, and Section 30 establishes a procedure for third parties to lodge claims and objections that particular property should not be forfeited because it does not in fact constitute proceeds of terrorism or belongs to a person other than the offender. The Designated Authority, exercising its civil-court powers under Section 31, inquires into such claims and may dismiss frivolous or vexatious objections.

To prevent the obvious evasion of transferring assets the moment seizure looms, Section 32 declares that any transfer of property effected after the issue of a seizure or attachment order, or after the issue of a show-cause notice under Section 27, shall be ignored and treated as null and void for the purposes of the proceedings. This anti-alienation rule, together with the bona-fide protection, draws the line the legislature intended: pre-notice purchasers in good faith are safe, while post-notice transfers designed to defeat forfeiture are simply disregarded. The balance struck here is the same one the Supreme Court has stressed across the UAPA, that stringent powers must be paired with real safeguards, a theme also explored in our note on the tribunal for adjudication of bans.

Attachment and Forfeiture of an Accused's Property: Section 33

Running parallel to the proceeds-based route in Sections 24A to 32 is a conviction-based and trial-based power in Section 33, exercised by the trial court itself. Section 33(1) allows the court, where a person is accused of an offence under Chapter IV or Chapter VI, to order that all or any of his movable or immovable property be attached during the period of the trial, if not already attached under the chapter. Section 33(2) then provides that on conviction the court may, in addition to any punishment, declare by written order that property belonging to the accused and specified in the order shall stand forfeited to the Central or State Government free from all encumbrances.

Section 33(3) contains a bespoke power for high-quality counterfeit Indian currency offences, permitting attachment or forfeiture of property equivalent to the value of the counterfeit currency involved, including the face value of associated currency seized in the same operation. The provision also addresses the situations of an accused who dies during trial or is a proclaimed offender, allowing proceedings to continue against the property. The conviction-dependent forfeiture in Section 33(2) should be carefully distinguished from the conviction-independent forfeiture of "proceeds of terrorism" under Sections 24A and 26: the former reaches any property of the convict, the latter reaches only tainted property but does so without any conviction at all. This twin-track design is a favourite examiner's distinction, and it connects to the substantive offences and penalties for terrorist acts that supply the Chapter IV and VI predicate.

Forfeited Shares and Companies: Section 34

Section 34 is a short but practically important tail-piece dealing with the mechanics of forfeiting securities. Where shares in a company stand forfeited to the Government under the chapter, the company must, on receipt of the forfeiture order and notwithstanding anything in the Companies Act or the company's articles of association, register the Central or State Government as the transferee of those shares. The provision overrides the ordinary corporate machinery for refusal to register transfers, ensuring that the Government's title to forfeited shares is given effect on the register of members.

The provision matters because terror finance is frequently routed through corporate shareholdings and front companies, and a forfeiture of shares that the company could simply decline to register on its books would be hollow. Section 34 thus completes the chapter's reach into intangible and corporate wealth, dovetailing with the wide definition of "property" that the chapter borrows from Section 2. Read together, Sections 24 to 34 form a continuum from cash in a bag to a controlling stake in a company, all of it reachable by the State once the proceeds-of-terrorism threshold is crossed.

Constitutional Balance and Judicial Safeguards

A power to confiscate property without conviction inevitably draws Article 300A (the constitutional right that no person shall be deprived of property save by authority of law) and the due-process content of Article 21. The constitutionality of the chapter rests on three pillars that the courts have repeatedly emphasised: a genuine "reason to believe" recorded by the investigating officer, adjudication by a Designated Authority clothed with civil-court powers within a strict time limit, and a statutory right of appeal with restitution on success. The Supreme Court's insistence in Aslam Mohd. Merchant on strict construction of confiscation statutes, and the J&K High Court's refusal in the 2023 Designated-Authority case to let authorities act beyond the sixty-day limit, are the judicial guarantees that keep the power within constitutional bounds.

At the same time, the standard of scrutiny remains deferential to the State at the seizure stage. The approach the Supreme Court took in NIA v. Zahoor Ahmad Shah Watali, that a court examining material under Chapters IV and VI must take the accusation as prima facie true without conducting a mini-trial, informs how a Designated Authority weighs the investigating officer's belief at the confirmation stage. The constitutional jurisprudence of mere membership and association, reshaped by the three-judge bench in Arup Bhuyan v. State of Assam (2023), which upheld Section 10(a)(i) and overruled the 2011 line of cases, forms the wider backdrop against which the financial provisions operate. For the offence that most often supplies the predicate for proceeds-of-terrorism forfeiture, see our note on the penalty for membership of an unlawful association, and for the complete map of the statute, the UAPA notes hub.

Exam Takeaways and Common Pitfalls

For the judiciary and CLAT-PG candidate, the recurring traps in this chapter are predictable. First, do not say forfeiture requires conviction: under Sections 24A and 26 it does not, and that is the headline point. Conviction is required only for the separate Section 33(2) route, which forfeits any property of the convict, not merely tainted proceeds. Second, get the actors and timelines right: the investigating officer seizes or attaches with prior written approval of the DGP (or DG, NIA), informs the Designated Authority within forty-eight hours, and the Designated Authority confirms or revokes within sixty days; the appeal lies to the High Court within one month under Section 28.

Third, remember the safeguards as a package, recorded "reason to believe" (Aslam Mohd. Merchant), mandatory show-cause notice (Section 27), bona-fide-transferee protection, the null-and-void rule for post-notice transfers (Section 32), and restitution on a successful appeal (Section 28). Fourth, treat Chapter V as a self-contained code whose remedies must be exhausted, as the J&K High Court held in Yasir Ahmad Bhat, rather than bypassed through the NIA Act. Finally, be able to trace the chapter's lineage from NDPS Chapter VA and POTA, and to explain the FATF-driven 2012 widening of "proceeds of terrorism" to include property merely "intended to be used" for terrorism. Mastering these distinctions will carry most questions the examiner can frame on Sections 24 to 34.