Telangana HC Lifts ACB Property Attachment After Accused Dies, Holds Prosecution Cannot Shift Burden to Third Party Without Proof
The Telangana High Court set aside attachment of a sister-in-law's properties in an ACB disproportionate assets case, ruling that the prosecution must first establish a benami nexus before the burden shifts to a third party.
The High Court for the State of Telangana, in a judgment delivered on 28 April 2026, allowed a criminal appeal filed by J. Nagakumari, the sister-in-law of a deceased government officer who had been investigated by the Anti-Corruption Bureau for accumulating disproportionate assets. Justice K. Sujana, sitting singly, set aside an order of the Principal Special Judge for Trial of SPE & ACB Cases, Hyderabad, dated 1 December 2025, which had dismissed Nagakumari's petition seeking release of properties attached under the seizure report. The court held that once the accused died before trial commenced, the prosecution could not sustain attachment of a third party's properties without placing cogent material establishing a direct money trail. The order directs that the attached properties be released in Nagakumari's favour forthwith.
The Dispute Before the High Court
The case arose from an ACB investigation into a government officer accused of amassing disproportionate assets. During the investigation, certain properties standing in the name of Nagakumari — including a residential flat, agricultural lands, bank balances, and documents — were attached on the allegation that they were benami assets purchased from the accused officer's ill-gotten wealth.
Nagakumari filed a petition before the Principal Special Judge in Crl.M.P.No.8 of 2025 in C.C.No.10 of 2020, seeking to set aside the interim attachment listed in Annexure-VI of the seizure report and for the properties to be released in her favour. She contended that she had independently acquired the properties through her own lawful income, agricultural earnings, family support, and sale proceeds from a divorce settlement, and that there was no nexus between her assets and the accused officer. She also pointed out that the accused officer had died during the pendency of the case, resulting in abatement of the criminal proceedings.
The prosecution opposed the petition, asserting that the accused had purchased the properties in Nagakumari's name to conceal illicit wealth, that she lacked sufficient independent income, and that financial records showed substantial deposits by the accused into her accounts. The trial court, after enquiry, found that Nagakumari had not satisfactorily established the source of funds or her independent ownership, and dismissed the petition. She then filed Criminal Appeal No.45 of 2026 before the High Court.
The Legal Questions
Two distinct legal questions arose before the High Court. First, where a third party — not an accused — claims that attached properties were independently acquired, at what point does the burden of proof shift, and what must the prosecution establish before that shift occurs? Second, what is the effect of the death of the sole accused and the consequent abatement of criminal proceedings on the continuation of attachment over a third party's properties?
The appellant's counsel, Sri P. Vamsheedhar Reddy, argued that the impugned order was arbitrary and suffered from non-application of mind. He submitted that once criminal proceedings abate, the basis for continuing attachment ceases, and that there was no evidence of any nexus or money trail connecting Nagakumari's properties with the deceased accused's alleged ill-gotten assets. He contended that the trial court had failed to properly consider the documentary evidence placed on record.
Sri T. Bala Mohan Reddy, Standing Counsel for the ACB appearing for the State, countered that the impugned order was well-reasoned, that the accused had acquired properties in Nagakumari's name as a benamidar, and that mere abatement of criminal proceedings does not automatically entitle release of attached properties. He argued that Nagakumari had failed to discharge the burden of proving lawful acquisition.
How the Court Reasoned
Justice Sujana examined the material on record and found that while the trial court had observed that the evidence produced by Nagakumari was insufficient, no direct or cogent material had been placed by the prosecution to conclusively establish that the properties were acquired from the accused's ill-gotten wealth. The trial court's finding, the High Court held, appeared to rest on suspicion rather than on legally admissible evidence establishing a clear nexus.
On the question of burden of proof, the court laid out the correct sequence: the initial burden lies on the prosecution to establish that the accused had, in fact, purchased the properties in the appellant's name as benami transactions. Once a plausible explanation supported by documents is offered by the third party, the onus shifts to the prosecution to establish the benami character and traceability to the accused's disproportionate assets. The court observed that “mere relationship with the accused cannot be a ground to draw an adverse inference in the absence of a clear money trail.”
On the specific properties, the court noted that Item No.1 was purchased by Nagakumari from the amount received in a divorce settlement. For Item Nos.2 to 8, she had produced Exs.P2 to P4 to show purchase from her own income and her father's income. The trial court had disbelieved these documents on the ground that survey numbers were not tallying and that a Tahsildar's certificate was insufficient. The High Court found this reasoning inadequate given the absence of any affirmative prosecution evidence of a money trail.
The court also addressed the significance of the accused's death. It held that while abatement by itself does not automatically entitle release of attached properties, in the absence of any adjudication of guilt and in the absence of independent proceedings conclusively establishing that the properties are tainted, continuation of attachment over a third party's properties cannot be sustained. Retaining such attachment, the court said, would amount to deprivation of property without sufficient legal basis.
Justice Sujana placed reliance on the Supreme Court's decision in U. Subhadramma and others v. State of Andhra Pradesh and another, reported in (2016) 7 SCC 797. In that case, the Supreme Court had held that if the law requires withdrawal of attachment upon acquittal, it stands to reason that such orders must also be withdrawn when prosecution abates or cannot result in conviction due to the death of the accused. The Supreme Court had observed that “the presumption of innocence of an accused till he is convicted must be borne in mind” and that this presumption does not vanish upon the accused's death. It had further held that a criminal court cannot continue proceedings against a dead person or find him guilty, and that any such finding is contrary to the very foundation of criminal jurisprudence.
Applying that principle, Justice Sujana found that the prosecution had failed to place any cogent material establishing a direct nexus between the subject properties and the alleged ill-gotten wealth of the deceased accused. Nagakumari had offered a plausible explanation supported by documentary evidence. In the absence of any finding of guilt and given the abatement of proceedings, the continuation of attachment could not be sustained. The trial court's findings were held to be unsustainable.
Order
Criminal Appeal No.45 of 2026 was allowed. The order dated 1 December 2025 passed in Crl.M.P.No.8 of 2025 in C.C.No.10 of 2020 by the Principal Special Judge for Trial of SPE & ACB Cases, Hyderabad, was set aside. The interim attachment of the properties listed in Annexure-VI of the seizure report was lifted. The properties are to be released in favour of J. Nagakumari forthwith, subject to any other proceedings, if pending, in accordance with law. Miscellaneous applications, if any pending, were directed to stand closed.