[Cites 24, Cited by 0]
Telangana High Court
Sanjay Agarwal vs The Union Of India on 26 March, 2026
Author: P.Sam Koshy
Bench: P.Sam Koshy
IN THE HIGH COURT FOR THE STATE OF TELANGANA ::
HYDERABAD
***
WRIT PETITION Nos.45761, 31957 & 31958 of 2022
Between:
Sanjay Agarwal and Others.
Petitioners
VERSUS
The Union of India,
Ministry of Finance,
North Block, New Delhi,
Rep. by its Secretary and others.
Respondents
COMMON ORDER PRONOUNCED ON: 26.03.2026
THE HON'BLE SRI JUSTICE P.SAM KOSHY
AND
THE HON'BLE SRI JUSTICE SUDDALA CHALAPATHI RAO
1. Whether Reporters of Local newspapers
may be allowed to see the Judgments? : Yes
2. Whether the copies of judgment may be
marked to Law Reporters/Journals? : Yes
3. Whether His Lordship wishes to
see the fair copy of the Judgment? : Yes
________________
P.SAM KOSHY, J
Page 2 of 39
* THE HON'BLE SRI JUSTICE P.SAM KOSHY
AND
THE HON'BLE SRI JUSTICE SUDDALA CHALAPATHI RAO
+ WRIT PETITION Nos.45761, 31957 & 31958 of 2022
% 26.03.2026
# Between:
Lateef Rahman Sharfan and others.
Petitioners
VERSUS
The Union of India,
Ministry of Finance,
North Block, New Delhi,
Rep. by its Secretary and others.
Respondents
! Counsel for petitioners : Mr. Sanjay Agarwal, petitioner / party in
person in Writ Petition No.45761 of 2022.
Mr. Vedula Srinivas, learned Senior Counsel
appearing for Ms. Vedula Chitralekha, learned
counsel for the petitioner in Writ Petition
Nos.31957 and 31958 of 2022.
^Counsel for respondent : Mr. A.R.N. Sundareshan, learned Additional
Solicitor General of India appearing for
Mr. Anil Prasad Tiwari, learned Standing
Counsel for Enforcement Directorate.
<GIST:
> HEAD NOTE:
? Cases referred
1) 2025 SCC Online Del 8672 2) 2018 SCC Online Del 6523
3) W.P.No.40454 of 2025, dated 08.01.2026 4) (2023) 12 SCC 1
Page 3 of 39
IN THE HIGH COURT FOR THE STATE OF TELANGANA
AT HYDERABAD
THE HON'BLE SRI JUSTICE P.SAM KOSHY
AND
THE HON'BLE SRI JUSTICE SUDDALA CHALAPATHI RAO
WRIT PETITION Nos.45761, 31957 & 31958 of 2022
DATE: 26.03.2026
Between:
Sanjay Agarwal and Others.
...Petitioners
AND
The Union of India,
Ministry of Finance,
North Block, New Delhi,
Rep. by its Secretary and others.
...Respondents
COMMON ORDER:
(per the Hon'ble Sri Justice P.Sam Koshy)
Heard Sanjay Agarwal, petitioner / party-in-person in Writ Petition
No.45761 of 2022; Mr. Vedula Srinivas, learned Senior Counsel
appearing for Ms. Vedula Chitralekha, learned counsel for the petitioner
in Writ Petition Nos.31957 and 31958 of 2022, and Mr. A.R.N.
Sundareshan, learned Additional Solicitor General of India appearing for
Mr. Anil Prasad Tiwari, learned Standing Counsel for Enforcement
Directorate.
2. These are three writ petitions arising out of the same transaction
by three different set of people. Since the issue involved and the factual
matrix being common, the three writ petitions are being proceeded to be
decided by this Common Order.
3. Writ Petition No.31957 of 2022 has been filed by a group of
petitioners namely Mahesh Agarwal, Mayur Agarwal and Pranita
Agarwal. Mayur Agarwal is the son of Mahesh Agarwal and Pranita
Agarwal is the wife of Mayur Agarwal. The three of them have
challenged the order dated 19.04.2022 passed by the adjudicating
authority under the Prevention of Money Laundering Act, 2002 (for short
the 'PMLA). Vide the said impugned order, the adjudicating authority
has allowed an application filed by the Directorate of Enforcement,
Calcutta Unit, under Section 17(4) of the PMLA whereby they had
prayed for retention of the materials seized in the course of search and
seizure for the purpose of further investigation required to be carried out.
4. Writ Petition Nos.31957 and 45761 of 2022 are filed challenging
the common order dated 25.05.2022, whereby the adjudicating authority
has confirmed the provisional attachment order dated 27.08.2021.
5. Writ Petition Nos.31957 and 31958 of 2022 are writ petitions
where the petitioners are represented by Mr. Vedula Srinivas, learned
Senior Counsel along with Ms. Vedula Chitralekha, learned counsel on
record for the petitioners. Whereas, in Writ Petition No.45761 of 2022
the petitioner Sanjay Agarwal is appearing as party in person.
6. The brief facts relevant for disposal of these writ petitions are that
the Directorate of Revenue Intelligence, Kolkata Zonal Unit (for short
the 'DRI') filed a complaint on 05.02.2020 against Sanjay Agarwal, Mr.
Preeth Kumar Agarwal, Ajay Kumar Agarwal and Avinash Soni, which
was registered as Case No.562/2018. As per the contents of the
complaint of the DRI, it is said that Preet Kumar Agarwal was
intercepted at the Netaji Subhash Chandra Bose International Airport,
Kolkata, on 04.04.2018 while he was about to board a flight to Dubai
vide flight No.EK 573. On interrogation it was found that he was
supposed to carry along with him gold weighing 54096 grams which was
cleared by the Customs Department for export to be carried on personal
hand carry basis. However, after the formalities for export were
completed Preet Kumar Agarwal is said to have diverted the said gold to
his father Sanjay Agarwal who was waiting outside the said baggage
and, who, in turn is said to have booked it to be delivered at Hyderabad
through the IndiGo Airlines domestic cargo and which was recovered by
the DRI from the IndiGo Airlines domestic cargo.
7. As per the DRI, from the investigations which were conducted
thereafter it was learnt that the accused persons were habitual offenders
and in similar fashion, in the past, have smuggled huge quantity of gold
jewelry expected to be about 2,500 kgs and have disposed of such gold
jewelry in the local market and in turn received consideration. The
remittances received were in due course of time layered into different
accounts of the family members and firms operated by the family. In the
course of investigation, the DRI could lay hand on the details of the
accounts maintained in the Axis Bank in the name of M/s. P.H. Jewelers,
the proprietor of which is Radhika Agarwal. The said account revealed
that during the period of around 2½ years between 19.04.2014 to
30.11.2016, there was a transaction amounting to Rs.1184 crores from
this account. Certain transactions from the said account also were found
to have been subsequently layered in the personal bank account of the
proprietor Radhika Agarwal. The DRI also found another Axis Bank
account in the name of Radhika Agarwal, which too, revealed huge
transaction amounting to more than Rs.400 crores to have undertaken
between 20.05.2015 to 10.06.2018.
8. Likewise, there was another search and seizure proceeding
conducted on 09.03.2021 at the residential and business premises of
Sanjay Agarwal, Radhika Agarwal, Ajay Kumar Agarwal and Preet
Kumar Agarwal. In the course of search, various incriminating
documents, properties, and records were seized and an O.A. bearing
O.A.No.474 of 2021 was filed seeking permission of the adjudicating
authority for retention of the said documents for further investigation
purpose. The search also revealed certain immovable properties having
been acquired by Sanjay Agarwal.
9. In the course of investigation, certain incriminating materials were
seized on 17.08.2021 and which were put forth for confirmation before
the adjudicating authority under Section 17(4) of the PMLA and the
adjudicating authority vide the impugned order dated 19.04.2022 (which
is under challenge in Writ Petition No.31957 of 2022) was passed
permitting the Directorate of Enforcement to retain the seized documents
and materials for further investigation. Further, down the line, the
Directorate of Enforcement passed the Provisional Attachment Order (for
short 'PAO') order dated 27.08.2021 in respect of the materials seized in
the course of search and seizure and also those which were collected
during the course of investigation as is reflected in paragraphs 8(A) and
8(B) of the PAO reflecting the description of materials attached. Later, in
terms of the provisions of the PMLA, the PAO was put for confirmation
before the adjudicating authority, who in turn, vide order dated
25.05.2022 (which is under challenge in Writ Petition Nos.31958 &
45761 of 2022) confirmed the PAO pending the proceedings, if any,
against the petitioners under the provisions of PMLA before the
concerned Court.
10. It is the order dated 19.04.2022 confirming the seizure and
permitting the investigating agency to retain the documents and materials
seized in the course of investigation which has been challenged in one of
the writ petitions and confirmation of the PAO passed by the
adjudicating authority on 25.05.2022 which is under challenge in other
two writ petitions.
11. The order of retention of the materials seized which is challenged
by Mahesh Agarwal, Pranita Agarwal and Mayur Agarwal is primarily
on the ground that the order of the adjudicating authority dated
19.04.2022 is contrary to the provisions of Section 5(1) of the PMLA on
account of the same having passed beyond 180 days from the date of the
PAO having passed.
12. According to the petitioners, the reasons assigned by the
adjudicating authority on the aspect of limitation as is prescribed under
Section 5(1) of the PMLA is totally erroneous and contrary to the
mandate given by the Hon'ble Supreme Court in suo moto case and the
orders passed so far as limitation is concerned on account of the COVID
pandemic that prevailed across the country from March, 2020 to
February, 2022.
13. Even on merits, the contention of the petitioners in the course of
challenging the order of retention was that the finding given by the
adjudicating authority is unsustainable for having not properly
appreciated the source and sources from where the funds were generated
by the petitioners in purchasing the properties, the documents of which
were seized. It was also contended that the findings of the adjudicating
authority that the properties purchased by the petitioners are from the
proceeds of crime related to alleged smuggling activities in which
Sanjay Agarwal and his family members were involved is without any
cogent basis or material proof collected in the course of investigation.
Hence, the said finding is purely imaginary in nature.
14. Further, the petitioners contended that as per Section 6(2) of the
PMLA, an Adjudicating Authority shall consist of a Chairperson and two
other Members, with at least one being a judicial member having
experience in law, administration, finance or accountancy. Section
6(5)(b) stipulates that a Bench may be constituted by the Chairperson
with one or two Members as deemed fit. On conjoint reading of these
provisions, an Adjudicating Authority must comprise more than one
member, with at least one judicial member, while deciding cases under
Section 8(3) of the PMLA. However, in the present case, only the
Chairman, who is not even a Judicial Member, presided over and heard
the matter alone in Original Complaint (OC)No.1532 of 2021 and passed
the impugned order dated 25.05.2022, thereby violating the mandatory
provisions of Sections 5(1), 6(2), and 6(5)(b) of the PMLA. Such an
order passed beyond jurisdiction is arbitrary, illegal, unlawful, and
violative of the principles of natural justice, and therefore cannot be
sustained in law and should be set aside.
15. It was lastly contended by the petitioners that the adjudicating
authority has not properly appreciated the evidence which the petitioners
submitted before the adjudicating authority so far as the genuineness of
the sources of funds from which the attached properties were purchased.
The order passed by the adjudicating authority also lacks reasons while
reaching to the conclusion that the properties purchased by the
petitioners in Writ Petition No.31957 of 2022 were from the illegal
money laundering of the gold by Sanjay Agarwal and his family
members and the share of which have also fallen to Mahesh Agarwal,
Pranita Agarwal and Mayur Agarwal.
16. Opposing the writ petitions, the learned Additional Solicitor
General submits that the petitioners in Writ Petition No.31957 of 2022
are part of a big conspiracy. It was also the contention that there have
been substantial material collected in the course of investigation which
would strongly indicate that the petitioners in Writ Petition No.31957 of
2022 were having a close connection and proximity with Sanjay Agarwal
and his family and their business.
17. According to the learned Additional Solicitor General, in the
course of investigation what is prima facie revealed is that the petitioners
had colluded with the main accused Sanjay Agarwal and others in
concealing the proceeds of crime. According to the learned Additional
Solicitor General, it is a case where the connivance of the petitioners that
the main accused Sanjay Agarwal is reflected from the property which
was initially agreed to be sold to Radhika Agarwal, the wife of Sanjay
Agarwal, in respect of the property developed by M/s. Shanta Sriram
Constructions. However, subsequently by way of paper arrangement the
deed in which the property was to be given in the name of Radhika
Agarwal got cancelled and the said property thereafter was got registered
in the name of Mahesh Agarwal, Pranita Agarwal and Mayur Agarwal.
Further strong material against Mayur Agarwal was the regular phone
calls that he was making to Sanjay Agarwal. The phone calls that were
made by Mayur Agarwal to Sanjay Agarwal was on a mobile phone and
the sim card used by Sanjay Agarwal was issued from Bangladesh. This
establishes the close proximity that Sanjay Agarwal had with Mayur
Agarwal and others.
18. Learned Additional Solicitor General further pointed that upon the
Enforcement Directorate calling upon the petitioners to provide proof of
the ownership and the sources of funds used for purchase of two villas in
the name of Mahesh Agarwal and one villa in the name of Pranita
Agarwal at M/s. Shanta Sriram Constructions, the petitioners did not
provide for any such material in their support, nor did they provide for
any cooperation assisting the Enforcement Directorate in the
investigation, which all the more would go against the petitioners.
According to the learned Additional Solicitor General, there was enough
material in respect of the dubious transaction of three villas which was
originally registered in the name of Mahesh Agarwal and Pranita
Agarwal.
19. Learned Additional Solicitor General further contended that the
provisions of Section 6(2) and Section 6(5)(b) of the PMLA are directory
in nature and not mandatory, and that any procedural irregularity in the
composition of the Bench does not vitiate the proceedings or the order
passed by the Adjudicating Authority. Further, the Chairperson of the
Adjudicating Authority is duly appointed under the provisions of the
PMLA and possesses the requisite qualifications and experience to
adjudicate matters independently and the petitioners have not
demonstrated any prejudice caused due to the alleged non-constitution of
a multi-member Bench, and that the impugned order is based on the
merits of the case and material on record. He submitted that the
petitioners are merely raising technical objections to avoid legal
consequences of the attachment order, and that the confirmation order
passed under Section 8(3) of the PMLA is in accordance with law and
the findings recorded therein are well-reasoned and sustainable.
20. Learned Additional Solicitor General contended that since there
was smuggling of huge quantity of gold made by the main accused
Sanjay Agarwal and others against whom the proceedings under the
PMLA have been initiated. In the course of the investigation, what is
also prima facie revealed is that, even the employers of the M/s. Shanta
Sriram Construction have deposed of the petitioners Mr.Mahesh
Agarwal, Pranita Agarwal and Mayur Agarwal having not visited the site
or the site office, nor have they at any point of time entered into any sort
of consultation or negotiation and that they were for the first time seen at
the time of re-registration of the property in their name. According to the
learned Additional Solicitor General, it was in this context and in this
line of investigation that the materials and records seized in the course of
search and seizure needs to be retained and which has allowed by the
adjudicating authority. According to the learned Additional Solicitor
General, it does not warrant any further interference and the writ
petitions deserve to be dismissed.
21. Having heard the contentions put forth on either side and on
perusal of records the factual matrix of the case on what exactly
transpired at the Airport is not in dispute though the petitioners have
denied the commissioning of any offence under the PMLA. What is also
prima facie revealed from the proceedings and the materials on record is
that from the phone calls made by Mayur Agarwal there appears to be
frequent phone calls being made by Mayur Agarwal to Sanjay Agarwal
and that on a phone belonging to Sanjay Agarwal which carried a sim-
card from Bangladesh. Subsequently, the purchase of two villas in the
name of Mahesh Agarwal and one in the name of Mr. Praneetha Agarwal
without any substantial proof of the source of income and the mode of
payment made to the developers.
22. All these facts go to prima facie establish the link that the
petitioners Mahesh Agarwal, Pranita Agarwal and Mayur Agarwal had
with one of the main accused Sanjay Agarwal, which further strengthens
from the reluctance shown by them to reveal more details to the
authorities concerned. All these facts are also strong enough material for
the adjudicating authority to pass an order permitting the retention of
materials and records seized in the course of search and seizure.
23. It would be trite at this juncture to refer to the provisions of
Section 6 of the PMLA. For ready reference, Section 6 of the PMLA is
reproduced hereunder, viz.,
"The Central Government shall, by notification, appoint 1 [an
Adjudicating Authority] to exercise jurisdiction, powers and authority
conferred by or under this Act.
(2) An Adjudicating Authority shall consist of a Chairperson and two
other Members: Provided that one Member each shall be a person having
experience in the field of law, administration, finance or accountancy.
(3) A person shall, however, not be qualified for appointment as Member
of an Adjudicating Authority,--
(a) in the field of law, unless he--
(i) is qualified for appointment as District Judge; or (ii) has
been a member of the Indian Legal Service and has held a
post in Grade I of that service
(b) in the field of finance, accountancy or administration unless
he possesses such qualifications, as may be prescribed.
(4) The Central Government shall appoint a Member to be the
Chairperson of the Adjudicating Authority.
(5) Subject to the provisions of this Act,--
(a) the jurisdiction of the Adjudicating Authority may be
exercised by Benches thereof;
(b) a Bench may be constituted by the Chairperson of the
Adjudicating Authority with one or two Members as the
Chairperson of the Adjudicating Authority may deem fit;
(c) the Benches of the Adjudicating Authority shall ordinarily sit
at New Delhi and at such other places as the Central
Government may, in consultation with the Chairperson, by
notification, specify;
(d) the Central Government shall, by notification, specify the
areas in relation to which each Bench of the Adjudicating
Authority may exercise jurisdiction.
(6) Notwithstanding anything contained in sub-section (5), the
Chairperson may transfer a Member from one Bench to another Bench.
(7) If at any stage of the hearing of any case or matter it appears to the
Chairperson or a Member that the case or matter is of such a nature that
it ought to be heard by a Bench consisting of two Members, the case or
matter maybe transferred by the Chairperson or, as the case may be,
referred to him for transfer, to such Bench as the Chairperson may deem
fit.
(8) The Chairperson and every Member shall hold office as such for a
term of five years from the date on which he enters upon his office:
Provided that no Chairperson or other Member shall hold office as such
after he has attained the age of 2(sixty-five) years.
(9) The salary and allowances payable to and the other terms and
conditions of service of the Member shall be such as may be prescribed:
Provided that neither the salary and allowances nor the other terms and
conditions of service of the Member shall be varied to his disadvantage
after appointment.
(10) If, for reasons other than temporary absence, any vacancy occurs in
the office of the Chairperson or any other Member, then, the Central
Government shall appoint another person in accordance with the
provisions of this Act to fill the vacancy and the proceedings may be
continued before the Adjudicating Authority from the stage at which the
vacancy is filled.
(11) The Chairperson or any other Member may, by notice in writing
under his hand addressed to the Central Government, resign his office:
Provided that the Chairperson or any other Member shall, unless he is
permitted by the Central Government to relinquish his office sooner,
continue to hold office until the expiry of three months from the date of
receipt of suchnotice or until a person duly appointed as his successor
enters upon his office or until theexpiry of his term of office, whichever is
the earliest.
(12) The Chairperson or any other Member shall not be removed from his
office except by an order made by the Central Government after giving
necessary opportunity of hearing.
(13) In the event of the occurrence of any vacancy in the office of the
Chairperson by reason of his death, resignation or otherwise, the senior-
most Member shall act as the Chairperson of the Adjudicating Authority/
until the date on which a new Chairperson, appointed in accordance with
the provisions of this Act to fill such vacancy, enters upon his office.
(14) When the Chairperson of the Adjudicating Authority is unable to
discharge his functions owing to absence, illness or any other cause, the
senior-most Member shall discharge the functions of the Chairperson of
the Adjudicating Authority until the date on which the Chairperson of the
Adjudicating Authority resumes his duties.
(15) The Adjudicating Authority shall not be bound by the procedure laid
down by the Code of Civil Procedure, 1908 (5 of 1908), but shall be
guided by the principles of natural justice and, subject to the other
provisions of this Act, the Adjudicating Authority shall have powers to
regulate its own procedure."
24. Now the first issue that arises for consideration of the Bench is
"whether the composition of the Adjudicating Authority while passing
the impugned order dated 25.05.2022 confirming the Provisional
Attachment Order is in violation of Sections 6(2) and 6(5)(b) of the
PMLA, thereby rendering the order illegal and void?"
25. Section 6(2) of the PMLA provides that the Adjudicating
Authority shall consist of a Chairperson and two other Members. Section
6(5)(b) provides that the Chairperson may constitute one or more
Benches consisting of one or two Members as he may deem fit. A plain
reading of these provisions makes it clear that while the Adjudicating
Authority as an institution consists of a Chairperson and two Members,
the actual adjudication can be done by a Bench constituted by the
Chairperson consisting of one or two Members. The use of the words
"may constitute" in Section 6(5)(b) clearly indicates that the provision is
directory and not mandatory. The Chairperson has been given discretion
to constitute Benches of one or two Members depending on the nature
and complexity of the case. This is a well-recognized principle of
administrative efficiency which enables speedy disposal of cases.
26. It would be relevant at this juncture to refer to a recent decision of
the Delhi High Court in Naresh Bansaland Othres vs. Adjudicating
Authority and Another 1, wherein in paragraph Nos.45 to 49, it was
held as under, viz.,
"D. Section 6 of the PMLA: Whether the AA was coram non judice?
45. Since the present issue concerning the validity of the SCN has been
argued on two distinct limbs, this Court deems it appropriate to
bifurcate the contentions under distinct heads and deal with them
separately, the issues are as follows:
2025 SCC Online Del 8672
i. Whether the SCN issued by AA is valid in view of the AA allegedly
acting coram non judice under Section 6 of the PMLA; and
ii. Whether an SCN can be issued even in the absence of prior
attachment of properties by the Directorate.
(i) Whether the SCN issued by AA is valid in view of the AA allegedly
acting coram non judice under Section 6 of the PMLA?
46. Section 6(2) of the PMLA provides that AA shall comprise of a
Chairperson and two other members; whereas, Section 6(5)(b)
authorizes the Chairperson to constitute Benches with either one or
two members, as deemed necessary, thereby enabling functional
flexibility of the AA. Section 6(7) of the PMLA, also enables the
Chairperson to formulate a two-member Bench, wherein she/he is of a
view that the matter is of such a nature which needs to be heard by a
Bench consisting of two members. These three provisions when read in
harmony, reveal that although the statute provides a prescription for
the composition of AA, nevertheless, the usage of word 'shall' under
Section 6(2) cannot be considered in isolation so as to suggest that a
three-member composition is a compulsory and only acceptable
composition, enabling the AA to exercise the power vested in it by the
statute. It further reveals that the statute provides a threefold
legislative design, permitting the AA to function in three distinct
configurations, either as a three-member authority or for purposes of
functional expediency, as a two-member Bench or even as a single-
member Bench, depending on the nature of the matter before it.
47. The aforesaid interpretation of the provision also aligns with the
fundamental principle of statutory interpretation, ut res magis valeat
quampereat, which mandates that every statutory provision must be
given effect and shall not be rendered as ineffectual, inoperative or
redundant. In view of the aforesaid, if the argument advanced by the
learned counsel for the Petitioner is accepted and the provisions of
Section 6 of the PMLA are interpreted in a manner that it prohibits the
existence or constitution of AA as a single-member Bench, such
interpretation would nullify the effects and intention behind adding
Section 6(5)(b) and Section 6(7) of the PMLA, which is impermissible
under the recognised principles of statutory provisions. A similar view
has also been taken by the Division of Bench of Telangana High Court
in Enforcement Directorate v. Karvy India Reality Limited. 2024
SCC Online TS 18
48. The Court in Karvy India (supra) further clarified that although
AA performs quasi-judicial functions, it is neither a tribunal within the
meaning of Articles 323A or 323B of the COI, nor has it been vested
with any adjudicatory function transferred from traditional courts.
Additionally, it was also noted that the powers under Section 8 of the
PMLA may validly be exercised by a single-member bench, even in
absence of a judicial officer. While elaborating further, it was
observed by the Court that under PMLA there exist sufficient checks
and balances, since the order of the AA is subject to challenge before
the AT under Section 26 of the PMLA, which is presided over by a
retired Chief Justice.
49. To conclude, applying the aforesaid principles to the present case,
this Court is of the view that the SCN issued by a Bench, comprising of
a technical member, was valid. Consequently, the contention that the
AA was acting coram non judice is founded on a misinterpretation or
ignorance of the statutory framework. Thus, in the view of this Court,
the issuance of the SCN is well within the contours of the PMLA, and
as such, the first limb of argument advanced by the Petitioners, in
furtherance of validity of SCN, is devoid of merit."
27. Similarly, the Delhi High Court in the case of J. Sekar vs. Union
of India & Ors.2 held at paragraph Nos.79 and 80, as under, viz.,
"Composition of the AA and AT
79. The Court next takes up the question of the composition of the AA
on which extensive arguments were advanced by the learned counsel
for the Petitioners. In this context, it must be noticed that under
Section 6 PMLA, the AA is supposed to consist of the Chairperson and
two other members - one of whom shall be a person having experience
in the field of law. Section 6(3) further sets out what the qualifications
for appointment as a member of an AA should be. One of those
qualifications is that the person has to be qualified for appointment as
a District Judge or a person in the field of law or a member of an
Indian Legal Service. The other qualification is possession of a
qualification in the field of finance, accountancy or administration as
may be prescribed. It is, therefore, not the case that all the members
of the AA should be judicial members.
80. It is seen that under Section 5 PMLA, the jurisdiction of the AA
"may be exercised by the Benches thereof". Under Section 6(5)(b)
PMLA, a Bench may be constituted by the Chairperson of the AA
"with one or two members" as the Chairperson may deem fit.
Therefore, it is possible to have single-member benches. The word
'bench' therefore does not connote plurality. There could, even under
Section 6(5)(b) PMLA, be a 'single member bench'. When Section
2018 SCC Online Del 6523
6(6) PMLA states that a Chairperson can transfer a member from one
bench to another bench, it has to be understood in the above context
of there also being single-member benches."
28. This Court also recently in the case of Shri. B.Sreenivasa Gandhi
vs. Adjudicating Authority and Another 3 dealt with a similar issue
concerning the composition of the Adjudicating Authority under Section
6 of the PMLA and held that a single-member Bench constituted by the
Chairperson under Section 6(5)(b) is competent to exercise the powers of
the Adjudicating Authority, and such constitution does not render the
proceedings coram non judice.
29. Thus, in the present case also the Chairperson who passed the
impugned order is duly qualified and appointed in accordance with law.
The petitioners have not alleged any lack of jurisdiction or competence
on the part of the Chairperson. The petitioners are merely raising a
technical objection without demonstrating any prejudice or miscarriage
of justice.
W.P.No.40454 of 2025, dated 08.01.2026
30. Now the second issue for consideration by the Bench is "whether
the order dated 19.04.2022 passed by the Adjudicating Authority
permitting retention of seized materials and documents is barred by
limitation under Section 5(1) of the PMLA?"
31. For ready reference, Section 5(1) of the PMLA is reproduced
hereunder, viz.,
"5. Attachment of property involved in money-laundering.--
[(1)Where the Director or any other officer not below the rank of
Deputy Director authorised by the Director for the purposes of this
section, has reason to believe (the reason for such belief to be
recorded in writing), on the basis of material in his possession, that--
(a) any person is in possession of any proceeds of crime; and
(b) such proceeds of crime are likely to be concealed, transferred
or dealt with in any manner which may result in frustrating any
proceedings relating to confiscation of such proceeds of crime
under this Chapter,
he may, by order in writing, provisionally attach such property for a
period not exceeding one hundred and eighty days from the date of the
order, in such manner as may be prescribed:
Provided that no such order of attachment shall be made unless, in
relation to the scheduled offence, a report has been forwarded to a
Magistrate under section 173 of the Code of Criminal Procedure,
1973 (2 of 1974), or a complaint has been filed by a person authorised
to investigate the offence mentioned in that Schedule, before a
Magistrate or court for taking cognizance of the scheduled offence, as
the case may be, or a similar report or complaint has been made or
filed under the corresponding law of any other country:
Provided further that, notwithstanding anything contained in 1 [first
proviso], any property of any person may be attached under this
section if the Director or any other officer not below the rank of
Deputy Director authorised by him for the purposes of this section has
reason to believe (the reasons for such belief to be recorded in
writing), on the basis of material in his possession, that if such
property involved in money-laundering is not attached immediately
under this Chapter, the non-attachment of the property is likely to
frustrate any proceeding under this Act.]"
32. The aforesaid interpretation of the provision provides that where a
Provisional Attachment Order has been made, the Adjudicating Authority
shall issue a notice to show cause as to why the attached property should
not be declared as property involved in money laundering. The proviso
to Section 5(1) mandates that the Adjudicating Authority shall after
affording reasonable opportunity of being heard by an order in writing,
within a period of 180 days from the date of receipt of the reply to the
show cause notice, confirm the attachment or release the property.
33. In the instant case, the petitioners contend that the order dated
19.04.2022 is beyond the period of 180 days and therefore liable to be
set aside. This contention is devoid of merit for multiple reasons.
34. Firstly, the Hon'ble Supreme Court in Suo Motu Writ Petition
(Civil) No.3 of 2020, dated 10.01.2022, extended the period of limitation
prescribed under any law for the time being in force w.e.f. 15.03.2020 till
28.02.2022. Consequently, the period during which COVID pandemic
restrictions were in force is required to be excluded while computing the
period of limitation under Section 5(1) of the PMLA. Secondly, the
Adjudicating Authority has recorded detailed reasons in the impugned
order dated 19.04.2022 explaining how the period of limitation was
computed after excluding the period affected by the COVID pandemic.
The petitioners have failed to point out any error in such computation.
Thirdly, even assuming without admitting that there was any delay, the
same would be a procedural irregularity which by itself would not vitiate
the order passed by the Adjudicating Authority, particularly when the
petitioners have been afforded adequate opportunity of being heard and
the order is supported by material on record. Therefore, merely because
there is some irregularity in the procedure followed, the same would not
vitiate the order unless it results in miscarriage of justice or causes
prejudice to the party concerned. The petitioners have failed to
demonstrate any such prejudice.
35. Therefore, in the present case, far from being prejudiced, the
petitioners were granted multiple opportunities to file their replies and
explanations. The Adjudicating Authority proceeded only after affording
complete opportunity of hearing. Therefore, even if there was any
procedural irregularity in computation of limitation, the same would not
render the order void or illegal.
36. Another issue before the Bench is "whether the findings recorded
by the Adjudicating Authority in the impugned orders dated 19.04.2022
and 25.05.2022 are supported by material on record and whether there
exists prima facie evidence to establish that the attached properties
represent proceeds of crime within the meaning of Section 2(1)(u) of the
PMLA?
37. For ready reference, Section 2 (1)(u) of PMLA is reproduced
hereunder, viz.,
"2. Definitions.-- (1) In this Act, unless the context otherwise
requires,--
xxx xxx xxx
(u) "proceeds of crime" means any property derived or obtained,
directly or indirectly, by any person as a result of criminal activity
relating to a scheduled offence or the value of any such property or
where such property is taken or held outside the country, then the
property equivalent in value held within the country or abroad;
Explanation.--For the removal of doubts, it is hereby clarified that
"proceeds of crime" include property not only derived or obtained
from the scheduled offence but also any property which may directly
or indirectly be derived or obtained as a result of any criminal activity
relatable to the scheduled offence;"
38. Before examining the evidence, it is essential to understand the
scheme of the PMLA and the standard of proof required at the stage of
confirmation of provisional attachment. The PMLA does not require
proof beyond reasonable doubt at this stage. What is required is prima
facie satisfaction based on material on record that the property in
question is likely to be involved in money laundering. In the present
case, the material on record overwhelmingly establishes a prima facie
case of money laundering.
39. The following circumstances cumulatively establish the
involvement of the petitioners in the alleged money laundering
activities:-
a) Sanjay Agarwal, the main accused was intercepted at the Airport
with concealed gold worth substantial value. The modus operandi
involved smuggling gold through innovative concealment
techniques indicating a well-organized and systematic operation.
b) Investigation revealed that the property which was initially agreed
to be purchased in the name of Radhika Agarwal (wife of Sanjay
Agarwal) at M/s. Shanta Sriram Constructions was subsequently
through paper arrangements got registered in the names of the
Mahesh Agarwal, Pranita Agarwal and Mayur Agarwal. This
sudden change in the identity of purchasers immediately after the
detection of smuggling activities raises strong suspicion of
layering and placement of proceeds of crime.
c) The Call detail records (CDR) analysis revealed frequent
communications between Mayur Agarwal and Sanjay Agarwal.
Significantly, the calls were made to a mobile phone of Sanjay
Agarwal which carried a SIM card issued from Bangladesh. This
establishes close proximity and coordination between the
petitioners and the main accused.
d) Despite repeated opportunities, the petitioners failed to provide
credible and verifiable proof of the source of funds utilized for
purchasing three villas worth substantial amounts. The explanation
offered by the petitioners regarding the source of income is vague,
unsubstantiated and not supported by any documentary evidence
such as income tax returns, bank statements, or other financial
records.
e) The petitioners have shown lack of cooperation with the
investigating agency and have failed to provide necessary
documents and information despite specific requests. Whereas,
under Section 50 of the PMLA, every person is obligated to
furnish information and documents as may be required by the
authorities.
40. The Hon'ble Supreme Court in the case of Vijay Madanlal
Choudhary vs. Union of India4 has comprehensively dealt with the
scheme and object of the PMLA and has held that the twin conditions of
concealment and possession or acquisition or use of proceeds of crime
must be established for constituting the offence of money laundering.
For ready reference, paragraph Nos.105 to 109 are reproduced
hereunder, viz.,
"105. The other relevant definition is "proceeds of crime" in Section
2(1)(u) of the 2002 Act. This definition is common to all actions under
the Act, namely, attachment, adjudication and confiscation being civil
in nature as well as prosecution or criminal action. The original
provision prior to amendment vide the Finance Act, 2015 and Finance
(No. 2) Act, 2019, took within its sweep any property [mentioned in
Section 2(1)(v) PMLA] derived or obtained, directly or indirectly, by
any person "as a result of" criminal activity "relating to" a
scheduled offence [mentioned in Section 2(1)(y) read with Schedule to
the Act] or the value of any such property. Vide the Finance Act,
2015, it further included such property (being proceeds of crime)
which is taken or held outside the country, then the property
equivalent in value held within the country and by further amendment
vide Act 13 of 2018, it also added property which is abroad. By
further amendment vide Finance (No. 2) Act, 2019, Explanation has
been added which is obviously a clarificatory amendment. That is
(2023) 12 SCC 1
evident from the plain language of the inserted Explanation itself. The
fact that it also includes any property which may, directly or
indirectly, be derived as a result of any criminal activity relatable to
scheduled offence does not transcend beyond the original provision.
In that, the word "relating to" (associated with/has to do with) used
in the main provision is a present participle of word "relate" and the
word "relatable" is only an adjective. The thrust of the original
provision itself is to indicate that any property is derived or obtained,
directly or indirectly, as a result of criminal activity concerning the
scheduled offence, the same be regarded as proceeds of crime. In
other words, property in whatever form mentioned in Section 2(1)(v),
is or can be linked to criminal activity relating to or relatable to
scheduled offence, must be regarded as proceeds of crime for the
purpose of the 2002 Act. It must follow that the Explanation inserted
in 2019 is merely clarificatory and restatement of the position
emerging from the principal provision [i.e. Section 2(1)(u)].
106. The "proceeds of crime" being the core of the ingredients
constituting the offence of money laundering, that expression needs to
be construed strictly. In that, all properties recovered or attached by
the investigating agency in connection with the criminal activity
relating to a scheduled offence under the general law cannot be
regarded as proceeds of crime. There may be cases where the property
involved in the commission of scheduled offence attached by the
investigating agency dealing with that offence, cannot be wholly or
partly regarded as proceeds of crime within the meaning of Section
2(1)(u) of the 2002 Act -- so long as the whole or some portion of the
property has been derived or obtained by any person "as a result of"
criminal activity relating to the stated scheduled offence. To be
proceeds of crime, therefore, the property must be derived or
obtained, directly or indirectly, "as a result of" criminal activity
relating to a scheduled offence. To put it differently, the vehicle used in
commission of scheduled offence may be attached as property in the
case (crime) concerned, it may still not be proceeds of crime within
the meaning of Section 2(1)(u) of the 2002 Act. Similarly, possession
of unaccounted property acquired by legal means may be actionable
for tax violation and yet, will not be regarded as proceeds of crime
unless the tax legislation concerned prescribes such violation as an
offence and such offence is included in the Schedule to the 2002 Act.
For being regarded as proceeds of crime, the property associated with
the scheduled offence must have been derived or obtained by a person
"as a result of" criminal activity relating to the scheduled offence
concerned. This distinction must be borne in mind while reckoning
any property referred to in the scheduled offence as proceeds of crime
for the purpose of the 2002 Act. Dealing with proceeds of crime by
way of any process or activity constitutes offence of money laundering
under Section 3 PMLA.
107. Be it noted that the definition clause includes any property
derived or obtained "indirectly" as well. This would include property
derived or obtained from the sale proceeds or in a given case in lieu
of or in exchange of the "property" which had been directly derived
or obtained as a result of criminal activity relating to a scheduled
offence. In the context of the Explanation added in 2019 to the
definition of the expression "proceeds of crime", it would inevitably
include other property which may not have been derived or obtained
as a result of any criminal activity relatable to the scheduled offence.
As noticed from the definition, it essentially refers to "any property"
including abroad derived or obtained directly or indirectly. The
Explanation added in 2019 in no way travels beyond that intent of
tracking and reaching up to the property derived or obtained directly
or indirectly as a result of criminal activity relating to a scheduled
offence. Therefore, the Explanation is in the nature of clarification
and not to increase the width of the main definition of "proceeds of
crime". The definition of "property" also contains Explanation which
is for the removal of doubts and to clarify that the term property
includes property of any kind used in the commission of an offence
under the 2002 Act or any of the scheduled offences.
108. In the earlier part of this judgment, we have already noted that
every crime property need not be termed as proceeds of crime but the
converse may be true. Additionally, some other property if purchased
or derived from the proceeds of crime even such subsequently
acquired property must be regarded as tainted property and
actionable under the Act. For, it would become property for the
purpose of taking action under the 2002 Act which is being used in the
commission of offence of money laundering. Such purposive
interpretation would be necessary to uphold the purposes and objects
for enactment of the 2002 Act.
109. Tersely put, it is only such property which is derived or obtained,
directly or indirectly, as a result of criminal activity relating to a
scheduled offence that can be regarded as proceeds of crime. The
authorities under the 2002 Act cannot resort to action against any
person for money laundering on an assumption that the property
recovered by them must be proceeds of crime and that a scheduled
offence has been committed, unless the same is registered with the
jurisdictional police or pending inquiry by way of complaint before
the competent forum. For, the expression "derived or obtained" is
indicative of criminal activity relating to a scheduled offence already
accomplished. Similarly, in the event the person named in the criminal
activity relating to a scheduled offence is finally absolved by a court
of competent jurisdiction owing to an order of discharge, acquittal or
because of quashing of the criminal case (scheduled offence) against
him/her, there can be no action for money laundering against such a
person or person claiming through him in relation to the property
linked to the stated scheduled offence. This interpretation alone can
be countenanced on the basis of the provisions of the 2002 Act, in
particular Section 2(1)(u) read with Section 3. Taking any other view
would be rewriting of these provisions and disregarding the express
language of the definition clause "proceeds of crime", as it obtains as
of now."
41. In the present case, the sudden transfer of properties initially
earmarked for Radhika Agarwal to the other accused persons combined
with their inability to establish legitimate source of funds, clearly
indicates concealment and use of proceeds of crime derived from gold
smuggling activities. Further, it must be noted that the PMLA adopts the
principle of "reverse burden of proof" to some extent. Section 24 of the
PMLA provides that where a person is charged with having committed
the offence of money laundering, the burden of proving that the proceeds
of crime are untainted property shall be on the accused. While Section 24
applies to trial, the principle underlying it reflects the legislative policy
that in cases involving economic offences, persons in possession of
disproportionate assets must satisfactorily explain the source thereof.
42. In the present case, the petitioners have miserably failed to
discharge even the initial burden of establishing the legitimacy of the
source of funds. Their explanation is vague, inconsistent and
unsupported by credible documentary evidence. In such circumstances,
the Adjudicating Authority was perfectly justified in drawing adverse
inference and confirming the attachment.
43. The Bench is duty-bound to uphold the rule of law and to ensure
that economic offenders do not escape the rigors of law through
technical pleas or by abusing the process of the Court. The present writ
petitions are nothing but an attempt to stall the proceedings under the
PMLA and to frustrate the investigation.
44. In the result, for the detailed reasons recorded hereinabove, all the
three writ petitions are hereby dismissed. The impugned orders dated
19.04.2022 and 25.05.2022 passed by the Adjudicating Authority are
upheld and confirmed.
45. As a sequel, miscellaneous petitions pending if any shall stand
closed. However, there shall be no order as to costs.
________________
P.SAM KOSHY, J
_______________________________
SUDDALA CHALAPATHI RAO, J
Date: 26.03.2026
Note: L.R. copy to be marked.
(B/o)GSD
