The Delhi High Court has emphasised that the Prevention of Money Laundering Act, 2002 (PMLA) was carefully designed to strike a balance between empowering enforcement agencies and safeguarding individual rights.
The Division Bench of Justice Subramonium Prasad and Justice Harish Vaidyanathan Shankar observed that before the Enforcement Directorate (ED) can seek approval from the adjudicating authority to retain seized or frozen property, an authorised officer must first issue a formal order justifying the necessity of such retention for up to 180 days. Without this preliminary step, the Court said, the adjudicating authority cannot lawfully determine whether the property is connected to money laundering.
The case arose from an appeal filed by the ED against a February 2019 decision of the PMLA Appellate Tribunal, which had rejected its plea to retain seized and frozen properties linked to accused Rajesh Kumar Aggarwal in a money laundering case. The tribunal held that the retention procedure adopted did not conform to the statutory scheme of the PMLA.
According to the ED, accused Surendra Kumar Jain and Virendra Jain had laundered money by infusing cash from Jagat Projects into bank accounts of corporate entities they controlled, projecting it as share subscription money at an inflated premium during the financial year 2008–2009. Aggarwal, a chartered accountant, was alleged to be a co-conspirator in the scam.
The Bench observed, “We are of the opinion that the architecture of the Prevention of Money Laundering Act (PMLA) is designed to strike a delicate balance between empowering enforcement agencies and protecting individual rights. The processes of search, seizure, freezing, attachment, and retention are embedded with procedural safeguards to ensure that state action is not only lawful but also proportionate and subject to independent scrutiny".
The Court further stressed that judicial and quasi-judicial oversight is envisaged at every stage to prevent arbitrary use of power and to uphold constitutional values, adding that the integrity of this framework rests on the rigorous application of statutory mandates. It reiterated the principle that “when a statute prescribes a method to do a particular thing, it must be done in that manner alone and not otherwise.”
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