The Delhi High Court has ruled that property seized by the ED (Enforcement Directorate) under the Prevention of Money-laundering Act must be returned within 365 days if the investigation fails to result in any proceedings.
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NEW DELHI: The Delhi High Court has established a significant precedent under the Prevention of Money-Laundering Act (PMLA), mandating the return of seized property by the Enforcement Directorate (ED) if no prosecution complaint is filed within 365 days of the seizure. This decision underscores the court’s commitment to ensuring that the powers of seizure and attachment under the PMLA are exercised within the bounds of the law, respecting the rights of individuals and entities.
Justice Navin Chawla, presiding over the case, clarified the interpretation of Section 8(3) of the PMLA, which pertains to the retention of seized assets. The court’s interpretation hinges on the understanding that the “pendency of the proceedings” mentioned in the Act refers specifically to a complaint pending before a Special Court in relation to the person from whom the property was seized. This interpretation excludes other judicial challenges such as petitions against summons or search and seizure actions initiated by the aggrieved parties.
The ruling came in response to a petition filed by the former Insolvency Resolution Professional (IRP) of Bhushan Power and Steel, Mahender Kumar Khandelwal. Khandelwal challenged the continued retention of documents, records, and jewellery valued at over Rs 85 lakh, seized from his premises by the ED during a search and seizure operation conducted in August 2020. The petitioner argued that the order passed by the Adjudicating Authority under Section 8(3) of the PMLA, which confirmed the retention of the seized items, had lapsed since no prosecution complaint was filed within the stipulated 365-day period.
Justice Chawla’s decision emphasized that the continuation of a seizure beyond 365 days without the initiation of any proceedings related to the offence before a court is confiscatory in nature and violates Article 300A of the Constitution, which protects individuals from being deprived of their property save by the authority of law. The court directed the ED to return the seized items to Khandelwal, subject to any contrary order passed by a competent court.
This ruling not only sets a precedent for future cases under the PMLA but also serves as a reminder of the judiciary’s role in balancing the enforcement of law with the protection of constitutional rights. The court’s insistence on a strict interpretation of the PMLA’s provisions reflects a cautious approach towards the exercise of power by enforcement agencies, ensuring that such powers are not used in a manner that unjustly deprives individuals of their property.
The Delhi High Court’s decision is a significant development in the legal landscape surrounding money laundering investigations in India. It reinforces the principle that while the state has the authority to investigate and seize assets in the fight against money laundering, such actions must be conducted within the framework of the law, ensuring respect for the rights of individuals and the rule of law.
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