Delhi High Court criticised the ED for freezing a woman’s bank account without proper legal grounds and mixing up key PMLA procedures. The Court said suspicion cannot replace “reason to believe” and called the ED’s approach a legal “khichdi.”
New Delhi: The Delhi High Court on Friday strongly criticised the Enforcement Directorate (ED) for freezing a woman’s bank account only based on suspicion in the case Directorate of Enforcement Through Deputy Director v Poonam Malik.
A Bench of Justice Subramonium Prasad and Justice Harish Vaidyanathan Shankar said that the Adjudicating Authority had also not applied its mind properly when it allowed the freezing order to continue under the Prevention of Money Laundering Act (PMLA).
The Court observed that the ED had completely mixed up the legal meanings of the terms “retention”, “continuation” and “confirmation” while asking for extension of the freezing order.
The judges said the ED and the Authority had confused these distinct concepts so badly that
“they ended up serving a khichdi.”
The Court added,
“The Application of the Appellant [ED] under Section 17(4) and the order [by AA] have conflated all these terms and served up what can at best be called a ‘khichdi’.”
The Bench clarified that the PMLA has separate steps for seizure, freezing, retention, continuation and confirmation of property. Each action is different and cannot be used interchangeably.
The judges stated,
“We are amazed at the manner in which the ED sought the relief of confirmation in an application titled as one for continuation and was finally granted retention. We are conscious of the fact that we may be blamed for indulging in semantics, but at the cost of repetition, we reiterate that each of these words, as used, is distinct and in respect of different actions and different species. ‘Retention’ can only be done in respect of something that is seized and ‘Continuation’ can only be done in respect of something frozen. That apart, we continue to remain bewildered by the grant of ‘Retention’ when what was actually sought was an order of ‘Confirmation’.”
The Court also stressed that the Adjudicating Authority cannot casually pass orders for retention or continuation of freezing immediately after the ED freezes any property. It must strictly follow the requirements of the PMLA. The judges warned that ignoring these safeguards would be unfair to citizens.
The Court stated,
“To permit the ED to do so would be a travesty of justice, denying a person the procedural safeguards guaranteed by the PMLA itself.”
These remarks came while the High Court was dismissing two appeals filed by the ED against an order of the PMLA Appellate Tribunal, which had directed that the bank accounts of Poonam Malik should be unfrozen.
The ED had told the Court that cash deposits in Malik’s bank accounts were suspicious and connected to alleged money laundering activities of her husband, Ranjit Malik.
He was working as a driver for Sterling Biotech executive Gagan Dhawan, who is an accused in a major fraud case. The ED further said that Malik’s husband acted as a “cash manager” in the case under investigation since 2017.
However, after reviewing the matter, the High Court held that the ED did not follow the mandatory steps under the PMLA before freezing her accounts.
The Court noted that the freezing orders were very vague and did not mention any real evidence or reasons for believing that the money was connected to crime. Instead, the orders only said that “it is suspected” that the accounts contained proceeds of crime.
The Court highlighted that suspicion is not enough for freezing someone’s money, especially because it affects a citizen’s constitutional right to property under Article 300A.
The Court said that actions like freezing require solid material and cannot be based on guesswork.
Due to these violations, the High Court concluded that the freezing orders were illegal and deserved to be struck down, just as the Tribunal had already done.
Special Counsel Zoheb Hossain, Panel Counsel Vivek Gurnani, along with advocates Kanishk Maurya and Satyam, appeared for the ED. Poonam Malik was represented by Senior Advocate Madhav Khurana and advocate Vignaraj Pasayat.
Case Title:
Directorate of Enforcement Through Deputy Director v Poonam Malik
Read Order:
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