The Delhi High Court has issued notice to the Centre and ED on a plea challenging property attachment rules under PMLA. The case questions how “reason to believe” is used and seeks stricter safeguards against misuse.
The Delhi High Court on Thursday issued a notice to the Central government and the Directorate of Enforcement (ED) in a significant case challenging certain provisions of the Prevention of Money Laundering Act (PMLA). The petition seeks a “reading down” of provisions related to the attachment of properties in money laundering cases, particularly under Section 5 of the Act.
A Bench led by Chief Justice Devendra Kumar Upadhyaya and Justice Tejas Karia directed both the ED and the Central government to file their replies within four weeks. The matter has been listed for further hearing on July 22.
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The plea has been filed by Sachin Dev Duggal, a UK-based entrepreneur who is currently under investigation by the ED in connection with a money laundering case linked to the Videocon Group. Duggal has challenged the attachment of his residential property and has also raised important legal questions regarding the interpretation of Section 5 of the PMLA.
Appearing for the ED, Advocate Zoheb Hossain raised an initial objection regarding whether the petition is even maintainable. He pointed out that the Supreme Court of India has already upheld the constitutional validity of Section 5 in the landmark judgment of Vijay Madanlal Choudhary v. Union of India.
However, Senior Advocate Vivek Chaudhari, appearing for the petitioner, argued that even if the Supreme Court has upheld the law, courts can still “read down” specific provisions to ensure fair implementation and prevent misuse.
Taking note of this argument, the High Court issued notice in the case. The Court clarified that the petition is not seeking to strike down the law as unconstitutional but is instead requesting a limited interpretation of certain provisions to ensure they are applied correctly and fairly.
In his petition, Duggal has sought several key clarifications and safeguards regarding the exercise of powers under Section 5 of the PMLA. One of the main demands is that the “material” which forms ‘reasons to believe’ should be based on admissible evidence to be led before the Court and not inadmissible evidence.
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He has also requested the Court to hold that the expression ‘reason to believe’ is not equivalent with the expression ‘grave suspicion to believe’ and, therefore, the same ought to be of a higher degree of satisfaction.
Further, the plea emphasizes that recording of ‘reason to believe in writing’ is a sine qua non and a legal necessity for the designated officer to ‘provisionally attach’ any property. The petitioner has also asked the Court to declare that the term ‘reason to believe’ is subject to judicial review.
Another important contention raised is that the expression ‘reason to believe’ is not synonymous with the subjective satisfaction of the officer and must be held in good faith and cannot merely be a pretense. Duggal has also argued that officers should not have unchecked discretion and has requested the Court to direct that the officer acting under Section 5 (1) cannot pick and choose material to provisionally attach properties.
Additionally, the plea challenges the scope of attachment powers, stating that an officer’s power to attach provisionally attach a property
“cannot take into its ambit, scope and sweep any property ‘equivalent in value”.
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The petition also questions the structure of the adjudicating authority under the PMLA, arguing that a single member,
“that too from outside the ‘field of law’” can never be construed to constitute the Adjudicating Authority and “such single member under no circumstances can act as its Chairperson’”.
Apart from Senior Advocate Chaudhari, the petitioner was also represented by Advocates Vivek Jain and Swapnil Shrivastava.
This case is expected to have wider implications on how enforcement agencies exercise their powers under the PMLA, especially in relation to property attachment and the interpretation of “reason to believe,” which forms the foundation of such actions.
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