Delhi High Court held that the Prevention of Money Laundering Act ensures both ED’s powers and citizens’ rights, stressing strict adherence to procedural safeguards. The court said oversight prevents arbitrary action.
New Delhi: On September 12, the Delhi High Court said that the Prevention of Money Laundering Act (PMLA) was created to maintain a fine balance between giving power to enforcement agencies and, at the same time, ensuring the protection of individual rights.
A division bench of Justice Subramonium Prasad and Justice Harish Vadiyanathan Shankar gave this observation on September 12 while deciding a case about the procedure that the Enforcement Directorate (ED) must follow when it wants to keep seized or frozen property for investigation.
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The court explained that the law requires a clear process. Before the ED can approach the adjudicating authority for permission to keep a seized or frozen property, an authorised officer must first pass a formal written order stating why the retention is required for up to 180 days.
If this crucial step is not followed, then the adjudicating authority cannot legally decide whether the property has any connection to money laundering.
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.”
It further stressed that,
“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 judges highlighted the importance of judicial supervision at every stage, saying,
“Judicial and quasi-judicial oversight was envisaged at every stage to prevent the arbitrary exercise of power and to uphold constitutional values.”
The court pointed out that the reliability of this legal system lies in strict compliance with procedures:
“The integrity of this framework rests on the rigorous application of the procedural mandates enshrined in the statute.”
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Reiterating the principle of law, the bench said,
“When a statute prescribes a method to do a particular thing, it must be done in that manner alone and not otherwise.”
The court was hearing an application filed by the ED challenging a February 2019 order of the PMLA Appellate Tribunal.
The tribunal had rejected the ED’s request to retain properties seized or frozen in connection with a case against Rajesh Kumar Aggarwal, who was accused of being involved in money laundering.
According to the tribunal, the way the ED had tried to retain the property did not match the proper legal procedure under the PMLA.
The ED alleged that businessmen Surendra Kumar Jain and Virendra Jain laundered money during the financial year 2008-2009. The agency said they infused cash from Jagat Projects into the bank accounts of companies they controlled, and disguised the money as “share subscription at a huge premium.”
The ED further claimed that Rajesh Kumar Aggarwal, a chartered accountant (CA), was a co-conspirator in the alleged scam.
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