Constitutional limits during lengthy investigations under PMLA, emphasizing the importance of safeguarding individuals’ rights and not exceeding legal boundaries–Delhi High Court
The Delhi High Court has made an important decision about taking away people’s property under the Prevention of Money-Laundering Act (PMLA), 2002. The court, led by Justice Navin Chawla, highlighted the rights of individuals and the restrictions on the power of authorities during lengthy investigations. The decision emphasizes that law enforcement agencies must follow constitutional limits, especially when investigations last for more than a year without any formal charges for a crime. This ruling stresses the importance of respecting people’s rights and not exceeding the proper legal boundaries during investigations.
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The case in question involved Mahender Kumar Khandelwal, who was appointed as the Interim Resolution Professional (IRP) for Bhushan Power and Steel Limited (BPSL), a company embroiled in a money laundering investigation by the Enforcement Directorate (ED) based on a Central Bureau of Investigation (CBI) FIR. Despite not being named in the FIR, Khandelwal found himself in the ED’s crosshairs in August 2020 when the agency conducted a raid on his premises, seizing various documents, digital devices, and valuable items under the pretext of its investigation against BPSL. The seizure was later confirmed by the PMLA Adjudicating Authority.
Khandelwal’s plea for the return of his property, grounded in the argument that no complaint had been filed against him within the stipulated 365 days, brought to light the critical issue of property seizure under the PMLA. The ED’s refusal to return the seized items, coupled with its lack of response to Khandelwal’s requests, prompted judicial intervention.
Justice Chawla’s ruling was indisputable:
“The continuation of such seizure beyond 365 days, in absence of the pendency of any proceedings relating to any offence under this Act before a court or under the corresponding law of any other country before the competent court of criminal jurisdiction outside India, shall be confiscatory in nature, without authority of law and, therefore, violative of Article 300A of the Constitution of India.”
This statement not only highlighted the constitutional violation involved in indefinite seizures but also reinforced the principle that property rights cannot be infringed without due process.
The court rejected the ED’s argument that the absence of a specified consequence for the lapse of 365 days in Section 8(3)(a) of the PMLA meant there could be no mandate for the return of seized property. Justice Chawla clarified, “The natural consequence of the investigation for a period beyond three hundred and sixty-five days not resulting in any proceedings relating to any offence under the Act, in terms of Section 8(3) of the Act, is that such seizure lapses and the property so seized must be returned to the person from whom it was so seized.”
This ruling not only mandates the return of Khandelwal’s seized property but also sets a precedent for similar cases, where individuals’ assets are held indefinitely under the guise of ongoing investigations. The court’s decision is a reminder of the balance that must be maintained between the need for effective law enforcement and the protection of individual rights.
The Delhi High Court’s judgment is a critical commentary on the limits of enforcement authority under the PMLA and a exonerate for those who have long argued against the arbitrary and indefinite seizure of property without due process. It underscores the importance of adhering to constitutional principles and the rule of law, ensuring that investigations do not overstep into the realm of rights infringement.
