The Supreme Court on December 12 sought the Centre’s response to a petition by a sitting Karnataka MLA. She challenges the Enforcement Directorate’s power under PMLA to seize and retain assets without oversight for up to 180 days.
The Supreme Court on December 12 sought the Centre’s response regarding a petition from a sitting MLA in Karnataka, who is challenging the Enforcement Directorate’s (ED) authority to seize and retain assets under the Prevention of Money Laundering Act (PMLA) without judicial oversight for up to 180 days.
A Bench comprising Justices PS Narasimha and AS Chandurkar issued a notice on the plea and associated it with ongoing challenges to the constitutionality of the PMLA’s adjudication framework.
A significant concern raised by the petitioner is that the Adjudicating Authority responsible for assessing the validity of the ED’s property seizures lacks a judicial background.
During the hearing, Justice Narasimha noted a potential flaw in the Act (PMLA) and questioned how a non-judicial official could evaluate complex issues related to property rights and constitutional protections.
The Court has directed that all requests from the petitioner be examined, including those questioning the Adjudicating Authority’s structure and the legitimacy of Sections 20 and 21 of the PMLA. The matter will be considered alongside other pending cases challenging the validity of Section 6 of the PMLA.
Senior Advocates Mukul Rohatgi and Ranjit Kumar represented the MLA, arguing that the law permits the ED to operate without accountability, resulting in widespread misuse of power.
The legislator from Chitradurga district in Karnataka claimed that all his assets including bank accounts, fixed deposits, jewelry, and vehicles were seized or frozen by the ED without justification or the chance to contest these actions. He contended that such extensive powers enable the ED to function unchecked for at least six months before any judicial review occurs.
Rohatgi argued that the challenge has two main aspects: first, Sections 20 and 21 of the PMLA, which allow the ED to hold onto property and documents for 180 days without providing reasons; and second, the composition of the PMLA Adjudicating Authority, which currently consists of a sole member who is not legally trained.
He pointed out that only one individual a cost accountant serves as the Adjudicating Authority for the entire nation, and that this individual has upheld nearly 99 percent of all attachment and retention decisions made by ED officials.
These statistics, he noted, are sourced from the Enforcement Directorate’s own website, indicating that the authority functions merely as an “approving body” without critical evaluation.
The petition asserts that this situation violates individuals’ rights to equality and personal liberty as outlined in Articles 14 and 21 of the Constitution. It argues that the ED’s ability to seize, freeze, and retain property for up to 180 days without providing written “reasons to believe” prevents affected individuals from seeking legal recourse during a vital period.
The petition emphasizes that adjudication only occurs after the 180 days have elapsed, when the ED requests the Adjudicating Authority to extend retention. Until that point, there is no opportunity to contest the legality of the actions taken.
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Urging the Court to amend the provisions to mandate the disclosure of reasons and early judicial review, the petition states,
“The vacuum enables illegal and excessive seizure and retention in complete darkness,”
The plea also requests that all benches of the PMLA Adjudicating Authority include at least one judicial member.
It cites a 2023 ruling from the Sikkim High Court in Eastern Institute for Integrated Learning in Management University v. Joint Director, Enforcement Directorate, which directed the Centre to ensure that benches under the PMLA consist of judicial members.
This decision is currently being contested in the Supreme Court in The Joint Director v. Eastern Institute, with the present case now linked to it.
During the hearing, Rohatgi highlighted that the Sikkim High Court’s ruling aligns with the constitutional principle that quasi-judicial bodies must include individuals trained in law. He argued that important legal and factual questions are being determined by a single person lacking a legal background, which undermines the essence of judicial adjudication.
The petition further references a 2025 Supreme Court decision in Arvind Kejriwal v. Directorate of Enforcement, which asserted that when executive actions impact individual liberty, “reasons to believe” must not only be recorded but also shared with the affected person.
It contended that this safeguard should also extend to property seizures, which can severely affect an individual’s livelihood and reputation.
Unlike arrests, for which written justifications must be provided, individuals facing search, seizure, freezing, and retention have no means to challenge these actions, the plea asserts, describing Sections 20 and 21 of the PMLA as manifestly arbitrary and unconstitutional.
Senior Advocates Rohatgi and Kumar were supported by a team of advocates including Mayank Jain, Madhur Jain, Arpit Goel, Aakrti Dhawan, Deepak Jain, Akash Dikshit, and Nikilesh Ramachandran.
Case Title: KC Veerendra vs. Union of India & Ors.