Full Text
HIGH COURT OF DELHI
JUDGMENT
ANIRUDH PRATAP AGARWAL .....Appellant
Through: Mr. Awanish Kumar, Mr. R.P.
Thakur and Ms. Garima, Advocates.
Through: Mr. Anurag Jain, Mr. Padmesh Mishra and Mr. Nikunj Goyal, Advocates.
HON'BLE MR. JUSTICE HARISH VAIDYANATHAN SHANKAR
1. The present Appeal, under Section 42 of the Prevention of Money Laundering Act, 2002 1, impugns the Order dated 26.06.2024 2 passed in FPA-PMLA-1872/DLI/2017 by the learned Appellate Tribunal (PMLA), New Delhi[3]. By the said order, the learned AT dismissed the appeal filed under Section 26 of the PMLA against the Order dated 14.06.2017 passed by the learned PMLA Impugned Order Adjudicating Authority (PMLA) 4, which had allowed Original Application No. 78/2017 dated 17.03.2017 filed under Section 17(4) of the PMLA seeking retention of seized properties of the Appellant herein.
BRIEF FACTS:
2. An FIR No. 416/2016 dated 29.11.2016 was registered by the Delhi Police under Sections 420 and 120B of the Indian Penal Code,, against several individuals, namely, Vineet Gupta, Shobhit Sinha, Devendra Kumar Jha, Mohit Garg, and Raj Kumar Sharma, for allegedly engaging in fraudulent conversion of demonetized currency notes of Rs. 1,000/- and Rs. 500/- into gold and diamonds by depositing the said currency into bank accounts of front companies maintained at Axis Bank, Kashmere Gate, Delhi.
3. During the course of investigation, additional offences under Sections 409, 419, 467, 468 and 471 of the IPC, along with Sections 7 and 13(1)(d) of the Prevention of Corruption Act, 1988, were also invoked.
4. Pursuant to the registration of the said FIR, the Enforcement Directorate 6 /Respondent registered ECIR No. 11/DLZO/2016 on 30.11.2016 and initiated an investigation under the provisions of the PMLA.
5. In the course of the investigation and based on statements recorded under Section 50 of the PMLA, including that of the Appellant, a search was conducted on the Appellant’s residential premises on 18.02.2017 under Section 17 of the PMLA. During the AA IPC said search, five gold bars (each weighing one kilogram) and five diamonds were seized, which were alleged to be proceeds of crime.
6. Thereafter, on 17.03.2017, the ED filed Original Application No. 78/2017 before the learned AA under Section 17(4) of the PMLA, seeking permission for continued retention of the seized items. The learned AA, vide Order dated 14.06.2017, allowed the said application and permitted the retention of the seized assets under Section 8(3) of the PMLA.
7. It is relevant to note that on 01.02.2017, in ECIR NO. 11/DLZO/2016 dated 30.11.2016, a prosecution complaint was filed under the PMLA, before the learned Special Court (PMLA), Tis Hazari, Delhi 7, against Rajeev Singh Kushwaha, Vineet Gupta, and Shobhit Sinha for the offence of money laundering under Section 3 of the PMLA. Cognizance of this complaint was taken vide order dated 25.02.2017. On 30.03.2018, the ED filed its first supplementary prosecution complaint, wherein the Appellant was arrayed as Accused No. 14.
8. Aggrieved by the Order dated 14.06.2017 passed by the learned AA, the Appellant filed an appeal under Section 26 of the PMLA before the Learned AT, registered as Appeal No. FPA-PMLA- 1872/DLI/2017, which was dismissed by the learned AT vide the Impugned Order dated 26.06.2024.
9. Against the Impugned order dated 26.06.2024, the Appellant has preferred the present Appeal.
10. The learned counsel for the Appellant would primarily contend that the Respondent/ED failed to comply with the mandatory procedural requirements under Sections 17 and 20 of the PMLA, and thereby violated the well-established principle that when a statute prescribes a manner of doing an act, it must be done in that manner alone and not otherwise.
11. He would further assert that the ED neither recorded any “reason to believe” under Section 17 of the PMLA, nor did it record such reason for the retention of property under Section 20 of the PMLA, and this failure renders the entire action procedurally defective and unlawful.
12. The learned counsel for the Appellant would further submit that the ED deliberately disregarded the statutory obligation imposed under Section 20(2) of the PMLA, read with Rule 3 of the 2005 the Prevention of Money Laundering (The Manner of Forwarding the Copy of the Order of Retention of Seized Property, and the Period of Its Retention) Rules, 2005, which mandates that the authorized officer must immediately pass a retention order and forward it along with supporting material in a sealed cover to the learned AA.
13. It would also be argued that this requirement is not discretionary but mandatory, and since, admittedly, the ED neither passed any such order nor forwarded the material to the learned AA, the retention is rendered unlawful and unsustainable. In support of this argument, he would place reliance on paragraph 22.[7] of the judgment of the Telangana High Court in Pradeep Kumar and Ors. V. Dy. Director of Enforcement[8]. MANU/TL/1285/2023
14. As another ground, the learned counsel for the Appellant would contend that although the Appellant’s property was seized on 18.02.2017 and its retention was confirmed by the learned AA on 14.06.2017, such retention automatically lapsed immediately, since no proceedings were pending against the Appellant in relation to any scheduled offence or offence under the PMLA at that time. He would also submit that under Section 8(3)(a) of the PMLA, retention is legally sustainable only during the pendency of proceedings relating to an offence under the PMLA, and since the prosecution complaint was filed only on 30.03.2018, the continued retention beyond June 2017 lacks legal authority.
15. The learned counsel for the Appellant would further submit that although amendments were made to Section 8(3)(a) of the PMLA in 2018 and again in 2019, introducing fixed periods of 90 days and later 365 days for retention, such amendments are substantive in nature and affect the vested rights of individuals. He would also argue that these amendments cannot be applied retrospectively to validate a retention that had already lapsed in 2017.
SUBMISSIONS OF THE RESPONDENT:
16. The learned counsel for the Respondent/ ED would submit that Section 20 of the PMLA empowers the ED to independently pass an order for retention of seized property for a period of up to 180 days, while Section 17 of the PMLA authorizes the ED to conduct search and seizure operations, and, more precisely, Section 17(4) mandates that if the ED intends to retain the seized property or records, it must file an application before the learned AA within 30 days from the date of seizure, seeking confirmation of such retention.
17. The learned counsel for the Respondent would further contend that the plain language of Sections 17(4) and 20 reveals that they serve distinct procedural purposes, and are not interdependent in their operation; as Section 17(4) comes into play when the ED seeks judicial confirmation of the retention through an application filed within the prescribed 30-day period, whereas, Section 20 allows the ED to retain property for up to 180 days on its own authority, without immediate recourse to the learned AA; thus, the invocation of one is not contingent upon the other, and the procedure under Section 17(4) is not conditioned on prior action under Section 20.
18. In conclusion, on this issue, the learned counsel for the ED would submit that even in cases where no retention order under Section 20 is passed for the full 180-day period, the ED is still legally entitled to approach the learned AA within 30 days under Section 17(4) to seek authorization for continued retention; and therefore, both Sections 17(4) and 20 provide parallel yet independent procedural routes for securing lawful retention of seized property, and the choice of mechanism depends solely on the course of action adopted by the ED.
19. On the second issue, the learned counsel for the ED would submit that prior to the enactment of Amendment Act 13 of 2018, Section 8(3) of the PMLA stipulated that once the learned AA confirmed the retention, the same could continue for as long as proceedings relating to “any offence” under the PMLA were pending before a competent court. He would further submit that the phrase “proceedings relating to any offence” is to be interpreted broadly and not limited to cases where the person whose property is retained is named as an accused in the prosecution complaint.
20. It would be further submitted by the learned counsel for the ED that once the learned AA has confirmed the retention under Section 8(3) of the PMLA, the property of any person, whether or not they are formally named as an accused, may continue to be retained so long as the prosecution for the offence under the PMLA remains pending. To bolster this argument, he would rely on the decision of the Hon’ble Supreme Court in Union of India v. J.P. Singh[9], wherein the Apex Court clarified that the validity of retention or attachment under Section 8(3) of the PMLA does not depend on whether the individual is arrayed in the prosecution complaint.
ANALYSIS AND FINDING:
21. This Court has heard the parties at length and has carefully examined the pleadings, the Impugned Order, and the written submissions filed post-hearing by both sides.
22. In the arguments, the Appellant has raised two grounds in the present appeal: (a). The Appellant’s property has been unlawfully retained beyond the permissible period under the then Section 8(3)(a) of the PMLA. (b). Retention of the Appellant’s property is illegal due to non-compliance with Section 20 of the PMLA by the ED. (a). The Appellant’s property has been unlawfully retained beyond the permissible period under the then Section 8(3)(a) of the PMLA
23. It is an undisputed fact that on 01.02.2017, a prosecution complaint was filed under the PMLA, before the learned Special Court, in ECIR No. 11/DLZO/2016 dated 30.11.2016 against Rajeev Criminal Appeal No. 1102/2025 (decided on 05.03.2025) Singh Kushwaha, Vineet Gupta, and Shobhit Sinha for the offence of money laundering under Section 3 of the PMLA. Cognizance of this complaint was taken on 25.02.2017.
24. It is also not in dispute that, pursuant to a search and seizure conducted upon the Appellant on 18.02.2017, the ED filed Original Application No. 78/2017 dated 17.03.2017 before the learned AA. In that proceeding, the learned AA, by order dated 14.06.2017, confirmed the seizure of the Appellant’s properties.
25. It is also a matter of fact that on 30.03.2018, the ED filed its first supplementary prosecution complaint, wherein the Appellant was arrayed as Accused No. 14.
26. The Appellant contends that although a prosecution complaint was already pending before the learned Special Court at the relevant time, he had not been named as an accused therein. He was formally arrayed as an accused only later, on 30.03.2018, through the supplementary prosecution complaint. On this basis, the Appellant argues that, at the relevant time, the mandate of Section 8(3)(a) of the PMLA provided that retention or continuation orders would remain in force “during the pendency of proceedings relating to any offence under this Act”. According to him, on 14.06.2017, when the learned AA confirmed the seizure of his property, no proceedings were pending against him before the learned Special Court. Consequently, the confirmation order, in his view, lacked legal validity since then.
27. The Appellant further submits that the subsequent amendments to Section 8(3)(a) of the PMLA, which introduced the specific timelines of 90 days or 365 days “during investigation”, came into force only later. Therefore, even assuming without admitting that the amended provision applied to his case, the prosecution complaint was filed beyond the statutory periods prescribed, rendering the continuation of seizure and retention legally untenable.
28. In view of admitted facts referred to hereinabove, at the outset, the contention of the Appellant deserves outright rejection in view of the binding precedent laid down by the Hon’ble Supreme Court in Union of India v. J.P. Singh (supra), wherein it was unequivocally held that for the application under Section 8(3)(a) of the PMLA, it is not essential for the individual to be specifically named as an accused in the complaint; rather, the statutory requirement stands fulfilled if a complaint alleging the commission of an offence under Section 3 of the PMLA is pending before the competent Court. The Relevant paragraphs of the said judgment are as follows:
(Emphasis supplied)
29. In light of the above authoritative pronouncement, the argument advanced by the Appellant is devoid of merit and is accordingly rejected. (b). Retention of the Appellant’s property is illegal due to noncompliance with Section 20 of the PMLA by the ED
30. The PMLA is a special legislation enacted to combat the menace of money laundering and related financial crimes, and it vests extensive powers in the ED, including attachment, search, seizure, and freezing of property suspected to be linked with the proceeds of crime. However, since the exercise of these coercive powers directly impacts valuable constitutional and statutory rights of individuals, the PMLA simultaneously incorporates stringent procedural safeguards to ensure fairness and prevent arbitrary action.
31. The statutory framework governing search, seizure, and subsequent retention of property, set out in Chapter V of the PMLA. Sections 17, 20, and 8 of the PMLA relate to such search and seizure and also incorporate therein a framework of safeguards in the exercise of the powers of search, seizure and retention. In our opinion, the scheme of the PMLA and in particular the Chapter and the Sections embodied therein provide for a graded manner in which property that is seized may be retained. In the first phase of such graded retention, Section 20 would play its part whereby the property may be retained for a period up to 180 days. The further retention beyond 180 days would fall within the province of Section 8 of the PMLA.
32. Section 17(1) of the PMLA empowers the ED to search premises and seize property if there is a “reason to believe”, based on material in possession that such property is involved in money laundering. Significantly, this provision is limited to search and seizure and does not itself contemplate adjudication by the learned AA. The requirement under Section 17(2) that material seized must be forwarded to the learned AA, to our mind, furthers the safeguard of a formulation of an opinion for such seizure, and also ensures that the learned AA has the benefit of the said reasons to believe as well as the relevant records, for the purpose of an adjudication, while exercising jurisdiction under Section 8 of the PMLA.
33. Section 17(4) of the PMLA obliges the ED to file an application before the learned AA within thirty days of seizure, but this requirement is only procedural. The substantive authority to retain seized property for the initial period of 180 days stems not from Section 17 but from Section 20 of the PMLA.
34. Section 20 is the crucial link between search and seizure under Section 17 and adjudication under Section 8 of the PMLA. Under Section 20(1), once property has been seized or frozen, an officer authorised by the Director may, on the basis of available material and after recording a “reason to believe” that such property is required for adjudication, can pass an order retaining or continuing the freezing of such property for up to 180 days. The provisions of Section 20 are the immediate next step upon the act of seizure under Section 17 of the PMLA.
35. Section 20(2) of the PMLA requires that a copy of the retention order, along with supporting material, be forwarded to the learned AA. Section 20(3) stipulates that unless the learned AA permits continuation beyond 180 days, the property must be returned to the concerned person. Section 20(4) further mandates that before such adjudication under Section 8(3), the learned AA must be satisfied that the property is “prima facie” involved in money laundering and is required for adjudication under Section 8 of the PMLA.
36. We are of the considered opinion that Section 20 is substantive and mandatory in nature. It ensures that seizure under Section 17 does not result in indefinite deprivation of property without independent scrutiny. Section 20(1) requires a fresh and independent “reason to believe”, duly recorded in writing, by an authorised officer, who may not necessarily be the same officer who conducted the search under Section 17. Without such a retention order, the learned AA, under Section 8(3), while exercising its confirmatory adjudicatory power, has nothing before it to confirm. Therefore, Section 20 acts as a vital safeguard against arbitrary executive action and ensures that property rights are protected until a full adjudication takes place under Section 8 of the PMLA.
37. The ED’s contention that Section 17(4) alone suffices for retention of the property is untenable. Section 17(4) merely empowers the ED to approach the learned AA requesting for retention of the property, but the legal foundation for retention during the initial 180 days rests exclusively on Section 20 of the PMLA.
38. Section 8 governs the process of adjudication by the learned AA. Sub-section (1) thereof empowers the learned AA to issue a notice to the concerned person, calling upon them to indicate the source of the property in question. Sub-section (2) requires the learned AA to consider the reply, hear both parties, and evaluate the material on record. Sub-section (3) authorises the learned AA to pass a written order confirming the retention of the seized property if satisfied that the property is indeed involved in money laundering. Such confirmation permits continuation of the seized property beyond 180 days, up to 365 days during investigation, or until the learned Special Court concludes proceedings under the PMLA.
39. We are of the firm opinion that Section 8(3) of the PMLA only governs confirmation; it does not, of itself, authorize the retention of property, and therefore, a valid order under Section 20 is a necessary precondition before Section 8(3) of the PMLA can be invoked.
40. The procedural safeguards contained in Section 20 are substantive in character and cannot be bypassed. We cannot be oblivious to the settled principle of statutory interpretation, which mandates that where a statute prescribes a particular manner of performing an act, it must be performed in that manner alone. Accordingly, resorting to Section 8 of the PMLA, without:
(i) recording independent reasons under Section 20(1), (ii) forwarding the retention order to the learned AA under Section 20(2), (iii) adhering to the 180-day limit under Section 20(3), and (iv) the learned AA’s satisfaction under Section 20(4) as to “prima facie” involvement, is invalid and void ab initio.
41. The statutory scheme of the PMLA thus embeds multiple layers of oversight as Section 17 authorises search and seizure; Section 20 provides for retention based on a reasoned and independent order for up to 180 days; and Section 8 sets the adjudicatory framework for confirmation and continuation. Any attempt to directly invoke Section 8(3) without compliance with Section 20 is impermissible.
42. The architecture of the PMLA reflects a careful balance. While it equips the ED with robust enforcement powers to address money laundering, it simultaneously incorporates substantive procedural safeguards at every stage to protect constitutional rights and ensure judicial scrutiny. Compliance with Sections 17, 20, and 8 of the PMLA is not a mere formality but a statutory mandate. Any deviation from this framework renders the retention order void. Only by rigorously adhering to these safeguards can the PMLA preserve both the integrity of its enforcement regime and the constitutional guarantee of property rights under Article 300A of the Constitution of India10.
43. This Court, on an earlier occasion, while dealing with substantially identical arguments as those raised in the present appeal, in Enforcement Directorate vs. Rajesh Kumar Agarwal11, considered this issue and while rejecting the contentions advanced by the ED and held as follows: “……….
41. We are of the view that the core issue for adjudication in the present matter pertains to the applicability of Section 20 of the PMLA, which governs the retention of property and records following search and seizure operations conducted by the ED under Section 17 of the PMLA. We are also of the view that the fact that, this point was not raised by the Appellant before the learned AA and was raised only before the learned AT, is of no significance since the same is a pure question of law relating to the statutory scheme of the Act, which can be raised at any point in time. The non-raising of the same before the learned AA does not prejudice the Respondent or vitiate the Judgment of the learned AT.
42. Section 17 of the PMLA lays down the procedure for search and seizure. Sub-section (1) permits the search and seizure of any record or property, after forming a “reason to believe”, based on the material in his possession. This, in our opinion, is the first procedural safeguard provided to a person before his property or records are seized.
43. Sub-section (1A) of Section 17 provides an alternative where immediate search and seizure of the property or record is not practicable. In such cases, the authorized officer may pass an order to freeze the property. However, the officer retains the discretion to seize the frozen property later, provided it becomes practicable to do so before the relevant adjudicatory stage. Constitution
44. Sub-section (2) provides that the ED must immediately forward the material and the order passed by the authorized officer to the learned AA, following the search and seizure or the issuance of the freezing order.
45. Sub-section (3) empowers the authority to carry out seizure where, during a survey conducted under Section 16 of the PMLA, there arises a reasonable apprehension regarding concealment, transfer, or tampering with the property.
46. Section 17(4) requires the authorized officer of the ED to file an application before the learned AA within 30 days of the search, seizure, or freezing order, seeking permission for retention of the seized or frozen property.
47. Section 17 (as amended up-to-date) states as follows:
property shall not be transferred or otherwise dealt with, except with the prior permission of the officer making such order, and a copy of such order shall be served on the person concerned: Provided that if, at any time before its confiscation under sub-section (5) or sub-section (7) of Section 8 or Section 58-B or sub-section (2-A) of Section 60, it becomes practical to seize a frozen property, the officer authorised under sub-section (1) may seize such property. (2) The authority, who has been authorised under subsection (1) shall, immediately after search and seizure or upon issuance of a freezing order, forward a copy of the reasons so recorded along with material in his possession, referred to in that sub-section, to the adjudicating authority, in a sealed envelope, in the manner, as may be prescribed and such adjudicating authority shall keep such reasons and material for such period, as may be prescribed. (3) Where an authority, upon information obtained during survey under Section 16, is satisfied that any evidence shall be or is likely to be concealed or tampered with, he may, for reasons to be recorded in writing, enter and search the building or place where such evidence is located and seize that evidence: Provided that no authorisation referred to in sub-section (1) shall be required for search under this sub-section. (4) The authority seizing any record or property under sub-section (1) or freezing any record or property under sub-section (1-A) shall, within a period of thirty days from such seizure or freezing, as the case may be, file an application, requesting for retention of such record or property seized under sub-section (1) or for continuation of the order of freezing served under sub-section (1-A), before the adjudicating authority.” (emphasis supplied)
48. The second limb pertains to Section 20 of the PMLA, which deals with the retention of property seized or frozen under Section 17. Before delving into its substantive applicability, it is appropriate to reproduce Section 20 (as amended up-to-date), which reads as under:
or if frozen, may continue to remain frozen, for a period not exceeding one hundred and eighty days from the day on which such property was seized or frozen, as the case may be. (2) The officer authorised by the Director shall, immediately after he has passed an order for retention or continuation of freezing of the property for purposes of adjudication under section 8, forward a copy of the order along with the material in his possession, referred to in sub-section (1), to the Adjudicating Authority, in a sealed envelope, in the manner as may be prescribed and such Adjudicating Authority shall keep such order and material for such period as may be prescribed. (3) On the expiry of the period specified in sub-section (1), the property shall be returned to the person from whom such property was seized or whose property was ordered to be frozen unless the Adjudicating Authority permits retention or continuation of freezing of such property beyond the said period. (4) The Adjudicating Authority, before authorising the retention or continuation of freezing of such property beyond the period specified in sub-section (1), shall satisfy himself that the property is prima facie involved in moneylaundering and the property is required for the purposes of adjudication under section 8. (5) After passing the order of confiscation under subsection (5) or sub-section (7) of section 8, Special Court, shall direct the release of all property other than the property involved in money-laundering to the person from whom such property was seized or the persons entitled to receive it. (6) Where an order releasing the property has been made by the Special Court under sub-section (6) of section 8 or by the Adjudicating Authority under section 58B or subsection (2A) of section 60, the Director or any officer authorised by him in this behalf may withhold the release of any such property for a period of ninety days from the date of receipt of such order, if he is of the opinion that such property is relevant for the appeal proceedings under this Act.
49. Section 20 comprises six sub-sections, which prescribe a detailed mechanism concerning the retention of seized or frozen property. Sub-sections (1) and (2) set out the essential preconditions and procedures for retaining such seized or frozen property, for a period not exceeding 180 days from the date of seizure or freezing, by the ED.
50. Sub-section (3) prescribes the consequences of the lapse of the initial 180-day period and Sub-section (4) prescribes the manner in which the learned AA is to approach any retention for a period beyond the 180 days. We add a caveat here that the said “prima facie” satisfaction is not by itself the procedural requirement and this aspect will be made clearer in the later part of this Judgment.
51. Sub-sections (5) and (6) address the subsequent course of action to be taken upon the final decision of the Special Court concerning the seized or frozen property and are not really relevant for the present purposes.
52. At the outset, it needs to be borne in mind that the entire Scheme of Search and Seizure is set out in Chapter V of the PMLA. It is evident that the fact that all the provisions set out in the said Chapter deal expressly with the said subject of Search and Seizure and the Headings of the said Sections, though not conclusive, given the express provisions contained in the Sections themselves and the fact that all these Sections are contained in the Chapter which expressly purport to be dealing with matters relating to Search and Seizure, the Heading of the Chapter is the first indicator that the provisions in the Chapter are a ring fenced set of provisions. Further, the procedure as provided in the provisions is very elaborate and deals expressly with the subject of “Search and Seizure”, without lending itself to any ambiguity or doubt or need for a reference to a provision outside the said chapter, till so occasioned and provided by the provisions themselves.
53. Sub-section (1) of Section 20 concerns retention of property that is either seized or frozen under Section 17 or 18, and in which event, the authorized officer, duly empowered by the Director of ED, based on the material in his possession, forms a reason to believe that that the said property is required for adjudication under Section 8 of the PMLA, and proceeds to pass an order for its retention/ continued freezing.
54. Sub-section (2) of Section 20 further mandates that the officer who passes the order for retention or continuation of freezing shall immediately forward a copy of such order, along with the material or evidence on which the order is based, to the learned AA in the manner prescribed under the Prevention of Money Laundering (the Manner of Forwarding a Copy of the Order of Retention of Seized Property along with the Material to the Adjudicating Authority and the Period of its Retention) Rules,
2005.
55. It is here that the Appellant sets up a two-pronged challenge: (a). The Appellant would contend that Sections 17(4) and 20 operate differently since the provision of Section 17(4) comes into play when the Appellant would decide to immediately retain the property, for which purpose he makes an application under the said provision and thereby seek an adjudication by the learned AA in this regard; meaning thereby that the Appellant can make an application for “Retention” of property, in respect of which the learned AA can pass an order under Section 8(3) and thereby retain the same. The concomitant to the same would be that the Respondent can directly seek an adjudication under Section 8(3) for “Retention” of seized goods/ property without resort to the provisions of Section 20 of the PMLA. (b). The second challenge is more factual in nature, and wherein the Appellant would contend that, in the facts of the present matter, since the adjudication process was completed before the period of 180 days, there was no need to resort to Section 20 of the PMLA.
56. We are afraid that we believe both prongs of the challenge are toothless and unacceptable.
57. Since the Order sought to be defended herein was one passed under Section 8, we propose to start by examining Section 8 of the PMLA, which reads as under:
properties referred to in the notice issued under subsection (1) are involved in money-laundering: Provided that if the property is claimed by a person, other than a person to whom the notice had been issued, such person shall also be given an opportunity of being heard to prove that the property is not involved in money-laundering. (3) Where the Adjudicating Authority decides under subsection (2) that any property is involved in money-laundering, he shall, by an order in writing, confirm the attachment of the property made under subsection (1) of section 5 or retention of property or record seized or frozen under section 17 or section 18 and record a finding to that effect, whereupon such attachment or retention or freezing of the seized or frozen property or record shall— (a) continue during investigation for a period not exceeding three hundred and sixty-five days or the pendency of the 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, as the case may be; and (b) become final after an order of confiscation is passed under sub-section (5) or sub-section (7) of section 8 or section 58B or sub-section (2A) of section 60 by the Special Court; Explanation. — For the purposes of computing the period of three hundred and sixty-five days under clause (a), the period during which the investigation is stayed by any court under any law for the time being in force shall be excluded. (4) Where the provisional order of attachment made under sub-section (1) of section 5 has been confirmed under subsection (3), the Director or any other officer authorised by him in this behalf shall forthwith take the possession of the property attached under section 5 or frozen under sub-section (1A) of section 17, in such manner as may be prescribed: Provided that if it is not practicable to take possession of a property frozen under sub-section (1A) of section 17, the order of confiscation shall have the same effect as if the property had been taken possession of. (5) Where on conclusion of a trial of an offence under this Act, the Special Court finds that the offence of moneylaundering has been committed, it shall order that such property involved in the money laundering or which has been used for commission of the offence of money-laundering shall stand confiscated to the Central Government. (6) Where on conclusion of a trial under this Act, the Special Court finds that the offence of money laundering has not taken place or the property is not involved in moneylaundering, it shall order release of such property to the person entitled to receive it. (7) Where the trial under this Act cannot be conducted by reason of the death of the accused or the accused being declared a proclaimed offender or for any other reason or having commenced but could not be concluded, the Special Court shall, on an application moved by the Director or a person claiming to be entitled to possession of a property in respect of which an order has been passed under sub-section (3) of section 8, pass appropriate orders regarding confiscation or release of the property, as the case may be, involved in the offence of money-laundering after having regard to the material before it. (8) Where a property stands confiscated to the Central Government under sub-section (5), the Special Court, in such manner as may be prescribed, may also direct the Central Government to restore such confiscated property or part thereof of a claimant with a legitimate interest in the property, who may have suffered a quantifiable loss as a result of the offence of money laundering: Provided that the Special Court shall not consider such claim unless it is satisfied that the claimant has acted in good faith and has suffered the loss despite having taken all reasonable precautions and is not involved in the offence of money laundering: Provided further that the Special Court may, if it thinks fit, consider the claim of the claimant for the purposes of restoration of such properties during the trial of the case in such manner as may be prescribed.”
58. As is manifest, Section 8 is a provision for the purposes of “Adjudication”. Section 8(3) does not deal with the act of simpliciter “Retention”. In fact, a plain reading of Section 8(3) makes it evidently clear that it provides that the learned AA will “…by an order in writing confirm the attachment of the property made under sub-section (1) of Section 5 or retention of property or record seized or frozen under section 17 or section 18 and record a finding to that effect, whereupon such attachment or retention or freezing of the seized or frozen property or record shall - (a) continue during investigation for a period not exceeding three hundred and sixty five days or the pendency of the 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, as the case may be ….”.
59. In its plain terms, the Section deals with the circumstance where the learned AA is to “confirm” the “retention of property”. It cannot be read in a manner such as to translate into the order of Retention itself, which, in our opinion, is the subject matter of Section 20.
60. Therefore, on a plain reading, it is manifest that the power under Section 8(3), being one for confirming any retention, there needs to be, in the first instance, an order for such retention, which can be confirmed under Section 8(3).
61. The other aspect is that, the power of confirmation, once exercised, would entitle the retention of the seized or frozen property for a period beyond 180 days and up to 365 days. The provision, therefore, is clearly not exercisable for the purpose of retention of the property for the period of 180 days, as is sought to be contended.
62. If we were to accept the contention of the Appellant, it would mean that any property so seized, upon the making of an application under Section 17(4), would, on the basis of an order passed by the learned AA, be able to be retained from the date of seizure for a period of 365 days (during investigation).
63. Chapter V of the Act deals with “Summons, Searches and Seizures, etc.” and as already dwelt upon earlier, it is manifest that the said Chapter would necessarily have to be held to govern any such action.
64. We take note of the fact that both Sections 17 and 20 form an intrinsic and integral part of the said Chapter. Both Sections have been reproduced earlier and are not being reproduced again.
65. Section 17(1) provides for the officer authorised in that behalf, on the basis of information in his possession, formulating a reason to believe, in respect of any person regarding the various aspects related to money laundering as set out therein, either by himself or by authorising an officer subordinate to him, to seize any record or property and under Section 17(2), immediately after so doing, forward a copy of the reasons so recorded for the purpose of seizing, along with the material in his possession to the learned AA, who shall keep the same, for the period as prescribed.
66. Interestingly, Section 17(2) does not state that the material that is being sent to the learned AA is for the purpose of making any adjudication. It would appear that, it is the intent of the legislature, that the learned AA should have access to all relevant material for the purpose of adjudication. However, the fact that Section 8 is clearly for the purpose of adjudication and also the fact that Section 17 is completely silent on the aspect of adjudication, makes it apparent that Section 17, in fact, does not contemplate a procedure where immediately after a seizure or freezing being effected, the adjudicatory powers of the learned AA could be resorted to. In the succeeding paragraphs, relating to Section 20, this aspect will be further elaborated upon.
67. Section 17(4) of the PMLA, which has been reproduced in the preceding paragraphs of this judgement, is what is sought to be relied upon by the Appellant to contend that the same allows the Appellant to file an application “…. requesting for retention of such record or property seized…” before the learned AA and upon the filing of such an application, the learned AA, without having an order of retention under Section 20(1) can proceed to pass an order permitting the retention of the same.
68. We are of the view that the same is clearly against the plain reading of the Statute itself. Section 17(4) cannot confer upon Section 8(3), a power to pass an order of Retention. Section 8(3) is confined to the confirmation of an order of retention. Surely, one cannot contend that the authority which is statutorily conferred the power to “confirm” an order can also pass the order. That is precisely what will be the case in the event that the contentions of the Appellant were to be accepted.
69. Moving now to an examination of Section 20 of the PMLA, the provisions of which have already been extracted herein above. The opening lines of Section 20(1) of the PMLA, “Where any property has been seized under section 17…” and the words, “from the day on which such property was seized”, taken together, to our mind, clearly establish that Section 20 comes into play from the day of any seizure and will have to be applied for any retention of seized goods upto a period of 180 days. Put simplistically, post the action of seizing or freezing under Section 17, the baton would be handed over to the provisions of Section 20.
70. Further, this provision also clearly indicates that the said retention is to be for the purpose of adjudication under Section 8; meaning thereby that the retention is for the purpose of the exercise of the power of adjudication by the learned AA under Section 8, which, as indicated earlier, is to be exercised for the purpose of “confirmation” of retention. A plain reading of Sections 20 (1) and (2) leads us to firmly opine that the provisions of Section 20(1) will necessarily have to be brought into play, before the adjudication under Section 8, since the said retention can only be for the purposes of an “adjudication” under Section 8.
71. Section 20(1) makes it evident that the authorised officer would, under it, pass an order for retention.
72. Section 20(2) clarifies that an Order for Retention is to be passed under Section 20(1) and further reiterates that the Order under Section 20(1) is for the purposes of adjudication under Section 8.
73. The provisions of Section 20(1) apply for the period from the day of seizure for a period upto 180 days. This is further clarified by the provisions of Section 20(3), which provides that in the event that the learned AA does not permit the retention or continuation of freezing, the goods would be returned.
74. Section 20(2) mandates that the copy of the order of retention passed under Section 20(1), along with the material in his possession, is to be sent to the learned AA, once again, for the purposes of adjudication under Section 8.
75. We also believe that the fact that Sub-section (3) of Section 20 stipulates that, upon the expiry of 180 days from the date of seizure or freezing, the property shall be returned to the person from whom it was seized or whose property was frozen, unless the learned AA grants permission for continued retention or freezing, also clarifies the entire issue further.
76. A plain reading of this provision makes it evident that the learned AA exercises power only in respect of the retention of the seized property beyond the period of 180 days, meaning thereby that the power to retain the seized goods for a period of 180 days, was never conferred upon the learned AA.
77. Section 20(4), which has been reproduced in the preceding paragraphs of this judgment, fortifies our view even further, as a reading of the said provision clearly indicates that, this is the juncture from where the starting point of the exercise of powers of the learned AA, under Section 8, which power, it is reiterated, is exercisable only for the purposes of retention beyond the 180-day period, would have to be considered to commence.
78. At this stage, the learned AA would have, the relevant material under Section 17(2) and the material under Section 20(2). The learned AA would thus, under Section 20(4), first satisfy itself, on the basis of the material available with it for the purpose of exercising its powers of adjudication, whether a prima facie case exists.
79. The satisfaction of the existence of a prima facie case is the precursor to the exercise of the adjudicatory power under Section 8, exercisable by the learned AA for the continuation of the retention of the seized property beyond the period of 180 days.
80. The power under Section 8(3) of the PMLA, being one, which permits the retention of property of a person, meaning thereby, permitting the continuance of the deprivation of property from a person who otherwise would be entitled to enjoy it to the fullest, the same would necessarily have to be exercised in a manner only after the person who is being deprived of the same is given the maximum possible safeguards. We are also of the opinion that the lay of the Statutory land, is clearly indicative of this and the contentions of the Appellant in this regard would effectively circumvent, what we believe are safeguards statutorily provided by the Legislature.
81. Regulations 21 to 25 of the Adjudicating Authority (Procedure) Regulations, 2013 provide the procedural framework for conducting adjudication under Section 8. These regulations empower the learned AA to examine witnesses, mark exhibits, issue commissions, and undertake other procedural steps necessary for a fair adjudication. Regulations 21 to 25 of the Adjudicating Authority (Procedure) Regulations, 2013 state as follows:
matters of summoning and enforcing attendance of any person as witness and issuing a commission for examination of such witness.
22. Recording of deposition. The deposition of the witness whenever necessary shall be recorded in Form 8. A Certificate of attendance, if requested for, will be issued in Form 9.
23. Numbering of witness. The witness called by the applicant shall be numbered consecutively as P.Ws and those by the defendant or any other persons not being applicants as D.Ws. and any witness examined at the instance of the complainants shall be numbered consequently as C.Ws, and the witness called by the Adjudicating Authority shall be numbered as A.Ws.
24. Witness expenses payable. The Adjudicating Authority may, if it considers necessary, direct the concerned party for the payment of expenses to the witness, as the case may be.
25. Marking of documents. Every document filed by the applicant shall be marked as Ex. A[1] and the document filed by the complainant shall be marked as Ex. C[1] and the documents filed by the defendants or other person not being applicant shall be marked as Ex. Dl and so on.”
82. In light of the statutory provisions, the above discussion, and the scheme of the PMLA, the conclusions, as relevant for the present purposes, which, though not exhaustive, may be summarised as follows: (a). The ED initiates action under the PMLA by conducting search and seizure under Section 17(1). (b). Upon executing a search and seizure or passing a freezing order, the ED is statutorily obligated to immediately inform the learned AA and forward the reasons recorded along with the relevant material, as mandated under Section 17(2). (c). Within 30 days of such search, seizure, or freezing, the ED must file an Application under Section 17(4), before the learned AA for confirmation and adjudication in accordance with Section 8(1), (2), and (3) of the PMLA. (d). Prior to the point in time when the power for confirmation of retention of the seized/ frozen property or records is required to be confirmed by the learned AA for the period beyond 180 days, in exercise of its powers under Section 8(3), the Provisions of Section 20(1) and Section 20(2) read with Section 20(3) would have to be necessarily held to be the power under which the seized goods are permitted to be retained for a period up to 180 days. (e). Therefore, after informing the learned AA under Section 17(2) and before filing the requisite application under Section 17(4), the ED, if it believes the retention of the seized or frozen property is necessary for adjudication under Section 8, would have to necessarily invoke Section 20. (f). Filing an application under Section 17(4) before the learned AA does not ipso facto permit the ED to retain the seized property unless it also complies with the requirements of Section 20. Failure to do so would amount to a violation of the express procedure established by law. (g). Section 20(1) mandates that the officer authorized by the Director of ED must have in his possession, material leading to a reasonable belief that the continued retention is required for adjudication under Section 8. This belief must be based on tangible evidence and recorded in writing. Upon forming such a belief, the officer shall pass an order for such retention or continued freezing for a period not exceeding 180 days from the date of seizure or freezing. (h). Once such a belief is formed and recorded in an order, it must be communicated to the learned AA under Section 20(2). This communication becomes relevant as part of the record and basis for the learned AA’s adjudication. (i). Under Section 20(4), the learned AA may allow continued retention or freezing only if it is satisfied that:
(i) The property is prima facie involved in money laundering; and
(ii) The property is required for adjudication under
Section 8. (j). On the basis of the Application under Section 17(4), made within 30 days of the seizure, the learned AA, after satisfying itself on the foundational requirement under Section 20(4) of “prima facie” satisfaction, would thereafter, along with the relevant material and Reasons to believe under Sections 17(2) and 20(2) undertake the mandatory procedural requirements set out in Sections 8(1) and 8(2) and under 8(3), pass an order, in writing, confirming the retention, whereupon, the seizure would continue beyond 180 days and up to 365 days, during the investigation. (k). The learned AA, upon receiving such application, forms an opinion under Section 8(1), issues notice, and provides the concerned person an opportunity to respond with evidence and be heard under Section 8(2). Thereafter, based on the material on record, the learned AA determines whether the property in question is involved in money laundering. Based on the decision under Section 8(2), the learned AA, under Section 8(3), confirms the retention of property or records seized or frozen under Section 17 or 18 for a period beyond 180 days. (l). Before forming any such opinion, the learned AA must adhere to the procedural requirements of Sections 8(1) and (2), and in doing so, may invoke the relevant provisions of the Adjudicating Authority (Procedure) Regulations, 2013. (m). Section 8(2) imposes a duty upon the learned AA to:
(i) consider the reply, if any, submitted by the aggrieved person;
(ii) hear both, the aggrieved person and the ED; and
(iii) take into account all relevant materials placed on record.
(n). The scope of Section 8(2) of the PMLA is not confined to the response and hearing of the parties; it also includes all materials previously submitted by the ED, during and after the search, seizure and retention. (o). The decision of the learned AA is appealable before the learned AT, and if aggrieved by the decision of the learned AT, a further challenge may lie before the appropriate High Court. (p). In case there is no order for retention, Section 20(3) provides that, upon expiry of the 180-day period, the property must be returned to the person from whom it was seized or whose property was frozen.
83. The PMLA, being a special legislation with significant economic implications, occupies a distinct place in the statutory framework of financial regulation and jurisprudence. Recognising the evolving nature of economic offences and the growing threat of money laundering to the integrity of national and international financial systems, the PMLA has been extensively amended over time, almost a dozen times, to address exigencies, close legal loopholes, and reinforce its enforcement architecture. The list of amendments, which underscores the evolving scope and rigor of the statute, includes: (a). The Prevention of Money Laundering (Amendment) Act, 2005 (20 of 2005). (b). The Prevention of Money Laundering (Amendment) Act, 2009 (21 of 2009). (c). The Prevention of Money Laundering (Amendment) Act, 2012 (2 of 2013). (d). The Finance Act, 2015 (20 of 2015). (e). The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (22 of 2015). (f). The Finance Act, 2016 (28 of 2016). (g). The Finance Act, 2018 (13 of 2018). (h). The Prevention of Corruption (Amendment) Act, 2018 (16 of 2018). (i). The Finance Act, 2019 (7 of 2019). (j). The Aadhaar and Other Laws (Amendment) Act, 2019 (14 of 2019).
84. Section 20 of the PMLA was comprehensively amended by the Prevention of Money Laundering (Amendment) Act, 2012 (2 of 2013), reflecting the legislature's intent to introduce a more robust and clearly delineated procedure concerning the retention of seized or frozen property. The substantive nature of this amendment implies that these provisions are not merely directory or procedural but are mandatory and of critical legal consequence. If they were of lesser import, such comprehensive legislative substitution would have been unnecessary. Furthermore, the amendments to Section 20 triggered corollary changes across other provisions of the Act, reinforcing the view that the amended provisions form a central part of the scheme for lawful seizure and retention.
85. The Appellant’s contention that once the learned AA confirms the seizure under Section 8 within the statutory period of 180 days, non-compliance with procedural safeguards, if any, under Sections 20 becomes inconsequential, is legally flawed and merits outright rejection. Such an argument, if accepted, would render the statutory safeguards illusory and undermine the checks instituted by Parliament against potential abuse of power by enforcement agencies.
86. Such an interpretation would, in our opinion, run contrary to the express mandate of the Statute, as resort to Section 17(4) without referral or resort to the Provisions of Section 20, would effectively render the provisions of Section 20 nugatory. The argument of the Appellant that the resort to the provisions of Section 17(4), is at an “initial stage”, in our opinion, is incorrect. This argument, to our mind, propounds a “cheat code” to the statutory intent as is otherwise apparent.
87. In our view, the Statute does not provide for any such route wherein the provisions of Section 17(4) can be directly resorted to. For the purpose of “retention” or freezing, resort to Section 17(4), in the manner as sought for, effectively translates into a short-cut, bypassing, what we believe is the express mandate of the Statute, providing statutory safeguards, necessitated by the fact that consequences of such retention would have an extreme and draconian effect on the person whose property is seized or frozen.
88. Any such order without following the required procedure would, in our opinion, not survive and is, in fact, void ab initio.
89. The Hon’ble Supreme Court in State of Orissa v. Mamata Mohanty (supra) held that an order which is void ab initio cannot be salvaged or legitimised by any subsequent action or development. Thus, confirmation by the learned AA cannot cure initial procedural violations or validate unlawful retention carried out without adherence to statutory requirements. The relevant portion of the judgment states as follows: “Order bad in inception
37. It is a settled legal proposition that if an order is bad in its inception, it does not get sanctified at a later stage. A subsequent action/development cannot validate an action which was not lawful at its inception, for the reason that the illegality strikes at the root of the order. It would be beyond the competence of any authority to validate such an order. It would be ironic to permit a person to rely upon a law, in violation of which he has obtained the benefits. If an order at the initial stage is bad in law, then all further proceedings consequent thereto will be non-est and have to be necessarily set aside. A right in law exists only and only when it has a lawful origin. (Vide Upen Chandra Gogoi v. State of Assam [(1998) 3 SCC 381: 1998 SCC (L&S) 872: AIR 1998 SC 1289], Mangal Prasad Tamoli v. Narvadeshwar Mishra [(2005) 3 SCC 422: AIR 2005 SC 1964] and Ritesh Tewari v. State of U.P. [(2010) 10 SCC 677: (2010) 4 SCC (Civ) 315: AIR 2010 SC 3823]).”
90. Similarly, in Ritesh Tewari v. State of U.P., the Apex Court reiterated that statutory compliance is not an empty formality and any deviation from express procedural mandates cannot be condoned under the pretext of subsequent validations. The relevant paragraphs of the said judgement observed as follows: “32. It is settled legal proposition that if an order is bad in its inception, it does not get sanctified at a later stage. A subsequent action/development cannot validate an action which was not lawful at its inception, for the reason that the illegality strikes at the root of the order. It would be beyond the competence of any authority to validate such an order. It would be ironical to permit a person to rely upon a law, in violation of which he has obtained the benefits. (Vide Upen Chandra Gogoi v. State of Assam [(1998) 3 SCC 381: 1998 SCC (L&S) 872]; Satchidananda Misra v. State of Orissa [(2004) 8 SCC 599: 2004 SCC (L&S) 1181] and SBI v. Rakesh Kumar Tewari [(2006) 1 SCC 530: 2006 SCC (L&S) 143].)
33. In C. Albert Morris v. K. Chandrasekaran [(2006) 1 SCC 228] this Court held that a right in law exists only and only when it has a lawful origin.
34. In Mangal Prasad Tamoli v. Narvadeshwar Mishra [(2005) 3 SCC 422] this Court held that if an order at the initial stage is bad in law, then all further proceedings consequent thereto will be non-est and have to be necessarily set aside.”
91. It is thus clear that although the PMLA empowers the ED to seize or freeze property suspected to be involved in money laundering, such powers are embedded within a stringent procedural framework aimed at ensuring accountability, transparency, and protection of individual rights. The exercise of such coercive powers must strictly conform to the statutory checks and balances provided within the Act.
92. We reiterate that, Section 20(1) would necessarily get attracted, at the very first instance, in respect of any action taken for the Retention of property or the continuance of freezing of any property. Section 20(1) mandates that a separate and independent opinion must be formed by an officer authorised by the Director, who may not necessarily be the same officer as authorized under Section 17(1), stating reasons justifying such retention. After forming an independent reason to believe, which would naturally have to form the basis for the order for retention, the order would be required to be forwarded along with the material in his possession, without delay, under Section 20(2). Such an order would draw sustenance from the reason to believe and would necessarily have to form a part of the order, as any order without the appurtenant reasoning would not be an order at all. This is all the more relevant since the said order effectively seeks to prolong the curtailment of the enjoyment of valuable rights of a party who has suffered any such seizure or freezing of property.
93. We are of the opinion that these provisions are not directory or mere procedural niceties but are substantive and mandatory in nature. The statutory text leaves no scope for discretion or implied exceptions for retaining property or records without following the prescribed procedure. Allowing retention of seized property without strict adherence to these provisions would amount to a violation of the legislative mandate and would undermine the very purpose of incorporating procedural safeguards in the PMLA.
94. This, all the more since, it is well settled that although the right to property is no longer a fundamental right under the Constitution of India, it retains its status as a constitutional and legal right under Article 300A. No person can be divested of their property save by authority of law. This position was unequivocally reaffirmed by the Hon’ble Supreme Court in Laxman Lal v. State of Rajasthan as follows:
property is being threatened with acquisition; such right cannot be taken away as if by a side wind (Nandeshwar Prasad v. State of U.P. [AIR 1964 SC 1217]).”
95. Similarly, in Sukh Dutt Ratra v. State of H.P., the Apex Court emphasised that the constitutional right to property commands protection from arbitrary state action and must be respected in all enforcement actions. The relevant paragraphs of the said judgment are set out below: “Analysis and conclusion
13. While the right to property is no longer a fundamental right [“Constitution (Forty-fourth Amendment) Act, 1978”], it is pertinent to note that at the time of dispossession of the subject land, this right was still included in Part III of the Constitution. The right against deprivation of property unless in accordance with procedure established by law, continues to be a constitutional right under Article 300-A.
14. It is the cardinal principle of the rule of law, that nobody can be deprived of liberty or property without due process, or authorisation of law. The recognition of this dates back to the 1700s to the decision of the King's Bench in Entick v. Carrington [Entick v. Carrington, 1765 EWHC (KB) J98: 95 ER 807] and by this Court in Wazir Chand v. State of H.P. [Wazir Chand v. State of H.P., (1955) 1 SCR 408: AIR 1954 SC 415] Further, in several judgments, this Court has repeatedly held that rather than enjoying a wider bandwidth of lenience, the State often has a higher responsibility in demonstrating that it has acted within the confines of legality, and therefore, not tarnished the basic principle of the rule of law.
15. When it comes to the subject of private property, this Court has upheld the high threshold of legality that must be met, to dispossess an individual of their property, and even more so when done by the State. In Bishan Das v. State of Punjab [Bishan Das v. State of Punjab, (1962) 2 SCR 69: AIR 1961 SC 1570] this Court rejected the contention that the petitioners in the case were trespassers and could be removed by an executive order, and instead concluded that the executive action taken by the State and its officers, was destructive of the basic principle of the rule of law. This Court, in another case — State of U.P. v. Dharmander Prasad Singh [State of U.P. v. Dharmander Prasad Singh, (1989) 2 SCC 505: (1989) 1 SCR 176],held: (SCC p. 516, para 30) “30. A lessor, with the best of title, has no right to resume possession extra-judicially by use of force, from a lessee, even after the expiry or earlier termination of the lease by forfeiture or otherwise. The use of the expression “reentry” in the lease deed does not authorise extra-judicial methods to resume possession. Under law, the possession of a lessee, even after the expiry or its earlier termination is juridical possession and forcible dispossession is prohibited; a lessee cannot be dispossessed otherwise than in due course of law. In the present case, the fact that the lessor is the State does not place it in any higher or better position. On the contrary, it is under an additional inhibition stemming from the requirement that all actions of Government and Governmental authorities should have a “legal pedigree”.”
96. We are of the opinion that the architecture of the PMLA is designed to strike a delicate balance between empowering enforcement agencies and protecting individual rights. 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. Judicial and quasi-judicial oversight is envisaged at every stage to prevent the arbitrary exercise of power and to uphold constitutional values. The integrity of this framework rests on the rigorous application of the procedural mandates enshrined in the statute.
97. A cardinal principle of statutory interpretation, as reiterated by courts time and again, is that when a statute prescribes a method to do a particular thing, it must be done in that manner alone and not otherwise. Therefore, if Section 20 stipulates a defined mechanism for the retention of seized property or records, it is imperative that such procedure is strictly followed.
98. This legal position was reaffirmed by a three-judge Bench of the Hon’ble Supreme Court in OPTO Circuits (India) Ltd. v. Axis Bank, wherein the Court stressed that procedural compliance under the PMLA is not optional, especially when individual rights are at stake. The relevant paragraphs of the said judgement are herein below:
reasons recorded along with material in his possession to the adjudicating authority in a sealed envelope. Subsection (4) provides that the authority seizing or freezing any record or property under sub-section (1) or (1-A) shall within a period of thirty days from such seizure or freezing, as the case may be, file an application before the adjudicating authority requesting for retention of such record or properties seized.
9. For the purpose of clarity, it is emphasised that the freezing of the account will also require the same procedure since a bank account having alleged “proceeds of crime” would fall both under the ambit “property” and “records”. In that regard, it would be appropriate to take note of Sections 2(1)(v) and 2(1)(w) of the PMLA which defines “property” and “records”. The same read as follows:
compliance with Section 17 of the PMLA, more particularly recording the belief of commission of the act of money-laundering and placing it before the adjudicating authority or for filing application after securing the freezing of the account to be made. In that view, the freezing or the continuation thereof is without due compliance with the legal requirement and, therefore, not sustainable.
14. This Court has time and again emphasised that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner alone and in no other manner. Among others, in a matter relating to the presentation of an election petition, as per the procedure prescribed under the Patna High Court Rules, this Court had an occasion to consider the Rules to find out as to what would be a valid presentation of an election petition in Chandra Kishore Jha v. Mahavir Prasad [Chandra Kishore Jha v. Mahavir Prasad, (1999) 8 SCC 266] and in the course of consideration observed as hereunder: (SCC p. 273, para
17)
Therefore, if the salutary principle is kept in perspective, in the instant case, though the authorised officer is vested with sufficient power; such power is circumscribed by a procedure laid down under the statute. As such the power is to be exercised in that manner alone, failing which it would fall foul of the requirement of complying with due process under law. We have found fault with the authorised officer and declared the action bad only insofar as not following the legal requirement before and after freezing the account. This shall not be construed as an opinion expressed on the merit of the allegation or any other aspect relating to the matter and the action initiated against the appellant and its Directors which is a matter to be taken note of in appropriate proceedings if at all any issue is raised by the aggrieved party.” (Emphasis supplied)
99. As already elaborated upon earlier, the interpretation as sought to be canvassed by the Appellant effectively puts paid to the expressed timelines delineated in Sections 20 and 8(3) of the PMLA. The same is clearly impermissible in view of the determinative position of law as elaborated by the Hon’ble Supreme Court. ………”
44. In the present case, it is undisputed, and as admitted by the learned counsel for the ED during the arguments, that no order under Section 20 was ever passed by the ED in relation to the initial 180-day retention of the Appellant’s property, nor was any such order communicated to the learned AA, as mandatorily required. Despite this non-compliance, the Appellant’s property continued to remain under retention until the conclusion of adjudication proceedings under Section 8 of the PMLA. Such conduct is not only procedurally flawed but also a clear violation of the safeguards enshrined in the PMLA.
45. Examined in the light of the binding precedent in Rajesh Kumar Agarwal (supra), the present factual matrix reveals that the ED’s action in retaining the Appellant’s property without adherence to Section 20 is contrary to the statutory framework and constitutes an infringement of the Appellant’s constitutional right to property under Article 300A of the Constitution, and therefore, the ED’s retention, being unsustainable in law, cannot be permitted to stand.
46. Accordingly, the present appeal is allowed, and the Impugned Order dated 26.06.2024 passed by the learned AT is set aside.
47. No order as to costs.
SUBRAMONIUM PRASAD, J. HARISH VAIDYANATHAN SHANKAR, J. SEPTEMBER 26, 2025/sm/va