Retention or seizure of property under PMLA must conform strictly to statutory mandates : Property returned.
Delhi High Court Nullifies ED's Retention Order in Money Laundering Cass. Judgment Emphasizes Strict Compliance with Statutory Procedures under PMLA, Declares Retention Order Void
In a significant ruling, the Delhi High Court has nullified the Directorate of Enforcement's (ED) order for retention of property in a high-profile money laundering case involving Chartered Accountant Rajesh Kumar Agarwal. The judgment, delivered by a division bench comprising Justices Subramonium Prasad and Harish Vaidyanathan Shankar, emphasizes the importance of strict adherence to procedural safeguards prescribed under the Prevention of Money Laundering Act, 2002 (PMLA).
The case stemmed from allegations that the respondent, Agarwal, was involved in a money laundering operation orchestrated by the Jain Brothers, who allegedly infused cash into corporate entities through share subscription at inflated premiums during the financial year 2008-2009. The ED had seized several items, including files, computer equipment, and currency, from Agarwal's office following a search under Section 17 of the PMLA.
The pivotal issue before the court was the ED's failure to comply with mandatory procedural requirements under Sections 17, 20, and 8 of the PMLA for retention of the seized property. The court found that the ED did not follow the prescribed procedure, rendering the retention order legally flawed and void ab initio. The judgment underscored that procedural safeguards are substantive in nature, designed to ensure transparency, accountability, and protection of individual rights.
The court clarified that Section 20 of the PMLA mandates the formation of a reasoned belief by an authorized officer for retaining seized or frozen property, which must be communicated to the Adjudicating Authority. The failure to do so in this case was a fundamental procedural defect that could not be cured by subsequent confirmation under Section 8.
In its ruling, the court reaffirmed the constitutional right to property under Article 300A, which protects individuals from arbitrary deprivation of property by the state. The judgment aligns with the Supreme Court's stance that statutory compliance is not an empty formality, and any deviation from express procedural mandates cannot be condoned.
The ruling has significant implications for enforcement agencies, reinforcing the need for meticulous adherence to statutory procedures in cases involving seizure and retention of property. It serves as a reminder that while tackling economic offences like money laundering, the enforcement process must uphold the rule of law and respect individual rights.
Bottom Line:
Prevention of Money Laundering Act, 2002 - Strict adherence to statutory procedural safeguards under Sections 17, 20, and 8 is mandatory for retention of seized or frozen property. Failure to comply renders the retention order void ab initio.
Statutory provision(s): Prevention of Money Laundering Act, 2002 - Sections 17, 20, 8; Constitution of India - Article 300A
Directorate of Enforcement v. Rajesh Kumar Agarwal, (Delhi)(DB) : Law Finder Doc id # 2777669
