Delhi High Court Slams ED For Freezing Woman's Bank Accounts By Issuing 'Cryptic' Orders, Says 'Suspicion' Not 'Reason To Believe'

The Delhi High Court on Friday slammed the Enforcement Directorate (ED) for freezing bank accounts of a woman on mere suspicion, while setting aside the agency's orders calling them “cryptic” in nature. A division bench comprising Justice Subramonium Prasad and Justice Harish Vaidyanathan Shankar observed that “suspicion” cannot be equated to a “reason to believe” and cannot also be equated with a “prima facie” opinion.“The freezing orders dated 05.09.2018 themselves do not disclose any such reason to believe, nor do they refer to any record from which such a conclusion could be inferred. On the contrary, the order records that “it is suspected that amount involved in money laundering are lying in the above mentioned bank account,” the Court said. The Bench dismissed the appeals filed by ED challenging the orders passed by Appellate Tribunal (PMLA), which had set aside the order confirming the freezing of the woman's bank accounts under Section 17(1A) of the PMLA.The ED had filed arosecution complaint against the woman‟s husband. It was alleged that her bank account was used by him for the purpose of money laundering.Rejecting the appeals, the Bench ruled that since ED failed to adhere to the express statutory mandate, the orders passed by the Adjudicating Authority permitting retention of the bank accounts by invoking Section 8 of PMLA stood vitiated. The Court observed that the manner in which the ED is to proceed post the passage of the freezing order is similar to the path that is to be followed in the case of property that is seized. “…it is evident that the authorised officer has passed a cryptic freezing order under Section 17(1A) solely on the basis of suspicion. No material has been placed before us to demonstrate compliance with the mandatory requirements of Sub- sections (1) and (1A) of Section 17 of the PMLA and of Rules 3 and 4 of the PMLA (Search and Seizure or Freezing) Rules, 2005,” the Court said.“There is nothing on record to indicate that the „Director, or any other officer not below the rank of Deputy Director authorised by him‟, had, on the basis of information in his possession and upon recording in writing the requisite „reasons to believe‟, concluded that the Respondent or her husband had, through impugned bank accounts, committed the offence of money laundering, or was in possession of the proceeds of crime, or was holding relevant records, or was the owner of property connected with crime,” it added. The Bench held that since freezing is merely an alternative to seizure, it cannot logically be subjected to a lower or different standard of satisfaction than that applicable to the act of seizure itself.It said that the ED had attempted to improve upon its case by subsequently furnishing reasons in the application under Section 17(4) of PMLA, as well as through pleadings, oral submissions, and written arguments. It observed that any attempt by the ED to supplement or improve the contents of the impugned freezing orders through their submissions cannot cure the fundamental legal infirmities inherent in the order.Furthermore, the Court noted that the Original Application filed by the ED before the Adjudicating Authority was titled as being one for“..allowing continuation of freezing of bank account which was frozen…” but ultimately prayed that the freezing order “…be permitted to be confirmed in terms of Section 17(4) of the PMLA.”On this, the Court said “ The Application of the Appellant under Section 17(4) and the order have conflated all these terms and served up what can at best be called a “khichdi”.”It further said that the Adjudicating Authority cannot immediately after seizure or freezing, pass an order for retention or continuation of the freezing order without following the mandate of the PMLA. To permit the ED to do so would be a travesty of justice, denying a person the procedural safeguards guaranteed by the PMLA itself, it said. “In view of the foregoing discussion and the legal position emerging therefrom, it stands conclusively established that the freezing orders dated 05.09.2018 issued by the ED regarding the Respondent‟s bank accounts cannot be sustained in law, as they have been passed without compliance with the mandatory requirements of the statute and in disregard of the procedural safeguards provided therein,” it added:Title: DIRECTORATE OF ENFORCEMENT THROUGH DEPUTY DIRECTOR v. POONAM MALIK & other connected matterCitation: 2025 LiveLaw (Del) 1503Click here to read order

Delhi High Court Slams ED For Freezing Woman's Bank Accounts By Issuing 'Cryptic' Orders, Says 'Suspicion' Not 'Reason To Believe'

Nupur Thapliyal

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