Can PMLA adjudicating authority function without judicial member? Supreme Court reserves verdict

The Supreme Court on Tuesday reserved its verdict on the question of whether provisional property attachments carried out by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act, 2002 (PMLA) can be confirmed by a single-member of a PMLA adjudicating authority, without the presence of a judicial member.

A Bench of Chief Justice of India (CJI) Surya Kant and Justices Joymalya Bagchi and V Mohana reserved judgment on the matter after a detailed hearing today. 

The Court was hearing a batch of petitions raising various questions about the interpretation of the PMLA.

Central to the issue is Section 8 of the PMLA. This provision governs the adjudication of provisional attachment proceedings. It empowers an adjudicating authority to determine whether the attached property is involved in money laundering, which in turn affects whether the attachment is confirmed or the attached property released.

One of the petitions before the Court (M/s Karvy Realty (India) Ltd. v. Directorate of Enforcement) challenges a 2024 Telangana High Court decision that held that a single-member PMLA adjudicating authority can exercise powers under Section 8, even if the said member does not have any legal experience.

Today, the petitioners argued that while upholding the validity of the PMLA in the case of Vijay Madanlal Choudhary v Union of India, the top court had specifically noted that PMLA adjudicating authorities were three-member bodies headed by a district judge.

This was treated like a safeguard in Section 5 (provisional attachment of properties by ED) of the PMLA, the petitioners pointed out. 

The petitioners added that forwarding such cases of provisional attachment to an adjudicating authority is a vital function and an independent check on the ED’s powers to provisionally attach property.

“The reasoning in Vijay Madanlal proceeded on the basis that there was a bulwark of a three-member Adjudicating Authority,” the petitioners’ counsel said. 

This led Justice Bagchi to question whether the petitioners were arguing that the concept of separation of powers would be given a go by if no judicial officer is present in PMLA’s adjudicating authority Benches.

“Orders having civil consequences would have, even in a tribunal, the facet of judicial identity. Is your argument that the facet of judicial identity is completely rendered nugatory, thereby going against the concept of separation of powers?”

The petitioners went on to raise concern that on the one hand, the functions of an adjudicating authority under the PMLA requires proper application of mind, whereas on the other hand, such authorities are often tasked with examining thousands of matters within a six-month deadline. 

“Otherwise the 180-day period expires,” the petitioners’ counsel explained. 

“So if there are thousands of matters to be dealt with within six months, will there be a real application of mind or will it become merely signing on the dotted line?” asked the Court. 

“That is exactly our concern. If Your Lordships see the proceedings, lawyers of standing do not want to appear anymore. It has effectively become one-sided. There is no real communication. There is nothing,” replied the petitioners’ counsel. 

The petitioners added that adjudicating authorities often perform functions that have a judicial element. A judicial member must be part of such bodies in such cases they said.

“We have to go by the statutory scheme, how the provisions are structured and how they are required to be interpreted,” replied CJI Surya Kant.

Senior Advocate Gopal Sankaranarayanan, representing the petitioner side, added that there were judgments in which the Court has observed that while creating new judicial forums, the executive cannot take over judicial functions bit by bit.

“Freedom from executive control and protection from executive domination were treated as necessary preconditions for the independence of such adjudicatory bodies,” he said. 

Representing the ED, Senior Advocate Zoheb Hossain submitted that Section 6 (appointment, composition, and powers of the adjudicating authority) of the PMLA itself provides for scenarios where even one or two-member adjudicatory authorities can be formed.

“If, during the hearing of a case, it appears to the Chairperson or a member that the matter ought to be heard by a Bench consisting of two members, it can be so directed. That itself shows that one member can hear a matter (in other cases),” the ED’s counsel said. 

He added, 

“The provisions have to be harmoniously construed. There may be cases before a tribunal involving complex questions of law requiring serious consideration, but there will also be many matters where no constitutional or substantial legal issue arises. The submission that every single-member Bench must necessarily consist only of a judicial member was not accepted there.”

Submissions were also made on the number of attachments being made by the ED each year. The ED's counsel informed the Court that around 400 attachments have taken place in one year.

"Even if you have 100 matters, why should you have only one officer to adjudicate?” asked CJI Surya Kant.

The Court proceeded to direct the ED to file an affidavit with details on the number of attachments that have taken place, within two days.  

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