'Khichdi served': Delhi High Court pulls up ED for freezing bank account based only on suspicion
The Delhi High Court on Friday censured the Enforcement Directorate (ED) for freezing a woman’s bank account merely on the basis of suspicion [Directorate of Enforcement Through Deputy Director v Poonam Malik].
A bench of Justice Subramonium Prasad and Justice Harish Vaidyanathan Shankar also found that there was hardly any application of mind by the Adjudicating Authority which allowed the continuation of the freezing order under the Prevention of Money Laundering Act (PMLA).
The Court held that ED's application for continuation of the freeze as well the order passed by the Adjudicating Authority conflated legal concepts of “retention”, “continuation” and “confirmation”.
They ended up serving a khichdi, the Court said.
“The Application of the Appellant [ED] under Section 17(4) and the order [by AA] have conflated all these terms and served up what can at best be called a “khichdi”,” it said.
The bench explained that the scheme of the PMLA provides for separate events and that acts of seizure, freezing, retention, continuation and confirmation are set out and defined.
None of these words are interchangeable, it opined.
“We are amazed at the manner in which the ED sought the relief of confirmation in an application titled as one for continuation and was finally granted retention. We are conscious of the fact that we may be blamed for indulging in semantics, but at the cost of repetition, we reiterate that each of these words, as used, is distinct and in respect of different actions and different species. ‘Retention’ can only be done in respect of something that is seized and ‘Continuation’ can only be done in respect of something frozen. That apart, we continue to remain bewildered by the grant of ‘Retention‟when what was actually sought was an order of ‘Confirmation’,” the Court observed.
Further, the Court said that the Adjudicating Authority, immediately after the seizure or freezing of property, cannot pass an order for the retention or continuation of the freezing order without complying with 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 added
The Court made these observations while dismissing two appeals filed by the ED against an order of the PMLA Appellate Tribunal, directing the unfreezing of bank accounts belonging to one Poonam Malik.
The ED had argued that cash deposits in Malik’s accounts were unexplained and linked to alleged money-laundering activities of her husband, Ranjit Malik, who worked as a driver for the Sterling Biotech group’s accused executive Gagan Dhawan. The agency claimed that Malik’s husband acted as a “cash manager” in a multi-crore fraud case under investigation since 2017.
After considering the case, the High Court ruled that the agency failed to follow mandatory legal procedures before restricting Malik’s access to funds.
The Court found the freezing orders to be cryptic, noting that they did not cite any material demonstrating that ED officers had recorded “reasons to believe”, as mandated under PMLA.
Instead, the orders simply stated that “it is suspected” that laundered money lay in Malik’s accounts, the Court noted.
The bench said that suspicion cannot be equated with a reason to believe, as such action affects a citizen’s constitutional right to property under Article 300A and must be backed by concrete material, not conjecture.
Therefore, the Court concluded that ED’s orders freezing the bank accounts were bad in law and deserved to be set aside, as was done by the Tribunal.
Special Counsel Zoheb Hossain, Panel Counsel Vivek Gurnani with advocates Kanishk Maurya and Satyam appeared for the ED.
Poonam Malik was represented by Senior Advocate Madhav Khurana and advocate Vignaraj Pasayat.
[Read Judgment]