Should ED’s ‘reason to believe’ for property attachment be kept confidential? Gauhati HC judges differ

A single-judge of the Gauhati High Court recently differed with a co-ordinate Bench’s view that the 'reason to believe' needed to attach a property under Section 5 of the Prevention of Money Laundering Act (PMLA) is confidential in nature and need not be recorded in the Provisional Attachment Order (PAO)..Justice Manish Choudhury said there is no such restriction under the Section 5(1) of the PMLA or PMLA Rules. It added that the reason to believe is required to be furnished to the affected person, sooner or later, by the Enforcement Directorate (ED).“If the reason to believe is made part of the PAO, the same would be in alignment with the constitutional principles of natural justice and fair play; and the same would lessen the possibility of subjective fishing expedition,” Justice Choudhary held. .However, the judge noted that a co-ordinate Bench has rendered a contrary view on the issue in Aftabuddin Ahmed and another vs. Enforcement Directorate and others.Therefore, Justice Choudhury made a reference for a larger bench decision so that a conclusive judicial view may be given on this subject.The points of reference are:1. Whether the reason to believe, which is to be recorded in writing by the Authorized Officer on the basis of material in his possession to pass a Provisional Attachment Order [PAO] under Section 5[1] of the PMLA, is confidential in character or not, and/or is to be furnished to the affected person or not?2. If such reason to believe is made part of the PAO, whether the PAO suffers from any jurisdictional error or not?.The Court dealt with the issue while hearing a petition challenging a PAO passed by the ED in a money laundering case. Interestingly, the argument for confidentiality of the ‘reason to believe’ in this case was made by counsel representing the petitioner (person whose property was attached by the ED). The petitioner's counsel said that the ‘reason to believe’ is to be recorded in a separate file prior to the initiation of the process for property attachment and not in the PAO itself. The submission was that the Authorised Officer in the present case did not record the ‘reason to believe’ on a separate file at any prior point of time but mentioned it in the order itself."In the impugned PAO, the Authorized Officer has recorded his reason to believe in the Order itself and not in a separate file at any prior point of time and the same invalidates the PAO," the counsel said..However, the Court said if such an argument were accepted, then PAO orders would be “barren” orders listing only details of the attached properties. In such circumstances, affected persons - like the petitioner - would not know why their property has been attached, it added.“The Court cannot read into a restriction which the legislature itself has not incorporated. From the above analysis, this Court does not reach a conclusion that if the reason to believe, which if recorded by the Authorized Officer to exercise the power under Section 5 [1] of the PMLA in a file at a prior point of time, is made part of the PAO, the PAO would suffer from any kind of illegality. Rather, this Court is of the view that such reason to believe is required to be furnished to the affected person, sooner or later, if a request is made to that effect by the affected person,” the Bench said further.In view of the contrary view of a co-ordinate Bench, the matter has been now been referred to the Chief Justice for the constitution of a larger bench. .Senior Advocate A Saraf with Advocate SP Sharma represented the petitioner.Senior Counsel and Deputy Solicitor General of India RK Deb Choudhury represented the Union of India.Advocate R Dhar represented the ED..[Read Order]