Supreme Court flags concern over ED's power to seize assets without judicial check

The Supreme Court on Friday sought the Centre's response on a plea filed by a sitting MLA from Karnataka challenging the powers of the Enforcement Directorate (ED) to seize and retain property under the Prevention of Money Laundering Act (PMLA) without judicial scrutiny for 180 days [KC Veerendra vs. Union of India & Ors.].

A Bench of Justices PS Narasimha and AS Chandurkar issued notice on the plea on Friday, December 12 and tagged it with pending matters that question the constitutionality of the PMLA’s adjudication structure.

Notably, one of the concerns flagged by the petitioner is that the Adjudicating Authority tasked with examining whether the ED's seizure of property is valid or not does not come from a judicial background.

During the hearing yesterday, Justice Narasimha observed that there appeared to be “a fault in the Act (PMLA)” and questioned how a non-judicial member could adjudicate complex matters involving property rights and constitutional safeguards.

The Court has issued notice on all prayers made by the petitioner, including those challenging the structure of the Adjudicating Authority and the validity of Sections 20 and 21 of PMLA. It has directed that the matter be heard alongside the pending cases on the validity of Section 6 of the PMLA.

During the hearing, Senior Advocates Mukul Rohatgi and Ranjit Kumar appeared for the MLA and argued that the provisions of the law permit the ED to act without accountability, leading to a widespread abuse of power.

The petitioner, who is a sitting legislator from Karnataka’s Chitradurga district, alleged that all his assets, including bank accounts, fixed deposits, jewellery, and vehicles, were seized or frozen by the ED without being given any reasons or an opportunity to challenge the action. He claimed that such sweeping powers allow the ED to operate unchecked for at least six months before any judicial scrutiny begins.

Rohatgi told the Court that the challenge was twofold - first, to Sections 20 and 21 of the PMLA that allow the ED to retain property and records for 180 days without furnishing reasons, and second, to the very composition of the PMLA Adjudicating Authority, which currently comprises a single member who is not from a judicial background.

He submitted that for the entire country, only one person - a cost accountant - is functioning as the Adjudicating Authority and that he has confirmed nearly 99 per cent of all attachments and retentions made by ED officers.

These figures, he added, were drawn from the Enforcement Directorate’s own website, suggesting that the authority was functioning merely as an “approving body” without applying its mind.

According to the petition, this state of affairs violates the right to equality and personal liberty under Articles 14 and 21 of the Constitution. It has argued that the ED can seize, freeze, and retain property for up to 180 days without providing the affected person with any written “reasons to believe,” thereby preventing them from seeking legal redress during that crucial period.

The petition further highlighted that the law provides for adjudication only after 180 days, when the ED applies to the Adjudicating Authority to continue retention. Until then, there is no forum to test the legality of the action.

“The vacuum enables illegal and excessive seizure and retention in complete darkness,” the petition said, urging the Court to read down the provisions and mandate disclosure of reasons and early judicial review.

The plea also sought that every Bench of the PMLA Adjudicating Authority must include at least one judicial member.

It relied on a 2023 judgment of the Sikkim High Court in Eastern Institute for Integrated Learning in Management University v. Joint Director, Enforcement Directorate, which had directed the Centre to ensure benches under the PMLA include judicial members. That judgment is already under challenge before the Supreme Court in The Joint Director v. Eastern Institute, and the present case has now been tagged with it.

During the hearing, Rohatgi pointed out that the Sikkim High Court’s ruling aligns with the constitutional principle that quasi-judicial bodies must include those trained in law. He contended that serious questions of law and fact are being decided by a single person with no legal background, adding that such a structure defeats the very idea of judicial adjudication.

The petition also invoked the Supreme Court’s 2025 decision in Arvind Kejriwal v. Directorate of Enforcement, where the Court held that when executive power affects individual liberty, the “reasons to believe” must not only be recorded but also furnished to the affected person. It argued that this safeguard should equally apply to property seizures, which can devastate a person’s livelihood and reputation.

Unlike arrests, where written reasons must be furnished, in cases of search, seizure, freezing, and retention, the affected person has nothing in hand to challenge the action, the plea said, calling Sections 20 and 21 of PMLA “manifestly arbitrary” and unconstitutional.

Senior Advocates Rohatgi and Kumar were assisted by advocates Mayank Jain, Madhur Jain, Arpit Goel, Aakrti Dhawan, Deepak Jain, Akash Dikshit and Nikilesh Ramachandran.

[Read Order]