The Delhi High Court mandated the return of property seized by the Enforcement Directorate (ED) if a Prevention of Money Laundering Act (PMLA) investigation surpasses 365 days without leading to any legal proceedings. Justice Navin Chawla stated that continued seizure beyond this timeframe, without pending court proceedings, is unlawful and violates Article 300A of the Indian Constitution.
The case involved Mahender Kumar Khandelwal, an Interim Resolution Professional (IRP) of Bhushan Power and Steel Limited (BPSL). The ED seized documents and assets from Khandelwal in 2020. Despite no charges filed within 365 days, the ED refused to return the seized items. The court overruled the ED's argument that Section 8(3)(a) of the PMLA lacked provisions for such a time limit.
The court directed the ED to return Khandelwal's seized assets, unless another court order dictates otherwise. It noted the ED could have sought custodial investigation or arrest but didn't. The court emphasized that the 365-day period had passed since the Adjudicating Authority's order, necessitating the return of the seized property.
The Delhi High Court has observed that where the investigation under Prevention of Money-Laundering Act, 2002, extends beyond 365 days and does not result in any proceedings relating to any offence, the seizure of a property will lapse and must be returned to the person from whom it was so seized.
“The continuation of such seizure beyond 365 days, in absence of the pendency of any proceedings relating to any offence under this Act before a court or under the corresponding law of any other country before the competent court of criminal jurisdiction outside India, shall be confiscatory in nature, without authority of law and, therefore, violative of Article 300A of the Constitution of India,” Justice Navin Chawla ruled.
The court rejected the contention put forth by the Enforcement Directorate (ED) that as Section 8(3)(a) of the PMLA does not provide for a consequence of lapsing of 365 days, there can be no direction for the return of the property so seized.
“The natural consequence of the investigation for a period beyond three hundred and sixty five days not resulting in any proceedings relating to any offence under the Act, in terms of Section 8(3) of the Act, is that such seizure lapses and the property so seized must be returned to the person from whom it was so seized,” the court said.
Justice Chawla was dealing with a plea moved by Mahender Kumar Khandelwal, who was appointed as Interim Resolution Professional (IRP) of Bhushan Power and Steel Limited (BPSL).
A money laundering case was filed by ED against BPSL based on CBI's FIR which did not name Khandelwal.
It was Khandelwal's case that in August 2020, ED conducted search from his premises on the basis of ED's ECIR against BPSL and seized various documents, records, digital devices, and gold and diamond jewellery. The PMLA Adjudicating Authority confirmed the seizure.
Khandelwal claimed that as no complaint against him was filed for more than 365 days, he sought return of the seized documents and properties but the ED refused to do so and did not even give any reply to his request.
Allowing the plea, Justice Chawla directed the ED to return the documents, digital devices, property, and other material seized from Khandelwal, subject to any order to the contrary passed by any competent Court.
The court observed that in case ED wanted to conduct custodial investigation or arrest Khandelwal, it was open for it to move an appropriate application before court but admittedly it did not do so.
“In view of the above, it is held that the period of 365 from the passing of the order dated 10.02.2021 by the Adjudicating Authority having been passed, the documents/digital device/property seized from the petitioner in the search and seizure conducted on 19th and 20th August, 2020 from the premises of the petitioner are liable to be returned,” the court held.
Counsel for Petitioner: Mr.D.P. Singh, Mr.Archit Singh & Ms.Shreya Dutt, Advs Counsel for Respondents: Mr.Zoheb Hossain, Mr.Vivek Gurnani, Mr.Kavish Garach & Mr.Vivek Gaurav, Advs. for ED
Title: MR MAHENDER KUMAR KHANDELWAL v. DIRECTORATE OF ENFORCEMENT & ANR.
Citation: 2024 LiveLaw (Del) 123
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