Freezing of bank accounts under PMLA invalidated where mandatory speaking order and procedural preconditions were not complied with

Freezing of bank accounts and seizure of records was set aside because the Enforcement Directorate did not issue or communicate any order under the prerequisite provision before invoking Section 17(1-A) of the PMLA; absence of the statutory speaking order and failure to satisfy procedural preconditions rendered the impugned freezing unlawful. The court emphasised that money laundering is a specialised offence requiring special legislative measures and noted that the broader constitutional validity of the PMLA has been sustained by precedent, but procedural compliance is mandatory for asset restraint actions.

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Issues: Whether the freezing of the petitioner company's bank accounts and records on 08.03.2025 by the Enforcement Directorate was lawful in the absence of an express order under Section 17(1-A) of the Prevention of Money Laundering Act, 2002 recording impracticability of seizure and communicating that order to the petitioner.

Analysis: The Court examined the material placed by the parties and the affidavits filed by the Enforcement Directorate and found no proof that any express order was passed under Section 17(1) recording that seizure was not practicable, nor that any such order under Section 17(1-A) was communicated to the petitioner prior to freezing. The Court considered the statutory scheme of PMLA which prescribes procedural safeguards for use of the extraordinary power to freeze property and noted authorities upholding the need to follow the procedure set out in the statute. In view of absence of the mandated order and communication, the procedural pre-requisites for invoking Section 17(1-A) were not satisfied. The Court also weighed the public interest in combating money laundering and observed that the matter involves alleged laundering of tainted funds and is pending adjudication before the adjudicating authority.

Conclusion: The freezing of the bank accounts and records of the petitioner company dated 08.03.2025 is unlawful for non-compliance with the procedure prescribed under Section 17(1-A) of the Prevention of Money Laundering Act, 2002; relief of immediate release is withheld and the frozen funds remain in possession of the Enforcement Directorate subject to orders of the Adjudicating Authority.

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