Statutory freezing of bank accounts: limited interim permission to operate account for employee salaries subject to administrative verification.

Where an authorised officer has ordered continuance of freezing under the Prevention of Money Laundering Act, factual sufficiency for that continuance is for the Adjudicating Authority to examine and the superior court will not intervene at this stage to set aside the continuance. Concurrently, limited interim relief may be granted: upon administrative verification and bank communication the frozen account can be operated to meet employees' salary payments for specified months under quantified and procedural conditions, protecting livelihood interests while preserving the statutory adjudicatory process.

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Issues: (i) Whether the High Court should intervene under Article 226 when an officer authorised under Section 20 of the Prevention of Money Laundering Act, 2002 has passed an order for continuance of freezing of accounts; (ii) Whether the petitioner should be permitted to operate the frozen account to defray employees' salaries for the specified months despite the freezing order.

Issue (i): Whether the High Court must intervene when the Authority under Section 20 of the Prevention of Money Laundering Act, 2002 has passed an order for continuance of freezing of the account.

Analysis: The scheme of the Prevention of Money Laundering Act, 2002 contemplates initial freezing under Section 17(1A) and a power of continuance where the authorised officer records reasons under Section 20, subject to review by the Adjudicating Authority under Section 8. The factual question whether material justifying the exercise of Section 17(1A) existed at the time of freezing, and whether further material was gathered during search, is within the remit of the Adjudicating Authority to examine in proceedings concerning continuation beyond the statutory period.

Conclusion: The petitioner's grievance as to continuance of freezing is to be decided by the Adjudicating Authority and the High Court will not, at this stage, intervene to set aside the continuance order. This conclusion is against the petitioner.

Issue (ii): Whether the petitioner should be permitted to operate the frozen account to defray employees' salaries for January 2026 and for February-March 2026 on conditions specified.

Analysis: The statutory prohibition on operating a frozen account is subject to prior permission of the officer who froze the account; judicial orders in analogous contexts have permitted operation of frozen/attached accounts for payment of salaries after verification. The petitioner and its holding company engage in activities not entirely impermissible and require continuing day-to-day operations and salary disbursements. Given the limited and quantifiable monthly salary requirement and the temporary nature of the continuance (until expiry of the 180-day period unless extended by the Adjudicating Authority), administrative verification and directed limited operation are an appropriate interim measure to protect employees' statutory and contractual dues while preserving the state's interest in adjudication of freezing continuation.

Conclusion: The petitioner is permitted, subject to verification by the respondent and bank communication, to operate the frozen account to pay salaries for January 2026 and, on provision of details by specified dates, for February and March 2026. This conclusion is in favour of the petitioner.

Final Conclusion: The petition is disposed of by directing limited interim relief allowing operation of the frozen account for payment of employees' salaries for the specified months while leaving the question of continuation of freezing to be adjudicated by the Adjudicating Authority under the statutory scheme.

Ratio Decidendi: Where statutory freezing is continued under Section 20 of the Prevention of Money Laundering Act, 2002, factual sufficiency for continuance is for the Adjudicating Authority to consider; meanwhile, limited interim permission to operate frozen accounts for payment of employees' salaries may be granted after administrative verification to protect livelihood interests without prejudicing the statutory adjudicatory process.

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