2025 (6) TMI 523 - HC - Money Laundering

Assets remain frozen under PMLA as applicants fail to justify Rs 5 crore release for expenses

Nimrita Parvinder Singh, Nandini Parvinder Singh, Nanaki Parvinder Singh Versus Directorate Of Enforcement

Delhi HC dismissed applications seeking directions for unfreezing of movable assets and bank accounts frozen under Prevention of Money Laundering Act, ... Money Laundering - proceeds of crime - Seeking directions in view of the continued freezing of movable assets and bank accounts pursuant to proceedings initiated under the Prevention of Money Laundering Act, 2002 - alleged siphoning of approximately Rs. 1,260 crores from Religare Finvest Limited [RFL] by orchestrating a complex conspiracy wherein unsecured loans were routed to entities under promoter control - HELD THAT:- Apart from the single quantified need of Rs. 30 lakhs for tuition, none of the Applicants has provided any substantial or persuasive material justifying why each of the Applicants would require access to almost Rs. 5 crores for educational costs or daily sustenance, maintenance, and living expenses - Upon careful scrutiny, the Applicants’ claims appear vague, inadequately substantiated, and ultimately unsustainable. Mere invocation of educational need, without presenting a concrete, detailed, and credible plan backed by documentation, cannot justify the sweeping relief they seek. It is a well-established legal principle that, at the interim stage, the Court must refrain from deciding issues that could pre-emptively determine or effectively render the main petition or appeal infructuous, thereby undermining the proper adjudication of the case on its full merits. This Court finds no merit in these applications, and these, accordingly, stand dismissed. The core legal questions considered by the Court in these applications under Section 151 of the Code of Civil Procedure, 1908, arising from proceedings under the Prevention of Money Laundering Act, 2002 (PMLA), include:(a) Whether the Applicants, whose movable assets and bank accounts have been frozen under Section 17(1A) of the PMLA, are entitled to the de-freezing of such accounts to meet urgent financial needs related to education and daily sustenance;(b) Whether the Applicants have demonstrated a credible and urgent necessity to access substantial funds (approximately Rs. 5 crores each) despite ongoing investigations and confirmed freezing orders;(c) The extent to which the Applicants' claims of educational and living expenses justify relief in the interim stage without adjudicating the merits of the underlying PMLA proceedings;(d) The legal principle governing interim relief in the context of frozen assets under PMLA when the main appeals challenging the freezing orders are pending;(e) Whether the Applicants, not named as accused in the predicate offence or related PMLA complaints, have a distinct right to access their frozen assets;(f) The appropriateness of permitting transfer of frozen funds into interest-bearing instruments to mitigate financial loss during the freeze period;(g) The relevance and sufficiency of evidence submitted by the Applicants to substantiate their financial requirements and claims of innocence.Issue-wise Detailed Analysis1. Entitlement to De-freezing of Frozen Bank Accounts and AssetsThe Applicants sought directions for de-freezing their bank accounts and movable assets frozen under Section 17(1A) of the PMLA, citing urgent financial needs for higher education and daily living expenses. The legal framework involves the provisions of the PMLA, particularly Section 8(3) which empowers the Adjudicating Authority to confirm freezing orders, and Section 26 and 42 which provide appellate remedies.The Court noted that the freezing orders had been confirmed by the Adjudicating Authority and upheld by the Appellate Tribunal. The Applicants' appeals under Section 42 of the PMLA against these orders were pending before the Court, indicating that the substantive merits of the freezing were yet to be adjudicated.The Court emphasized the principle that interim relief should not pre-empt or undermine the main proceedings. It held that permitting access to frozen assets at this stage, especially in substantial amounts, would risk frustrating the objectives of the PMLA, which aims to prevent dissipation of proceeds of crime.The Applicants' contention that they were not named as accused in the predicate offence or PMLA complaints was acknowledged; however, the Court observed that the freezing was pursuant to the investigation and seizure of assets believed to be proceeds of crime, which included the Applicants' assets. The Court did not find this alone sufficient to warrant de-freezing.2. Sufficiency and Credibility of Evidence Regarding Financial NeedThe Applicants claimed urgent financial requirements of approximately Rs. 5 crores each, primarily for educational expenses and daily sustenance. The Court scrutinized the documentary evidence submitted:One Applicant produced an offer letter from the University of British Columbia, Canada, but it lacked details of program fees.Another Applicant submitted offer letters from UK universities with tuition fees ranging between EUR 29,000 and 32,000 (approximately Rs. 27-30 lakhs).One Applicant provided a GMAC confirmation email for the GMAT exam but did not submit the GMAT score or evidence of formal admission applications.Another Applicant relied solely on unsubstantiated assertions of intent to pursue a master's degree without documentary support.The Respondent pointed out that two of the Applicants failed to provide credible evidence of active engagement in admissions processes. Moreover, the Respondent demonstrated that the tuition fees for the Applicant with offer letters could be met from six bank accounts holding approximately Rs. 90 lakhs, which were never frozen by the ED. This fact was unchallenged by the Applicants.The Court found the Applicants' claims vague and inadequately substantiated, noting the absence of a detailed, credible financial plan justifying the release of such large sums. The mere invocation of educational needs without concrete evidence was deemed insufficient for the sweeping relief sought.3. Application of Interim Relief Principles in PMLA ProceedingsThe Court reiterated the well-established legal principle that interim relief should not be granted if it would pre-empt or render the main appeal or petition infructuous. Given that the main appeals challenging the freezing orders were pending and ripe for hearing, the Court declined to grant interim relief that could undermine the adjudication on merits.The Court observed that if, upon hearing the main appeals, the frozen properties were found untainted, the Applicants would regain access to them. Conversely, if found tainted, releasing substantial funds at the interim stage would contravene the PMLA's objectives.4. Treatment of Competing Arguments Regarding Ownership and Connection to Proceeds of CrimeThe Applicants argued that many frozen artworks were inherited or gifted before the alleged offence period and that their bank accounts were unconnected to proceeds of crime. They also emphasized their non-involvement as accused in the predicate offence.The Court noted these contentions but observed that such issues were inherently linked to the merits of the main appeals and not suitable for determination at the interim stage. The Court directed that these grounds be raised and argued during the main appeals.5. Permission to Transfer Frozen Funds into Interest-Bearing InstrumentsThe Applicants sought permission to transfer frozen funds into interest-bearing instruments to mitigate financial loss due to idle funds. The Court did not expressly grant this relief, implicitly indicating that such requests also hinged on the outcome of the main appeals and the confirmation of the freezing orders.6. Impact of Freezing on Applicants' Financial LiquidityThe Applicants highlighted the liquidity crisis caused by the freezing of 27 family bank accounts since May 2022. The Court acknowledged the hardship but balanced it against the statutory mandate of the PMLA to prevent dissipation of proceeds of crime and the need to preserve the status quo pending adjudication.Conclusions on IssuesThe Court concluded that the Applicants had failed to demonstrate an urgent and credible necessity to access the frozen funds at the interim stage. The evidence was insufficient to justify de-freezing substantial amounts, especially given the availability of unfrozen funds adequate to meet specific educational expenses. The Court emphasized that the main appeals would determine the ultimate fate of the frozen assets and that interim relief should not undermine the PMLA's objectives.Significant Holdings'It is a well-established legal principle that, at the interim stage, the Court must refrain from deciding issues that could pre-emptively determine or effectively render the main petition or appeal infructuous, thereby undermining the proper adjudication of the case on its full merits.''Permitting the release of substantial funds now, would risk directly undermining the objectives and framework of the PMLA.''Mere invocation of educational need, without presenting a concrete, detailed, and credible plan backed by documentation, cannot justify the sweeping relief they seek.''If this Court ultimately find that the frozen properties are untainted, the Applicants will regain access to them.'The Court upheld the principle that freezing orders under the PMLA, once confirmed by the Adjudicating Authority and Appellate Tribunal, should not be lightly disturbed at the interim stage absent compelling evidence of urgent necessity and credible justification.Accordingly, the applications seeking directions for de-freezing of bank accounts and movable assets were dismissed, with the main appeals reserved for adjudication on merits.