New Delhi: The Supreme Court has recently expressed serious concern over the expansive powers granted to the Enforcement Directorate (ED) that allow the agency to provisionally attach, freeze or seize assets without prior judicial oversight for up to 180 days under the Prevention of Money Laundering Act (PMLA).
The apex court has summoned the Centre’s response in a petition filed by a sitting Member of the Legislative Assembly (MLA) from Karnataka, challenging these statutory provisions as unconstitutional and violative of fundamental rights.
Background of ED Asset Seizure Powers
The Enforcement Directorate is India’s premier financial crime investigation agency with the statutory mandate to enforce laws related to money-laundering, foreign exchange violations, and related economic offences.
Among its significant powers under the Prevention of Money Laundering Act, 2002 (PMLA) are the authority to:
- Arrest individuals suspected of money-laundering,
- Conduct searches, seizures, and searches of premises,
- Provisionally attach the property believed to be connected with the alleged crime without prior judicial approval, and
- Retain or freeze such assets for up to 180 days before adjudication.
Although these provisions are designed to prevent dissipation of proceeds of crime and ensure recovery, critics argue that such powers — when exercised without judicial scrutiny — can undermine personal liberty and procedural fairness.
ED Asset Seizure Powers: What Triggered the Supreme Court’s Concerns
The current legal challenge was filed by a sitting MLA from Karnataka, who has alleged that the ED exercised its authority to seize or freeze his properties, accounts, and assets, including bank deposits, jewellery, vehicles and other holdings, without furnishing any reasons or justification.
This, he contended, amounted to a violation of the principles of natural justice and Articles 14 and 21 of the Indian Constitution — which guarantee equality before law and protection of life and personal liberty, respectively.
Key Issues Highlighted in the Petition
The Supreme Court’s notice flagged several significant concerns raised by the petitioner, including:
1. Absence of Judicial Oversight: The PMLA allows provisional attachment of assets for 180 days without any prior judicial approval or check — meaning the ED can unilaterally decide to freeze properties even before filing a prosecution complaint.
2. Lack of Reasons Provided to the Affected Person: The agency is not currently required to issue any written reasons to the affected individual at the time of attachment or freezing, effectively denying the person an opportunity to challenge the action early.
3. Questionable Structure of the Adjudicating Authority: Under PMLA, any extension of the attachment beyond 180 days must be approved by an Adjudicating Authority — a quasi-judicial body — which the petitioner contended consists of only one member with no judicial background.
4. Delayed and Limited Review: Judicial review only occurs after 180 days when the ED applies to the authority to continue retaining the assets. During the initial six months, there is no forum available for the affected party to challenge the legality of the seizure.
ED Asset Seizure Powers: Supreme Court’s Response and Hearing
A bench comprising Justice P.S. Narasimha and Justice A.S. Chandurkar issued notice to the Central Government, seeking responses to the constitutional objections raised.
The matter has now been tagged with pending cases challenging various aspects of the PMLA adjudication framework.
During the hearing, the Court itself remarked that there seemed to be “a fault in the Act” given the absence of judicial checks, especially when a non-judicial person decides on issues involving one’s property and constitutional rights.
Senior advocates appearing for the petitioner argued that the existing scheme permits the ED to operate without accountability, and that such unchecked powers are prone to misuse.
They highlighted statistics suggesting that nearly 99% of all asset attachment confirmations by the adjudicating authority were upheld despite consisting of members without legal training.
