Supreme Court Questions ED Asset Seizure Powers Under PMLA

The Supreme Court of India has raised sharp constitutional questions over the ED asset seizure powers under PMLA, signalling renewed judicial scrutiny of one of India’s most powerful economic offence laws. While hearing a challenge to provisions of the Prevention of Money Laundering Act, 2002 (PMLA), the Court expressed concern over the Enforcement Directorate’s authority to provisionally attach and freeze property for up to 180 days without prior judicial oversight or recorded reasons.

A Bench of the Supreme Court asked the Union government to respond to a petition filed by Karnataka MLA Veerendra, who has questioned the validity of Sections 20 and 21 of the PMLA. According to the petitioner, these provisions allow the ED to seize assets and retain control over them for prolonged periods, allegedly violating the constitutional guarantees of equality before law and personal liberty under Articles 14 and 21 of the Constitution.

The Court’s observations, made during oral hearings, suggest that the long-standing debate around the balance between economic crime enforcement and due process safeguards is once again at the centre of constitutional adjudication.

The statutory framework behind ED asset seizure powers under PMLA

Under the PMLA, the Enforcement Directorate is empowered to provisionally attach property believed to be “proceeds of crime.” Section 5 of the Act allows provisional attachment for 180 days if the ED believes that the property is involved in money laundering and is likely to be concealed, transferred, or dealt with in a manner that may frustrate proceedings.

Sections 20 and 21 then deal with the continuation of attachment and seizure of property during investigation and adjudication. These provisions allow the ED to retain seized assets during the pendency of proceedings before the adjudicating authority.

In practice, this framework enables the ED to freeze bank accounts, attach immovable properties, and seize assets even before a trial begins. While the Act provides for confirmation of attachment by an adjudicating authority, that authority is not a judicial court but a quasi-judicial body constituted under the PMLA.

It is precisely this structure that has now come under constitutional scrutiny, with the Supreme Court questioning whether such wide-ranging ED asset seizure powers under PMLA sufficiently respect procedural fairness.

The petitioner’s challenge: Articles 14 and 21 at the core

The petition before the Supreme Court argues that Sections 20 and 21 permit asset seizure without adequate safeguards. According to the challenge, the ED can freeze property for 180 days without recording detailed reasons and without immediate judicial scrutiny.

This, the petitioner contends, violates Article 14 by enabling arbitrary state action and Article 21 by depriving individuals of property and liberty without fair procedure. The argument emphasises that attachment of property often has serious civil consequences, including loss of livelihood, reputational harm, and prolonged financial distress.

The petition also highlights that individuals affected by ED asset seizure powers under PMLA are often left with limited immediate remedies, as adjudication can take months or years, during which assets remain frozen.

Supreme Court’s concerns over lack of judicial oversight

During the hearing, the Supreme Court Bench made pointed observations about the absence of judicial control in the exercise of ED asset seizure powers under PMLA. The judges noted that it was “problematic” that decisions with serious civil consequences were being taken by authorities that are not part of the regular judicial hierarchy.

The Bench questioned how such extensive powers could be exercised without mandatory recording of reasons or prompt oversight by an independent judicial authority. The Court reportedly observed that allowing the ED to retain seized assets for 180 days without such checks “appears to infringe” constitutional guarantees of equality and personal liberty.

The judges also flagged the issue of proportionality, a doctrine increasingly used by Indian courts to assess whether state action excessively restricts fundamental rights. The concern was whether the blanket power to seize and retain property for extended periods meets the constitutional requirement of being fair, reasonable, and proportionate.

The role of adjudicating authorities under PMLA

A key aspect of the Court’s concern relates to the nature of adjudicating authorities under the PMLA. These authorities, though vested with significant powers, are not courts in the traditional sense. They consist of appointed officials who decide whether provisional attachments should be confirmed.

The Supreme Court questioned whether such bodies provide sufficient institutional independence when exercising functions that directly impact property rights and personal liberty. The Bench indicated discomfort with the idea that non-judicial members effectively decide the fate of seized assets without the procedural rigour associated with judicial proceedings.

This line of questioning brings into focus the broader structure of enforcement under the PMLA and whether its design sufficiently separates investigative, prosecutorial, and adjudicatory functions.

A history of judicial deference, now under review

The PMLA has previously withstood multiple constitutional challenges, with the Supreme Court upholding many of its stringent provisions. In earlier judgments, the Court had taken note of the seriousness of money laundering and the need for strong enforcement mechanisms.

However, the present hearing suggests a possible shift in tone, at least with respect to ED asset seizure powers under PMLA. Rather than questioning the legitimacy of the law’s objectives, the Court’s focus appears to be on procedural safeguards and institutional accountability.

By seeking a response from the Centre, the Court has opened the door to a closer examination of whether the existing framework adequately protects individuals against arbitrary deprivation of property.

What the Court has asked the Union government to explain

The Supreme Court has asked the Union government to respond specifically to the concerns raised about Sections 20 and 21 of the PMLA. The Bench wants the Centre to explain how the absence of mandatory judicial oversight and recorded reasons aligns with constitutional requirements.

The Court is also likely to examine whether existing internal safeguards within the ED and the adjudicating authority mechanism are sufficient substitutes for independent judicial scrutiny.

While no final conclusions have been drawn at this stage, the questions posed by the Bench indicate that the government may have to justify not just the necessity of ED asset seizure powers under PMLA, but also the proportionality and fairness of their exercise.

Broader implications for due process in economic offence laws

The Supreme Court’s observations resonate beyond the PMLA alone. Many economic offence statutes in India confer wide investigative and coercive powers on enforcement agencies, often justified by the complexity and transnational nature of financial crimes.

The present hearing highlights a recurring constitutional tension: how to empower the state to effectively combat economic crime without diluting fundamental principles of due process.

By scrutinising ED asset seizure powers under PMLA, the Court is engaging with larger questions about executive discretion, institutional checks, and the role of courts in safeguarding civil liberties in economic enforcement regimes.

Possible outcomes: judicial interpretation or legislative response

At this stage, the proceedings are at a preliminary phase, with the Supreme Court having sought responses from the Centre. Depending on how the matter evolves, the Court could choose one of several paths.

It may interpret Sections 20 and 21 in a manner that reads additional safeguards into the law, such as mandatory recording of reasons or time-bound judicial review. Alternatively, the Court could strike down or read down portions of the provisions if found unconstitutional.

Another possibility is that the Court’s observations prompt legislative reconsideration, leading Parliament to amend the PMLA to introduce clearer procedural checks on ED asset seizure powers under PMLA.

Why this moment matters in the constitutional landscape

The Supreme Court’s scrutiny comes at a time when enforcement actions under the PMLA have become increasingly visible and contested in public discourse. Asset attachments and seizures often precede or accompany high-profile investigations, making the question of procedural fairness particularly significant.

By questioning the structural design of ED asset seizure powers under PMLA, the Court has reaffirmed that even laws aimed at combating serious economic offences must operate within constitutional boundaries.

As the case progresses, it is likely to draw close attention from policymakers, civil society, and the legal community, not for its immediate outcome alone, but for what it signals about the evolving constitutional standards governing state power and individual rights in India.