Introduction
The question of whether the Enforcement Directorate’s (ED) ‘reason to believe’ for property attachment should remain confidential under the Prevention of Money Laundering Act (PMLA) has caused a divergence of opinions among judges in the Gauhati High Court. A recent ruling by Justice Manish Choudhury differed from a prior decision by a co-ordinate Bench regarding the confidentiality of such reasons.
Legal Background
Under Section 5 of the PMLA, the ED can issue a Provisional Attachment Order (PAO) to attach properties involved in money laundering activities. However, the debate revolves around whether the ‘reason to believe’ justifying such an order should be included in the PAO or kept confidential.
Judicial Opinions
Justice Manish Choudhury stated there is no statutory requirement for confidentiality under Section 5(1) of the PMLA or its rules. He argued that transparency in the PAO aligns with constitutional principles of natural justice and fair play, reducing the risk of arbitrary actions by the ED. He emphasized that affected individuals should eventually be informed of the ‘reason to believe.’
Conversely, a previous ruling in Aftabuddin Ahmed and another vs. Enforcement Directorate and others held a contrary view, maintaining the confidentiality of the ‘reason to believe.’
Points of Reference for Larger Bench
Due to differing views, Justice Choudhury has referred the matter for consideration by a larger Bench. The key issues to be addressed include:
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- Whether the ‘reason to believe,’ recorded in writing by the Authorized Officer, should remain confidential or be shared with the affected parties.
- Whether including the ‘reason to believe’ in the PAO constitutes a jurisdictional error.
The Case in Question
The court evaluated these issues during a petition challenging a PAO issued by the ED in a money laundering case. Curiously, the confidentiality argument was presented by the petitioner’s counsel, who contended that the ‘reason to believe’ should be documented separately before initiating property attachment and not included in the PAO itself. The counsel argued that the failure to do so invalidated the PAO.
Court’s Analysis
The Court, however, disagreed with this argument, stating that excluding the ‘reason to believe’ would result in PAOs that merely list attached properties without explanation, leaving affected individuals unaware of the grounds for attachment. The Court concluded that the legislature did not impose such a restriction, and including the ‘reason to believe’ in the PAO does not render it illegal. The Court emphasized that affected parties should have access to this reasoning upon request.
Next Steps
Given the conflicting opinions, the Chief Justice has been asked to constitute a larger bench for a conclusive judicial determination. The case saw representation from Senior Advocate A Saraf and Advocate SP Sharma for the petitioner, while Senior Counsel and Deputy Solicitor General of India RK Deb Choudhury represented the Union of India, and Advocate R Dhar represented the ED.
[Read Order]
