Delhi HC Dismisses ED Appeals, Upholds Unfreezing of Accounts in PMLA Case [Read Judgment]

New Delhi: The Delhi High Court has delivered a significant judgment dismissing two appeals filed by the Directorate of Enforcement (ED) and upholding an Appellate Tribunal (PMLA) order directing the unfreezing of bank accounts belonging to Poonam Malik, the wife of an accused in a money-laundering case. The Court held that the ED’s freezing orders were “cryptic in nature and founded solely on mere suspicion,” falling short of the mandatory statutory requirement of “reason to believe” under the Prevention of Money Laundering Act (PMLA), 2002.

A Division Bench comprising Justice Subramonium Prasad and Justice Harish Vaidyanathan Shankar observed that procedural safeguards under the PMLA had not been strictly adhered to, rendering the initial freezing action legally unsustainable.

‘Suspicion’ Not Equal to ‘Reason to Believe’

The core issue before the Court was the ED’s failure to justify the freezing orders dated September 5, 2018, with concrete material. The freezing orders expressly stated: “Whereas, it is suspected that amount involved in money laundering are lying in the above-mentioned bank account.”

Justice Harish Vaidyanathan Shankar, who authored the judgment, emphasized that “suspicion” reflects a subjective state of mind that may have little or no factual basis, whereas “reason to believe” requires a preliminary, objective assessment founded on “credible and cogent material.”

“We are of the firm opinion that ‘suspicion’ cannot be equated to a ‘reason to believe’,” the Bench held. It further clarified that since freezing of property under Section 17(1A) is an alternative to seizure under Section 17(1), it cannot be governed by a lower standard of satisfaction.

Non-Compliance With Mandatory Statutory Requirements

The Court also found that the ED failed to comply with the mandatory requirements of Sections 17(1) and 17(1A) of the PMLA, as well as Rules 3 and 4 of the PMLA (Search and Seizure or Freezing) Rules, 2005. Relying on the Supreme Court’s ruling in Opto Circuit India Limited v. Axis Bank, the Bench reiterated that the legality of an administrative order must be assessed solely on its stated reasoning, and that the ED cannot subsequently “supplement or improve” the contents of an impugned order through later filings or submissions.

Consequently, the Court held that the subsequent confirmation orders issued by the Adjudicating Authority on February 8, 2019, and February 26, 2019, were also vitiated.

Clarification on Section 8(3)(a) PMLA: No Time Limit for Investigation

While dismissing the appeals, the High Court corrected a significant legal error made by the Appellate Tribunal. The Tribunal had held that Section 8(3)(a) of the PMLA prescribes a 90-day limit for completion of the investigation.

The High Court clarified that this interpretation was incorrect. The ninety-day period pertains only to the continuation of attachment or retention of property during the investigation, not to the duration of the investigation itself. The law does not prescribe any specific time limit for completing a money-laundering investigation.

The Bench further criticised the Adjudicating Authority’s orders and the ED’s application under Section 17(4), noting the incorrect and interchangeable use of distinct legal terms such as “seizure,” “freezing,” “retention,” “continuation,” and “confirmation.” “To our mind, none of these words are interchangeable,” the Bench remarked, concluding that the overall process demonstrated “hardly any application of mind.”

Conclusion

Given the fundamental legal infirmities in the freezing orders and the ED’s failure to adhere to mandatory procedural safeguards, the Delhi High Court found “no infirmity in the ultimate conclusion arrived at by the learned Appellate Tribunal” and accordingly dismissed the ED’s appeals.

Case Details

Case Title: Directorate of Enforcement Through Deputy Director v. Poonam Malik

Court: Delhi High Court

Bench: Hon’ble Mr. Justice Subramonium Prasad and Hon’ble Mr. Justice Harish Vaidyanathan Shankar

Civil Appeal Nos.: MISC. APPEAL (PMLA) 4/2021 and MISC. APPEAL (PMLA) 5/2021

Date of Judgment: 14.11.2025

Appearances:

• Appellant (ED): Mr. Zoheb Hossain, Special Counsel along with Mr. Vivek Gurnani, Panel Counsel for ED; Mr. Kanishk Maurya and Mr. Satyam, Advocates.
• Respondent (Poonam Malik): Mr. Madhav Khurana, Senior Advocate assisted by Mr. Vignaraj Pasayat, Advocate.

[Read Judgment]