{"id":243361,"date":"2021-02-04T22:51:39","date_gmt":"2021-02-04T17:21:39","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=243361"},"modified":"2021-02-05T11:57:06","modified_gmt":"2021-02-05T06:27:06","slug":"explained-scope-of-eds-power-to-freeze-bank-accounts-under-prevention-of-money-laundering-act-2002","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2021\/02\/04\/explained-scope-of-eds-power-to-freeze-bank-accounts-under-prevention-of-money-laundering-act-2002\/","title":{"rendered":"Explained: Scope of ED’s power to freeze bank accounts under Prevention of Money Laundering Act, 2002"},"content":{"rendered":"

Supreme Court<\/strong>: The 3-judge bench of SA Bobde, CJ and AS Bopanna*<\/strong> and V. Ramasubramanian, JJ has held that \u00a0under the Prevention of Money \u00adLaundering Act, 2002, though the Directorate of Enforcement is vested with sufficient power to freeze the accounts; such power is circumscribed by a procedure laid down under the statute.<\/p>\n

\u201cIt certainly is not the requirement that the communication addressed to the Bank itself should contain all the details. But what is necessary is an order in the file recording the belief as provided under Section 17(1) of PMLA before the communication is issued and thereafter the requirement of Section 17(2) of PMLA after the freezing is made is complied.\u201d<\/span><\/p><\/blockquote>\n

Background<\/strong><\/span><\/h3>\n

Enforcement\u00a0Directorate\u00a0in\u00a0order\u00a0to\u00a0track\u00a0the\u00a0money\u00a0trail relating\u00a0to\u00a0the\u00a0predicate\u00a0offence by the appellant company and\u00a0prevent\u00a0layering\u00a0of the\u00a0same\u00a0had\u00a0initiated\u00a0the\u00a0proceedings\u00a0under\u00a0the Prevention\u00a0of Money \u00adLaundering Act, 2002 (PMLA). This led to the freezing of the accounts maintained by the appellant company.<\/p>\n

It was Appellant Company\u2019s case that the freezing of the accounts has\u00a0prejudiced\u00a0the appellant, inasmuch as, the amount in the account which belongs to the appellant is made unavailable to them due to which statutory payments to be made to the Competent Authorities under various enactments is withheld and the payment of salary which is due to the employees is also prevented. The limited issue before the Supreme Court, hence, is that of defreezing the bank account so as to enable the appellant to make the statutory payments.<\/p>\n

Analysis<\/strong><\/span><\/h3>\n

Scheme of PMLA<\/strong><\/span><\/h4>\n

While PMLA seeks to achieve the object of preventing money laundering and bring to book the offenders, it also safeguards the rights of the persons who would be proceeded against under the Act by ensuring fairness in procedure. Hence a procedure, including timeline is provided so as to ensure that power is exercised for the purpose to which the officer is vested with such power and the Adjudicating Authority is also kept in the loop.<\/p>\n

Section 17 of PMLA<\/u><\/em><\/strong><\/span><\/p>\n

The pre-requisite of Section 17 of PMLA is that the Director or such other Authorised Officer in order to exercise the power under the section, should on the basis of information in his possession, have reason to believe that such person has committed acts relating to money laundering and there is need to seize any record or property found in the search.\u00a0 Such belief of the officer should be recorded in writing.<\/p>\n