ED Must Return Company Director’s Seized Documents And Devices, Unfreeze His Locker After 180 Days Without Retention Order: Bombay HC

On 21 February 2022, the Directorate of Enforcement (ED) searched premises connected with the petitioner, seized documents and digital devices, and froze his locker under Section 17 of the Prevention of Money Laundering Act, 2002 (PMLA).

The ED applied to the Adjudicating Authority for retention of the seized materials and confirmation of the freezing order; the petitioner responded to the show-cause notice and attended a hearing.

More than 180 days elapsed without an order permitting continued retention or freezing.

The petitioner sought release of the property and de-freezing of the locker.

The Court noted that the petitioner also relied on the quashing of the predicate offence and ECIR, but did not consider that argument necessary to decide the petition.

1. Whether the ED could continue to retain property seized under Section 17 of the PMLA, or continue a freezing order, after 180 days had elapsed without permission from the Adjudicating Authority

2. Whether the petitioner’s argument that the predicate offence and ECIR had been quashed required determination to grant the requested relief

Section 17 of the PMLA authorises search and seizure, or freezing where seizure is not practicable, and requires the ED to seek retention or continuation of freezing before the Adjudicating Authority.

Under Section 20(1), property seized under Section 17 may be retained or remain frozen for 180 days from seizure or freezing; Section 20(3) requires its return on expiry of that period unless the Adjudicating Authority permits continued retention or freezing.

The Court also noted the absence of confirmation under Section 8 of the PMLA in this case.

The seizure and freezing occurred on 21 February 2022, and the ED did not dispute that more than 180 days had elapsed.

Nor was there an order of the Adjudicating Authority permitting retention or continued freezing beyond that period.

Applying Section 20(3), the Court held that the ED’s authority to retain the articles or keep the locker frozen had expired by operation of law.

Because this statutory ground resolved the petition, the Court found it unnecessary to determine the effect of the quashing of the predicate offence and ECIR.

It directed the ED, within one week, to release and hand over Locker No. 1643 at M/s India Safety Vaults Pvt. Ltd., Mumbai, to the petitioner and return the documents and digital devices seized during the search on 21 February 2022.