PMLA Overriding Effect Mandates Banks to Transfer Frozen Funds to ED Despite Concurrent Investigating Agency Freezes

The petitioner Bank maintained two accounts for "Virtous Payment Solutions LLP" and "Wonder Enterprises"

Multiple state police authorities (Maharashtra, Telangana, Rajasthan, and Karnataka) issued notices under Section 91 Cr.P.C. and directed ‘debit freeze’ on these accounts due to alleged cybercrimes

Subsequently, the Enforcement Directorate (ED) registered an ECIR and obtained an order from the Adjudicating Authority (PMLA) confirming the freezing of these accounts

The ED then directed the Bank to transfer the frozen funds via Demand Draft to the Joint Director, ED

The Bank filed this petition seeking relief, fearing liability or prejudice if it complied with the ED’s direction while other police freeze orders remained active

1. Whether the Bank is obligated to transfer frozen funds to the Enforcement Directorate despite existing freeze orders from other state police agencies

2. Whether the provisions of the Prevention of Money Laundering Act (PMLA), 2002, override instructions issued by other investigative agencies under the Cr.P.C.

Section 8(4) of the PMLA, 2002, which mandates that once an adjudicating authority confirms a provisional attachment or freezing order, the authorized officer shall take possession of the property

Section 71 of the PMLA, which stipulates that the Act has an overriding effect over any other inconsistent laws for the time being in force

The court reasoned that since the PMLA is a specialized statute specifically dealing with money laundering and scheduled offences, its provisions take precedence over general investigative actions under the Cr.P.C.

The court noted that Section 8(4) creates a statutory mandate for the ED to take physical possession of frozen assets once the Adjudicating Authority confirms the freeze

Regarding the Bank’s apprehension of conflicting claims, the court observed that the Bank's compliance with a statutory direction under PMLA serves as a valid legal discharge of its obligation

The court determined that any further demands from other agencies could be managed by the Bank providing proof (acknowledgment) of the transfer to the ED, as the ultimate disposal of the funds remains subject to the final trial under Section 8(6) of the PMLA

The court ordered the Authorized Officer of the ED to issue a formal acknowledgment to the Bank upon receipt and the writ petition was disposed of accordingly

It held that the Bank may produce this acknowledgment before other investigating agencies to mitigate any claims of non-compliance with their respective freeze orders