HC Declares PMLA Provisional Attachment Lapsed After 180 Days; ED Cannot Rely on COVID-19 Limitation Orders

HC Declares PMLA Provisional Attachment Lapsed After 180 Days; ED Cannot Rely on COVID-19 Limitation Orders

The petitioners, led by Chartered Accountant Naresh T. Jain, challenged a Provisional Attachment Order (PAO) dated 27 November 2020 issued by the Enforcement Directorate (ED) under Section 5 of the Prevention of Money Laundering Act, 2002. They argued that under Sections 5(1) and 5(3), the PAO automatically ceases after 180 days unless confirmed by the Adjudicating Authority. Since that period expired on 26 May 2021 without confirmation, they sought a declaration that the attachment had lapsed and that all restraints be lifted. Proceedings continued, prompting them to invoke the High Court’s writ jurisdiction.

An interim stay on adjudication granted by the Supreme Court also required the High Court to expedite the hearing. The ED countered by invoking the Supreme Court’s orders passed in Suo Motu, which had extended limitation periods during the COVID-19 pandemic.

Issue Raised: Whether the Supreme Court’s COVID-19 limitation orders in suspend or extend the 180-day statutory limit under Section 5 of the PMLA for the life of a provisional attachment order.

HC’s Ruling: The Court held that the PAO had unquestionably lapsed after 180 days, since the PMLA itself provides a strict, non-extendable outer limit for provisional attachments, except where there is a High Court-ordered stay. The Bench reasoned that Section 5(1) fixes a maximum duration, Section 5(3) declares mandatory cessation thereafter, and the third proviso identifies the only permissible exclusions. Relying on S. Kasi and adopting the High Court’s interpretation, the Judges concluded that the ED’s attempt to rely on SMWP orders was misconceived, especially since the ED’s own application seeking PMLA-specific relaxation before the Supreme Court had not been granted.

Following the Supreme Court’s ruling in Kaushalya Infrastructure, the Court clarified that the lapsing of the PAO does not halt or invalidate adjudication under Section 8. The earlier stay on adjudication was therefore vacated, allowing proceedings to continue on their merits.

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