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Synopsis

The Delhi High Court on Thursday stayed an order of a single judge bench that mandated the return of seized property if an investigation under the Prevention of Money Laundering Act (PMLA) exceeds 365 days without resulting in a prosecution complaint.

A division bench comprising Acting Chief Justice Manmohan and Justice Manmeet Pritam Singh Arora granted the stay following an appeal filed by the Enforcement Directorate (ED).

The stay will be effective until March 11, 2024 the date set for the next hearing on the matter.

Notably, on January 31, the single-judge bench of Justice Navin Chawla ruled that if the investigation under the Prevention of Money Laundering Act (PMLA) extends beyond 365 days without resulting in a prosecution complaint, the seizure of the property must be deemed lapsed, and it should be returned to the individual from whom it was confiscated.

The bench had clarified that the phrase "pendency of the proceedings relating to any offence under this Act [PMLA] before a Court" in Section 8(3) of the PMLA specifically refers to a complaint pending before a PMLA Court concerning the person from whom the property was seized.

"Therefore, the natural consequence of the investigation for a period beyond three hundred and sixty-five days not resulting in any proceedings relating to any offence under the Act, in terms of Section 8(3) of the Act, is that such seizure lapses and the property so seized must be returned to the person from whom it was so seized," the court had observed.

The court had emphasized that this does not include petitions filed by the affected individual challenging actions like summons, search, and seizure or seeking the supply of relied-upon documents.

The ruling was delivered by the single-judge bench in response to a plea by Mahender Kumar Khandelwal, former Insolvency Resolution Professional (IRP) of Bhushan Power and Steel. Khandelwal had challenged an Adjudicating Authority's order confirming the retention of documents, records, and jewelry seized by the ED during a search and seizure operation.

Khandelwal had sought a declaration that the order had ceased to be effective from February 11, 2022, due to the non-filing of a prosecution complaint within the stipulated 365 days under Section 8(3) of PMLA.

Court, agreeing with Khandelwal's interpretation of Section 8(3), had directed the ED to return the seized items from Khandelwal's premises.

Case Title: Directorate of Enforcement & Anr v. Mahender Kumar Khandelwal