Delhi High Court: COVID Limitation Extension Applies to PMLA Proceedings - 2025-10-23

Delhi High Court Rules Supreme Court's COVID Limitation Extension Applies to PMLA Adjudication

In a significant ruling with wide-ranging implications for economic offenses, the Delhi High Court has held that the Supreme Court's suo motu orders extending statutory limitation periods during the COVID-19 pandemic are applicable to proceedings under the Prevention of Money Laundering Act, 2002 (PMLA).

The judgment clarifies that the 180-day timeline for an Adjudicating Authority to confirm a Provisional Attachment Order (PAO) was tolled by the apex court's directives, preventing such orders from automatically lapsing due to pandemic-induced delays.

A division bench, disposing of a Letters Patent Appeal filed by the Directorate of Enforcement (ED), concluded that the Adjudicating Authority under the PMLA exercises quasi-judicial functions, bringing its proceedings squarely within the ambit of the Supreme Court's protective orders. The Court underscored that these orders were intended to apply universally to all judicial and quasi-judicial proceedings under both general and special laws, unless expressly excluded.

"The orders of the Hon‘ble Supreme Court in In re: Cognizance for Extension of Limitation were intended to extend limitation periods prescribed under all general and special laws in relation to judicial and quasi-judicial proceedings," the Court held. "Consequently, in the absence of any express exclusion, these directions would squarely apply to proceedings under the PMLA."

The decision sets aside a single-judge bench ruling which had quashed a notice issued by the Adjudicating Authority on the grounds that it was beyond the 180-day period prescribed under Section 5(3) of the PMLA.

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Background of the Dispute

The core issue before the High Court revolved around whether the Supreme Court's landmark orders in In re: Cognizance for Extension of Limitation saved PAOs from expiring after the statutory 180-day period. The private parties in the case argued that the PMLA's timeline is a strict, substantive safeguard against prolonged deprivation of property and not a mere procedural limitation period for litigants. They contended that once the 180-day clock ran out without confirmation by the Adjudicating Authority, the PAO ceased to exist, and the authority became functus officio .

The ED countered that its proceedings were stymied by the nationwide lockdown and restrictions. It argued that the Supreme Court's orders, passed under the extraordinary powers of Articles 141 and 142 of the Constitution, were designed to prevent injustice arising from circumstances beyond any party's control. The agency maintained that allowing PAOs to lapse on a technicality caused by an unprecedented global crisis would defeat the very purpose of the PMLA—to prevent the dissipation of proceeds of crime.

The Court's Comprehensive Analysis

The Division Bench undertook a meticulous examination of the series of suo motu orders passed by the Supreme Court between March 2020 and January 2022. It concluded that the apex court's intent was unequivocally broad and inclusive, aimed at alleviating the hardships faced by all stakeholders in the justice delivery system. The High Court observed that these directives were intended to be interpreted in their "correct perspective and spirit, and not in a narrow or restrictive manner."

Adjudicating Authority as a Quasi-Judicial Body

A cornerstone of the Court's reasoning was its determination of the nature of the Adjudicating Authority. By analyzing the statutory framework of Sections 5 and 8 of the PMLA, the bench found that the authority performs a critical adjudicatory role, distinct from the ED's executive function of investigation. The Court highlighted that the authority must issue notices, consider replies, hear the parties, evaluate evidence, and provide a reasoned decision—all hallmarks of a quasi-judicial function.

"We have no hesitation in holding that under Section 8 of the PMLA, it exercises a quasi-judicial function. It determines questions affecting valuable rights in property, it is vested with legal authority under the statute, and it is bound to act judicially," the Court affirmed.

This finding was crucial, as the Supreme Court's extension orders explicitly covered "all judicial or quasi-judicial proceedings."

Interpreting the Supreme Court's Silence on PMLA

The private parties had advanced a compelling argument that the Supreme Court's failure to explicitly name the PMLA in its orders, despite a specific application by the ED to that effect, amounted to a deemed rejection. The High Court disagreed, finding this interpretation to be without merit. It noted that the Supreme Court's final comprehensive orders were intended to dispose of all pending applications collectively. The inclusion of certain specific statutes like the Arbitration Act was merely clarificatory and did not detract from the general, all-encompassing nature of the directive, which explicitly mentioned its applicability to "any other laws."

Distinguishing Property Rights from Personal Liberty

The Court also carefully distinguished the present case from the Supreme Court's judgment in S. Kasi vs. State , which held that the COVID extension did not apply to the timeline for filing a chargesheet under Section 167(2) of the CrPC for the purpose of default bail. The bench reasoned that S. Kasi was rooted in the sacrosanct right to personal liberty under Article 21 of the Constitution, which stands on a different constitutional footing from the right to property under Article 300A.

Furthermore, the Court pointed out that attachment under PMLA does not lead to a complete deprivation of property, as Section 5(4) allows the interested person to continue enjoying the immovable property. Citing the Supreme Court's own distinction in Prakash Corporates v. Dee Vee Projects Ltd. , the bench held that the S. Kasi ruling could not be applied to civil or quasi-judicial proceedings concerning property.

Implications of the Judgment

This judgment provides much-needed clarity on a contentious issue that has been litigated across various high courts with differing outcomes.

1. Strengthening the ED's Position: The ruling validates the continuation of adjudication proceedings in numerous PMLA cases where the 180-day period lapsed during the pandemic, preventing attached properties from being released on procedural grounds.
2. Upholding Legislative Intent: The Court's decision aligns with the legislative intent of the PMLA, which is to create a stringent framework to combat money laundering and prevent offenders from enjoying the fruits of their crime. A contrary ruling would have risked frustrating the entire confiscation process in cases affected by the lockdown.
3. Broad Interpretation of SC's Powers: The judgment reinforces the sweeping and benevolent nature of the Supreme Court's suo motu orders, emphasizing that they should be interpreted broadly to advance the cause of justice rather than being read down through narrow, technical interpretations.
4. Guidance on Quasi-Judicial Functions: The detailed analysis of the Adjudicating Authority's role serves as a valuable precedent for determining the quasi-judicial nature of other statutory bodies, particularly in the context of the applicability of general legal principles.

By applying the legal maxim actus curiae neminem gravabit (an act of the court shall prejudice no one), the Delhi High Court has ensured that the unprecedented disruption of the COVID-19 pandemic did not inadvertently create a loophole for the release of assets suspected to be proceeds of crime.

Case: Directorate of Enforcement & Anr. Vs Vikas WSP Ltd & Ors. and connected matters.