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Reserves Order on ED's Composition Challenge
The on Wednesday reserved orders on a batch of petitions challenging the ’s (ED) actions, including the composition of the and the issuance of addendums to the Enforcement Case Information Report (ECIR). The court’s bench, led by Justice M. Nagaprasanna, heard extensive arguments from both sides, with the ED informing the court of a fresh judicial member’s appointment in line with the ’s directives in the . The bench, however, observed that if the authority had previously functioned without proper jurisdiction, all proceedings would have to commence afresh, casting a shadow over ongoing adjudication.
A Fresh Judicial Member and a Question
At the outset, , representing the ED, highlighted a key development: “One development in this matter—proceedings before the Adjudicating Authority were primarily challenged on the ground that it was a single member. Now the judicial member has been freshly appointed in pursuance of JSW principles…” This move was intended to address the petitioners’ central grievance that the authority lacked the mandated strength.
However, the court was quick to consider the legal consequences if the earlier composition was indeed invalid. Justice Nagaprasanna orally remarked: “…Then it should begin . Evidence collected or proceedings by a tribunal without jurisdiction cannot be relied upon. If that's the case, start …”. This remark underscores the potential invalidation of any steps taken by the authority before the new appointment. The ASG, however, clarified that no evidence had been recorded yet, only issued and objections filed, which could be easily reset if required.
The Statutory Three-Member Requirement
The petitioners, including , maintained that the appointment of one additional judicial member does not cure the fundamental defect. They argued that mandates that the Adjudicating Authority shall consist of a Chairperson and two members, making a total of three. The petitioners further pointed to an ED notification dated , which explicitly requires the authority to have three members. , for the petitioners, asserted: “The issue is still there since the authority envisages 3 members…Even assuming another judicial member was appointed, the authority still doesn't have 3 members. As per , the authority must have 3 members. That's how the provision interpretation was done.” He also stressed that under , the Chairperson can only form benches of one or two members if the full complement exists; otherwise, the discretion cannot be exercised.
The ED, in rebuttal, argued that the composition question is no longer , citing the ’s decision in and the ’s judgment in . The ASG submitted that Section 6(2) sets the overall strength but allows the Chairperson to constitute benches of one or two members as deemed fit. He quoted : “…Section 6(2) of PMLA says the Adjudicating Authority should have a Chairperson and two members. However, the bench may be constituted by the Chairperson with one or two members as the Chairperson may deem fit[as per ]. Therefore, it is possible to have single member benches.” He further relied on decisions from five High Courts—Delhi, Calcutta, Madras, Telangana, and others—that upheld single-member adjudication. The ASG also argued that the authority does not decide criminality but rather conducts a , so the principle does not apply.
Addendums and Search and Seizure: A Separate Battle
Beyond the composition issue, the petitioners challenged the ED’s practice of adding
through addendums to the ECIR. They argued that the date of ECIR registration and the search, the
cited had either been closed or resulted in discharges. The petitioners asserted:
"The day on which ECIR was registered and on the date of search, there was no
at all. All schedule offences were either closed or there was a discharge."
This, they claimed, rendered the entire investigation invalid.
The ASG, however, countered that there is no legal bar against the ED adding such addendums. He detailed the search and seizure process, noting that the ED recorded on , and obtained approval from the Additional Director. Searches were then conducted at 31 premises between and , during which approximately ₹10 lakh in cash, agreements, and laptops were seized. The ASG emphasized: “… has built-in safeguards. There is no demonstration that any such safeguards have been violated. All procedural safeguards have been complied with.” He also invoked the ’s judgment in JSW to argue that proceedings should be allowed to take their natural course before the Adjudicating Authority, with parties relegated to that forum.
The Court’s Reserved Verdict and Its Implications
After hearing extensive submissions and accepting compilations on the issues, Justice Nagaprasanna reserved the matter for orders. The bench will now rule on three core questions: whether the ED can add via addendums, whether multiple FIRs from separate transactions can be clubbed into a single ECIR, and whether the adjudicating authority’s composition renders its proceedings invalid.
For the legal community, the outcome is highly anticipated. If the court holds that a single-member Adjudicating Authority is invalid, it could affect numerous pending cases under the PMLA, potentially requiring a fresh start before a properly constituted authority. This would not only cause significant delays but also burden the ED with restarting proceedings, even if the underlying evidence remains valid. Conversely, a ruling upholding the single-member composition would provide clarity and stability for ongoing adjudications.
The addendum issue also carries weight. If the court restricts the ED’s ability to expand the scope of an ECIR through addendums, it could limit the agency’s flexibility in investigating money laundering linked to multiple . Conversely, a broad allowance could lead to concerns about overreach and unfair prejudice to accused persons.
A Look at the Broader Context
The case, titled , is part of a series of challenges to ED’s actions in betting and gambling cases. The High Court’s earlier interim order on had directed the ED’s adjudicating authority not to close its proceedings against the partnership firm until the court decides the plea. The petitioners alleged that the ED registered a complaint in 2025 based on FIRs under various provisions, including , related to betting and gambling activities. They claimed the ED conducted searches and seizures without valid reasons and froze bank accounts.
The present hearing saw the ED defending its procedures, while the petitioners pressed the court to scrutinize the authority’s constitution. The court’s observations, particularly about proceedings, signal that it takes the jurisdictional issue seriously. If the court rules that the earlier composition was indeed defective, it may require the ED to reissue and allow the adjudicating authority to begin afresh, potentially with the newly appointed judicial member.
Impact on Legal Practice
This case is a litmus test for the PMLA’s procedural framework. Legal practitioners will be watching closely to see whether the High Court endorses the view that a single-member bench can validly discharge the Adjudicating Authority’s functions. The ’s earlier stance in Chaudhary and JSW will likely be central to the reasoning. The decision could also influence how other High Courts treat similar challenges, given the ED’s reliance on multiple High Court judgments.
Moreover, the court’s handling of the addendum question will shape how investigations are structured. The ED often uses addendums to incorporate new discovered during the investigation. A restrictive ruling could hamper ongoing probes, while a flexible interpretation would allow the agency to adapt to new information.
Conclusion
As the finalizes its verdict, the stakes are high for both the ED and the accused in PMLA cases. The composition of the Adjudicating Authority is not a mere technicality—it goes to the heart of and the validity of administrative actions. The coming order will either reinforce the ED’s current practices or compel a significant procedural overhaul, potentially setting a precedent for PMLA enforcement across the country. For now, all eyes remain on Justice M. Nagaprasanna’s decision, which promises to clarify several contentious aspects of India’s anti-money laundering framework.
