Supreme Court Sets Aside Unlawful Freezing of Accounts under PMLA.


13 October 2025
In a landmark judgment on October 13, 2025, the Supreme Court of India, consisting of Justice Sanjay Kumar and Justice Alok Aradhe, quashed the freezing of bank accounts of M/s Darsh Minerals Pvt. Ltd. and another, holding that the ED had not complied with the statutory procedure under Section 17(1A) of the Prevention of Money Laundering Act, 2002.

The appeal followed a July 17, 2025 order of the Punjab and Haryana High Court in CWP No. 7715/2025, which had confirmed the ED action even while recognizing procedural flaws. The appellants argued that the freezing order was not in accordance with the requirements of Section 17(1A), which includes both the passing of a formal written order and its intimation to the concerned person. The ED, however, had merely sent an email to the bank concerned, which it claimed constituted the freezing order.


 

 

The Supreme Court rejected this argument categorically, noting that the PMLA contemplates two different steps — initially, the passing of an order by the authorised officer under Section 17(1), and thereafter, the service upon the aggrieved party of a copy of such order. The Court held that clubbing these two acts into one communication cannot be considered as fulfilling the statutory requirement.

"The freezing of the bank accounts… cannot be maintained," ruled the bench, underlining that once it was determined that the mandated procedure had been violated, the whole exercise had been rendered unlawful. As such, the Court ordered the freezing of the accounts "shall stand lifted forthwith in its entirety."

Granting the appeal partly, the court held that the High Court erred in allowing the Directorate of Enforcement to hold on to the alleged tainted monies even after the observation of the procedural default. The order noted that all pending applications in the case stood disposed of.

This ruling reinforces the dictate that procedural protections under the PMLA are not formalities but essential protection against arbitrariness. The ruling emphasizes strict adherence by enforcement agencies when undertaking coercive actions like freezing of assets.


Section 17, PREVENTION OF MONEY LAUNDERING ACT - 2002  

PREVENTION OF MONEY LAUNDERING ACT, 2002