Delhi High Court Upholds Validity of Provisional Attachment Orders Under PMLA

Court Dismisses Petitions Challenging Attachment Orders and Show Cause Notices in International Cricket Betting Case

In a significant ruling, the Delhi High Court upheld the validity of Provisional Attachment Orders (PAOs) and Show Cause Notices (SCNs) issued under the Prevention of Money Laundering Act (PMLA), dismissing petitions filed by Naresh Bansal and others. The petitions challenged the Directorate of Enforcement's (ED) actions in connection with a large-scale hawala and international cricket betting operation.

The case, which revolved around illegal betting operations linked to a UK-based website "Betfair.com," involved substantial financial transactions conducted through unauthorized channels. The ED had issued PAOs and SCNs based on a comprehensive investigation that revealed proceeds of crime amounting to approximately Rs. 2400 Crores.

The petitioners argued that the attachment orders lacked a valid "reason to believe" and challenged the functioning of the Adjudicating Authority (AA) as a single-member bench. However, the Court, presided over by Justices Anil Kshetarpal and Harish Vaidyanathan Shankar, found that the ED's actions were based on tangible evidence and not merely suspicion.

In its analysis, the Court emphasized the broad scope of the definition of "proceeds of crime" under the PMLA, which includes properties indirectly obtained from criminal activities. The Court noted that while cricket betting itself may not be a scheduled offence, the activities surrounding it, such as forgery and identity fraud, are predicate offences under the PMLA.

Addressing the procedural aspects, the Court clarified that the issuance of a Show Cause Notice does not require prior attachment of properties and that a single-member bench of the Adjudicating Authority is valid under the PMLA's statutory framework.

The judgment underscores the robust legal framework of the PMLA in addressing money laundering and related offences, reaffirming the ED's authority to take preemptive measures against potential dissipation of illicit assets.

Bottom Line:

Prevention of Money Laundering Act (PMLA) - Provisional Attachment Order (PAO) and Show Cause Notice (SCN) under Sections 5(1) and 8(1) respectively - Validity upheld as the formation of "reason to believe" was based on cogent material and not on suspicion or mechanical exercise.

Statutory provision(s): Sections 2(1)(u), 5(1), 6, 8(1) of the Prevention of Money Laundering Act, 2002.

Naresh Bansal v. Adjudicating Authority, (Delhi)(DB) : Law Finder Doc Id # 2812464