PMLA Attachment Lapses after 180 Days, No COVID Relaxation for ED: Bombay HC quashes attachment against Chartered Accountant [Read Order]

In a very recent ruling, the Bombay High Court has held that a provisional attachment order under the Prevention of Money Laundering Act, 2002 ( PMLA ) automatically lapses after 180 days, and that the COVID-19 limitation extensions granted by the Supreme Court do not apply to such attachments.

Mr. Naresh T. Jain, a Chartered Accountant, and related entities filed a writ petitioner challenging a Provisional Attachment Order (PAO) dated 27 November 2020 issued by the ED under Section 5 of the PMLA. The attachment was related to alleged proceeds of crime and continued well beyond the statutory 180-day period prescribed under Sections 5(1) and 5(3) of the Act.

The ED argued that the 180-day period stood extended in view of the Supreme Court’s suo motu orders during the COVID-19 pandemic, which excluded time for limitation purposes between March 2020 and February 2022.

According to the ED, these orders should apply to PMLA proceedings as well, saving the provisional attachment from lapsing.

However, the Division Bench of Justice M.S. Sonak and Justice Advait M. Sethna held that the Supreme Court’s COVID orders were meant to protect litigants facing difficulty in filing cases before courts and tribunals, and not to extend the shelf-life of coercive executive actions like provisional attachments under PMLA.

The Court observed that a provisional attachment order is not a judicial or quasi-judicial proceeding, but an executive measure with serious consequences on property rights.

The bench also took note of the PMLA's Section 5 statutory regulations, pointing out that it clearly states that a provisional attachment "shall cease to have effect" after 180 days, unless the adjudicating body confirms this sooner. In Vijay Madanlal Choudhary v. Union of India, the Supreme Court upheld the constitutionality of the PMLA, noting this deadline as a critical protection.

In fact, the Court pointed out that the ED and the adjudicating authority were actively functioning during the COVID period, having issued the attachment order, filed complaints, issued show cause notices, and conducted hearings. Therefore, the plea of practical impossibility due to the pandemic was found to be untenable.

The Court decided that the provisional attachment dated 27 November 2020 lapsed on 26 May 2021, and restrained the authorities from taking any action pursuant to the expired attachment. The attachment was held to be without legal effect from that date onwards.

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However, the bench clarified that the lapsing of the provisional attachment would not affect the ongoing adjudication proceedings under Section 8 of the PMLA, which may continue independently on their own merits.

Therefore the court declared that the attachment order ceased to effect after completion of 180 days, however it didn’t vacate the adjudication. The court directed the ED to continue with the adjudication.

The Court accordingly quashed the Enforcement Directorate’s (ED) attachment of properties belonging to a Chartered Accountant, declaring the action to be without legal effect after the statutory period expired

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