New Delhi: In an order that will serve as a check on the Enforcement Directorate’s (ED) powers, the Supreme Court has dismissed its appeal against a November 2025 Delhi High Court judgment that held the anti-money laundering agency cannot freeze bank accounts without providing detailed reasons.
Essentially, the Delhi High Court had said the ED cannot freeze bank accounts on the basis of mere suspicion and that it must demonstrate valid “reasons to believe,” supported by documentary evidence, that the property or account is involved in money laundering.
Section 17 of the Prevention of Money Laundering Act, 2002 (PMLA) allows the ED to undertake steps to attach the property. Specifically, section 17(1A) gives the ED officer the authority, subject to conditions, to enter and search “any building, place, vessel, vehicle or aircraft where he has reason to suspect that such records or proceeds of crime are kept”.
On Friday, the ED’s appeal against this HC judgement was dismissed. In a one-page crisp order, a bench of justices Dipankar Datta and Sheel Nagu dismissed the ED’s special leave petition, thus strengthening the statutory safeguards in the law and affirming the HC’s view that the standard of “reasons to believe” must be satisfied before a freezing order is passed.
It made no observations with regard to the merits of the case before it.
Importantly, the order comes even as another co-ordinate bench of the Supreme Court is hearing the ED’s appeal in another case, raising the same issue. The judgement in question in that case was also delivered by the Delhi HC. However, the co-ordinate bench led by Justice Vikram Nath did not stay the operation of the HC decision.
This means the legal position that stands today makes it imperative for the ED to provide sufficient reasons before it proceeds to attach someone’s bank accounts or property, if it suspects that they were part of the proceeds of crime generated through money laundering.
The case decided by the SC Friday arose from the ED’s action to freeze two bank accounts of a woman after her husband was arrested in 2018 for allegedly managing cash operations in a bank where a fraud exceeding Rs 5,000 crore took place.
It was ED’s case that the woman’s husband, a driver with a Delhi-based bank, was linked to the Sterling Biotech Limited bank fraud case.
However, neither the wife nor her husband was named in the FIR or the ED’s ECIR (Enforcement Case Information Report) registered in connection with the fraud case.
In 2019, the PMLA appellate tribunal set aside the freezing of two bank accounts. The ED challenged the order before the HC, which in November 2025 rejected it. The ED’s argument that attachment proceedings before the tribunal are civil in nature and governed by standard of preponderance of probabilities stood dismissed.
The HC was of the view that ED’s cryptic orders, based on mere suspicion, fell short of the mandatory statutory requirement under “reasons to believe” phrase of PMLA’s section 17.
Section 17(1A), which governs the ED’s power to attach properties or freeze bank accounts, was interpreted to be part of the single scheme envisaged under section 17 that deals with the ED’s broad search and seizure powers. The HC said they cannot be read in isolation and emphasized on their harmonious construction.
Before the SC, the ED argued both on the merits and facts of the case. On the facts, it said the ECIR in the Sterling Biotech case had been quashed on the directions of the SC.
It, however, assailed the HC order on a limited ground – to dispel what it called a “dangerous precedent” it had set in the context of ED’s seizure power.
The ED claimed the HC had exceeded its jurisdiction by re-appreciating the factual material and examining the sufficiency of evidence.
It said the HC’s interpretation would dilute the preventive framework of the PMLA, encourage premature judicial interference, and unduly restrict the statutory powers of the ED.
The SC order, dismissing the ED’s appeal, has significant implications for the ED’s enforcement powers under the PMLA as it reinforces critical procedural safeguards.
(Edited by Ajeet Tiwari)