The Supreme Court on Tuesday reserved judgment on a batch of petitions concerning the constitution and functioning of the Adjudicating Authority under the Prevention of Money Laundering Act, 2002 (PMLA). A bench comprising Chief Justice Surya Kant, Justice Joymalya Bagchi and Justice V Mohana heard arguments on whether the Authority, constituted under Section 6 of the PMLA, must include a judicial member and whether it can validly function as a single-member bench.
The proceedings were initiated by a batch of special leave petitions and writ petitions challenging various aspects of the PMLA framework, including the constitutional validity of the second proviso to Section 5(1) and allegations of vitiation of proceedings due to non-compliance with Sections 5(1) and 8(1) of the Act, particularly concerning the requirement to furnish “reasons to believe” before attaching property. The Court noted that these matters arose from appeals against decisions of different High Courts, one of which was a Division Bench of the Delhi High Court that had upheld the constitutional validity of the second proviso to Section 5(1) PMLA and held that single-member benches of the Adjudicating Authority and the Appellate Tribunal under PMLA could be constituted without mandatorily including a Judicial Member, allowing Administrative Members to serve in such capacities.
During the hearing, Justice Bagchi expressed concern over the workload imposed on the Adjudicating Authority, noting that it is required to confirm attachments within 180 days under the Act. He questioned Additional Solicitor General Anil Kaushik on whether the Authority could be expected to apply its mind properly given the volume of cases. Referring to the prevention of money laundering regime, Justice Bagchi observed that the law demands application of mind by a single Tribunal in processing thousands of cases within six months, and asked whether such a timeline, especially when applied to a Tribunal comprising one, two or three members, allows for genuine judicial scrutiny or merely results in perfunctory endorsement of orders.
Senior Advocate Gopal Sankaranarayanan, appearing for the petitioners, cited data from the Enforcement Directorate’s own website to highlight the disparity between initiation and trial of cases. He submitted that out of 8851 cases initiated by the ED during a specific period, only 60 proceeded to trial, while attachment proceedings under Sections 5 and 8 of the PMLA had been invoked in all 8851 cases. He argued that this led to serious civil consequences, including prolonged freezing of property for 20 to 30 years, without the matter ever reaching trial. When Justice Bagchi inquired about the number of actual attachments, Sankaranarayanan responded that the figure stood at 3501. The ASG contested the accuracy of the petitioners’ data, prompting a brief exchange where Sankaranarayanan reiterated that the figures were sourced from the ED’s official disclosures.
Senior Advocate Vikram Chaudhri, representing other petitioners, contended that the Adjudicating Authority was functioning as coram non judice due to its composition. He argued that Section 2(1)(a) read with Section 6(1) and (2) of the PMLA mandates that the Authority consist of a Chairperson and two other members, each possessing experience in law, administration and finance or accountancy. Chaudhri emphasized that the presence of a judicial member is essential and that proceedings conducted without such a member are legally vitiated. He pointed out that while the Authority had functioned as a three-member body including a judicial member when the Vijay Madanlal Chaudhary judgment was delivered, in recent years it had operated with only a single member for extended periods, and only recently had a second member—formerly an ED officer with a legal background—been inducted.
The bench declined a request to tag and hear these cases alongside petitions seeking review of the Vijay Madanlal Chaudhary judgment, stating that the matters would be heard separately. After hearing arguments, the Court reserved its judgment on the key questions of whether the Adjudicating Authority must include a judicial member and whether it can validly function as a single-member bench under the PMLA framework.