Delhi High Court Mandates Strict Three-Phase Safeguards for ED Property Seizures

COURTKUTCHEHRY SPECIAL ON ED’s PROPERTY SEIZURES GUIDELINES

Delhi High Court Mandates Strict Three-Phase Safeguards for ED Property Seizures

Court stresses compliance with Sections 17, 20 and 8 of PMLA

Ruling in Anirudh Agarwal case strengthens property rights and procedural fairness

By Our Legal Reporter

New Delhi: December 29, 2025:

In a landmark judgment delivered on December 26, 2025, the Delhi High Court reinforced the importance of procedural safeguards in enforcement actions under the Prevention of Money Laundering Act, 2002 (PMLA). The Court held that the Enforcement Directorate (ED) must strictly comply with a three-phase graded framework—search and seizure, initial retention, and adjudication—before attaching or retaining property suspected to be linked with money laundering.

Also Read: Patna High Court Rules: Taxpayer Not Required to Prove “Source of Source” Under Section 68

The ruling came in the case of Anirudh Pratap Agarwal v. Enforcement Directorate, where the ED had seized gold and diamond bars but failed to record mandatory retention orders under Section 20 of the PMLA.

Background of the Case

• FIR origin: The case began with a 2016 FIR alleging fraudulent conversion of demonetized currency into gold and diamonds through shell companies.
• ED investigation: Based on the FIR, the ED registered an ECIR and conducted a search at the residence of Anirudh Pratap Agarwal, recovering gold and diamond bars.
• Procedural lapse: While the ED seized the property under Section 17, it failed to record “reasons to believe” for retention under Section 20.
• Adjudicating Authority (AA): Despite this lapse, the ED sought retention beyond 180 days before the AA, which allowed it.
• Appeal: Agarwal challenged the order before the Appellate Tribunal, which dismissed his appeal. He then approached the Delhi High Court.

Supreme Court Precedent

The Delhi High Court relied heavily on the Supreme Court’s ruling in Enforcement Directorate v. Rajesh Kumar Agarwal (2025), which clarified that Sections 17, 20, and 8 of the PMLA operate sequentially. Skipping any step renders the entire process void.

Court’s Observations

The High Court made several key observations:

• Three-phase framework:
  1. Phase 1 – Search/Seizure (Section 17): ED must record reasons to believe and forward them to the Adjudicating Authority.
  2. Phase 2 – Initial Retention (Section 20): ED must independently record reasons to retain property for 180 days.
  3. Phase 3 – Adjudication (Section 8): AA decides whether property is involved in money laundering after hearing both sides.
• Mandatory compliance: Each phase is distinct and mandatory. Skipping Section 20 invalidates subsequent retention.
• Property rights: Procedural safeguards protect constitutional property rights and prevent arbitrary enforcement.
• Transparency: Judicial oversight ensures fairness in ED’s wide-ranging powers.

Case Title and Bench

• Case Title: Anirudh Pratap Agarwal v. Enforcement Directorate
• Citation: Misc. Appeal (PMLA) 21 of 2024
• Date: December 26, 2025
• Bench: Delhi High Court

Also Read: Patna High Court Rules: Taxpayer Not Required to Prove “Source of Source” Under Section 68

Impact of the Ruling

The ruling has significant implications:

• For ED: Reinforces the need for strict compliance with statutory safeguards.
• For individuals: Strengthens protection of property rights against arbitrary seizure.
• For financial institutions: Banks must verify ED’s compliance before acting on freezing orders.
• For litigation: Provides a clear framework for challenging unlawful seizures.

Expert Opinions

Legal experts have welcomed the ruling:

• Khaitan & Co. lawyers noted that the judgment reaffirms procedural discipline and transparency.
• Financial analysts believe it will prevent misuse of ED’s powers and protect businesses.
• Human rights advocates see it as a step toward balancing enforcement with constitutional rights.

Comparison with Other Cases

Broader Implications

The ruling also has implications for:

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• Anti-money laundering enforcement: Ensures ED’s powers are exercised with transparency.
• Financial institutions: Must demand valid authorizations before freezing accounts.
• Litigants: Provides a roadmap to challenge unlawful ED actions.
• Judicial consistency: Promotes uniform application of safeguards across courts.

Conclusion

The Delhi High Court’s ruling in Anirudh Pratap Agarwal v. Enforcement Directorate marks a turning point in money laundering jurisprudence. By mandating strict compliance with the three-phase graded framework under the PMLA, the Court has ensured that enforcement actions are transparent, fair, and constitutionally sound.

This judgment strengthens property rights, reduces arbitrary enforcement, and sets a precedent for future cases involving the ED’s powers.

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