PMLA Asset Freezes and the Supreme Court’s Wake Up Call on Unchecked ED Powers
Introduction
In the high-stakes world of economic crime enforcement in India, the line between vigilance and vendetta has increasingly blurred. The Prevention of Money Laundering Act, 2002 was enacted to choke the financial lifelines of terrorism and corruption over time. However, its provisional attachment powers have grown into a blunt instrument. Under Sections 20 and 21, the Enforcement Directorate can freeze bank accounts, properties and vehicles for up to 180 days without prior notice or judicial oversight. What began as an extraordinary safeguard has, in practice, become a routine tool capable of paralysing individuals and businesses overnight.
Since 2014, asset attachments have crossed Rs 1 lakh crore, even as conviction rates remain below one percent. On December 20, 2025, this imbalance drew sharp scrutiny from the Supreme Court. The Court’s intervention has reignited an old but unresolved debate about due process in an era of aggressive enforcement.
The immediate trigger was a plea by Karnataka MLA KC Veerendra, whose fixed deposits, jewellery and family vehicles were provisionally attached in connection with the Valmiki Corporation scam. Senior advocates Mukul Rohatgi and Ranjit Kumar argued that the attachment violated Articles 14 and 21 of the Constitution. They questioned the low threshold of “reason to believe” and highlighted that confirmation lies with a non-judicial Adjudicating Authority that approves the overwhelming majority of ED orders. The Bench, led by Justice PS Narasimha, openly acknowledged structural flaws in the law and issued notice to the Union. The matter has now been linked with other pending challenges to the PMLA.
This moment follows earlier judicial unease, including criticism of ED excesses in 2025 and the continuing aftershocks of the Vijay Madanlal ruling. For entrepreneurs, politicians and small businesses, asset freezes are not temporary inconveniences. They are existential shocks that halt payrolls, derail transactions and stain reputations. The Court’s remarks signal a deeper question. Can the fight against money laundering coexist with constitutional fairness, or must the law be reshaped to prevent irreversible harm to those who may ultimately be innocent.
The Human and Economic Toll of Frozen Lives and Livelihoods
The impact of a PMLA attachment is felt far beyond courtrooms. It seeps into homes, offices and balance sheets, turning suspicion into suffocation. KC Veerendra’s plea offers a telling example. With his accounts frozen without prior explanation, routine expenses became struggles. Business relationships frayed, political support thinned and family savings were locked in limbo, all while the investigation moved at its own pace. As his counsel argued, what was frozen was not just money but mobility, security and dignity.
Similar stories are repeated across the country. In Mumbai’s diamond trade, a trader faced a freeze of inventory worth Rs 50 crore during a hawala investigation. The timing, just before Diwali exports, led to cancelled orders, defaults and the loss of livelihoods for hundreds of workers. These are not isolated incidents but part of a broader economic pattern.
Between 2014 and 2025, provisional attachments increased nearly twentyfold. Yet only a fraction ended in final confiscation. For many, provisional measures became long term punishment. Small and medium enterprises were hit the hardest, with nearly half of all attachments involving such entities. Cash flows dried up, credit ratings collapsed and legal costs for revival ran into crores. The National Herald case illustrates the political dimension, where assets worth thousands of crores have remained attached for years, leaving operations crippled even as courts question the legal basis.
The human cost is equally severe. Individuals cleared after years of investigation speak of anxiety, broken families and disrupted education. The reverse burden under Section 24 forces the accused to prove the legitimacy of their assets, deepening isolation and stress. Investigations routinely stretch beyond two years, and provisional attachments are extended repeatedly. In Karnataka, the freezing of assets linked to the Valmiki case preceded resignations and public disgrace, long before any adjudication on guilt. The Supreme Court’s recent intervention brings these lived realities into focus, reminding the system that economic enforcement must not equate suspicion with seizure.
The Supreme Court’s Critique and the Flaws in Sections 20 and 21
The hearing on December 13, 2025, was not a routine procedural exchange. It was a pointed examination of the constitutional design of the PMLA’s attachment regime. The Court examined how Section 20 allows the ED to attach alleged proceeds of crime based on internal satisfaction, without disclosure or hearing, and how Section 21 places confirmation in the hands of a non-judicial authority.
Justice Narasimha’s observation that there is a fault in the Act cut to the core of the issue. The Bench questioned how such opaque powers align with property rights under Article 300A and basic principles of natural justice. The absence of pre attachment notice, the lack of reasoned orders and the delayed right of appeal were all flagged as serious concerns. By issuing notice and linking the case with broader constitutional challenges, the Court signalled that piecemeal fixes may no longer suffice.
This scrutiny builds on a growing body of judicial discomfort. High Courts have repeatedly cautioned against arbitrary raids and unsupported attachments. Questions have also been raised about the composition of the Adjudicating Authority, which excludes members of the regular judiciary. The long duration of attachments, far exceeding timelines seen in other fiscal laws, adds to the imbalance. The Supreme Court’s intervention appears less an act of confrontation and more an attempt at course correction, ensuring that investigation does not become punishment by default.
Legal Foundations and the Evolution of Jurisprudence
The PMLA was enacted in a climate shaped by global anti-terror commitments and international conventions. Its architecture is built around identifying proceeds of crime linked to scheduled offences and preventing their use. Provisional attachment followed by adjudication was intended as a temporary safeguard. Over time, however, judicial interpretation has exposed tensions within this framework.
Landmark rulings have oscillated between deference and correction. The striking down of stringent bail conditions, their partial revival and the continuing challenges to presumptions under Section 24 reflect an unsettled legal landscape. Courts have increasingly insisted on a clear and live link between the alleged offence and the attached asset. Amendments requiring recorded reasons were steps forward, but concerns about independence and fairness remain.
The Supreme Court’s present engagement fits within this evolving arc. Possible outcomes include stricter timelines, mandatory oversight and procedural safeguards that align the PMLA with broader criminal justice norms. Comparative global practice shows that strong enforcement can coexist with judicial checks. India now stands at a similar crossroads.
Pathways to Reform and the Road Ahead
Meaningful reform will not be easy. The appellate system is burdened with overbearing back-logs, enforcement agencies face capacity constraints and allegations of political misuse have eroded public trust. Legislative change is slow, and institutional resistance is real.
Yet workable solutions exist. Judicial approval before attachment, hardship exemptions for essential expenses and a more balanced adjudicatory framework could significantly reduce harm without weakening enforcement. A strengthened and independent tribunal structure could restore credibility. For businesses, proactive compliance and early legal intervention remain essential safeguards.
With hearings set to resume in early 2026, the Supreme Court’s engagement may well shape the future of economic crime enforcement in India. The challenge lies in striking a balance where the State can pursue illicit wealth effectively without undermining the constitutional promise of fairness.
Conclusion
The Supreme Court’s December 13, 2025 intervention on the PMLA attachment regime signals correction rather than collapse. It preserves the State’s authority to combat money laundering while restoring constitutional balance where enforcement has drifted into excess. By highlighting cases like KC Veerendra’s, where asset freezes stalled personal and political life without prior hearing, and the plight of small businesses paralysed by blocked cash flows, the Court acknowledged the real human cost of unchecked power. Provisional attachments, conceived as temporary safeguards, have too often become prolonged penalties, undermining confidence in the justice system.
As the challenges move toward a decisive hearing in January 2026, meaningful reform appears possible. Judicial scrutiny before attachment, tighter timelines, and reasoned adjudication could anchor enforcement in due process. A more measured application of the reverse burden under Section 24 would prevent innocent parties from spending years reclaiming what was never illicit. Strengthening investigative capacity can ensure the ED remains focused on genuine financial crime rather than collateral damage.
In reaffirming that justice must be fair as well as firm, the Court has strengthened, not weakened, the fight against money laundering. If translated into reform, this moment could recalibrate enforcement toward legality, restraint, and trust.
Contributed By:- Siddharth Bankal (Intern)