The Karnataka High Court has invalidated a provisional attachment order under the Prevention of Money Laundering Act, 2002, for failing to record specific, fact-based reasons demonstrating that non-attachment would likely frustrate proceedings. This ruling reinforces that statutory mandates under PMLA are not procedural formalities but jurisdictional prerequisites.
Background & Facts
The Dispute
The petitioner, Smt. Jayamma, widow of late Sri. Kalegowda, is a claimant to land in Sy. No. 13, Malalavadi Village, Mysore, inherited after the demise of her husband and brother-in-law, Sri. Bandigowda and Sri. Girigowda. The land was allegedly utilized by Mysore Urban Development Authority (MUDA) for the formation of Jayanagar Layout without formal acquisition. In lieu of compensation, MUDA executed Sale Deeds dated 14.06.2024 in favor of the petitioner and her daughter for allotted sites. The petitioner subsequently sought Katha (land record) mutation, which was denied by Revenue Authorities.
Key Facts
- The petitioner’s claim to the sites is based on Sale Deeds executed by MUDA on 14.06.2024.
- The petitioner filed a writ petition (W.P. No. 36147/2024) on 20.11.2025 seeking direction to MUDA to effect Katha transfer; this petition remains pending.
- No mutation or transfer of the sites has occurred since the Sale Deeds were executed.
- The petitioner is not named as an accused in any criminal proceeding.
- The sites are alleged by the Enforcement Directorate (ED) to be proceeds of crime arising from a predicate offence involving MUDA officials.
Procedural History
- 27.09.2024: Lokayukta Police registered FIR No. 11/2024 under IPC and Prevention of Corruption Act, 1988, against accused nos. 1 - 4 for alleged illegal site allotments.
- 01.10.2024: ED registered ECIR No. ECIR/BGZO/25/2024 under PMLA.
- 28.01.2026: Lokayukta Police filed a Final Report (‘B’ Report) before the Special Court regarding accused nos. 1 - 4; investigation against other accused remained pending.
- 09.06.2025: ED issued Provisional Attachment Order No. 14/2025 under Section 5(1) of PMLA, attaching the sites.
- 07.07.2025: ED filed complaint under PMLA before the Adjudicating Authority.
- 26.11.2025: Adjudicating Authority confirmed the provisional attachment.
- 09.09.2025: Writ Petition No. 28108/2025 filed before Karnataka High Court challenging the attachment order.
- 31.10.2025: High Court passed an interim order stating: "Any proceedings taken would be subject to the outcome of the present petition."
The Parties' Positions
The petitioner contends that the attachment order is legally invalid because the ED failed to record specific reasons, based on material in its possession, that non-attachment would likely frustrate proceedings under PMLA. She argues that the property cannot be transferred or dissipated due to the absence of Katha mutation, rendering the urgency claim baseless.
The ED contends that the attachment was lawful under the Second Proviso to Section 5(1) of PMLA, citing the existence of a predicate offence and the potential for money laundering. It argues that the Adjudicating Authority’s confirmation order renders the writ petition infructuous.
Relief Sought
The petitioner seeks quashing of the Provisional Attachment Order dated 09.06.2025, setting aside all consequential proceedings, and a declaration that the sites are not proceeds of crime.
The Legal Issue
The central question was whether the Enforcement Directorate validly exercised its power under the Second Proviso to Section 5(1) of the PMLA by recording specific, fact-based reasons, grounded in material in its possession, that the non-attachment of the property would likely frustrate proceedings under the Act.
Arguments Presented
For the Petitioner
The petitioner’s counsel, Sri. Jaysham Jayasimha Rao, argued that the ED’s attachment order merely recited statutory language without applying its mind to the facts. He emphasized that the property in question - sites with no Katha mutation - could not be transferred, sold, or alienated, making the claim of imminent frustration of proceedings speculative. He relied on Radha Krishan Industries v. State of Himachal Pradesh and Aftabuddin Ahmed v. Enforcement Directorate to show that mechanical repetition of statutory phrases does not satisfy the requirement of recorded reasons. He further contended that the absence of any evidence linking the property to actual or imminent dissipation rendered the attachment jurisdictionally defective.
For the Respondent
The ED, represented by Sri. Aravind Kamat, contended that the statutory scheme under PMLA provides a comprehensive redressal mechanism, and the writ petition was not maintainable as the petitioner had an alternative remedy under Section 26 of PMLA to appeal the Adjudicating Authority’s confirmation order. It argued that the existence of a predicate offence and the nature of the alleged proceeds justified the attachment. It further submitted that the court should not interfere with the ED’s subjective belief regarding risk of frustration, absent mala fides.
The Court's Analysis
The Court began by acknowledging that while statutory remedies under PMLA generally bar writ jurisdiction, exceptions exist under Whirlpool Corporation and Dyani Antony Paul where jurisdictional defects or violations of natural justice are alleged. The Court held that the failure to comply with the Second Proviso to Section 5(1) - which mandates that the officer record reasons in writing based on material in his possession - is not merely a procedural lapse but a jurisdictional defect.
"It is necessary that where the statute provides for exercise of power in a particular manner, power must be exercised strictly in accordance with such procedure or not at all."
The Court meticulously examined the provisional attachment order and found that Paragraph 9, the only paragraph addressing the Second Proviso, contained generic, conclusory statements: "...the non-attachment of the properties are likely to frustrate any further proceedings under the Act... such Proceeds of Crime would further be laundered; that it will bear effect on the financial system and can break the economic backbone of the country..." These were not tied to any specific material in the ED’s possession regarding the petitioner’s property.
The Court distinguished between material indicating commission of money laundering and material demonstrating imminent risk of frustration. The ED’s reliance on the predicate offence and general economic harm was insufficient. The Court noted that the Sale Deeds were executed on 14.06.2024, and no mutation had occurred. Without Katha, the property could not be transferred, sold, or encumbered. Thus, the apprehension of dissipation was not grounded in objective facts.
The Court further held that the Adjudicating Authority’s order dated 26.11.2025 could not cure the jurisdictional defect in the provisional attachment order. The authority under Section 8 of PMLA is limited to confirming whether the property is proceeds of crime; it cannot validate a procedurally invalid attachment. The Court’s own interim order dated 31.10.2025, which explicitly made subsequent proceedings subject to the outcome of the writ petition, further reinforced that the attachment order was under judicial scrutiny.
The Court cited Chief Information Commissioner v. State of Manipur to affirm that statutory procedures, once prescribed, must be strictly followed. Mere copy-pasting of statutory language does not constitute compliance.
The Verdict
The writ petition was allowed. The Court set aside the Provisional Attachment Order No. 14/2025 dated 09.06.2025. All proceedings initiated pursuant to this order, including the Adjudicating Authority’s confirmation order dated 26.11.2025, were declared void. The Court reserved liberty to the Enforcement Directorate to initiate fresh proceedings under the Second Proviso to Section 5(1) of PMLA, if it can demonstrate, with specific, material-based reasons, that non-attachment would likely frustrate proceedings under the Act.
What This Means For Similar Cases
Procedural Compliance Is Non-Negotiable
- Practitioners must now insist that every provisional attachment order under PMLA contains specific, fact-based reasoning tied to the property in question.
- Generic statements about "frustration of proceedings" or "economic harm" without linking to the property’s characteristics or conduct will be struck down.
No Automatic Presumption of Urgency
- The mere existence of a predicate offence does not justify provisional attachment.
- The ED must demonstrate, with evidence, why immediate attachment is necessary for this specific property - e.g., evidence of attempted transfer, third-party claims, or financial layering.
Katha and Mutation Are Critical in Real Property Cases
- In cases involving immovable property, absence of Katha mutation is a strong indicator of non-transferability.
- Legal teams should proactively collect and submit land records, sale deeds, and pending mutation applications to rebut claims of dissipation risk.
Adjudicating Authority Cannot Cure Jurisdictional Defects
- The confirmation order under Section 8 of PMLA is not a cure-all.
- A jurisdictionally invalid provisional attachment cannot be validated by subsequent proceedings.
- Writ petitions remain maintainable even after confirmation if the initial order is void ab initio.
