The Enforcement Directorate (ED) is India's financial intelligence and enforcement agency, responsible for investigating violations of the Prevention of Money Laundering Act, 2002 (PMLA) and the Foreign Exchange Management Act, 1999 (FEMA). Over the last several years, the ED's investigative and prosecution activity has expanded dramatically — and the legal consequences of a PMLA investigation can be severe: provisional attachment of assets, arrest, prolonged pre-trial detention, and ultimately prosecution before the Special Court.
If you or your company has received an ED summons or is aware of an ongoing PMLA investigation, the most important step is to retain experienced PMLA defence counsel immediately — before the first statement is recorded.
The Architecture of PMLA: Predicate Offence and Proceeds of Crime
PMLA prosecutions are built on two foundations: a predicate offence (a scheduled offence under PMLA's schedule — which includes fraud, corruption, drug trafficking, human trafficking, and dozens of others) and proceeds of crime derived from that predicate offence. The ED must establish both limbs to make out a money laundering charge under Section 3 of PMLA. A successful challenge to either limb — the predicate offence prosecution or the ED's proof of proceeds — can unravel the entire PMLA case.
ED Summons: How to Respond
An ED summons under Section 50 of PMLA is not equivalent to an arrest. You are required to appear before the ED, answer questions on oath, and produce documents as directed. However, you are not required to self-incriminate. The right to legal representation during the Section 50 examination has been a contested issue — while the ED has historically conducted examinations without lawyers present in the room, the constitutional right to legal advice before and after each session is well-established.
Never appear for a Section 50 examination without legal counsel. Statements recorded under Section 50 are admissible as evidence in PMLA proceedings — an exception to the Indian Evidence Act's rule against confessions to police officers. The implications of every answer are significant.
Provisional Attachment: How It Works and How to Challenge It
The ED can provisionally attach property "believed to be proceeds of crime" under Section 5 of PMLA. Provisional attachment is made by order — it does not require court sanction in advance — and immediately restricts the owner's right to deal with the attached assets. The attachment is confirmed or revoked by the Adjudicating Authority (a quasi-judicial body under PMLA) within 180 days.
Challenging provisional attachment effectively requires demonstrating one or more of the following: the attachment lacks a nexus to the scheduled offence; the property is not proceeds of crime; the ED has not followed mandatory procedural requirements; or the attachment is disproportionate. The confirmation order of the Adjudicating Authority is appealable before the Appellate Tribunal for Money Laundering, and thereafter to the High Court.
PMLA Bail: The Twin Conditions
Obtaining bail in PMLA matters is significantly harder than in ordinary criminal cases. Section 45 of PMLA — as amended and upheld by the Supreme Court — imposes twin conditions for bail: the court must be satisfied that there are reasonable grounds for believing the accused is not guilty of the offence, and that the accused is not likely to commit any offence while on bail. These conditions effectively reverse the ordinary presumption of innocence for bail purposes and place a heavy burden on the accused.
Successful PMLA bail strategy requires demonstrating clean financial history, strong grounds of innocence on the predicate offence, absence of flight risk, and cooperation with the investigation. Each element must be built carefully, with supporting documentation and compelling arguments before the Special Court or High Court.
The Supreme Court's Recent Jurisprudence on PMLA
The Supreme Court's three-judge bench judgment in Vijay Madanlal Choudhary v. Union of India (2022) upheld most of PMLA's harsh provisions — including the reverse burden, the twin conditions for bail, and the admissibility of ED statements. However, the Court also held that a PMLA prosecution cannot survive if the predicate offence case results in acquittal or is quashed. This remains the most potent route of challenge in appropriate cases.
Our PMLA Practice
Satyam Dwivedi has acted as defence counsel in ED investigations and PMLA prosecutions involving SFIO-referred matters, SEBI referrals, and banking fraud cases. We advise clients from the stage of summons through Adjudicating Authority proceedings, appellate tribunals, bail applications, and trial. For an urgent consultation regarding an ED matter, contact us immediately or reach us on WhatsApp.