HC Allows Salary Payments from PMLA Frozen Accounts, Rejects ED Appeal

The Enforcement Directorate (ED) challenged an order of the Single Judge permitting a company to use funds from its frozen bank accounts for payment of employee salaries. The accounts had been frozen under the Prevention of Money Laundering Act, 2002 during an investigation into alleged financial irregularities.

The ED argued that once accounts are frozen under the PMLA framework, the affected party must seek relief before the Adjudicating Authority or the Special Court. It contended that the High Court should not have exercised writ jurisdiction to allow partial defreezing for operational expenses like salaries.

Issue Raised: Whether the High Court can permit salary payments from bank accounts frozen under PMLA when statutory authorities lack power to grant such relief.

HC’s Ruling: The High Court dismissed the ED’s appeal and upheld the order of the Single Judge. It held that the Adjudicating Authority under PMLA can only confirm or set aside attachment and does not have the power to allow partial release of funds. The Court observed that in situations where statutory remedies are inadequate to grant necessary relief, the High Court can step in under its writ jurisdiction.

It emphasised that denial of access to funds for salary payments would unfairly impact employees who are not involved in the alleged wrongdoing. Balancing the interests of investigation with the need to avoid hardship to employees, the Court found the limited relief justified. Thus, it upheld the direction permitting use of frozen funds strictly for payment of salaries.

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