ED Can Retain Seized Property Under PMLA, Rules Tribunal in Mahesh Bank Fraud Case
The Appellate Tribunal under SAFEMA has upheld the Enforcement Directorate’s power to retain cash and documents seized during its investigation into alleged financial irregularities at the AP Mahesh Cooperative Urban Bank. The ruling came in an appeal filed by bank chairman Ramesh Kumar Bung against the PMLA Adjudicating Authority’s order.
A bench headed by Justice Munishwar Nath Bhandari dismissed Bung’s challenge and held that the PMLA Adjudicating Authority has an independent power under Section 8(3) of the Prevention of Money Laundering Act to order retention of property seized or frozen during an investigation.
The dispute centred on the Adjudicating Authority’s January 6, 2025 order. Bung argued that the order could not stand because the ED had not first obtained a separate retention order under Sections 20(1) and 20(2) of the PMLA.
His lawyers relied on a September 2025 Delhi High Court ruling in Directorate of Enforcement v. Rajesh Kumar Agarwal. That judgment had interpreted Section 8(3) as permitting the Adjudicating Authority to confirm an existing retention order rather than independently create one.
The tribunal rejected that interpretation, describing the Delhi High Court decision as per incuriam because, according to the tribunal, it had not adequately considered the Supreme Court’s three-judge bench judgment in Vijay Madanlal Choudhary v. Union of India. The tribunal also relied on its April 2026 decision in S. Srividhya v. Directorate of Enforcement.
The tribunal reasoned that requiring a separate prior Section 20 order could create overlapping procedures and would also conflict with the statutory timeline governing proceedings under Section 17(4) of the PMLA. The ruling therefore gives the Adjudicating Authority wider operational power to keep seized or frozen assets within the PMLA proceedings.
The case originates from Hyderabad police FIRs registered in 2024 over alleged cheating, criminal breach of trust and financial irregularities involving AP Mahesh Cooperative Urban Bank. The allegations reportedly include loan irregularities exceeding ₹300 crore, alleged diversion of about ₹18.3 crore connected with construction expenditure, forgery and alleged misappropriation of funds.
The ED subsequently conducted searches at premises connected with Bung, managing director Umesh Chand Asawa, vice-chairman Purushottamdas Mandhana, Solipuram Venkat Reddy and others. During the investigation, the agency seized various assets and documents which it considered relevant to the money-laundering probe.
Importantly, the tribunal’s decision on retention does not amount to a finding that Bung is guilty of money laundering or of the underlying bank fraud. The tribunal expressly left him free to contest his factual involvement in the alleged offences during the criminal proceedings or at the stage of framing of charges.
The ruling is significant beyond the Mahesh Bank case because it addresses a recurring procedural dispute under the PMLA: how and when seized property can legally remain in ED custody while investigation and adjudication continue. By affirming independent powers under Section 8(3), the tribunal has strengthened the ED’s ability to preserve disputed property during the proceedings.
The latest decision also comes against the backdrop of continuing litigation over the scope of the PMLA’s seizure, retention and attachment provisions. A recent Telangana-related PMLA proceeding, for example, records an ED application seeking continued retention of seized jewellery, cash and documents beyond the statutory initial period, illustrating how these procedural safeguards are being contested in different cases.
For the Mahesh Bank investigation, the immediate effect is that the disputed seized property will remain within the PMLA proceedings rather than being released merely because the accused challenged the procedural basis of its retention. The underlying criminal allegations, however, remain matters for the appropriate criminal court to determine.
