PMLA Not Meant For Private Property Disputes, ED Must Prioritise Public Money Cases: Madras High Court

On 6 October, the Madras High Court observed that the stringent provisions of the Prevention of Money Laundering Act (PMLA) are not meant to be invoked in disputes that are essentially between private individuals over private property, and that the Enforcement Directorate should prioritise cases involving public money, corruption and scams of national consequence.

Justice N Ramesh granted bail to Ala Alagappan, the third accused in an ED money laundering case arising from allegations that his father, who held power of attorney from the complainant, diverted her funds to himself and his family members. The Bench observed:

“Father and son have lived with that relationship throughout the investigation, and no instance of interference is pointed out. The apprehension can be met by conditions. I am satisfied that the petitioner is not likely to commit any offence while on bail.”

The scheduled offence arose from a 2023 Central Crime Branch case alleging that Alagappan's father misused the power of attorney and diverted the complainant's funds. The final report named ten accused, and the case is pending before the Chief Metropolitan Magistrate, Egmore.

The ED attributed four transactions to Alagappan: Rs. 4.5 lakh credited to his bank account, a Rs. 32.75 lakh flat in T. Nagar purchased in his name, 2.36 acres of agricultural land transferred to him, and Rs. 52 lakh transferred to his business account.

Alagappan was arrested on 25 August 2026 and remained in judicial custody. He claimed that the amount attributed to him was below Rs. 1 crore and sought the benefit of the first proviso to Section 45(1) of the PMLA. The ED alleged that he had acted with his family members and associates to siphon off Rs. 4.73 crore.

The ED opposed bail, relying on banking records to establish the alleged money trail and contending that the Rs. 1 crore threshold had to be assessed with reference to the total proceeds allegedly laundered jointly with the co-accused.

The Court held that the Rs. 1 crore threshold under the first proviso to Section 45(1) PMLA is based on the amount the accused is alleged to have laundered, whether individually or jointly with co-accused, and not merely the amount found in his own account.

Referring to Vijay Madanlal Choudhary v. Union of India and Prem Prakash v. Union of India, it noted that the prosecution must first establish the foundational facts, including the commission of the scheduled offence, derivation of the property from that offence and the accused's involvement in a process connected with such property.

On examining the four transactions relied upon by the ED, the Bench found that the material did not sufficiently establish Alagappan's connection with proceeds of crime. It further noted that nothing beyond the predicate cases was specifically alleged against Alagappan, which arose from his family's dealings with the complainant.

It also noted that the evidence consisted of documentary and banking material that the ED had already collected, while the ED's apprehension of influence rested only on his proximity to his father, the first accused. It concluded:

“I am satisfied, in terms of Section 45(1)(ii) of the Act, that there are reasonable grounds for believing that the petitioner is not guilty of such offence and that he is not likely to commit any offence while on bail.”

Further, the Court observed that the case arose from dealings between a private individual and the family of the person whom she had appointed as her power agent. It noted that no public money, public body or public servant was involved.

It noted that the complainant had already initiated several criminal cases and obtained a civil decree concerning one of the transactions. It said:

“The resources of the Directorate are not unlimited. Each hour its officers spend tracing a flat bought by a father in his son's name in 2016 is an hour not spent on the laundering of public money, the proceeds of corruption, scams that defraud the public at large, and crime that touches the security and economic interest of the nation. It is for the Directorate to decide where its investigations should go, and nothing in this order is a direction to close or abandon this one.”

The Bench also clarified that these observations did not amount to a direction to the ED to close or abandon the investigation. It added that the stringent provisions of the PMLA were not intended to be invoked where a dispute was, in substance, between private individuals concerning private property and could be addressed through ordinary civil and criminal law remedies.

Accordingly, the High Court allowed the petition and ordered Alagappan's release on bail on executing a bond for Rs. 25,000 with two sureties.

 For Petitioner: Senior Advocate T Mohan and Advocate G Uma Maheswari

For Respondent: Advocate P Sidharthan, Special Public Prosecutor, ED