PMLA Appellate Tribunal Sets Aside ED Order Retaining Frozen Assets Of Kwality Ex-Director Sidhant Gupta

The PMLA Appellate Tribunal has set aside an order permitting the Enforcement Directorate (ED) to retain and continue freezing properties linked to former Kwality Limited director Sidhant Gupta and associated entities in a money laundering case arising from an alleged Rs 1,400.62-crore bank fraud involving the company.

The tribunal ruled that such retention cannot be sustained merely because the investigation is ongoing.

Member V. Anandarajan held that the Adjudicating Authority (AA) failed to provide a reasoned, independent finding on whether the seized and frozen properties were involved in money laundering. The matter was remanded for fresh adjudication.

“This finding in my view does not meet the requirement of section 8(3) which mandates that the adjudicating authority, after considering the reply to the notice, hearing both the parties and 'taking into account all relevant materials placed on record before him, record a finding whether all or any of the properties referred to in the notice are involved in money laundering.' The retention of seized properties and records cannot be allowed solely, or even primarily, on the ground that investigation is ongoing,” the Bench observed.

The batch of appeals arose from a common order dated May 19, 2025. That order allowed the retention and continued freezing of various movable and immovable assets seized during ED searches conducted in November and December 2024.

The ED case stems from a 2020 CBI FIR registered on a complaint by Bank of India against Kwality Limited, a milk and dairy products company. It was alleged that the company and its directors, including Sidhant Gupta and Sanjay Dhingra, falsified books of accounts and misrepresented sales, purchases, debtors and creditors to cheat a consortium of banks. The alleged wrongful loss was Rs 1,400.62 crore.

The ED alleged that the accused created dummy entities and carried out bogus sale and purchase transactions. It claimed they siphoned off bank loan funds and acquired assets in the names of family members and beneficially owned entities using proceeds of crime.

Challenging the order, the appellants argued before the tribunal that the ED had failed to properly record “reasons to believe” as required under Section 17(1A) of the PMLA. They also argued that copies of seized records were not supplied as required under Section 21(2).

The appellants also challenged the AA's reliance on a forensic audit report by GSA & Associates. They argued that a Delhi High Court had later appointed a fresh forensic auditor after concerns were raised regarding the earlier report.

The ED argued that Sidhant Gupta was the beneficial owner of entities including Golf Link Projects. It alleged these entities were operated through drivers and former employees acting as name-sake directors. The ED also claimed that one such entity received about Rs 63.71 crore from alleged bogus firms used to provide dummy entries to Kwality Limited.

The ED further argued that at this stage, it only needed to establish a substantially probable nexus between the properties and proceeds of crime.

Upon examining the impugned order, the Tribunal found that the Adjudicating Authority had largely reproduced the ED's application, relevant PMLA provisions, and the parties' submissions. It found that the Authority had failed to record independent findings on the issues raised.

The bench observed that the Authority had reduced its conclusion to a single omnibus sentence stating prima facie involvement. It said the reasoning process behind that conclusion was absent.

The tribunal observed, “Even that one-line finding has been recorded without stating the process of reasoning and application of mind through which the conclusion was drawn. With that single sentence, all the arguments and contentions of all the respondents have been brushed aside in one go.”

Holding that Section 8(3) required the Adjudicating Authority to record a finding, after considering all relevant materials, on whether the properties were involved in money laundering, the Tribunal held that retention could not be justified merely because the investigation was continuing.

Accordingly, the tribunal set aside the order and remanded the matter to the Adjudicating Authority for de novo adjudication within three months. It directed the Authority to pass a detailed speaking order with reasoned findings.

The parties were directed to maintain the status quo regarding the properties in the meantime.

For Appellant: Advocate Gurpreet Singh, Advocate Harsh Yadav, Advocate Bakul Jain, Advocate Naveen Kohar, Advocate Madhav Khurana, Advocate Jagjit Nandal

For Respondent: Advocate Kshitiz Aggarwal