The Gauhati High Court has upheld a provisional attachment order issued by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act (PMLA), ruling that an authorised officer's recorded "reason to believe" can validly form part of the attachment order itself. The Court declined to interfere with the ED's action after finding that the investigating authority had sufficient material before issuing the order.
Justice Manish Choudhury delivered the judgment while deciding a writ petition filed by businessman Mrig Mrinal Dhawan, who had challenged the attachment of three of his properties by the ED.
Background of the Case
The dispute arose from an ED investigation linked to an alleged fake GST input tax credit (ITC) network. According to the investigation, a firm named M/s Siddhi Vinayak Trade Merchants allegedly issued thousands of invoices without actual movement of goods, resulting in fraudulent ITC worth around ₹99.31 crore.
The ED alleged that the proceeds of crime moved through several downstream entities, including firms that had business dealings with the petitioner's concern, M/s Fama Marketing. Based on this investigation, the ED provisionally attached three plots of land belonging to the petitioner through a Provisional Attachment Order (PAO) dated March 30, 2026.
The petitioner argued that the attachment was illegal because the properties had been purchased before the alleged scheduled offences, were not directly linked to the alleged proceeds of crime, and that the ED had wrongly included its "reason to believe" in the attachment order instead of recording it separately.
Arguments Before the Court
Senior counsel appearing for the petitioner contended that the PMLA requires the authorised officer to first record confidential "reasons to believe" before issuing an attachment order. It was argued that these reasons should not appear in the PAO itself and that attaching properties acquired before the alleged offence was legally impermissible.
The Enforcement Directorate, on the other hand, submitted that the reasons had already been recorded in writing on March 29, 2026, before issuance of the PAO. It further argued that there is no statutory prohibition against reproducing those reasons in the attachment order itself and that the petitioner would have an adequate remedy before the Adjudicating Authority under the PMLA.
Court's Observations
Justice Manish Choudhury observed that the Court's role in judicial review is limited to examining whether the authorised officer possessed relevant material capable of forming the statutory "reason to believe."
The Court noted that the ED had examined GST returns, statements recorded during investigation, seized documents and other materials before concluding that proceeds of crime had allegedly travelled through multiple entities and that a portion allegedly reached M/s Fama Marketing.
Rejecting the petitioner's challenge, the Court observed:
"The Court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Authorized Officer."The Court further held that once adequate material exists, the formation of "reason to believe" cannot be replaced by the Court's independent assessment.
The Court further held that once adequate material exists, the formation of "reason to believe" cannot be replaced by the Court's independent assessment.
On the issue of attachment of properties acquired before the alleged offence, the Court referred to Supreme Court precedents and held that where the actual proceeds of crime are no longer available, property of equivalent value can be provisionally attached under the PMLA. Therefore, the earlier purchase of the properties did not automatically make the attachment illegal.
The Court also disagreed with the argument that the "reason to believe" must remain confidential or cannot appear in the PAO. It noted that in the present case, the reasons had already been separately recorded before issuance of the order and their inclusion in the PAO did not invalidate the proceedings.
Decision
After examining the statutory scheme of the PMLA and the material relied upon by the ED, the Gauhati High Court found no jurisdictional error in the provisional attachment order.
The Court held that the authorised officer had sufficient material to form the required "reason to believe," that the conditions under Section 5 of the PMLA were satisfied, and that the attachment of equivalent-value property was legally permissible.
Accordingly, the writ petition challenging the provisional attachment order was dismissed, leaving the petitioner to pursue the statutory remedies available under the PMLA before the Adjudicating Authority.
Case Details
Case Title: Mrig Mrinal Dhawan v. Union of India and Another
Case Number: Writ Petition (C) No. 2531/2026
Judge: Justice Manish Choudhury
Decision Date: 26 June 2026
