The Delhi High Court has overturned orders made by the Adjudicating Authority under Section 8 of the Prevention of Money Laundering Act (PMLA) freezing the bank accounts of 66 companies in response to a "request for legal assistance" from the Office of the Prosecutor General of Rio de Janeiro, Brazil.
India and Brazil have agreed to cooperate in criminal matters after signing a Mutual Legal Agreement Treaty. The Prosecutor General's Office in Rio de Janeiro had contacted Indian authorities in connection with a criminal matter involving a former Governor of Brazil, Sergio Cabral, who has been accused of corruption and money laundering totalling more than $100 million. The specific allegation against Indian companies was worth approximately $ 13.24 million.
The Brazilian Prosecutor General requested the seizure of the bank accounts of the companies implicated, as well as digital copies of all documents relating to the identified bank accounts. In response to this Letter of Request, the ED issued freezing orders in July 2020 under Section 17(1A) of the Prevention of Money Laundering Act, 2002 freezing various bank accounts of the Petitioners and other companies in India, and also initiated proceedings under the Act against all 66 companies.
In November 2020, the freezing orders were amended and limited to the amounts specified in the request letters.
A single-judge bench led by Justice Pratibha M. Singh ruled that the ED's failure to transmit all "material in its possession" to the Adjudicating Authority prior to the issuance of the show cause notice would be in violation of Rule 8 of the 2005 PMLA Rules.