The Appellate Tribunal under SAFEMA has upheld the Enforcement Directorate’s retention of currency and documents seized from Ramesh Kumar Bung, chairman of AP Mahesh Cooperative Urban Bank, holding that the PMLA Adjudicating Authority possesses an independent power under Section 8(3) of the Prevention of Money Laundering Act to order the retention of seized or frozen property.
The bench of Justice Munishwar Nath Bhandari (Chairman) dismissed Bung’s appeal challenging the Adjudicating Authority’s order dated January 6, 2025. The tribunal rejected the contention that the retention order was legally unsustainable merely because the ED had not first passed a separate order under Sections 20(1) and 20(2) of the PMLA.
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The tribunal, however, clarified that Bung would remain at liberty to raise his arguments concerning his alleged factual involvement in the offences before the competent criminal court, either during the trial or at the stage of framing of charges.
Challenge to retention of seized currency and documents
The dispute arose from searches conducted by the ED in connection with an alleged financial fraud involving AP Mahesh Cooperative Urban Bank. During the investigation, the agency seized currency and documents from premises linked to Bung and other individuals associated with the bank.
Bung subsequently challenged the continued retention of the seized material. His primary argument was that the Adjudicating Authority could not independently direct retention under Section 8(3) unless the investigating officer had first passed an order under Sections 20(1) and 20(2).
According to Bung, Section 8(3) merely empowers the Adjudicating Authority to confirm a retention order already passed by the ED. In the absence of such an initial order, he argued, the Adjudicating Authority’s direction dated January 6, 2025 was without jurisdiction.
Tribunal declines to follow Delhi High Court ruling
In support of his case, Bung relied upon the Delhi High Court’s September 12, 2025 judgment in Directorate of Enforcement v. Rajesh Kumar Agarwal. In that ruling, the High Court interpreted Section 8(3) as permitting the Adjudicating Authority only to confirm an existing retention order.
The Appellate Tribunal, however, declined to follow that interpretation. It held that the Delhi High Court’s ruling was per incuriam because it had not 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, Chennai, in which it had examined the statutory scheme governing the seizure, freezing and retention of property under the PMLA.
On the basis of these authorities, the tribunal concluded that Section 8(3) independently authorises the Adjudicating Authority to order the retention of property seized or frozen during a money-laundering investigation.
Prior order under Section 20 not mandatory
Rejecting Bung’s interpretation, the tribunal observed that making a prior order under Section 20 compulsory would result in overlapping statutory procedures.
Under Section 17(4), the authorised officer is required to approach the Adjudicating Authority within 30 days of the seizure or freezing of property. The Adjudicating Authority thereafter examines the material placed before it and determines whether the property should continue to remain seized or frozen for the purposes of investigation or proceedings under the PMLA.
The tribunal reasoned that requiring the investigating officer to separately pass a retention order under Section 20 before the Adjudicating Authority exercises its jurisdiction under Section 8(3) would create duplication and disturb the timelines prescribed under the Act.
It accordingly held that the absence of an earlier order under Sections 20(1) and 20(2) did not invalidate the Adjudicating Authority’s decision to permit continued retention of the seized currency and documents.
Proceedings arise from alleged AP Mahesh Bank fraud
The money-laundering investigation originated from FIRs registered by the Hyderabad police in 2024. The police cases contained allegations of cheating, criminal breach of trust, forgery, misappropriation and other financial irregularities involving AP Mahesh Cooperative Urban Bank.
As part of its investigation, the ED conducted searches at several locations in Hyderabad connected with Bung and other bank officials and individuals. The premises searched reportedly included those linked to managing director Umesh Chand Asawa, vice-chairman Purushottamdas Mandhana and Solipuram Venkat Reddy.
The underlying complaints alleged irregularities in the sanction and disbursement of loans exceeding ₹300 crore. Investigators also examined allegations concerning the diversion of approximately ₹18.3 crore purportedly connected with construction expenditure, apart from claims of forged records and misappropriation of the bank’s funds.
The complaints were lodged by Shyam Sunder Biyani, secretary of the AP Mahesh Cooperative Bank Shareholders Association.
Allegations claimed to be politically motivated
Bung has denied the allegations and maintained that the complaints were politically motivated. He has claimed that the proceedings were initiated at the instance of rivals connected with elections in the cooperative society.
His earlier petition seeking the quashing of the principal FIR was dismissed by the Telangana High Court. The criminal and money-laundering proceedings arising from the allegations have continued thereafter.
While dismissing the challenge to the retention order, the Appellate Tribunal did not conclusively determine Bung’s alleged involvement in the offences. It confined its findings to the legal validity of the Adjudicating Authority’s power to retain the seized property.
The tribunal clarified that questions relating to Bung’s role, the evidentiary value of the material collected by the investigating agencies and the merits of the allegations could be considered by the criminal court at the appropriate stage.
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