2022 (4) TMI 1586 - HC - Money Laundering

Seeking direction to the respondent to release the Fixed Deposits encashed by and lying in the possession of the respondent - Bank Guarantee - proceeds of crime or not - HELD THAT - It is stated that the petitioner had already furnished Bank Guarantees to the respondent by way of letter in the year 2019 itself, but the same has not been considered till date by the respondent and that it cannot keep both FDRs and Bank Guarantee with it, as such, the respondent is liable to accept the Bank Guarantee furnished by the petitioner. Application is allowed directing the respondent to accept the Bank Guarantee furnished by the petitioner in lieu of Fixed Deposits by releasing the same in favour of petitioner pending appeal.

Summary

Issues Involved:
1. Release of Fixed Deposits (FDs) by the respondent to the petitioner.
2. Legality of substituting FDs with a Bank Guarantee under the Prevention of Money Laundering Act, 2002 (PMLA).
3. Allegations of obtaining mining lease through influence and subsequent legal proceedings.

Issue-Wise Detailed Analysis:

1. Release of Fixed Deposits (FDs) by the respondent to the petitioner:
The petitioner sought the release of FDs amounting to INR 152,84,61,315/- which were encashed by the respondent, in compliance with the Appellate Tribunal's judgment dated 26.07.2019 (modified on 06.08.2019). The petitioner had provided a Bank Guarantee of the same amount to the respondent. Despite this, the respondent failed to release the FDs, which the petitioner argued was illegal and arbitrary since the Bank Guarantee adequately protected the funds.

2. Legality of substituting FDs with a Bank Guarantee under the PMLA:
The respondent argued that under the PMLA, the proceeds of crime could not be converted into a Bank Guarantee, as the nature of the property should remain unchanged. The respondent contended that the Appellate Tribunal erred in directing the substitution of attached properties with a Bank Guarantee, as there was no provision in the PMLA for such substitution. The Tribunal's order was challenged, and the respondent sought a stay on the Tribunal's judgment, emphasizing that the proceeds of crime should remain in their original form for potential confiscation if criminal charges were proven.

3. Allegations of obtaining mining lease through influence and subsequent legal proceedings:
The respondent highlighted allegations against the petitioner related to obtaining a mining lease through influence during the regime of a former Chief Minister. The case involved investigations by the CBI and subsequent attachment of properties under the PMLA. The Appellate Tribunal had found no illegality in granting the mining lease to the petitioner, noting that the lease was granted following due procedure and was not canceled despite changes in government. The Tribunal allowed the petitioner to furnish a Bank Guarantee in lieu of the FDs, which were not declared as proceeds of crime.

Judgment:
The court noted that the petitioner had complied with the Tribunal's orders by furnishing a Bank Guarantee equivalent to the FDs amount. The Tribunal had found no illegality in granting the mining lease to the petitioner, and the FDs were not declared as proceeds of crime. Therefore, the court directed the respondent to accept the Bank Guarantee and release the FDs to the petitioner. The respondent's contention that proceeds of crime could not be converted into a Bank Guarantee was rejected, as the FDs were not declared as such. Consequently, I.A. No. 1 of 2021 was allowed, directing the respondent to release the FDs, and I.A. No. 2 of 2019 was dismissed.