2020 (8) TMI 938 - HC - Money Laundering

Seeking direction for quashing of summons - illegal search and seizure proceedings conducted by the Respondent ED - HELD THAT - As sought, let the respondents no.2 and 3 file replies within two weeks from today with an advance copy thereof to the learned counsel for petitioner through email. Rejoinder thereto, if any, be also filed within two weeks thereafter. List on 12.10.2020 and in the meanwhile, the petitioner is directed to join the investigation as and when directed to do so, however there shall be no coercive action against him by the Department till the next date of hearing.

Summary

Issues:
1. Quashing of Summons and Proceedings
2. Legality of Search and Seizure Proceedings
3. Coercive Action Against Petitioner
4. Application of Insolvency Bankruptcy Code
5. Allegations of Diversion of Stocks
6. Jurisdiction under Prevention of Money Laundering Act
7. Application of Section 236 of the Insolvency Bankruptcy Code

1. Quashing of Summons and Proceedings:
The petitioner filed a writ petition seeking to quash the summons issued by the respondents under the Prevention of Money Laundering Act (PMLA) dated 19.08.2020 and 22.08.2020. The petitioner argued that he had acted in good faith as a Resolution Professional and should not have been impleaded as an accused. The petitioner cited various provisions of the Insolvency Bankruptcy Code (IBC) to support his contention. The court directed the respondents to file replies within two weeks and restrained them from taking coercive action against the petitioner until the next hearing.

2. Legality of Search and Seizure Proceedings:
The petitioner challenged the legality of the search and seizure proceedings conducted by the Enforcement Directorate (ED) at his residences in Gurgaon and Dwarka. The petitioner alleged that the proceedings were illegal and violated Articles 14 and 21 of the Constitution. The court directed the respondents to respond to these allegations within the specified timeline.

3. Coercive Action Against Petitioner:
The petitioner sought a writ of mandamus to prevent the respondents from taking any coercive action against him in connection with the ECIR/DLZO/I/02/2019. The court directed the petitioner to cooperate with the investigation but ordered no coercive action to be taken against him until the next hearing.

4. Application of Insolvency Bankruptcy Code:
The petitioner's counsel referred to various sections of the IBC to argue that the petitioner had acted in good faith as a Resolution Professional. The petitioner's actions were based on approved plans for the revival of the company and realization of assets. The court noted the petitioner's submissions regarding the IBC but allowed time for the respondents to file detailed replies.

5. Allegations of Diversion of Stocks:
The respondents alleged that the promoters of the company had diverted stocks worth over Rs. 700 crores to third parties. The petitioner had provided statements and documents to the respondents, leading to the initiation of a complaint under the PMLA. The petitioner had also reported the diversion of stocks to the Committee of Creditors and sought action against the erstwhile promoters.

6. Jurisdiction under Prevention of Money Laundering Act:
The respondents issued summons to the petitioner under Section 50 of the PMLA, requiring his appearance. The petitioner, however, was unable to appear due to health reasons. The court noted discrepancies in the summoning process and directed the respondents to address these issues in their replies.

7. Application of Section 236 of the Insolvency Bankruptcy Code:
The petitioner invoked Section 236 of the IBC to argue that he should not have been impleaded as an accused since he had acted in good faith. The court allowed time for the respondents to respond to the petitioner's contentions and scheduled the next hearing for further proceedings.