2022 (11) TMI 1488 - HC - Money Laundering

Application filed for modification and/or vacation of the interim order - replacement of immovable properties under attachment with fixed deposit - seeking a direction to the Enforcement Directorate to accept fixed deposit and in lieu thereof to release the immovable properties covered by the provisional attachment order - HELD THAT - While Appellate Tribunal may be right in saying that there is no provision under PMLA and the Rules made thereunder for replacement of attached immovable property for some other property, however, it must be noted that the said decision was in the context of an appeal pending before the Appellate Tribunal. The appeal was filed by the appellant against the order of the adjudicating authority confirming provisional attachment of the immovable properties relevant to the said case. In other words, in Hetero Drugs Limited 2015 (7) TMI 1255 - APPELLATE TRIBUNAL, PREVENTION OF MONEY LAUNDERING ACT AT NEW DELHI provisional attachment order was confirmed by the adjudicating authority, the correctness of which was an issue before the Appellate Tribunal in the pending appeal. Appellate Tribunal was yet to decide whether such attachment was right or wrong. It was during the pendency of such appeal before the Appellate Tribunal that the appellant moved for replacement of the attached immovable properties. On looking at the judgment and order of the Appellate Tribunal, it is evident that Appellate Tribunal had allowed the appeal of the applicant by interfering with the order of provisional attachment as well as the confirmation order. Even in the provisional attachment order, it was clearly mentioned that value of the attached property was equivalent to proceeds of crime. In other words, even as per the attaching authority property attached was not acquired by proceeds of crime. Since the proceeds of crime got intertwined with other transaction, property of equivalent value was attached. However, in so far the present case is concerned, even this position has now become academic in as much as Appellate Tribunal had interfered with the orders of attachment and confirmation. From the judgment and order of the Appellate Tribunal, it is abundantly clear that the interest of opposite party/appellant is protected by directing various parties to provide bank guarantee equivalent to Rs.192 crores. Rest of the attachments were directed to be released by the Appellate Tribunal. Even for the aforesaid attached property, applicant/respondent has come forward to offer alternative property. For the subject property, applicant/respondent has offered fixed deposit of Rs.1,36,91,285.00. Application allowed.

Summary

Issues Involved:
1. Modification and/or vacation of the interim order dated 18.11.2019.
2. Substitution of attached immovable and movable properties with fixed deposits.
3. Return of Rs.14.29 crores along with interest.

Summary:

Issue 1: Modification and/or vacation of the interim order dated 18.11.2019

The three interlocutory applications were filed for modification and/or vacation of the interim order dated 18.11.2019 passed by the Court in I.A.No.2 of 2019 in C.M.S.A.No.15 of 2019. The Court had directed the maintenance of status quo as on 18.11.2019 until further orders. The opposite party, Deputy Director, Directorate of Enforcement, filed counter affidavits objecting to and seeking dismissal of the applications.

Issue 2: Substitution of attached immovable and movable properties with fixed deposits

In I.A.No.1 of 2021, the applicant sought to substitute the attached immovable property with a fixed deposit of Rs.1,36,91,285.00. In I.A.No.2 of 2021, the applicant sought to substitute the attached movable property (61,38,937 equity shares) with a fixed deposit of Rs.6,13,89,370.00. The Court noted that while there is no specific provision in the PMLA for substitution of attached properties, Rule 5(5) of the Prevention of Money Laundering (Taking Possession of Attached or Frozen Properties Confirmed by Adjudicating Authority) Rules, 2013 allows for accepting equivalent value of fixed deposits in certain cases. The Court found the applicant's prayer just and reasonable and allowed I.A. Nos.1 and 2 of 2021.

Issue 3: Return of Rs.14.29 crores along with interest

In I.A.No.3 of 2021, the applicant sought the return of Rs.14.29 crores along with interest, which was appropriated by the opposite party by encashing fixed deposits. The Court, considering the pending appeal, declined to issue any positive direction for the return of the amount at this stage and dismissed I.A.No.3 of 2021.