2021 (5) TMI 83 - HC - Money Laundering

Release of provisionally attached properties - Seeking release of goods and hand over to respondent no.4 liquidator in order to reimbursement of the deposit/investment of the investor/depositor of ACCSL - seeking process of winding up and appointment of liquidator under the provisions of MSCS Act, 2002 - direction to to respondent no.1 and 2 to immediately to frame guidelines with regards to loopholes of the Multi State Co-coperative Society Act, 2002 - HELD THAT - It is pertinent to note that winding up of Multi-State Cooperative Societies is governed by the provisions contained in Chapter X of the Act of 2002. If the Central Registrar on the basis of the audit, special audit, inquiry or inspection conducted under the provisions of the Act of 2002 is of the opinion that any society ought to be wound up may after giving the society a reasonable opportunity of making its representation, direct it to be wound up. The Central Registrar is also empowered to direct winding up of the society on his own motion. Thus, nothing prevented the aggrieved persons from approaching the Central Registrar to initiate the process for winding up of the society. The Enforcement Directorate has provisionally attached the properties of ACCSL, the society in liquidation, under the provisions of PMLA. It is noticed that the order passed under Section 5(1) of PMLA, provisionally attaching the property is subject to confirmation by the Adjudicating Authority under Section 8(3) of PMLA. It is only after confirmation of the attachment order, the property attached can be taken possession of. Further, confiscation of property can be ordered, when after the trial the offence of money laundering is found proved. Thus, the directions sought by the petitioners as aforesaid, at this stage are absolutely misconceived. In any case, this Court is not inclined to inter-meddle with the proceedings initiated by the Enforcement Directorate in conformity with the provisions of PMLA, in exercise of PIL jurisdiction. There are no good reason to entertain the present writ petition preferred by the petitioners - petition dismissed.

Summary

Issues:
Petition seeking directions for winding up of a cooperative society and release of attached properties under PMLA.

Analysis:
The petitioners, comprising advocates and individuals involved in social welfare, filed a PIL seeking directions related to the winding up of a credit cooperative society and the release of its properties. They alleged fraud by the management of the society, leading to financial losses for investors. The petitioners requested the court to issue writs for releasing properties, initiating the winding-up process, and preventing misuse of the Multi-State Cooperative Societies Act, 2002. They argued that the society should be wound up under the Act of 2002 to protect investor interests. However, the court noted that the Central Registrar had the authority to initiate winding-up proceedings based on audits or inquiries. As such, the court found no grounds to entertain the petition seeking directions for winding up the society.

Regarding the attachment of properties by the Enforcement Directorate under the Prevention of Money Laundering Act, 2002 (PMLA), the petitioners claimed that PMLA did not apply to societies under the Act of 2002. They argued that the Enforcement Directorate had no legal basis to freeze the society's assets. The court clarified that the Enforcement Directorate's provisional attachment under PMLA was subject to confirmation by the Adjudicating Authority. Confiscation of property could only occur after a trial found money laundering offenses. The court declined to interfere with the Enforcement Directorate's actions under PMLA, stating that the petitioners' requests were misconceived at that stage. Consequently, the court dismissed the PIL, emphasizing that aggrieved parties could seek appropriate legal remedies for their grievances outside of the PIL jurisdiction.