2024 (4) TMI 115 - HC - Money Laundering

Money Laundering - proceeds of crime - Provisional attachment of properties - Seeking to raise the attachment of the properties mortgaged to the petitioner bank - seeking declaration that G.Os.issued by Home Department, Government of Andhra Pradesh, to the extent of the properties mortgaged by M/s. Agri Gold Farm Estate India Private Limited to the petitioner Bank as illegal, arbitrary, unjust and violation of Article 300-A of the Constitution - HELD THAT - In the instant case, the prime charge against the accused persons is that they have collected deposits from the depositors by making false promises of high returns by contravening Section 5 of the APPDFE Act. As rightly contended by the learned Advocate General, the said provision is not included in the schedule offence under PML Act - The prime intention of any legislation more particularly in the matters relating to economic offences would be to restore back the position or status of victim or deceived as much as possible by recovering the property illgotten from the accused. Mere confiscation of the property to the State would not serve the purpose of legislation, if it would not come to the rescue of the victim. Though the PML Act is a central legislation having overriding effect that too subsequent in point of time to the State legislation i.e. APPDFE Act, the interest of the depositors would well be subserved if the properties of the accused firm remained attached under APPDFE Act so that there may be equitable distribution among the depositors. The Enforcement Directorate may go on investigating the case initiated by it into the offences said to have been committed by accused. However, in view of the reasons given above that the attachment made under the provisions of the APPDFE Act would subserve the interest of the depositors, the Provisional Attachment Orders passed by the Enforcement Directorate are liable to be quashed, for the reason that the same would deter the primary objective of the APPDFE Act in mitigating the hardship of the depositors - All the depositors are natives of this State and the properties attached are situated in this State and the possible inconvenience that may be caused to the depositors, who had parted with their hard earnings with the Company by way of deposits, in approaching the Authority under PMLA Act for pursuing their claims to get back the amount, is also taken into consideration while reaching to the conclusion that proceeding with the matter before the Special Court designated under APPDFE Act would subserve the interest of the depositors. The Enforcement Directorate is at liberty to participate in the proceedings before the Special Court, Eluru under the provisions of APPDFE Act for taking necessary action on the surplus of the amount of the sale proceeds of the auction of the attached properties in accordance with the provisions of the PLM Act. Further, the Enforcement Directorate is free to deal with the properties, which were not attached by the investigating agency of the predicate offence and are covered under Provisional Attachment Orders impugned in these writ petitions, in accordance with the provisions of the PMLA Act. Petition disposed off.

Summary

Issues Involved:
1. Legality of Government Orders (G.Os) issued by the Home Department, Government of Andhra Pradesh.
2. Legality of Provisional Attachment Orders issued by the Enforcement Directorate under the Prevention of Money Laundering Act (PMLA).
3. Validity of attachments under the Andhra Pradesh Protection of Depositors of Financial Establishments Act (APPDFE Act).
4. Rights of bona fide purchasers of properties before registration of crimes.
5. Priority of claims between banks and Enforcement Directorate.

Summary:

1. Legality of Government Orders (G.Os):
The Corporation Bank filed W.P.Nos.4043 and 4044 of 2019 challenging G.O.Ms.No.39 and G.O.Ms.No.23 issued by the Home Department, Government of Andhra Pradesh, which attached properties mortgaged to the bank by M/s. Agri Gold Farm Estate India Private Limited. The court noted that these properties were attached under the APPDFE Act to secure the interests of depositors.

2. Legality of Provisional Attachment Orders by Enforcement Directorate:
The Union Bank of India (erstwhile Corporation Bank) and other petitioners challenged the Provisional Attachment Orders issued by the Enforcement Directorate under Section 5(1) of the PMLA. The court observed that the primary objective of the PMLA is to prevent money laundering and confiscate proceeds of crime, but it does not cater to the equitable distribution of such proceeds among depositors, which is the primary objective of the APPDFE Act.

3. Validity of Attachments under APPDFE Act:
The court upheld the validity of attachments made under the APPDFE Act, emphasizing that the Act aims to protect depositors by ensuring equitable distribution of recovered assets. The court noted that the APPDFE Act has provisions for the Special Court to administer and distribute the attached properties among depositors, which aligns with the legislative intent to safeguard depositors' interests.

4. Rights of Bona Fide Purchasers:
Petitioners in W.P.No.16770 of 2021 and W.P.No.11520 of 2023, who were bona fide purchasers of flats before the registration of crimes, contended that their properties should not be subject to attachment. The court acknowledged their claims and directed them to pursue their remedies before the Special Court designated under the APPDFE Act.

5. Priority of Claims:
The court addressed the claims of Union Bank of India and M/s. BLG Infra Projects, which had purchased properties through E-auction. The court directed these parties to pursue their claims before the Special Court, noting that the bank, as a mortgagee, has priority under Section 58(f) of the Transfer of Property Act.

Conclusion:
The court quashed the Provisional Attachment Orders issued by the Enforcement Directorate to the extent they overlapped with properties attached under the APPDFE Act. The court emphasized that the APPDFE Act's provisions for equitable distribution among depositors should take precedence. The Enforcement Directorate was allowed to participate in proceedings before the Special Court for any surplus amount from the sale of attached properties and to proceed with properties not covered by the APPDFE Act attachments. The court directed all parties to pursue their claims before the Special Court, ensuring that the interests of depositors are adequately protected.