2024 (6) TMI 48 - HC - Money Laundering

Money Laundering - Provisional attachment of property - proceeds of crime - substitution of attached property by bank guarantee - HELD THAT - The Supreme Court in various cases has ordered for substitution of attached property. The Supreme Court in ESSKAY PROPERTIES AND INVESTMENTS PRIVATE LIMITED ANR. VERSUS UNION OF INDIA ORS. 2022 (9) TMI 1592 - SC ORDER lifted the attachment order on producing the fixed deposit of Rs. 3,00,00,000/- in lieu of part of the attached property with no lien of any other party except the Enforcement Directorate and order of attachment was allowed to be substituted by fixed deposit although without prejudice to the rights and contentions of the parties in the proceedings to be instituted before the Appellate Authority. The land admeasuring 26.76 hectares situated at Village Saha, Tehsil Raghurajnagar, District Satna (M.P.) having a total value of Rs. 4,68,60,710/- and attached vide impugned Provisional Attachment Order No 2/2019 dated 23.09.2019 is ordered to be substituted by bank guarantee of equivalent amount to be furnished by the applicant/petitioner no 1 in favour of the respondent no 3 within 15 days who shall be having lien over said FDR. The bank guarantee shall be kept alive by periodical renewal till conclusion of trial arising out of ECIR bearing no. 03/INSZO/2014. If the respondents succeed in present petition then the respondent no. 2 shall be at liberty to encash the bank guarantee. The applicant/petitioner no 1 is also directed to submit an undertaking by way of affidavit that the applicant/petitioner no 1 shall not create any interest in favour of any other person or entity in respect of said bank guarantee. Application allowed.

Issues Involved:
1. Quashing of Provisional Attachment Order No. 02/2019.
2. Quashing of Original Complaint No. 1208/2019.
3. Quashing of Notice to Show Cause dated 22.10.2019.
4. Substitution of attached property with a bank guarantee.
5. Jurisdictional challenge.

Summary:

Issue 1: Quashing of Provisional Attachment Order No. 02/2019

The petitioners sought to quash Provisional Attachment Order No. 02/2019 dated 23.09.2019 issued u/s 5(1) of the PMLA by respondent no. 3, which attached land admeasuring 26.76 hectares situated in Satna, M.P., valued at Rs. 4,68,60,710/-. The petitioners argued that the proceedings were a gross misuse and abuse of PMLA provisions, alleging the charges were false and unsubstantiated. The respondent no. 3 filed Original Complaint OC 1208/2019 dated 14.10.2019 u/s 5(5) of PMLA and issued a Notice to Show Cause dated 22.10.2019 u/s 8(1) of PMLA. The Adjudicating Authority confirmed the attachment u/s 8(3) of PMLA on 02.03.2020. The petitioners' appeal against this confirmation is pending before the Appellate Tribunal.

Issue 2: Quashing of Original Complaint No. 1208/2019

The Original Complaint No. 1208/2019 was filed by respondent no. 3 u/s 5(5) of PMLA. The petitioners contended that the complaint and subsequent proceedings were based on false allegations and should be quashed. The Adjudicating Authority issued a notice to show cause u/s 8(1) of PMLA, and the provisional attachment was confirmed by the Adjudicating Authority.

Issue 3: Quashing of Notice to Show Cause dated 22.10.2019

The Notice to Show Cause dated 22.10.2019 was issued by the Adjudicating Authority u/s 8(1) of PMLA following the filing of the Original Complaint. The petitioners argued that this notice, along with the complaint and attachment order, should be quashed as they were based on unsubstantiated allegations.

Issue 4: Substitution of Attached Property with a Bank Guarantee

The petitioners requested the substitution of the attached land with a bank guarantee of equivalent value (Rs. 4,68,60,710/-). They argued that the attachment caused significant financial losses and hindered their business operations. The court noted various precedents, including Supreme Court orders, allowing such substitutions. The court ordered the substitution of the attached land with a bank guarantee, which should be kept alive by periodical renewal until the conclusion of the trial arising out of ECIR No. 03/INSZO/2014.

Issue 5: Jurisdictional Challenge

The respondent no. 3 argued that the application was not maintainable in Delhi due to forum non-conveniens, as the petitioner, attached property, and respondent were based in Madhya Pradesh. However, the court found that the Original Complaint was filed in Delhi, and related proceedings, including the CBI FIR and trial, were also in Delhi. Therefore, the court held that it had jurisdiction to entertain the petition.

The application was allowed, and the attached land was ordered to be substituted by a bank guarantee. The court clarified that this order should not be taken as an opinion on the merits of the case.

List on 29.07.2024, the date already fixed.

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