2024 (8) TMI 1216 - HC - Money Laundering

Provisional attachment of properties under Section 5 of the PMLA Act - seeking release if attached property - third party rights/interests - HELD THAT - The order in appeal dated 24th December 2019 clearly protects the Appellant insofar as attachment is concerned. No third-party rights and/or interests can be created in respect of all seven properties by the Respondent. The direction for restoring the possession of the properties cannot be faulted with on merits. Moreover even the order dated 24th December 2019 directed that the Appellant/Department was restrained from taking the possession of the properties. The stand of the Appellant is that notices were issued on 18th December 2019 and 19th December 2019 and the time period as prescribed in the PMLA Rules were adhered to. These issues would have to be now resolved in the Appellate Tribunal. The possession of all the seven properties shall now remain with the Respondent subject to the order of attachment in terms of paragraph 19 of the impugned order dated 17th January 2020. Appeal disposed off.

Issues Involved:
1. Challenge to the impugned order of the PMLA Appellate Tribunal dated 17th January 2020.
2. Provisional attachment of properties under Section 5 of the PMLA Act.
3. Confirmation of the provisional attachment order by the Adjudicating Authority.
4. Restoration of possession of properties to the Respondent.
5. Compliance with procedural requirements for taking possession of properties.
6. Interim relief and deposit of Rs. 11.13 crores by the Respondent.

Issue-wise Detailed Analysis:

1. Challenge to the Impugned Order of the PMLA Appellate Tribunal:
The appeal was filed by the Appellant challenging the order dated 17th January 2020 passed by the PMLA Appellate Tribunal, which directed the Appellant to restore possession of certain properties to the Respondent. The Tribunal had observed a prima facie case in favor of the Respondent for restoration of possession.

2. Provisional Attachment of Properties Under Section 5 of the PMLA Act:
An Enforcement Case Information Report (ECIR) was registered against the Respondent, leading to an investigation under the PMLA Act. A provisional attachment order was issued on 3rd July 2019, attaching properties equivalent to the value of the proceeds of crime. These properties were detailed in the order and located in Village Bhasaur, Tehsil Dhuri, District Sangrur, Punjab.

3. Confirmation of the Provisional Attachment Order by the Adjudicating Authority:
The provisional attachment order dated 3rd July 2019 was confirmed by the Adjudicating Authority on 12th December 2019. The Authority concluded that the defendants had committed the scheduled offense, were associated with the generation of proceeds of crime, and laundered them. The properties under reference were held to be involved in money laundering, and the provisional attachment order was confirmed.

4. Restoration of Possession of Properties to the Respondent:
The Respondent challenged the confirmation order before the Appellate Tribunal, which on 17th January 2020, directed the restoration of possession of the properties to the Respondent. The Tribunal noted that the properties were not acquired out of proceeds of crime and were attached as a value equivalent to the proceeds of crime. The Tribunal also considered the potential damage to perishable goods stored in the properties.

5. Compliance with Procedural Requirements for Taking Possession of Properties:
During the pendency of the appeal, the Respondent filed an application (CM APPL. 25639/2020) highlighting that possession was not given despite the Tribunal's order. The Court, on 23rd October 2020, permitted the Respondent to deposit Rs. 11.13 crores and use the warehouses lawfully. The Court also emphasized that the possession of properties could not be taken without issuing a mandatory notice as required by Rule 5(2) of the PMLA Rules.

6. Interim Relief and Deposit of Rs. 11.13 Crores by the Respondent:
The Respondent deposited Rs. 11.13 crores with the Enforcement Directorate, and the Court directed that this amount be kept in an interest-bearing fixed deposit. The Appellate Tribunal was instructed to decide on the interim relief application and whether the amount should be refunded to the Respondent.

Conclusion:
The Court upheld the Tribunal's direction for restoring possession of the properties to the Respondent, subject to the attachment order. The matter was remanded to the Appellate Tribunal for further adjudication on the interim relief and the appeal. The Appellate Tribunal was to decide within two weeks from 14th October 2024, and the deposit of Rs. 11.13 crores was to be maintained in a fixed deposit until further orders. The appeal was disposed of with all pending applications.

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