2023 (12) TMI 855 - HC - Money Laundering

Money Laundering - proceeds of crime - provisional attachment order - refusal by the Registrar of documents to register the Sale Certificate executed by the Respondent No. 4/Bank - HELD THAT - Admittedly, on the date when the property in question was put to public auction and on the date when the consideration amount was deposited by the Petitioner and on the date when the possession of the property in question was handed over to the Petitioner by the Respondent No. 5/Bank, there was no communication from the Respondent No. 3/ED to the Registering authority informing the Registrar of documents regarding the fact that the property could be tainted with the proceeds of crime. Section 17 (4) of the PMLA mandates that the authority seizing any record or property under sub-section (1) or freezing any record or property under sub-section (1A) shall, within a period of thirty days from such seizure or freezing, as the case may be, file an application, requesting for retention of such record or property seized under sub-section (1) or for continuation of the order of freezing served under sub-section (1A), before the Adjudicating Authority. Admittedly, this procedure has also not been complied with by the authority - It is also well settled that a Sale Certificate which is issued to an Auction Purchaser by a bank in public auction is an evidence of title and the Auction Purchaser derives title on the confirmation of Sale in his favour. This Court does not find any impediment for the Registrar of documents to proceed ahead and register the Sale Certificate in favour of the Petitioner. It is trite law that availability of an alternate remedy alone is not an absolute bar for a High Court to refuse to entertain a petition under Article 226 of the Constitution of India. In the present case, the property in question had been sold in auction to the Petitioner herein before the steps under Section 17 of the PMLA were initiated, and, therefore, this Court in the facts of the present case is inclined to exercise its jurisdiction under Article 226 of the Constitution of India even though the matter is pending before the Tribunal - Petition allowed.

Summary

Issues involved:
The refusal to register the sale of a property due to a Provisional Attachment Order (PAO) under the Prevention of Money Laundering Act (PMLA) issued after the property was auctioned. The contention of compliance with PMLA procedures and the exercise of jurisdiction under Article 226 of the Constitution of India.

Refusal to Register Sale:
The Petitioner, an auction purchaser, sought direction for registration of a property sale certificate. The Respondent Bank auctioned the property, and the Petitioner acquired it, but registration was denied due to a PAO issued post-auction. The Registrar withheld registration pending clearance from the Enforcement Directorate (ED), which was not communicated during the auction or possession transfer.

Compliance with PMLA Procedures:
The Petitioner argued that the refusal to register violated the law as no ED communication was made during the auction process. Citing the OPTO Circuits case, it was contended that non-compliance with PMLA procedures renders property attachment invalid. The Respondents suggested adjudication before the Tribunal, while the Bank confirmed no ED communication pre-auction.

Exercise of Jurisdiction under Article 226:
The Court analyzed the PMLA's search and seizure provisions, noting the lack of communication from ED during the auction process. Quoting the OPTO Circuits case, it emphasized strict adherence to statutory procedures. The Sale Certificate issued to the Petitioner was deemed valid evidence of title, allowing registration despite pending Tribunal proceedings under the PMLA.

Conclusion:
The Court allowed the writ petition, asserting jurisdiction under Article 226 despite pending Tribunal proceedings. It highlighted the discretionary nature of writ jurisdiction and upheld the Petitioner's right to register the Sale Certificate. The Enforcement Directorate was advised to seek appropriate orders through the Tribunal concerning the property's proceeds of crime, acknowledging the Bank's appropriation of the sale amount.