Finance

SC pulled up ED for attachment of property under PMLA

A Prevention of Money Laundering Act, 2002 (PMLA) case was going on before the honourable Supreme Court of Indian (SC) where the issue involved is whether provisional attachment order passed on 3^rd June 2021 ceases to be in force on the expiry of 180 days. The SC pulled up the Directorate of Enforcement (ED) for attaching the property under PMLA and taking symbolic possession of such property despite the 28^th March, 2022 order of the SC where the advance copy of the petition was asked to be serviced on ED and the matter was supposed to be listed for 1^st April, 2022. 

Background of the case

A divisional bench of the honourable SC comprising of Justices A.S. Oka and A.M. Khanwilkar was hearing a special leave petition (SLP)^[1] against the 3^rd March, 2022 order of the Bombay High Court which allowed the ED to attach the properties of the petitioners.  

The Bombay High court had issued a stay order on the possession of properties of the petitioners which included a residential apartment along with other 11 properties. The court has asked the petitioners to deliver the possession of the properties to the respondents. The order allowed continued attachment by ED of the 11 properties including the residential apartment until the further orders of the court or of any appellate authority.

Facts of the case on attachment of property under PMLA

The divisional bench of SC headed by Justice A.M. Khanwilker passed an order on the SLP on 28^th of March stating that the petitioners need to serve an advance copy of the petition to the standing counsel for the Central Agency while listing the matter for 1^st April, 2022.

The petitioners informed the bench on 1^st April, 2022 that as ordered by the court, the petitioners had served the copy of the petition on the central agency on 30^th March 2022 pursuant to the 28^th March, 2022 order of the court.

However, on 31^st March, 2022, just a day later, the ED went ahead with sealing of the said properties and took ‘notional possession’ of the same. The petitioner urged before the SC that despite assurance from the SC that status quo will not be changed from the 28^th March till the date of listing of the matter before the SC on 1^st April, 2022. Just a day after the petitioners served the petition to the defendant, the defendants proceeded with attaching the property under PMLA despite the matter being listed before the SC.

Observations of the court

The Supreme Court asked for explanation from the respondents. The respondents answered that they had not received any instructions in the instant matter to which the bench rebuked that the respondents have not received the instructions because the officers are hell bent on taking possession of the properties.

The bench said that the statutory period of provisional attachment had already expired and the matter was listed on 1^st April 2022. Even if the order was not communicated to the respondents, the petition was still served on them. The court questioned how the respondents could proceed to attach the properties. The bench then reprimanded the counsel of the respondents to take corrective actions otherwise contempt proceedings would be initiated against the concerned officers.

Order of the court on attachment of property under PMLA

The bench dictated the order wherein it acknowledged the fact that the copy of the petition pursuant to the court order of 28^th March has been served on the respondents on 30^th March by the petitioners and the order of 28^th March also clarified that matter was listed on 1^st April 2022. Despite the said order the officials of ED proceeded with attachment of properties under PMLA and took symbolic possession of the same. The question raised in the order was whether the order of provisional attachment of properties dated 3^rd June 2021 ceases on expiry of the statutory period of 180 days. If the issue gets decided in favour of the petitioners, then no action can be initiated against them on the basis of such order. The court then ordered the respondents to take remedial measures and submit their responses before the date of next hearing on 8^th April, 2022.

Read Our Article:Can Third Party Rights Be Protected During Attachment of Property Under PMLA 2002?