Punjab National Bank v. Dy. Director, Directorate of Enforcement

PREVENTION OF MONEY LAUNDERING ACT, 2002

--Appeal to Appellate Tribunal --Appeal filed against attachment of mortgaged property Mortgaged property acquired by mortgagor prior to commission of crime --No involvement of proceeds of crime in acquiring mortgaged properties --When mortgagor purchased properties prior to commission of crime and bank had also created charge over the properties prior to commission of scheduled offence, then, it meant that no “proceeds of crime” were involved in acquiring of these properties, therefore, order of attachment of the mortgaged properties under section 5 was set aside and the properties were released from attachment.--Bank sanctioned a loan facility to mortgagor on the basis of mortgaged of properties. However, Enforcement Directorate (ED) attached the properties of the mortgagor including the mortgaged properties under section 5 on the ground that the mortgagor violated sections 3 and 4 and the properties were purchased out of proceeds of crime. Adjudicating Authority also confirmed the attachment under section 8. Bank filed an appeal against the order and for releasing of the mortgaged properties on the ground that it had already filed suit for recovery under SARFAESI Act, which was pending. Further that, the mortgaged properties were not acquired out of any proceeds of crimes as per section 2(1)(u), because the mortgaged properties had been purchased by the mortgagor and same were already mortgaged with the bank much prior to the commission of the offence. There was no material to form the reason to believe that the mortgaged properties were out of proceeds of crime and liable for the attachment. Held: Evidence on record suggested that the mortgagor had purchased the mortgaged properties prior to commission of crime. Further that, the bank had also created charge over the mortgaged properties prior to commission of scheduled offence, which showed that no “proceeds of crime” were involved in acquiring of these properties. Bank had already filed suit for recovery of money and had also taken action under SARFAESI Act. Therefore, when the mortgaged properties were not purchased from proceeds of crime, then, the same could not be attached by the ED under section 5, because the same would result in hampering the interest of the bank. Adjudicating Authority failed to consider that the ED had attached the mortgaged properties without examining the case of the bank. There was no involvement of proceeds of crime in the mortgaged properties. Hence, the provisional attachment was bad in law, which was liable to be set aside and the mortgaged properties attached under section 5 were released from attachment.