Court confirms Provisional Attachment Order under Money Laundering Act, releases vehicles, directs compliance with Motor Vehicles Act

The Court partially confirmed the Provisional Attachment Order under the Prevention of Money Laundering Act, releasing some vehicles attached. It directed Regional Transport Offices to transfer vehicles purchased from the Official Liquidator, subject to ongoing legal proceedings. The Court emphasized compliance with the Motor Vehicles Act and instructed petitioners to pay statutory dues as operational debt under the Insolvency and Bankruptcy Code. Petitioners were directed to pay 50% of dues within three weeks of notification. The case was disposed of with specific directions for vehicle transfer and payment of statutory dues.

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Issues Involved:

1. Validity of the Provisional Attachment Order under the Prevention of Money Laundering Act (PMLA).
2. Transfer of ownership of vehicles purchased in an auction from the Official Liquidator.
3. Compliance with the Motor Vehicles Act and the Rules for vehicle transfer.
4. Payment of statutory dues relating to the vehicles.

Issue-wise Detailed Analysis:

1. Validity of the Provisional Attachment Order under the PMLA:

The petitioners challenged the Provisional Attachment Order dated 18.06.2019 issued by the Deputy Director, Directorate of Enforcement, under Section 5(1) of the PMLA, which attached 6170 commercial vehicles of the Corporate Debtor. The petitioners contended that the attachment order was unjust as the vehicles had already been sold in an e-auction conducted by the Official Liquidator. The Adjudicating Authority under the PMLA later confirmed the attachment for 1334 vehicles while releasing 4826 vehicles, which were sold in auction proceedings, indicating partial confirmation of the provisional attachment order.

2. Transfer of Ownership of Vehicles Purchased in Auction:

The petitioners sought directions for the transfer of vehicles purchased from the Official Liquidator. The petitioners argued that they faced severe financial loss due to the non-transfer of vehicles, as they had obtained loans for the purchase and the vehicles' value was depreciating. The Court directed the Regional Transport Offices (RTOs) to complete the transfer proceedings of the vehicles subject to the outcome of pending proceedings under the PMLA or any other law.

3. Compliance with the Motor Vehicles Act and Rules for Vehicle Transfer:

The respondents argued that the petitioners had not completed the necessary documentation and had not paid the mandatory taxes/fees required for vehicle transfer under the Motor Vehicles Act and Rules. The Court acknowledged the need for compliance with the Motor Vehicles Act but emphasized that the statutory dues should be claimed under the Insolvency and Bankruptcy Code (IB Code) provisions, specifically the waterfall mechanism under Section 53 of IB Code, which prioritizes the distribution of liquidation assets.

4. Payment of Statutory Dues Relating to the Vehicles:

The Court held that statutory dues, classified as 'operational debt,' should be claimed against the Corporate Debtor under the IB Code, not from the petitioners. The petitioners were directed to pay statutory dues from the date of their vehicle purchase and not for the period prior to their purchase. The RTOs were instructed to inform the petitioners of the dues by 15th July 2021, and the petitioners were to pay 50% of the dues within three weeks of communication, subject to the outcome of proceedings under the relevant Motor Vehicles Tax Acts.

Conclusion:

The petition was partly allowed with specific directions:

(i) RTOs were directed to complete the transfer of vehicles purchased by the petitioners, subject to pending proceedings under the PMLA or other laws.
(ii) RTOs were to inform the petitioners of the statutory dues from the date of vehicle purchase by 15th July 2021.
(iii) Petitioners were to pay 50% of the statutory dues within three weeks of communication, subject to ongoing proceedings.
(iv) The process was to be concluded within four weeks from the receipt of the writ order.
(v) Respondents were granted liberty to approach the Official Liquidator for their dues as per the law.

The petition was disposed of with these directions, and the rule was made absolute to the extent specified.

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