2023 (2) TMI 15 - HC - Money Laundering

High Court upholds validity of PMLA attachment order, emphasizes alternative remedies

M/s. Saravana Stores (Gold Palace), A Partnership firm represented by its Partner, Shri. Y.P. Shiravan, Mrs. P. Sujatha W/o. Late Y. Palakkudurai, Shri. Y.P. Shiravan S/o. Late Y. Palakkudurai, Indian Bank Versus The Deputy Director Directorate of Enforcement, The Adjudicating Authority [PMLA], M/s. Indian Bank, Stressed Assets Management Branch, represented by the Branch Head, M/s. Saravana Stores (Gold Palace), represented by its Partners, Mrs. P. Sujatha & Mr. Y.P. Shiravan, Mrs. P. Sujatha, Mr. Y.P. Shiravan

The High Court dismissed the writ petitions challenging the provisional attachment order under the Prevention of Money Laundering Act, 2002 (PMLA). The ... Money Laundering - provisional attachment order - SARFAESI Act will have the primacy/overriding effect over the provisions of the PMLA or not - diversion of funds - HELD THAT:- It has been brought to our notice that all the petitioners have already raised objections both on facts and on law and it has been submitted before the Adjudicating Authority viz., the second respondent. The second respondent is a quasi judicial authority, who can go into both the facts and law while dealing with the objections raised by the petitioners. The provisional attachment order passed u/s.5 of the PMLA has been held to be constitutionally valid by the Apex Court in Vijay Madanlal Choudhary and others v. Union of India and others [2022 (7) TMI 1316 - SUPREME COURT] and hence, the provisional attachment order passed by the first respondent does not suffer from lack of jurisdiction. The provisional attachment order has been placed before the second respondent for confirmation u/s.8(3) of the PMLA. The alternative remedy is only a self-imposed restriction and it is not an absolute one and in appropriate cases, this Court can exercise its jurisdiction under Article 226 of the Constitution of India in spite of the availability of an alternative remedy. Such exercise of jurisdiction is normally done in cases where the authority has initiated proceedings or passed orders without or in excess of jurisdiction or in cases where there is a serious violation of principles of natural justice or where certain extraordinary/special circumstances exist, which require the exercise of extraordinary power and jurisdiction under Article 226 of the Constitution of India. The law on this issue is too well settled. In the facts of the present case, it is already held that the provisional attachment order passed by the first respondent does not suffer from any excess or lack of jurisdiction. The petitioners in both the writ petitions have been put on notice by the Adjudicating Authority and the petitioners have also submitted their objections both on facts and on law and hence, it cannot be held that a decision is taken behind the back of the petitioners and there is no violation of principles of natural justice - the petitioners have an effective, alternative and efficacious remedy and hence, we are not inclined to entertain these writ petitions. If any adverse order is passed by the Adjudicating Authority, an appeal is provided u/s.26 of the PMLA to the Tribunal from where there is a further appeal to the High Court u/s.42 of the PMLA. There are no ground to entertain these writ petitions and we leave it open to the petitioners to raise all the grounds both on facts and on law before the Adjudicating Authority, viz., the second respondent and the same shall be considered on its own merits and in accordance with law - petition dismissed. Issues Involved:1. Challenge to provisional attachment order under Prevention of Money Laundering Act, 2002 (PMLA).2. Primacy of SARFAESI Act over PMLA.3. Maintainability of writ petition due to alternative remedies.4. Validity of provisional attachment order and adjudication proceedings.Analysis:1. Challenge to Provisional Attachment Order under PMLA:The Indian Bank filed a writ petition challenging the provisional attachment order under the PMLA and the notice for adjudication issued by the Enforcement Directorate (ED). The petitioners defaulted on loans, leading to the bank classifying them as non-performing assets. Subsequently, irregularities in loan disbursal and property valuation were detected, resulting in a complaint to the CBI and registration of a First Information Report. The ED passed a provisional attachment order under the PMLA, which was challenged in the writ petitions.2. Primacy of SARFAESI Act over PMLA:The main contention raised was regarding the primacy of the SARFAESI Act over the PMLA. The petitioners argued that the SARFAESI Act, being a Special Act, should take precedence over the PMLA, a General Act. They relied on Section 26(c) of the SARFAESI Act to assert that any security interest by a secured creditor should have priority over subsequent proceedings. Several judgments were cited to support this argument.3. Maintainability of Writ Petition:The ED contended that the writ petition was not maintainable due to the availability of alternative remedies before the Adjudicating Authority and the Appellate Tribunal. Citing precedent, it was argued that the petitioners should exhaust these remedies before approaching the High Court under Article 226 of the Constitution of India.4. Validity of Provisional Attachment Order and Adjudication Proceedings:The Court noted that the provisional attachment order under the PMLA was constitutionally valid, as established by a previous Supreme Court ruling. The petitioners had raised objections before the Adjudicating Authority, which is empowered to consider both factual and legal aspects. The Court emphasized that the availability of an alternative remedy does not always bar the High Court from exercising its jurisdiction, particularly in cases of jurisdictional excess, natural justice violations, or special circumstances. Given the lack of such circumstances, the Court declined to interfere with the provisional attachment order and ongoing adjudication proceedings.In conclusion, the Court dismissed the writ petitions, emphasizing the availability of alternative remedies and the need for the petitioners to address their concerns before the Adjudicating Authority. The Court refrained from making definitive legal findings due to conflicting judgments in different High Courts and pending cases before the Supreme Court.