Court quashes Provisional Attachment Order, directs release of assets not linked to crime.

The court allowed the petition, quashing the Provisional Attachment Order dated 21.09.2022 concerning the specified assets. The court directed the release of the assets as they were not proceeds of crime and rejected the request for maintaining the status quo for an additional four weeks.

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Issues Involved:
1. Legality of the Provisional Attachment Order under the Prevention of Money Laundering Act (PMLA).
2. Applicability of Section 32A of the Insolvency and Bankruptcy Code (IBC) concerning the protection of assets acquired through a liquidation process.
3. Validity of the "reason to believe" for the attachment under Section 5 of the PMLA.
4. Jurisdictional issues and the availability of alternative remedies under the PMLA.

Detailed Analysis:

1. Legality of the Provisional Attachment Order under the PMLA:
The petitioners challenged the Provisional Attachment Order dated 21.09.2022, arguing that the assets acquired were not "proceeds of crime" as defined under the PMLA. The court examined whether the assets acquired by the petitioners through a court-sanctioned auction could be considered proceeds of crime. The court noted that the assets were acquired following a liquidation process under the IBC, and there was no evidence to suggest that these assets were derived from any criminal activity. The court highlighted that the mere diversion of funds by the corporate debtor does not automatically render the assets acquired by the petitioners as proceeds of crime.

2. Applicability of Section 32A of the IBC:
The petitioners argued that Section 32A of the IBC provides immunity to the assets acquired through a resolution plan or liquidation process from any action under the PMLA. The court referred to the Supreme Court's decision in Manish Kumar vs. Union of India, which upheld the constitutional validity of Section 32A. The court noted that Section 32A bars any action against the property of the corporate debtor once a resolution plan is approved or liquidation is initiated. The court emphasized that the assets acquired by the petitioners were through a court-approved liquidation process, and thus, Section 32A's protection applies.

3. Validity of the "Reason to Believe" for the Attachment under Section 5 of the PMLA:
The court scrutinized whether the "reason to believe" for the attachment was based on tangible material or mere suspicion. The court cited several precedents, including Vijay Madanlal Choudhary vs. Union of India, to establish that "reason to believe" must be founded on credible evidence and not on mere suspicion or gossip. The court found that the attachment order lacked sufficient material to justify the belief that the assets were proceeds of crime. The court concluded that the attachment was based on assumptions and not on concrete evidence, thus failing the "reason to believe" test.

4. Jurisdictional Issues and the Availability of Alternative Remedies under the PMLA:
The court addressed the argument concerning the availability of alternative remedies under Section 8 of the PMLA. The court noted that when the assumption of jurisdiction is non-existent and the order is based on irrelevant facts, the alternative remedy cannot oust the court's jurisdiction under Article 226 of the Constitution. The court held that the provisional attachment order was without jurisdiction as it was not based on valid "reason to believe."

Conclusion:
The court allowed the petition, quashing the Provisional Attachment Order dated 21.09.2022 concerning the specified assets. The court directed that the assets should be released from attachment, as they were not acquired from proceeds of crime. The court rejected the request for maintaining the status quo for a further period of four weeks.

Further Order:
The court rejected the request by the learned ASG to maintain the status quo for a further period of four weeks post-judgment.

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