Property purchased 15 years before alleged crime cannot be attached under PMLA Section 5

SATISH MOTILAL BIDRI Versus UNION OF INDIA, ASSISTANT DIRECTOR, ENFORCEMENT DIRECTORATE, COCHIN, ENFORCEMENT DIRECTORATE, MINISTRY OF FINANCE, GOVERNMENT OF INDIA NEW DELHI

SATISH MOTILAL BIDRI Versus UNION OF INDIA, ASSISTANT DIRECTOR, ENFORCEMENT DIRECTORATE, COCHIN, ENFORCEMENT DIRECTORATE, MINISTRY OF FINANCE, GOVERNMENT ... Issues Involved:
1. Freezing of bank accounts under PMLA.
2. Provisional attachment of immovable and movable properties under Section 5 of PMLA.
3. Maintainability of the writ petition in light of alternative remedies under PMLA.

Detailed Analysis:

1. Freezing of Bank Accounts under PMLA:
The petitioner, a businessman with an electronic shop in Sholapur, Maharashtra, had his bank accounts frozen by an order dated 05.09.2023 under the Prevention of Money Laundering Act, 2002 (PMLA). The petitioner claimed no connection with the business of M/s. Masters Finserv or its proprietor. The freezing of the bank accounts was challenged as being in violation of Section 17(1) of the PMLA. However, the court deemed the challenge to the freezing of bank accounts academic in nature due to the subsequent provisional attachment order dated 22.05.2024.

2. Provisional Attachment of Immovable and Movable Properties under Section 5 of PMLA:
The provisional attachment order dated 22.05.2024 attached the same bank accounts and an immovable property of the petitioner. The respondents argued that the writ petition was not maintainable due to the availability of an alternative remedy before the adjudicating authority under Section 8 of the PMLA. The predicate offence involved multiple FIRs, alleging that M/s. Masters Finserv and its proprietor embezzled over 73 crores from various complainants. The petitioner was alleged to have arranged mule accounts and received funds from the accused, which were used in online casinos.

3. Maintainability of the Writ Petition in Light of Alternative Remedies under PMLA:
The court acknowledged that PMLA provides a comprehensive mechanism for addressing grievances related to provisional attachment orders, including an appeal to the Adjudicating Authority under Section 6, an appeal to the Appellate Tribunal under Section 26, and a further appeal to the High Court under Section 42. The court referenced the judgment in Santiago Martin and Another v. Union of India and Others, which emphasized the rule of exhaustion of alternative remedies. However, the court also recognized that this rule is one of discretion and not compulsion, citing the Supreme Court's stance in PHR Invent Educational Society v. UCO Bank and Others.

Provisional Attachment Analysis:
The court examined the provisional attachment order, which included both immovable and movable properties. The immovable property was purchased by the petitioner in 2004, well before the alleged predicate offences occurred between 27-01-2021 and 14-11-2022. The court observed that under Section 5 of PMLA, only properties derived or obtained from criminal activities related to a scheduled offence could be attached. The court referenced decisions from the Punjab and Haryana High Court and the Andhra Pradesh High Court, which held that properties purchased before the commission of a scheduled offence do not fall within the ambit of proceeds of crime.

The court disagreed with the Delhi High Court's interpretation in The Deputy Director, Directorate of Enforcement, Delhi v. Axis Bank and Others, which allowed for the attachment of properties of equivalent value. The court emphasized that PMLA's purpose is to target tainted money and properties directly or indirectly derived from criminal activities, not properties unconnected with the criminal activity.

Conclusion:
The court concluded that the provisional attachment of the immovable property, purchased in 2004, was ultra vires the powers of the statute and illegal. Therefore, the order attaching the immovable property was set aside. However, the provisional attachment of the movable properties (bank accounts) was not interfered with, and the petitioner was directed to pursue alternative remedies provided by the statute.

Judgment:
The writ petition was allowed in part, setting aside the provisional attachment of the immovable property while maintaining the attachment of the movable properties.