HC quashes Provisional Attachment Orders under PMLA Act favoring state APPDFE Act for depositor protection

The HC quashed Provisional Attachment Orders issued by Enforcement Directorate under PMLA Act regarding properties of accused company that collected deposits through false promises. The court held that while PMLA is central legislation with overriding effect, properties should remain attached under state APPDFE Act to better serve depositors' interests through equitable distribution. The court reasoned that mere confiscation to state wouldn't help victims, and proceeding under APPDFE Act would mitigate depositors' hardship more effectively than PMLA proceedings, considering all depositors were state natives and properties were located within state jurisdiction.

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Issues Involved:
1. Legality of Government Orders (G.Os) issued by the Home Department, Government of Andhra Pradesh.
2. Legality of Provisional Attachment Orders issued by the Enforcement Directorate under the Prevention of Money Laundering Act (PMLA).
3. Validity of attachments under the Andhra Pradesh Protection of Depositors of Financial Establishments Act (APPDFE Act).
4. Rights of bona fide purchasers of properties before registration of crimes.
5. Priority of claims between banks and Enforcement Directorate.

Summary:

1. Legality of Government Orders (G.Os):
The Corporation Bank filed W.P.Nos.4043 and 4044 of 2019 challenging G.O.Ms.No.39 and G.O.Ms.No.23 issued by the Home Department, Government of Andhra Pradesh, which attached properties mortgaged to the bank by M/s. Agri Gold Farm Estate India Private Limited. The court noted that these properties were attached under the APPDFE Act to secure the interests of depositors.

2. Legality of Provisional Attachment Orders by Enforcement Directorate:
The Union Bank of India (erstwhile Corporation Bank) and other petitioners challenged the Provisional Attachment Orders issued by the Enforcement Directorate under Section 5(1) of the PMLA. The court observed that the primary objective of the PMLA is to prevent money laundering and confiscate proceeds of crime, but it does not cater to the equitable distribution of such proceeds among depositors, which is the primary objective of the APPDFE Act.

3. Validity of Attachments under APPDFE Act:
The court upheld the validity of attachments made under the APPDFE Act, emphasizing that the Act aims to protect depositors by ensuring equitable distribution of recovered assets. The court noted that the APPDFE Act has provisions for the Special Court to administer and distribute the attached properties among depositors, which aligns with the legislative intent to safeguard depositors' interests.

4. Rights of Bona Fide Purchasers:
Petitioners in W.P.No.16770 of 2021 and W.P.No.11520 of 2023, who were bona fide purchasers of flats before the registration of crimes, contended that their properties should not be subject to attachment. The court acknowledged their claims and directed them to pursue their remedies before the Special Court designated under the APPDFE Act.

5. Priority of Claims:
The court addressed the claims of Union Bank of India and M/s. BLG Infra Projects, which had purchased properties through E-auction. The court directed these parties to pursue their claims before the Special Court, noting that the bank, as a mortgagee, has priority under Section 58(f) of the Transfer of Property Act.

Conclusion:
The court quashed the Provisional Attachment Orders issued by the Enforcement Directorate to the extent they overlapped with properties attached under the APPDFE Act. The court emphasized that the APPDFE Act's provisions for equitable distribution among depositors should take precedence. The Enforcement Directorate was allowed to participate in proceedings before the Special Court for any surplus amount from the sale of attached properties and to proceed with properties not covered by the APPDFE Act attachments. The court directed all parties to pursue their claims before the Special Court, ensuring that the interests of depositors are adequately protected.

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