JSPL shares worth Rs 3.11 crore attached under PMLA Section 5(1) can be substituted with equivalent FDR

Delhi HC allowed substitution of 1,70,00,168 JSPL shares (book value Rs. 3,11,05,588) attached under PMLA Section 5(1) with interest-bearing FDR of equivalent amount. Court distinguished between proceeds of crime and equivalent value of proceeds of crime, noting shares were attached as latter not former. Relying on SC precedent in Esskay Properties, HC ordered release of shares upon furnishing FDR in petitioner's name deposited with Enforcement Directorate having lien rights. Court emphasized its power to modify status quo orders while protecting opposite party's interests through adequate security.

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Issues Involved:
1. Quashing of Provisional Attachment Order No. 04/2021 dated 30.07.2021.
2. Quashing of Original Complaint bearing O.C. No. 1514 of 2021 dated 26.08.2021.
3. Quashing of Notice to Show Cause dated 22.09.2021.
4. Substitution of attached shares with a Bank Guarantee or Fixed Deposit Receipt (FDR) or Indemnity Bond.

Summary:

Issue 1: Quashing of Provisional Attachment Order No. 04/2021 dated 30.07.2021
The petitioner sought to quash the Provisional Attachment Order No. 04/2021 dated 30.07.2021 passed u/s 5(1) of the Prevention of Money Laundering Act (PMLA), which attached the shares of M/s Jindal Steel & Power Ltd. (JSPL) as 'value equivalent to the proceeds of crime'. The respondent argued that the petitioner acquired proceeds of crime amounting to Rs. 59,34,21,292 through share sales, and the attachment was necessary to prevent the concealment or transfer of these proceeds.

Issue 2: Quashing of Original Complaint bearing O.C. No. 1514 of 2021 dated 26.08.2021
The petitioner also sought to quash the Original Complaint bearing O.C. No. 1514 of 2021 filed u/s 5(5) of PMLA. The respondents argued that the complaint was filed following proper procedure after identifying proceeds of crime amounting to Rs. 59.34 crores during the investigation.

Issue 3: Quashing of Notice to Show Cause dated 22.09.2021
The petitioner challenged the Notice to Show Cause dated 22.09.2021 issued u/s 8(1) of PMLA, arguing that the Adjudicating Authority was not properly constituted and thus 'coram non judice'. The respondents maintained that the proceedings were in accordance with the law and that the petitioner had not exhausted available remedies under PMLA.

Issue 4: Substitution of Attached Shares with a Bank Guarantee or FDR or Indemnity Bond
The petitioner filed an application u/s 151 of the Civil Procedure Code, 1908, seeking substitution of 1,70,00,168 equity shares attached vide Provisional Attachment Order No. 04/2021 with a Bank Guarantee, FDR, or Indemnity Bond. The petitioner argued that the shares were allotted before the PMLA came into force and the attachment was causing significant prejudice. The court noted that while the attachment of 'proceeds of crime' cannot be substituted, the attachment of property equivalent to the proceeds of crime can be. The court allowed the substitution of the attached shares with an interest-bearing FDR amounting to Rs. 3,11,05,588, to be deposited with the respondent, who would have a lien over it.

Conclusion:
The court allowed the petitioner's application for substitution of the attached shares with an FDR, emphasizing that this order does not reflect an opinion on the merits of the case. The main petition is scheduled for further hearing on 03.09.2024.

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