2024 (7) TMI 1170 - HC - Money Laundering

Provisional attachment order set aside for lack of prior notice to lawful property owner under Section 5

Revathy Vijayagopalan Versus Deputy Director/Authorised Officer, Chennai

The Madras HC set aside a provisional attachment order where the petitioner, who was the lawful owner of property, was not given prior notice before the ... Validity of provisional attachment order - no notice issued to the petitioner, who was the lawful owner of the property - violation of principles of natural justice - HELD THAT:- When the records before the Registering Authorities, as well as the Revenue Authorities, reveal that the petitioner herein is the lawful owner of the property, there was a duty cast on the Adjudicating Authority to issue a notice, before confirming the provisional attachment under Section 5 of the Act. In the absence of any such notice, the entire exercise of attaching the petitioner's property, would be in violation of the mandatory requirements of serving the provisional attachment order under Section 5, as well as the prior show cause notice under Section 8(1) of the Act, on the petitioner, apart from violation of the principles of natural justice and therefore cannot be legally sustainable. In the case of R. AMARABALAN VERSUS DIRECTORATE OF ENFORCEMENT (CHENNAI ZONE) , JOINT DIRECTORATE OF ENFORCEMENT (CHENNAI ZONE) , [2022 (4) TMI 1619 - MADRAS HIGH COURT] a Coordinate Bench of this Court had dealt with a similar situation and set aside the attachment over the property therein. When the petitioner had lawfully purchased the property on 28.11.2018, much before the Provisional Attachment Order dated 29.05.2019 and has been in peaceful possession and enjoyment of the same, the subsequent attachment under Section 5 (1) of the Act and the confirmation under 6 of the Act, without prior notice, cannot be legally sustained. The impugned impugned Provisional Attachment Order passed by the respondent, which was subsequently confirmed by the Adjudicating Authority - Petition allowed. Issues:Challenge to Provisional Attachment Order under Prevention of Money Laundering Act, 2002Analysis:The petitioner sought quashment of the Provisional Attachment Order issued under the Prevention of Money Laundering Act, 2002, concerning a specific property. The property in question had changed hands through legitimate transactions before the attachment order was passed, with the petitioner being the lawful owner as per revenue records and sale deeds.The petitioner contended that the attachment was made without serving notice, violating procedural requirements. The court examined the sale deed, revenue records, and encumbrance certificate, confirming the petitioner's ownership. It highlighted the failure of authorities to conduct due diligence before attaching the property, emphasizing the lack of notice to the petitioner.The court noted the mandatory nature of serving notices under Section 8(1) of the Act and Rule 3(2) of the Rules, emphasizing the importance of due process and natural justice. It referenced a Bombay High Court judgment and the Act's provisions guiding the Adjudicating Authority's actions, stressing the need for adherence to procedural fairness.Referring to a similar case, the court emphasized the necessity of notice issuance before attachment, especially when the lawful ownership is established. It held that the attachment without prior notice to the petitioner was legally unsustainable, directing the quashing of the attachment order and instructing the respondent to hand over possession to the petitioner promptly.In conclusion, the court allowed the writ petition, quashing the Provisional Attachment Order and ordering the respondent to transfer possession of the property to the petitioner within a specified timeframe. The judgment underscored the importance of procedural regularity and respect for legal rights in attachment proceedings under the Act, ensuring justice and fairness in such matters.