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of <h1>Appeal allowed: Attachment order modified, delay condoned under Section 14; buyers treated as bona fide purchasers due to officials' negligence</h1> <h3>M/s. Hindavi Swarajya Trading Pvt. Ltd. And M/s Scrum Utkarsh CGHS Ltd. Versus The Joint Director Director of Enforcement, Mumbai</h3> M/s. Hindavi Swarajya Trading Pvt. Ltd. And M/s Scrum Utkarsh CGHS Ltd. Versus The Joint Director Director of Enforcement, Mumbai - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether the appellants and the allottees of flats are bonafide purchasers without knowledge of Provisional Attachment Orders dated 25.03.2013 & 28.03.2013 and the Adjudicating Authority's confirmation dated 15.07.2013. 2. Whether there was negligence or failure by the investigating/enquiry officer or Enforcement Directorate in taking procedural steps (service, notice, endorsement in Sub-Registrar/land revenue records, possession, publication) after attachment and/or confirmation, and whether such failure affected the rights of subsequent purchasers and financiers. 3. If answers to (1) and (2) are affirmative, what are the legal consequences and relief available to the bonafide purchasers and third-party allottees (including effect on confirmation of attachment as to the property in question and consequences for sales/loans already executed)? ISSUE-WISE DETAILED ANALYSIS Issue 1 - Bonafide purchaser status and knowledge of attachment Legal framework: The prevention of money-laundering statutory scheme contemplates provisional attachment under the Act and confirmation by the Adjudicating Authority; provisions require service of orders and compliance with Rules (including those dealing with taking possession and public notice). Principles of bona fide purchase for value without notice and marketability of title under general property law are relevant in assessing protection afforded to subsequent purchasers and financiers. Precedent Treatment: No specific precedent was invoked in the judgment. The Tribunal applied statutory and established general principles concerning notice, possession and protection of innocent third parties. Interpretation and reasoning: The Tribunal examined documentary evidence of the appellants' due diligence: published notice in a local daily prior to purchase, two independent legal title searches/clearance certificates, mutation in land revenue records, municipal/building sanctions and commencement certificate, sanction of bank loans after their searches, and prompt registration of sale deed. The Tribunal found absence of any contemporaneous record showing that the Provisional Attachment Orders or confirmation order were conveyed to the Sub-Registrar or recorded in the land/registration records at the time of the sale and subsequent transactions. The director's appearance before ED in July 2014 was considered: the Tribunal found no record that he was informed of the attachment/confirmation at that appearance; ED enquiries sought transactional details but did not notify or restrain development. The totality of these facts supported a finding that appellants and many flat-buyers lacked notice or knowledge of the attachment when they acted. Ratio vs. Obiter: Ratio - where Provisional Attachment/confirmation orders are not communicated, endorsed or acted upon vis-à-vis registration/land revenue/possession, a purchaser who takes land for valuable consideration after reasonable due diligence (including bank and legal searches) may be considered a bonafide purchaser without notice and entitled to protection. Obiter - observations on why the vendor's accounts were frozen/de-frozen and other operational conduct of ED are explanatory but not necessary to the core legal holding. Conclusion: The Tribunal answered Issue 1 in the appellants' favour, holding they were bonafide purchasers without knowledge of attachment/confirmation at relevant times. Issue 2 - Negligence/failure of investigating/enquiry officer or Enforcement Directorate in procedural steps Legal framework: The Prevention of Money-Laundering (Taking Possession of Attached or Frozen Properties Confirmed by the Adjudicating Authority) Rules, 2013 (notably Rules concerning affixation of notice/possession and publication), statutory obligations to communicate/endorse attachments, and principles of fair procedure and natural justice govern conduct after attachment/confirmation. Precedent Treatment: Judgment did not rely on decided authorities but applied the statutory Rules and administrative expectations of prompt and effective action to protect third parties from unknowingly dealing with attached assets. Interpretation and reasoning: The Tribunal found multiple procedural lapses: absence of record that PAOs or confirmation were conveyed to the Sub-Registrar; no timely endorsement in land revenue/registration records; failure to affix notice/board or publish notice in local media immediately after confirmation; no possession taken or restraining directions issued to local authorities; delayed updating of land record (remarks added only in 2018); limited and selective freezing of vendor accounts and unexplained de-freezing. The Tribunal concluded these failures constituted active concealment or gross negligence by the investigating/enquiry officer and ED, which enabled the vendor to effect resale and induced the purchasers and banks to invest/advance loans. The Tribunal noted that ED's own later communications evinced awareness that the attachment had not been properly made known to local authorities and prospective purchasers, reinforcing the finding of procedural neglect. Ratio vs. Obiter: Ratio - failure by the enforcement agency to effect or communicate statutory steps required after attachment/confirmation (service, endorsement, affixation, publication, possession) may render subsequent innocent purchasers entitled to relief; such failures can prejudice bona fide third parties and mitigate the consequences of prior attachment as to those purchasers. Obiter - detailed critique of ED's selective freezing/defreezing of accounts and motives of particular officers go to credibility and misconduct but are explanatory rather than essential to the holding. Conclusion: Issue 2 answered affirmatively - the ED/I.O. failed to take and record required procedural steps, and such failure materially prejudiced the appellants and innocent allottees. Issue 3 - Consequences and relief Legal framework: Remedies arise from balancing the PMLA's object of preserving proceeds of crime against established protections for bonafide purchasers without notice and the equitable concern to avoid injustice to innocent third parties who have acted in good faith for valuable consideration. Limitation principles (Section 14 benefit) may govern date of knowledge for filing appeals. Precedent Treatment: The Tribunal exercised equitable and statutory interpretation to fashion relief without purporting to nullify the entire attachment regime; it relied on facts showing bona fides and procedural failure to justify modification of the confirmation order qua the appellants' property. Interpretation and reasoning: Because the appellants satisfied the Tribunal that they had no notice and exercised reasonable due diligence, and because ED failed to effectuate statutory steps that would have put purchasers and banks on notice, the Tribunal held that reversing transactions at this advanced stage would unduly prejudice numerous innocent third parties and public/mutual bank funds. The Tribunal concluded that equity and statutory purpose required modification of the confirmation order limited to the subject property as held by the appellants. The appellants' delay in filing the appeal was excused under the principle that limitation runs from date of knowledge; the Tribunal found appellants acted promptly once aware and availed statutory remedies (writ, RTI, criminal complaint against vendor). Consequential directions were left to follow (the order states consequences to follow accordingly) but the core relief was modification of the Adjudicating Authority's order as to the appellants' property and allowance of the appeals. Ratio vs. Obiter: Ratio - where an enforcement authority fails to implement or communicate attachment/confirmation and innocent third parties acquire interests for value after reasonable due diligence, the adjudicatory forum may modify confirmation orders as to those properties to protect bonafide purchasers and third-party financiers; limitation may be tolled till knowledge of attachment. Obiter - suggested broader administrative reforms and critical remarks about operational conduct of ED are illustrative rather than essential to the outcome. Conclusion: The Tribunal allowed the appeals and modified the confirmation order insofar as the specified property was concerned, holding appellants to be bonafide purchasers entitled to relief because of ED's procedural failures; appeals allowed and miscellaneous applications disposed of accordingly.
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