Karnataka High Court
Deputy Director vs Rajendra Kumar Jain on 14 November, 2025
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MSA No. 12 of 2020
R
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 14TH DAY OF NOVEMBER, 2025
PRESENT
THE HON'BLE MR. JUSTICE D K SINGH
AND
THE HON'BLE MR. JUSTICE VENKATESH NAIK T
MISCELLANEOUS SECOND APPEAL NO.12 OF 2020
BETWEEN:
DEPUTY DIRECTOR
DIRECTORATE OF ENFORCEMENT
PRESENTLY OFFICE AT
4TH FLOOR, KAISER-I-HIND
CURIMBHOY ROAD, BALLARD ESTATE
MUMBAI - 400 001
BY ITS ASSISTANT DIRECTOR
SRI RAJESH GOEL.
...APPELLANT
(BY SRI MADHUKAR M. DESHPANDE, ADVOCATE)
AND:
1. RAJENDRAKUMAR JAIN
S/C MR. S.M. JAIN
AGED ABOUT MAJOR
RESIDENT OF NO.F-31
KALPATHRU APARTMENTS
Digitally signed by NO.12 MADHAVANAGAR
MOUNESHWARAPPA
NAGARATHNA RACE COURSE ROAD
Location: High Court
of Karnataka BENGALURU-560 001.
2. STATE BANK OF INDIA
STRESSED ASSETS MANAGEMENT BRANCH
2ND FLOOR, OFFICE COMPLEX BUILDING
LHO COMPOUND, ST. MARKS ROAD
BENGALURU-560 025
BY ITS ASSISTANT GENERAL MANAGER
SMT. HEMALATA P.K.
3. PUNJAB NATIONAL BANK
A BODY CORPORATE UNDER BANKING
COMPANIES (ACQUISITION AND UNDERTAKING)
ACT, 1970
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MSA No. 12 of 2020
HAVING ITS HEAD OFFICE AT
7, BIKAJI CAMA PLACE
NEW DELHI-110 066
ACTING THROUGH ITS LARGE
CORPORATE BRANCH AT
CENTENARY BUILDING
28, M.G. ROAD
BENGALURU-560 001.
4. IDBI BANK LIMITED
A COMPANY INCORPORATED
UNDER THE COMPANIES ACT, 1956
AND A BANKING COMPANY
WITHIN THE MEANING OF THE
BANKING REGULATION ACT, 1949
HAVING ITS HEAD OFFICE AT
IDBI TOWERS, WTC COMPLEX
CUFFE PARED
COLABA, MUMBAI-400 005.
5. BANK OF BARODA
A BODY CORPORATE UNDER BANKING
COMPANIES (ACQUISITION AND UNDERTAKING)
ACT, 1970
HAVING ITS HEAD OFFICE AT
BARODA HOUSE P.B. NO.506
MANDAVI, VADODARA-396 006
HAVING BRANCH AT P.O BOX NO.11745
SAMATA BUILDING GENERAL BHOSALE MARG
NARIMAN POINT
MUMBAI-400 021.
6. UNION BANK OF INDIA
(ERSTWHILE CORPORATION BANK)
HAVING CORPORATE OFFICE AT
UNION BANK BHAVAN, NO.239
VIDHAN BHAVAN MARG
NARIMAN POINT
MUMBAI-400 021.
7. UCO BANK
A BODY CORPORATE UNDER BANKING COMPANIES
(ACQUISITION AND UNDERTAKING) ACT, 1970
AND HAVING ITS HEAD OFFICE AT
NO.10, BTM SARANI, KOLKATA-700 001
WEST BENGAL INDIA
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MSA No. 12 of 2020
HAVING ITS BRANCH OFFICE AT
1ST FLOOR, 13/22 K.G. ROAD
BENGALURU-560 009.
8. INDIAN OVERSEAS BANK
A BODY CORPORATE UNDER BANKING
COMPANIES (ACQUISITION AND UNDERTAKING)
ACT, 1970
HAVING ITS CENTRAL OFFICE AT 763
ANNA SALAI, CHENNAI-600 002
HAVING ITS BRANCH OFFICE AT
HARI KRIPA, 26A, S.V. ROAD
SANTACRUZ (W)
MUMBAI-400 054.
9. THE FEDERAL BANK LTD.
A COMPANY WITHIN THE MEANING
OF THE INDIAN COMPANIES ACT, 1956
HAVING ITS REGISTERED OFFICE AT
FEDERAL TOWERS, ALIUVA-683 101
KERALA.
HAVING ITS BRANCH OFFICE AT
ST. MARKS ROAD, 9, HALEYON COMPLEX
ST. MARKS ROAD
BENGALURU-560 001.
10. PUNJAB AND SIND BANK
A BODY CORPORATE UNDER BANKING COMPANIES
(ACQUISITION AND UNDERTAKING) ACT, 1970
HAVING ITS HEAD OFFICE AT 21
RAJENDRA PALACE, NEW DELHI-110 008
HAVING BRANCH OFFICE AT
J.K. SOMANI BUILDING
BRITISH HOTEL LANE
MUMBAI-400 023.
11. JAMMU AND KASHMIR BANK LTD.
A BANKING COMPANY INCORPORATED
UNDER THE PROVISIONS OF THE
JAMMU AND KASHMIR COMPANIES ACT, 1977
HAVING REGISTERED OFFICE AT
CORPORATE HEADQUARTER
MAULANA AZAD ROAD
SRINAGAR, KASHMIR - 190 001
AND ITS BRANCH OFFICE AT SAIYAD HOUSE
124 S.V. SAVARKAR MARG
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MSA No. 12 of 2020
MAHIM WEST
(MUMBAI)- 400 016.
12. JM FINANCIAL ASSET
RECONSTRUCTION CO. PVT. LTD.
HAVING ITS REGISTERED OFFICE AT
7TH FLOOR, CNERGY
APPASAHEB MARATHE MARG
PRABHADEVI
MUMBAI-400 002.
(AMENDMENT CARRIED OUT
VIDE ORDER DATED 6-8-2025)
...RESPONDENTS
(BY SRI UDAYA HOLLA, SENIOR COUNSEL, FOR
SRI VIVEK HOLLA, ADVOCATE FOR R-1;
SRI K.G. KRISHNAMURTHY, SENIOR COUNSEL, FOR
SRI PATIL VEERENDRA CHANDRASHEKHAR, ADVOCATE FOR
IMPLEADING APPLICANT AS R-2 TO R-12)
***
THIS MISCELLANEOUS SECOND APPEAL IS FILED UNDER
SECTION 42 OF THE PREVENTION OF MONEY LAUNDERING ACT,
2002, PRAYING TO QUASH AND SET ASIDE THE IMPUGNED ORDER
DATED 06-8-2019 PASSED BY THE LEARNED APPELLATE TRIBUNAL
UNDER PML ACT, 2002, NEW DELHI AND ETC.
THIS MISCELLANEOUS SECOND APPEAL, HAVING BEEN
HEARD AND RESERVED ON 14-08-2025 COMING ON FOR
PRONOUNCEMENT OF JUDGMENT, THIS DAY,
VENKATESH NAIK T. J., PRONOUNCED THE FOLLOWING:
CORAM: HON'BLE MR. JUSTICE D K SINGH
and
HON'BLE MR. JUSTICE VENKATESH NAIK T
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MSA No. 12 of 2020
CAV JUDGMENT
(PER: HON'BLE MR. JUSTICE VENKATESH NAIK T)
1. This appeal is filed by the appellant/Directorate of
Enforcement under Section 42 of the Prevention of Money
Laundering Act, 2002 (for short, 'PMLA, 2002') to set aside the
judgment dated 06.08.2019 passed by the Appellate Tribunal,
New Delhi, under the PML Act, 2002, in MP-PMLA-
4917/MUM/2018(U.A), MP-PMLA-4918/MUM/2018 (Stay) and
FPA-PMLA-2532/MUM/2018.
2. The brief facts of the case are that, the CBI - BS & FC has
registered the FIR No. RC BSM 2015 E 0006 dated 29.07.2015
against Sri Vijay Mallya, M/s. Kingfisher Airlines Ltd., and
unknown officers of IDBI and others for showing undue favour
to M/s. Kingfisher Airlines Ltd. (for sake of brevity, "M/s. KAL")
in the matter of sanction and disbursement of short-term loans
(STL) to the tune of Rs.150 Crores, Rs.200 Crores and Rs.750
Crores, respectively, despite weak financials, negative net
worth and low credit rating of the borrower Company and
despite the fact that the Company, viz., M/s. KAL, being a new
client, did not satisfy the norms stipulated in the corporate loan
policy of the bank.
3. The officials of the IDBI Bank Ltd., M/s. KAL and its
officials conspired among themselves and got sanctioned and
disbursed term loans aggregating to Rs.750 Crores to M/s. KAL
without conducting due diligence and M/s. KAL had diverted the
funds, thereby putting the IDBI Bank to a wrongful loss of
Rs.750 Crores.
4. The FIR revealed that M/s. KAL was a company promoted
and incorporated by Sri Vijay Mallya in the year 2003 and was a
fully owned subsidiary company of M/s. UB (Holdings) Ltd.,
Bengaluru. Sri Vijay Mallya was the chairman and CEO of M/s.
KAL. Later, a significant portion of the aforementioned funds
which was sanctioned and disbursed by IDBI Bank Ltd., were
transferred by M/s. KAL to their bank account held with various
other banks, which were then further transferred to other
accounts of M/s. KAL. The said loan amounts were utilised for
the purposes other than the declared ones. Similarly, a major
portion of funds transferred were shown to be utilised for
foreign remittances towards lease rentals, purchase of aircraft
parts, etc., which had gone outside the country and paid into
the bank account of M/s. KAL in London.
5. Hence, the CBI-BS & FC filed an FIR under Section 409
read with 120B of Indian Penal Code, 1860, and 13(2) read
with Section 13(1)(d) of the Prevention of Corruption Act, 1988.
6. Based on the scrutiny of the facts of the said case, the
appellant, Enforcement Directorate, has registered a case
bearing No.ECIR/MBZO/03/2016 dated 25.01.2016, for
investigating into the offence of money laundering, if any, in
terms of the PMLA, 2002. The offence under Section 120(B) of
IPC, 1860 and Section 13(2) read with Section 13(1)(d) of the
Prevention of Corruption Act, 1988, falls under scheduled
offences covered by paragraphs 1 and 8 of Part-A of Schedule
to the PMLA, 2002.
7. During the course of investigation, the appellant, viz., the
Enforcement Directorate, on the basis of documents and
investigation under PMLA provisionally attached the following
properties under the Provisional Attachment Order No.11/2016
dated 11.06.2016 under Section 8(3) of the PMLA, 2002.
Sr. Description of the Area adm. In the name of
property
No.
01 87/16, Rustomji Flat, 2291 sq. ft. United Breweries
Richmond Road, Richmond (Holdings) Ltd
Town, Bangalore
02 604, IIB, Wallace 1561 sq. ft. United Breweries
Apartments, Nashir (Holdings) Ltd.
Bharucha Marg, Grant Road,
Mumbai.
03 Factory Building & land at 4.50 Acres UB Global - a division
Sy. No.254/1, Thuthipattu of United Breweries
Village, Ambur, (Holdings) Ltd.
Vaniyambadi Taluk, Vellore
District, Tamil Nadu.
04 Land parcels situated in 28.71 Acres M/s.Endeavour
Biligeri Village, Kiragandoor Estates Pvt. Ltd.
Village, Madikeri, Kumboor
Village.
05 UB City, Bengaluru (U.B. 35511.64 sq. United Breweries
Towers Commercial) ft. (Holdings) Ltd.
1st Floor - car parking
IInd Floor - Reception
12th Floor- UBHL office
14th Floor- .......do.......
15th Floor- .......do.......
16th Floor- .......do.......
06 UB City, Bengaluru 309974 sq. ft. M/s.United Breweries
(Canberra Tower) (3rd Floor (Holdings) Ltd.
to 16th Floor except 9th &
part of 15th Floor sold to
M/s. USL)
07 UB City, Bengaluru - UB Mall 76406 sq. ft. M/s.United Breweries
(Canberra & Concorde Retail (Holdings) Ltd.
- commercial area viz.,
Basement to IInd Floor)
08 Amount lying balance in Rs.34.21 P.E. Data Centre
bank A/c Crores Resources Pvt. Ltd.
No.0164351000009300 held (approx)
with Lakshmi Vilas Bank,
Bengaluru (presently in
Fixed Deposit A/c
No.164.113.8959/1)
09 Under construction flats in ......... M/s.United Breweries
Kingfisher Tower, Bengaluru (Holdings) Ltd.
to the extent of the
remaining POC 78.
8. Later, the Adjudicating Authority confirmed the Provisional
Attachment Order in O.C.No.612/2016 dated 01.12.2016.
Hence, respondent No.1, Rajendra Kumar Jain filed an appeal
before the Appellate Tribunal (PMLA) under Section 26 of the
PMLA, 2002, being aggrieved by the order dated 01.12.2016
passed by the Adjudicating Authority in O.C. No.612/2016. The
Appellate Tribunal allowed the appeal and set aside the order
dated 01.12.2016 passed by the Adjudicating Authority and
thereby, quashed the provisional order. The Tribunal, however,
by order dated 06.08.2019 clarified at para-34 as under:
"34. However, it is clarified that this Tribunal has decided the
appeal pertaining to the order passed on the attachment of flat
allegedly purchased by the appellant. The finding shall have no
bearing with regard to merit of other proceedings pending
against the accused parties including extradition proceedings.
It is alleged that the flat in question is one of the assets in
which the official liquidator is appointed, therefore, the
appellant, respondent No.3, 5 and 8, unless the final order is
passed in his favour, shall not create third party interest
directly or indirectly."
9. Being aggrieved by the impugned order, the appellant, the
Enforcement Directorate, has filed this appeal.
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10. We have heard learned counsel for the parties.
11. Sri Madhukar M. Deshpande, learned counsel for the
appellant vehemently contended that, the impugned order
passed by the Appellate Tribunal dated 06.08.2019 is
unsustainable in law and on facts, hence liable to be set aside.
The learned Adjudicating Authority has rightly held that
properties provisionally attached under Provisional Attachment
Order No.11/2016 are proceeds of crime, attached under the
concept of property is equivalent in value under the provision of
Section 2(1)(u) of PMLA, 2002, Order of the Tribunal is contrary
to the scheme of PMLA, 2002 and Tribunal has not appreciated
the evidence, facts, and Provisional Attachment Order, which
was passed after due investigation in accordance with Section 5
of PMLA, 2002 by considering all relevant legal aspects, the
Tribunal failed to note that appellant had duly explained the
factors justifying attachment of the properties as equivalent
value of proceeds of crime under Section 8 of the PMLA, 2002.
12. It is also further contended that the money laundering
possesses a grave threat to the Nation's financial integrity and
sovereignty. The PMLA, 2002 was enacted to prevent money
laundering and to attach and confiscate properties derived from
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such offences, however, the Tribunal without considering these
aspects has passed the impugned order mechanically and a
mere agreement to purchase property does not confer
ownership unless a registered sale deed is executed. Hence,
learned counsel contends the finding of the Tribunal is bad in
law.
13. Further, Appellate Tribunal has also erred in relying upon
the decision in VannarakkalKallalathil Sreedharan v.
Chandramaath Balakrishnan and another, reported in
(1990) 3 SCC 291, which pertains to the attachment under
Civil Procedure Code, 1908 and present attachment is under
PMLA, 2002, a special enactment with overriding effect under
Section 71, PMLA and pertains to proceeds of crime and not a
mere civil attachment. Hence, he prayed to allow the appeal.
14. Thus, the appellant, Directorate of Enforcement has framed
the following substantial questions of law on facts, which reads
as under:
I. Is not the Appellant Tribunal refusing to confirm the
Provisional Attachment Order is not against Section 24 of
the PMLA, 2002?
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II. Is not the Appellate Tribunal failing to examine the
proceeds of crime defined under Section 2(1)(u) of the
Act?
III. Is not the Appellate Tribunal failing to examine the
Money laundering defined under Section 2(1)(p) r/w
offence of Money Laundering under Section 3 of the Act?
IV. Is not the Appellate Tribunal failing to examine the
presumption as to records or property in certain cases
defined under Section 22 of the Act?
V. Is not the Appellate Tribunal failing to examine the
presumption in inter connected activities under Section
23 of the Act?
VI. Whether Appellate Tribunal was right in reversing the
confirmation order passed by the Adjudicating Authority
without giving any categorical finding regarding the
existence of the proceeds of crime?
VII. Whether the Appellate Tribunal decided the appeal
contrary to the provisions of the Prevention of Money
Laundering Act, 2002 and decided the appeal?
VIII. Whether the Appellate Tribunal failed to take note of the
statements of various persons including Mr. Jaggaiah and
Mr. Venkaiah while passing the impugned order?
IX. Whether the Appellate Tribunal by ordering release of
property exceeded its jurisdiction?
15. Per Contra, Sri Udaya Holla, learned Senior counsel
appearing for Sri Vivek Holla, on behalf of respondent No.1,
vehemently contended that, on 26.04.2010, a Joint
Development agreement was entered into between M/s. United
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Breweries (holdings) Ltd. ("UBHL") and M/s. Prestige Estate
Projects Pvt. Ltd. ("Prestige"), whereby, inter alia it was argued
upon between the parties to distribute the shares in the
proportion of 55% and 45% respectively. The agreement
entered into between M/s. UBHL and M/s. Prestige, whereby,
inter alia the apartments falling into the respective shares of
each party, were identified and earmarked on 04.11.2010.
Respondent No.1 paid the initial booking amount of Rs.1 Crore
on 05.01.2011 and was allotted Apartment No.7A (8321 sq.ft).
On 22.09.2011, respondent No.1 paid a further sum of
Rs.17,38,79,000/- through banker cheque/DD No.793499 as a
second instalment. On the same day, respondent No.1 paid
third instalment of a sum of Rs.1 Crore through banker
cheque/DD No.793500. Thus, respondent No.1 paid in all
Rs.18,38,79,000/- as on 22.09.2011, and thus, the UBHL
issued acknowledgment to that effect. In this regard, the UBHL
executed an Agreement to Sell in favour of respondent No.1 on
21.05.2012, wherein, the UBHL agreed to sell flat No.7A in
favour of respondent No.1. Therefore, the consideration passed
under the Agreement to Sell is not proceeds of crime and value
thereof. Thus, respondent No.1 is a bona fide purchaser and
the UBHL is a corporate guarantor. Therefore, the appellant/ED
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could attach the sale proceeds in the hands of vendor of
respondent No.1 and not the properties standing in the name of
genuine/legitimate/bona fide purchaser of the flat, without
knowledge. Thus, learned Senior counsel prayed to dismiss the
appeal.
16. Sri K. G. Krishnamurthy, learned Senior counsel appearing
for impleading applicants/respondent Nos.2 to 12 vehemently
contended that, the Bank lends loan to the borrowers and the
public money is involved in this case, and the Tribunal has set
aside the order of the Adjudicating Authority and thus, the
appellant may proceed to attach the properties, which are
available for attachment. The Banks advanced various finance
facility to M/s. KAL for which, Sri Vijay Mallya was a personal
guarantor and the UBHL is a Corporate Guarantor. He contends
that once the winding-up proceeding of the company is
commenced under Sections 441 and 446 of the Companies Act,
the Company Court can deal with the matter and as such, the
Agreement to Sell is not a transfer of title under the provisions
of Transfer of Properties Act, 1882, as the transactions is
barred under Section 536(2) of the Companies Act.
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ANALYSIS & FINDING:
17. This Court has heard the parties at length and has
carefully examined the pleadings, the impugned order, and the
submissions made by both the parties.
18. At the outset, it is pertinent to note that the present
appeal is filed by the appellant on 16.10.2019, and the
impugned order is passed on 06.08.2019.
19. The Prevention of Money Laundering Act, being a special
legislation with significant economic implications, occupies a
distinct place in the statutory framework of financial regulations
and jurisprudence. Recognising the evolving nature of
economic offences and the growing threat of money laundering
to the integrity of national and international financial systems,
the Prevention of Money Laundering Act, has been extensively
amended over time, almost a dozen times, to address
exigencies, close legal loopholes, and reinforce its enforcement
architecture. The list of amendments, which underscores the
evolving scope and rigor of the statute, includes:
(a). The Prevention of Money Laundering (Amendment) Act,
2005 (20 of 2005).
(b). The Prevention of Money Laundering (Amendment) Act,
2009 (21 of 2009).
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(c). The Prevention of Money Laundering (Amendment) Act,
2012 (2 of 2013).
(d). The Finance Act, 2015 (20 of 2015).
(e). The Black Money (Undisclosed Foreign Income and
Assets) and Imposition of Tax Act, 2015 (22 of 2015).
(f). The Finance Act, 2016 (28 of 2016).
(g). The Finance Act, 2018 (13 of 2018).
(h). The Prevention of Corruption (Amendment) Act, 2018 (16
of 2018).
(i). The Finance Act, 2019 (7 of 2019).
(j). The Aadhaar and Other Laws (Amendment) Act, 2019 (14
of 2019).
20. It is thus clear that although the Prevention of Money
Laundering Act empowers the Directorate of Enforcement to
seize or freeze property suspected to be involved in money
laundering, such powers are embedded within a stringent
procedural framework aimed at ensuring accountability,
transparency, and protection of individual rights. The exercise
of such coercive powers must strictly conform to the statutory
checks and balances provided within PMLA.
21. We reiterate that, Section 20(1) of PMLA would necessarily
get attracted, at the very first instance, in respect of any action
taken for the retention of property or the continuance of
freezing of any property. Section 20(1) of PMLA mandates that
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a separate and independent opinion must be formed by an
officer authorised by the Director, who may not necessarily be
the same officer as authorised under Section 17(1) of PMLA,
stating reasons justifying such retention. After forming an
independent reason to believe, which would naturally have to
form the basis for the order for retention, the order would be
required to be forwarded along with the material in his
possession to the Adjudicating Authority, without delay, under
Section 20(2) of PMLA. Such an order would draw sustenance
from the reason to believe and would necessarily have to form
a part of the order, as any order without the appurtenant
reasoning would not be an order at all. This is all the more
relevant since the said order effectively seeks to prolong the
curtailment of the enjoyment of valuable rights of a party, who
has suffered any such seizure or freezing of property.
22. We are also of the opinion that the architecture of the
Prevention of Money Laundering Act is designed to strike a
delicate balance between empowering enforcement agencies
and protecting individual rights. The processes of search,
seizure, freezing, attachment, and retention are embedded with
procedural safeguards to ensure that state action is not only
lawful, but also proportionate and subject to independent
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scrutiny. Judicial and quasi-judicial oversight is envisaged at
every stage to prevent the arbitrary exercise of power and to
uphold constitutional values. The integrity of this framework
rests on the rigorous application of the procedural mandates
enshrined in the statute.
23. A cardinal principle of statutory interpretation, as
reiterated by the Courts, time and again, is that when a statute
prescribes a method to do a particular thing, it must be done in
that manner alone and not otherwise. Therefore, if Section 20
of PMLA stipulates a defined mechanism for the retention of
seized property or records, it is imperative that such procedure
is strictly followed.
24. This legal position was reaffirmed by a Three-Judges
Bench decision of the Hon'ble Supreme Court in the case of
OPTO Circuit (India) Ltd. v. Axis Bank and Others,
reported in (2021) 6 SCC 707, wherein the Court stressed
that procedural compliance under the Prevention of Money
Laundering Act is not optional, especially when individual rights
are at stake. The relevant paragraphs of the said judgment are
extracted herein below:
"8. A perusal of the above provision would indicate that the
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prerequisite is that the Director or such other authorised
officer in order to exercise the power under Section 17 of
the PMLA, should on the basis of information in his
possession, have reason to believe that such person has
committed acts relating to money- laundering and there is
need to seize any record or property found in the search.
Such belief of the officer should be recorded in writing.
Sub-section (1-A) to Section 17 of the PMLA provides that
the officer authorised under sub-section (1) may make an
order to freeze such record or property where it is not
practicable to seize such record or property. Sub-section
(2) provides that after search and seizure or upon issuance
of a freezing order the authorised officer shall forward a
copy of the reasons recorded along with material in his
possession to the adjudicating authority in a sealed
envelope. Sub-section (4) provides that the authority
seizing or freezing any record or property under sub-
section (1) or (1-A) shall within a period of thirty days from
such seizure or freezing, as the case may be, file an
application before the adjudicating authority requesting for
retention of such record or properties seized.
9. For the purpose of clarity, it is emphasised that the
freezing of the account will also require the same procedure
since a bank account having alleged "proceeds of crime"
would fall both under the ambit "property" and "records".
In that regard, it would be appropriate to take note of
Sections 2(1)(v) and 2(1)(w) of the PMLA which defines
"property" and "records". The same read as follows:
"2.(1)(v) "property" means any property or assets of
every description, whether corporeal or incorporeal,
movable or immovable, tangible or intangible and includes
deeds and instruments evidencing title to, or interest in,
such property or assets, wherever located;
2.(1)(w) "records" include the records maintained in the
form of books or stored in a computer or such other form
as may be prescribed;"
10. The scheme of the PMLA is well intended. While it seeks
to achieve the object of preventing money-laundering and
bring to book the offenders, it also safeguards the rights of
the persons who would be proceeded against under the Act
by ensuring fairness in procedure. Hence a procedure,
including timeline is provided so as to ensure that power is
exercised for the purpose to which the officer is vested with
such power and the adjudicating authority is also kept in the
loop. In the instant case, the procedure contemplated under
Section 17 of the PMLA to which reference is made above
has not been followed by the officer authorised. Except
issuing the impugned Communication dated 15-5-2020 to
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AML Officer to seek freezing, no other procedure
contemplated in law is followed. In fact, the impugned
communication does not even refer to the belief of the
authorised officer even if the same was recorded separately.
It only states that the officer is investigating the case and
seeks for relevant documents, but in the tabular column
abruptly states that the accounts have to be "debit
freezed/stop operations". It certainly is not the requirement
that the communication addressed to the Bank itself should
contain all the details. But what is necessary is an order in
the file recording the belief as provided under Section 17(1)
of the PMLA before the communication is issued and
thereafter the requirement of Section 17(2) of the PMLA
after the freezing is made is complied with. There is no
other material placed before the Court to indicate
compliance with Section 17 of the PMLA, more particularly
recording the belief of commission of the act of money-
laundering and placing it before the adjudicating authority or
for filing application after securing the freezing of the
account to be made. In that view, the freezing or the
continuation thereof is without due compliance with the legal
requirement and, therefore, not sustainable.
xxx xxx xxx
14. This Court has time and again emphasised that if a
statute provides for a thing to be done in a particular
manner, then it has to be done in that manner alone and in
no other manner. Among others, in a matter relating to the
presentation of an election petition, as per the procedure
prescribed under the Patna High Court Rules, this Court had
an occasion to consider the Rules to find out as to what
would be a valid presentation of an election petition in
Chandra Kishore Jha v. Mahavir Prasad and Others (1999) 8
SCC 266] and in the course of consideration observed as
hereunder : (SCC p. 273, para 17).
"17.......It is a well-settled salutary principle that
if a statute provides for a thing to be done in a
particular manner, then it has to be done in
that manner and in no other manner."
Therefore, if the salutary principle is kept in
perspective, in the instant case, though the Appellate
Tribunal is vested with sufficient power; such power is
circumscribed by a procedure laid down under the statute.
As such, the power is to be exercised in that manner alone,
failing which, it would fall foul of the requirements of
complying with due process under law.
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25. In the instant appeal, two questions are primarily
involved for decision namely,
(1) Whether the respondent No.1 could
be said to be the owner of Flat No.7A
(under construction) in Kingfisher
Towers on the basis of unregistered
agreement to sell dated 21.05.2012?
(2) Whether Flat No.7A could be
attached as 'proceeds of crime' under
the concept of 'property' which is
equivalent in value under the provisions
of Section 2(1)(u) of PMLA, 2002?
26. Before adverting to the aforesaid questions, it would be
appropriate to take note of the relevant provisions of PMLA,
2002:-
Section 2(1)(u) of PMLA, 2002:
"(u) "proceeds of crime" means any property derived or
obtained, directly or indirectly, by any person as a result of
criminal activity relating to a scheduled offence or the
value of any such property; [or where such property is
taken or held outside the country, then the property
equivalent in value held within the country] [or abroad];"
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Section 5 of PMLA, 2002:
5. Attachment of property involved in money-
laundering.--[(1)Where the Director or any other officer not
below the rank of Deputy Director authorised by the Director
for the purposes of this Section, has reason to believe (the
reason for such belief to be recorded in writing), on the basis
of material in his possession, that--
(a) any person is in possession of any proceeds of crime; and
(b) such proceeds of crime are likely to be concealed, transferred or
dealt with in any manner which may result in frustrating any
proceedings relating to confiscation of such proceeds of crime under
this Chapter, he may, by order in writing, provisionally attach such
property for a period not exceeding one hundred and eighty days
from the date of the order, in such manner as may be prescribed:
Provided that no such order of attachment shall be made
unless, in relation to the scheduled offence, a report has been
forwarded to a Magistrate under section 173 of the Code of
Criminal Procedure, 1973 (2 of 1974), or a complaint has
been filed by a person authorised to investigate the offence
mentioned in that Schedule, before a Magistrate or court for
taking cognizance of the scheduled offence, as the case may
be, or a similar report or complaint has been made or filed
under the corresponding law of any other country:
Provided further that, notwithstanding anything
contained in [first proviso], any property of any person may
be attached under this section if the Director or any other
officer not below the rank of Deputy Director authorised by
him for the purposes of this section has reason to believe (the
reasons for such belief to be recorded in writing), on the basis
of material in his possession, that if such property involved in
money-laundering is not attached immediately under this
Chapter, the non-attachment of the property is likely to
frustrate any proceeding under this Act.]
[Provided also that for the purposes of computing the period
of one hundred and eighty days, the period during which the
proceedings under this section is stayed by the High Court,
shall be excluded and a further period not exceeding thirty
days from the date of order of vacation of such stay order
shall be counted.];
(2) The Director, or any other officer not below the rank of
Deputy Director, shall, immediately after attachment under
sub-section (1), forward a copy of the order, along with the
material in his possession, referred to in that sub-section, to
the Adjudicating Authority, in a sealed envelope, in the
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manner as may be prescribed and such Adjudicating Authority
shall keep such order and material for such period as may be
prescribed.
(3) Every order of attachment made under sub-section (1)
shall cease to have effect after the expiry of the period
specified in that sub-section or on the date of an order made
under [sub-section (3)] of section 8, whichever is earlier.
(4) Nothing in this section shall prevent the person interested
in the enjoyment of the immovable property attached under
sub-section (1) from such enjoyment.
Explanation.-- For the purposes of this sub-section, "person
interested", in relation to any immovable property, includes
all persons claiming or entitled to claim any interest in the
property.
(5) The Director or any other officer who provisionally
attaches any property under sub-section (1) shall, within a
period of thirty days from such attachment, file a complaint
stating the facts of such attachment before the Adjudicating
Authority."
27. As per the material available on record, the Joint
Development Agreement (JDA) between UBHL, the owner of
the property, 26, Vittal Mallya Road, Bengaluru, ('the Schedule
Property') with Prestige is dated 26.04.2010 to construct
'Kingfisher Towers' consisting of the residential flats
whereunder, the Prestige Estates undertook to develop the
construction of luxurious residential apartments on the
Scheduled Property and handover 55% of the total saleable
super built-up area to the UBHL and appropriate unto itself
45% of the super built-up area. It is very strange to note that
the respondent No.1 alleges that he had paid almost entire sale
- 24 -
consideration to the UBHL in respect of the Schedule Property
before even the construction commenced. According to the
respondent No.1, he had paid Rs.1 crore on 05.01.2011 and
Rs.17,38,79,000/- on 22.09.2011 and finally, Rs.1 crore on
22.09.2011.
28. One International Aero Engines AG filed the Company
Petition No.57/2012 on 26.03.2012 seeking winding up of the
KAL and its holding company, the UBHL.
29. Consortium banks led by the State Bank of India (SBI), on
the request of the KAL, entered into a Master Debt Recast
Agreement (MDRA) dated 21.12.2010 and in pursuance
thereto, various related agreements were entered into on the
same day between the consortium banks and the UBHL
including the Personal Guarantee by Dr. Vijay Mallya.
30. The consortium banks filed OA Nos.766/2013 and
1220/2015 before the Debts Recovery Tribunal, Bengaluru
(DRT). The consortium banks also filed Company Petition
No.162/2013 seeking winding up of the UBHL. This Company
Petition was tagged with the pending Company Petition
No.57/2012 besides several other company petitions seeking
winding up of the UBHL.
- 25 -
31. The DRT allowed the OA No.766/2013 vide order dated
19.01.2017 and directed the UBHL, its subsidiaries and sister
companies to pay a sum of Rs.6,203 crores along with interest
@11.50% p.a. from the date of the application till the date of
realisation and OA No.1220/2015 was allowed vide order dated
30.06.2018 and directed the UBHL and KAL to pay a sum of
Rs.644.92 crores along with interest @ 12% p.a. from the date
of the application till the date of realisation.
32. The total decretal amount as on 16.05.2024 came to
Rs.17,471.46 crores. Out of the said amount, the banks were
temporarily holding Rs.10,814.54 crores and the balance sum
due was Rs.6,656.92 crores.
33. The consortium of banks also invoked the Corporate
Guarantee dated 21.12.2010 executed by the UBHL to secure
the obligations of the KAL. The Company Petitions for winding
up of the UBHL, the corporate guarantor to the loan advanced
to the KAL, was allowed vide order dated 07.02.2017. The said
order got confirmed up to the Supreme Court. It appears that
the respondent No.1 entered into an Agreement to Sell for
purchase of Flat No.7A (8321 sq.ft) along with a proportionate
undivided area jointly developed by M/s. UBHL and
- 26 -
M/s.Prestige Estate. The advance sale consideration of
Rs.18,38,79,000/- was said to be paid by the respondent No.1
on 22.09.2011. Thus, even if the respondent No.1 entered into
an unregistered Agreement to Sell dated 21.05.2012 in respect
of the property in question, no title was passed on to the
respondent No.1 under the agreement. A mere Agreement to
Sell, that too unregistered in respect of the immovable property
does not pass title or ownership to the agreement holder. It
only creates a right to seek specific performance of the
contract, while the title remains with the seller until a
registered sale deed is executed and registered.
34. The contention of the respondent No.1 that a Letter of
Allotment dated 12.04.2011 was issued by the UBHL in his
favour in respect of the Flat bearing No.7A in Kingfisher Towers
admeasuring 8,321 square feet of super built-up area for a
total consideration of Rs.20,80,25,000/- and he paid the almost
entire consideration even before execution of the unregistered
agreement to sell dated 21.05.2012 is unbelievable.
35. We find it little strange that almost entire sale
consideration was paid by the respondent No.1 even before
entering into the alleged agreement to sell dated 21.05.2012.
- 27 -
It may also be noted that the agreement to sell dated
21.05.2012 was after filing of the Company Petition
No.57/2012 on 26.03.2012 by the International Aero Engines
AG and this company petition, along with other company
petitions, came to be allowed vide judgment and order dated
07.02.2017.
36. Payment of the alleged almost entire consideration even
before the unregistered agreement to sell being executed in
favour of the respondent No.1 by the UBHL in respect of Flat
No.7A of Kingfisher Towers would cause a huge shadow of
doubt of bona fides and genuineness of these transactions.
Even otherwise, the Company Petition No.57/2012 which was
filed on 26.03.2012 was widely published and advertised.
37. It is relevant to note that despite the Company Petition
No.57/2012 having been filed on 26.03.2012, the respondent
No.1 had entered into the alleged unregistered agreement to
sell dated 21.05.2012 without any leave from the Company
Court. Therefore, even otherwise the said Agreement to Sell
dated 21.05.2012 would be a void transaction. It appears that
there was an intent by the respondent No.1 to assist the
accused in circumventing the pending legal actions by
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facilitating the transactions with the UBHL, post filing of the
winding up petition.
38. Section 54 of the Transfer of Property Act, 1882 (for short
'the TP Act') provides that the contract of sale itself does not
create any interest in or charge on the property for which the
contract of sale has been entered into. It is mere an agreement
for sale of the property which shall take place on the terms
settled between the parties. Section 54 of the TP Act reads as
under:
"54. "Sale" defined.- "Sale" is a
transfer of ownership in exchange for a
price paid or promised or part-paid and
part-promised.
Sale how made.- Such transfer, in
the case of tangible immoveable
property of the value of one hundred
rupees and upwards, or in the case of
a reversion or other intangible thing,
can be made only by a registered
instrument.
In the case of tangible immoveable
property of a value less than one
hundred rupees, such transfer may be
made either by a registered instrument
or by delivery of the property.
Delivery of tangible immoveable
property takes place when the seller
places the buyer, or such person as he
directs, in possession of the property.
- 29 -
Contract for sale.-A contract for the
sale of immoveable property is a
contract that a sale of such property
shall take place on terms settled
between the parties.
It does not, of itself, create any
interest in or charge on such property."
39. The transfer of immovable property by way of sale can
only be by way of a deed of conveyance (duly stamped and
registered) as required by law. Without registration of the sale
deed, no right, title, interest in the immovable property can be
transferred. A contract of sale (Agreement to Sell) which is not
a registered deed of conveyance would fall short of the
requirements of Sections 54 and 55 of the TP Act.
40. The Hon'ble Supreme Court in the case of SURAJ LAMP
AND INDUSTRIES PVT. LTD., vs STATE OF HARYANA AND
ANOTHER, (2012) 1 SCC 656 has held in paragraphs 18 and
19 as under:
"18. It is thus clear that a transfer of
immovable property by way of sale can
only be by a deed of conveyance (sale
deed). In the absence of a deed of
conveyance (duly stamped and
registered as required by law), no
right, title or interest in an immovable
property can be transferred.
- 30 -
19. Any contract of sale (agreement to
sell) which is not a registered deed of
conveyance (deed of sale) would fall
short of the requirements of sections
54 and 55 of the Transfer of Property
Act and will not confer any title nor
transfer any interest in an immovable
property (except to the limited right
granted under section 53A of the
Transfer of Property Act). According to
the Transfer of Property Act, an
agreement of sale, whether with
possession or without possession, is
not a conveyance. Section 54 of the
Transfer of Property Act enacts that
sale of immovable property can be
made only by a registered instrument
and an agreement of sale does not
create any interest or charge on its
subject-matter."
41. The Bombay High Court in the case of CREST HOTEL
LTD and another vs ASSISTANT SUPERINTENDENT OF
STAMPS and another, (AIR 1994 BOM 228) has held that a
contract for sale of immovable property does not by itself
create any interest in or charge on such property. It is an
Agreement to Sell, a document creating a right to obtain any
other document of sale on fulfillment of terms and conditions
specified therein. The relevant paragraph is extracted
hereunder:
"It is well settled that a contract for sale of
immovable property is a contract that a
sale of such property shall take place on
terms settled between the parties. It does
not, of itself, create any interest in or
- 31 -
charge on such property. It is thus clear
that an agreement for sale is merely a
document creating a right to obtain
another document of sale on fulfillment of
terms and conditions specified therein. It
does not, of itself, create any interest in or
charge on such property. On the strength
of such an agreement a buyer does not
become the owner of the property. The
ownership remains with the seller. It will
get transferred to the buyer only on
execution of the sale deed by the seller.
What the buyer gets from an agreement
for sale is only a right to obtain a sale
deed executed in his favour. If the seller
refused to comply, the buyer is entitled to
enforce that obligation by filing a suit for
specific performance."
42. The Provisional Attachment Order No.11/2016 and its
confirmation by the Adjudicating Authority vide order dated
01.12.2016 in OC No.612/2016 were based on the evidence
that the UBHL, controlled directly or indirectly by Dr.Vijay
Mallya, held the properties linked to the proceeds of the crime.
The subject property, Flat No.7A, remained vested with the
UBHL as no registered sale deed took place before the date of
passing of the Provisional Attachment Order and Final
Attachment Order.
43. The consortium of banks led by the SBI had filed
restoration application dated 08.01.2019 under Section 8(7)
and second proviso to Section 8 of the PMLA, 2002 in PMLA
- 32 -
Special Case No.7/2017 to secure temporary restoration of the
properties till final adjudication of the PMLA proceedings. The
official liquidator of the UBHL had filed his reply dated
04.03.2019 to the aforementioned application. The official
liquidator had opposed the restoration of the properties in
favour of the consortium of banks led by the SBI and prayed for
restoration of the attached properties in favour of the official
liquidator on the ground that he was the sole custodian of the
interests of the secured and unsecured creditors of the UBHL.
44. The Special Judge for CBI, Greater Bombay at Mumbai,
has considered the provisions of PMLA, 2002 and held that the
restoration of attached assets was not a matter of right for the
claimant, but the claimant had to undergo various hurdles and
establish his bona fides before the Court. The Special Court for
PMLA specifically held that the consortium of banks led by the
SBI, being the public sector banks dealing with the public
money, passed the stringent test enumerated under Section 8
of PMLA, 2002 and therefore, they are entitled for restoration of
the assets in their favour. The Special Court for PMLA rejected
the prayer of the official liquidator to restore the attached
properties and advised the official liquidator to approach the
Recovery Officer, DRT for further proceedings. The restoration
- 33 -
application of the consortium of banks was allowed vide order
dated 01.06.2021. The properties including the property in
question in the present appeal were ordered to be restored to
the consortium of banks through the Recovery Officer, DRT.
The Special Court directed the Recovery Officer and the
consortium of banks to furnish bonds of undertaking as per
Rule 3A(2) of the Prevention of Money Laundering (Restoration
of Property) Rules, 2016 (for short 'the said Rules'). The
Recovery Officer was permitted to proceed in accordance with
law subject to compliance of the order dated 07.02.2017
passed by this Court in Company Petition No.57/2012.
45. The consortium of banks led by the SBI had executed the
bond of undertaking dated 03.06.2021 under Rule 3A(2) of the
said Rules before the Special Judge in PMLA Special Case
No.7/2017. The consortium banks had undertaken to return the
assets and the properties restored to them by the Enforcement
Directorate for their equivalent amount immediately within 24
hours of the demand made by the Court of Special Judge for
CBI, Greater Bombay at Mumbai. During the pendency of the
restoration application before the PMLA Court and also during
the pendency of the present appeal, the respondent No.1 filed
Company Application No.153/2020 in Company Petition
- 34 -
No.162/2013 seeking direction to the official liquidator to
execute and register the sale deed in respect of Flat No.7A by
suppressing the aforesaid proceedings in PMLA Special Case
No.7/2017. The official liquidator, without disclosing the same,
submitted a memo dated 18.12.2020 stating that the official
liquidator did not have objection for execution of the sale deed.
In pursuance of the order dated 22.12.2020 passed by the
learned Single Judge, the sale deed came to be executed on
05.02.2021.
46. Having considered the aforesaid facts and circumstances
of the case, we are of the considered view that the respondent
No.1 did not have any title over Flat No.7A, Kingfisher Towers.
The property was of the UBHL and not of the respondent No.1.
We are also of the view that the transactions between the
respondent No.1 and the UBHL were not bona fide.
47. The Enforcement Directorate was well within the power to
attach the aforesaid property in possession of the UBHL being
equivalent to the value of the proceeds of crime as defined
under Section 2(1)(u) of the PMLA, 2002. We are also of the
considered view that no objection of the official liquidator for
registration of the sale deed despite the pendency of the
- 35 -
proceedings for restoration of the properties in favour of the
consortium of banks and the pendency of this appeal, was not a
bona fide act. We, therefore, set aside the impugned order
passed by the PMLA Tribunal and allow the appeal.
In view of disposal of the appeal, pending IAs, if any, do
not survive for consideration and accordingly, they stand
disposed of.
Sd/-
(D K SINGH)
JUDGE
Sd/-
(VENKATESH NAIK T)
JUDGE
AM/MN/BKV
