Karnataka High Court
Deputy Director vs Smt Zareena Taj on 17 October, 2025
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MSA No. 78 of 2020 AND
CONNECTED MATTERS
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 17TH DAY OF OCTOBER 2025
PRESENT
THE HON'BLE MR. JUSTICE D K SINGH
®
AND
THE HON'BLE MR. JUSTICE VENKATESH NAIK T
MISCELLANEOUS SECOND APPEAL NO. 78 OF 2020
C/W
MISCELLANEOUS SECOND APPEAL NO. 87 OF 2020,
MISCELLANEOUS SECOND APPEAL NO. 88 OF 2020 &
MISCELLANEOUS SECOND APPEAL NO. 89 OF 2020
IN M.S.A.NO.78/2020:
BETWEEN:
1. DEPUTY DIRECTOR,
DIRECTORATE OF ENFORCEMENT,
BANGALORE ZONAL OFFICE,
3RD FLOOR, B BLOCK, BMTC,
SHANTINAGAR - TTMC,
KH ROAD, SHANTINAGAR,
Digitally BANGALORE-560 027,
signed by REPRESENTED BY ITS
VASANTHA ASSISTANT DIRECTOR
KUMARY B K
Location: MR. M N THYAGARAJ.
HIGH COURT ...APPELLANT
OF
KARNATAKA
(BY SRI MADHUKAR M. DESHPANDE, ADVOCATE)
AND:
1. SRI ASADHULLAH KHAN,
S/O SRI RAHMATULLAH KHAN,
AGED ABOUT 38 YEARS,
RESIDING AT H.NO.D.4/418/2481,
5TH CROSS, GANDHINAGAR,
MANDYA-571 401.
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MSA No. 78 of 2020 AND
CONNECTED MATTERS
2. THE MANAGER,
SYNDICATE BANK,
MANDYA BRANCH,
MANDYA-571 401.
...RESPONDENTS
(BY SRI BHARGAVA D. BHAT, ADVOCATE FOR R-1;
SRI C. VINAY SWAMY, ADVOCATE FOR R-2)
THIS MSA IS FILED UNDER SECTION 42 OF THE
PREVENTION OF MONEY LAUNDERING ACT, 2002, PRAYING TO
SET ASIDE THE IMPUGNED ORDER DATED 18.09.2017
(ANNEXURE-A) PASSED BY THE APPELLATE TRIBUNAL
(PREVENTION OF MONEY LAUNDERING ACT), NEW DELHI, IN
FPA-PMLA-383/BNG/2012 AND ETC.
IN M.S.A.NO.87/2020
BETWEEN:
DEPUTY DIRECTOR,
DIRECTORATE OF ENFORCEMENT,
BANGALORE ZONAL OFFICE,
3RD FLOOR, B BLOCK, BMTC,
SHANTINAGAR-TTMC,
KH ROAD, SHANTINAGAR,
BANGALORE-560 027,
REPRESENTED BY ITS
ASSISTANT DIRECTOR
MR. M.N.THYAGARAJ.
...APPELLANT
(BY SRI MADHUKAR M. DESHPANDE, ADVOCATE)
AND:
1. SMT. AYESHA NAJAM,
W/O ASADHULLAH KHAN,
AGED ABOUT 41 YEARS,
R/AT H.NO.D.4/418/2481,
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MSA No. 78 of 2020 AND
CONNECTED MATTERS
5TH CROSS, GANDHINAGAR,
MANDYA-571 401.
2. THE MANAGER,
SYNDICATE BANK,
MANDYA BRANCH,
MANDYA-571 401.
3. SRI ASADHULLAH KHAN,
S/O SRI RAHMATULLAH KHAN,
AGED ABOUT 38 YEARS,
R/AT H.NO.D.4/418/2481,
5TH CROSS, GANDHINAGAR,
MANDYA-571 401.
4. SMT. NASREEN TAJ,
W/O ASADHULLAH KHAN,
MAJOR BY AGE,
R/AT H.NO.D.4/418/2481,
5TH CROSS, GANDHINAGAR,
MANDYA-571 401.
5. SMT. ZAREENA TAJ,
M/O NASREEN TAJ,
MAJOR BY AGE,
R/AT H.NO.D.4/418/2481,
5TH CROSS, GANDHINAGAR,
MANDYA-571 401.
...RESPONDENTS
(BY SRI BHARGAVA D. BHAT, ADVOCATE FOR R-1, R-3 & R-5;
SRI C. VINAY SWAMY, ADVOCATE FOR R-2;
VIDE COURT ORDER DATED 23.01.2023, NOTICE TO
R-4 IS HELD SUFFICIENT)
THIS MSA IS FILED UNDER SECTION 42 OF THE
PREVENTION OF MONEY LAUNDERING ACT, 2002, PRAYING TO
SET ASIDE THE IMPUGNED ORDER DATED 18.09.2017
(ANNEXURE-A) PASSED BY THE APPELLATE TRIBUNAL
(PREVENTION OF MONEY LAUNDERING ACT), NEW DELHI IN
FPA-PMLA-385/BNG/2012 AND ETC.
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MSA No. 78 of 2020 AND
CONNECTED MATTERS
IN M.S.A.NO.88/2020
BETWEEN:
1. DEPUTY DIRECTOR,
DIRECTORATE OF ENFORCEMENT,
BANGALORE ZONAL OFFICE,
3RD FLOOR, B BLOCK, BMTC,
SHANTINAGAR-TTMC, K.H ROAD,
SHANTINAGAR,
BANGALORE-560 027,
REPRESENTED BY ITS
ASSISTANT DIRECTOR
MR. M.N.THYAGARAJ.
...APPELLANT
(BY SRI MADHUKAR M. DESHPANDE, ADVOCATE)
AND:
1. SMT. NASREEN TAJ,
W/O ASADHULLAH KHAN,
MAJOR BY AGE,
RESIDING AT H.NO.D.4/418/2481,
5TH CROSS, GANDHINAGAR,
MANDYA-571 401.
2. THE MANAGER,
SYNDICATE BANK,
MANDYA BRANCH,
MANDYA-571 401.
...RESPONDENTS
(BY SRI BHARGAVA D. BHAT, ADVOCATE FOR R-1;
SRI C. VINAY SWAMY, ADVOCATE FOR R-2)
THIS MSA IS FILED UNDER SECTION 42 OF THE
PREVENTION OF MONEY LAUNDERING ACT, 2002, PRAYING TO
SET ASIDE THE IMPUGNED ORDER DATED 18.09.2017
(ANNEXURE-A) PASSED BY THE APPELLATE TRIBUNAL
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MSA No. 78 of 2020 AND
CONNECTED MATTERS
(PREVENTION OF MONEY LAUNDERING ACT), NEW DELHI, IN
FPA-PMLA-382/BNG/2012 AND ETC.
IN M.S.A.NO.89/2020
BETWEEN:
1. DEPUTY DIRECTOR,
DIRECTORATE OF ENFORCEMENT,
BANGALORE ZONAL OFFICE,
3RD FLOOR, B BLOCK, BMTC,
SHANTINAGAR-TTMC, KH ROAD,
SHANTINAGAR,
BANGALORE-560 027,
REPRESENTED BY ITS
ASSISTANT DIRECTOR
MR. M.N.THYAGARAJ.
...APPELLANT
(BY SRI MADHUKAR M. DESHPANDE, ADVOCATE)
AND:
1. SMT. ZAREENA TAJ,
M/O NASREEN TAJ,
MAJOR BY AGE,
R/AT H.NO.D.4/418/2481,
5TH CROSS, GANDHINAGAR,
MANDYA-571 401.
2. THE MANAGER,
SYNDICATE BANK,
MANDYA BRANCH,
MANDYA-571 401.
3. SRI ASADHULLAH KHAN,
S/O SRI RAHMATULLAH KHAN,
AGED ABOUT 38 YEARS,
R/AT H.NO.D.4/418/2481,
5TH CROSS, GANDHINAGAR,
MANDYA-571 401.
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MSA No. 78 of 2020 AND
CONNECTED MATTERS
4. SMT. AYESHA NAJAM,
W/O ASADHULLAH KHAN,
AGED ABOUT 41 YEARS,
R/AT H.NO.D.4/418/2481,
5TH CROSS, GANDHINAGAR,
MANDYA-571 401.
5. SMT. NASREEN TAJ,
W/O ASADHULLAH KHAN,
MAJOR BY AGE,
R/AT H.NO.D.4/418/2481,
5TH CROSS, GANDHINAGAR,
MANDYA-571 401.
...RESPONDENTS
(BY SRI BHARGAVA D. BHAT, ADVOCATE FOR R-1, R-3 & R-4;
SRI C. VINAY SWAMY, ADVOCATE FOR R-2;
VIDE COURT ORDER DATED 09.09.2024, NOTICE ON
R-5 IS DEEMED TO HAVE BEEN EFFECTED)
THIS MSA IS FILED UNDER SECTION 42 OF THE
PREVENTION OF MONEY LAUNDERING ACT, 2002, PRAYING TO
SET ASIDE THE IMPUGNED ORDER DATED 18.09.2017
(ANNEXURE-A) PASSED BY THE APPELLATE TRIBUNAL
(PREVENTION OF MONEY LAUNDERING ACT), NEW DELHI, IN
FPA-PMLA-384/BNG/2012 AND ETC.
THESE APPEALS HAVING BEEN HEARD AND RESERVED
FOR JUDGMENT ON 13.08.2025, COMING ON FOR
PRONOUNCEMENT THIS DAY, D K SINGH J., PRONOUNCED
THE FOLLOWING:
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MSA No. 78 of 2020 AND
CONNECTED MATTERS
CORAM: HON'BLE MR. JUSTICE D K SINGH
and
HON'BLE MR. JUSTICE VENKATESH NAIK T
CAV JUDGMENT
(PER: HON'BLE MR. JUSTICE D K SINGH)
These four Miscellaneous Second Appeals have been filed
by the Directorate of Enforcement impugning the judgment dated
18.09.2017 passed by the Appellate Tribunal Prevention of
Money Laundering Act at New Delhi, in FPA-PMLA-
382/BNG/2012, FPA-PMLA-383/BNG/2012, FPA-PMLA-
384/BNG/2012 and FPA-PMLA-385/BNG/2012.
2. The brief facts of the case are that the Central Bureau of
Investigation (CBI) registered a case on 15.04.2009 against
Sri H.M. Swamy, the then Branch Manager of Syndicate Bank,
Mandya Branch, Mandya, Sri Asadulla Khan of Gandhi Nagar,
Mandya and others for the offences punishable under Section
120B read with Sections 409, 420, 467 and 471 of Indian Penal
Code, 1860 (IPC) and Section 13(2) read with Section 13(1)(d)
of the Prevention of Corruption Act, 1988 (PC Act), on a
complaint of Chief Vigilance Officer, Syndicate Bank, Corporate
MSA No. 78 of 2020 AND
CONNECTED MATTERS
Office, Gandhi Nagar, Bengaluru, regarding fraudulent
transactions in the sanction and disbursal of Syndicate Jai Kisan
loan and other credit facilities. The CBI had filed the charge
sheet under Section 173 of the Code of Criminal Procedure,
1973, after completing the investigation against Sri H.M. Swamy,
Sri Asadulla Khan, Sri P.K. Vitthaldas, Sri Ayub Pasha, Sri
Najamodeen, Smt. Ayesha Najam, Smt. Naseemunnissa and
Smt. Nasreen Taj, for the offences punishable under Section
120B read with Section 420 of IPC and Section 13(2) read with
Section 13(1)(d) of the PC Act.
3. In sum and substance, the allegations in the charge sheet
against the aforesaid accused are that Sri H.M. Swamy, the then
Branch Manager of Syndicate Bank, Mandya Branch and Sri
P.K. Vitthaldas, the then Manager of Syndicate Bank, Mandya
Branch, had conspired with Sri Asadulla Khan and others in the
matter of disbursal of temporary overdrafts, sanctions/disbursal
of loans and other credit facilities in favour of Sri Asadulla Khan,
in gross violation of the procedures, banking norms and in
excess of their delegated financial powers.
MSA No. 78 of 2020 AND
CONNECTED MATTERS
4. The borrowers defaulted in making repayment of the loans
and credit facilities advanced to them, which resulted in loss of
Rs.12,63,65,210/- to the Syndicate Bank. It was also found that
the properties offered as securities for the overdraft credit
facilities by the borrowers/accused were not found sufficient to
meet the outstanding liabilities of the borrowers.
5. A complaint was filed by the Directorate of Enforcement,
Bengaluru under Section 5(5) of the Prevention of Money
Laundering Act, 2002 (PMLA). The provisional Attachment Order
No.02/2012 dated 14.03.2012 in No.ECIR/87/BZO/2010-AD-
MNT/2054 was confirmed by the Adjudicating Authority in terms
of Section 8(4) of the PMLA on 27.07.2012.
6. The Appellate Tribunal, vide impugned order dated
18.09.2017, had allowed the appeals filed by the accused
challenging the confirmation order of attachment and quashed
the confirmation order passed by the Adjudicating Authority.
7. The details of the attached properties of the respective
respondents, which are mortgaged to the Syndicate Bank are
given hereunder:
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MSA No. 78 of 2020 AND
CONNECTED MATTERS
Sl. Particulars of the Property & Date of Name of the Value
No. Acquisition Holder of the
Property
1 A house constructed by Shri Smt. Ayesha Rs.
Asadulla Khan at the cost of Rs. 1 Najam Wife of
crore during the year 2009 at the Mr. Asadulla 1,00,00,000/-
house site/plot measuring 37ft X 60ft Khan
property municipal Khata
No. D4/418/2481 at 5th Cross,
Gandhinagar, Mandya City, Mandya
purchased vide Registration No.
5047 registered at Sub-registrar,
Mandya dated 08-08-2006.
2 A factory M/s Faara Industries Smt. Ayesha Rs.
constructed by Shri Asadulla Khan Najam, Wife of
1,00,00,000/-
at No.163, 5th Cross, Gandhinagar, Mr. Asadulla
Mandya. The factory plot was Khan
allotted by KIADB (The Karnataka
Industrial Areas Development
Board) vide Possession Certificate
No. IADB/MYS/941/1846/99-2000
dated 8-11-1999 measuring 53.75
Mts x 150.00 Mtrs.
Industrial Property bearing site No.
916, 'F' Block, Vivekananda Nagar
Layout, Mandya City
3 Agricultural land measuring 12 Smt. Nasreen Taj Rs. 42,000/- as
Guntas at Sy. No. 51/7, and 1 acre Wife of per sale deed
at Sy. No. 51/6 at Panduvapura Mr. Asadulla registered at
taluk, Kasab Hobli, Khan sub-registrar
Doddabyadrahalli, Mandya District office
with property registration of sub- Pandavapura
registrar Pandavapura No. 4584/07- on 22-01-2008.
08 dated 22-01-2008 held
in the name of Smt. Nasreen Taj D/o
Najamudeen
4 Agricultural land measuring 1.3 acre Smt. Nasreen Taj Rs. 1,13,000/-
at Sy. No. 51/9, and 1.31 acres at Wife of as per the sale
Sy. No. 51/2 at Panduvapura taluk, Mr. Asadulla deed
Kasab Hobli, Doddabyadrahalli, Khan registered at
Mandya District with property Sub-registrar
registration of sub-registrar, office
Pandavapura No.4580/07-08 dated Pandavapura
22-01-2008 held in the name of Smt. on 22-01-2008.
Nasreen Taj D/o Najamudeen
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MSA No. 78 of 2020 AND
CONNECTED MATTERS
5 Agricultural land measuring 1.40 Smt. Nasreen Taj Rs. 44,000/- as
acres at Sy. No. 51/8, at Wife of per the sale
Panduvapura taluk, Kasab Hobli, Mr. Asadulla deed
Doddabyadrahalli, Mandya District Khan registered at
with property registration of sub- sub-registrar
registrar, Pandavapura No. 4583/07- office
08 dated 22-01-2008 held in Pandavapura
the name of Smt. Nasreen Taj D/o on 22-01-2008
Najamudeen
6 Agricultural land measuring 2.19 Smt. Nasreen Taj Rs. 2,98,000/-
acres at Sy. No. 52/1P-1 at Wife of as per the sale
Panduvapura taluk, Kasab Hobli, Mr. Asadulla deed
Doddabyadrahalli, Mandya District Khan registered at
with property registration of sub- sub-registrar
registrar, Pandavapura No.371/07- office
08 dated 27-05-2008 held in Pandavapura
the name of Smt. Nasreen Taj D/o on 27-05-2008
Najamudeen
7 A factory M/s GAD Industries Smt. Zareen Taj Rs. 35 lakhs
constructed by Shri Asadulla Khan Mother-in-law of
at No.50-D, KIADB Industrial Area, Mr. Asadulla
Tubinakere, Mandya. The factory Khan and Mother
plot was allotted by KIADB (The of Smt. Nasreen
Karnataka Industrial Areas Taj
Development Board) vide
Possession Certificate
No. IADB/MYS/949/1657/99-2000
dated 08-10-1999
measuring 84.50 Mts X 25.00 Mtrs.
8. It is not in dispute that the Syndicate Bank was not a party
to the proceedings before the Adjudicating Authority. No notice
was issued by the Adjudicating Authority to the Syndicate Bank
to appear before it and make its submissions or reply to the
notice.
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MSA No. 78 of 2020 AND
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9. The attachment proceedings were taken against 7
properties mortgaged to the Bank, the details of which have
been given in the preceding paragraph. These properties belong
to Mr. Asadulla Khan, his two wives Smt. Nasreen Taj, Smt.
Ayesha Najam and the mother of Smt. Nasreen Taj namely,
Smt. Zareen Taj. The details of acquisition of the 7 properties of
the borrowers mortgaged to the Bank to avail the loans by Sri
Asadulla Khan have been described in paragraphs 10 to 13 of
the impugned order passed by the Appellate Tribunal.
10. The Bank had initiated the proceedings under the
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (for short 'the
SARFAESI Act') by issuing a demand notice on 04.08.2009 and
a possession notice on 12.03.2010 and took physical possession
of the property bearing Site No.50-D, Survey No.172,
Thubinakere Industrial Area, Mandya District. In respect of other
properties also, the Bank had initiated proceedings before the
Debt Recovery Tribunal.
11. The properties which can prima facie be said to be the
properties acquired from the proceeds of the crime only can be
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MSA No. 78 of 2020 AND
CONNECTED MATTERS
subjected to the attachment proceedings under the provisions of
the PMLA. The properties offered as collateral security against
the loans, which have been found not to be sufficient, could not
be described as proceeds of crime as defined under Section 2(u)
of the PMLA. These properties had not been acquired from the
proceeds of the crime and cannot be confiscated by the Central
Government.
12. The period of the alleged offences was prior to 01.06.2009,
when the offences of criminal conspiracy and cheating under
Sections 120B and 420 of IPC were added in the Schedule to
the PMLA. The 7 properties mortgaged to the Bank, which are
the subject matter of attachment proceedings, were acquired
prior to the alleged offences. The Bank had taken
symbolic/physical possession of the properties mortgaged to it
under the provisions of the SARFAESI Act. As the properties
have been mortgaged against the loans advanced by the Bank,
the mortgagor or the accused would have only the right of
redemption in respect of these properties.
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MSA No. 78 of 2020 AND
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13. The question which falls for consideration before this Court
is whether the mortgaged properties with the Bank could have
been attached or not?
14. The allegations against the borrowers and the then Branch
Manager and the then Manager of the Syndicate Bank are that in
furtherance of a criminal conspiracy, the Bank was induced to
advance the loans to the borrowers in violation of the lending
norms of the Bank and in excess of the delegated powers of the
Manager, which has resulted in loss to the Bank to an extent of
Rs.12,63,65,210/-. The Bank, as an institution, was not party to
the conspiracy. The loans were advanced from the funds of the
Bank. The source of funds of the Bank could not be described as
illegal or tainted money. Whether the loans advanced by the
Bank to the borrowers and the investment made from the loan
proceeds could be described as proceeds of crime under
Section 2(u) of the Act, is the question which needs to be
answered.
15. The properties have been mortgaged to the Bank in terms
of the contract of loan between the Bank and the borrowers. The
Bank could not be said to have entered into conspiracy and it
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MSA No. 78 of 2020 AND
CONNECTED MATTERS
was only the Branch Manager and the Manager of the Bank
against whom the allegation of criminal conspiracy has been
levied along with the borrowers. When the Adjudicating Authority
became aware of the fact of the properties had been mortgaged
to the Bank for advancement of the loans, it was incumbent upon
the Adjudicating Authority to have issued notice to the Syndicate
Bank in terms of Section 8(1) proviso and Section 8(2) proviso
for being heard to prove that the properties were not involved in
money laundering.
16. When prima facie the properties mortgaged to the Bank
are not the proceeds of the crime, we are of the view that the
attachment order passed by the Adjudicating Authority in respect
of the 7 properties mortgaged to the Bank for advancement of
loans, cannot be justified in law.
17. It is the public money which was advanced by the Bank to
the borrowers against the mortgaged properties, the subject
matter of attachment. In fact, the Appellate Tribunal has rightly
observed that the Bank has been the victim of the crime
committed by the Branch Manager and the Manager in
conspiracy with the borrowers. By attaching these properties, the
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MSA No. 78 of 2020 AND
CONNECTED MATTERS
Bank would not be able to proceed against these properties to
recover its loans and that cannot be the object of the PMLA.
Considering the provisions of Section 3 and the mandate of
Section 8(8) of the Act, we are of the view that the Appellate
Tribunal has correctly held that the attachment order was bad in
law and has rightly set aside the same.
18. The Bank is a secured creditor and had commenced the
recovery proceedings under the SARFAESI Act before the Debt
Recovery Tribunal. The blocking of recovery under the
SARFAESI Act would cause grave prejudice to the Bank and the
recovery proceedings and it would not be in the interest of justice
and the interest of the Bank which itself had filed the criminal
complaint on the basis of which, the CBI undertook the
investigation and the proceedings under the PMLA have been
undertaken against the then Branch Manager and the then
Manager and borrowers. The Bank is entitled to enforce its
security interest by attaching the secured assets. The Bank's
right should not be nullified. If the Enforcement Directorate is
permitted to proceed with the matter, this conflict puts the Bank
in a precarious position. Their address on SARFAESI Act, which
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MSA No. 78 of 2020 AND
CONNECTED MATTERS
empowers the Bank to enforce security interests without Court's
intervention, would be undermined by a simultaneous
Enforcement Directorate's action.
19. In view of the aforesaid and also considering the mandate
of Section 8, as the Adjudicating Authority had failed to serve a
notice to the Syndicate Bank under Section 8(1) proviso and
Section 8(2) proviso of the PMLA, we find that no error is
committed by the Appellate Tribunal. We, therefore, dismiss
these appeals filed by the Directorate of Enforcement.
In view of dismissal of the appeals, 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
BKV
