Kerala High Court
Indian Bank vs Sub Registrar on 22 October, 2024
Author: Kauser Edappagath
Bench: Kauser Edappagath
WP(C) No.31073/2023 1 / 19
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE DR. JUSTICE KAUSER EDAPPAGATH
Tuesday, the 22nd day of October 2024 / 30th Aswina, 1946
WP(C) NO. 31073 OF 2023 (H)
PETITIONER:
INDIAN BANK, REPRESENTED BY ITS CHIEF MANAGER, PB NO 2554, SHANMUGAM
ROAD, ERNAKULAM, 682 003
RESPONDENTS:
1. SUB REGISTRAR, OFFICE OF THE SUB REGISTRAR, EDAPALLY RAILWAY STATION
ROAD, EDAPALLY, ERNAKULAM, KOCHI, PIN - 682 024.
2. ENFORCEMENT DIRECTORATE, 3RD FLOOR, KENDRIYA BHAVAN, M.S. BABURAJ
ROAD, KALLAI, KOZHIKODE, REPRESENTED BY ITS DEPUTY DIRECTOR, PIN -
673 003.
3. MR.SHEFFIN YUSUF, S/O MR SHAJAHAN YOUSUF SHAHIB, PROPRIETOR, AL
SHIFA SUPER SPECIALITY HOSPITAL FOR PILES, 50/150-F EETTICAKAL
HOUSE, SRI NARAYANA ROAD, EDAPALLY, ERNAKULAM, KOCHI, PIN - 682 024.
4. MRS.RASHEEDA SHAJAHAN, W/O SHAJAHAN YOUSUF SHAHIB, 50/150-F
EETTICAKAL HOUSE, SRI NARAYANA ROAD, EDAPALLY, ERNAKULAM, KOCHI, PIN
- 682 024.
5. UNION OF INDIA, REPRESENTED BY SECRETARY, MINISTRY OF FINANCE, NEW
DELHI
6. ADDL.R6: DR. BENZIR HUSSAIN, S/O. A.M. ABOOBACKER, AGED 35 YEARS,
ANJIKATH HOUSE, THRIKKAKARA P.O., COCHIN-682 021 (ADDL.R6 IS
IMPLEADED AS PER ORDER DATED 06.08.2024 IN IA NO.2/2024 IN WP(C)
NO.31073/2023)
Writ petition (civil) praying inter alia that in the circumstances
stated in the affidavit filed along with the WP(C) the High Court be
pleased to direct the 1st respondent efface the attachment effected over
property covered by Exhibit P2 as evident from Exhibit P5.
WP(C) No.31073/2023 2 / 19
This petition again coming on for orders upon perusing the petition
and the affidavit filed in support of WP(C) and this Court's order dated
19.02.2024 and upon hearing the arguments of M/S.BINOY VASUDEVAN &
K.V.RAJESWARI, Advocates for the petitioner, GOVERNMENT PLEADER for R1,
SRI.JAISHANKAR V.NAIR, STANDING COUNSEL for R2, M/S.VARGHESE C.KURIAKOSE,
AMRITHA J., KURUVILLA MATHEW & VIPIN C. VARGHESE, Advocates for R3 and
R4, DEPUTY SOLICITOR GENERAL OF INDIA for Addl.R5 and of M/S.S.SREEKUMAR
(SR.), THAHSEEM A., P.MARTIN JOSE, NAVEEN A.VARKEY & O.S.JAFARKHAN,
Advocates for Addl.R6, the court passed the following:
WP(C) No.31073/2023 3 / 19
DR.KAUSER EDAPPAGATH, J.
=================
WP(C) No.31073/2023
===================
Dated this, the 22nd day of October, 2024
ORDER
The above writ petition was originally filed by the
petitioner Bank seeking to issue a writ of mandamus or other
appropriate writs, directions or order declaring that the
provisions of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act,
2002 (for short, the SARFAESI Act) will prevail over the
provisions of the Prevention of Money Laundering Act, 2002
(for short, the PMLA). There is also a prayer to issue a writ of
mandamus or other appropriate writs, directions or order
directing the 1st respondent to efface the attachment
effected over the property covered by Ext.P2 in Ext.P5
encumbrance certificate. As per the order in IA No.5/2024,
the prayer in the writ petition has been amended
incorporating the prayer to issue a writ of mandamus or
other appropriate writs, orders or direction commanding the
1st respondent to register the sale certificate issued by the
petitioner Bank in favour of the additional respondents and
to remove the entry in the encumbrance certificate
regarding the attachment made by the 2nd respondent.
2. The 3rd respondent is the proprietor of Al Shifa
Super Speciality Hospital for piles situated at Edappally,
Ernakulam. The 3rd respondent availed credit facility from
the petitioner Bank. The credit facility availed by the 3 rd
respondent was secured by the equitable mortgage created
by the 3rd and 4th respondents of land and building
measuring 16.40 Ares of land in Sy.Nos.23/2A, 3A (Re. Sy
Nos.14, 15, 18 and 15/2) of Edappally North Village
(hereinafter called 'the mortgaged property') belonged to
them covered by sale deed No. 447/2013 and settlement
deed No. 211/2018 of SRO, Edappally. Later, the account of
the 3rd respondent was classified as NPA due to its irregular
operation. The proceedings under the SARFAESI Act were
initiated, and the mortgaged property was sold in an e-
auction. The additional 6th respondent and three others,
directors of Futureace Healthcare Pvt. Ltd., purchased the
mortgaged property in e-auction for a sum of
`21,00,10,000/-, The sale certificate was issued to them on
6/10/2023. The physical possession of the property was
taken by the petitioner Bank and was handed over to the
auction purchasers. The respondent Nos.3 and 4 challenged
the sale in favour of the additional 6 th respondent and two
others before the Debts Recovery Tribunal -I, Ernakulam,
which is still pending.
3. The 2nd respondent/Enforcement Directorate
provisionally attached mortgaged property as per Ext.P7
provisional attachment order under Section 5(1) of the PMLA
in the ECIR/KZSZO/07/2021 registered by it against
Sri.Nishad K, Sri.Ajayan and others. The proceedings were
initiated by the Enforcement Directorate on the basis of
eight FIRs registered at various Police Stations in Kerala
against the above-mentioned persons under Sections 406,
420, and 34 of IPC on the allegation that they cheated the
victims by offering the high return of dividend per day for
investing in Morris scam by devising a scheme called Ponzi
Scheme. During the investigation under PMLA, it was
revealed that the accused persons fraudulently and
dishonesty conducted and promoted a pyramid model
investment scheme based on a binary enrolment plan and
swindled and siphoned off the money derived from the
entrance money and deposits of the investors, collected a
total of `1200 crores through various banks and cheated
investors. It was alleged that the accused used a part of the
proceeds of crime for the purchase of immovable property in
the name of Al Shifa Hospital which was mortgaged in favour
of the petitioner Bank (mortgaged property). The specific
allegation is that a sum of `7,00,00,000/- out of the said
proceeds of crime was used for the purchase of the above
property. In short, the attachment order was for an amount
of `7,00,00,000/-. Ext.P7 provisional attachment order was
later on made absolute by Ext. R2(a) order passed by the
Adjudicating Authority under Section 8(4) of PMLA.
4. During the pendency of the writ petition, the
petitioner made an offer to deposit `7,00,00,000/- mentioned
in Ext.P7 provisional attachment order from the sale price
given by the auction purchaser before the Enforcement
Director in order to enable the order of lifting of attachment.
This court, as per the order dated 19/02/2024, passed an
interim order directing the 1st respondent to lift the
attachment on condition that the petitioner will deposit an
amount of `7,00,00,000/- with the 2nd respondent. Based on
the said direction, the petitioner deposited `7,00,00,000/-
with the 2nd respondent who accepted it and issued a
receipt. The respondents 3 and 4 challenged the said order
before the Division Bench in WA No.413/2024. The Division
Bench, as per the judgment dated 08/04/2024, allowed the
appeal, setting aside the order of this court dated 19/2/2024,
remitted the matter back and directed this court to pass a
fresh order after giving an opportunity of hearing to both
sides. After remand, the petitioner filed IA No.3/2024 to give
an interim direction to the 1st respondent to register the sale
certificate in the name of the auction purchaser.
5. I have heard Sri. Binoy Vasudevan, the learned
counsel for the petitioner, Smt. Deepa V., the learned
Government Pleader for the 1st respondent, Sri.Jaishankar V.
Nair, the learned standing counsel for the 2 nd respondent,
Sri.Varghese C. Kuriakose, the learned counsel for
respondents 3 and 4, the learned DSGI for the 5 th
respondent, and Sri. S. Sreekumar, the learned senior
counsel for the additional 6th respondent.
6. It is not in dispute that the mortgaged property
belonged to the 3rd and 4th respondents, and they mortgaged
it to the petitioner Bank while availing credit facility for Al
Shifah Super Speciality Hospital. It is also not in dispute that
the said property was sold in auction in the proceedings
initiated by the petitioner Bank under the SARFAESI Act and
the additional 6th respondent and three others who are the
directors of Futureace Health Care Pvt. Ltd purchased it for a
sum of `21,00,10,000/- and the sale certificate was issued to
them. What was attached by the 2 nd respondent was not the
entire mortgaged property, but shares to the extent of
`7,00,00,000/- over the said property. As stated already, this
Court, as per the interim order dated 19/2/2024, directed the
1st respondent to lift the attachment on condition of the
petitioner depositing an amount of `7,00,00,000/- with the
2nd respondent. The petitioner Bank had complied with the
said direction and deposited `7,00,00,000/- with the 2nd
respondent. The 2nd respondent has accepted the same and
issued the receipt.
7. The learned counsel for the petitioner submitted
that the attachment effected by the 2 nd respondent as per
Exts.P7 and R2(a) was to the extent of `7,00,00,000/- in the
property mortgaged with it and inasmuch as the said
`7,00,00,000/- has already been deposited with the 2 nd
respondent who accepted it without protest, the attachment
is liable to be lifted. The learned Senior Counsel for the
additional 6th respondent while endorsing the said argument
of the learned counsel for the petitioner added that the 6 th
respondent is a bonafide purchaser of the mortgaged
property in the e-auction and since the value of the
attachment over the property has already been deposited by
the petitioner, the attachment is liable to be lifted. Per
contra, the learned counsel for the respondents 3 and 4
submitted that the power to lift the attachment vests with
the Special Court constituted under PMLA and thus if the 6 th
respondent or the petitioner is aggrieved by the attachment
effected by the 2nd respondent under the PMLA, the remedy
open to them is to file an appeal under Section 26 of PMLA
against Ext.R2(a) order. The counsel further submitted that
without exhausting the said statutory remedy, the petitioner
cannot invoke the jurisdiction of this court under Art.226 of
the Constitution of India to lift the attachment.
8. The mortgaged property was attached on the
premises that the accused in ECIR/KZSZO/07/2021 registered
by the 2nd respondent, viz., Sri. Nishad K. generated
proceeds of crime from the criminal activity and part of the
said proceeds of crime to the tune of `7,00,00,000/- was
advanced to the 3rd respondent, 4th respondent and
Dr.Shajahan for purchase of the mortgaged property. To be
more precise, the case of the 2nd respondent, as revealed
from Exts. P7 and R2(a) is that a sale agreement was
entered into between Sri. Nishad K and Sri. Mohammed
Hasif, in the capacity of the designated partners of "Fly with
me Mobile App" with Dr.Shajahan and the 3 rd and 4th
respondents, to purchase the mortgaged property for a total
sum of `27,20,00,000/- and an advance amount of
`7,00,00,000/- was paid by Sri.Nishad K. to respondents 3
and 4 and Dr.Shajahan. However, the sale could not be
materialised. The respondents 3 and 4 also admit the
execution of the sale agreement and the receipt of
`7,00,00,000/-.
9. Section 5 of the PMLA deals with the attachment of
property involved in money laundering. Sub-section (1) of
Section 5 says that where the Director or any other officer
not below the rank of Deputy Director authorised by the
Director has reason to believe 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, 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. The term
"proceeds of crime" has been defined under Section 2(u) as -
'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. Thus, the property liable
to be attached under Section (5) must be the proceeds of the
crime. The property derived or obtained, directly or
indirectly, as a result of criminal activity relating to a
scheduled offence or the value of any such property can only
be 'proceeds of crime' as defined under Section 2(u). The
case of the 2nd respondent, as revealed from Exts.P7 and
R2(a), is that Sri. Nishad K. and the remaining accused
indulged in a criminal conspiracy resulting in committing the
scheduled offence, generated proceeds of crime from the
criminal activity to the tune of `1,200 crores and
`7,00,00,000/- out of the said sum of `1,200 crores was
transferred to the respondent Nos.3 and 4 and Dr.Shajahan
to purchase the mortgaged property. No doubt, going by the
case set up by the 2 nd respondent, the said sum of
`7,00,00,000/- given by Sri.Nishad K to the respondents 3
and 4 and Dr.Shajahan would fall within the definition of
'proceeds of crime'. However, there is absolutely no case for
the 2nd respondent that the mortgaged property was
acquired by the 3rd and 4th respondents utilizing the said
`7,00,00,000/-. On the other hand, the counter affidavit filed
by the 3rd and 4th respondents would show that they
purchased the mortgaged property in the years 2013 and
2017 as per the sale deed No. 447/2013 and the settlement
deed No. 211//2018. Thus, the mortgaged property was not
acquired or obtained directly or indirectly by respondents 3
or 4 or Dr Shajahan utilizing `7,00,00,000/- advanced by
Sri.Nishad K. to them. The definite finding in Ext.P7 is that
`7,00,00,000/- from the proceeds of crime was given as
advance by Sri. K.Nishad to respondents 3 and 4, and Dr
Shajahan to purchase the mortgaged property, and the sale
did not take place. Thus, the person against whom
proceedings under PMLA were initiated did not acquire any
right, title or possession over the property. A mere
agreement for sale and receipt of advance consideration
would not confer any title over the property to the buyer. For
all these reasons, the mortgaged property cannot be
characterized as proceeds of crime. On the other hand,
`7,00,00,000/- given by Sri. Nishad K to respondents 3 and 4
and Dr Shajahan, as per the sale agreement, can be termed
as proceeds of crime. Hence, there is absolutely no legal
impediment in lifting the attachment created over the
mortgaged property by substituting the attachment on
`7,00,00,000/- already transferred by the petitioner to the
2nd respondent.
10. As per Section 26(1) of the PMLA, any person
aggrieved by an order made by the Adjudicating Authority
may prefer an appeal to the Appellate Tribunal. The learned
counsel for respondents 3 and 4 submitted that without
exhausting the said remedy, the petitioner cannot invoke the
jurisdiction of this court. I cannot subscribe to the said
argument. First of all, it is settled that the existence of an
alternative remedy is not an absolute bar on the exercise of
the jurisdiction. The Supreme Court recently in M/s. Godrej
Sara Lee Ltd. v. The Excise and Taxation Officer-Cum-
Assessing Authority and Others [2023 Livelaw (SC) 70] held
that where the controversy is a purely legal one and does
not involve disputed questions of fact, but only questions of
law, then it should be decided by the High Court instead of
dismissing the writ petition on the ground of an alternative
remedy being available. Again, the Supreme Court in State
of U.P and Another v. Ehsan and Another [2023 Livelaw (SC)
887] held in paragraph 28 as under:
"We are conscious of the law that existence of an
alternative remedy is not an absolute bar on exercise of
writ jurisdiction. More so, when a writ petition has been
entertained, parties have exchanged their pleadings/
affidavits and the matter has remained pending for long.
In such a situation there must be a sincere effort to decide
the matter on merits and not relegate the writ petitioner to
the alternative remedy, unless there are compelling
reasons for doing so. One such compelling reason may
arise where there is a serious dispute between the parties
on a question of fact and materials/evidence(s) available
on record are insufficient/ inconclusive to enable the Court
to come to a definite conclusion."
Here also, there is no disputed question of fact. That apart,
notably, the 3rd and 4th respondents are the only persons
who oppose the prayer of the petitioner to lift the
attachment. The 2nd respondent has no objection to lift the
attachment on payment of `7,00,00,000/-. They have
already voluntarily accepted `7,00,00,000/- from the
petitioner. The 3rd and 4th respondents cannot oppose the
lifting of the attachment for the simple reason that their
definite case in the counter statement is that the attachment
effected by the 2nd respondent as per Exts.P7 and R2(a) is
illegal, on a totally wrong premises and not sustainable. They
also contended that the property attached cannot be
classified as proceeds of crime.
11. In the wake of the above findings, the following
order is passed:
(i) The attachment effected on the mortgaged
property as per Ext.P7 and confirmed as per Ext.R2(a) is
hereby lifted.
(ii) The 2nd respondent shall effect the attachment on
`7,00,00,000/- deposited by the petitioner with them.
(iii) The 1st respondent is directed to make the
necessary entry in Book No.1 that the attachment over the
mortgaged property is lifted as per the order of this Court as
contemplated under Section 89(5) of the Registration Act.
Corresponding entries shall be made in the encumbrance
certificate as well.
(iv) Since the attachment has been lifted, there is no
legal impediment for the 1st respondent to register the sale
certificate in the name of the auction purchasers.
Sd/-
DR. KAUSER EDAPPAGATH
JUDGE
Rp
22-10-2024 /True Copy/ Assistant Registrar
APPENDIX OF WP(C) 31073/2023
Exhibit P2 COPY OF THE SETTLEMENT DEED DATED 23-12-2017 IN FAVOUR
OF THE 3RD RESPONDENT
Exhibit P5 TRUE COPY OF THE ENCUMBRANCE CERTIFICATE DATED
23-02-2023
Exhibit P7 CERTIFIED COPY OF THE PROVISIONAL ATTACHMENT ORDER
NO.03/2022/KZSZO (IN ECIR/KZCZO/07/2021) DATED DAY OF
JULY, 2022 ISSUED ON 17/02/2023
Exhibit R2(a) TRUE COPY OF THE CONFIRMATION ORDER OF THE ADJUDICATING
AUTHORITY IN OC NO. 1781 OF 2022
22-10-2024 /True Copy/ Assistant Registrar
