IMPORTANT POINT
Properties acquired prior to the commission of a predicate offence cannot be attached under the Prevention of Money-Laundering Act, as they do not constitute proceeds of crime.

JUDGMENT :

Bechu Kurian Thomas, J.

A septuagenarian, who claims to be suffering from a terminal illness, along with his wife, has approached this Court seeking to quash the order of provisional attachment issued under the Prevention of Money-Laundering Act, 2002 (for short ‘PML Act’). According to the petitioners, by the attachment, they have been wholly crippled to even manage the day-to-day living as all their immovable properties, bank accounts and all their vehicles have been attached.

2. Petitioners allege that their family has business interests in hosiery, textiles and chit funds apart from real estate. They contend that loans were availed by them from financial institutions for their business activities and were regularly repaying them as well. According to the petitioners, in the year 2015, they approached the Karuvannur Service Co-operative Bank No.112 (for short ‘the Bank’) for an overdraft facility for their business ventures. After satisfaction of the security offered, which included their residential property, a total loan of Rs.3.49 Crores was granted in the name of the first petitioner and his four business associates. Petitioners allege that the security offered by them was far more valuable than the amounts availed as overdraft facility and the present market value of the mortgaged property is more than Rs.8.5 Crores.

3. In the meantime, petitioners learnt from the media that some irregularities were detected at the bank relating to the disbursement of loans to other persons and an investigation was being conducted. While so, petitioners received summons from the first respondent requiring their presence and production of documents relating to the loans availed by them, which were duly complied with. Petitioners allege that during the enquiry they were made to sign certain statements dictated by the officials of the first respondent and later they were served with a provisional order of attachment dated 13.10.2023 bearing No.05/2023. The order attached five of their immovable properties - four belonging to the second petitioner and one that of the first petitioner apart from the motorcar of the second petitioner and the bank accounts held by them. Petitioners allege that the provisional attachment order is manifestly illegal, without jurisdiction or authority and have hence approached this Court under Article 226 of the Constitution of India.

4. A statement has been filed by the respondents contending that the writ petition is not maintainable as the remedy lies elsewhere under the PML Act. It was pleaded that the committee members including the Secretary and other persons of the bank had conspired from 2014 onwards to swindle more than Rs.100 Crores thereby making pecuniary gains. It was alleged that several loans were sanctioned to the same person against the limit of the bank that too on the basis of the same security, using fake addresses, after altering the bank's software and at times without the knowledge of the owner of the property. Pursuant to an F.I.R registered as Crime No.650/2021 on 14.7.2021, under sections 406, 420, 409 and 465 read with section 34 of the IPC against six persons, the Enforcement Directorate initiated enquiry proceedings since a scheduled offence under section 420 of IPC was involved. The first respondent further alleges that during the investigation, several searches were conducted and it was realised that loans were availed by persons violating the provisions of the byelaws of the bank and the public was cheated of crores of money which were embezzled by the accused.

5. The statement also pointed out that, petitioners had availed a total loan of Rs.3.49 Crores as of 31.03.2018 in the name of seven persons and the total outstanding loan had risen to Rs.7.06 Crores. According to the respondents, during the course of investigation, it was found that petitioners had conspired with the employees of the bank to obtain illegal loans and embezzled the funds and therefore, properties purcha