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2025 Supreme(Online)(Ker) 41062
IN THE HIGH COURT OF KERALA AT ERNAKULAM
P.V.KUNHIKRISHNAN, J
KANDAL SERVICE CO-OPERATIVE BANK – Appellant
Versus
DIRECTORATE OF ENFORCEMENT – Respondent
O.P. (Crl.) No. 39 of 2025 | CRIM NO.726/2023
For the Appellants/Petitioners: SRI. R. I. PRADEEP, SMT. M. BINDTJIDZIS, SMI. N. I. PRADHEEP
For the Respondents: SRI JAISHANKAR V RAIR, SRI ARUN MISHRA, SRI ARUN SREEDESH, SRI I. K. SANDREP, SRI ALEX ABRAHAM, SRI HARIKRISHNAN, P.A. SRI AMJITH, C.M. SMT. SREEJAKSHMI, SHIBU
Statutory charge under Section 36A creates paramount right over mortgaged properties, overriding PMLA attachment. Court exercised Article 226 jurisdiction to direct property release when petitioners could not seek restoration from special court due to unframed charges.
Headnote:(A) Kerala Co-operative Societies Act, 1969 - Section 36A - Prevention of Money Laundering Act, 2002 - Section 8(8) read with Rules 3 and 4 of Prevention of Money Laundering (Restoration of Property) Rules, 2016 - Statutory charge under Section 36A creates paramount right over mortgaged properties for loan recovery - Directorate of Enforcement consents to validity of statutory charge and banker's lien - Court exercises extraordinary jurisdiction under Article 226 to order property release when restoration from PMIA Special Court is impossible due to unframed charges. (Paras 4,5,6)
(B) Original petition - Section 36A - Statutory charge priority overrides attachment under PMLA. Directorate of Enforcement's consent and inability of petitioners to approach PMIA Special Court for restoration before charge framing justify Article 226 intervention. (Para 6)
Facts of the case:
Cooperative bank petitioned against attachment of properties by Enforcement Directorate under PMLA. Bank claimed statutory charge under Section 36A and banker's lien. Directorate of Enforcement consented to validity of claim.
Findings of Court:
Court ordered Directorate to release properties to bank within three weeks.
Issues: Whether statutory charge under Section 36A overrides PMLA attachment and whether Article 226 jurisdiction applies for property release before charge framing.
Ratio Decidendi: Statutory charge under Section 36A is paramount. Directorate's consent and petitioners' inability to seek restoration from PMIA Special Court without charge framing make Article 226 applicable.
Result: Original petition allowed.
| Table of Content |
|---|
| 1. secured property recovery petition (Para 2) |
| 2. enforcement agency consent to claim (Para 3 , 4 , 5) |
| 3. court directs property release (Para 6) |
P.V.KUNHIKRISHNAN, I -11,I,I1,I,-I,I,I,llIIIIII,~111111II,, O.P. (Crl.) No. 39 of 2025 IIIII,III1,,IIII--I~I1----llIII,IIIIll Dated this the llth day of July, 2025
JUDGMENT
The above original petition is filed with following Prayers :
i. '`To set aside Exhibits pl and p2.
ii. To direct the lst Respondent to release the movable and immovable pl-opeTties of Respondents 2 to 6 which are the subject matter of Exhibit Pl and P2 to the petitioners I;orthwith so ais to enable the pel:itioners to proceed agaiinst those properties to realize the amount due on the loans taiken by I.espondents 2 to 6 and to pay off the unpaid depositors,.
iii. Such other relief ;s which this Hon'ble court may deem fit and proper in the interest of justice." [sic]
2. The lst petitioner is a Co-operative Society registered under the Co-operative Societies Act, 1969. The 2nd petitioner is the town branch (Maranalloor branch, Thiruvananthapuram) of the lst petitioner-society. It is alleged that the former president of the bank and the members of his family looted the society by swindling the funds of the bank in the fonn of loans and other means. Criminal cases were registered at the instance of unpaid depositors of the bank alleging offences under Sec. 420 IPC. The offence being a scheduled offence under Prevention of Money Laundering Act, 2002 (for short PMIA), proceedings were initiated as per the PMLA. The movable and immovable properties of respondent Nos. 2 to 6, who are former President and members of his family were provisionally attached by the Enforcement Directorate in the proceedings under PMIA and the attachment was confirmed by the adjudicating authority by Ext.Pl and Ext.P2 is the consequential notice of taking possession of the immovable properties. According to the petitioners, the respondent Nos. 2 to 6 had executed Gehan with respect to their immovable properties in favour of the society and the society has got statutory charge over those properties under Sec. 36A of the Kerala Co-operative Societies Act, 1969 (for short 'Act'). It is submitted that the Gehan has all the characteristic features of a mortgage under the provisions of the Transfer of Property Act. The special charge under Sec.36A of the Act would have predominance over any other charge pertaining to the property is the submission of the petitioners. It is the submission of the petitioners that the society has got banker's lien over the movable properties of respondent Nos. 2 to 6. It is also contended by the petitioners that they raised the same before the adjudicating authority to release the properties to the society, over which the society has got banker's lien and statutory charge. It is the case of the petitioners that Ext.Pl was passed by-passing the claim of the petitioners. The respondent mos. 2 to 6 are heavily indebted to the society for the loan taken by them. It is the case of the petitioners that there are about 2500 unpaid depositors lining in the society craving for return of deposit without even interest. The society is unable to proceed against the properties to liquidate the liability of respondent Nos. 2 to 6 and pay off the unpaid depositors for the reason of Exts.Pl and P2 is the submission. The properties cannot be confiscated to Government under PMIA in the wake of entitlement of society to proceed against the properties to realise the amount due on the loans taken by respondent Nos. 2 to 6 and those properties are not proceeds of the crime nor involved in money laundering is the submission. Hence, the petitioners challenged Exts.Pl and P2.
3. Heard the learned counsel for the petitioners, the Standing Counsel appearing for the lst respondent and the counsel appearing for the respondent Nos.2 to 6.
4. The short point raised by the petitioners is that in the light of Sec.36A of the Act, the petitioner-s
