Prpl Enterprises Pvt Ltd( Formerly Known As Piramal Realty Pvt Ltd) v. Directorate of Enforcement

ORDER 1 Applications Exhibits 166 to 173 preferred on behalf of Accused No.1, 2 and 12 to 17 are allowed. 2 Entities /Companies Accused No.1, 2 and 12 to 17 for themselves and for Babulal Varma (A3) and Kamalkishor Gupta (A4) are hereby discharged as per Sec.227 Cr.P.C. from PMLA Special Case No.377 of 2021 in respect of ECIR/MBZO-II/20/2020 from offences under Sec.3 punishable under Sec.4 of the PML Act."

¶9The Supreme Court in Vijay Madanlal Choudhary & Ors. v. UOI & Ors., 2022 SCC OnLine SC 929, has categorically held that when the accused person has been discharged/acquitted in the scheduled offence or the criminal case against the accused person has been quashed, there can be no offence of money laundering against the accused person. Further, in the said judgement it has also been stated that no offence of money laundering can be made out against any person having property linked to the person accused in the scheduled offence. The relevant extract of the judgement is this regard reads as under: "467. In light of the above analysis, we now proceed to summarise out conclusion on seminal points in issue in the following terms: XXXX

XXXX

XXXX

(d) The offence under Section 3 of the 2002 Act is dependent on illegal gain of property as a result of

criminal activity relating to a scheduled offence. It is concerning the process or activity connected with such property, which constitutes the offence of money-laundering. The Authorities under the 2002 Act cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal complaint before the competent forum.

If the person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by the Court of competent jurisdiction, there can be no offence of moneylaundering against him or any one claiming such property being the property linked to stated scheduled offence through him."

Therefore, in the event that the accused person is discharged in the PMLA case itself, the impugned PAO and the attachment of such property linked to the accused person, from the said PAO, deserves to be quashed.

¶10This legal position has been subsequently affirmed by the Supreme Court in the following cases.

i. Parvathi Kollur v. Enforcement Directorate [Criminal Appeal

No. 1254/2022, decided on 16th August, 2022],

ii. Adjudicating Authority v. Shri Ajay Kumar Gupta & Ors.

[Criminal Appeal Nos. 391-392/2018, decided on 2nd

December, 2022],

iii. Directorate of Enforcement v. M/s Obulapuram Mining

Company Pvt. Ltd [Criminal Appeal No.1269/2017, decided on

2nd December, 2022].

¶11Vide order dated 16th August, 2022, in Criminal Appeal No.154 of 2022 titled 'Parvathi Kollur v. Enforcement Directorate', the Supreme Court also specifically referred to the paragraph as mentioned above in Vijay Madanlal Choudhary (supra) and held that when the accused person has been acquitted in the scheduled offence under the PMLA, the closure of the proceedings under the PMLA against persons said to connected to the accused person would be the natural consequence. The relevant portion of the said judgment reads as under: "2. The Appellants herein have questioned the judgment and order dated 17.12.2020 as passed by the High Court of Karnataka at Bengaluru in Criminal Revision Petition No. 590 of 2019 whereby, the High Court allowed the revision petition filed by the Respondent and set aside the discharge order passed by the IIIrd Additional District and Sessions Judge, D.K., Mangaluru (Karnataka) for the offence Under Section 3 of the Prevention of Money-Laundering Act, 2002 (hereinafter referred to as 'the Act of 2002').

¶3 The Appellants herein are wife and son of the accused No. 1 against whom the allegations had been that during his tenure as Deputy Revenue Officer, he amassed assets disproportionate to his known source of income to an extent of Rs. 42,25,859/-. For this, the Lokayukta Police registered a case Under Section 13(1)(e) read with Section 13(2) of the Prevention of Corruption Act, 1988 (hereinafter referred to as 'the Act of 1988'). During the pendency of trial, the Directorate of Enforcement registered a case against the accused No. 1 and the Appellants under the Act of 2002 and filed a complaint on 08.06.2016 before the Special Court for trial of the offence Under Section 3 thereof.

¶4In the meantime, the Special Judge (Lokayukta) acquitted the accused No. 1 of the offences aforesaid

under the Act of 1988 while observing that the evidence produced by the prosecution was insufficient to hold him guilty. Then, the accused No. 1 as also the present Appellants moved an application Under Section 277 of the Code of Criminal Procedure, 1973 seeking discharge in the case pertaining to the Act of 2002. Before the said application was considered and decided, the accused No. 1 expired on 08.05.2018.

¶5 Thereafter, the Trial Court, by its judgment and order dated 04.01.2019, allowed the application and discharged the Appellants from the offences pertaining to the Act of 2002 while observing that occurrence of a scheduled offences was the basic condition for giving rise to "proceeds of crime"; and commission of scheduled offence was a pre-condition for proceeding under the Act of 2002.

¶6 Aggrieved by the said discharge order, the Directorate preferred a revision petition before the High Court. The High Court proceeded to set aside the discharge order while observing that the allegations made in the complaint and the material produced, prima facie, made out sufficient ground for proceeding against the Appellants for offences under the Act of 2002.

¶7 Learned Counsel for the Appellants has contended that the issue as involved in this matter is no more res integra, particularly for the view taken by a 3-Judge Bench of this Court in the case of Vijay Madanlal Choudhary and Ors. v. Union of India and Ors. decided on 27.07.2022 where, the consequence of failure of prosecution for the scheduled offence has been clearly provided in the following terms:

¶187.......(d) The offence Under Section 3 of the 2002 Act is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. It is concerning the process or activity connected with such property, which constitutes the

offence of money-laundering.

The Authorities under the 2002 Act cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal complaint before the competent forum. If the person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by the Court of competent jurisdiction, there can be no offence of money-laundering against him or any one claiming such property being the property linked to stated scheduled offence through him.

¶8 Learned ASG appearing for the Respondent, in all fairness, does not dispute the above position of law declared by this Court.

¶9 The result of the discussion aforesaid is that the view as taken by the Trial Court in this matter had been a justified view of the matter and the High Court was not right in setting aside the discharge order despite the fact that the accused No. 1 had already been acquitted in relation to the scheduled offence and the present appellants were not accused of any scheduled offence.

¶10 In view of the above, this appeal succeeds and is allowed. The impugned judgment and order dated

17.12.2020 is set aside and the order dated 04.01.2019 as passed by the Trial Court, allowing discharge application of the appellants, is restored"

¶12The ld. Division Bench of this Court, in Harish Fabiani and Ors. v. Enforcement of Directorate and Ors., 2022 SCC OnLine Del 3121 has also

taken a similar view. The relevant portion of the said judgment is set out below: "22. The Hon'ble Supreme Court has been clear and categorical in its reasoning as evident from the para extracted above. The undeniable sequitur of the above reasoning is that firstly, authorities under the PMLA cannot resort to action against any person for money-laundering on an assumption that the property recovered by them must be proceeds of crime and that a scheduled offence has been committed; secondly, the scheduled offence must be registered with the jurisdictional police or pending inquiry by way of complaint before the competent forum; thirdly, in the event there is already a registered scheduled offence but the person named in the criminal activity relating to a scheduled offence is finally absolved by a Court of competent jurisdiction owing to an order of discharge, acquittal or quashing of the criminal case of the scheduled offence, there can be no action for money laundering against not only such a person but also any person claiming through him in relation to the property linked to the stated scheduled offence. In other words no action under PMLA can be resorted to unless there is a substratum of a scheduled offence for the same, which substratum should legally exist in the form of a subsisting (not quashed) criminal complaint/inquiry or if it did exist the accused has since been discharged or acquitted by a Court of competent jurisdiction."

¶13The Supreme Court in W.P.(C) 368/2021 titled 'Indrani Patnaik & Anr. v. Enforcement Directorate and Ors.' has recently held that there cannot be any prosecution in relation to an offence for which the accused person has already been discharged. The relevant portion of the said order of the Supreme Court reads as:

Learned senior counsel has submitted that in the present case, prosecution of the petitioners in relation to the scheduled offence, on which the proceedings under the Prevention of Money-laundering Act, 2022

(PMLA) were based, have already come to an end with the petitioners having been discharged from V.G.R. Case No. 59 of 2009(T.R. Case No. 80 of 2011) by the order dated 27.11.2020, as passed by the High Court of Orissa in Criminal Revision No. 831 of 2018. Learned counsel would submit that in the given state of facts and the law declared by this Court, there cannot be any prosecution for the alleged offence of money-laundering in relation to the said offence for which, the petitioners have already been discharged. Learned Additional Solicitor General appearing for the respondents though has not disputed the order dated 27.11.2020 passed by the High Court, discharging the petitioners from the scheduled offence but has submitted that he has not received further instructions as to whether the prosecuting agency has challenged the said order or not. The record as it stands today, the petitioners stand discharged of the scheduled offence and therefore, in view of the law declared by this Court, there could arise no question of they being prosecuted for illegal gain of property as a result of the criminal activity relating to the alleged scheduled offence. That being the position, we find no reason to allow the proceedings against the petitioners under PMLA to proceed further.

¶14This position of law in terms of proceedings under the PMLA has been recently considered by this Court in EMTA Coal Limited and Ors. v. The Deputy Director of Directorate of Enforcement, 2023/DHC/000277. In the said judgement it was held that once the closure report in the offences under respective FIRs has been filed, no criminality is ascertainable and the

respective PAOs as well as the ECIRs are liable to be quashed.

¶15After hearing all the ld. Counsels for the parties and considering the judgements of the Supreme Court as also this Court, the Court is clearly of the opinion that the impugned PAOs against the properties of Piramal cannot continue as the Petitioner was not arrayed as an accused and was merely a lender to M/s Omkar Realtors and Developers Pvt. Ltd. ("ORDPL"). Accordingly, the flats which were attached by the ED, as extracted in Table No. 9 extracted above are thus, released.

¶16With these above observations, the present petition with all pending applications, if any, is disposed of.

¶17The Court grants liberty to the ED to seek revival of the PAO in accordance with law, if there is any change in the circumstances. Liberty is also granted to the Petitioner to move an appropriate application if the properties are not released.

PRATHIBA M. SINGH JUDGE FEBRUARY 16, 2023 MR/Am

* IN THE HIGH COURT OF DELHI AT NEW DELHI Date of Decision: 16th February, 2023 + W.P.(C) 11152/2022 and CM APPL. 32766/2022 PRPL ENTERPRISES PVT LTD( FORMERLY KNOWN AS PIRAMAL REALTY PVT LTD) ..... Petitioner Through: Mr. Vijay Aggarwal, Advocate along with Mr. Pankush Goyal and Mr. Anuj Kapoor Advocates (M: 8800192008). versus DIRECTORATE OF ENFORCEMENT ..... Respondent Through: Mr. Anurag Ahluwalia CGSC for ED (M: 9811418995). CORAM: JUSTICE PRATHIBA M. SINGH Prathiba M. Singh, J.(Oral) 1. This hearing has been done through hybrid mode. 2. The present petition is connected with Writ Petition Civil 11473/2022 titled 'Omkar Realtors and Developers Private Limited v. Adjudicating Authority, Prevention of Money Laundering through its Registrar and Ors.' The Petitioner is aggrieved by the impugned Provisional Attachment Order dated 14th January, 2022 i.e., PAO No. 1/2022 by which one of the properties which was mortgaged with the Petitioner was attached/seized by the Directorate of Enforcement (ED) under Section 5 of the Prevention of Money Laundering Act (hereinafter 'PMLA'). The basis of the PAO is FIR No. 109/2020 dated 7th March, 2020 registered with City Chowk Police Station Aurangabad invoking Sections 420, 406 and 34 of the Indian Penal Code, 1860. The details of the properties attached in the impugned PAO are set out below:- 6.2 Ms. Loveleen Behera, Vice President, Yes Bank Ltd. during her statement recorded on 01.09.2021 under the provisions of Section 50 of PMLA, has interalia stated that during the year 2015, the then saleable area of Omkar 1973 Project was mortgaged with Yes Bank Ltd. and M/s Piramal Realty Pvt. Ltd; that in the year 2016, M/s Surana Developers (Wadala) LLP, a company of M/s ORDPL, approached the Yes Bank Ltd. for an additional loan of Rs. 410 crores for Anand Nagar SRA CHS Scheme; that Yes Bank Ltd. disbursed an amount of Rs. 410 crores and against the said loan, a saleable area of 3.5 lakhs sq ft. to be loaded in Omkar 1973 project, Worli, was mortgaged with the Yes Bank Ltd and therefore, the specific saleable area of 3.5 lakhs sq ft. of M/s Surana Developers (Wadala) LLP for Anand Nagar SRA CHS Scheme was mortgaged only with the Yes Bank Ltd. and the other saleable area of identified units of area 5 lakhs sq ft. in Omkar 1973 Worli was mortgaged with M/s Piramal Realty Pvt. Ltd. only with residual charge on Yes Bank Ltd. and the rest of saleable area of Omkar 1973 project, Worli was mortgaged with both Yes Bank Ltd. and M/s Piramal Realty Pvt. Ltd. She further stated that earlier the saleable area of 3.5 lakhs sq ft of Anand Nagar SRA CHS Scheme was mortgaged only with the Yes Bank Ltd; that by the year 2019, the development right of Surana Developers (Wadala) LLP's LOI for Anand Nagar SRA CHS Scheme, was also cross collateralised for Rs. 1300 crores which was the other loans of Yes Bank Ltd. and therefore, the total saleable area mortgaged for Rs. 1300 crores and the total saleable area of Anand Nagar SRA CHS Scheme were now mortgaged with both Yes Bank Ltd. and M/s Piramal Realty Pvt. Ltd. due to cross collateral; that Yes Bank Ltd. has primary charge on the Omkar 1973 Project for an outstanding amount of Rs. 1300 crores and a residual charge for Rs. 410 crores of Surana Developers which means if Rs. 1300 crores given as loan to M/s ORDPL is paid by them and still there are some more saleable area left to be sold, then the same could be used for the payment of Rs. 410 crores given as loan by Yes Bank Ltd. to M/s Surana Developers; that Yes Bank Ltd. and M/s Piramal Realty Pvt. Ltd. has entered into Inter Creditor Agreement dated 02.03.2021; that Yes Bank Ltd. loan exposure of Rs. 1810 crores was classified as NPA in the year 2019; that the loan exposure of Rs. 872 crores of M/ s Piramal Realty Pvt. Ltd. was not paid by M/s ORDPL and the same were still outstanding. 6.3 From the above, it is revealed that for the constructions of Tower A, B & C in Omkar 1973 Worli, the Project has been financed