Meliora Asset Reconstruction Company Limited V. Union of India, Department of Revenue, Government of India, Ministry of Finance, Department of Financial Services and Deputy Director, Directorate of Enforcement, Government of India, Ministry of Finance and The Adjudicating Authority

WP/18749/2021

AI Insights

The case involves Meliora Asset Reconstruction Company Limited (petitioner) challenging the confirmation of a Provisional Attachment Order by the Adjudicating Authority under the Prevention of Money Laundering Act, 2002. The petitioner argued that the properties provisionally attached were not proceeds of crime and that the Adjudicating Authority had mechanically confirmed the attachment without substantial evidence. The respondents, including the Union of India and the Directorate of Enforcement, defended the attachment based on the properties being involved in money laundering activities. The High Court, after considering the arguments and the legal framework, decided to relegate the petitioner to the appellate remedy available under the PMLA.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 803988 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 02-07-2024
• Assessment Year: misc
• Other Referred Cases: Deputy Director vs. Axis Bank and Ors, United Bank of India vs. Satganoati Tondon, Commissioner of Income Tax vs. Chhabil Dass Agarwal, PIIR Instant Educational Society vs. UCO Bank
• Laws Referred To: Prevention of Money Laundering Act, 2002, Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: GAD PRAVEEN KUMAR
• Assessee Lawyers: P SRI REDDY
• Keywords: Asset Reconstruction Company; Judicial review; Money laundering; Provisional attachment order; Writ of Certiorari
• Section: 26; 151; 226; 5(5); 8(1); 8(3)

Judgement Text

"1 I [ 32e6 ] HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction) TUESDAY, THE SECOND DAY OF JULY TWO THOUSAND AND TWENTY FOUR PRESENT THE HONOURABLE SRI JUSTICE C.V. BHASKAR REDDY WRIT PETITION NO: 18749 OF 2021 Between: Meliora Asset Reconstruction Company Limited, Represented by its CEO' 503, lrilayfair Gardens, Road No. 'l2,Banjara Hills, Hyderabad-500034. .....PETITIONER AND 1. Union of lndia, Department of Revenue, Government of lndia, It/inistry of Finance, Departmbnt of Financial Services, Room No. 46, North Block, New Delhi 1 10001 . 2- Deputy Director, Directorate of Enforcement, Government of lndia, Ministry of Finance Department Shakkar Bhavan, Basheerbagh. 3. The Adjudicating Authority, 4th Floor, Jeevan Deep Building, Parliament Street, New Delhi - 1 10001 . .....RESPONDENTS Petition Under Article 226 of the Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue a writ order or directions more particularly one in the nature of writ of certiorari calling for the records dated 22.04.2O21 of the 3rd Respondent under the Prevention of lt/oney Laundering Act,2OO2 in O.C No. 1367 of 2020 confirming the Provisional Attachment Order No. 3 of 2020 in ECIR/HYZOI01/2016 dated 27.10.2020 of the 2nd Respondent and set aside the said orders as being contrary to the provisions of the PIVILA, ex facie arbitrary and unco nstitutional. l.A.NO:1 OF 2021 Petition Under slection 151 cpc praying that in the circumstances stated in the affidavit filed in support of the petition, the High court may be pleased lo direct the 2nd Respondent to co-operate with the continuaticn of legitimate recovery mechanisrn fry the Petitioner as permissible under law as held in the judgment of the Hon'ble Delhi High court in Deputy Director vs. Axis Bank and Ors reported in 2019 SCC OnLine Del 7854. |.A.NO:2 OF 2021 Petition under Section l5i cpc praying that in the circunrstances stated in the affidavit filed in r;upport of the petition, the High Court ma,/ be pleased to suspension of impugned order dated 22.o4.2021 of the 3rd Respondent in oc No. 1367 of 2020 arrd the provisionar Attachment order Nc,.3 of 2o2o in ECIR/HYZOIO1 12016 o' the 2nd Respondent dared 27.10.2a20, in so far as the Petitioner is concerned pending disposal of the main writ petition. Counsel for the Petitioners : SRI p.SRl HARSHA REDDy 9:yl:1 for the Respondents : SRt cADl PRAVEEN KUMAR, DEpUry solrctToR GENERAL OF tNDtA (SC FOR CENTRL GOVT) The Court made the following ORDER THE HON'BLE SRI JUSTICE C. V. BHASKAR REDDY WRIT PETITION No.18749 of 2O2L ORDER: This Writ Petition, is hled by the petitioner-company seeking to issue writ in the nature of Certiorari calling for records relating to the order dated 22.04.2021 passed in O.C.No. 1367 of 2O2O by the respondent No.3 confirming the Provisional Attachment Order No.3 of 2O2O dated 27.1O.2O2O in ECIR/HYZOIOl/2016 of the respondent No.2 and consequently prayed this Court to set aside the said orders as being contrary to the provisions of Prevention of Money Launderrng Act, 2OO2 (for short \"PMLA Act\"), arbitrary and unconstitutional. 2. It is stated that petitioner is an Asset Reconstruction Company (for short \"ARC\") and it obtained license under Section of the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2OO2 (for short \"SARFAESI Act\") from the Reserve Bank of India (RBI) and the RBI also issued Certilrcate of Registration on 05.12.2014' It is further stated that the said Certificate of Registration was cancelled by the RBI vide order dated 30.08.2019 alleging that the petitioner failed to meet the capital requirements as mandated by it. It is the case of the pbtitioner that under the mechanism evaluated for appointment of 2 ARC, the loan account and securities would be assigned to ARC u,hich in tu:n, nill hold it in a trust.to whrch the ARC and bank would contribltte amounts equivalent to their rcspective shares. Thereafter, lhe ARC would act as a trustee to takc al reasonable measures to erLsure that the best possible amounts are recovered depending Lrpon the quality of securities, the outsta.lding dues, other possible actions against promoters depending on their net worth, their otller assets etc. Once the best possible amounts are recovered from the transaction, the net proceeds are di'uided as per the initial agreed upon percentage, subject to deduction of expenses and other fees that ARC is entitled to. While the matter stood thus. on the basis of material placed before the C)omplainant i.e, respondenl- No.2 and with the reasonable belir:f that the properties listezen property and pass appropriate reasoned order. Admittedly, in the instant case, on the complaint filed try the competent authority under sub-section (5) of Section 5, the Adjudicating Ar-rthority i.e, respondent No.3 exercising its power as conferred under sub-Section (3) of Section B, has passed the impugned order dated 22.O4.2021 in Original Complaint No.1367 of 2O2O confirnring the Provisionai Attachment order No.O3/2020 dated 27.1O.2O20 passed by the respondent No.2. lrgainst the impugned order dated 22.O4.2021 passed in Original Complaint No.1367 of 2O2O by the respondent No.3-Adjudicating Authority, an appeal lies under Section 26 of the PMLA Act. ..:,i.;iii', . . 7 8. In United Bank oJ India tt. Satganoati Tondonr, the Hon'ble Apex Court laid down the following principles for entertaining the writ petitions, when alternative remedy is available. \"43. UnfortunatelA, the High Court ouerlooked the settled law tluat the High Court wilt ordinarilg not enterlain a petition under Article 226 of th.e Constitution if an effectiue remedg ts auailable to the aggieued person and that this nie applies with greater rigour in matters inuoluing recouery of toxes, cesq ..fees, other tApes of public moneg and tLrc dues of banks and other fi.nancial in-stitutions. In our uiew, white dealing uith thE petitions inuoluing challenge to the action taken for recouery of the public dues, etc. tlrc High Court must keep in mind that the legtslations enacted bA Parliament and Stqte Legislatures for recouery of such dues are a code unto themselues inasmuch as theg not onlg contqin amprehensive procedure for recouery of the dues but also enuisoge constihttion of quasi-judicial bodies for redressal of the grieuance of ang aggrieued person. Therefore, in all such cases, the High Court must insist that before auailing remedA under Article 226 of the Constitution, a person must exhoust the remedies auqilable under the releuant statute. 44. White expressing the aJoresaid vieu, u.te are conscious that the pou.ters conferued upon the High Court under Article 226 of ttLe Constitution lo issue to anA person or authoritA, including in appropiate cases, anA Govemmen[ directions, orders or uits including the fue prerogatiue uits for the enJorcement of ang of the rights confered bg Part III or for anV other purpose are uery uide and there is no express limitation on exerctse of thot poluer but, at the same time, u)e cdnnot be obltuious oJ the rules of setf-imposed restraint euolued bg this Court, uhich euery High Court is bound to keep in uiew uhile exercising pouer under Article 226 of the Coftstitution. ' lzoto; a scc t l0 : (2010) 3 scc (civ) 2601 8 45. It is true thot the rule of exhaustion of alternatiue remedg is a rule of dtscretion ond not one of compulsion, but it is dtfrtcutt to fothon anA reason uthg the High Court should enlertoin a petittott filed under Article 2-16 of the Constitution and pass inteim order tgnoiruT the fact that the petitioner cqn auail effectiue alternotiue remedg bg filing application. appea| reuision, etc. and the particutar Legis ation contais a detailed mechanism for redressal of his gieuaru:e 55. /l rs e matter of senous concem thot despite repeated pronouncement of this Court, the High Courts continue to ignore the auailabihtg of statutory remedies under the DRT Act cutd the SARFAESY Act and exercise juisdiction under Article 226 for passing orders wlricl'- haue seious adterse impoct on the ight of banks and other financial institutions to recouer th,eir dues. We hope c,nd tntst that in fliwe the High CourTs utill exercise their discretion in such matters ttith greater caution, care and circamspection.\"' 9. In Commissioner o:f Income Tax vs. Chhabil Dass AgaruaP, the l{on'ble Apex Court observed as under \"15. Thtts, while it can be said that this Court ho.s recognised some exceptions to tlae rule of alternatiue remedy i.e. where the :;tatutory authoritq has not acted in accordance Luith the prouisions of the enacttn(,nt tn questio or in def.ance of the fundamental pnnciples of judicial orocedure, or ttas resorted to inuoke the proutsions uhich are repealed, or when qn order has been passed in total utolo:tion of the pinciptes o.f natural justice, the proposition loid doun in Tt.ansingh Nathmal cose IAIR 1964 SC 1419], Titaghur paper MiL[s case lTitaghur Pctper Mills Co. Ltd. u. State of Orissa, (1983) 2 SOC 433 : 1 983 ,S(lC (fox) 1311 and other similqr judgments that the Hiqh Collrt witt not etlle-rtoin a petition under Article 226 of the Constitution if an efkctiue alternatiue remedg is quailabLe to the aggieued person or the statute under tuhich the action complained. of has been taken Ltsef cotiains a mechanism for redressal of grieuance still holds the '(2014) I scc 60] 9 fietd. Therefore, tuhen a statutory forum is created bA taLU for redressal oJ grieuances, a uit petition should not be entertained ignoring the statutory dispensqtion. \" 10. In PIIR Inaent Educational Societg as. UCO Bank and other* the Hon'ble Apex Court while reiterating the principles laid down above, has observed that the High Courts will not entertain a petition under Article 226 of tlre Constitution of India if an effective alternative remedy is available to the aggrieved person or the statute under which the action complained of has been taken itself contains a mechanism for redressal of grievance. 11. In the instant case, in view of the complicated issues involved in this writ petition and they require determination basing on the evidence, and as the petitioner is having alternative remedy of statutory appeal under Section 26 of PMLA Act and taking into consideration various judgments of the Hon'ble Apex Court referred supra, this Court is of the opinion that ends of justice would be met, if the petitioner is relegated to hie an appeal under Section 26 of the PMLA Act, on the file of Appellate Tribunal, PMLA New Delhi. 12. Accordingly, this Writ Petition is disposed of relegating the petitioner to file an appeal on the hle of Appellate Tribunal, PMLA New Delhi and on filing such appeal, the Appellate Tribunal shall , I ' 2024 (3) ALD 142 (sc) -- r,aral f .-dl,cr ;ZZ : - -a ! )'N.ry /' / .,,/. I i I I I I i l0 AS examine and c isposc of the same, in accordance u,ith law, expeditiousll. as possibie. As a seqtrel, the miscellaneous petitions, if any, pending in the Writ PetitiorL shall stand closed. SD/.MOHD. ISMAIL ASSISTAN REGISTRAR //TRUE COPY// SE ION OFFICER To 1 The Union of lndizr, Department of Revenue, Government of lndia. Ivlrnistrv of Finance,-Deparlment of Financiar services, iioom No. +0, r.ro,tn iirocr,, -r.r.iui Delhi 1 10001 . The Deputy Director, Directorate_of Enforcement, Government of lndia, I ,4inis1ry of Financr-. Department Shakkar Bhavan, Basheerbagh. fhe Adjudica_ting l uthority, 4th Floor, Jeevan Deep Building, farliament Street, New Delhi - '1 10001. One CC to SRI GAD| PRAVEEN KUIVIAR, DEpUTy SOL|C|TOR GENERAL oF IND^lA (9q FOR CENTRL GoW) Advocate tOpLJCl One CC to SRt p.ltRt HARSHA REDDY, Advocite tOpUCl Two CD Copies 2 3 4 6 SA GJP R- ',.!:' HIGH COURT DATED:0210712024 ORDER WP.No.18749 of 2021 DISPOSING OF THE W.P WITHOUT COSTS. J 1 ? 0itl 2024 / '7 r+. a . '1.,, { o1..r,, ,. -i:.- ..---- :. ,, . ../ ..7 g,GrPqe) \" Vr- du>t t ( "