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.
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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 WP(C) No.31073/2023 4 / 19 WP(C) No.31073/2023 -:2:- 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 WP(C) No.31073/2023 5 / 19 WP(C) No.31073/2023 -:3:- 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 WP(C) No.31073/2023 6 / 19 WP(C) No.31073/2023 -:4:- 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 WP(C) No.31073/2023 7 / 19 WP(C) No.31073/2023 -:5:- 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 WP(C) No.31073/2023 8 / 19 WP(C) No.31073/2023 -:6:- 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 WP(C) No.31073/2023 9 / 19 WP(C) No.31073/2023 -:7:- 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 WP(C) No.31073/2023 10 / 19 WP(C) No.31073/2023 -:8:- 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 WP(C) No.31073/2023 11 / 19 WP(C) No.31073/2023 -:9:- 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 WP(C) No.31073/2023 12 / 19 WP(C) No.31073/2023 -:10:- 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, WP(C) No.31073/2023 13 / 19 WP(C) No.31073/2023 -:11:- 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 WP(C) No.31073/2023 14 / 19 WP(C) No.31073/2023 -:12:- 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 WP(C) No.31073/2023 15 / 19 WP(C) No.31073/2023 -:13:- 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 WP(C) No.31073/2023 16 / 19 WP(C) No.31073/2023 -:14:- 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 WP(C) No.31073/2023 17 / 19 WP(C) No.31073/2023 -:15:- 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 WP(C) No.31073/2023 18 / 19 WP(C) No.31073/2023 -:16:- 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 WP(C) No.31073/2023 19 / 19 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