Case Details: Deputy Director, Directorate of Enforcement vs. Sri Asadhullah Khan - [2025] 179 taxmann.com 686 (HC-Karnataka)
Judiciary and Counsel Details
- D.K. Singh & Venkatesh Naik T., JJ.
- Madhukar M. Deshpande, Adv. for the Appellant.
- Bhargava D. Bhat & C. Vinay Swamy, Advs. for the Respondent.
Facts of the Case
In the instant case, the CBI registered a case against borrowers for fraudulent transactions in the sanction and disbursal of loans and other credit facilities. The borrowers defaulted on repaying loans and credit facilities advanced to them, resulting in a loss to the bank.
It was also found that properties offered as securities for overdraft credit facilities by borrowers were not found to be sufficient to meet the outstanding liabilities of borrowers. A complaint was filed by the Directorate of Enforcement under section 5(5) of the PMLA, 2002.
The Adjudicating Authority confirmed a provisional attachment order in respect of 7 properties mortgaged to the bank by borrowers to avail a loan. However, the Appellate Tribunal had quashed the confirmation order passed by the Adjudicating Authority. Thereafter, an appeal was made before the High Court.
It was noted that since 7 properties mortgaged to the bank, which were subject matter of attachment proceedings, were acquired prior to the alleged offences, and were not proceeds of crime, they could not be subjected to attachment proceedings under the provisions of the PMLA.
High Court Held
The High Court held that, since the bank was a secured creditor and had commenced recovery proceedings under the SARFAESI Act, it was entitled to enforce its security interest by attaching the secured assets. Further, since the Adjudicating Authority had failed to serve a notice to the bank under section 8(1) proviso and section 8(2) proviso of the PMLA, no error was committed by the Appellate Tribunal.
List of Cases Reviewed
- Smt. Nasreen Taj v. Deputy Director Directorate of Enforcement [2017] 88 taxmann.com 287 ((PMLA-AT), NEW DELHI) (para 17) affirmed
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