S. 8(8) PMLA | Bonafide Individuals Suffering Loss Due To Money Laundering Can Approach Special Court To Restore Attached Property: J&K High Court

Citing Sec 8 Sub Sec 8 of the Prevention of Money Laundering Act, 2002, Justice Sanjeev Kumar observed,

“.. that a person, who has acted in good faith and has suffered a quantifiable loss as a result of the offence of money laundering, despite having taken all reasonable precautions and is otherwise not involved in money laundering, would be a claimant entitled to invoke the second proviso to sub-section (8) of Section 8 of the Act of 2002”.

Background:

These observations came in a case revolving around a real estate project titled "Palm Springs" in Humhama, Airport Road Srinagar, initiated by a company registered as a limited by shares entity. The petitioners had invested in this project after confirming its legitimacy, including necessary approvals from competent authorities and NOCs from the Revenue Department and building permissions from the Municipal Corporation.

Despite these precautions, the Enforcement Directorate (ED) attached the properties linked to the project, claiming they were purchased using the proceeds of crime derived from the Adarsh Credit Cooperative Society Ltd (ACCSL) scandal.

This action of the respondents was based on an investigation initiated by an FIR filed in Jaipur alleging that ACCSL diverted investor funds into various schemes and properties, including the Palm Springs project.

The petitioners through Senior Advocate Jahangir Iqbal Ganai challenged the provisional attachment and its subsequent confirmation on several grounds. They argued that the attachment orders were passed without hearing the petitioners, who were directly affected.

It was further submitted that the value of the attached property exceeded the alleged proceeds of crime, unfairly impacting the petitioners.The petitioners, as bona fide purchasers, were deprived of their property without involvement in the money-laundering activities, they urged.

Mr Tahir Majid Shamsi for the Directorate of Enforcement (respondent) defended the attachment, stating it was a necessary measure to prevent the disposal of assets acquired through the proceeds of crime. He maintained that the petitioners could seek redress through the special courts established under the Act.

Court Observations:

After considering the rival contentions Justice Kumar referenced the Prevention of Money-Laundering (Restoration of Property) Rules, 2016 to explain the term “claimant” and observed,

“The petitioners, as per their claim, fall in the category of claimants and are, thus, well within their right to approach the Special Court under the Prevention of Money-Laundering Act at Jaipur, which has taken cognizance of the prosecution complaint bearing No. 06/2021 filed by the Enforcement Directorate on 31-03-2021”.

Pointing out to Section 26 of the Act which prescribes for an appeal from the order of the Adjudicating Authority before the Appellate Tribunal the court explained, 

“Not only the accused or any person who is found to be in possession of the property raised by proceeds of crime but any person aggrieved by an order of the Adjudicating Authority has the locus standi to file an appeal against such order before the Appellate Tribunal. The petitioners are undoubtedly persons aggrieved and thus well within their right to invoke Section 26 of the Act and avail the remedy against the order passed by the Adjudicating Authority.”

While assuming that the petitioners might have had no knowledge of the proceedings undertaken by the Adjudicating Authority under Section 8 of the Act the court said that the petitioners were still free to approach the Special Court which may, if it thinks fit, consider the claim of the claimant for purposes of restoration of the attached property during trial of the case in such manner as may be prescribed.

“It is thus abundantly clear that the remedy of the petitioners lies before the Special Court under the Prevention of Money-laundering Act, at Jaipur which has taken cognizance of the case and is seized of the matter… The petitioners have deliberately skipped the aforesaid statutory remedy which is equally efficacious and have rushed to this Court invoking extraordinary jurisdiction of this Court”, Justice Kumar maintained.

In light of these observations, the court dismissed the petition leaving it open to the petitioners to avail the alternate remedies provided under the Act which are not only statutory but are also equally efficacious.

Case Title: Dr. Junaid Vs Union Of India

Citation: 2024 LiveLaw (JKL) 164

Mr. Jehangir Iqbal Ganai, Sr. Advocate with Ms. Mehnaz Rather, Mr. Kamil Nazir & Mr.Syed Faheem, Advocate appeared for the petitioners, Mr. T. M. Shamsi, DSGI with Mr. Faizan, Mr. Showkat Ali Khan, Advocate appeared for the respondents.

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