Madras High Court Quashes ED's Provisional Attachment Order, Says Neither Notice Given To Party Nor Order Confirmed By Adjudicating Authority

The bench of Justice MS Ramesh and Justice Sunder Mohan, however, gave liberty to the authorities to take action under the law if upon further investigation it was found that the sale made was a sham.

“We may also note here that even in the counter, the respondents have not explained how the provisional attachment can be sustained on merits, in view of the sale in favour of the petitioners. Since the provisional attachment is not in accordance with the law, all consequential actions cannot be sustained,” the court observed.

The court was hearing two pleas challenging the provisional attachment order and the entries made in the encumbrance certificate. The ED had registered ECIR in 2010 against one Devadoss and had attached 51 properties that were in his possession including the properties of the petitioners. In the first plea, it was submitted that the provisional attachment was not confirmed by the adjudicating authority and thus sought for removal of entries in the encumbrance certificate. In the second plea, it was submitted that no notice was issued before passing the provisional order of attachment and thus sought to quash the same.

The court was informed that the petitioners had purchased the property in 2008 while the provisional attachment order was made in 2011. The petitioners submitted that they were not aware of the attachment and only when they had applied for additional facilities from the bank, they were informed of the entries.

The ED, on the other hand, opposed the plea by submitting that the parties had an alternative remedy and could approach the authorities concerned under Section 8(2) of the PMLA. The ED argued that if the petitioners were aggrieved by any action, they could file an appeal before the appellate tribunal under Section 26 of the Act. It was submitted that there were several factual disputes which could be adjudicated only by the authorities.

The court noted that in some casesthe provisional attachment was not confirmed by the adjudicating authority and though the authority had sought liberty to re-investigate the transaction relating to the property, it was unclear whether the re-investigation was conducted. Thus, noting that the provisional attachment was not in force, the court ordered the entries made in the encumbrance certificate to be removed.

Regarding the second plea, the court noted that the fact of the sale was not brought to the notice of the authorities, and if they were informed of the same, the attachment would not have been confirmed by the authorities. The court also agreed with the petitioners that no notice was served while confirming the attachment.

Though the court agreed that the petitioners had alternative remedies, the court also noted that since the attachment itself was not proper, the petitioners needn't be relegated to approach the authorities or Special Court. the court, thus set aside the provisional attachment order with respect to the petitioners' property.

Counsel for the Petitioners: Mr.M.Sricharan Rangarajan, Sr. Counsel for Mr.A.K.Athiban Vijay

Counsel for the Respondents: Mr.Rajnish Pathyil, Special Public Prosecutor (ED cases)

Citation: 2024 LiveLaw (Mad) 68

Case Title: Nithesh Chaudhari v The Special Director

Case No: W.P.Nos.28454 and 34676 of 2022