Nagpur: In a significant ruling, the Nagpur Bench of the Bombay High Court has set aside key orders of the PMLA Appellate Tribunal, delivering a major legal victory to the Enforcement Directorate (ED) in a case linked to alleged coal block allocation irregularities.
A Division Bench comprising Justices Mukulika S. Jawalkar and Nandesh S. Deshpande allowed two First Appeals filed by the Joint Director of the Enforcement Directorate, Panaji (Goa), under Section 42 of the Prevention of Money Laundering Act.
The High Court quashed and set aside the Appellate Tribunal’s orders dated August 28, 2017, and January 25, 2018. These orders had earlier overturned the ED’s provisional attachment of properties dated May 30, 2016, particularly those mortgaged to banks.
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The Tribunal had ruled in favour of secured creditors, including HDFC Bank and Punjab National Bank, citing their priority rights under Section 31-B of the Recovery of Debts and Bankruptcy Act, 1993, and Section 26-E of the SARFAESI Act.
However, the High Court found the Tribunal’s reasoning unsustainable and held that the impugned orders were liable to be struck down.
The case stems from an FIR registered by the Central Bureau of Investigation alleging irregularities in coal block allocation involving Grace Industries Ltd. The ED claimed that the company generated wrongful gains of over ₹24.92 crore, categorizing it as “proceeds of crime” under the PMLA.
The attached assets, which had been mortgaged to HDFC Bank for credit facilities prior to the ED’s action, became the focal point of the legal dispute. The bank had already classified the account as a non-performing asset (NPA) and initiated recovery proceedings under the SARFAESI Act.
While delivering relief to the ED, the High Court clarified that it would not remand the matter back to the Tribunal. Instead, it granted liberty to the respondent banks to approach the Special Court under Section 8(8) of the PMLA for appropriate relief, including release of attached properties.
Advocates K N Shukul (DSGI), P N Hardas, and Gaurav Khatwani represented the ED, while Senior Advocate M G Bhangde along with Advocate S D Ingole appeared for the respondent banks.
