Lucknow, Jul 7 The Allahabad High Court has held that the Prevention of Money Laundering Act (PMLA) cannot be invoked to exert pressure in purely commercial or civil disputes, observing that the law is not meant to serve as a mechanism for resolving contractual or financial disagreements.
Justice Subhash Vidyarthi of the Lucknow bench of the Allahabad High Court on Monday quashed the Enforcement Directorate's (ED) money laundering proceedings against Tulsiani Construction and Developers Ltd and its directors, including the Special PMLA Court's January 30 order, taking cognisance of the complaint and summoning the accused.
Justice Vidyarthi observed, "I am of the considered view that the proceedings under PMLA is maliciously instituted with an ulterior motive for wreaking vengeance on the applicants and thereby coercing them to redress the grievances of the flat buyers to transfer in their favour the flats and/or refund their money, without their resorting to the remedies available under the laws and the same are liable to be quashed."
The court said that the dispute essentially arose out of contractual obligations between a builder, a bank and flat buyers, but had been given a criminal colour by initiating proceedings under the PMLA.
It said the objective of the anti-money laundering law was not to facilitate the resolution of civil disputes or to coerce parties into settling commercial claims.
The proceedings originated from an FIR lodged by Punjab National Bank, alleging that the builder failed to hand over flats despite home loans having been sanctioned to buyers, causing financial loss to the bank.
Based on the FIR, the ED registered an Enforcement Case Information Report (ECIR) and filed a money laundering complaint against the company and its directors.
The bench noted that of the four loan accounts relied upon by the ED, one had never turned into a non-performing asset (NPA), two had already been settled and the fourth had also been resolved through a one-time settlement. In these circumstances, the dispute was essentially civil and commercial in nature, the court held.
The bench also held that the ED had illegally attached a property purchased in 2012, nearly a decade before the alleged scheduled offence of 2022.
Such a property, the court said, could not be treated as "proceeds of crime".
It further found fault with the Special Court order for taking cognisance without dealing with the objections raised by the accused or recording adequate reasons, holding that the order suffered from non-application of mind.
