The Union Bank of India since 2017 has been fighting to takeover a mortgaged property – a farmhouse in Delhi. However, it is now up against a formidable opponent - which is not the loan defaulter but the Enforcement Directorate (ED).
According to a report carried out by Indian Express on Friday, the farmhouse currently houses the Gurugram Zonal office of India’s anti money laundering agency. The report said the property is stated to be worth ₹120 crores.
At present, the matter of Union Bank of India vs Assistant Director, Directorate of Enforcement is pending before Punjab and Haryana High Court where the bank has challenged a Panchkula Court order for confiscation of the property in a case under Prevention of Money Laundering Act (PMLA).
Bar & Bench explains how the FarmHouse 22 got caught up in litigation and the legal questions surrounding the property.
The loan default
The controversy has its origin in the credit facilities availed in 2012 by ABW Infrastructure, through its Director Atul Bansal, from Corporate Bank, which in 2020 merged with Union Bank of India.
Wisdom Realtors, which had purchased the property in December 2004 and is stated to be its actual owner, stood as Corporate Guarantor for the credit facilities and along with ABW Infrastructure executed a Common Deed of Hypothecation in favour of the bank.
Pertinently, Bansal was also a Director of the Wisdom Realtors.
Among the properties mortgaged against the credit facilities was the farmhouse.
However, in 2015, the account of ABW Infrastructure was declared a Non-performing Asset. The bank in 2016 issued a demand notice to the firm for repayment of Rs ₹121,05,47,380 - the principal amount and interest up to Feb 28, 2017.
In April 2017, the bank initiated recovery proceedings under Recovery of Debts Due to Banks and Financial Institutions Act before the Debts Recovery Tribunal in Delhi.
The plea sought sale through auction and attachment of properties mortgaged in favour of the bank for securing the credit facilities.
Wisdom Realtors challenged the issuance of notice on the bank’s plea and was able to secure an order restraining the bank from taking over possession of the mortgaged property.
However, the bank moved the Debts Recovery Appellate Tribunal (DRAT) which in 2019 set aside the order and permitted it to proceed under SARFAESI Act for auction of the farm house to realise the outside dues.
ED makes entry
However, the ED registered a money laundering case against Bansal, the ABW Infrastructure and its group companies and in December 2018 attached the farm house as a derivate of ‘proceeds of crime’.
Meanwhile, Bansal reportedly passed away during the pendency of proceedings.
The money laundering case originated in an alleged land purchase scam in Haryana’s Manesar.
It is alleged by central agencies that villagers in Manesar were compelled to sell about 400 acres of land to private persons at throwaway prices under the threat of acquisition by the Haryana government.
ABW Group, owned by Bansal, is alleged to have been one of the private players in the alleged fraud. The Central Bureau of Investigation in 2015 began a probe into the allegations.
The ED later registered a money laundering case in the matter and attached properties of Bansal and other entities worth ₹399 crores. Four prosecution complaints under PMLA were filed before the Panchkula Court between 2018 and 2022.
Since Bansal and his wife remained elusive and were declared as proclaimed offenders in April 2019 and November 2020 respectively, the ED moved the trial court in Panchkula for confiscation of the properties.
According to provisions of the PMLA, the Special Court can consider ED’s application for confiscation in case a trial cannot be conducted due to death of an accused person or him being declared a proclaimed offender.
Opposing the ED application, the bank argued that the attached properties had been purchased prior to the check period for the alleged offences and, hence they cannot be said to have been derived from the proceeds of crime.
The ED attached the property as ‘alternative attachable property’ as the same does not have any direct link or nexus with the offence of money laundering alleged in the complaint, the bank said.
It was further argued that the bank had taken symbolic possession of the farmhouse in April 2017 and is a bonafide third party claimant having prior secured interest in the properties.
A special court in May 2022 rejected the bank’s objections, while relying on Punjab and Haryana High Court rulings holding that PMLA would prevail over SARFAESI Act. The bank then moved the High Court against the order allowing confiscation of the properties
Current Status
The ED in July this year raised a preliminary objection against the maintainability of the bank’s revision plea.
It said the trial court’s order was only interlocutory and the bank can approach the special court under relevant provisions of PMLA to seek restoration of the confiscated property.
However, a single-judge of the High Court ruled in favour of the bank, saying the trial court order had attained finality. Thus, it held criminal revision to be maintainable and proceeded with hearing the case. The matter is next listed for hearing on October 22.