HDFC Bank Limited Vs Government of India (Patna High Court)
Summary: The Patna High Court in HDFC Bank Limited Vs Government of India held that properties acquired from legitimate sources before commission of the alleged scheduled offence could not be provisionally attached under Section 5 of the Prevention of Money Laundering Act, 2002 merely because the actual proceeds of crime were no longer available. Three immovable properties belonging to the borrower, respondent No.5, had been mortgaged to HDFC Bank for securing an overdraft facility before the alleged money-laundering activity and were subsequently attached by the Enforcement Directorate. The Court examined the three limbs of “proceeds of crime” under Section 2(1)(u) of the PMLA and held that property purchased before commission of the scheduled offence did not fall within the first limb.
It further held that the expression “value of such property” in the second limb did not permit attachment of any unrelated legitimate property merely because tainted property was unavailable. Property equivalent in value under the third limb could be attached where property obtained or derived from criminal activity had been taken or held outside India. Following Seema Garg v. Deputy Director, Directorate of Enforcement and preferring that view over the Delhi High Court’s decision in Deputy Director of Enforcement v. Axis Bank, the Court concluded that the attached properties were not “proceeds of crime”. The Court separately rejected HDFC Bank’s contention that its status as secured creditor under Section 31B of the Recovery of Debts and Bankruptcy Act and Section 26-E of the SARFAESI Act by itself defeated a valid PMLA attachment, observing that the statutes operated in different fields.
