Dismissed¶57

The Deputy Director v. the Chief Executive Officer Karnataka State Board of Auqaf

PMLA – Attachment of funds belonging to the victim of the scheduled offence

Karnataka HC11 Sept 2025MSA/39/2020

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Case brief

AI extract

What is this about?

MSA 39/2020 (PMLA), Karnataka HC, 11.09.2025, D K Singh J. (author) with Venkatesh Naik T J. — Enforcement Directorate appeal against Appellate Tribunal order quashing attachment qua WAKF Board/AUQAF (victim of Rs.4 crore misappropriation; Rs.2,29,45,465/- attached in third-party account; AA order of 20.06.2017 for Rs.2,72,24,926/- quashed); reliance by Tribunal on M/s. Indian Bank, 2012-TIOL-538-HC-MAD-PMLA; Special Court vs Tribunal competence to continue attachment during PMLA pendency; S.8(6) PMLA application; appeal dismissed, question of law left open.

What did the court decide?

No relief to the appellant; Miscellaneous Second Appeal dismissed with the question of law left open to be decided in an appropriate case. ¶57

The Deputy Director Vs the Chief Executive Officer… — Money Laundering | Karnataka HC (2025)

What the court decided

AI extract

Outcome

No relief to the appellant; Miscellaneous Second Appeal dismissed with the question of law left open to be decided in an appropriate case.

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Issue for consideration

Whether the Enforcement Directorate's Miscellaneous Second Appeal should be allowed, i.e., whether the Appellate Tribunal's order (setting aside the attachment against the victims and quashing the Adjudicating Authority's order qua the WAKF Board) should be set aside and the provisional attachment order No.3/2017 in ECIR/BGZO/04/2017 dated 31.01.2017 confirmed. +1 more

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Court's answer

Since the attached money belongs to the WAKF Board (which is not an accused in the scheduled offences or the PMLA proceedings) and has already been released in its favour with certain conditions, the Court declines to interfere with the Tribunal's impugned order notwithstanding its disagreement with the Tribunal's reasoning on the propriety of the attachment.

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Ratio / Principle

The Court does not subscribe to the Tribunal's view that the attachment order was improper; the question whether there is justification to keep attachment during the pendency of PMLA proceedings falls to be decided by the Special Court and not by the Tribunal.

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Key takeaways

The Miscellaneous Second Appeal is dismissed, leaving the question of law open to be decided in an appropriate case.ratio¶57

Detailed headnote1 paragraphs

PMLA – Attachment of funds belonging to the victim of the scheduled offence – Enforcement Directorate's Miscellaneous Second Appeal under S.42 PMLA against the Appellate Tribunal's order setting aside the provisional attachment and its confirmation qua the Karnataka State Board of AUQAF and quashing the Adjudicating Authority's order dated 20.06.2017 – Held: the money attached was the WAKF Board's own misappropriated funds, and the Board/CEO were not accused either in the scheduled offences (S.120-B/420/467/468/471 IPC) or in the PMLA proceedings; the question whether there is justification to keep the attachment alive during pendency of PMLA proceedings is for the Special Court, not the Tribunal, and to that extent the Court did not subscribe to the Tribunal's view; however, since the amount (Rs.2,29,45,465/-) had already been released by the Special Court in favour of the Board with conditions, the Court declined to interfere and dismissed the appeal, leaving the question of law open.

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NC: 2025:KHC:36074-DB MSA No. 39 of 2020

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HC-KAR

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 11^TH DAY OF SEPTEMBER, 2025

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PRESENT

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THE HON'BLE MR. JUSTICE D K SINGH

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AND

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THE HON'BLE MR. JUSTICE VENKATESH NAIK T MISCELLANEOUS SECOND APPEAL NO. 39 OF 2020 (PMLA)

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BETWEEN:

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THE DEPUTY DIRECTOR DIRECTORATE OF ENFORCEMENT, BENGALURU ZONAL OFFICE, 3^RD FLOOR, 'B' BLOCK, BMTC, SHANTINAGAR - TTMC, KH ROAD, SHANTINAGAR, BENGALURU-560 027, REPRESENTED BY MR. N.SOMASEKARA, ASSISTANT DIRECTOR, DIRECTORATE OF ENFORCEMENT.

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…APPELLANT

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Digitally signed by VASANTHA KUMARY B K Location: HIGH COURT OF KARNATAKA

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(BY SRI. UNNIKRISHNAN M., ADVOCATE)

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AND:

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THE CHIEF EXECUTIVE OFFICER KARNATAKA STATE BOARD OF AUQAF, "DARUL AWAK", NO.6, CUNNINGHAM ROAD, BENGALURU-560 052.

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…RESPONDENT

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(BY SRI. CHIDANANDA URS B.G., ADVOCATE)

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THIS MSA IS FILED UNDER SEC. 42 OF THE PREVENTION OF MONEY LAUNDERING ACT, 2002 PRAYING TO CALL FOR RECORDS AND SET ASIDE THE IMPUGNED ORDER DATED 18.06.2019 PASSED BY THE HON'BLE APPELLATE TRIBUNAL

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HC-KAR

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(THE PREVENTION OF MONEY LAUNDERING ACT), NEW DELHI, IN FPA-PMLA-1878/BNG/2017 (ANNEXURE-A) AND CONSEQUENTLY CONFIRM THE PROVISIONAL ORDER OF ATTACHMENT BEARING 03/2017 IN ECIR/BGZO/04/2017 DATED 31.01.2017 PASSED BY THE APPELLANT AND TO GRANT SUCH OTHER RELIEFS TO THE APPELLANT, IN THE INTEREST OF JUSTICE AND EQUITY.

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THIS MSA, COMING ON FOR HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

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CORAM: HON'BLE MR. JUSTICE D K SINGH and HON'BLE MR. JUSTICE VENKATESH NAIK T

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ORAL JUDGMENT

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(PER: HON'BLE MR. JUSTICE D K SINGH)

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The present Miscellaneous Second Appeal has been

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filed impugning the order dated 18.07.2019 passed by the Appellate Tribunal, New Delhi in MP-PMLA3698/bng/2017(STAY); FPA-PMLA-1878/BNG/2017.

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Heard Mr. M. Unnikrishnan, learned counsel for the appellant and Mr. Chidananda Urs B.G., learned counsel for the for the respondent.

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The respondent was the Chief Executive Officer

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of the Karnataka State Board of AUQAF, Cunnigham Road, Bengaluru. One employee of the WAKF Board, in alleged

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HC-KAR

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connivance with the Manager of the Vijaya Bank, Chintamani Branch, misappropriated the said WAKF'S funds of Rs.4 Crores. When the respondent came to know about the misappropriation of large funds of the WAKF, he lodged a criminal complaint against the employee and the Manager of the Vijaya Bank and a criminal case was registered under Section 120-B read with Sections 420, 467, 468 and 471 of IPC. Thereafter, the Enforcement Directorate registered provisional attachment order No.3/2017 in F.No.ECIR/BGZO/04/2017 dated 31.01.2017 and filed a complaint before the Special Court. In the money trial, it was found that an amount of Rs.2,29,45,465/- lying in the bank account of one Vijay Pullijala, owner of M/s. Ajay Sharma Trading Corporation which was recovered and attached. The Adjudicating Authority confirmed the said attachment order against which the appeal was filed by the respondent - Board before the Appellate Tribunal.

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HC-KAR

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The respondent, who is the Chief Executive

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Officer of the WAKF Board, is not an accused either in the scheduled offences or in the proceedings undertaken by the Enforcement Directorate under the provisions of the Prevention of Money Laundering Act, 2002 (for short 'the PMLA, 2002').

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The Tribunal vide the impugned order, relying on the decision of the Madras High Court in the case of

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M/s. Indian Bank Vs. Joint Director of Enforcement

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reported in 2012-TIOL-538-HC-MAD-PMLA wherein it was held that Sections 8 and 9 are not be used by the Enforcement Directorate to inflict injury upon the victims of the crime and the provisional order of attachment as well as the order of confirmation was set aside against the victims of the crime. It was further held that money of the WAKF Board which was wrongly transferred to the account of another person without proper documents should not be the ground for the Enforcement Directorate to proceed

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HC-KAR

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against the Board when it is its own money was misappropriated.

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In view thereof, the order dated 20.06.2017 passed by the Adjudicating Authority alleging misappropriation of a sum of Rs.2,72,24,926/- qua the WAKF Board was quashed, as the Board and the CEO were not involved in the commission of the scheduled offences nor that they were accused in the proceedings under the PMLA, 2002.

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Mr. UnniKrishnan, learned counsel for the Enforcement Directorate submits that the Enforcement Directorate is aggrieved by the said order inasmuch as it is not in dispute that the amount was misappropriated and laundered. During pendency of the PMLA proceedings, the Tribunal should not release said amount. For release of the said amount, the respondent - Board could have filed an application under Section 8(6) of the PMLA, 2002 before the Special Court. He therefore, submits that the

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HC-KAR

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impugned order quashing the attachment order is not sustainable and may be set aside.

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On the other hand, learned counsel for the respondent submits that it was the money of the WAKF Board and the money could get recovered only on the complaint of the WAKF Board. Therefore, there was no justification for keeping attachment on the said money and the Tribunal has rightly observed that the WAKF Board being the victim of the crime, it cannot be penalized for its own money. He further submits that the Board has filed an application before the Special Court, and the Special Court has released the amount with a condition that in case the Enforcement Directorate succeeds, the WAKF Board will deposit the money back.

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We have considered the submissions of the

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learned counsel for the parties.

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The facts are not in dispute. The money attached was the money of the WAKF Board. Whether

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HC-KAR

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there is justification to keep attachment during the pendency of the proceedings under PMLA should be decided by the Special Court and not by the Tribunal. Therefore, to that extent, we do not subscribe to the view of the Tribunal that the attachment order was not proper. However, as the money is of the WAKF Board, and it has been released in its favour, with some conditions, we do not wish to interfere with the impugned order.

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Thus, considering the aforesaid facts, we

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dismiss the Miscellaneous Second Appeal leaving the question of law open to be decided in an appropriate case.

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Sd/(D K SINGH) JUDGE

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Sd/(VENKATESH NAIK T) JUDGE

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RKA List No.: 1 Sl No.: 43

The Deputy Director v. the Chief Executive Officer Karnataka State Board of Auqaf

Case brief

What is this about?

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The Deputy Director v. the Chief Executive Officer Karnataka State Board of Auqaf

Case brief

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