Dismissed

Hyde-Park Flat Owners Association v. Director, Directorate of Enforcement

Rajasthan HC12 Aug 2021CW/8607/2021

Case brief

AI extract

What is this about?

Petitioners, being flat owners in a registered project, challenged the ED's provisional attachment order. The court held the petitioners lacked locus standi to challenge the attachment and found the RERA order protecting their interests remained unaffected by the attachment.

What did the court decide?

The writ petition was dismissed as not maintainable against the provisional attachment order.

Hyde-Park Flat Owners Association Vs Director… — Property and Title | Rajasthan HC (2021)

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(1 of 8)

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[CW-8607/2021]

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HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR

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S.B. Civil Writ Petition No.8607/2021

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HYDE-Park Flat Owners Association, Hyde Park Project Behind Dalda Factory, Durgapura, Jaipur-302018 Through Its Authorized Signatory Mr. Kamal Singh Raghav.

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Kamal Singh Raghav S/o Late Shri Kapoor Singh Raghav, R/o 228, Shreeji Nagar, Tonk Road, Durgapura, Jaipur.

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----Petitioners

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Versus

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Director, Directorate Of Enforcement, 6Th Floor, Lok Nayak Bhawan, Khan Market, New Delhi- 110003.

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Deputy Director, Directorate Of Enforcement, Govt. Of India, Zonal Office, Second Floor, Jeevan Nidhi-Ii, Lic Building, Bhawani Singh Road, Jaipur- 302 005.

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----Respondents

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For Petitioner(s) : Mr. Anant Kasliwal For Respondent(s) :

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HON'BLE MR. JUSTICE SANJEEV PRAKASH SHARMA

Judgment

Reportable

12/08/2021

The petitioners have preferred this writ petition with the following prayers:-

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“It is therefore most humbly prayed that:

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a. this writ petition may kindly be allowed and this Hon’ble Court may graciously be pleased to issue writ, order or any other direction to quash and set aside Impugned Order dated 25.06.2021 passed by Deputy Director, Enforcement Directorate; and b. by appropriate writ, order or direction, the Enforcement Directorate be directed not to interfere in any manner whatsoever, in the completion of project as per Scheme approved by RERA and not to issue any directions to any authority against registration of

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(2 of 8)

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[CW-8607/2021]

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flats of residential apartment, project namely “Hydepark” situated at Durgapur, Jaipur; and

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c. Any other order, relief or direction which this Hon’ble High Court may deem fit and proper be passed in favour of the Petitioner.”

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Learned counsel for petitioners submits that the petitionerassociation is formed with the object to secure and safeguard the interest of more than 150 allottees of flats in the residential apartment namely, Hyde-park situated at Durgapura, Jaipur. In order to safeguard the interests of the members of the petitionerassociation who are allottees too and would be purchasing flats namely Hyde-park, a complaint was registered with the Rajasthan Real Estate Regulatory Authority (hereinafter referred to as “RERA”. An order came to be passed on 10.02.2021 after hearing the Directorate of Enforcement who had taken up a case under the Prevention of Money Laundering Act, 2002 (hereinafter referred to as “PMLA, 2002”) against the builders namely Adarsh Build-state Ltd. Jaipur and were proceeding to attach the property where the flats were to be constructed.

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After hearing the Enforcement Directorate, the RERA passed a detailed order as under:-

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“ 97. With this view in mind, resultant of the arguments that have been discussed in detail in the above paragraphs, we in exercise of the powers conferred under section 6, 7, 8, 34, 36, 37 and 38 of the Act, order as follows:

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1. The registration of the project bearing registration No. RAJ/P/2018/604 shall remain revoked as ordered by this Authority in its order dated 16.01.2020;

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2. The development agreement signed between the Promoter Respondent and the landowners having become incapable of being executed or acted upon by the Promoter Respondent on account of the Promoter Respondent facing serious multi-crore money laundering charges and being investigated by the Enforcement Directorate, is terminated;

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(3 of 8)

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[CW-8607/2021]

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3. The Promoter Respondent is declared defaulter in terms of Section 7 (4) (a) of the Act and is barred from accessing its website in relation to this project. The Registrar of the Authority is directed to display his photograph on the website as a defaulter and inform other Real Estate Regulatory Authorities in other States about the revocation of registration of this project.

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4. The registration of the project bearing Registration No. RAJ/P/2018/604 is extended for a period of one year from the date of the order of such extension subject to the new promoter completing the formalities for extension. Any further extension will be considered by this Authority subject to the satisfactory progress in the completion of the project.

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5. The scheme as submitted jointly by the Complainant Association and the landowners including the terms and conditions that are binding on all the stakeholders (the new developer, the members of the Complainant Association and the landowners) is accorded approval of this Authority subject to the following additional conditions provided that these additional conditions shall prevail over any provisions of the Scheme as submitted in case they are inconsistent in any manner with these additional conditions:

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(i) That the scheme is sent to the State Government for consultation and approval as required under section 8 of the Act before starting its implementation;

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(ii) An escrow bank account is opened in the name of the new Revised Phase I wherein the entire revenue received from the members of the Complainant Association towards the payment of their balance amount would be deposited;

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(iii) The revenue received from the sale of unallotted balance number of flats will also be deposited by the new developer /landowners in the escrow bank account only;

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(iv) The money from this escrow bank account would be used only and only for the completion of the Revised Phase I, allied amenities and construction of EWS/LIG flats for handing over to the Jaipur Development Authority or for

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(4 of 8)

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[CW-8607/2021]

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payment of any other taxes, dues or expenses pertaining to the construction; (v) The construction and expenses from the escrow bank account will be monitored by a Project Management Consultant to be approved by this Authority. The progress of construction and the details of the bank account would be submitted to this Authority on a monthly basis before the 10th day of each month

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(vii) After the completion of the project in all respects, the first charge on the balance amount in the escrow bank account would be that of the Enforcement Directorate, who would be paid their claim as determined in terms of para 69 of this Order.

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(viii) The Landowners would be able to partake any amount from this escrow bank account only after the settlement of the reasonable claim of the Enforcement Directorate has been paid off from this account;

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(ix) The new developer shall commence the construction of the work immediately within thirty days from the receipt of instalments from the members of the Complainant Association as per the terms of the Scheme and complete the apartments within two years from the start of the work.

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(x) The Promoter Respondent or any of his contractor, vendor or agency are restrained from interfering in the progress of the completion of the revised Phase 1 as per the Scheme.

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6. The Enforcement Directorate is directed to withdraw their direction given to the Sub Registrar, Jaipur prohibiting the Sub Registrar to register the sale deeds of the apartments in this project and refrain from any interference in the progress of work towards the completion of the Project as per the Scheme.

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7. As for the reward to the new developer for the construction work to be completed by him, we do not feel the need of intervention if, as per the Scheme, the landowners and the Complainant Association have

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(5 of 8)

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[CW-8607/2021]

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agreed to pay 8 percent of the construction cost to the new developer as a reward for the construction.

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8. The Jaipur Development Authority is directed to extend the validity of the map approved so as to complete the project in terms of the Scheme submitted to this Authority.

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9. Some other punishments and penalties for various violations of provisions of the Act and contravention of the obligations cast upon the promoter are due to be imposed on the Promoter Respondent. We deem it fit to defer them in view of the Promoter Respondent being behind the bars and no substantial purpose will be served if penalties are imposed upon the Promoter Respondent in such circumstances

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98. The complaint is disposed of in terms of above directions. ”

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Learned counsel submits that the said order passed by the RERA has not been challenged in appeal and has attained finality. However, after the aforesaid order having been passed, the Directorate of Enforcement has issued an order on 25.06.2021 of provisional attachment under Section 5(1) of PMLA, 2002. Learned counsel submits that in view of an order passed by the RERA, the respondent could not have issued an order of attachment under the PMLA, 2002 in relation to the properties of Hyde-Park as it would directly go contrary to the orders passed by the RERA. Once the ED Authorities have accepted the order of RERA which is statutory authority, the provisions of PMLA, 2002 could not have been invoked with regard to the said property of Hyde-Park. Learned counsel submits that the order of attachment, therefore, deserves to be set aside so far as it relates to Hyde-park. Learned counsel further submits that if such action is allowed to be continued, it would create a chaotic situation and the orders passed by RERA protecting the purchaser of flats would go in a vain and the entire purpose would be lost.

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(6 of 8)

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[CW-8607/2021]

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I have considered the submissions.

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A look at the PMLA, 2002 and specially Section 5 reveals that the power of Directorate of Enforcement to declare any property acquired by proceeds of crime, is liable to be attached and the power is absolute with the Directorate of Enforcement. Section

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5(4) of the PMLA, 2002 provides as under:-

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Section 5 : Attachment of property involved in money-laundering

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(1)

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(2)

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(3)

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(4) Nothing in this section shall prevent the person interested in the enjoyment of the immovable property attached under sub-section (1) from such enjoyment. Explanation.--For the purposes of this sub-section, "person interested", in relation to any immovable property, includes all persons claiming or entitled to claim any interest in the property.

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Thus, a person who is interested relating to any immovable property or is claiming or is entitled to claim any interest in the property would be free to enjoy the said immovable property even if the same is attached.

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However Section 8(8) of the PMLA, 2002, provides as

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under:-

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Section 8 : Adjudication

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(8) Where a property stands confiscated to the Central Government under sub-section (5), the Special Court, in such manner as may be prescribed, may also direct the Central Government to restore such confiscated property or part thereof of a claimant with a legitimate interest in the property, who may have suffered a quantifiable loss as a result of the offence of money laundering:

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Provided that the Special Court shall not consider such claim unless it is satisfied that the claimant has acted in good faith and has suffered the loss despite having taken all reasonable precautions and is not involved in the offence of money laundering:

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Provided further that the Special Court may, if it thinks fit, consider the claim of the claimant for the

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(7 of 8)

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[CW-8607/2021]

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purposes of restoration of such properties during the trial of the case in such manner as may be prescribed.

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Thus, if the property is confiscated by the Central Government, such claimant with legitimate interest in the property or who may have suffered a quantifiable loss as a result of offence of money laundering may move appropriate application for restoration of such confiscated property or a part thereof.

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However, the above provisions show that so far as interested person or any claimant is concerned, they did not have any locus to challenge the attachment order at all. While the statute protects them in some way but they have no say in respect to attachment which is essentially against the person who has procured the property by proceeds of crime. If such subsequent purchaser or interested person as explained under Section 5(4) is allowed to challenge the attachment, it would not only create a chaotic situation but it can be a method of subterfuge litigation by the main accused in getting himself let off in case relating to money laundering.

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In the circumstances, the present petition filed by the interested persons to challenge the attachment order is found to be not maintainable as they did not have any locus standi to the said aspect. However, if their right of enjoyment is in any manner being affected, they can always approach the appropriate authority for getting restoration of their rights for enjoyment.

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At the present stage, however, this court finds that the members of the petitioner-association cannot be said to be persons whose rights have been created in the property in any manner as they are not registered purchaser of the property. However, it appears that RERA has passed an order protecting

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(8 of 8)

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[CW-8607/2021]

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their interest. The order passed by the RERA, therefore, can not be said to have been in any manner interfered with merely on account of attachment of the property by the ED. Observing as above, it is left for the petitioners to approach the appropriate forum for implementing the order of RERA, if they so choose. The present petition is held to be not maintainable as against provisional attachment order dated 25.06.2021.

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The writ petition is accordingly dismissed.

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All pending applications, if any, shall also stand dismissed.

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(SANJEEV PRAKASH SHARMA),J

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Karan/34

Hyde-Park Flat Owners Association v. Director, Directorate of Enforcement

Case brief

What is this about?

What did the court decide?

Hyde-Park Flat Owners Association v. Director, Directorate of Enforcement

Case brief

What is this about?

What did the court decide?

What the court decided

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