New Delhi: In a landmark judgement, an appellate tribunal handling money laundering cases ruled that if the Enforcement Directorate (ED) fails to publicise or delays the attachment of an accused’s property, it would be unfair to penalise third parties who unknowingly purchase such properties.
The Appellate Tribunal under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act (Safema), 1976, New Delhi, made this observation while quashing the ED’s attachment of a Pune land parcel where a housing society had been built for 126 families.
Comprising members G.C. Mishra and Rajesh Malhotra, the tribunal nullified the ED’s plan to seize the plot, citing the agency’s failure to make the attachment public.
The Tribunal noted that ED’s laxity rendered the attachment order “unenforceable against bona fide transferees”.
Criticising the agency’s conduct as “negligence verging on collusion”, the Tribunal set a precedent on third-party rights under the Prevention of Money Laundering Act (PMLA).
The ruling also establishes a template for similar cases involving third parties who unknowingly acquire attached properties.
In its July 8 order, the Tribunal stated that the limitation for appeal under PMLA must begin from the date of actual knowledge of the attachment, not from the undisclosed date of issuance.
Bringing relief to 126 families, the Tribunal ruled in favour of the petitioners—special-purpose development company Hindavi Swarajya Trading and the residents of Scrum Utkarsh CGHS—and quashed the ED’s 2013 attachment of land at Survey No. 220, Hinjewadi, Pune.
The land, acquired by Hindavi through lawful consideration and thorough due diligence, was the site of the Scrum Utkarsh cooperative housing project—a community of 126 homes occupied by middle-class software professionals and their families.
The ED’s attachment of the plot was linked to scam kingpin Sayed Masood’s laundering of ₹6.67 crore of investor funds from City Limouzines into the Hinjewadi land, routed through shell transactions facilitated by Sajid Ibrahim Varekar (Masood’s power-of-attorney holder) and Guddu Mehboob Sheikh.
Hindavi and its members were unaware that the ED had secretly attached the land in March 2013 in connection with the City Limouzines scam, masterminded by Masood.
By the time the ED’s first communication reached the Sub-Registrar in September 2015, construction was complete, bank finance had been disbursed, and most flat sales had been executed, according to the petitioners.
The delayed and selective use of powers nearly collapsed flat registrations and triggered years of litigation for both Hindavi and Scrum.
Acknowledging the human cost, the Tribunal observed that penalising bona fide purchasers who followed every procedural safeguard, while leaving actual money launderers’ properties untouched, would “invert the raison d’être of the PMLA”.
Lead counsel for the appellants, Faraz Khan, said, “This decision draws a constitutional boundary – punish launderers, not honest citizens.”
“Due diligence is not a game of hide-and-seek. When the State attaches property, it must shout it from the rooftops – register it, publicise it, and mark it, he said.
Aakriti Mathur, counsel for Scrum Utkarsh, said, “This case was never just about property law or technicalities – it was about protecting the dignity and homes of 126 innocent families.”
(inputs from IANS)