PMLA Tribunal Confirms Debit Freeze Of Dove Infrastructure Accounts Despite Existing Bank Guarantee Lien

Background Of The Dispute

M/s Dove Infrastructure Pvt. Ltd. (DIPL) filed Appeal No. FPA-PMLA-3057/CHD/2019 before the Appellate Tribunal under SAFEMA, New Delhi, assailing the order dated 16.11.2018 passed by the Adjudicating Authority in Original Application No. 234/2018 under the Prevention of Money Laundering Act, 2002 (PMLA).

The Adjudicating Authority had permitted retention of the “debit freeze” on balances lying in three bank accounts of DIPL, including amounts held in the form of Bank Guarantee/FDRs, under Section 17(1A) read with Section 20 of PMLA.

These measures arose out of a larger investigation into an alleged land acquisition scam involving villages around Manesar, Haryana, where farmers were purportedly coerced to sell ancestral land at heavily undervalued prices under the looming threat of State acquisition. The investigation indicated that the main accused, Atul Bansal and his group entities, were in possession of alleged “proceeds of crime” of about ₹160 crore.

Within this broader probe, the Enforcement Directorate (ED) traced certain bank accounts and FDRs in the name of DIPL and directed the concerned bank to freeze them on the ground that they were suspected to be connected to money-laundering activities.

Appellant’s Case: Main Grounds Of Challenge

Alleged Violation Of Natural Justice

Counsel for DIPL contended that:

  • The Adjudicating Authority passed the attachment and debit freeze order without serving proper notice on the Appellant.
  • No effective opportunity of hearing was allegedly granted before confirming the freezing of the bank accounts and FDRs.

According to DIPL, this omission rendered the order invalid, as Section 8(1) and Section 20(4) of PMLA require the Adjudicating Authority to apply its mind on the basis of material and reasons to believe, after giving an opportunity to the concerned party.

Nature Of Business And Regulatory Requirements

DIPL asserted that:

  • It is an infrastructure company that had secured a license No. 281/2007 from the Directorate of Town and Country Planning, Haryana (DTCP) for development of an IT Park Project.
  • Under the conditions of this license, DIPL was required to furnish a bank guarantee in favour of DTCP.
  • The bank guarantee was backed by a fixed deposit (FDR) on which a lien had been marked in favour of the bank/DTCP.

DIPL argued that because of this lien and statutory obligation:

  • DTCP, acting through the bank, had a prior charge or superior claim over the FDR amount.
  • The bank guarantee could either be renewed or encashed exclusively for DTCP’s benefit.
  • ED’s action in taking over the FDR, leading to the bank’s inability to honour or renew the guarantee, inflicted serious and irreparable loss to the Appellant’s ongoing project and license.

Encumbrance And Bank Guarantee As A Bar To Attachment

The Appellant emphasised that:

  • The fixed deposit bearing No. 530401003505783 was already earmarked for Bank Guarantee No. 2007/40, initially issued on 06.12.2007 by Corporation Bank in favour of the Director, Town and Country Planning, Haryana.
  • Standing instructions existed with the bank to either extend the guarantee or, if not extended, encash the FDR exclusively in favour of DTCP.
  • Since an encumbrance had existed for approximately 12 years, ED could not legally attach or freeze that FDR under PMLA.

DIPL claimed that the bank guarantee was furnished strictly in compliance with statutory and licensing requirements of DTCP, and thus, the FDR should be insulated from PMLA attachment.

Legitimacy Of Source Of FDR Funds

The Appellant further contended that:

  • The FDR was funded from legitimate business receipts, mainly from RIL and BNB Investment & Properties Ltd.
  • These funds were not derived from any “proceeds of crime” linked to Atul Bansal or ABW Infrastructure Ltd. (ABW).
  • DIPL was originally incorporated on 07.03.2006 as a Special Purpose Vehicle by Vijay Gupta and Amit Gupta, who were also associated with Orris Group (Orris Infrastructure Pvt. Ltd.).

It was argued that:

  1. DIPL purchased 8.73 acres of land at Faridabad from M/s Kirloskar Pneumatic Company Ltd. for ₹1903.45 lakh vide two sale deeds dated 20.09.2006.
  2. Initial funds for acquisition came from earlier promoters and their associates, including:
    • Dinesh Jain
    • M/s Pegasus Developers Pvt. Ltd.
    • Sparsh Builders Pvt. Ltd.
    • Sparsh Build Well Pvt. Ltd.
  3. The Bank Guarantee of ₹79.69 lakh (Bank Guarantee No. 2007/40) was issued against the aforesaid FDR to satisfy licensing conditions of DTCP.

DIPL stressed that:

  • It was not originally part of ABW Group.
  • Only at a later stage was shareholding acquired by:
    • Realtech Infrastructure Ltd. – 36%
    • BNB Constructions Pvt. Ltd. – 10%
    • Atul Bansal – 54%

Therefore, in the Appellant’s view, the company’s bank accounts and FDR could not legally be treated as proceeds of crime merely because Atul Bansal later acquired a controlling stake.

Jurisdictional Objection & Pending Application Under Section 8(8)

DIPL submitted that: