Mr. Rishabh Basra, Mr. Sirhaan Seth, Mr. Kanav Madnani and Mr. Sultan, Advocates v. UNION OF INDIA AND ORS

Applications stand disposed of. W.P.(C) 1241/2025 1. The present petition has been filed by the petitioner assailing the Provisional Attachment Order dated 05.09.2024 bearing no. 9/2024 (hereinafter ‘PAO’) issued under Section 5 (1) of the Prevention of Money Laundering Act, 2002 (hereinafter “PMLA”) against the petitioner’s This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 06/02/2025 at 14:51:20 property, issued by the respondent no.2 (Directorate of Enforcement), Show Cause Notice dated 14.10.2024 issued by the respondent no.3 (Adjudicating Authority) and consequential actions/proceedings emanating thereto. 2. It is submitted that the petitioner is engaged in the real estate business and is a part-owner of two commercial properties purchased in 2008, as well as two other properties acquired in 2005 and 2009. It is submitted that these acquisitions occurred well before the alleged predicate offense. 3. The petitioner contends that the ED’s actions are arbitrary and lack legal basis, as they fail to establish a direct link between the alleged proceeds of crime and the petitioner’s properties. 4. The case stems from investigations of M/s Amtek Auto Ltd. (AAL) and its subsidiaries, which were significant players in the automotive manufacturing sector. These subsidiaries, including Castex Technologies Ltd., Metalyst Forgings Ltd., ARGL Ltd., and ACIL Ltd., were involved in various financial transactions that later became the subject of banking fraud allegations. Following complaints by IDBI Bank and the Bank of Maharashtra, the Central Bureau of Investigation (CBI) registered two separate cases—RC No. 22322022A0009 and RC No. 2202022E0019 on

21.12.2022 and 29.12.2022, respectively. 5. The first complaint (RC22322022A0009), filed on 21.12.2022, was based on a complaint from IDBI Bank regarding a loan that was sanctioned to ACIL in 2012. The said loan was later classified as a non-performing asset (NPA). The second complaint (RC2202022E0019), filed on

29.12.2022, was based on a similar loan default reported by the Bank of Maharashtra. Both complaints allege fraud and financial mismanagement, leading to the registration of criminal cases under the Indian Penal Code This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 06/02/2025 at 14:51:20 (IPC) and the Prevention of Corruption Act. 6. In the case of IDBI Bank, the loan for Rs. 254 Crore was sanctioned to ACIL in 2012 for a total project cost of Rs. 317.52 Crore. The loan was secured with mortgages on properties. Due to the company’s failure to service its debts, it was declared an NPA in 2016. IDBI later declared the company, including the petitioner, as “willful defaulters” in 2018, although this declaration was stayed by the Bombay High Court, pending further legal proceedings. In addition to this, forensic audits were conducted, revealing irregularities in the way the funds were used, including allegations of improper payments and asset mismanagement. 7. Similarly, the Bank of Maharashtra sanctioned a term loan of Rs. 200 Cr. to ACIL in 2012, which was later red-flagged and declared a fraud account by the bank in 2019. The petitioner, along with other related entities, was declared a “willful defaulter” in connection with this loan as well. This Hon’ble Court in WP (C) No. 10981/2019 stayed the same and the petition is pending before this Court. 8. State Bank of India (SBI) subsequently issued a letter on 02.11.2020, discharging the petitioner from the wilful defaulters proceedings related to AAL. As part of the larger insolvency landscape, the Corporate Insolvency Resolution Process (CIRP) for AAL was initiated on 24.07.2021, and the forensic audit by M/s K.G. Somani & Co. again found no fraud. Following an order of liquidation passed by the National Company Law Appellate Tribunal (NCLAT) on 16.08.2019, the Supreme Court directed the National Company Law Tribunal (NCLT) to consider a resolution application and pass appropriate orders, which led to further developments in AAL’s resolution process. This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 06/02/2025 at 14:51:20

9. Similarly, for other companies in the Amtek Group, forensic audits were also conducted. The forensic audit reports for Castex Technologies Ltd. (dated 03.07.2020), ARGL (approved resolution plan on 02.12.2019), and Metalyst Forgings Ltd. (with NCLAT observing no interference on

07.02.2020) all concluded that no fraudulent activity was found in relation to loans and transactions. 10. On 27.02.2024, the Supreme Court directed an investigation into the alleged banking fraud, while allowing parallel investigations by the Serious Fraud Investigation Office (SFIO) and Central Bureau of Investigation (CBI). 11. Simultaneously, the Enforcement Directorate (ED) began a money laundering investigation against Arvind Dham, the former promoter and Non-Executive Chairman of Amtek Auto Ltd., based on the Prevention of Money Laundering Act (PMLA). Mr. Dham had appeared before the ED on

19.06.2024 and cooperated with the investigation, which led to search and seizure operations at his residence from 20.06.2024 to 22.06.2024. These actions culminated in his arrest on 09.07.2024. 12. Subsequently, the ED issued the impugned PAO, attaching land and other assets belonging to the petitioner company. The PAO indicated that the unpaid loan funds, which remained outstanding even after the commencement of insolvency proceedings, amounted to over Rs. 26,956.13 crores, which was considered proceeds of crime. 13. On 06.09.2024, respondent no. 2 filed a prosecution complaint against the accused under Section 44 read with Section 45 of the Prevention of Money Laundering Act, 2002, before the Trial Court. Following this, on

07.09.2024, the Trial Court issued notice to all the proposed accused persons This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 06/02/2025 at 14:51:20 in accordance with the proviso to Section 223 of the BNSS. 14. In a separate development, on 14.10.2024, the Adjudicating Authority issued a Show Cause Notice to the petitioner under Section 8(1). The petitioner contends that the issuance of this Show Cause Notice was improper, as there was no reasonable belief or evidence suggesting that the petitioner had committed an offence under Section 3 of the PMLA or that they were in possession of proceeds of crime. 15. The Petitioner had previously filed a W.P (Crl.) bearing number 3490 /2024 this Court concerning the same subject matter as stated above. This prior petition was subsequently withdrawn by the petitioner on 14.01.2025, with an express liberty to file a fresh petition before an appropriate forum. 16. The petitioner has now approached this court challenging the impugned PAO and the impugned Show Cause Notice. 17. It is the case of the petitioner that under Section 5(1) of PMLA, the existence of proceeds of crime is a prerequisite for any action of seizure, attachment, or freezing. The petitioner asserts that in the absence of a final determination in the scheduled/predicate offence, the ED’s actions are premature, speculative, and legally unsustainable. 18. It is submitted that the statute mandates that before provisionally attaching a property, the designated officer must have ‘reason to believe’ that the property represents proceeds of crime and is likely to be concealed, transferred, or dealt with in a manner that would frustrate confiscation proceedings. 19. After some hearing, with the consent of respective counsel, the present petition is disposed of with the direction that the adjudicating authority shall provide an opportunity of hearing to the petitioner; the This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 06/02/2025 at 14:51:20 petitioner shall be at liberty to urge all grounds in support of its contentions, and make submissions as regards legality / validity of the said impugned PAO and the impugned Show Cause Notice. 20. It is further agreed that all such documents to which the petitioner may be entitled under law, shall be duly provided to the petitioner within a period of ten days from today. It is directed accordingly. 21. The adjudicating authority shall afford adequate opportunity of hearing to the petitioner and shall pass an order within the period contemplated under Section 5 r/w Section 8 of the PMLA. 22. With the above directions, the present petition is disposed of. The pending application also stands disposed of. 23. All rights and contentions of the parties are kept open for consideration by the adjudicating authority. JANUARY 31, 2025/sv SACHIN DATTA, J This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 06/02/2025 at 14:51:20