PMLA Appellate Tribunal Sets Aside ED Attachment Of Mortgaged Properties In Samprash Foods Case

The PMLA Appellate Tribunal (Appellate Tribunal Under SAFEMA) on Wednesday set aside the Enforcement Directorate's attachment of properties mortgaged to IDBI Bank and Union Bank of India in a money laundering case linked to Samprash Foods Ltd., accepting the banks' contention that the action did not meet the requirements of Section 5(1) of the Prevention of Money Laundering Act (PMLA), 2002.

Member V. Anandarajan held that the ED had not shown, on record, that the attached properties were proceeds of crime, observing: “Upon a careful perusal, I do not find any material to conclude that the said four properties standing in the name of M/s Anmol Ratan were attached as property acquired directly or even indirectly out of the proceeds of crime generated from the scheduled offence. Rather, all the material on record indicates that the properties have been attached as 'value of such property' ('value thereof').”

The case stems from a CBI probe into alleged fraud and diversion of loan funds by Samprash Foods Ltd., a dairy products company. The agency registered a case over defaults on loans of about Rs. 122 crore extended by a consortium led by Union Bank of India.

Of this, more than Rs. 60 crore remained unpaid when the account was classified as a non-performing asset in March 2017. IDBI Bank separately reported a fraud of Rs. 10 crore. The borrower had offered 10 immovable properties as collateral.

Following the probe, the ED registered a case in 2020 and, in March 2024, issued a provisional attachment order covering several properties, including those mortgaged to the banks. The Adjudicating Authority later confirmed the attachment, leading to the present appeals.

The banks argued that the loans were given between 2011 and 2014 against properties acquired before the alleged offence. They said recovery proceedings had begun in 2018, possession had been taken, and four properties had already been auctioned before the ED's action. According to the banks, the agency failed to trace assets purchased using diverted funds and instead attached mortgaged properties, affecting their recovery rights.

The ED, on the other hand, contended that certain properties held by Anmol Ratan Construction & Builders Pvt. Ltd. were acquired using diverted loan funds. It said the company was controlled by the main accused, C. N. Kuchroo, and that its properties were used to secure loans taken by Samprash Foods Ltd. The agency also alleged that Kuchroo had attempted to shift control of the company to his brother by transferring shares, and that the attachment was necessary to prevent such actions.

The tribunal said attachment under the law requires a recorded “reason to believe,” based on material in possession, that the property is linked to crime and is likely to be dealt with in a manner that would frustrate confiscation.

Applying this standard, the Tribunal found that, at the time of attachment, the properties were already mortgaged to the banks, possession had been taken, and four properties had been auctioned.

It noted, "In para 8.16 of the PAO, the respondents have claimed that the four properties sold by the Bank were sold much below value. However, there is nothing on record to substantiate the claim, nor is there any allegation of complicity or collusion on the part of the Bank or its employees.”

The tribunal also held that the ED's claim that the properties were direct proceeds of crime was not borne out from the record and amounted to an attempt to make out a new case. It pointed out that the agency's own documents classified the properties as the “value of such property” under Section 2(1)(u) of the Act.

The tribunal then allowed the appeals filed by IDBI Bank and Union Bank of India and set aside the order confirming the attachment.