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The Delhi High Court has overturned a provisional attachment of Piramal Realty's properties worth INR 410 crore by the Enforcement Directorate (ED). The court stated that the provisional attachment could not continue because Piramal Realty was not an accused and was only a lender to M/s Omkar Realtors and Developers (ORDPL), a company under investigation for money laundering.
The ED had accused the Omkar Group of taking a loan of INR 410 crore from Yes Bank to build buildings for slum dwellers under a Slum Rehabilitation Authority (SRA) scheme in Mumbai but redirecting the money to other companies. The agency is investigating an alleged INR 22,000 crore SRA scandal by Omkar Realtors & Developers' promoters, Kamal Gupta and Babulal Verma.
The high court ruled that the ED was at liberty to seek the revival of the provisional attachment orders if there was any change in the circumstances, and Piramal Realty had the freedom to file an appropriate application if the properties were not released.
Last August, the high court restrained Piramal Realty from disposing of or creating third-party rights or encumbering the property. The company's advocate, Vijay Aggarwal, argued that there was no nexus between Piramal Realty's bona fide interest in the attached properties and any alleged offence or proceeds of crime. Aggarwal further contended that in January this year, the Mumbai Police filed a closure report against Omkar Relators, and even the ED's case had been closed. He claimed that Piramal Reality was only one of the lenders and that the ED had attached its properties in a "completely improper manner".
The high court relied on several Supreme Court judgments to reach its decision. In one of those judgments, the court had held that "proceedings under the PMLA [Prevention of Money Laundering Act] are essentially penal in nature", and hence, any provisional attachment order passed under the Act "should be based on the existence of a prima facie case against the accused and not on the existence of a prima facie case against a person, who may have been involved in some capacity in the commission of the offence, but has not been arrayed as an accused".
The ED's action against Piramal Realty was part of a wider crackdown on money laundering in the real estate sector. In recent years, several prominent real estate companies have come under investigation for allegedly diverting funds and engaging in fraudulent activities. The government has been taking steps to curb these practices, including introducing stricter regulations and initiating criminal proceedings against offenders. The crackdown has had a significant impact on the industry, with many developers facing liquidity issues and struggling to complete projects.
Despite these challenges, the real estate sector remains a crucial component of the Indian economy, contributing significantly to GDP and creating jobs. The government has recognized the sector's importance and has taken steps to support its growth, including launching schemes to promote affordable housing and providing incentives for developers to invest in infrastructure projects. The sector is expected to rebound in the coming years, driven by increased demand for housing and rising incomes. However, the industry will need to adopt more transparent and ethical practices to regain public trust and avoid further regulatory scrutiny.
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