Shree Hanuman Cotton Mills Ltd & Ors Vs Union of India & Ors(Calcutta High Court)

Date -27th September, 2022

Sub- Whether property(proportionate to shareholding of a shareholder) belonging to a Company can be attached under the Prevention of Money Laundering Act(PMLA) when the shareholder of such a company is charged with commission of offence under the said Act.

An interesting question arose in this case where the shareholder of a company Mr Mahesh Kejriwal and his wife Mrs Alka Kejriwal were charged with offence under PMLA and in view of this, Enforcement Directorate(ED) not only attached the shares which were held by such shareholders but also served a notice of attachment on the company whose shares were held to attach the land and building belonging to the company proportionate to such shareholding.

The Hon’ble Single bench of Calcutta high court in this interim order decided first upon the hurdle of alternate remedy as was cited by ED. The Court noted that a patent jurisdictional error can be interfered with by this court even if an alternative remedy is available appreciating argument of the petitioner that the writ court can entertain a challenge under Article 226 of the Constitution of India, as no authority can confer jurisdiction on itself by deciding a jurisdictional fact wrongly, as held in Raza Textiles Ltd. V. Income Tax Officer, Rampur, reported at (1973) 1 SCC 633. Thereafter the court delved into the aspect of right of a shareholder in the property of the company which is fairly settled law in view of decision in the case of Bacha F Guzdar that the shareholder has no right in the assets of the company and thus simply because the shareholder has been charged with crime under PMLA that cannot be a ground to attach the property of the Company unless there is an allegation that the property acquired by the company was with the help of proceeds of crime.

Thus, in view of this the Court granted relief to the company by holding that ED shall not take any coercive action until the final order is passed, though liberty was granted to proceed against the shareholder and his personal assets.

This judgement will be helpful in dealing with alternative remedy hurdle when writ is sought to be dismissed on the grounds of statutory remedy.

Ramesh Patodia
30-09-2022