Rs.1,267 Crore Fraud in Canara Bank! Supreme Court praises ED

In a landmark ruling, the Supreme Court of India has praised the Enforcement Directorate (ED) for its efforts in returning properties to innocent homebuyers affected by the ₹1,267.79 crore Syndicate Bank fraud case. The apex court recognized the ED’s balanced and lawful approach under the Prevention of Money Laundering Act (PMLA), 2002, while dealing with the complex case.

Background: What is Syndicate Bank Fraud

The case originates from FIRs filed by the Central Bureau of Investigation (CBI) against Bharat Bomb and his associates, accused of defrauding Syndicate Bank (now Canara Bank) between 2011 and 2016. According to the CBI charge sheet, the accused diverted funds through companies and firms held in their own names or those of their family members and associates, causing a loss of ₹1,267.79 crore to the bank.

The proceeds of crime were allegedly used to purchase M/s Udaipur World Entertainment Pvt. Ltd., the developer of the Royal Rajvilas housing project, and to finance its construction. The dispute, however, does not involve the project’s homebuyers, but rather the fraudulent activities committed against the bank.

ED’s Investigation and Property Attachment

The Enforcement Directorate began its investigation under the PMLA, 2002, after registering an Enforcement Case Information Report (ECIR) on July 11, 2016. The case was based on offences under various sections of the Indian Penal Code (IPC) and the Prevention of Corruption Act, 1988.

On April 2, 2019, the ED issued a Provisional Attachment Order (PAO No. 05/2019), attaching 365 unsold flats/units, 17 commercial units, and 2 plots owned by M/s Udaipur World Entertainment Pvt. Ltd. The attachment was confirmed by the Adjudicating Authority (PMLA), New Delhi, on September 19, 2019, through Original Complaint No. 1138/2019.

Insolvency Proceedings and NCLT’s Intervention

Later, M/s Udaipur World Entertainment Pvt. Ltd. was admitted into the Corporate Insolvency Resolution Process (CIRP) by the National Company Law Tribunal (NCLT), Mumbai, on April 16, 2021. The process was initiated by homebuyers led by Anup Jain under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016).

Subsequently, on February 24, 2022, the NCLT approved the company’s resolution plan and set aside the ED’s attachment order, which led to a jurisdictional dispute. The ED argued that the NCLT had no authority to cancel or override an order passed under Section 8 of the PMLA, 2002, as the power lies exclusively with the PMLA Adjudicating Authority and higher judicial forums.

The Supreme Court, while resolving the matter, commended the ED for ensuring that innocent homebuyers were not penalized due to the fraud committed by the company’s promoters. The judgment marks an important precedent in balancing insolvency proceedings and anti-money laundering laws in India.