Since 2017, the Union Bank of India has been embroiled in a legal battle over a farmhouse in Delhi, which was mortgaged to the bank as part of a loan agreement. However, the bank isn’t facing just the loan defaulters; it is now up against the Enforcement Directorate (ED), India’s anti-money laundering agency. This farmhouse, reportedly valued at ₹120 crores, is at the center of a complex legal struggle involving the bank and ED, with the case now pending before the Punjab and Haryana High Court.
The Origins of the Dispute: Loan Default and Mortgage
The trouble started back in 2012 when ABW Infrastructure, through its director Atul Bansal, availed credit facilities from the bank, which later merged with Union Bank of India in 2020. One of the properties mortgaged against this loan was Farmhouse 22, located in Delhi, owned by Wisdom Realtors, a company that acted as a guarantor for the loan. Notably, Atul Bansal was also a director in Wisdom Realtors.
In 2015, ABW Infrastructure defaulted on its loan, and the account was declared a Non-Performing Asset (NPA). By 2016, the bank issued a demand notice for repayment of over ₹121 crore. In April 2017, the bank initiated recovery proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act before the Debts Recovery Tribunal (DRT) in Delhi, seeking the sale of the mortgaged properties.
Though Wisdom Realtors initially secured a stay preventing the bank from taking possession of the farmhouse, Union Bank successfully appealed the decision in 2019. The Debts Recovery Appellate Tribunal (DRAT) allowed the bank to proceed with the auction of the property under the SARFAESI Act.
ED’s Entry: A Money Laundering Investigation
Meanwhile, the Enforcement Directorate (ED) registered a money laundering case against Atul Bansal and his companies, including ABW Infrastructure, in 2018. The ED claimed the farmhouse was part of the “proceeds of crime” in an alleged land scam in Manesar, Haryana, where villagers were forced to sell land at extremely low prices under the threat of government acquisition. ABW Group, owned by Bansal, was accused of benefiting from this scam.
The ED attached properties, including Farmhouse 22, worth ₹399 crores. Unfortunately, Bansal passed away during the investigation, and both he and his wife were declared proclaimed offenders. Due to Bansal’s death, the ED sought confiscation of the property under provisions of the Prevention of Money Laundering Act (PMLA).
The Legal Battle: Bank vs. ED
The Union Bank of India has contested the ED’s claims, arguing that the property was purchased long before the alleged money laundering offenses took place, making it unrelated to the case. The bank asserted that it had taken symbolic possession of the farmhouse in 2017 and should be considered a legitimate third-party claimant with a secured interest in the property.
However, in May 2022, a special court rejected the bank’s objections, ruling that the PMLA takes precedence over the SARFAESI Act, allowing the ED to proceed with confiscation. This decision prompted Union Bank to move the Punjab and Haryana High Court, where the case is now being heard.
Current Status and What’s Next
In July 2024, the ED raised a preliminary objection, questioning the maintainability of Union Bank’s appeal. The agency argued that the trial court’s order was interlocutory, meaning it wasn’t a final judgment, and that the bank should approach the special court under the PMLA for restoration of the confiscated property.
Despite this, the Punjab and Haryana High Court ruled in favor of Union Bank, stating that the trial court’s order had attained finality, and thus, the bank’s appeal was valid. The court is set to continue hearing the case, with the next hearing scheduled for October 22, 2024.
Key Legal Questions
This case raises important legal questions about the priority of claims between creditors and enforcement agencies. The central issue is whether a bank’s secured interest in a property should prevail over the government’s claims under the PMLA when the property is allegedly linked to criminal proceeds. The outcome of this case could set a precedent for future disputes involving banks and regulatory bodies like the ED.
As the legal battle continues, the Union Bank of India remains locked in a complex struggle to recover its dues while facing a powerful opponent in the Enforcement Directorate. Whether the farmhouse will eventually be auctioned to recover the loan or remain confiscated as part of the ED’s money laundering case will be determined in the coming months.
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