MUMBAI: A special Prevention of Money Laundering Act (PMLA) court has denied a request from Encore Asset Reconstruction Company Pvt Ltd (ARC), a secured creditor, to release and auction properties tied to the Deepak Sakharam Kulkarni (DSK) group case.
The judge highlighted that the properties in question were not only seized by the Enforcement Directorate (ED) under the PMLA but were also under the state’s attachment pursuant to the Maharashtra Protection of Interest of Depositors (MPID) Act.
Judge R B Rote remarked, “Considering the circumstances, the applicant cannot vacate the attachment on mortgaged properties nor proceed with the auction. This decision is crucial to avoid irreparable harm to numerous investors who have lost substantial amounts due to the actions of the accused.”
The plea was deemed premature as the confirmation process for the MPID attachment is still ongoing. “No charges have been framed against the accused, making this application under the PMLA appear unwarranted at this stage. Furthermore, the state has attached these properties as per the MPID Act, and the adjudication process is still pending,” the judge explained.
ENC’s ARC is the assignee of credit facilities originally granted by Kalyan Janata Sahakari Bank Ltd (KJSBL) to D S Kulkarni Developers Pvt Ltd, among others. The loans, secured by mortgaged properties, have outstanding dues exceeding ₹19.52 crore as of August 31, 2017. The DSK group has faced multiple FIRs since late 2017 for offenses such as cheating and criminal breach of trust related to the collection of large sums from the public through eight partnership firms under the DSKDL banner.
The ED initiated an enforcement case information report (ECIR) in March 2018 and provisionally attached the mortgaged assets in February 2019, with the adjudicating authority affirming this attachment in August 2019.
Encore ARC asserted that its rights under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act) should take precedence, referencing Section 26-E that prioritizes secured creditors. They maintain that the mortgaged properties were secured before the alleged offenses (2006-2017) and should not be considered “proceeds of crime”. The ARC also mentioned that a prior ruling by the PMLA appellate tribunal allowed them to claim their rights during the trial phase, contingent upon depositing any overages from the auction with the ED via fixed deposit receipts (FDR).
The ED, along with the accused and the Economic Offence Wing (EOW), opposed the ARC’s plea.
