The Enforcement Directorate (ED) has informed the Bombay High Court that the recovery of substantial amounts by a State Bank of India-led consortium from assets belonging to businessman Vijay Mallya does not absolve him of the criminal charges pending under the Prevention of Money Laundering Act, 2002 (PMLA).

The agency made the submission in Vijay Vittal Mallya v. State Bank of India & Others, in response to an earlier direction asking the ED and the consortium of lending banks to clarify whether Mallya’s debts had been discharged through the utilisation of his attached properties.

Buy Now: 50+ PMLA JUDGEMENTS : CASE LAWS

In an affidavit filed on September 8, the ED stated that movable and immovable properties valued at ₹14,131.6 crore, as assessed in August 2021, had been handed over to the SBI-led consortium.

However, the agency maintained that the restoration and subsequent utilisation of these assets for recovery of bank dues would not result in the termination of the money laundering prosecution against Mallya.

According to the ED, restoration of attached assets under the PMLA is a statutory mechanism intended to enable legitimate claimants, including banks and other financial institutions, to recover losses suffered by them. Such restoration does not erase the alleged criminal conduct that led to the attachment and prosecution.

“The criminal prosecution launched pursuant to the investigation under the PMLA is therefore not rendered infructuous merely because the claimant banks have subsequently recovered substantial amounts from the assets restored to them,” the ED submitted.

Mallya Challenges Restoration of Attached Assets

The Bombay High Court is considering a criminal petition filed by Mallya in 2020 against an order of the special PMLA court permitting the utilisation of his attached assets for recovery of outstanding bank loans.

Mallya is accused of laundering and diverting at least ₹3,500 crore from loans amounting to approximately ₹9,000 crore that were advanced by a consortium of banks to the now-defunct Kingfisher Airlines.

The ED had provisionally attached several movable and immovable properties associated with Mallya in 2016 as part of its investigation under the anti-money laundering law.

In 2019, the special court allowed the SBI-led consortium and other lending banks to use Mallya’s attached movable assets for recovering their dues. The assets covered by the order included shares of United Breweries Holdings Limited.

Mallya subsequently approached the Bombay High Court in 2020 to challenge the special court’s decision allowing restoration of the attached properties to the lenders.

Civil Recovery and Criminal Liability Are Separate: ED

Appearing for Mallya, Senior Advocate Amit Desai argued that the challenge to the restoration of assets had effectively become redundant because the underlying civil liabilities had substantially been settled.

Desai also submitted that the dispute had a commercial character and required final closure in view of the recoveries already made by the banks.

The ED rejected this argument as misconceived, contending that proceedings for recovery of civil debts and prosecution for money laundering operate in legally distinct fields.

“The present proceedings arise from allegations of scheduled offences and the offence of money-laundering under the PMLA, which operate in a field distinct from proceedings for recovery of civil dues by the lending institutions,” the agency said.

The ED explained that the amount realised by the banks and the liability determined in debt-recovery proceedings may be relevant for calculating the outstanding financial dues. However, such recovery cannot determine whether the legal ingredients of the offence of money laundering have been established.

According to the agency, the repayment or recovery of money may affect the civil or financial liability owed to the banks, but it does not automatically extinguish criminal liability arising from the alleged generation, possession, concealment, use or projection of proceeds of crime.

The ED has consequently urged the High Court not to treat the substantial recovery made by the lenders as a ground for bringing the pending PMLA proceedings against Mallya to an end.

Read More: Bona Fide Buyer Can’t Be Denied ITC for Supplier’s Failure to Deposit Tax: Gauhati High Court