If PMLA authorities are given a free hand to pass orders of attachment of properties which were acquired by a successful bidder in a liquidation process, could be contrary to the interest of value maximization of the corporate debtor’s assets by substantially reducing the chances of finding a willing resolution applicant/bidder in liquidation – Welspun Steel Resources Pvt. Ltd. Vs. Union of India – Gujarat High Court
Hon’ble High Court held that if the authorities were given a free hand to pass orders of attachment of properties which were acquired by a successful bidder in a liquidation process, on a presumption that such acquisition was as a result of a criminal activity, could be contrary to the interest of value maximization of the corporate debtor’s assets by substantially reducing the chances of finding a willing resolution applicant or a bidder in liquidation. Only such property which is derived or obtained directly or indirectly as a result of a criminal activity can be regarded as proceeds of crime.
The Hon’ble Court also held that sine qua non to arrive at a determination that the assets are proceeds of crime, the foremost requirement is that the author has to have ‘reason to believe’ on the basis of material in his possession. ‘Reason to believe’ cannot arise from mere suspicion, gossip or rumour. Merely because the impugned order records alleged fraudulent transactions and diversion of funds, it cannot automatically lead to a conclusion that the properties acquired by the petitioners are proceeds of crime. In order to arrive at a conclusion that ‘reason to believe’ exists, there must be some material to suggest such formation of opinion
