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The Karnataka High Court has upheld the Enforcement Directorate's (ED) attachment of Flat 7A in Kingfisher Towers, Bengaluru, finding that the property legally remains with United Breweries Holdings Ltd (UBHL) and not with the purchaser. The court rejected the claim that an unregistered agreement to sell conferred title, ruling that ownership had not passed without a registered sale deed. It agreed with the ED that the flat could be treated as 'proceeds of crime' under the Prevention of Money Laundering Act (PMLA), reinforcing the agency's long-running asset-recovery effort in the Vijay Mallya case.
The Karnataka High Court has upheld the Enforcement Directorate's attachment of Flat 7A in Kingfisher Towers, Bengaluru, concluding that the respondent did not acquire legal ownership of the property. The court held that the flat continued to belong to United Breweries Holdings Ltd (UBHL), the company associated with Vijay Mallya, because no registered sale deed was executed. Advertisement
The dispute centred around an unregistered agreement to sell, under which the respondent claimed to have paid around INR 18.4 crore for the flat. The court observed that such an agreement does not transfer title under property law. It further noted that most of the payments towards the flat were made even before the agreement was signed, which raised doubts about the credibility and intent of the transaction.
Another issue highlighted was the no-objection certificate issued by the official liquidator for registering the sale deed. The court found this action questionable, as restoration proceedings in favour of the banks and the present appeal were still pending at that time, suggesting that the issuance of the NOC was not bona fide.
After reviewing the facts, the High Court determined that the ED was justified in treating the flat as 'proceeds of crime' under Section 2(1)(u) of the Prevention of Money Laundering Act. The court also ruled that the Appellate Tribunal, which had earlier set aside the attachment, failed to consider the overriding nature of the PMLA as a special statute and incorrectly relied on civil-law principles.
The flat, measuring about 8,300 square feet, was provisionally attached by the ED in mid-2016. The attachment was confirmed by the Adjudicating Authority later that year. The respondent had challenged the confirmation, and the tribunal had ruled in their favour in 2019 a decision that the ED subsequently appealed before the High Court.
This case forms part of the ED's broader efforts to recover assets linked to the financial defaults involving Kingfisher Airlines. UBHL, which acted as a guarantor for several bank loans to the airline, has been at the centre of various recovery and enforcement actions as bank dues continue to remain significant.
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