Proceeds of Crime : Supreme Court Partially Lifts Attachment on Properties for benefit of innocent and genuine home buyers

Apex Court's Order Restores Properties to Resolve Insolvency, Protects Innocent Home Buyers Under PMLA and IBC Frameworks

In a significant ruling, the Supreme Court of India has partially lifted the provisional attachment of properties owned by Udaipur Entertainment World Private Limited, marking a crucial development for home buyers associated with the project. The judgment, delivered on October 10, 2025, by a bench comprising Justices Sanjay Kumar and Alok Aradhe, addressed the complexities arising from the intersection of the Prevention of Money Laundering Act, 2002 (PMLA), and the Insolvency and Bankruptcy Code, 2016 (IBC).

The judgment emerged from a civil appeal involving Udaipur Entertainment World Private Limited, the appellant, against the Union of India. At the heart of the matter was the provisional attachment order dated April 2, 2019, issued under the PMLA, which had frozen the company's assets amid allegations connected to proceeds of crime.

In a bid to safeguard the interests of innocent and genuine home buyers, the Supreme Court ordered the restoration of the attached properties to the Successful Resolution Applicant (SRA) under the IBC framework. This decision was facilitated by an affidavit from the Directorate of Enforcement (DoE), which acknowledged the interests of home buyers who had acquired the units without knowledge of the underlying financial irregularities.

The Supreme Court's order, however, maintained the attachment of 11 specific units within the Royal Raj Villas project, as these units were linked to the proceeds of crime. The court emphasized that the attachment of these units would continue under the PMLA provisions.

Furthermore, the court invoked Section 32A of the IBC to remove the Corporate Debtor's name from the array of accused in the ongoing prosecution complaint. This section provides conditional immunity to the SRA, ensuring that the resolution process can proceed without legal hindrances, provided there is no connection with erstwhile directors or benefits from the proceeds of crime.

The DoE was directed to focus its confiscation efforts solely on the 11 identified units while continuing its prosecution against the former directors and conspirators involved in the alleged financial misconduct.

The judgment also noted that in cases where payments for other units are found to be linked to the proceeds of crime, the DoE retains the authority to take appropriate legal actions against involved parties.

Importantly, the Supreme Court clarified that this order is based on the specific facts of the case and the consent of the parties involved. It is not to be treated as a legal precedent, leaving the door open for future adjudications on similar issues.

The order effectively resolved pending legal proceedings related to the attachment, including appeals before the PMLA Tribunal and a writ petition before the Rajasthan High Court.

In conclusion, the Supreme Court's decision represents a balanced approach to resolving complex legal and financial issues, prioritizing the protection of innocent home buyers while ensuring compliance with legal statutes. The ruling underscores the judiciary's role in facilitating equitable resolutions in cases involving financial irregularities and insolvency.

Bottom Line:

Provisional Attachment Order partially set aside for the benefit of innocent and genuine home buyers - Order passed under the second proviso to sub-Section (8) of Section 8 of the PMLA, 2002 - Corporate Debtor's properties restored to Successful Resolution Applicant (SRA) for the benefit of home buyers - Specific 11 units remain attached under PMLA regulations - Conditional benefit under Section 32A of the Insolvency and Bankruptcy Code, 2016, accorded to SRA, subject to compliance with law.

Statutory provision(s): Prevention of Money Laundering Act, 2002, Insolvency and Bankruptcy Code, 2016, Section 32A of the Insolvency and Bankruptcy Code, 2016

Udaipur Entertainment World Private Limited v. Union of India, (SC) : Law Finder Doc Id # 2794503