Yes Bank-DHFL case: Bombay HC sets aside ED’s attachment of assets worth ₹25 cr

The Bombay High Court cancelled the appellate tribunal’s order continuing the ED’s provisional attachment of two properties linked to Avinash Bhosale, Gauri and Samit Realty Private Limited. The ruling matters because the court found no legal basis for keeping the assets attached in the Yes Bank–DHFL money-laundering probe.

The attached assets included a Pune land parcel valued at ₹14.65 crore, held by Samit Realty, and a Nagpur plot valued at ₹15.52 lakh, held by Gauri. The court reviewed the transactions involving Yes Bank, DHFL, Bhosale’s entities and other companies. It said each was an independent transaction with an independent corporate entity.

The court concluded that the transactions were lawful and could not be treated as proceeds of crime. It said there was no nexus between the properties and the alleged offence. As a result, the tribunal’s April order was set aside, removing the basis for continuing the attachment.

A provisional attachment is a temporary legal restriction placed on property during an investigation. It prevents the owner from freely selling, transferring or otherwise dealing with the asset. The measure protects property that investigators believe may be connected to unlawful gains until a competent authority or court examines the evidence.

Under India’s Prevention of Money Laundering Act, the ED can use this mechanism when it has recorded reasons to believe that a person possesses proceeds of crime or property connected with them. The attachment is not the same as a final finding of guilt. It is an interim step, subject to confirmation and challenge through the legal process.

In this case, the tribunal continued attachment of a Pune land parcel and a Nagpur plot. The High Court later found no basis for continuing it, because the transactions were lawful and the properties lacked a nexus with alleged proceeds of crime.

The wider case involved an alleged ₹3,983 crore in proceeds of crime, according to the ED’s October 2022 charge sheet. The allegation concerned money sanctioned and disbursed by Yes Bank to DHFL during April to June 2018. The funds related to investments, including DHFL debentures, and the grant of loans.

The ED separately alleged that ₹164.64 crore was received by Avinash Bhosale or his entities. It linked that amount to transactions involving consultancy, Nibhodh Realty and ABIL Dairy. The article specifically states that ABIL Dairy received ₹25 crore.

These figures describe the ED’s allegations, not findings accepted by the High Court. The court said the relevant transactions were independent and lawful. It held that receipt of money by DHFL as investment or loan could not be faulted in law, and that later disbursements to other legal entities were also not automatically illegal.

The court rejected the idea that ordinary banking and corporate transactions automatically became criminal because they appeared in the investigation. It said Yes Bank’s investments and loans to DHFL were official banking transactions. DHFL’s receipt of that money, whether as investment or loan, could not be faulted in law.

The court also examined later payments involving Bhosale’s entities and other companies. It said each transaction was independent and involved an independent corporate entity. The subsequent disbursement of money by DHFL to other legal entities was also described as a recognised lawful transaction. The court found no connection, or nexus, linking these dealings to crime.

It specifically rejected the allegation that DHFL’s ₹600 crore loan to DOIT Urban Ventures was a kickback. The court said calling it a kickback was unfounded. Because the transactions were legal, the court said they could not be treated as proceeds of crime or justify continued attachment.

In a money-laundering case, proceeds of crime generally means money or property derived or obtained, directly or indirectly, from criminal activity connected with a scheduled offence. The label does not apply simply because funds moved between companies, involved a bank or later reached a person under investigation.

Before property can be attached, investigators must establish a legally meaningful connection between the asset and the alleged criminal proceeds. That connection may concern the asset itself, the money used to acquire it or an equivalent value linked to unlawful gains. The attachment process therefore focuses on both the alleged offence and the property’s relationship to it.

The High Court found that connection missing here. It said Yes Bank’s loans and investments in DHFL were official banking transactions, while later payments to legal entities were lawful transactions. Since the court found no nexus and no proceeds of crime, it found no basis for continuing attachment.

An attachment is meant to preserve property that may represent proceeds of crime. It depends on a demonstrated connection between the asset and the alleged unlawful activity. If that connection fails, the legal justification for restricting the property also fails. The attachment should therefore be lifted or discontinued through the applicable legal process.

In this case, the High Court examined the Pune land parcel attached for ₹14.65 crore and the Nagpur plot valued at ₹15.52 lakh. It reviewed the transactions cited by the ED, including Yes Bank’s dealings with DHFL and subsequent payments to other entities. The court found those transactions legal and independent.

The court consequently set aside the appellate tribunal’s April order. It expressly said there was no basis for continuing attachment of the two properties. The ruling means the tribunal’s continuation decision no longer stands, although the article does not state any further procedural steps regarding release.

Banks invest or lend money through recognised financial transactions. An investment may involve buying securities such as debentures. A loan involves disbursing funds to a borrower under agreed terms, potentially with security, repayment obligations and other conditions. Later payments can move from the borrower to other legal entities for separate business purposes.

The key mechanism is the transaction’s legal purpose and evidence, not merely the fact that money changed hands. The court said a lender may decide, using its commercial judgment, whether to lend to an individual or entity. It may extend a loan with or without appropriate security. That fact alone does not make the transaction a kickback.

Applying this reasoning, the court said Yes Bank’s loans and investments involving DHFL were official banking transactions. It also rejected the allegation that DHFL’s ₹600 crore loan to DOIT Urban Ventures was automatically a kickback. The article does not describe any separate finding of criminal conduct in that loan.