ED can’t attach company’s land as shareholders’ asset: Cal HC

Kolkata: The Calcutta High Court has held that the Enforcement Directorate (ED) cannot attach land owned by a company, Shree Hanuman Cotton Mills Ltd, by treating it as the personal property of its shareholders.

The bench of Justice Sabyasachi Bhattacharyya ruled that the ED’s provisional attachment could not extend to 25.39 acres of land at Fuleswar, as the land stands in the company’s name and not in the names of the individuals accused in the related criminal proceedings.

The court noted that shareholders are entitled to dividends and voting rights but do not own the company’s assets; therefore, the land could not be attached on the basis of their shareholding. In this case, the ED had attached the company’s land, certain shares and an office room during proceedings arising from allegations against members of the Kejriwal family. The High Court examined whether the land held in the company’s name could be brought within the scope of an attachment aimed at individuals. It concluded that such attachment was legally unsustainable and modified the ED’s orders to that extent.

However, the court upheld the rest of the attachment. The ED may continue proceedings regarding 1,793 shares — 1,025 allegedly held by Mahesh Kumar Kejriwal and 768 by Alka Kejriwal — as well as an office room (Room No. 12) on the fifth floor of premises no. 12A, N.S. Road, Kolkata–700001, which also forms part of the attachment.

The court further directed the company’s directors to inform the ED in writing if the company enters liquidation or any Corporate Insolvency Resolution Process, noting that such information would be necessary for the agency in relation to the attached shares and property.

It also clarified that the observations made in the judgment are limited to the attachment issue and must not influence the ongoing criminal proceedings involving the accused individuals.

With these directions, the High Court disposed of the petition without costs, making it clear that only the portion of the attachment relating to the 25.39-acre land stands set aside, while the remaining attachment and adjudication under the Prevention of Money Laundering Act may proceed.