“After filing the initial FIR in 2020, homebuyers communicated with the Enforcement Directorate (ED) in June 2022, alleging misappropriation of funds.
On June 25, 2022, the ED stated that Mantri Developers and its subsidiaries had collected funds from homebuyers for apartments in various projects and diverted these funds for purposes other than project construction. They noted that approximately Rs 1,189 crore was collected from Mantri Serenity homebuyers, with Rs 277 crore being redirected.
In January, the developer sought relief from the Karnataka High Court and obtained a status quo regarding the apartments in the delayed Mantri Serenity project, which had been seized by the ED.
The Karnataka High Court acknowledged, “The complainant has presented numerous documents to assert that the developer engaged in money laundering. They invested the funds received from homebuyers in various banks by mortgaging the property that rightfully belongs to the homebuyers.”
The complainant argued that if this does not constitute fraud, nothing else can be described as such at the hands of the developers, the court stated.
However, the court also emphasized that the ED’s investigation was based on the FIR filed in 2020.
Citing various Supreme Court and High Court rulings, the Karnataka HC stated, “Criminal law cannot be set in motion for a breach of an agreement, as it primarily pertains to civil proceedings.”
Consequently, it concluded that delayed apartment delivery cannot be subject to criminal prosecution because such circumstances arise from agreements between the parties, and at most, they may constitute a breach of those agreements.
“The charges in the 2020 FIR are untenable. Furthermore, the ED’s initiated proceedings cannot be allowed to continue. Offenses under the Prevention of Money Laundering Act (PMLA) cannot independently stand,” the court’s order affirmed.
A set of questions has been sent to the developer, and Moneycontrol will provide updates to the story once a response is received.”