Supreme Court permits M3M real estate developer to swap attached property

The Supreme Court has allowed real estate developer M3M India Private Limited to substitute a property attached provisionally by the Enforcement Directorate (ED) with unencumbered marketable assets to facilitate the resumption of commercial projects.

The move seemed to balance the state’s interest in the strict implementation of the law and allowing business continuity.

A Bench headed by Justice P.S. Narasimha, however, made it clear that the recent order allowing the substitution was passed “in the facts and circumstances of the case and shall not be treated as a precedent”.

The order came on a petition filed by M3M seeking substitution of the properties attached by the ED under a provisional attachment order in July last year. The company had proposed several unsold commercial units which were part of their M3M Broadway project, located in Haryana, as property for the substitution. The ED had engaged the services of a valuator and assessed the total fair market value of commercial units offered for substitution to be ₹317 crore.

Some riders

The Central agency had agreed to the substitution with certain riders, including that the property offered for substitution in place of the attached asset must have a ‘no encumbrance certificate’ to establish clear and marketable title along with the petitioner’s (M3M) undisputed ownership. The company must disclose the source of acquisition of the assets.

Further, the court directed the petitioner to provide a notarised undertaking that the substituted property will not be sold, transferred or alienated in any manner. The Bench directed the submission of the original title documents of the substituted property, which would be deposited with the ED or the court along with a formal acknowledgment. The order recorded that an indemnity bond must be furnished to compensate the ED/government in case of any loss or legal deficiency arising from the substitution.

The Court also accepted the ED’s conditions that the company must furnish an undertaking to safeguard the third-party rights created for other commercial units of the M3M Broadway project; that the company must consent to hand over the possession of alternative assets to the ED in case the attachment is confirmed by the adjudicating authority.

Finally, the court ordered the company to cooperate with the investigation and made it clear that the substitution would not prejudice the investigation or trial in the case.