Allowed

FPA-PMLA-1681/MUM/2017 of Shri Vivek Mathias v/s The Deputy Director, Directorate of Enforcement, Mumbai

ATFP13 Aug 2018FPA-PMLA-1681/MUM/2017

Case brief

AI extract

What is this about?

The Appellate Tribunal quashed an Adjudicating Authority order confirming provisional attachment of flats purchased by the appellant. The court held that mandatory notice and hearing under Section 8(2) PMLA were ignored despite the appellant being a claimant with vested rights prior to attachment.

What did the court decide?

The impugned confirmation order dated 01.12.2016 confirming provisional attachment was set-aside and the appeal allowed.

FPA-PMLA-1681/MUM/2017 of Shri Vivek Mathias v/s The Deputy… — Money Laundering | ATFP (2018)

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APPELLATE TRIBUNAL, PREVENTION OF MONEY LAUNDERING ACT AT NEW DELHI

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Date of decision 13^th August, 2018

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MP-PMLA-3236/MUM/2017(STAY) FPA-PMLA-1681/MUM/2017

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Shri Vivek Mathias ... Appellant/Applicant Versus The Deputy Director, … Respondent Directorate of Enforcement, Mumbai

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Advocates/Authorized Representatives who appeared

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For the appellant : Shri Rajiv Nayar, Sr. Advocate With Shri Arshdeep Singh, Advocate Shri Akshay Gupta, Advocate Shri Manish Jha, Advocate
For the respondent : Shri Rajeev Awasthi, Advocate
CORAM
JUSTICE MANMOHAN SINGH : CHAIRMAN

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JUDGEMENT

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MP-PMLA-3236/MUM/2017(STAY) & FPA-PMLA-1681/MUM/2017

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The appellant has filed the present appeal under Section 26 of the Prevention of Money Laundering Act, 2002 against the Order dated 01.12.2016.

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In the impugned order, the Adjudicating Authority has arrived on a conclusion in its order in Original Complaint No. 612/2016 dated 1^st December, 2016, in confirming the Provisional Attachment Order No. 11/2016 dated 11^th June, 2016.

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FPA-PMLA-1681-MUM/2017

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Page 1 of 34

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The Original Complaint No. 612/2016 was filed against Shri Vijay Mallya, M/s Kingfisher Airlines Ltd. & Ors., under Section 5(5) of the PMLA, 2002, wherein certain properties (movable & immovable properties) have been attached provisionally under Provisional Attachment Order No. 11/2016 dated 11.06.2016, under Section 8(3) of the PMLA, 2002.

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Admittedly, the Enforcement Directorate, Mumbai has registered a case against Shri Vijay Mallya, M/s Kingfisher Airlines Ltd. (KAL) and others under Prevention of Money Laundering Act (PMLA), 2002, in the matter of IDBI Loan of Rs. 900 Crore.

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The properties mentioned in the aforesaid Provisional Attachment Order have been provisionally attached under Section 5(5) of PMLA, and the same has been duly confirmed by the Adjudicating Authority in its order in Original Complaint No. 612/2016 dated 01/12/2016, which also includes the property as mentioned by the Appellant.

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It is submitted on behalf of respondent no. 1 that the impugned provisional attachment has been made by invoking provision of Section 2(1)(u) of PMLA, 2002, which empowers the Complainant (an authority under PMLA) to attach properties of equivalent value of Proceeds of crime to the offender. Hence, during the course of investigation, various properties held/owned/acquired by Shri Vijay Mallya, including those through various companies and/or special purpose vehicle, which were controlled directly or indirectly by him, through dummy Directors appointed by him were identified, which included the subject property held in the name of M/s United Breweries (Holdings) Ltd.

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The Adjudicating Authority has confirmed the attachment order. The same has been challenged by the appellant on various grounds.

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Admittedly, the appellant was not impleaded as defendant in the proceedings before the Adjudicating Authority by the Respondent no. 1 nor any

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notice was issued to the appellant. The appellant was not given any opportunity of hearing as per the mandatory provision of Section 8(2) of the PMLA.

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9. The appellant was not arrayed in the FIR or charge sheeted. He was not involved in schedule offence. No prosecution complaint is pending against the appellant.

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The few facts as per the case of appellant in nut-shell are as under:-

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i) The appellant is a citizen of India and has been a Non-Resident Indian for his entire lifetime, having lived in Hong Kong, Japan, USA, UK and Monaco. The appellant is currently residing at Europa Residence, Place des Moulins, MC 98000, Monaco. The appellant is engaged in the business of banking and hedge funds for the last 24 years.

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ii) In December, 2011, the appellant was desirous of purchasing residential property in Bangalore. In this regard, the appellant, through his broker, one Sh. Nicky Sawhney alias Rajan Kumar Sawhney, came across a real estate project by the name of „Kingfisher Towers‟, being jointly developed by Respondent No. 5 and 8 (herein referred to as the “said project”). The said project was being developed at property bearing number Municipal NO. 24 (Old Nos. 24 and 33), situated in Grant Trunk, now known as Vittal Mallya Road, Corporate Division No. 61, Ward No. 76 of Shanthi Nagar Range, Bangalaore-560001 and admeasuring about 17,953.76 sq. mtrs. (hereinafter referred to as the “said land”).

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iii) The appellant entered into discussions and negotiations with Respondent No.5 for the purchase of flats/apartment(s) in the said project. In the course of the aforesaid negotiations and discussions Respondent No. 5 represented and assured the appellant that it was the full and absolute owner and in possession

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of all the part and parcel of the said land (including the existing structure thereat) where the said project was being developed. Further that, Respondent No. 8 being desirous of developing the same, had entered into a joint Development Agreement dated 26.04.2010 with Respondent No. 5, undertaking to develop the said project and to deliver 55% of the total saleable super built-up area in the proposed buildings/structures to Respondent No. 5, and in consideration thereof, Respondent No. 5 agreed to transfer to Respondent No. 8, 45% or such portion of undivided share of said land as would be proportionate to the saleable super built-up area falling to the share of Respondent No. 8 in the said project.

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iv) Consequently, after arms-length discussions and negotiations, the appellant entered into six agreements with Respondent No. 5 & 8 for the purchase of the two apartments bearing No. 17B and 19B in the said project (hereinafter collectively referred to as “said flatss”) and the proportionate undivided area in the said land. The following agreements were executed among the appellant, Respondent No. 5 and 8 (hereinafter collectively referred to as the “said agreements”):

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a. Two Agreements to sell dated 30.01.2012, one each for the said flatss;

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b. Two Construction Agreements dated 30.01.2012, one each for the said flatss; and

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c. Two Side Letters dated 30.01.2012, one each for the said flats.

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By the aforesaid two Agreements to Sell, the appellant acquired under each such Agreement, 8321/767870^th Undivided right, title and interest and ownership in the said Lands (hereinafter referred to as „the proportionate undivided area I the said land‟) and vide

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the aforesaid two Construction Agreements, the appellant acquired the right to get the said flats constructed by the Respondent No. 5 and 8.

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Copies of the aforesaid six Agreements all dated 30.01.2012 are filed .

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v) The consideration payable by the appellant towards the Agreements to sell dated 30.01.2012 was Euro 8,05,461/-, equivalent to Rs.5,24,84,000/- (Rupees five crores twenty four lakh eighty four thousand only) towards each Agreement for the proportionate undivided area in said land; and the consideration payable by the appellant towards the Construction Agreements dated 30.01.2012 was Euro 30,19,539/-, equivalent to Rs.19,67,53,000/- (Rupees nineteen crore sixty seven lakh fifty three thousand only) towards construction of each of the said flats. Thus, the cumulative consideration payable by the appellant towards acquiring the legal and complete right, title and interest of the said flatss and the proportionate undivided area in the said land was Euro 76,50,000/-, equivalent to Rs.49,84,74,000/(Rupees forty nine crore eighty four lakh seventy four thousand only) (hereinafter referred to as the „entire Purchase Consideration‟).

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vi) As per the said Agreements, the appellant paid the entire purchase consideration to Respondent No. 5, amounting Euro 7,650,000/(equivalent to Rs.49,84,74,000/-) on 22.02.2012. Further, at the request of Respondent No. 5 and 8, the entire purchase consideration was remitted to an escrow account of HDFC Bank Limited (Respondent No. 9 herein), since it was represented to the appellant, that the Respondent No. 9 was a creditor of Respondent No. 5. The entire purchase consideration was remitted through

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legal banking channels from the overseas account of the appellant. In light of the execution of the said Agreements and the payment of full consideration by the appellant, the latter became the beneficial owner of the said flats and the proportionate undivided area in the said land and acquired rights in the said flatss, inter alia, highlighted in the Agreements to Sell dated 30.01.2012.

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Copies of the Certificate of Foreign Inward Remittance bearing serial number 1332982 dated 23.02.2012, Receipt dated 24.02.2012 issued by Respondent No. 5 and the Party Advice dated 23.02.2012 in respect of payment of purchase consideration by the appellant are filed.

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vii) The appellant paid the entire purchase consideration from his own personal bank account having funds from his independent sources and earnings, which had no relation whatsoever with any of the respondents named above nor was the purchase consideration part of, directly or indirectly, any transaction(s) with the respondents named above. In this regard, the appellant has filed Confirmation of Transfer dated 14.02.2017 issued by the banker of the appellant confirming that the purchase consideration was paid by the appellant from his personal bank account consisting of his personal funds.

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viii) The appellant paid the entire purchase consideration upfront to lock the purchase price at the time of execution of the said Agreements and to ensure that the consideration is not subjected to any escalation in the future. Further, the entire purchase consideration was made inclusive of existing VAT and Service Tax, as applicable on the purchase transaction and it was also agreed that the appellant shall not be liable to pay any additional taxes on

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the purchase transaction, including any upward revision to existing taxes and that in case of any upward revision, the same was to be paid by the purchase consideration. Therefore, to keep himself immune from any price escalation (which usually takes place in the construction sector) and from any upward revision in taxes, the appellant agreed to pay the entire purchase consideration upfront. This issue was discussed during the negotiations between the parties and was also specifically highlighted by the appellant in his emails dated 29.12.2011, 26.01.2012 and 30.01.2012 addressed to the representative of the Respondent No. 5, Mr. Shashikanth V., who was negotiating on its behalf with the appellant. Print out of the emails dated 29.12.2011, 26.01.2012 and 30.01.2012 are filed.

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ix) After execution of the said Agreements and payment of the entire purchase consideration, disputes arose amongst the appellant, Respondent No. 5 and Respondent No. 8, in the year 2013. It is submitted that Respondent No. 5 had deliberately miscalculated the Service Tax and VAT leviable and payable in respect of the purchase of said flatss, which was not only in contravention of the said agreements but was also contrary to the applicable law. Thus, being under the legitimate belief that Respondent No. 5 had unjustly enriched himself as aforesaid, the appellant herein brought the issue to the Respondent No. 5 and 8‟s notice and demanded that the same be resolved as per law. The appellant has also ascertained that the Respondents had sold out certain common areas in certain floors linking the three towers in the said project to certain interested purchasers. However, the said respondents persisted with their position and aggrieved by the

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same, the appellant herein was constrained to initiate Arbitration proceedings on 11.09.2013 by filing a petition under the Arbitration and Conciliation Act, 1996, before Justice (Retd.) G. Patri Basavana Goud, the Ld. Arbitrator, seeking the following reliefs:

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“a. To refund to the Petitioner Rs.2,21,00,000/- (Rupees two crore twelve lakh only) (Rupees one crore six lakh against each apartment set out in the Schedule Property), the excess amount charged to petitioner alongwith interest at 18% per annum from the date of receipt, i.e., 22.02.2012 till date of award;

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b. To render to the petitioner proper accounts of actual VAT and service tax paid in respect of the Schedule Property;

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c. To refund the amounts equivalent to the reduction in the super built-up area due to the alleged sale of common area to the proposed purchasers of apartment, alongwith interest at 18% per annum from the date of receipt, i.e., 22.02.2012 till date of award;

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d. Pay interest at 18% per annum on the above amounts from the date of award till date of payment;

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e. To award cost/s towards arbitration proceedings;

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f. Pass such other order/s as this Hon’ble Arbitrator deems fit to grant in the circumstances of the case, including the costs of the petition, in the interest of justice and equity.”

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Therefore, at the conclusion of the arbitration proceedings, the same were decided by the Arbitral Tribunal against the appellant herein, vide its Final Award dated 22.04.2016. Copies of the appellant‟s petition dated 10.09.2013 under the Arbitration and Conciliation Act, 1996, separate Defence Statements dated 05.12.2013 filed by the respondents 5 and 8 herein, and the Final Award dated 22.04.2016 passed by the Arbitral Tribunal are filed.

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It is addressed the oral arguments on behalf of the respondent no. 1 in the present appeal and has also filed in its written-submission. The following issues are raised:-

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FPA-PMLA-1681-MUM/2017

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11.1 The appellant has no locus standi to file the present appeal as appellant was neither the defendant before Adjudicating Authority nor he can any rightful claim.

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11.2 The appellant has attempted to help the accused person by entering into the so-called agreement for the purchase of the flats in Kingfisher Tower which has already been attached and the attachment is confirmed by the Adjudicating Authority.

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11.3 Only agreements for the seven flats out of hundreds of flats in Kingfisher towers and that too in the year 2012 not before not thereafter were executed in spite of prohibition by way of Corporate guarantee not to sell, create third party right etc. in the year 2010 given to the consortium of banks.

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11.4 The connivance of the appellant with accused Vijay Mallya is apparent from the fact that the winding up petitions filed by the consortium bank 26.03.2012 in COP No. 57/2012, before the Hon‟ble Karnataka High Court which were widely published both in print as well as electronic media and the people were well aware of the fraud committed by Vijay Mallya. However, the appellant despite of pendency of application in the winding up petition, rather the appellant entered into an agreement dated 30.01.2012 and paid money.

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11.5 In the agreement dated 05.04.2012, there is an arbitration clause and if the appellant has any grievances against Mallya he must invoke arbitration clause and merely by entering in to agreement that too unregistered he has no claim in attached property which is not even fully constructed, then how he can ask for possession or execution of sale deed.

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11.6 In April, 2010 a Lenders meeting was held between the Respondents Bank, certain other banks and KAL. In the said meeting, it was decided to recast the debts of KAL. In pursuance of the same, the Respondent Banks and the KAL entered into a Master Debt Recast Agreement dated December 21, 2010 (MDRA). Simultaneous with the execution of the MDRA, various other agreements were entered into between KAL and the Respondent Banks, inter-alia to secure and create securities pursuant to the MDRA and as contemplated under the MDRA (Financing Documents).

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11.7 Any encumbrance created in favour of any third party is breach of such undertaking is non-est and void. The agreement, therefore, is null and void in view of the corporate guarantee.

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11.8 The appeal is no maintainable in view of the decree dated 19.01.2017 is passed by the Debt Recovery Tribunal against these very assets including the flatss in question directing KAL, Dr. Vijay Mallya and KFIL to jointly and severally pay the sum of Rs. 6203,35.03,879.42 alongwith further interest at 11.5% yearly. Therefore, the said decree which has attained finality as such cannot be interfered. There is an arbitration award in favour of the Consortium Bank. The appellant has prima facie not made out a case for this Court to consider the reliefs claimed in the instant appeal. In case the prayer is allowed, it would result in according priority to their claims over those of other secured creditors of the appellant which is impermissible in law.

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11.9 Even the Hon‟ble Division bench of Karnataka High Court wherein the order of winding up is challenged the Hon‟ble High Court vide order dated 25.4.2017 observe that the official liquidator is requested not to precipitate the matter during the pendency of the appeal.

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11.10 The appellant for the same relief had already filed an application before the Hon‟ble Division Bench of Karnataka High Court and the same is pending adjudication, therefore, the appellant cannot be allowed to go for forum shopping. The UBHL has filed the interlocutory application before Karnataka High court prosing to sell the assets to re pay the debts and in the list of assets UBHL has also included the present flats then how the appellant making any claim over it. The Official Liquidator had filed its reply in response to the application filed by the appellant before the Karnataka High Court opposing their application.

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11.11 During the course of investigation, it was observed that the appellant had entered into an “Agreement to Sell” to purchase a flats in the said tower and had alleged made payments the same as was agreed between them with the developers of „Kingfisher Towers‟. The appellant based on their “Agreement to Sell” claimed to have 8321/767870^th undivided right, title, interest and ownership in the said Lands i.e. the proportionate undivided area in the said land where the tower is located. Apparently, the towers have not yet been completely constructed and the parties had only entered into an agreement to sell the said property. There appears to be no sale deed entered into, nor the said agreement was registered with the Statutory Authority authenticating the genuinity of the said transaction. Section 54 of the Transfer of Property Act, which very categorically states that – “Contract for Sale – A contract for sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties. It does not itself create any interest in or charge on such property.”

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11.12 In the case of Crest Hotel Ltd. Vs. Asstt. Superintendent of Stamps, AIR

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1994 Bom 229, the Hon‟ble Bombay High Court has held that:-

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“It is well settled that a contract for sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties. It does not, of

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itself, create any interest in or charge on such property. It is thus clear that an agreement for sale is merely a document creating a right to obtain another document of sale on fulfillment of terms and conditions specified therein. It does not, of itself, create any interest in or charge on such property. On the strength of such an agreement a buyer does not become the owner of the property. The ownership remains with the seller. It will get transferred to the buyer only on execution of the sale deed by the seller. What the buyer gets from an agreement for sale is only a right to obtain a sale deed executed in his favour. If the seller refused to comply, the buyer is entitled to enforce that obligation by filing a suit for specific performance see Padma Nair v. The Deputy Collector, Valuation and Stamp Duty, W.P. No. 2586 of 1988 dated 28^th July, 1993, since reported in 1994 Mh.L.J.”

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11.13 In the case of B. Rama Raju Vs. Union of India & Ors. 2011 SCC Online AP 152, in which the constitutional validity of Section 5 and 8 of the PMLA was challenged, the Division Bench of Andhra High Court as follows:-

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“37. It further requires to be noticed that not only from the second proviso to Section 9 of the Act but on general principles of law as well, a person deprived of the property in his ownership, control or possession on account of confiscation proceedings under the Act, has a right of action against transferor of such property to recover the value of such property.”

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11.14 In the case of Suraj Lamp & Industries vs. State of Haryana & Ors.

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[(2012) 1 SCC 656 very aptly observed as follows:-

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“18. It is thus clear that a transfer of immovable property by way of sale can only be by a deed of conveyance (duly stamped and registered as required by law), no right, title or interest in an immovable property can be transferred.

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19. Any contract of sale (agreement to sell) which is not a registered deed of conveyance (deed of sale) would fall short of the requirements of Sections 54 and 55 of the Transfer of Property Act and will not confer any title nor transfer any interest in an immovable property (except to the limited right granted under Section 53-A of the Transfer of Property Act). According to the Transfer of Property Act, an agreement of sale, whether with possession or without possession, is not a conveyance. Section 54 of the Transfer of Property Act enacts that the sale of immovable property can be made only by a

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registered instrument and an agreement of sale does not create any interest or charge on its subject matter.

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Since, there is no Registered Sale deed nor there is any handing over of the possession of the flats/property to the appellant since the building is still under construction.

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11.15 The above fact was also corroborated in the statement of Shri Manoj Kumar, an employee of M/s UB Group dated 02.06.2016, wherein he has interalia, stated that “Kingfisher Tower is a single tower consisting of thirty five floors of which from basement to four floors, consist of parking. This tower is purely residential property and the details of the flats owned by M/s UBHL are mentioned in the sharing agreement dated 04.11.2010. On being asked, he states that the tower is presently under construction. Out of all these flats, for seven flats, agreement to sell have been entered with different parties. However, the sale deed has not been executed as there is a restraint Order from the Hon‟ble High Court of Karnataka, Bangalore.”

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It is submitted that there was only an agreement of sale entered between the appellant and M/s UBHL, which only denotes about the intention of selling of the Flats to the appellant. There is no registered Sale Deed nor the appellant is in possession of the impugned property/Flats in the Kingfisher Tower. Thus, the appellant does not have any legal ground to claim any title or interest in the said property. Appellant therefore cannot claim any relief from the Hon‟ble Appellate Tribunal.

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11.16 An application under Section 19 of the Recovery Debts Due to Banks & Financial Institutions Act, 1993, bearing No. O.A. No. 766/2013 was filed by the consortium of banks consisting of 15 banks as the applicants against M/s Kingfisher Airlines Ltd., M/s United Breweries (Holdings) Ltd., Dr. Vijay Mallya & Ors., before the Debt Recovery Tribunal wherein inter-alia, they had prayed for certain interim orders to restrain the

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Respondents from selling their properties. However, the Debts Recovery Tribunal had neither considered the application on its merits nor had granted any ad-interim relief pending consideration of the application. The consortium of banks thereafter, filed Writ Petition Nos. 38870/2013, W.P. Nos. 39048-39052/2013 and W.P. No. 39053/2013 before the Hon‟ble Karnataka High Court, Bangalore seeking an ad-interim order. Accordingly, the Hon‟ble Court vide its order dated 03.09.2013 passed an ad-interim order of injunction against the Respondents No. 1 to 3 viz. M/s Kingfisher Airlines Ltd., M/s United Breweries (Holdings) Ltd. and Dr. Vijay Mallya from transferring, alienating disposing or creating third party rights in movable as well as immovable properties belonging to them until further orders. The property in dispute of the appellant is owned and in control of M/s United Breweries (Holdings) Ltd. Further, the Hon‟ble Karnataka High Court vide its order dated 13.11.2013 confirmed its interim order dated 03.09.2013 to ensure to the benefit of the petitioners till the applications are considered and disposed of by the Debts Recovery Tribunal. Finally, the OA No. 766/2013 was disposed off on 19.01.2017 by the Debts Recovery Tribunal, upholding the contention of the consortium of banks.

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11.17 M/s United Breweries (Holdings) Ltd. has filed an application bearing No. OSA 5/2017 against the winding up petition order of M/s United Breweries (Holdings) Ltd., before the Division Bench of the Hon‟ble Karnataka High Court and have also filed an Interlocutory Application in 2017 in OSA 2/2017, wherein they have offered to sell the entire properties immovable as well as movable, which also includes the property of the subject petitioner and deposit the sale proceeds to the Hon‟ble High Court of Karnataka.

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11.18 The Order of Debt Recovery Tribunal and the Interlocutory Application of

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M/s United Breweries (Holdings) Ltd. establishes that the appellant is not FPA-PMLA-1681-MUM/2017 Page 14 of 34

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owing the impugned property nor does the appellant has any right on the said property inasmuch as no sale deed has been entered and/or registered with the statutory authorities, which may confer legal title as per law. Further, the appellant failed to plead before even the Debt Recovery Tribunal with reference to his interest in the impugned property and failed to challenge the final order of Debt Recovery Tribunal. Similarly, he also failed to challenge the interim order of Stay granted by the Hon‟ble Karnataka High Court as well, even after having full knowledge of the same.

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11.19 As earlier mentioned, the Hon‟ble Karnataka High Court had ordered for the winding up of M/s United Breweries (Holdings) Ltd. and has appointed an Official Liquidator to oversee & Supervise the process of liquidation of assets of United Breweries (Holdings) Ltd. This order of the single Bench of the Hon‟ble High Court, which is in process of been decided shortly.

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It is the case of appellant that he had purchased two apartments/flats bearing number 17B and 19B, along with the proportionate undivided area in the underlying land in a real estate project being jointly developed by Respondent No. 5 (M/s. United Breweries (Holdings) Ltd. ) and Respondent No. 8 (M/s. Prestige Estates Projects Pvt. Ltd.). It is alleged on behalf of appellant that arms-length discussions and negotiations between the parties for the aforesaid purchase was initiated in 2011 and all the relevant Agreements to Sell were executed on 31.01.2012.

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It appears from the material on record that the entire purchase consideration (i.e. Euro 7,650,000/-, equivalent to Rs.49,84,74,000/- ) was paid by the appellant on 22.02.2012, through banking channels from the overseas account of the appellant. It is alleged by the appellant that at the request of Respondent No. 5 and 8, the entire purchase consideration was FPA-PMLA-1681-MUM/2017 Page 15 of 34

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remitted to an escrow account of HDFC Bank Limited (Respondent No. 9), since it was represented to the appellant, that Respondent No. 9 was a creditor of Respondent No. 5. It is stated that as on 22.02.2012, the appellant was a purchaser and beneficial owner of the said property and had acquired proprietary rights and title over the said property. As such, 22.02.2012 onward, the appellant was a „claimant‟ to the said property in terms of the Proviso to Section 8(2), Prevention of Money Laundering Act, 2002.

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14. Counsel for the appellant during the course of hearing has handed over the list of dates and events. The same is reproduced below:-

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Sl. No.	Date	Particulars
1.	26.04.2010	Joint Development Agreement between M/s United Breweries Holdings Ltd. (Respondent No. 5) and M/s Prestige Estates Projects Pvt. Ltd. (Respondent No. 8)
2.	29.12.2011 26.01.2012 30.01.2012	Negotiations between Appellant and Respondent No. 8/Respondent No. 5 vide emails regarding purchase of property
3.	30.01.2012	Agreements executed among the Appellant, Respondent No. 5 and 8 for sale of Flats No. 17B and 19B and proportionate undivided area in the underlying land -  Two Agreements to Sell dated 30.01.2012, one each for the said Flatss  Two Construction Agreements dated 30.01.2012, one each for the said Flatss  Two Side Letters dated 30.01.2012, one each for the said Flatss
4.	23.02.2012	Entire sale consideration remitted to M/s HDFC Bank Ltd. (Respondent No. 9) Payment documents @ pg. 348/349
5.	10.09.2013	Arbitration proceedings initiated by the Appellant against Respondent No. 5 and Respondent No. 8  Appellant’s Claim Statement  Respondent No. 5’s Statement of Defence  Respondent No. 5’s Statement of Defence
		FIR registered for predicate offence.
6.	29.07.2015	Not named in FIR  Not on record

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7.	29.01.2016	ECIR No. ECIR/03/MBZO/2016 registered.  Not on record  AppellantnotnamedintheECIR
8.	22.04.2016	Final Award in Arbitration proceedings
9.	11.06.2016	Provisional Attachment Order No. 11/2016  Not on record  Under-construction flatss (including those purchased by the Appellant) in Kingfisher Towers attached
10.	July, 2016	Appellant made enquiries regarding status of construction
11.	07.07.2016	Appellant issued Legal Notice to Respondent No. 5 and 8, seeking specific performance of agreements regarding purchase of flatss and seeking supply of ED documents_re_ attachment  No response from either
12.	27.09.2016	Appellant wrote to ED seeking details of the attachment  No response from ED
13.	01.12.2016	Confirmation Order passed by the Adjudicating Authority
14.	20.12.2016	On gaining knowledge of the Confirmation Order, the Appellant applied for certified copy of the same
15.	30.12.2016	Certified copy received by the Appellant
16.	21.02.2017	Appeal filed before this Tribunal

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It is submitted by the appellant that the appellant is an innocent bona fide purchaser of the said property. The complete transaction pertaining to the purchase of the said property stood concluded much prior to the registration of the FIR pertaining to the predicate offence and the registration of the ECIR.

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The appellant is not even named/mentioned in the FIR or the ECIR or the captioned Original Complaint. It is not even the case of the Enforcement Directorate/ Respondent No. 1 that the appellant is involved or connected in any manner with the alleged offence under PMLA or the predicate offence and FPA-PMLA-1681-MUM/2017 Page 17 of 34

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at the time of issuance of Provisional Attachment Order, the ED/ Respondent No. 1 was aware of the purchase of the said property by the appellant and the appellant himself brought the same to the ED‟s notice; however, the ED did not investigate it further or if it did investigate it, then the same did not result in any inculpatory findings.

¶116

There is no material on record to show that the appellant has any link, association or relation with any of the defendants i the captioned Original Complaint. It is the case of appellant that the purchase of the said property was after arms-length negotiations.

¶117

The appellant had initiated arbitration proceedings (much prior to the registration of the FIR and the ECIR) against Respondent No. 5 and 8 on the issue of the validity of the purchase consideration, tax liability and had also issued various legal notices to the said respondents from time to time.

¶118

The entire purchase consideration was made from the appellant‟s own income and fully documented sources, as supported by the appellant‟s banker‟s certificate. All documentation related to this was brought to the ED‟s notice of the appellant‟s own volition.

¶119

The details of payment made by the appellant is as under:-

¶120

United Breweries (Holdi UB Tower, Level 12, 24, Vittal Mallya Road, Banga Tel: +91 80 22272808, 222758 Fax: +91 80 222748 Website:www.theubgrou	ngs) Limited UB City lore-560 001 09, 39856000 90 p.com RECEIPT No. UBHL/KFT/001 Date:24-02-2012
Received with thanks from	Mr. Vivek Mathias Son of Mr. Denis Mathias Europa Residence Place des Moulins MC 98000,Monaco
The amount	EUR 7,650,000.00* Euro Seven Million Six Hundred and Fifty Thousand only.

¶121

FPA-PMLA-1681-MUM/2017

¶122

Page 18 of 34

¶123

	Rupee Equivalent to INR 498,474,OOO* Rupees Four Hundred Ninety Eight Million Four Hundred and Seventy Four Thousand only *In terms of FIRC No.912022200148 dated 23-02-2012 issued byHDFC Bank Limited.
Towards payment of	Amount received is in full and final settlement towards purchase of Apartment No(s): 17B & 19B in “Kingfisher Towers”, Vittal Mallya Road, Bangalore-560001
Through	Wire Transfer on 22-02-2012 credited to our Escow Account No.00090350002126 Maintained with HDFC Bank Limited, Kasturba Road, Bangalore-560 001, INDIA
	ForUnited Breweries (Holdings) Limited
	(Authorised Signatory)

¶124

HDFC BANK Party Advice cum

¶125

Dear Customer

¶126

In accordance with details shown below we have effected following transactions your Account 0009035000212
Particulars	Amount in INR
Transactions Reference no. 912022200148
Inward remittance details –[email protected]	498,474,000.00 Credit
Remittance name 1/VIVEK MATHIAS
BeneficiaryName UNITED BEWERIES(HOLDINGS)LIMITED
Govt. Service Tax as per sub rule(7B) of Rule 6 of the ServiceTax(Amendment)Rules	5,000.00 Debit
Govt. Education Cess and Secondary & Higher	150.00 Debit
EducationCess–3% onServiceTax
Grand Total	498,468,850.00

¶127

It is claimed by the appellant that as on 22.02.2012 (i.e. the date of advance payment of the entire purchase consideration), the Appellant was a purchaser and beneficial owner of the subject Properties and had acquired proprietary rights and title over the said Properties. As such, 22.02.2012

¶128

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¶129

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¶130

onward, the Appellant was a „claimant‟ to the subject Properties in terms of the Proviso to Section 8(2), Prevention of Money Laundering Act, 2002 .

¶131

It is admitted position that at the time of issuance of the subject Provisional Attachment Order, the Respondent ED ( See Appellant‟s Letter dated 22.09.2016 @ Pg.449) as well as the Adjudicating Authority ( See Impugned Confirmation Order @ Pg. 225) were aware that the Appellant was a „Claimant‟ to the subject Properties in terms of proviso to Section 8(2), PMLA; despite which the Respondent ED and the Adjudicating Authority failed to issue notice to the Appellant or to afford him a hearing, during the adjudication proceedings which is mandatory as the appellant rightly or wrongly was the interested/aggrieved party and claiming its right by virtue of agreement and by making a huge payment to the bank who has issued no objection if the flatss are purchased by the appellant.

¶132

The Respondent ED‟s allegation is that the Appellant has attempted to help the accused Vijay Mallya and has connived with him by entering into the Agreements to Sell is without any substance as there is no evidence or material on record.

¶133

However, the Respondent ED has also failed to show that the Appellant has any link, nexus or connection whatsoever with the Accused Vijay Mallya directly or indirectly. Even otherwise, if the appellant had any link and nexus why the appellant was not charge-sheeted or any complaint under PML Act, 2002 was filed against the appellant. Why no action was taken by the ED and CBI or any authorities.

¶134

It appears that the allegation of connivance is made by the Respondent ED without any basis. It is not denied by the ED that the entire payment was made through banking system. It is also not the case of respondent no. 1 that

¶135

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¶136

Page 20 of 34

¶137

it was a tainted money or earned from the proceed of crime or by means of criminal activities.

¶138

It is argued on behalf of the appellant that once the entire payment of the purchase consideration was made, the Appellant became owner of the said Property and had acquired proprietary rights and title a „claimant‟ to the said Property in terms of the Proviso to Section 8(2), Prevention of Money Laundering Act, 2002 being interested/aggrieved party.

¶139

It is also correct that the Appellant is not even named/ mentioned in the FIR or the ECIR or the captioned Original Complaint. It was not even the case of the Enforcement Directorate/Respondent No. 1 that at the time of the PAO was issued and at the time of filing of the captioned O.C., that the Appellant is involved or connected in any offence or with the alleged offence under PMLA or the predicate offence.

¶140

The respondent no. 1 cannot deny that at the time of passing the Provisional Attachment Order, the ED/Respondent No. 1 was aware of the purchase of the said Property by the Appellant, as is evident from the statement of Shri Manoj Kumar, an employee of M/S UB Group. Though the said fact has also been disputed by the ED, but the ED did not investigate the same or if it did investigate the same, otherwise the real position might have been different.

¶141

There is also no material on record to show that the Appellant has any link, nexus or association or relation with the respondent nos. 5 and 8. As per the case of the appellant that the purchase of the said Property was after negotiations. The entire consideration was paid from the Appellant‟s own income. The same is supported by the Appellant‟s Banker‟s Confirmation Letter and her bank account statements.

¶142

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¶143

Page 21 of 34

¶144

It is argued by the appellant that he is an innocent bona fide purchaser, and the said Property could not have been attached under Section 5, PMLA. It is also not the case of respondent no. 1 that the consideration paid by him is a tainted amount or it was belonged to Vijay Mallya, as admittedly all the amount was paid through banking channel.

¶145

The proviso of Section 8(1) and 8(2) of PMLA, 2002 are read as under:-

¶146

“ Provided that where a notice under this sub-section specifies any property as being held by a person on behalf of any other person, a copy of such notice shall also be served upon such other person:

¶147

Provided further that where such property is held jointly by more than one person, such notice shall be served to all persons holding such property.

¶148

(2) The Adjudicating Authority shall, after –

¶149

(a) considering the reply, it any, to the notice issued under subsection (1);

¶150

(b) hearing the aggrieved person and the Director or any other officer authorized by him in this behalf, and

¶151

(c) taking into account all relevant materials placed on record before him,

¶152

by an order, record a finding whether all or any of the properties referred to in the notice issued under sub-section (1) are involved in moneylaundering:

¶153

Provided that if the property is claimed by a person, other than a person to whom the notice had been issued, such person shall also be given an opportunity of being heard to prove that the property is not involved in money-laundering.

¶154

It is evident from the material available on record and from the Impugned Confirmation Order that the Enforcement Directorate/Respondent No. 1 and the Adjudicating Authority were aware that the Appellant was a „Claimant‟ to the said Property in terms of proviso to Section 8(2), PMLA. The interest in the property by the appellant is not denied on behalf of the respondent no. 1 during hearing, except it was stated that the appellant was not necessary party, therefore no notice was required to be issued. The said arguments are

¶155

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¶156

Page 22 of 34

¶157

wholly contrary to law and facts involved in the present appeal as the respondent no. 1 was aware who failed to investigate further in the matter.

¶158

Despite of having full knowledge about the transaction, Respondent No. 1 and the Adjudicating Authority failed to issue notice to the Appellant or to afford a hearing to her, during the adjudication proceedings. Thus, the Respondent No. 1 and the Adjudicating Authority have failed to comply with the mandatory statutory requirement of the Proviso to Section 8(2), PMLA. The mandatory notice has not been issued. After recording the statement of Manoj Kumar, an employee of M/s. U.B. Group, no further investigation appears to have been done. The appellant had interest in the flat in question but no mandatory notice required under section 8(2) was served. Section 8(2) is a mandatory provision, it is mandated under the proviso that if property is claimed by a person other than accused, he shall also be given an opportunity of being heard to prove that the property is not involved in money laundering. Despite of clear language of the act, no notice was given. The prescribed period has already been expired. The appellant is no doubt claimant in the attached property. It is not understood why the requisite notice was not issued by the respondent no. 1 and Adjudicating Authority. Despite being Appellant‟s claim to the said Property, Respondent No. 1 failed to fulfill its statutory duty, in terms of Rule 3(2) PML (Issuance of Provisional Attachment Order) Rules, 2013, to supply a copy of the Provisional Attachment Order to the Appellant at the time of the issuance of the same to the best reason known to respondent no. 1. It appears that after realizing its mistakes, the respondent no. 1 is now trying to justifying its lapse.

¶159

Respondent No. 1 was having the details regarding the purchase of the said Property and was in possession of the relevant documents. Thus, the said Property could not have been attached as “proceeds of crime”, even if one were FPA-PMLA-1681-MUM/2017 Page 23 of 34

¶160

Page 23 of 34

¶161

to invoke the concept of “equivalent value” as the consideration paid for the purchase of the said Property had been remitted to HDFC Bank Ltd. (Respondent No. 9 herein), which was Defendant No. 8 before the Adjudicating Authority and Respondent No. 1 was aware of this fact at the time of issuing the provisional attachment order.

¶162

It is argued by the appellant that the respondent no. 1 has already attached the other properties of Vijay Mallya. There is no specific plea why the flats were attached under the concept of equivalent value without the notice and knowledge of the appellant.

¶163

It is not the case of respondent no. 1 that the said amount which was in possession of the appellant was not proceed of crime. Even, there is no evidence or any material on record to show for the sake of argument that the appellant has received the said amount from main accused and thereafter it was deposited with the bank in order to help him. No such findings are rendered. Even many pleas/objections are raised first time in the writtensubmissions as those were not the part of pleadings of respondent no. 1.

¶164

The Respondent-ED even prima facie is not able to establish any collusion/connection of the Appellant with UBHL or Kingfisher Airlines Ltd. or Mr. Vijay Mallya. Therefore, none of the decisions referred on behalf of respondent no. 1 are applicable to the facts of the present case.

¶165

Next contention on behalf of respondent no. 1 is that the Agreement to Sell in favour of the Appellant is not registered. There is no sale deed, thus, the Appellant does not have any interest in the subject-property which is still under construction and possession has not been given to the Appellant.

¶166

The said arguments have no force as at the stage of adjudication under Section 8, PMLA and the onus upon any Claimant is only to show that the FPA-PMLA-1681-MUM/2017 Page 24 of 34

¶167

attached property is not involved in money laundering. It is not even the Respondent‟s case that the subject property is involved in money laundering, rather it is the „value thereof‟. It is not even the case of the Respondent that the Appellant is involved, in any manner, in the offence of money laundering. No such contention has been raised, except in the Written Submissions filed by the counsel of the respondent no. 1. New case in the written-submission cannot be set-up. There is no allegation that the money deposited in the bank by the appellant was tainted money or any cash deposit was made. All the payments were made through banking channel. Many of contentions raised in the written submissions are not part of the pleadings of respondent no.1.

¶168

It appears from the material that the Appellant has executed Agreements to Sell, Construction Agreements and has also paid the full purchase consideration. Furthermore, all these documents were executed much prior to the registration of ECIR and FIR in the captioned Original Complaint. The Appellant has paid sufficient Stamp Duty on the Agreements to Sell and the Construction Agreements. It is not a civil dispute. It is also a matter of fact and it has come on record that the entire amount has already been paid. In the present case, the appellant definitely is a claimant and the flats were attached without any notice and hearing of the appellant nor any opportunity was given to raise his stand.

¶169

Even at the stage of Section 8(8), PMLA, that is, confiscation, the only requirement upon a claimant to seek restoration of the subject-property is only to show that he has a “legitimate interest” in the subject-property. Even otherwise, the right acquired by an Agreement to Sell holder would prevail over a subsequent statutory attachment as hold in the case of Vannarakkal Kallalathil Sreedharan v. Chandramaath Balakrishnan & Anr. , (1990) 3 SCC 291.

¶170

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¶171

Page 25 of 34

¶172

The respondent‟s contention that the flats are not constructed and possession has not been handed over. It is stated by the appellant who specifically made the statement that the subject-property/Flats have been fully constructed and is ready for delivery and even the vendor is ready to hand-over possession of the subject property, but it could not be given due to attachment order. The winding up was only passed in the year 2017. In 2012, merely the said petition was passed.

¶173

Even otherwise, it is settled law that the rights in any asset of a company acquired by any person prior to initiation of the winding-up proceedings against the said company are absolute and cannot be defeated by the windingup proceedings, subject to the transaction being an arms-length transaction.

¶174

There is also no force in the submission of the respondent no. 1 that there was a connivance between the appellant and the accused parties as the filing of the winding of petition was published in the print as well as electronic media.

¶175

In the case of Laxmi Raj Shetty and another vs. Tamil Nadu reported in (1988) 3 S.C.C. 319 in para – 25 the Hon‟ble Supreme Court hold that the courts cannot take judicial notice of the facts stated in a news item being in the nature of hearsay secondary evidence unless proved by evidence aliunde and presumption cannot be drawn under section 81 of the Evidence Act.

¶176

In the present, the presumption can be attached that the appellant was aware about the news published in 2012 about the pendency of winding up petition. The funds were paid during the period 2012 to 2017 and the prayer in the winding up petition was allowed in 2017.

¶177

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¶178

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¶179

In the present case, the Agreement to Sell entered into by the Appellant with M/s UBHL is of the year2012 (i.e. prior to even the initiation of the winding-up proceedings) and the entire purchase consideration was duly paid in the year 2015( i.e. much prior to the subject Provisional Attachment Order). It is not even the Respondent ED‟s has established prima facie case that the purchase of the subject Property vide inter alia the Agreements to Sell was not an arms-length transaction.

¶180

48. In Vannarakkal Kallalathil Sreedharan Vs. Chandramaath Balakrishnan & Anr. (1990 (3) SCC 291) a Bench of two Judges considered a question identical to the question raised before us. The question was whether the sale prevailed over the attachment. The facts were that 80 cents of land were agreed to be sold in favour of the appellant under an agreement dated October 9, 1978. Before the sale deed was executed, a third party in execution of a decree got the property attached on November 16, 1978. The sale deed was executed on November 23, 1978.

¶181

49. On the above facts, it was held as under :

¶182

“ We may first draw attention to some of the relevant statutory provisions bearing on the question. Order XXXVIII Rule 10 of the Code of Civil Procedure provides that attachment before judgment shall not affect the rights existing prior to the attachment of persons not parties to the suit. Under Sec. 40 of the Transfer of Property Act, a purchaser under a contract of sale of land is entitled to the benefit of an obligation arising out of that contract and it provides that that obligation may be enforced inter alia against a transferee with notice. Sec. 91 of the Trusts Act also recognises this principle that the transferee with notice of an existing contract of which specific performance can be enforced must hold the property for the benefit of the party to the contract. These are equitable rights though not amounting to interest in immovable property within the meaning of Sec. 54 of the Transfer of Property Act which declares that a contract of sale does not create an interest in the property. On this line of reasoning it has been held by the Madras High Court that the purchaser of (sic under) an antecedent agreement gets good title despite attachment.”

¶183

Their Lordships then considered that the same view has been taken by the Bombay and Calcutta High Courts. The view taken by Punjab & Haryana High Court in Mohinder Singh Vs. Nanak Singh ( AIR 1971 P & H, 381) was overruled. It was observed as under :

¶184

FPA-PMLA-1681-MUM/2017

¶185

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¶186

“ In our opinion, the view taken by the High Courts of Madras, Bombay, Calcutta and Travancore Cochin in the aforesaid cases appears to be reasonable and could be accepted as correct. The agreement for sale indeed creates an obligation attached to the ownership of property and since the attaching creditor is entitled to attach only the right, title and interest of the judgment-debtor, the attachment cannot be free from the obligations incurred under the contract for sale. Sec. 64 C.P.C. no doubt was intended to protect the attaching creditor, but if the subsequent conveyance is in pursuance of an agreement for sale which was before the attachment, the contractual obligation arising therefrom must be allowed to prevail over the rights of the attaching creditor. The rights of the attaching creditor shall not be allowed to override the contractual obligation arising from an antecedent agreement for sale of the attached property. The attaching creditor cannot ignore that obligation and proceed to bring the property to sale as if it remained the absolute property of the judgmentdebtor. We cannot, therefore, agree with the view taken by the Punjab & Haryana High Court in Mohinder Singh’s case.”

¶187

50. In the above case this Court has gone even to the extent that not only a sale deed but even an agreement of sale will prevail over attachment before judgment made subsequent to such agreement for sale. I do not want to express any opinion with regard to the case of an agreement for sale, but I am of the confirmed opinion that a sale deed having been executed prior to attachment before judgment, though registered subsequently will prevail over attachment before judgment.

¶188

51. Even in the case of B. Rama Raju Vs. UOI decided by (DB) of High Court of Judicature, Andhra Pradesh at Hyderabad, the Judgment reported in 2011

¶189

S.C.C on lines AP-152 in para – 103 and 104, it was hold as under:-

¶190

“103 Since proceeds of crime is defined to include the value of any property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence, where a person satisfies the adjudicating authority by relevant material and evidence having a probative value that his acquisition is bona fide, legitimate and for fair market value paid therefor, the adjudicating authority must carefully consider the material and evidence on record (including the reply furnished by a noticee in response to a notice issued under Section 8 (1) and the material or evidence furnished along therewith to establish his earnings, assets or means to justify the bona fides in the acquisition of the property); and if satisfied as to the bona fide acquisition of the property, relieve such property from provisional attachment by declining to pass an order of confirmation of the provisional attachment; either in respect of the whole or such part of the property provisionally attached in respect whereof bona fide acquisition by a person is established, at the stage of the Section

¶191

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¶192

Page 28 of 34

¶193

8(2) process. A further opportunity of establishing bona fide acquisition of property or that the property in question is not proceeds of crime involved in money-laundering is available and mandated, prior to the adjudicating authority passing an order of confiscation, under Section 8(6).

¶194

104. Proceedings for attachment and confiscation of proceeds of crime are a process distinct and dissimilar to the process for prosecution of the offence of money-laundering. Deprivation of property involved in money-laundering is the sanction in the first process while deprivation of personal liberty is the sanction enjoined in conviction for the offence. Mens rea is not a jurisprudentially nonderogable adjunct for visitation of civil consequences and therefore the legislative policy in this area is eminently within the domain of legislative choice. This challenge must therefore fail. Challenge to dispossession before conviction of the accused:

¶195

It is clear from the above that two proceedings, one is before this tribunal and other proceedings where the criminal complaint pending before the Special Court (where the trial of schedule offence is being conducted) are distinct

¶196

The next submission of the respondent no. 1 is that in view of other proceedings pending, the impugned order cannot be interferred. The proceedings relied upon by the ED are the following:

¶197

a. O.A. No. 766/2013 before the Hon‟ble Debts Recovery Tribunal; b. Writ Petition No. 38870/2013, 39048-39052/2017 and 39053/2017;

¶198

c. O.S.A. No. 5/2017; and d. Interlocutory Application No. 1/2018 in O.S.A. No. 5/2017, as referred in Para 21.

¶199

The said arguments have no force as the said proceedings have no bearing whatsoever on the adjudication of the present Appeal for the determination of which, this Tribunal ought only to determine the following:

¶200

i) Issue 1 - Whether the Appellant has committed any offence under Section 3 of the Prevention of Money Laundering Act, 2002 (“Act”)?

¶201

ii) Issue 2- Whether the subject property is proceeds of crime and the Appellant is in possession of proceeds of crime?

¶202

FPA-PMLA-1681-MUM/2017

¶203

Page 29 of 34

¶204

With regard to issue 1, it is not even the case of the Respondent that the Appellant has committed any offence under Section 3 or is in any manner involved in the commission of the same. The Appellant is the purchaser of the subject property, for which he paid the complete consideration through duly documented legal banking channels, even prior to the date of registration of the FIR or the ECIR.

¶205

On second issue, it is admitted position that the subject property has been attached as „value thereof‟. The Appellant has vested rights in the subject property prior to the attachment by Respondent-ED. It is the case of the appellant the same could never have been attached as “value thereof” of the proceeds of crime. At the time of issuance of the Provisional Attachment Order there is no Confirmation Order that any proceeds of crime have flowed to UBHL.

¶206

The next submission of the respondent is that since the application of the appellant is pending before the Hon‟ble Court, therefore, the matter should not be heard.

¶207

It is not denied by the appellant that the appellant has filed the application before the Hon‟ble High Court of Karnataka for registering the sale deed and possession of the flats. The said application is still pending. This tribunal is not passing any direction either to execute the sale deed nor the order of handing over the possession of the flats to the applicant as this tribunal has no jurisdiction to pass such orders.

¶208

This tribunal is only to determine whether the subject Property falls within the ambit of the Act or to whether the subject Property is involved in money laundering. Thus, there is no force in submission of the respondent no. 1 this tribunal has no jurisdiction to even cannot consider the said issue and FPA-PMLA-1681-MUM/2017 Page 30 of 34

¶209

these proceedings should not continue till disposal of the said proceedings where the prayer for execution of sale deed is pending.

¶210

The proceedings before the Debt Recovery Tribunal were inter alia between the secured creditor banks and M/s United Breweries [Holdings] Ltd., under a special enactment for recovery of dues.

¶211

The appellant is not seeking relief of delivery of possession or registration of Sale Deed from this. As such also, all submissions regarding the Corporate Guarantee and the Master Debt Recast Agreement are wholly irrelevant at this stage.

¶212

Even respondent-ED has for the first time has argued about the issue of Guarantee and a Master Debt Recast Agreement (“MDRA”) who has failed to place the same on record.

¶213

As far as the Corporate Guarantee is concerned, it is submitted on behalf of the appellant that HDFC bank was not even a party to the said Corporate Guarantee and therefore, the same has no relevance to the present Appeal. The corporate guarantee is executed between UBHL and certain secured creditors. The same is not registered either with the Ministry of Companies Affairs or the jurisdictional Registrar of Assurances and hence no public knowledge can be imputed to the Appellant.

¶214

The next submission of the respondent ED is that if the Appellant has any grievances against Mr. Vijay Mallya, the appellant must invoke the arbitration clause contained in the agreement. The said submission has no force as the Agreement to Sell has been entered into by the Appellant with M/s UBHL and not with Mr. Vijay Mallya. The Appellant may invoke the said arbitration clause against M/s UBHL in the event of breach of any covenants of FPA-PMLA-1681-MUM/2017 Page 31 of 34

¶215

the said Agreement, including non-handing over of possession or nonexecution of sale deed in favour of the Appellant in due course. The said aspect cannot be determined in the present proceedings.

¶216

The Appellant is not seeking any direction from this Tribunal that the Appellant be handed over the possession of the subject Property nor that the sale deed(s) in respect of the subject Property be executed by M/s UBHL in favour of the Appellant as the scope of the present Appeal is limited to the determination as to whether the subject Property are involved in moneylaundering or not. Thus, the existence of the said arbitration clause cannot, in any way, be an impediment to the adjudication of the present Appeal.

¶217

The Respondent ED‟s next submission is that if the present Appeal is entertained by this Tribunal, it would result in according priority to the Appellant‟s claims over the claims of other secured creditors is wholly misconceived. It is a matter of fact that the appellant is neither seeking any direction from this Tribunal that the Appellant be handed over the possession of the subject Property nor that the sale deed(s) in respect of the subject Property be executed by M/s UBHL in favour of the Appellant. The scope of the present Appeal is limited to the determination as to whether the subject Property is involved in money-laundering or not.

¶218

In the present case, the Agreement to Sell entered into by the appellant with M/s. UBHL is dated 30.01.2012 (i.e. prior to even the initiation of the winding up proceedings) and the entire purchase consideration was duly paid by 22.02.2015 (i.e. much prior to the subject Provisional Attachment Order). It is the case of the appellant that the purchase of the subject property vide inter alia the Agreement to Sell dated 30.01.2012 is an arms-length transaction. At that time even winding-up petition was not pending, prima facie, it appears the

¶219

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¶220

Page 32 of 34

¶221

question of helping anyone and knowledge does not arise as the winding up petition was filed on 26.3.2012 before the Hon‟ble High Court of Karnataka. The objection raised by the respondent no. 1 is baseless.

¶222

As regard to plea as to whether right of the appellant would prevail over the rights of the other secured creditors, no opinion is being expressed. The said aspect would be considered by the Court where the prayer of execution of sale deed is pending or before the Special Court who is also empowered to pass such order under the proviso of amended provision of section 8(8) of the Act (Act of 2018). All secured creditors including DRT and banks are at liberty to raise the objection as per law as admittedly this tribunal is not deciding the fate of title of the flat in question.

¶223

The second proviso of sub-section 8 of section 8 has been incorporated by the Act, 13 of the 2018. Both proviso of section 8(8) are read as under:-

¶224

“ Provided that the Special Court shall not consider such claim unless it is satisfied that the claimant has acted in good fath and has suffered the loss despite having taken all reasonable precautions and is not involved in the offence of money laundering.

¶225

Provided further that the Special Court may, if it thinks fit, consider the claim of the claimant for the purposes of restoration of such properties during the trial of the case in such manner as may be prescribed.”

¶226

From the entire gamut of the matter, it is evident that the appellant was

¶227

the claimant in the flats. By making the entire payment, the appellant is become stake-holder as the amount paid by the appellant was not proceed of crime. The appellant is also not involved in the money laundering. The question of link and nexus in the criminal activities directly or indirectly does not arise.

¶228

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¶229

Page 33 of 34

¶230

As far as the impugned order dated 1.12.2016 is concerned, the same is not sustainable in law and the facts of the present case. The same is set-aside against the appellant with regard to flats in question. The provisional order is also quashed accordingly by allowing the appeal.

¶231

However, it is clarified that this tribunal has decided the appeal pertaining to the order passed on the attachment of flats allegedly purchased by the appellant. The finding shall have no bearing with regard to merit of other proceedings pending against the accused parties including extradition proceedings. It is alleged that the flats in question is one of the assets in which the Official Liquidator is appointed, therefore, the appellant, the respondent nos. 3, 5 and 8, unless the final order is passed in his favour, shall not create third party interest directly or indirectly.

¶232

No costs.

¶233

(Justice Manmohan Singh) Chairman

¶234

New Delhi, 13th August, 2018. „skb‟

¶235

FPA-PMLA-1681-MUM/2017

¶236

Page 34 of 34

FPA-PMLA-1681/MUM/2017 of Shri Vivek Mathias v/s The Deputy Director, Directorate of Enforcement, Mumbai

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FPA-PMLA-1681/MUM/2017 of Shri Vivek Mathias v/s The Deputy Director, Directorate of Enforcement, Mumbai

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