Allowed

FPA-PMLA-1772/MUM/2017 of Ms. Kiran Mazumdar v/s The Deputy Director, Directorate of Enforcement, Mumbai

ATFP13 Aug 2018FPA-PMLA-1772/MUM/2017

Case brief

AI extract

What is this about?

The Tribunal quashed a confirmation order attaching an apartment as 'proceeds of crime' value. It held that the appellant, a claimant with a valid Agreement to Sell paid via banking channels, was denied a mandatory hearing under PMLA Section 8(2). The attachment was unsustainable as the property was not proceeds of crime in her hands.

What did the court decide?

Impugned Confirmation Order dated 11.2.2016 was quashed and set aside regarding the flat in question; provisional attachment also quashed.

FPA-PMLA-1772/MUM/2017 of Ms. Kiran Mazumdar 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-3464/MUM/2017(STAY) MP-PMLA-3465/MUM/2017(STAY) &

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FPA-PMLA-1772/MUM/2017

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Ms. Kiran Mazumdar ... Appellant/Applicant

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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 Sudhir Nandrajog, Sr. Advocate and Shri Arshdeep Singh, Advocate Ms. Meena Venugopal, Ms. Prija Jha & Mr. 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-3464/MUM/2017(STAY), MP-PMLA-3465/MUM/2017(STAY) & FPA-PMLA-1772/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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The appellant was not arrayed in the FIR or charge sheeted. She was not involved in schedule offence. No prosecution complaint is pending against her.

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The few facts are that the appellant is presently residing at Glenmore, Survey No. 58, Goolimangala Village, Sarjapura Hobli, Anekal Taluk, Bengaluru.

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FPA-PMLA-1772/MUM/2017

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Page 1 of 26

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She is the Chairman and Managing Director of Biocon Limited. Biocon Limited is Asia‟s premier biopharmaceutical company.

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The appellant is a well renowned business woman. She is popular in work of Biotechnology Sector and has earned numerous national awards including prestigious Padma Shree in 1989 and Padma Vibhushan in 2005 from the Government of India.

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The appellant desirous of owning a residential property in Bangalore 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.

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The case of the appellant is that she entered into discussions and negotiations with Respondent No.5 for the purchase of flat(s)/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 of all the part and parcel of the said land (including the existing structure thereat) where the said project was being developed. The 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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FPA-PMLA-1772/MUM/2017

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Page 2 of 26

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After discussions and negotiations, the appellant entered into six agreements with Respondent No. 5 & 8 for the purchase of the one apartment bearing No. 24A in the said project (hereinafter collectively referred to as “said flat”) and the proportionate undivided area in the said land. The following agreements were executed among the appellant, Respondent Nos. 5 and 8 (hereinafter collectively referred to as the “said agreements”):

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a. Two Agreements to sell dated 05.04.2012 for the said flat;

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b. Construction Agreements dated 05.04.2012 for the said flat.

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By the aforesaid Agreement to Sell, the appellant acquired under such Agreement, 8321/767870^th undivided right, title and interest and ownership in the said Lands (hereinafter referred to as „the proportionate undivided area in the said land‟) and vide the aforesaid Construction Agreement, the appellant acquired the right to get the said flat constructed by the Respondent No. 5 and

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Copies of the aforesaid Agreements dated 05.04.2012 are filed along with the appeal. The respondent nos. 5 and 6 are arrayed in the appeal are United Brewers (Holding) Ltd and M/s. Prestige Estate Project Pvt. Ltd. (who were defendant no.4 and 7 in the complaint). Vijay Mallya was arrayed as defendant no. 2 in the complaint.

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The consideration payable by the appellant towards the Agreement to sell dated 05.04.2012 was Rs.5,23,54,875/- (Rupees five crores twenty three lakhs fifty four thousand eight hundred seventy five only) towards the proportionate undivided area in said land; and the consideration payable by the appellant towards the Construction Agreement dated 05.04.2012 was Rs.20,88,45,125/(Rupees twenty crore eighty eight lakhs forty five thousand one hundred twenty five only) towards construction of flat. The entire total consideration payable by the appellant towards acquiring the legal and complete right, title and interest of the said flat and the proportionate undivided area in the said land was Rs.26,12,00,000/- (Rupees twenty six crore twelve lakh only).

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As per the said Agreements, the appellant paid the entire purchase consideration from time to time as per details set out hereunder:-

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Sl. No.	Cheque No.	Date	Drawn on	Amount	Details of Receipts issued by Respondent No.5
1.	704165/ 704166	April 5, 2012	HSBC	15,000,000	UBHL/KFT/004 Dt.23.09.2013
2.	011887	Sept. 1, 2012	HSBC	43,545,635	UBHL/KFT/002 Dt.12.09.2013 and UBHL/KFT/004 Dt.23.09.2013
3.	066208	March 12, 2013	HSBC	43,545,635	UBHL/KFT/004 Dt.23.09.2013
4.	096567	Sept. 02, 2013	HSBC	43,110,175	UBHL/KFT/004 Dt.23.09.2013
5.	131197	February 24, 2014	HSBC	43,110,175	UBHL/KFT/007 Dt.28.02.2014
6.	745088	August 27, 2014	HSBC	43,110,175	UBHL/KFT/013 Dt.24.09.2014
7.	171592	February 28, 2015	HSBC	28,187,105	UBHL/KFT/017 Dt.09.03.2015

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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), it was represented to the appellant, that the Respondent No. 9 was a creditor of Respondent No. 5. The property was mortgaged with the bank, therefore, the entire payment was made directly to the bank as per details mentioned in earlier para. The entire purchase consideration was remitted through normal/legal banking channels from the overseas account of the appellant. It is claimed that 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 flat and the proportionate undivided area in the said land and acquired rights in the said flats, inter alia, highlighted in the Agreement to Sell dated 05.04.2012.

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Copies of the Receipts dated 12.09.2012, 23.09.2013, 28.02.2014, 24.09.2014 and 09.03.2015 and copies of cheques issued by Respondent No. 5 in respect of payment of purchase consideration by the appellant are filed along with the appeal.

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From the documents placed on record, it is evident that the appellant paid the entire purchase consideration from her personal bank account. She has no family relation whatsoever with any of the respondents named above. Even the purchase consideration part of, directly or indirectly, any transaction(s) with the respondents named above. The appellant has filed confirmation issued by the bankers HSBC confirming the details of the cheques issued in favour of UB Holdings – HDFC Bank Escrow Account and cleared from her account.

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The respondent no. 9 bank had also issued a No Objection Certificate to the sale of the said flat, subject to the condition that the entire sale consideration is deposited into their escrow account. The No Objection Certificate dated April 4, 2012 of the respondent no. 9 is also filed.

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As already mentioned that during the period 5.4.2012 to 28.2.2015, entire sale consideration remitted by the appellant to HDFC Bank. FIR registered for predicate offence on 29.7.2015 against the accused persons Admittedly, the appellant was not named in the FIR. There is not even an allegation against the appellant in the FIR nor about link and nexus directly or indirectly as a result of criminal activity relating to a schedule offence.

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On the basis of FIR and allegation on 29.1.2016, ECIR No. ECIR/03/MBZO/2016 was registered on the basis of FIR. The appellant was not named in the ECIR. Admittedly, the appellant was not named in the ECIR. From a perusal of the PAO and the record of the Adjudicating Authority, she was not summoned nor any notice u/s 8(2) was issued.

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Provisional Attachment Order No. 11/2016 was passed on 11.6.2016. No role attributed to the Appellant in the PAO.

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Confirmation Order was passed by the Adjudicating Authority on 11.2.2016. There is no role attributed towards crime to the Appellant in the Confirmation Order. The said order has been challenged by the appellant

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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 matter of IDBI Loan of Rs. 900 Crore.

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In the impugned order, it was held by the respondent no. 1 prima facie that proceeds had been generated out of the criminal activities related to Scheduled Offences and that the same had been utilized by respondent no. 2 in inter alia servicing their existing debs and further that a significant amount there from had been siphoned out of India on false pretexts and on the basis of the aforesaid, respondent no. 1 also formed prima facie opinion that the respondent no. 2 and 5 had projected the proceeds of crime as untainted, thus committing the offence of Money Laundering defined under section 3 of PMLA.

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It is alleged on behalf of respondent no. 1 that the impugned provisional attachment was passed 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 of 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 purposes 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 (UBHL).

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20.1 In the appeal, oral arguments are addressed and written submission is also filed on behalf of respondent no. 1, the case in nut-shell is that the properties mentioned in the aforesaid Provisional Attachment Order have been provisionally attached under Section 5(5) of PMLA, 2002 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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20.2 Appellant has no locus standi to file the present appeal as appellant was neither the defendant before Adjudicating Authority nor has any rightful and legal claim.

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

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20.4 Agreements for the seven flats out of hundred of flats in Kingfisher were executed in spite of prohibition by way of Corporate guarantee executed in 2010 not to sell, create third party right given to the consortium of banks.

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20.5 The respondent during investigation found that the appellant was the director in one of the company UBL from 26.10.2009 onwards and taken due advantage by purchasing one of the flat in question in Kingfisher Towers.

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20.6 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. The appellant, therefore, must be aware about the said fact that the fraud committed by Vijay Mallya. The appellant did not care about it rather entered into an agreement dated 05.04.2012 after coming to know about the winding up petition and paid money between 2012-15, thus it shows that the present transaction was entered with a view to help Mr. Vijay Mallya, otherwise inspite of coming to know about the pendency of winding up petition and other action against Vijay Mallya, she would not have been paid the money.

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20.7 Agreement dated 05.04.2012, there is an arbitration clause and if the appellant has any grievances against Mallya she must invoke arbitration clause and merely by entering in to agreement that too unregistered she

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has no claim in attached property which is not even fully constructed, then how she can ask for possession or execution of sale deed.

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20.8 Now nothing is left in the present appeal in view of the decree dated 19.01.2017 is passed by the Debt Recovery Tribunal against these very assets including the flats in question directing KAL, Dr. Vijay Mallya and KFIL to jointly and severally pay the sum of Rs.6203,35,03,879.42 along with further interest at 11.5% yearly. Therefore, the said decree which has attained finality as such cannot be interfered.

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20.9 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 hunting.

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20.10 The UBHL has also filed the interlocutory application before Karnataka High Court prosing to sell the assets to repay the debts and in the list of assets UBHL has also included the present flat then how the appellant making any claim over it .

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20.11 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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20.12 During the course of investigation, it was observed that the appellant had entered into an “Agreement to Sell” to purchase a flat 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” 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. The towers have not yet been completely constructed. There is no sale deed entered into, nor the said agreement was registered with the Statutory Authority authenticating the genuinity of the said transaction.

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The counsel has referred the provision of Section 54 of the Transfer of

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Property Act, which very categorically states that –

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“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 change on such property”.

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22. Mr. Rajiv Awasthi has also referred the case of B Rama Raju Vs. Union of India & Ors. 2011 SCC Onlie AP 152, in which the constitutional validity of Section 5 and 8 of the PMLA was challenged, the Division Bench of Andhra High Court while rejecting the Writ Petition, observed 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 the transferor of such property to recover the value of such property”.

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23. And also the case of Suraj Lamp & Industries vs. State of Haryana & Ors. [(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 Section 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 this 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 registered instrument and an agreement of sale does not create any interest or charge on its subject matter”.

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It is submitted on behalf of respondent no. 1 that there is no Registered Sale Deed nor there is any handing over of the possession of the flat/property to the appellant since the building is still under construction. 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 Flat to the appellant. Page 9 of 26 FPA-PMLA-1772/MUM/2017

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However, there is no registered Sale Deed nor the appellant is in possession of the impugned property/Flat in the Kingfisher Tower. Thus, it appears that the appellant does not have any legal ground to claim any title or interest in the said property i.e. the flat or the land on which it is being constructed. Appellant therefore cannot claim any relief from the Appellate Tribunal. Thus, learned counsel appearing on behalf of respondent no. 1 has supported the impugned order and rely-upon the submission made by him as well as writtenargument.

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From the material available on record and as per submissions made on behalf of respondent no. 1, it appears very clearly that the appellant was the claimant of the ownership of apartment/Flat bearing number 24A, 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.).

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It has also come to record that the total purchase consideration for the purchase of the aforesaid Flat was Rs. 26,12,00,000/-. The entire purchase consideration was remitted through banking channels, from her personal bank account having funds from her earnings. Banker‟s certificate reflecting payments have been made from her account is annexed along with Affidavit filed on 09.07.2018. The entire purchase consideration was paid before the registration of the FIR pertaining to the predicate offence and the registration of the ECIR. The said factual position is available on record. It has also come on record that at the request of Respondent Nos. 5 and 8, the entire purchase consideration was 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. The „No-Objection‟ from HDFC Bank 4.05.2012 is filed as „A-6‟ of the Appeal.

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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

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Property in terms of the Proviso to Section 8(2), Prevention of Money Laundering Act, 2002 being interested/aggrieved party.

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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.

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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.

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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.

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It is argued by the appellant that she 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 her is a tainted amount or it was belonged to Vijay Mallya, as admittedly all the amount was paid through banking channel.

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

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“ 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:

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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.

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(2) The Adjudicating Authority shall, after –

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

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

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

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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:

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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.

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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 alleged claim 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 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.

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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 Page 12 of 26 FPA-PMLA-1772/MUM/2017

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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. The mandatory provision of Special Act line PML Act, 2002 cannot be ignored even different meaning cannot be given to the said provision.

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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 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.

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

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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

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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.

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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. The main allegation of the Respondent is that the Appellant was a Director in a company associated with the aforesaid companies appointed by Mr. Vijay Mallaya.

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In this regard the Appellant has filed a detailed Affidavit, alongwith documents, on 09.07.2018; the contents of the same may be read as under–

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i. The Appellant has no connection whatsoever with UBHL or M/s Kingfisher Airlines Ltd., which are the companies alleged to be involved in the FIR and the ECIR in the present case.

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ii. The Appellant has never been a Shareholder or Director in UBHL or KAL, at any point of time. The Appellant has no other direct, or indirect interest, financial or otherwise, in UBHL or KAL.

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iii. The Appellanthas never received any remuneration or any pecuniary advantage from UBHL or KAL, at any point of time.

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iv. The Appellant hasbeen an „Independent Director‟ on the Board of M/s United Breweries Ltd. (“ UBL ”), which is a public listed company, since 26.10.2009. Further, to the best of the Appellant‟s knowledge, UBL has neither been named in the FIR nor the ECIR. As per the Annual Report of UBL for FY 2016-17, which is available in the public domain, UBL has not received any communication from the Respondent ED in relation to the FIR and/or the ECIR in question.

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v. The fact that the Appellant is an Independent Director,by itself reflects that she has no relation whatsoever with UBL or any of its associate companies. Reliance is placed on section 149, Companies Act, 2013.

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vi. That, as an Independent Director, the Appellant received „sitting fee‟ and commission over the years, which is permissible under the provisions of the Companies Act, 2013. It is reiterated and clarified that the Appellant has not received any other amounts/pecuniary benefits, in any manner whatsoever, from UBL. Further, the amounts received by the Appellant can be confirmed from the Annual Reports of UBL, which are available in the public domain.

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Relevant extracts of the Annual Reports of UBL for the Financial Years 2009-10 to 2016-17 are already filed with the Appellant‟s aforesaid Affidavit.

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vii. It is further submitted that the Appellant was been appointed as an Independent Director in view of her qualification and experience (and for no other reason). Reliance is placed on pages 10, 15, 19, 23, 34, 38 of the Affidavit filed on 09.07.2018.

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viii. It is further submitted that the Appellant has also been an Independent Director of M/s Infosys Ltd., a public limited company and a global leader in the IT business and in various other companies, which are completely unrelated to the UBHL and KAL.

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Se ction 149(6) (a) to (d) of the Companies Act, 2013 says that

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“(a) who, in the opinion of the Board, is a person of integrity and possesses relevant expertise and experience;”

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“(b) (i) who is or was not a promoter of the company or its holding, subsidiary or associate company;

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(ii) who is not related to promoters or directors in the company, its holding, subsidiary or associate company;”

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“(c) who has or had no pecuniary relationship with the company, its holding, subsidiary or associate company, or their promoters, or directors, during the two immediately preceding financial years or during the current financial year;

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“(d) none of whose relatives has or had pecuniary relationship or transaction with the company, its holding, subsidiary or associate company, or their promoters, or directors, amounting to two per cent. or more of its gross turnover or total income or fifty lakh rupees or such higher amount as may be prescribed, whichever is lower, during the two immediately preceding financial years or during the current financial year;”

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It appears to me that the applicant was not active director of the company. She was merely an independent director and used to visit the company in the meeting conducted against the reasonable charges in view of her qualification and experience. She was not handling any business of any company of Vijay Mallya or of any activities. Hence, the arguments of the respondent no. 1 are without any substance. It has also come on record that she is also independent director of other well-known companies in Bangalore. It is not the case of respondent no. 1 that she has earned profits of any company of Vijay Mallya at any point of time or she was promoter and shareholder of any of his company.

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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.

¶129

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 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.

¶130

Many of contentions raised in the written submissions are not part of the pleadings of respondent no.1. Some of the plea have been taken first time in the written-submissions.

¶131

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 flat was attached without any notice and hearing of the appellant nor any opportunity was given to raise her stand.

¶132

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¶134

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 she 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.

¶135

The respondent‟s contention that the flat is not constructed and possession has not been handed over. It is stated by the appellant who specifically made the statement that the subject-property/Flat has 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. It is even prima facie established by the respondent no. 1 that she had the knowledge or the respondent no. 1 has informed her.

¶136

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.

¶137

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.

¶138

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.

¶139

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¶140

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¶141

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 2015 and the prayer in the winding up petition was allowed in 2017 only.

¶142

The respondent no. 1 therefore cannot be allowed to presume that the agreements were executed in order to have the accused and with mala fide intention.

¶143

In the present case, the Agreement to Sell entered into by the Appellant with M/s UBHL is dated 05.04.2012 (i.e. prior to even the initiation of the winding-up proceedings) and the entire purchase consideration was duly paid by 28.02.2015 ( i.e.much prior to the subject Provisional Attachment Order). It is not even the Respondent ED‟s case that the purchase of the subject Property vide inter alia the Agreement to Sell dated 05.04.2012 is not an arms-length transaction.

¶144

54. 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.

¶145

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

¶146

“ 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

¶147

FPA-PMLA-1772/MUM/2017

¶148

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¶149

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.”

¶150

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 :

¶151

“ 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.”

¶152

56. 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.

¶153

57. 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

¶154

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

¶155

“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

¶156

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¶157

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¶158

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 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).

¶159

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:

¶160

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

¶161

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:

¶162

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;

¶163

c. O.S.A. No. 5/2017; and

¶164

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

¶165

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:

¶166

FPA-PMLA-1772/MUM/2017

¶167

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¶168

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

¶169

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

¶170

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 she paid the complete consideration through duly documented legal banking channels, even prior to the date of registration of the FIR or the ECIR.

¶171

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.

¶172

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

¶173

It is true that the appellant has filed the following two applications in O.S.A. No. 5/2017 before the Hon‟ble Karnataka High Court:

¶174

a. Interlocutory Application bearing No. 11 of 2017 seeking impleadment in O.S.A. No. 5/2017; and

¶175

b. Interlocutory Application bearing No. 8 of 2017 seeking directions from the Hon‟ble Karnataka High Court to UBHL and the Official Liquidator to execute the Sale Deed(s) in the Appellant‟s favour pursuant to the Agreement to Sell dated 05.04.2012.

¶176

The above two applications are pending before the Hon‟ble High Court of Karnataka and are to be decided by the Hon‟ble High Court of Karnataka. This

¶177

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¶178

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¶179

tribunal shall never pass an order by-passing the order of execution of sale deed or to pass any direction to hand over the possession to the appellant as this tribunal has no jurisdiction of the same.

¶180

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

¶181

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.

¶182

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.

¶183

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.

¶184

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.

¶185

FPA-PMLA-1772/MUM/2017

¶186

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¶187

In the present case, HDFC bank had given „No-Objection‟ in respect of the subject-property which is placed on record at pg. 297 of the Appeal. The Property was mortgaged with HDFC Bank and not with the banks who are concerned with MDRA and the Corporate Guarantee. Since the entire payment was received by HDFC bank, the flat in question was released from the condition of mortgaged property. The contents of the said „No objection‟ issued reads as under:-

¶188

“HSBC

¶189

To Date: 18 February 2007

¶190

Ms. Kiran Mazumdar Biocon India Pvt. Ltd. 20^th KM Hosur Road Hebbagudi Bangalore-560100

¶191

Sir/Madam

¶192

Sub: Cheque favouring details Ref: 071-060123-006

¶193

We confirm that Ms. Kiran Mazumdar has been maintaining the captioned account with us since 08 Aug 1994

¶194

Please find the cheques issued in favour of United Breweries (Holdings) limited, HDFC Bank Escrow a/c: 00090350002126 as enclosed.

¶195

Sl. No.	Cheque No.	Cheque Date	Clearing Date	Debit Amount
1	704165	05Apr2012	09Apr2012	3,006,597
2	704166	05Apr2012	09Apr2012	11,993,403
3	011887	01Sept 2012	07Sept 2012	43,545,635
4	066208	12Mar2013	16Mar2013	43,545,635
5	096567	02 Sept 2013	03 Sept 2013	43,11,0175
6	131197	24 Feb 2014	03Mar2014	43,110,175
7	745088	27 Aug 2014	26 Sept 2013	43,110,175
8	171592	28 Feb 2015	11 Mar 2015	28,187,105

¶196

This letter is being issued at the specific request of the customer without any risk or responsibility on the part of the bank or any of its signing officials.

¶197

Assuring you of our best services

¶198

For the Hongkong and Shanghai Banking Corporation Limited

¶199

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¶200

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¶201

Sd/-

¶202

Manager Pallavi Kulkarni Emp No. 195082 PPRM Bangalore

¶203

The Hongkong and Shanghai Banking Corporation Limited”

¶204

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

¶205

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.

¶206

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

¶207

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¶208

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¶209

present Appeal is limited to the determination as to whether the subject Property are involved in money-laundering or not.

¶210

In the present case, the Agreement to Sell entered into by the appellant with M/s. UBHL is dated 05.04.2012 (i.e. prior to even the initiation of the winding up proceedings) and the entire purchase consideration was duly paid by 28.02.2015 (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 05.04.2012 is an arms-length transaction.

¶211

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.

¶212

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:-

¶213

“ 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.

¶214

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.”

¶215

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

¶216

the claimant in the flat. 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

¶217

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¶218

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¶219

question of link and nexus in the criminal activities directly or indirectly does not arise.

¶220

As far as the impugned order dated 11.2.2016 is concerned, the said order is not sustainable in law and the facts of the present case. The same is set-aside against the appellant with regard to flat in question. The provisional order is also quashed accordingly by allowing the appeal.

¶221

However, it is clarified that this tribunal has decided the appeal pertaining to the order passed on the attachment of flat 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 flat 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 her favour, shall not create third party interest directly or indirectly.

¶222

No costs.

¶223

(Justice Manmohan Singh) Chairman

¶224

New Delhi, 13th August, 2018. „skb‟

¶225

FPA-PMLA-1772/MUM/2017

¶226

Page 26 of 26

FPA-PMLA-1772/MUM/2017 of Ms. Kiran Mazumdar v/s The Deputy Director, Directorate of Enforcement, Mumbai

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FPA-PMLA-1772/MUM/2017 of Ms. Kiran Mazumdar v/s The Deputy Director, Directorate of Enforcement, Mumbai

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