Allowed

FPA-PMLA-1892/LKW/2017 of Icici Bank Limited v/s The Joint Director Directorate of Enforcement, Lucknow

ATFP14 Dec 2018FPA-PMLA-1892/LKW/2017

Case brief

AI extract

What is this about?

The Appellate Tribunal allowed the appeal against an order confirming provisional attachment of Fixed Deposit Receipts held by ICICI Bank for the NKG Infrastructure Ltd. account. The court held the bank was not involved in the scheduled offence, the attachment lacked legal basis, and the matter was resolved by an undertaking for bail security.

What did the court decide?

Provisional attachment of the fixed deposit receipts is released; appeal and pending miscellaneous petitions are disposed of.

FPA-PMLA-1892/LKW/2017 of Icici Bank Limited v/s The Joint… — Banking and Recovery | ATFP (2018)

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APPELLATE TRIBUNAL FOR SAFEMA, FEMA, PMLA, NDPS & PBPT ACT AT NEW DELHI

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MP-PMLA-4017/LKW/2017 (MISC) FPA-PMLA-1892/LKW/2017

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ICICI Bank Limited … Appellant Versus

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The Joint Director Directorate of Enforcement, Lucknow … Respondent

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Advocates/Authorized Representatives who appeared

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For the appellant	: Shri Madhav Khurana, Advocate
For the respondent	: Shri Nitesh Rana, Advocate
CORAM
JUSTICE MANMOHAN SINGH	: CHAIRMAN
SHRI G.C. MISHRA	: MEMBER

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ORDER 14.12.2018

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FPA-PMLA-1892/LKW/2017

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1. The above-named Appellant, has filed the present Appeal under Section 26 of the Prevention of Money-Laundering Act, 2002, (hereinafter referred to as the “ Act ”) against Order dated 30.06.2017 passed by the Adjudicating Authority in O.C. No. 684/17 titled “Enforcement Directorate V/s Yadav Singh & Ors” (hereinafter referred to as the “ Impugned Order ”) by which the Adjudicating Authority has confirmed the Provisional Attachment Order No. 01/2017 dated 16.01.2017 with respect to, interalia ,38 Fixed Deposit Receipts (“ FDRs ”) issued by ICICI Bank Ltd., K-1, Senior Mall, Sector – 18 in the name of NKG Infrastructure Ltd. for a sum of Rs. 4,52,00,000/- (Rupees four crores fifty two lacs only).

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FPA-PMLA-1892/LKW/2017

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Page 1 of 12

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It is the admitted position that the Appellant is not in any manner whatsoever connected with the commission of the alleged scheduled offence committed by NKG Infrastructure Ltd or any of its directors. No part of Rs. 4,52,00,000/- (Rupees four crores fifty two lacs only) kept in the form of FDRs by NKG Infrastructure Ltd with the Appellant are proceeds of crime.

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It is contended by the appellant that the amount of Rs. 4,52,00,000/- (Rupees four crores fifty two lacs only) kept in the form of FDRs is a part of legitimate banking transactions between the Appellant and NKG Infrastructure Ltd. and forms part of security retained by the Appellant for monies advanced by the Appellant to or on behalf of NKG Infrastructure Ltd.pursuant to the execution of the transaction documents executed between the Appellant and NKG Infrastructure Ltd.

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The Appellant is a public listed company incorporated under the Companies Act, 1956 and a banking company within the meaning of the Banking Regulation Act, 1949, holding the money of the general public in trust. The Appellant, as a part of its regular banking business for Corporates, has been providing financial assistances to NKG Infrastructure Ltd since 2006. The banking facilities provided by the Appellant to NKG Infrastructure Ltd include but is not limited to, providing of various working capital facilities. The said working capital facilities include both “ Fund Based Facilities ” and “ Non-Fund Based Facilities ”. The Fund Based Facilities means and includes Cash Credit facility and Non Fund Based Facilities means and includes Performance/Financial Guarantees and Letter of credit.

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FPA-PMLA-1892/LKW/2017

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Page 2 of 12

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4.1 In 2010, NKG Infrastructure Ltd. through its officers/directors had approached the Appellant, Central Bank of India, Axis Bank, Corporation Bank and State Bank of India (“ SBI ”) for sanction of loans to meet its working capital requirements. In a meeting held on 28.05.2010 between the Appellant, the aforementioned Banks and officers of NKG Infrastructure Ltd., it was resolved by all that the Appellant and the aforementioned Banks would form a consortium to finance the working capital requirements of NKG Infrastructure Ltd. In the said meeting it was also resolved that the Lead bank would be SBI and that contribution of each bank including the Appellant would

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be as under:

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S.NO	Name of Bank	% of	Sanct	ioned (In	Crore)
		Shares	Fund Based	Non- Fund based	Total
1.	State Bank of India	50.00	140.00	550.00	690.00
2.	Syndicate Bank	3.62	20.00	30.00	50.00
3.	AxisBank	17.03	20.00	195.00	235.00
4.	ICICI Bank	25.00	70.00	275.00	345.00
5.	Corporation Bank	4.35	10.00	50.00	60.00
Total		100.00	280.00	1100.00	1380.00

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It is alleged by the appellant that though the appellant has had banking relationship with NKG Infrastructure Ltd since 2006, the present set of limits enjoyed by the latter can be traced to the year 2010. (Copy of the Minutes of Meeting held on 28.05.2010 is filed.

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4.2 Pursuant to the formation of the working capital consortium, on 25.06.2010, the Appellant issued a Credit Arrangement Letter to NKG Infrastructure Ltd., recording terms and conditions on

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FPA-PMLA-1892/LKW/2017 Page 3 of 12

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Page 3 of 12

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which it was granting credit facilities to NKG Infrastructure Ltd. As per the terms of the said credit arrangement letter, for all Financial and Performance Guarantees issued in relation to Non Fund Based Facilities by the Appellant on behalf of NKG Infrastructure Ltd., the latter would have to deposit a sum of 7.5% of the Financial/Performance Guarantee with the Appellant Bank. Further, the cash margin of 10.0% was stipulated for Letter of Credit facility. (Copy of Credit Arrangement Letter dated 25.06.2010 is filed.

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4.3. On 27.09.2011, the Appellant issued another Credit Arrangement Letter to NKG Infrastructure Ltd. recording terms and conditions on which it was granting credit facilities to NKG Infrastructure Ltd. As per the terms of the said credit arrangement letter, for all Financial Guarantee, Performance Guarantees and Letter of Credit issued in relation to Non Fund Based Facilities by the Appellant on behalf of NKG Infrastructure Ltd., the latter would have to deposit a sum of 5% of the Financial/Performance Guarantee/ Letter of Credit as security with the Appellant. (Copy of Credit Arrangement Letter dated 27.09.2011 is filed.

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4.4 Vide Credit Arrangement Letter dated 29.03.2013, the credit facilities available to NKG Infrastructure Ltd. were renewed at a reduced level, i.e. Rs. 70,00,00,000/- (Rupees seventy crores only) towards cash credit limit and Rs. 2,25,00,00,000/- (Rupees two hundred and twenty five crores only) towards non-fund based limits. The cash margin/ security deposit towards Financial/Performance Guarantees/ Letters of Credit issued by the Appellant was retained at 5%.

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FPA-PMLA-1892/LKW/2017

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Page 4 of 12

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4.5 On 26.08.2013, the Appellant and the other Banks forming a part of the Consortium and NKG Infrastructure Ltd. entered into an “Inter Se Agreement” for inter-alia securing the repayment of the credit facilities availed of by NKG Infrastructure Ltd. under the Working Capital Consortium Agreement.

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4.6 Vide Credit Arrangement Letter dated 26.06.2014, the credit facilities available to NKG Infrastructure Ltd. were renewed at a reduced level, i.e. Rs. 57,50,00,000/- (Rupees fifty seven crores fifty lacs only) towards cash credit limit and Rs. 2,25,00,00,000/(Rupees two hundred and twenty five crores only) towards nonfund based limits. The cash margin/security deposit towards Non fund based facilities availed by NKG Infrastructure Ltd. from the Appellant was retained at 5%.

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4.7 On 08.10.2015 the Directorate of Enforcement, Lucknow Zonal Office, Lucknow (hereinafter referred to as “ Respondent No. 1 ”) registered a Case vide ECIR/04/PMLA/LKZO/2015 under the provisions of PMLA, 2002 on the basis of FIR No. RC/DST/2015/A/0004 dated 30.07.2015 and the Charge Sheet No. 02/2016 dated 15.03.2016 filed by CBI, STF, New Delhi against Yadav Singh, Ramendra, Devi Ram Arya, Rajeev Kumar, J.P.Singh, R.D. Sharma, Om Pal Singh, Kusum Lata, Vinod Kumar Goel, Pradeep Garg, Pankaj Jain, M/s Tirupati Constructions Co. , M/s NKG Infrastructure Ltd and M/s JSP Constructions Co. for the alleged commission of offences U/s 120B/420/471 IPC R/w S. 13 Prevention of Corruption Act, 1988.

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FPA-PMLA-1892/LKW/2017

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Page 5 of 12

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4.8 Vide Credit Arrangement Letter dated 04.12.2015, the credit facilities available to NKG Infrastructure Ltd. were renewed at the same level, i.e., Rs. 57,50,00,000/- (Rupees fifty seven crores fifty lacs only) towards cash credit limit and Rs. 2,25,00,00,000/(Rupees two hundred and twenty five crores only) towards nonfund based limits. The cash margin/security deposit towards Financial/Performance Guarantees/Letter of Credit issued by the Appellant was retained at 5%.

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4.9 Vide Credit Arrangement Letter dated 02.03.2017, the credit facilities available to NKG Infrastructure Ltd. were renewed at the same level, i.e. Rs. 57,50,00,000/- (Rupees fifty seven crores fifty lacs only) towards cash credit limit and Rs. 2,25,00,00,000/(Rupees two hundred and twenty five crores only) towards nonfund based limits. The present proportion of the Appellant in the working capital consortium is 25.0%. The cash margin/security deposit towards Financial/Performance Guarantees/Letters of Credit issued by the Appellant was retained at 5%.

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4.10 As per the records, NKG Infrastructure Ltd. was awarded the work of conversion of Overhead LT 11 KV.33 KV line into underground system from Electrical sub Station (ESS) Sec. 19, Noida to Sector 12, 22, 56, T Point on MP-1 Road, Noida Under Contract bond No. 375 dated 08.12.2011. For this project NKG Infrastructure Ltd. furnished two Bank Guarantees to the Noida Authority which had been issued by The Appellant. The details of the Bank Guarantees are as under:

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S. No.	BankGuarantee No.	Amount(Rs.)	Status
1	0031BG00065216	1,74,45,000/-	Closed on 26.09.2016.
2.	0031BG00012015	1,74,45,000/-	Closed on 12.01.2016.

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FPA-PMLA-1892/LKW/2017

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Page 6 of 12

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(Copy of the Bank Guarantees are filed).

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4.11 As per the terms of the Credit Arrangement letters executed between NKG Infrastructure Ltd. and the Appellant, the former deposited with the Appellant a sum of Rs. 18,36,252/- (Rupees eighteen lacs thirty six thousand two hundred and fifty two only) in the form of two FDRs as security for the aforesaid Bank Guarantee issued by the Appellant. The details of the FDRs are as under:

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S. No.	FDR No.	Amount	Status
1	003110059138	8,99,350.00	Closed
2.	003114556777	9,36,902.00	Closed

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(Copy of the Account Ledger Inquires of the said FDRs are hereto filed).

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4.12 On 13.01.2017, the Appellant received a notice from the Respondent No. 1 stating that the latter was conducting an investigation into the allegations made in the RC registered by the CBI. In the said notice it was also states that as NKG Infrastructure Ltd. had a bank account with the Appellant. As such The Appellant was directed to freeze an amount of Rs. 4,52,00,000/- (Rupees four crores fifty two lacs only) kept in the form of FDRs by NKG Infrastructure Ltd. are filed.

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On 16.01.2017 the Provisional Attachment Order in OC. 684/17 was passed. (Copy of Provisional Attachment Order is annexed hereto and marked as Annexure-A15 ).

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FPA-PMLA-1892/LKW/2017

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Page 7 of 12

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On 30.01.2017, the Appellant sent a reply to the aforesaid notice, sent by the Complainant and informed the latter that though the Appellant had frozen FDRs worth Rs. 4,52,00,000/- (Rupees four crores fifty two lacs only). However, the said FDRs lying with the Appellant were actually lying as security with The Appellant in relation to the sanctioned Non Fund Based Facilities availed of by NKG Infrastructure Ltd. The Appellant also stated that the FDRs presently lying with the Appellant had originated from the Cash Credit account of NKG Infrastructure Ltd. Through the Cash Credit facility, the Appellant provides funds to NKG Infrastructure Ltd. for working capital management which in turn is from funds mobilized by the Appellant from general public and account holders. Therefore the money from which NKG Infrastructure had made the FDRs including the FDRs of Rs. 4,52,00,000/- (Rupees four crores fifty two lacs only was actually from the money of the Appellant itself.(Copy of Reply dated 30.01.2017 and Chart showing origin of money for the said FDRs are filed.

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On 18.03.2017 the Appellant received a Notice dated 23.02.2017 directing the Appellant to appear before the Adjudicating Authority.

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Between 04.04.2017 and 08.06.2017 the Appellant and other parties filed replies and argued their case before the Adjudicating Authority. On 16.05.2016, the Appellant filed its reply before the Adjudicating Authority praying that the Provisional Attachment Order No. 01/2017 in so far as it relates to the attachment of the amount of Rs. Rs. 4,52,00,000/- (Rupees four crores fifty two lacs only)be not confirmed.

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FPA-PMLA-1892/LKW/2017

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Page 8 of 12

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On 07.07.2017 the Appellant received a copy of the Order dated 30.06.2017 vide which the Adjudicating confirmed the Provisional Attachment Order No. 01/2017 passed by the Joint Directorate of Enforcement, Lucknow.

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The Impugned Order has been passed by the Adjudicating Authority is challenged before us.

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We have heard the counsel for both parties we are of the opinion that the Impugned Order suffers from gross non-application of mind because the Adjudicating Authority failed to appreciate that there was no basis or need to confirm the order of provisional attachment since even the provisional attachment itself was bad in law. As per S. 5(1)(a) and (b) of PMLA two requirements must be satisfied before an order for provisional attachment can be passed, i.e., firstly the person against whom such an order is going to be passed must be “in possession of proceeds of crime” and Secondly “ such proceeds of crime are likely to concealed, transferred or dealt with in a manner which will result in frustrating any proceedings relating to confiscation of such proceeds of crime” . Therefore unless and until the above two ingredients are satisfied no order of provisional attachment could have been passed, let alone an order confirming the same.

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In nut-shell, it is sated that the appellant ICICI Bank Limited who is Defendant no. 17 in the O.C. No. 684/2017 has filed the appeal against the order dated 30^th June, 2017. One Mr. Pradeep Garg who is involved in scheduled offence in the matter against him prosecution complaint is also pending. Mr. Pradeep Garg is Defendant no. 3 in said O.C. The respondent has seized the FDR then the appellant has received the notice dated 13^th January, 2017 during the course of the investigation. The appellant was FPA-PMLA-1892/LKW/2017 Page 9 of 12

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directed to freeze the amount of Rs. 4.52 Crores kept in the form of FDR by NKG Infrastructure Ltd. While seeking the bail from the Supreme Court by Shri Pradeep Garg in SLP No. 8838/2018. The following order was passed:-

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“Upon hearing the Counsel the court made the following O R D E R

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Delay Condoned. Issue Notice, returnable in two weeks. Tag with SLP (Crl.) No. 1990/2018.

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In the meantime, the petitioner is granted interim bail subject to the condition that he deposits the sum of Rs. 4.52 crores in the Court, which offer he had made before the High Court, in addition to the terms and condition which may be imposed by the trial court.

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The aforesaid amount of Rs. 4.52 crores may be deposited in short term fixed deposit in a nationalized Bank initially for a period of three months.”

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It is specifically mentioned in the order that Shri Pradeed Garg shall deposit the said amount before the Special Court in addition to the terms and conditions which may be imposed by the trial court.

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The learned counsel appearing on behalf of Shri Pradeep Garg has informed that the said amount has been deposited with the Special Court not only Pradeep Garg has also given of undertaking before this Tribunal that the said amount has been deposited before the Special CBI Court, Ghaziabad who is handling the scheduled offence matter. Shri Pradeep Garg is on bail. The undertaking has been given by Shri Pradeep Garg that amount deposited in the Special Court has also been secured as proceeds of crimes. The said amount is not lying in the FDR. Copy of the same is placed on record.

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FPA-PMLA-1892/LKW/2017

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Page 10 of 12

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Without prejudice, the said FDR with the Special CBI Court be treated as property attached at proceeds of crime under the provisional attachment order for the purpose of adjudication as per law.

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The undertaking has been given till the trial is over under the operation of law that Shri Pradeep Garg shall not withdraw the amount and FDR shall be renewed from time to time till the trial is over. The same is duly accepted.

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We have adjourned the matter two-three times despite of copy of undertaking served to the respondent. The respondent is aware about the order passed by Hon‟ble Supreme Court of India.

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We are inclined to accept the undertaking given by Shri Pradeep Garg by allowing the appeal.

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With regard to the merit of the case as far as amount deposited by Shri Pradeep Garg before Special Court the said amount shall be treated as proceeds of crime without prejudice under the Prevention of Money Laundering Act, 2002.

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With regard to the attachment of the said amount with the appellant bank is concerned the said amount is released till the conclusion of the criminal trial before the learned Special Court under Prevention of Money Laundering Act, 2002 as the bank is not involved in any offence whose money is clean and untainted.

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The appeal and pending M.P‟s are disposed of.

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FPA-PMLA-1892/LKW/2017

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Page 11 of 12

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Copy of the order be given „dasti‟ to both the sides.

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(Justice Manmohan Singh) Chairman

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(G.C. Mishra)

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Member

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New Delhi, 14^th December, 2018

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„D‟

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FPA-PMLA-1892/LKW/2017

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FPA-PMLA-1892/LKW/2017 of Icici Bank Limited v/s The Joint Director Directorate of Enforcement, Lucknow

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FPA-PMLA-1892/LKW/2017 of Icici Bank Limited v/s The Joint Director Directorate of Enforcement, Lucknow

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