Disposed

FPA-PMLA-1998/HYD/2017 of Icici Bank v/s The Joint Director Directorate of Enforcement, Hyderabad

ATFP29 Aug 2018FPA-PMLA-1998/HYD/2017

Case brief

AI extract

What is this about?

Appeal against provisional attachment of mortgaged property. Tribunal noted failure to issue notice to bank under PMLA. Stayed attachment pending appeal hearing, held delay condonable due to official inaction, and assigned costs.

What did the court decide?

Delay of 54 days condoned upon payment of Rs. 20,000; issue notice for reply; stay attachment pending appeal hearing.

FPA-PMLA-1998/HYD/2017 of Icici Bank v/s The Joint Director… — Money Laundering | ATFP (2018)

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APPELLATE TRIBUNAL, PREVENTION OF MONEY LAUNDERING ACT AT NEW DELHI

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MP-PMLA-3920/HYD/2017 (Stay) FPA-PMLA-1998/HYD/2017

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ICICI Bank ` … Appellant Versus The Joint Director Directorate of Enforcement, Hyderabad … Respondent

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Advocates/Authorized Representatives who appeared

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For the appellant : Ms. Richa Narain, Advocate

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For the respondent no. 1	: Shri Rajiv Awasthi, Advocate
For the respondent no. 2 & 3	: Shri Gaurav Natrajan, Advocate
CORAM
JUSTICE MANMOHAN SINGH	: CHAIRMAN
	ORDER 29.08.2018

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FPA-PMLA-1998/HYD/2017

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The appeal has been filed against the Order dated 12.08.2010 passed by the adjudicating authority in O.C. no. 47/2010.

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By the said impugned order, 3 properties were attached. The present appeal is only pertaining to one of the properties i.e. “plot at Survey No. T. Sy. No. 3(P) , 4(P), 5(P), 6, 7(P) Plot No.20, Nandagiri Hills Layout, Ward No.9, Block-D, Shaktipet Village, Jubilee Hills, Hyderabad registered vide Document No. 3605/06 by Sub Registrar, Hyderabad (South) measuring 334.88 Square Yards having a value of Rs.1,66,10,048/- (Rupees One Crore Sixty Six Lakhs Ten Thousand Forty Eight only)’.

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Along with the appeal, the appellant has also filed an application under Rule 3(4) of the Prevention of Money Laundering (Appeal) Rules, 2005 for condonation of delay of 54 days in filing of appeal under Section 26 of the Prevention of Money Laundering Act, 2002.

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FPA-PMLA-1998/HYD/2017

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Page 1 of 7

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The notice of this application was issued and time was granted to file the file reply by the respondents, however, no reply has been filed by the respondents.

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Mr. Rajiv Awasthi appears on behalf of the respondent no. 1 submits that although in the application it is mentioned that there is a delay of 54 days in filing the present appeal, however, according to his client, the delay is more than 7 years as the impugned order was passed on 12.08.2010. It is stated by him that on 31.8.2010, the appellant issued a Notice under section 13(2) of SARAESI Act, 2002 to respondent no. 2 as the latter had defaulted on the payment of the loan in respect of Property. On 20.9.2010, respondent no. 2 replied to the notice of the appellant vide which it was mentioned that for the first time the property had been attached by the respondent no. 1, thus, the appellant was aware that the properties were attached by the respondent no. 1. Therefore, the knowledge has to gether from the date of serving the reply and not from the date of 22.8.2016 when the appellant was made aware about the provisional attachment order as well as confirmation order. Mr. Awasthi states, it was the duty of the appellant to approach the office of respondent no. 1 and to inform that it was mortgaged property. Since the appellant has failed to do so, the present application filed by the appellant is misconceived and the same is liable to be dismissed. Similar argument is addressed by the learned counsel appearing on behalf of respondent no. 2 & 3.

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I have gone through the application filed by the appellant. The relevant dates mentioned in the application are read in paras 2.1 to 2.9, which are reproduced below:-

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2.1 On 31.8.2010 the Appellant through its counsel sent a notice U/s 13(2), SARFAESI Act as Respondent no.2 and 3 had defaulted in repayment of the home loan advanced by the Appellant.

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2.2 On 20.09.2010, Respondent Nos. 2 and 3 replied to the notice U/s 13(2), SARFAESI Act informing the Appellant Bank for the first time about the Provisional Attachment Order No. 02/2010 dated 31.03.2010 and the attachment of the Property by Respondent No. 1.

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FPA-PMLA-1998/HYD/2017

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Page 2 of 7

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2.3 Consequently, the Appellant Bank approached Respondent No. 1 to inquire about the status of the Property and was informed that the said matter was under investigation and the Appellant would be intimated further. Respondent no. 1 also suggested, in the alternate, that the Appellant Bank may make a representation before the Criminal Court where the criminal case was pending against Respondent No.2. However, Respondent No. 1 did not convey further information to the Appellant.

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2.4 The Appellant Bank, unable to obtain any information from Respondent no. 1, pursued its legal remedies under the SARFAESI Act. Thus, in 2013, the Appellant Bank preferred an O.A. No. 612 of 2013 under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 2993 titled “ICICI Bank vs. V. Srinivas & Anr.” before the Hon’ble Debts Recovery Tribunal, Hyderabad in order to recover its dues.

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2.5 In 2015, the Appellant Bank, through its empanelled Advocate, once again attempted to obtain an update regarding the Property from Respondent No. 1. However, no response was received.

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2.6 On 07.04.2016, the Appellant Bank again issued a Notice to Respondent No. 1 requesting it to remove the charge over the Property. Despite the receipt of this Notice, Respondent No. 1 failed to reply to the same.

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2.7 On 20.07.2016, as the Appellant Bank was only aware of the Provisional Attachment Order dated 31.03.2010, the Appellant Bank preferred a Writ Petition U/s 226 of the Constitution of India before the Hon’ble High Court of Judicature at Hyderabad for the State of Telangana and State of Andhra Pradesh seeking setting aside of the Provisional Attachment Order with respect to the property in question.

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2.8 On 22.08.2016 Respondent No. 1 i.e. Directorate of Enforcement filed a Counter Affidavit before the Hon’ble High Court of Judicature at Hyderabad for the State of Telangana and State of Andhra Pradesh. It was then that for the first time the Appellant was first informed of the Impugned Order vide which the Ld. Adjudicating Authority had confirmed the Provisional Attachment Order.

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2.9 On 04.07.2017, the Hon’ble High Court was pleased to dismiss the Writ Petition holding that “we have not gone through the merits of the writ petition and it is for the petitioner to invoke such remedies as are available to it in law if it is aggrieved by the attachment.”

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It is admitted position that on 12^th July, 2017, the Debt Recovery Tribunal has allowed the application of the appellant permitting them to proceed against the property which had been mortgaged by way of equitable mortgage with the appellant towards realization of the debt due.

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The learned counsel for the appellant has also referred Section 14 of the Limitation Act as according to him that due to bonafide instead of approaching this tribunal the appellant has filed the writ petition before the High Court challenging the impugned order. However, the said writ petition was disposed of and thereafter the present appellant has been filed under FPA-PMLA-1998/HYD/2017 Page 3

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Page 3 of 7

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Section 26 of the PML Act. There was a delay of 54 days in filing the appeal after passing the order by the High Court of Delhi. Counsel for the appellant has argued that the knowledge of attachment of the mortgaged property is immaterial as it was mandated in section 8(1) (2) of the PML Act, 2002 to the respondent no. 1 to serve the notice and opportunity should have been given to the appellant to file reply and hearing but it has not happened. It is the respondent who failed to perform its duty.

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It is admitted position that in the provisional attachment order which would show that the respondent was fully aware that the appellant was the claimant in one of the properties as the same is admitted in para 21 of the provisional attachment order. The relevant extract of para 21 of provisional attachment order reads as under;

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“ As regards the known sources of his and his family members income, he stated that the main source of income is his salary and the employees stock options under which he sold shares of M/s. SCSL. He also stated that he has sold approximately Rs.13.65 crores worth of M/s. SCSL shares and his wife and two children are housewife and students respectively and they did not have any source of income. He also stated that he had acquired 3 plots of 333 Sq. yds each in his name, wife’s name and son Shri Vijay’s name in the auction conducted by the Hyderabad Urban Development Authority sometime in the year 2007 and the source for acquisition of the above plots being sale/stock options and a loan of Rs.1.5 crores taken from ICICI Bank. He clarified that M/s. DSP Merril Lynch Ltd., used to help him in selling stock options and t he proceeds used to be deposited into his Citi Bank, Mumbai Account. From Citi Bank, Mumbai, the proceeds used to be transferred either to his Citi Bank, Hyderabad Account or HDFC, Begumpet Account. He also stated that he had been given a small number of ADRs which has been sold by him through HSBC bank and the proceeds were remitted back to India.”

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Section 8.1 and 8.2 of PML Act reads as under:-

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“8. Adjudication.-

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(1) On receipt of a complaint under sub-section (5) of section 5, or applications made under sub-section (4) of section 17 or under subsection (10) of section 18, if the Adjudicating Authority has reason to believe that any person has committed an offence under section 3 or is in possession of proceeds of crime, he may serve a notice of not less than thirty days on such person calling upon him to indicate the sources of his income, earning or assets, out of which or by means of which he has acquired the property attached under sub-section (1) of section 5, or, seized or frozen under section 17 or section 18, the evidence on which he relies and other relevant information and particulars, and to show cause why all or any of such properties should not be declared to be

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FPA-PMLA-1998/HYD/2017

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Page 4 of 7

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the properties involved in money-laundering and confiscated by the Central Government:

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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, if any, to the notice issued under subsection (1);

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

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(c) taking into account all relevant materials placed on

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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 money-laundering:

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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 moneylaundering.”

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Admittedly, the property, in question, was mortgaged with the appellant bank and borrower and bank have executed the equitable mortgage deed. The Notice under section 13(2) was also issued. The prayer made in the application in Section 13(2) under the SARFAESI Act has also been allowed. Once the symbolic possession is taken by the bank of the mortgaged property, the appellant has become the joint owner/aggrieved party/interested party of the said property within the meaning of 1^st proviso of section 8(1) of the Act which mandates that in case the property is held by a person on behalf of any other person, a copy of the notice shall be served upon such other person. With regard to section 8(2) of PML Act, the concerned proviso in this regard is also very clear which mandates the property if claimed by a person other than the 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 the money laundering.

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Both are mandatory provisions and the same cannot be ignored. The respondent no. 1 is duty bound to comply the mandatory provisions.

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FPA-PMLA-1998/HYD/2017

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Page 5 of 7

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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 and who was aware about the attachment order, therefore, there was no requirement of notice to be issued. The said argument is without any force.

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There is no denial that the 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.

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It is not understood why the requisite notice was not issued by the respondent no. 1 and Adjudicating Authority. Despite being Appellant’s claim, Respondent No. 1 failed to fulfill its statutory duty.

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In the present case, admittedly, no notice under section 8(1) or 8(2) has been issued. No opportunity was given to the appellant bank who was also not made party in the complaint under section 5(5) of the Act despite of having the knowledge by the respondent as well as the adjudicating authority. The provisional attachment order would show that the respondent was fully aware that the said property is mortgaged with the appellant bank. It is immaterial if the borrower bank in the SARFAESI Act proceeding has informed that the bank was aware about the attachment order in 2010. As a matter of fact, as per the mandatory provision, it was the duty by the respondent to inform the joint owner or the complainant about the proceeding initiated against the borrower so that the claimant or the joint owner can take his stand and clarify the position before the authority. This thing has not happened in the present case. FPA-PMLA-1998/HYD/2017 Page 6

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Page 6 of 7

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I am of the view that the substantial right of the bank is involved as the bank has already initiated action under the SARFAESI Act and order under section 13(4) has been passed, it has become necessary to hear the appeal on merit. Such delay, in fact, has happened due to non-compliance of the provisions by respondent no. 1. The same cannot be attributed to the appellant.

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As far as the delay of 54 days is concerned, the appellant was aware about the order passed by the High Court. Such delay is only condoned subject to the cost.

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Under these circumstances, the delay of 54 days is condoned subject to the cost of Rs.20,000/- which shall be paid by the appellant bank to the learned counsel appearing on behalf of the respondent no. 1. The application is accordingly disposed of.

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Issue notice in the appeal. Reply be filed within 4 weeks with financial cost by the appellant bank, who may file the rejoinder by the next date of hearing. Both the parties are allowed to file the written synopsis.

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List the matter on 8^th October, 2018 for final disposal. Till the next date, both the parties shall maintain the status quo with regard to attached property, in question i.e. subject matter of present appeal.

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(Justice Manmohan Singh) Chairman

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New Delhi, 29^th August, 2018 ‘skb’

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FPA-PMLA-1998/HYD/2017

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FPA-PMLA-1998/HYD/2017 of Icici Bank v/s The Joint Director Directorate of Enforcement, Hyderabad

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FPA-PMLA-1998/HYD/2017 of Icici Bank v/s The Joint Director Directorate of Enforcement, Hyderabad

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