Allowed

FPA-PMLA-610/AHD/2014 of M/s Neptune Overseas Ltd. v/s The Deputy Director Directorate of Enforcement, Ahmedabad

ATFP10 Jul 2018FPA-PMLA-610/AHD/2014

Case brief

AI extract

What is this about?

The Tribunal held that the Respondent cannot claim innocence simply because a bank executed a share transfer in violation of a status quo order. It directed the Respondent to restore the status quo by causing the shares to be re-transferred to the appellant's demat account.

What did the court decide?

Directed the Respondent to forthwith re-transfer the equity shares to the appellant's demat account to restore the status quo ante.

FPA-PMLA-610/AHD/2014 of M/s Neptune Overseas Ltd. 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: 10.07.2018

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MP-PMLA-4192/AHD/2018 (Misc.) MP-PMLA-3939/AHD/2017 (Misc.) MP-PMLA-2933/AHD/2016 (Misc.) MP-PMLA-2934/AHD/2016 (A.D.) FPA-PMLA-610/AHD/2014

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M/s Neptune Overseas Ltd.

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… Appellant/Applicant

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Versus

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The Deputy Director Directorate of Enforcement, Ahmedabad

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… Respondent

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Advocates/Authorized Representatives who appeared

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For the appellant : Shri Navin K. Pahwa, Sr. Advocate Shri Mohit D. Ram, Advocate Shri Nakul Mohta, Advocate For the respondent : Shri A.K. Tripathi, Advocate CORAM JUSTICE MANMOHAN SINGH : CHAIRMAN

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JUDGEMENT

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MP-PMLA-4192/AHD/2018 (Misc.) in FPA-PMLA-610/AHD/2014

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The above-mentioned Appeal under Section 26 of the PMLA 2002 has been filed against the order dated 06.06.2014 passed by the Adjudicating Authority in Original Complaint No. 225 of 2013 (“the Impugned Order”). The Adjudicating Authority by the Impugned Order confirmed the Provisional Attachment Order No. 08/2013 dated 18.10.2013 by which the Respondent attaching 33,45,729 equity shares of National Multi Commodity Exchange of India (“NMCE”) held by the Appellants/Applicants. By this order, I propose to decide the application for contempt filed by appellant being no. MP-PMLA-4192/AHD/2018 seeking direction against the respondent no. 1 to comply the status quo order passed by this Tribunal.

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MP-PMLA-4192/AHD/2018 in FPA-PMLA-610/AHD/2014

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Page 1 of 9

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Brief facts are that after passing the impugned order, on 03.07.2017 the Respondent issue a letter to MSC Share Transfer Agent Limited directing it to transfer immediately the equity shares of the NMCE held by the Appellant who again on 07.07.2017 again wrote to MCS Share Transfer Agent Limited directing it to transfer the equity shares of the Complainant held by the Appellant.

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In its reply dated 09.10.2017 NMCE wrote to the Appellant informing it that its Share Certificate of 19,74,900 equity shares had been split up into four certificates and three of the certificates had been delivered to the Respondent. These three certificates which constituted 12,96,900 equity shares being the subject matter of the connected Appeal No. 615 of 2014. The Appellant was also informed that the transfer of the equity shares held by them in the Demat form (which is subject matter of the present appeal) was under process. The Appellants on 16^th October, 2017 filed an application being MA 3939 of 2017 before this Tribunal seeking interim protection against the letters issued by the Respondents.

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On 26.10.2017, this Tribunal issued notice on the application filed by the Appellant. The counsel for the Respondent accepted notice and sought time to file its reply. The proceedings were directed to be listed for 28.11.2017. Thereafter again on 02.11.2017 despite of pendency of application, the Respondent wrote to HDFC Bank Directing it to transfer the equity shares of the Appellant to its Demat Account. The appellant on 26.11.2017 wrote to the Respondent requesting them to withdraw the letter dated 02.11.2017 in view of the pending for the application seeking interim relief in as much as the Respondent had themselves sought time to seek instructions on 26.10.2017 when the Application was listed before this Hon‟ble Tribunal.

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MP-PMLA-4192/AHD/2018 in FPA-PMLA-610/AHD/2014

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Page 2 of 9

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The Respondent filed its Reply to the Application. After hearing arguments on 28.11.2017 this Tribunal directed that “status quo shall be maintained by both the parties in respect of attached property.” The proceedings were directed to be listed for 08.01.2018. It has come on record that afternoon on the same day the Respondent informed the HDFC Bank of the passing of the Order of status quo by this Tribunal. However sometime in the afternoon the equity shares which are the subject matter of the appeal were transfer by HDFC Bank to the demat account of the Respondent.

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It was admitted position that the interim order was passed in the morning session in the presence of counsel appearing on behalf of both sides.

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In response to the emails sent by the Appellant, HDFC Bank informed them that the transfer of the equity shares to the Respondent had been done on the basis of the instructions dated 02.11.2017 and 17.11.2017 received from the Respondent and the same were transferred on 28.11.2017 as admitted by both parties. HDFC Bank wrote to the Respondents on 14.12.2017 informing them that on the basis of the instructions received from them the equity shares held by the Appellants had been transferred to them. The Respondent was requested to take appropriate steps in view of the status quo Order passed by this Tribunal.

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The Counsel for the Appellants on 22.12.2017 wrote to the counsel for the Respondent informing him that since the status quo order had been breached his clients be requested to restore the status quo ante.

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HDFC Bank wrote to the Appellants on 26.12.2017 requesting them to get directly in touch with the Respondents.

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MP-PMLA-4192/AHD/2018 in FPA-PMLA-610/AHD/2014

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Page 3 of 9

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The Appellants on 29.12.2017 wrote to HDFC Bank reiterating their request for the transfer of the equity shares back to their Demat Account.

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On 5^th January, 2018, the Appellants filed an Application for Contempt and appropriate directions being 4192 of 2018 before the Tribunal seeking inter alia a direction against Respondent to transfer the equity shares back to them.

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This Tribunal on 08.01.2018 issued notice on the Application for Contempt and appropriate directions filed by the Appellants. The Respondent was directed to file its Reply. The proceedings were directed to be listed for 23.01.2018.

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The respondent served a copy of its reply to the application for Contempt filed by the Appellants on 19.01.2018. In the reply the Respondent took the stand that it was a “mere coincidence that on the date of the pronouncement of order … the shares were transferred by the baking authorities.” In the reply took a categorical stand that that the shares had been transferred at 3:06 pm in the afternoon.

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Despite having already filed its Reply, during the proceedings before this Tribunal on 23.01.2018 the Respondent sought further time a file an additional Affidavit to bring on record emails “between the Department and the HDFC Bank, Mumbai on the date when the interim order was passed.” The proceedings were directed to be listed for 20.02.2018.

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The Respondent filed its Additional Reply dated 05.02.2018 to the Application for contempt filed by the Appellant reiterating the stand that the Respondent “has send the request for transfer of shares to the MP-PMLA-4192/AHD/2018 in FPA-PMLA-610/AHD/2014 Page 4 of 9

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Page 4 of 9

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Customer Care, HDFC on their email. There was no direct correspondence directly at the relevant time with the concerned person of the HDFC either through email or telephonically as this office had not any access.”

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HDFC Bank issue a letter on 03.03.2018 to the Respondent stating that since it is not a party to the PMLA proceedings, it had requested the Appellants to take up the issue directly with them.

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There is hardly any dispute that the said equity shares were till the passing of the order dated 28.11.2017 lying in Demat Account No. IN301151-21945334 in Navrangpura Branch, Ahmedabad. However, it has come to the knowledge of the Appellants that the said equity shares have been transferred to the Demat Account of the Respondent on the same day as the order was passed by this Tribunal even though the counsel for the Respondent was present while the passing of the Order. The transfer has been effected only after the Order was passed.

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It is also undisputed fact that the appellants had filed an Application for Direction and stay of the Letter dated 03.07.2017 issued by the Respondents to the MSC Share Transfer Agent Limited purportedly under Section 8(4) of the PMLA 2002 seeking to “take possession” of 33,45,729 equity shares of M/s NMCE belonging to the applicants and this Tribunal has issued notice on the Application filed by the Appellants by its order dated 26.10.2017. The respondents were directed to file their reply to the application within two weeks. The application had been directed to be listed on 28.11.2017. Both the Respondents and the HDFC Bank had been informed of the Application filed by the Appellants. They had been requested not to take any coercive steps till the disposal of the Application.

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MP-PMLA-4192/AHD/2018 in FPA-PMLA-610/AHD/2014

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Page 5 of 9

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It is the admitted position that on 28.11.2017 that this Tribunal after hearing both sides passed the following order in favour of the Appellants:

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“… The learned counsel for the appellant submits that in the meanwhile, the respondent has issued the notice under Section8(4). The matter is already coming up for final disposal on 8^th January, 2018. The notice under Section 8(4) has been issued after the expiry of about three years and once the appeal is set up for hearing. Under these circumstances the status quo shall be maintained by both the parties in respect of attached property.”

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There is no denial that both the HDFC Bank and the Respondents were aware of the listing of the Application on 28.11.2017. No transfer of the shares had been effected till the morning of 28.11.2017. After the passing of the order dated 28.11.2017, the same was duly communicated by email to the HDFC Bank and NSDL by the Appellants within hours of the passing of the Order. The said order had been passed in the presence of the counsel for the Respondent. The matter has been re-heard after the retirement of the member and part of the bench when the interim order was passed.

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Counsel for the Respondent submits that there is no fault of the respondent. It might be a matter of co-incident that once the order is passed on 28.11.2017 on the same afternoon shares were transfer. The said transfer might be in routine manner. Even the bank may not aware about the interim order. The Respondent no. 1 cannot be blamed who never asked the bank on 28.11.2017 to transfer the shares after passing the order. The appellant has made an incorrect statement. Counsel for the appellant submits that facts remain that the order has been violated and has not been complied with. He states that after the transfer of shares, it was the duty of respondent no. 1 to see that the order is complied with but for the last more than six months no steps are taken.

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MP-PMLA-4192/AHD/2018 in FPA-PMLA-610/AHD/2014

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Page 6 of 9

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There is no material on to record to show that respondent no. 1 has issued any communication to the bank after the interim order was passed or the respondent no. 1 has shown any interest to re-transfer of shares despite of interim order is passed. The bank was aware about passing of interim orders, the bank was aware that the interim application is pending and is listed on 28.11.2018. As far as first, the prayer made in the application to initiate proceeding at contempt, against respondent. I am not incline to grant such prayer as there is no material on record to show that the shares were transferred at the instance of respondent. However, the second prayer made in the application is being considered as I am of the considered opinion that the order passed by the Tribunal has not been complied with as there is a breach on the face it. Counsel for the respondent has referred few decisions in support of his submissions that the application filed by the appellant is not maintainable and once the process of transfer of shares have been completed, the interim order is become infructuous and the question of contempt does not arise. As far as referring the decisions by the counsel are concerned, since I am not inclined to grant the first prayer, thus the same has no bearing. However, I am of the opinion that rule of law must be prevailed upon and orders of the superior courts must be complied with otherwise system would be collapsed. It has been noticed even in another appeal no. 1905/2017 between Vinod Kumar Goyal Vs. Enforcement Directorate, the interim order passed by the bench on 15.11.2017 has not complied with which was passed in the presence of both counsel. Counsel for respondent after filing similar application for issuance of contempt petition has now agreed to restored the status quo in the original position as per order passed on 09.07.2018.

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In case of Century Flour Mills Ltd. Vs. Suppiah , passed by the Hon‟ble Madras High Court on 11.03.1975. It was observed that where in

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MP-PMLA-4192/AHD/2018 in FPA-PMLA-610/AHD/2014

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Page 7 of 9

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violation of a stay order or injunction against a party, something has been done in dis-obedience, it will be the duty of the court as a policy to set the wrong right and not allow the perpetuation of the wrong doing. The inherent power is bound to be exercised in that manner in the interests of justice. As a matter of judicial policy, the court should guard itself against being stultified in circumstances like this by holding that it is powerless to undo a wrong done in disobedience of the courts orders.

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Hon‟ble Bombay High Court has held if the orders are allowed to violate then the tendency to flout orders of Courts which is increasing day by day can never be curbed. The court exercises its powers on the foundation of respect and regard for its authority by litigating public. People would lose faith and respect completely if the Court does not curb and prevent this tendency. In the case of Keshrimal Jivji Vs. Bank of Maharashtra & Ors. [2004 (3) MH.L.J.] at para 26 passed by Hon‟ble Bombay High Court on 22.04.2004 .

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In case of Surjit Singh & Ors. V/s. Harbans Singh & Ors. in SCC No. (1995) 6 SCC 50 at page 52 para 4 (decided on 06.09.1995) it was held that in defiance of the restraint order, the alienation/assignment was made. If we were to let it go as such, it would defeat the ends of justice and the prevalent public policy. When the Court intends a particular state of affairs to exist while it is in seisin of a lis, that state of affairs is not only required to be maintained, but it is presumed to exist till the Court orders otherwise. The Court, in these circumstances has the duty, as also the right, to treat the alienation/assignment as having not taken place at all for its purposes.

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Therefore the respondent cannot be permitted to say that since the bank was not a party to the proceedings by taking the reap advantage or benefit from such transfer of shares as the respondent No. 1 was the

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MP-PMLA-4192/AHD/2018 in FPA-PMLA-610/AHD/2014

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Page 8 of 9

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party and the interim order was passed in the presence of his counsel. The said argument have no substance. I am of the view that even after transfer of shares by the bank in favour of the respondent No. 1, it was the duty of the respondent no. 1 to inform the bank that the said transfer has been made after passing the interims and the same is in violation of orders. There is no material on record to show the respondent No. 1 in order to show its bonafide to re-transfer the same to the bank.

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In light of above, I direct the respondent to re-transfer back the equity shares of appellant which are the subject matter of the present appeal to the demat account of the appellants forthwith.

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The above said order shall have no bearing in other proceedings in authorities. The present order is pertaining to the subject matter of present appeal only. I am not concerned as whether the appellant be allowed or not be allowed to exercise its for voting rights as same is not in the domain of this Tribunal. The said aspect is being dealt with by other Court.

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