Allowed

FPA-PMLA-1618/DLI/2017 of Dbs Bank Ltd. v/s The Deputy Director Directorate of Enforcement, Delhi

ATFP4 Jun 2019FPA-PMLA-1618/DLI/2017

Case brief

AI extract

What is this about?

Appellate Tribunal set aside the Adjudicating Authority's order confirming provisional attachment of mortgaged properties under PMLA. The court held banks were innocent bona fide claimants as properties were acquired before money laundering offences commenced.

What did the court decide?

Impugned order dated 22.09.2016 set aside; Provisional Attachment Order quashed in respect of mortgaged properties; Appeals disposed of.

FPA-PMLA-1618/DLI/2017 of Dbs Bank Ltd. v/s The Deputy Director… — Money Laundering | ATFP (2019)

¶1

APPELLATE TRIBUNAL, FOREIGN EXCHANGE MANAGEMENT ACT AT NEW DELHI

¶2

Date of Decision:- 04.06.2019

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1) FPA-PMLA-1616/DLI/2017

¶4

Punjab National Bank &Ors. ... Appellant/Applicants

¶5

Versus

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The Deputy Director Directorate of Enforcement, Delhi &Ors. ... Respondents

¶7

Advocates/Authorized Representatives who appeared

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For the appellant : Shri Rajesh Rattan, Advocate Shri Ravi Verma, Advocate Shri Suadat A. Kirmani, Advocate For the respondent : Shri Nitesh Rana, Advocate

¶9

2) FPA-PMLA-1618/DLI/2017 DBS Bank Ltd. ... Appellant/Applicant

¶10

Versus

¶11

The Deputy Director Directorate of Enforcement, Delhi ... Respondent

¶12

Advocates/Authorized Representatives who appeared

¶13

For the appellant : Shri S.K. Agarwal, Advocate Shri Saumyen Das,Advocate Shri Rajender Kumar, Advocate For the respondent : Shri Nitesh Rana, Advocate

¶14

CORAM JUSTICE MANMOHAN SINGH : CHAIRMAN

¶15

JUDGEMENT

¶16

FPA-PMLA-1616 & 1618/DLI/2017

¶17

This Appellate Tribunal, PMLA by Order dated 28.06.2018 allowed the banks appeal on the reasons that the mortgaged properties were acquired prior to the alleged date of crime and no money disbursed by the bank has been invested to acquire these properties and bank has created charge over the said properties prior to the date of crime and bank has already initiated measures under SARFAESI Act, 2002 and filed its OA before DRT-II, New F P A - P M L A - 1 6 1 6 / D L I / 2 0 1 7 P a g e 1 | 16

¶18

Delhi, for recovery of its dues and there is no nexus whatsoever between the alleged crime and the PNB Consortium who is the mortgagee of the properties in question and purchased prior to the sanctioning of the loan and bank is a victim of fraud and it is an innocent bonafide claimant and not involved in the money laundering activity and bank is at liberty to move its claim before the Special Court for disposal of the properties in order to recover its dues pending in the loan accounts.

¶19

The Hon‟ble High Court of Delhi in Crl. A. No 076/2018 vide Judgement dated 02.04.2019 allowed the appeal of the respondent inter-alia on the reasons that SARFAESI Act and RDB Act do not prevail over PMLA as these 3 Special Acts operate in their separate respective fields and upon doing harmonious construction of the provisions of these Special Acts remanded the present case back to this Appellate Tribunal for further construction on the specific facts of the present case and directed the parties to appear on 15.04.2019.

¶20

In view of Hon‟ble Delhi High Court Judgement, both parties through their counsels have re-argued both appeals. Various paras of the said judgement have been referred by both sides.

¶21

The facts are already recorded in earlier order dated 28.6.2018 which may be read in the present order. However, para 1 to 15 are reproduced below:-

¶22

Two set of Appellants have filed the present appeals under Section 26(1) of the Prevention of Money Laundering Act, 2002 (hereinafter PML Act) assailing the order pronounced by the Adjudicating Authority constituted under the PML Act on September 22, 2016 (hereinafter referred to as the “Impugned Oder”), inter-alia, confirming the Provisional Attachment made on 31.03.2016 passed by Respondent No. 1 whereby the Respondent No. 1 had attached properties of the Respondents No. 2 to 4 which were mortgaged with PNB Consortium wherein the Appellants in both appeal.

¶23

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¶24

The appeal no. FPA-PMLA-1616/DLI/2017 is filed on same facts and law by DBS Bank who is also one of the PNB consortium. The case of all the banks is identical. I propose to decide the above-mentioned appeals.

¶25

The Appellants in appeal no. 1616/2017 is the lead bank of a consortium of banks comprising of Appellant Nos. 2-21 who granted credit facilities to the Respondent No. 4 i.e. Surya Vinayak Industries Limited. Appellant Nos. 22-25 are banks which are members of a consortium which has granted credit facilities to SVIL Mines, a group company of Respondent No. 4.

¶26

The Respondent No. 2 & 3, namely Mr. Rajiv Jain and Mr. Sanjay Jain are the Directors of the Respondent No. 4 Company and also stood as guarantors for the repayment of the loan amounts sanctioned and disbursed by consortium members including the Appellant Bank to the Respondent No. 4 Company, by way of personal guarantees. Respondent No. 5 is a group company of Respondent No. 4, which also executed a corporate guarantee to secure the credit facilities. The Respondent No. 4 Company was majorly engaged in the business of trading of Agro-Commodities and Manufacturing and marketing of essence Oils, Perfumery Compounds, Flavors, Fragrances and Aromatic Chemicals.

¶27

The aforesaid financing facilities were provided by the Appellant Banks upon the Respondents executing various documents including creation of mortgages over the attached properties. It is pertinent to note that the attached properties were mortgaged by the Respondents with the Appellant Banks as early as 2005 and 2007 and the said properties were acquired by the Respondents between 1994 and 2005.

¶28

The operation of the Respondent No. 4’s account was initially regular and satisfactory due to which the Appellant Banks increased the credit limits in the year 2011. Thereafter, the account became irregular and was subsequently classified as Non-Performing Asset (NPA) as per RBI guidelines.

¶29

Since the Respondent No. 4 failed to regularise its account and did not provide a list of its debtors, the core committee of the Consortium of Banks decided to verify the assets of the company and get a Techno Economic Viability Study (“TEVS”) conducted for the same. The PNB led Consortium vide letter dated 20.12.2013 engaged reputed financial consultant M/s Ernst & Young to conduct a forensic audit and study of the accounts of the Respondent No. 4Company.

¶30

The audit report submitted by M/s. Ernst & Young revealed that the Defendants had committed various financial irregularities including misrepresentation of value of stocks and book debts.

¶31

It later transpired that the statement of stock as well as debtors and receivables of the company, on the basis of which they had obtained the credit facilities, were false and fabricated. Accordingly, then Assistant General Manager of the Appellant No. 1 filed a written complaint dated 09.12.2013 with the DIG, Banking Securities and Fraud Cell, Central Bureau of Investigations (CBI), New Delhi requesting CBI to enquire into the fraudulent activities of the Company and its directors. Pursuant to the Complaint filed by Appellant, an FIR No. RCBD1/2014/E/0001 dated 01.01.2014 was registered under Sections 120-B read with Section 420 of the Indian Penal Code, 1860. Thereafter, the investigations were also initiated by Enforcement Directorate against the suspected/accused person prima facie for commissioning of offence of money laundering under Section 3 of the Act, after registration of ECIR No. DLZO/01/2015/AD (VM). Subsequently, other members of the Consortium also filed similar complaints for taking appropriate action against the Respondent No.4 Company and its officials including Respondent Nos. 2 & 3.

¶32

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¶33

The Appellant banks in order to recover the loan amounts proceeded under the SARFAESI Act, 2002 to recover their loans and took symbolic possession of all secured assets which were mortgaged with them and also proceeded to file an Original Application before the Debts Recovery Tribunal, Delhi seeking recovery of a sum of Rs. 2071 Crores from the Respondents 2-4. The DRT vide its order dated 20.01.2014 granted an injunction order restraining the Respondents No. 2 to 4 from alienating or creating any encumbrance whatsoever in respect of properties that were mortgaged with the consortium for the purpose of securing the credit facilities.

¶34

That in parallel proceedings before the High Court of Delhi moved by certain secured creditors, the High Court appointed a provisional liquidator who took possession of certain properties of the Respondent No. 4 Company.

¶35

The Enforcement Directorate, Delhi Zonal Office is pursuant to the recording of the ECIR No. DLZO 101/2015/AD (VM) dated 12.02.2015 which came to be filed on the basis of Assistant General Manager, Punjab National Bank filing written complaint dated 09.12.2013 to the Banking Securities and Fraud Cell(BSFC),CBI, New Delhi for registration of a case for commission of fraud by M/s. Surya Vinayak Industries Ltd (SVIL) (Defendant no. 3) and its Directors, as they got loan/CC limit for SVIL on the basis of forged record/accounts details of the company. Accordingly, an FIR came to be registered on 01.01.2014 against Defendant Nos. 1 to 4 Directors and others. The FIR was registered for the offences punishable under Section 120-B and Section 420 of IPC. The said offences are also the scheduled offences under PMLA. Consequently as aforesaid the ECIR came to be recorded against the suspected/accused person prima facie for commission of offence of money laundering under Section 3, punishable under Section 4 of PMLA.

¶36

Despite the said attachment orders of the DRT, the Respondent No. 1 issued the Provisional Attachment Order dated 31.03.2016 and subsequently, Original Complaint, being OC No. 600/2016, was filed before the Ld. Adjudicating Authority in terms of Section 5(1) of the Act for confirmation of the said Provisional Attachment Order.

¶37

In the table below, the Appellant set out the dates of acquisition of such properties by Respondent Nos. 2 to 4 and thereafter, date of creation of first mortgages by deposit of title deeds in favour of its secured creditors, including the Appellant in respect of the properties for which the Provisional Attachment Order is confirmed by the Ld. Adjudicating Authority vide the Impugned Order:

¶38

Properties mortgaged to secure Credit facilities extended to Surya Vinayak Industries Limited

¶39

S. No.	Property d	etails	Owner	Date of acquisition	Date of Mortgage
1.	Plot No. Khaitian Industrial Centre, Zo Bodhjung Tripura Agartala, measuring Sq. mtrs acres)	38, No. 2, Growth ne- II, Nagar, (West), 6271 (1.52	Surya Vinayak Industries Limited (Respondent No. 4)	10.8.2003	21.12.2005
2.	Land and at Village Bans, District measuring kanal 11	Building Naya Sampla, Rohtak 23 marla	Surya Vinayak Industries Limited (Respondent No. 4)	19.4.2005	27.10.2007
F P A - P M L A - 1 6	1 6 / D L I /	2 0 1 7			**P a g e 4

¶40

	(14520 sq yards) in the name of Defendant No. 1 company, (Unit - III) Khewat No. 70/58, Khatoni No. 80, forming part of Killa No. 30/7 (8-0), 30/14 (8-0), 30/17/12 (0- 6) and 30/17/2/2 (4-12)
3.	Land and building at Mauza-Naya Bans, Tehsil Sampla, Distt. Rohtak, measuring an area of 6050 sq. yards (10 Kanal)	Surya Vinayak Industries Limited (Respondent No. 4)	11.04.1997	24.06.2008
4.	Land and building at D-259, Ground Floor, Ashok Vihar- I, Delhi measuring 167.22 sq. mts.	Rajiv Jain (Respondent no. 3)	6.10.1999 & 1.3.2005	27.12.2005
5.	Land and building on plot of land bearing Khewat No. 90 at Village Naya Bans, Sampla District, Rohtak, Haryana measuring 3025 sq. Yards.	Rajiv Jain (Respondent No. 3)	9.7.1999	27.05.2005
6.	Land bearing Khewat No. 134 (4446.75 sq. Yds.) and 145 (6897 sq. yds.) at Village Naya Bans Sampla, District Rohtak, Haryana measuring 11343.75sq.yds.	Rajiv Jain (Respondent No. 3)	11.08.2000 21.06.2000	27.05.2005
7.	Land measuring 18422.25 sq. yards at Village Naya Bans, Sampla, District Rohtak, Haryana.	Rajiv Jain (Respondent No. 3)	11.10.1998 4.10.1999 21.10.1999	27.05.2005
8.	Land measuring 32065 sq. Yds. At Village Naya Bans, Sampla, District Rohtak, Haryana.	Sanjay Jain (Respondent No. 2)	26.10.1994 29.10.1994 2.11.1994	27 2005

¶41

The appellants in reply to the Notice under Section8(1) has disclosed all the details before the Adjudicating Authority, who confirmed the provisional attachment order by passing the impugned Order, which is challenged by the Banks before this Tribunal.

¶42

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¶43

In view of judgement rendered by the Hon‟ble High Court, this Tribunal is to pass the afresh order after hearing. Mr. Nitesh Rana, learned counsel for the respondent does not dispute the finding arrived in para-163 and 165 of the judgement of the Hon‟ble High Court and legal issues involved on the subject. In addition, he has also referred paras 167 to 169 of the judgement. The same are read as under:-

¶44

“167. As has been highlighted earlier, the provisional order of attachment is subject to confirmation by the adjudicating authority. The order of the adjudicating authority, in turn, is amendable to appeal to the appellate tribunal. The said forum (i.e. the appellate tribunal) may pass such orders as it thinks fit “confirming, modifying or setting aside the order appealed against” [Section 26(4)]. Undoubtedly, an aggrieved party is entitled in law to invoke the said jurisdiction of the appellate tribunal to bring a challenge to the orders of attachment (as confirmed) but, the law in PMLA, at the same time, also confers jurisdiction on the special court to entertain such claim for purposes of restoration of the property during the trial of the case [Section 8). The jurisdiction to entertain objections to attachment conferred on the appellate tribunal on one hand and, on the special court, on the other, thus, may be co-ordinate, to an extent.

¶45

168. An argument, however, was raised, by the appellants that the respondents herein should have approached the special court, instead of the appellate tribunal, for consideration of their respective claims.

¶46

169. In view of afore-noted legislative scheme, it must be clarified that if the order confirming the attachment has attained finality, or if the order of confiscation has been passed or, further if the trial of a case for the offence under Section 4 PMLA has commenced, the claim of a party asserting to have acted bonafide or having legitimate interest will have to be inquired into and adjudicated upon only by the special court.

¶47

It is not disputed by Mr. Rana that the mortgaged immovable properties in question were purchased by M/s Surya Vinayak Industries Ltd. and its Promoters Rajiv Jain and Sanjay Jain and its Group Associate Company i.e M/s SVIL Mines Ltd in the years 1994, 1997, 1998, 1999, 2000, 2002, 2003, 2005. No contrary materials are available on record.

¶48

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¶49

It is also not disputed that the properties in question were mortgaged by deposit of original title deeds in favour of PNB Consortium by the above Mortgagors in the year 2005, 2007 and 2008 as collateral securities for availing the credit facilities in the loan A/c of Borrower Companies M/s Surya Vinayak Industries Ltd. and M/s SVIL Mines Ltd. The original title deeds of the mortgaged properties are in the possession of PNB, leader of the PNB Consortium, comprising of 20 other Banks/ Appellants herein.

¶50

The credit limits were first sanctioned to the Company by the PNB Consortium of Banks in the year 2005 / Secured Creditors and the Limits were enhanced from time to time and got enhanced to the tune of Rs. 1400 Crores on 18.01.2011 which was subsequently enhanced to 2240 Crores. The Loan A/cs. were regular and standard upto the year 2011.

¶51

In support of its arguments, the bank has produced the following documents:

¶52

a) True Copy of Extract of Mortgage Register of PNB dated 21.12.2005 in respect of creation of equitable mortgage by deposit of Original Title deeds of Plot No. 38, Khaitian No. 2, Industrial Growth Centre, Zone-II, Bodhjung Nagar, Tripura (West), Agartala, measuring 6271 Sq. mtrs (1.52 acres) in the name of Surya Vinayak Industries Limited (Borrower Company)

¶53

b) True Copy of Extract of Mortgage Register of PNB dated 27.10.2007 in respect of creation of equitable mortgage by deposit of Original Title deeds of Land and Building at Village Naya Bans, Sampla, District Rohtak measuring 23 kanal 11 marla (14520 sq yards) in the name of Defendant No. 1 company, (Unit – III) Khewat No. 70/58, Khatoni No. 80, forming part of Killa No. 30/7 (8-0), 30/14 (8-0), 30/17/12 (0-

¶54

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1. and 30/17/2/2 (4-12) in the name of Surya Vinayak Industries Limited (Borrower Company)

¶56

c) True Copy of Extract of Mortgage Register of PNB dated 24.06.2008 in respect of creation of equitable mortgage by deposit of Original Title deeds of Land and building at Mauza-Naya Bans, Tehsil Sampla, Distt. Rohtak, measuring an area of 6050 sq. yards (10 Kanal) part of Killa No.39/14, Khewat No. 73, Khatoni No.104 in the name of Surya Vinayak Industries Limited (Borrower Company).

¶57

d) True Copy of Extract of Mortgage Register of PNB dated 21.12.2005 in respect of creation of equitable mortgage by deposit of Original Title deeds of Land and building at D-259, Ground Floor, Ashok Vihar – 1, Delhi – 10 052 measuring 167.22 sq. mts., in the name of Sh. Rajiv Jain, Promoter/Director of the above said Borrower Company with true copies of Letters dated 22.12.2005 and 27.12.2005 .

¶58

e) True Copy of Extract of Mortgage Register of PNB dated 27.05.2005 in respect of creation of equitable mortgage by deposit of Original Title deeds of Land bearing Khewat No. 45, Khatoni No.58, Kila No.38/7/3 , Khewat No. 40/39, Khatoni No.51-53, Khewat No. 35, Kila No.22/1/1, Khewat No.73, 35 , 90 145,134 situated at Village Naya Bans Sampla, District Rohtak, Haryana, total measuring 32,790 sq. yds , in the name of Sh. Rajiv Jain, Promoter/Director of the above said Borrower Company with true copies of Letters dated 21.05.2006, 06.06.2006, 09.09.2006 .

¶59

f) True Copy of Extract of Mortgage Register of PNB dated 27.05.2005 in respect of creation of equitable mortgage by deposit of Original Title deeds of Land measuring 32065 sq. Yds., situated at Village Naya Bans, Sampla, District Rohtak, Haryana,

¶60

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¶61

in the name of Sh. Sanjay Jain, Promoter/Director of the above said Borrower Company with true copies of Letters dated 21.05.2006, 06.06.2006, 09.09.2006.

¶62

g) True Copy of Extract of Mortgage Register of PNB dated 27.05.2005 in respect of creation of equitable mortgage by deposit of Original Title deeds of Land measuring 32065 sq. Yds., situated at Village Naya Bans, Sampla, District Rohtak, Haryana , in the name of Sh. Sanjay Jain, Promoter/Director of the above said Borrower Company with true copies of Letters dated 21.05.2006, 06.06.2006, 09.09.2006

¶63

h) True Copy of Memorandum of Deposit of Title deeds vide letter dated 08.11.2005 by way of creation of equitable mortgage in respect of Property measuring 4.60 Hectares situated at Village Gudri ,Sleemnabad , Tehsil Bahoriband , District Katni , M.P , issued by SVIL Mines Ltd , Group Associate Company of the above said Borrower Company with true copies of Letters dated 26.11.2005, 31.05.2007, 20.03.2008

¶64

Loan A/cs. became irregular in the year 2012 and the Borrower Company submitted a Corporate Debt Restructuring Plan “cdr Plan” to the PNB Consortium on 22.05.2012 .

¶65

Member Banks of PNB Consortium held an emergency meeting on 24.05.2012 to discuss the above “ cdr Plan” submitted by the Company and in the minutes of meetings it was held that Company should regularize its loan A/cs first before reference of the “the cdr Plan”.

¶66

Company admittedly failed to regularize its outstanding A/cs and it became NPA on 31.07.2012. The Notice under Section 13(2) SARFAESI

¶67

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¶68

giving 60 days dt. 26.02.2013 was issued by the Appellant qua the mortgaged properties in question. Section 13(4) SARFAESI Notice i.e Possession Notice dt. 02.08.2013 was issued by the Appellant /Secured Creditors qua the mortgaged properties in question.

¶69

The Company challenged the SARFAESI measures taken by the PNB Consortium by filing an Appeal under Section 17 of the Said Act before DRTGuwahati but the same was dismissed vide order dated 23.05.2015.

¶70

The AGM, PNB filed the complaint dt. 09.12.2013 to CBI. FIR No. RCBDI/2014/E/0001 dt. 01.01.2014 was registered by CBI under Section 420 and 120-B of the IPC. PNB and other member Banks filed OA No. 29/2014 before DRT-II, New Delhi for recovery of Rs. 2071, 01, 79, 990/against the Company and its Promoters under Section 19 of the RDB, 1993 and vide order dt. 20.01.2014, they were restrained from dealing with the mortgaged properties in question/secured assets along with other immovable properties of the borrowers.

¶71

One of the Secured Creditor filed a Winding up Petition before Hon‟ble High Court of Delhi and Provisional Official liquidator was appointed in Co. Pet. No. 84/2013, vide Order dated 12.02.2014 and OL took possession of the mortgaged properties in question .

¶72

ED recorded ECIR No. DLZO/2001/2015/AD (VM) on 12.02.2015 for the offence of money-laundering.

¶73

Provisional Attachment Order dated 31.03.2016 was issued by ED qua the mortgaged properties in question alleging that the secured assets in question are proceeds of crime as the Company had provided fake list of debtors, creditors, fake invoices and indulged in diversion of funds to Overseas and the offence of money laundering commenced from the year

¶74

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¶75

2011-2012 onwards and funds obtained from the PNB Consortium have been misappropriated and they are proceeds of crime. It is admitted by ED that none of the mortgaged properties in question were obtained directly or indirectly or remotely connected with the funds obtained from PNB Consortium after 2011 onwards proceeds of crime as they were acquired in the year years 1994, 1997, 1998, 1999, 2000, 2002, 2003, 2005 prior approaching the Bank for loans.

¶76

OC No. 600/2016 dt. 29.04.2016 was filed before the Adjudicating Authority, PMLA.

¶77

PAO order 31.03.2016 was confirmed by the Adjudicating Authority, PMLA vide order dt. 22.09.2016. The reply filed by the appellants bank has not been legally dealt by the Adjudicating Authority. No valid reasons to believe as per settled law have been recorded. Very casual approach has been taken while passing the attachment order. Legal issues already decided by the Supreme Court on the subject have been discussed.

¶78

The main findings of the Hon‟ble High Court of Delhi in which the exceptions are created, are as follows:-

¶79

i) Date of Commission of offence of Money Laundering under PMLA is the “cut off” date and if the Bank has mortgage / charge over the properties prior to the commission of offence under PMLA then it is a Bonafide Claimant and its Statutory rights can‟t be defeated under Section 8 of PMLA ,2002.

¶80

ii) Priority of Bonafide Claimants / Secured Creditors will have their dues realized first from the sale of such attached immovable assets and if any balance is left out then the balance amount shall go to the ED on the premise the said

¶81

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¶82

properties will continue to remain attached with the ED under PMLA on the ground of value thereof.

¶83

iii) Prior mortgage charge of secured creditors must be registered qua the mortgaged immovable properties only then Bank‟s statutory rights under Section 13 of the SARFAESI, Act are protected and protected.

¶84

iv) SARFAESI, Action initiated prior to the commission of offence of Money Laundering under PMLA would remain valid and interest of secured creditors will remain protected .

¶85

Admittedly, the mortgaged properties in question were purchased much prior to the commission of Offence of Money Laundering as they were purchased in the years 1994, 1997, 1998, 1999, 2000, 2002, 2003, 2005 when the Borrowers had not been sanctioned any credit limits, therefore, the same do not come within the scope of Proceeds of crime in terms of Section 2(u) of PMLA, 2002.

¶86

There is no denial that the commencement of alleged commission of offence of Money Laundering was started by the Company and its promoters from the end of the year 2011 and 2012 onwards which is much later to the acquisition of the mortgaged properties in question.

¶87

Prior mortgage charge of secured creditors have also been registered qua the mortgaged immovable properties stating that these are under the mortgage charge of the Bank since 2005.

¶88

SARFAESI Act measures under Section 13(2) and Section 13(4) were initiated in the year 2013 and Bank‟s OA for recovery of dues under RDB, Act was filed in the year 2014 and DRT order dated 20.01.2014 restraining the Borrowers and Guarantors to deal with the mortgaged properties are much

¶89

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¶90

prior to the passing of the PAO order 31.03.2016 by the ED. Bank‟s OA for recovery.

¶91

The appellant is always at liberty to approach the Special Court to initiate the proceeding for disposal of mortgaged property, if so desired, who is agreeable to deposit the excess amount if such situation will arise. Counsel for appellants after taking the instructions from his clients stated that his clients are duty bound to deposit the excess amount with the respondent.

¶92

23 The Appellants have nothing to do and has no connection with the allegation of crime committed by the borrowers. They are not involved for the offences of money-laundering. The mortgage properties are admittedly not derived from criminal activities or proceed of crime. The scope of the PMLA is to punish the accused person and not to punish the innocent person who is not involved in the crime within the meaning of Section 2 (v) read with Section 3 of the Act. The appellants are not charge sheeted nor any prosecution complaint has been filed against the appellants.

¶93

There is no nexus whatsoever, between the alleged crime and the appellants who are mortgagee of the properties and is a victim of the fraud and is innocent party. The definition of proceed of crime as per Section (u) of the Act comprises of the property which is derived or obtained as a result of criminal activities. The mortgaged properties are not acquired from proceed of crime.

¶94

The scheme of the Act is such that is cannot apply to a transaction of the nature as in the present case against the appellant. Money of appellant is a public money and its right under SARFAESI cannot be taken away by the

¶95

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¶96

attachment order, in case the attachment continues against the mortgage property, in all matters the economy of the country would suffer.

¶97

If paras 167 to 169 are read co-jointly with para-163 and 165, it is clear from the same that if the attachment has attained finality or if order of confiscation has been passed, the claim and legitimate interest will have to be inquired by the Special Court. The said findings are correct if the situation in the present appears are the same. In the present case, attachment has not attained finality or any confiscation has been passed or any trial has commenced under the Section-4 of PMLA against the appellants. In fact, appellants are innocent parties. They are victim. The trial against accused parties may take number of years. Their case is squarely covered under para-163 and 165 of the judgement.

¶98

In terms with the statutory safeguards incorporated in the Act, any party aggrieved by the confirmation of the Provisional Attachment Order by the Adjudicating Authority may challenge such confirmation in an appeal to this Tribunal u/s 26 of the Act and then before the Hon‟ble High Court U/s 42 of the Act against the order of this Tribunal. Accordingly, under the legislative and statutory scheme of the Act, unless a party has exhausted its remedies in appeal right up to the Hon‟ble High Court, an order confirming the attachment cannot be said to have attained finality. This tribunal is only concerned with the validity of the impugned order and provisional attachment order which has been confirmed.

¶99

Therefore, this Tribunal possesses the requisite jurisdiction in terms with the Act as the court of first appeal, to adjudicate upon the pleas of the Appellant and determine the bonafides and legitimacy of its claims as well as the legality of the Provisional Attachment Order. Upon an argument being raised by the Enforcement Directorate that claims of third parties are to be F P A - P M L A - 1 6 1 6 / D L I / 2 0 1 7 P a g e 14 | 16

¶100

solely adjudicated by the Special Court before whom trial is pending, the Hon‟ble High Court of Delhi in the Axis Bank Decision has held that the claim of a party asserting a bonafide and legitimate claim would be inquired into by the Special Court only if the order confirming the attachment “has attained finality”. An order cannot be said to have attained finality until and unless all the remedies under the Act have been exhausted. No doubt the bank and financial institutions are always at liberty to approach the Special Court (if so desired) in order to invoke the amended provision of sub section 8 of Section 8, however, it is wrong to suggest that the bank and financial institutions are not entitled to challenged the order of attachment because this tribunal is only exclusively having jurisdiction to examine the validity of attachment and to decide the same under section 26 of the Act as to whether attachment was valid or not. The bank and financial institution are entitled to take the remedy before the Special Court after the decision of appeal or during the pendency of appeals.

¶101

In view of judgement passed by the High Court also, I am of the view that the Provisional Attachment Order dated 31.03.2016 passed by ED and impugned order dt. 22.09.2016 passed by the Adjudicating Authority, PMLA, confirming the Provisional Attachment Order are to be quashed and set aside.

¶102

In the light of above, the present appeals are allowed in terms of the Judgement dated 02.04.2019 passed by the Hon‟ble High Court of Delhi in Crl. A. No. 1076/2018. The appellants undertake to deposit the excess amount after appropriation of its long outstanding dues pending in the loan a/cs.

¶103

The impugned order dated 22.09.2016 is set-aside. Consequently, Provisional Attachment Order is also quashed in respect of mortgaged properties of the appellants.

¶104

F P A - P M L A - 1 6 1 6 / D L I / 2 0 1 7 P a g e 15 | 16

¶105