Partly allowed

FPA-PMLA-2533/CHN/2018 of M/s. Altico Capital India Pvt. Ltd. Mumbai v/s The Deputy Director, Directorate of Enforcement Chennai, M/s. Vgn Property Developers Pvt. Ltd. Chennai, M/s. Il&Fs Trust Company Ltd. Chennai & M/s. Altico Capital India Pvt. Ltd. Mumbai

ATFP14 Feb 2019FPA-PMLA-2533/CHN/2018

Case brief

AI extract

What is this about?

The Tribunal disposed of appeals against an order confirming provisional attachment of property. It held that lenders holding security interests were not proceeds of crime and quashed the attachment of mortgaged assets for them. For the primary borrower, the order was modified to require security instead of attaching the main property.

What did the court decide?

Provisional Attachment Order set aside for lenders; for borrower VGN, property released subject to furnishing a sum of Rs. 115 crores as surety rather than attachment.

FPA-PMLA-2533/CHN/2018 of M/s. Altico Capital India Pvt. Ltd… — Money Laundering | ATFP (2019)

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

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Date of Decision :14^th February, 2019

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1. FPA-PMLA-2534/CHN/2018
M/s. PHL Finance P. Ltd (Piramal Group)	… Appellant
Versus
1. The Deputy Director, Directorate of Enforcement Chennai	… Respondent no. 1
2. M/s. VGN Property Developers Pvt. Ltd. Chennai	… Respondent no. 2
3. M/s. IL&FS Trust Company Ltd. Chennai	… Respondent no. 3
4. M/s. Altico Capital India Pvt. Ltd. … Mumbai	Respondent no. 4

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Advocates/Authorized Representatives who appeared

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For the appellants :Shri Manoranjan Sharma, Advocate

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For	the respondent no. 1 : Mr. Mohd.	Faraz,	Advocate
2.	FPA-PMLA-2533/CHN/2018
	M/s. Altico Capital India Pvt. Ltd Mumbai	...	Appellant
	Versus
	1. The Deputy Director, Directorate of Enforcement Chennai	…	Respondent no. 1
	2. M/s. VGN Property Developers Pvt. Ltd. Chennai	…	Respondent no. 2
	3. M/s. IL&FS Trust Company Ltd. Chennai	…	Respondent no. 3
	4. M/s. PHL Finance Pvt. Ltd. … Mumbai	Resp	ondent no. 4

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FPA-PMLA-2534, 2533 & 2498/CHN/2018

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Page 1 of 33

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Advocates/Authorized Representatives who appeared

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For the appellants :Mr. Sidhartha Aggarwal, Advocate

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Mr. Nikhil Pillai, Advocate

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For the respondent no. 1

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: Mr. Mohd. Faraz, Advocate

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3. FPA-PMLA-2498/CHN/2018

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M/s. VGN Property Developers P Ltd. … Appellant Versus 1. The Deputy Director, … Respondent no. 1 Directorate of Enforcement Chennai 2. M/s. IL&FS Trust Company Ltd. … Respondent no. 2 Chennai 3. M/s. PHL Finance Pvt. Ltd. … Respondent no. 4 Mumbai 5. M/s. Altico Capital India Pvt. Ltd. … Respondent no. 4 Mumbai

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Advocates/Authorized Representatives who appeared

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For the appellants :Mr. Nikhil Rohtagi, Advocate

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Mr. Shashank Khurana, Advocate

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For the respondent no. 1 : Mr.Mohd. Faraz, Advocate For the respondent no. 2 : Mr. Nikhil Pillai Advocate & Mr. Krishna Datta Multani, Advocate For the respondent no. 3 : Mr. Manoranjan Sharma, Advocate For the respondent no. 4 : Mr. Siddharth Aggarwal, Advocate Mr. Nikhil Pillai, Advocate CORAM JUSTICE MANMOHAN SINGH : CHAIRMAN SHRI G.C. MISHRA : MEMBER

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FPA-PMLA-2534, 2533 & 2498/CHN/2018

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JUDGEMENT

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FPA-PMLA-2534/CHN/2018, FPA-PMLA-2533/CHN/2018 &FPA-PMLA2498/CHN/2018

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By this order, we propose to decide the above-mentioned three appeals filed by the appellants under Section 26 of the Prevention of Money Laundering Act, 2002 against common Order dated 27.07.2018 passed by the Adjudicating Authority confirming the provisional attachment order no. 02/2018 dated 13.02.2018 passed in O.C. No. 897/2018 dated 6.3.2018 in ECIR/CEZO/01/2017 dated 06.01.2017.

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All the appellants have separately argued theirrespective appeals. The facts are common so as the legal issues, thus, by single order these are being decided.

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The main allegations of the ED in the present case is that wrongful gain to the Appellant M/s. VGN Proprty Developers Pvt. Ltd. and wrongful loss to the Government of India of Rs. 115 Crores has been caused by sale of the property admeasuring about 10.46 Acres in Guindy Village, Chennai (hereinafter referred to as the “said property” ) at a sale price of Rs 272 Crores whereas the guidelines value for the same was Rs. 387 Crores (and hence the loss).

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The brief facts are that on 28.12.2016, the Central Bureau of Investigation, Anti-Corruption Branch, Chennai registered FIR RC MAI 2016 A0050 under Sec.120-B, 420 IPC and Sec.13(2) r/w 13(1)(d) of the Prevention of Corruption Act, 1988 against Mr. Leon Terattil, then DGM and Mr. Ramadoss, then Chief Manager of State Bank of India and Mr. D.P Gupta , C.O.O of M/s HTL Ltd, Mr. D. Pratish, Managing Director of M/s VGN Developers P Ltd and M/s VGN Developers Ltd. The allegation in the FIR is that M/s HTL, thiru-Vi-Ka-Industrial Estate, Guindy, Chennai, a public Sector enterprises of Government of India was financed by consortium of banks consisting of State Bank of India, Indus Bank, Axis Bank and South India Bank Ltd; in order to repay the debts and outstanding loans, M/s HTL Ltd FPA-PMLA-2534, 2533 & 2498/CHN/2018 Page 3 of 33

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proposed to sell 11.021 acres of land in Thiru-Va-Ka-Industrial Estate; after approval from the concerned department, HTL conducted online auction on 07.03.2007 and M/s RMZ Properties P. Ltd, Bangalore emerged as successful bidder by quoting Rs.27.10 crores per acre aggregating to total of Rs.298 crore; the Government of Tamil Nadu (SIDCO) raised objection to the sale of land and the matter was taken up before the High Court of Madras and the Hon‟ble Supreme Court finally ordered in favor of M/s HTL Ltd in 2009; in 2009, SBI leader of Consortium of banks took possession of the land and initiated proceedings under SARFAESI Act to recover the dues of the Consortium banks. It was further alleged that the SBI sold the land measuring 10.46 acres of HTL Ltd on 15.03.2013 by way of private treaty to M/s VGN Developers P Ltd for an amount of Rs.272 crores. Shri. Leon Terattil,

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then DGM and Shri Ramadoss, then Chief Manager of SBI and Shri. D.P Gupta CEO of M/s HTL Ltd who represented SBI working capital consortium meeting, in order to favor M/s VGN Developers P Ltd and its Managing Director had deliberately resorted to the method of private Treaty instead of public auction for disposal of the said property. It is further alleged that as per the State Revenue Records the guideline value of the property during 2013 was Rs.387 crores and the property was bidded for Rs.298 crores in the online auction held in 2007. The allegation is that the above-mentioned persons conspired among themselves and sold the land for a lesser value and thereby caused wrongful loss to Government of India.

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On 06.01.2017, Directorate of Enforcement registered ECIR/CEZO/01/2017 against the persons mentioned in the preceding paragraph on the basis of FIR RC MAI 2016 A0050.

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On 13.02.2018, in pursuance to the above said ECIR, the Respondent No.1 proceeded to pass a Provisional Attachment Order (hereinafter referred to as the PAO) No 02/2018 and inter alia provisionally attached the land

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FPA-PMLA-2534, 2533 & 2498/CHN/2018

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admeasuring 10.46 acres mentioned above, to the extent of INR 115,00,00,000/- (Rupees One Hundred and Fifteen Crores).

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The copy of the said Provisional Attachment Order was forwarded, along with the materials relied upon therein, to the Adjudicating Authority as required under Section 5(2) of the Act.

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Further, a complaint dated 05.03.2018 in terms of Section 5(5) of PMLA, 2002 was filed by the Deputy Director, Directorate of Enforcement, Chennai before the Adjudicating Authority (PMLA), New Delhi, which was taken cognizance of by the said authority vide Original Complaint (OC) No. 897/2018.

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The Adjudicating Authority disposed of the above said complaint and confirmed the PAO No. 02/2018 dated 13.02.2018 vide Order in OC No. 897/2018 dated 27.07.2018, with the conclusion that the properties attached are proceeds of crime involved in money laundering.

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Case of M/s. PHL Finance P. Ltd. (Piramal Group)( for short PHL)

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PHL Finance P. Ltd. (Piramal Group)( now known as Piramal Capital & Housing Finance Ltd.) has preferred an Appeal bearing no. FPA-PMLA2534/CHN/2018. PHL is also arrayed as respondent no. 3 in the appeal filed by the borrowers M/s. VGN Property Developers P Ltd. (for short VGN) in Appeal no. 2498/2018 and M/s. Altico Capital India Pvt. Ltd (for short Altico ) as respondent no. 4.

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M/s. Altico Capital India Pvt. Ltd ( who are reputed RBI registered nonbanking institution) have a first-ranking charge on the said property, which is clear from the reasons recorded by the Adjudicating Authority in its Order dated 16.03.2018.

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It is the common case of all the appellants that the present case is not covered under the case of propositions of PMLA as PHL Finance P. Ltd. (Piramal

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Group) and M/s. Altico Capital India Pvt. Ltd together have stake in the said property since they had jointly lent more than 90% towards the construction for the said property along with the money lent for constructions purpose in the said property. The said property is mortgaged with them through a Debenture Trustee, i.e. Respondent no. 2/ M/s. IL & FS Trust Company Ltd. in VGN appeal.

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It is submitted on behalf of PHL and Altico that if VGN fails to repay the loan, they have a right to bring the said property to sale and to recover their dues. This valuable right will be lost by the order of the attachment and for long trial against the borrowers. They cannot wait for such long period of time till the time final determination of criminal cases pending against the VGN i.e. under the schedule offence and PML Act, 2002. Therefore, the Adjudicating Authority erred in ignoring the statutory right of both, who is none other than a victim for none of its faults. Both are admittedly not involved in any matter either schedule offence or under PML Act, 2002. They are not arrayed as accused in FIR nor they have been charge-sheeted.

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As per them one M/s HTL (formerly, Hindustan Teleprinters Limited) had availed loans from a consortium of banks led by theState Bank of India.In order to clear the dues of M/s HTL, it appears that efforts weremade to sell the subject Property from March/April 2007onwards. However, as per details available on record, the sale could not go through,owing to the Government of Tamil Nadu objecting to the sale ofland to the bidder. After various rounds of litigation, andpursuant to an order of the Hon'ble Supreme Court in 2009, theconsortium of banks was permitted to take possession of the landand they initiated proceedings under the Securitisation andReconstruction of

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FPA-PMLA-2534, 2533 & 2498/CHN/2018

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Financial Assets and Enforcement of SecuritiesInterest Act, 2002 (“SARFAESI”) to recover the dues owed to theconsortium.

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14.1 In March 2013, after various failed efforts to sell the subject Property through public auction, an offer made by VGN to purchase the subject Property for a sum of Rs. 272 crores pursuant to a SARFAESI action initiated by a consortium of HTL'slenders led by SBI which came to be accepted by the consortium of lenders. The sale of the subject Property by HTL to VGN was completed above the floor price of Rs. 250 crore that was set for the subject Property by the SBI consortium. It is not denied by the respondent no. 1 that it was decision of the consortium and HTL that is the subject matter of the alleged scheduled offence. It is submitted that the Appellant cannot be made answerable for the actions/inactions of HTL or the SBI consortium in the sale of the subject Property. It is further pertinent to note that there was no role/involvement or connection of Respondent No. 2, i.e. VGN.

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14.2 The offer letter from VGN and the payment of the earnest money deposit (10% of the sale price) by VGN was completed in March 2013, i.e. a few months prior to the vendors even being approached for financing acquisition of the subject Property and around May 2013 for financing the payments towards the subject Property.

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14.3 Both lenders - Altico Capital India Pvt. Ltd. and M/s. PHL Finance Pvt. Ltd. (Piramal Group) jointly executed a term sheetdated 28.05.2013 with VGN. As per the understanding, it was decided that towards land acquisition andloan refinancing for an amount of Rs. 290 crore, the subscribers, namely both lenders would be issuedlisted secured nonconvertible debentures. In view of thisarrangement, they would

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FPA-PMLA-2534, 2533 & 2498/CHN/2018

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havethe benefit of a first ranking charge by way of registered mortgageon certain land parcels including the subject Property. It was alsoagreed that they would have the benefit of a charge/assignment of the development rights over the entire mortgaged properties and first ranking exclusive charge onthe monies received in the escrow account maintained for the mortgaged properties including the subject Property.

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14.4 Following this, corporate financial title and technical due diligences were carried out in respect of VGN and the subject Property. After evaluating the security provided by VGN and other parties on various properties including the Subject Property along with additional collaterals(such as, personal and corporate guarantees), the deal wasapproved by the Board of Directors of the lenders fordisbursement of the loan amounts in mid June 2013.

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14.5 Pursuant thereto, IL&FS was appointed as DebentureTrustee for the benefit of the Debenture Holders, i.e. the lenders, through a Debenture Trustee AppointmentAgreement dated 13.06.2013. Upon appointment, Respondent No.3 executed a debenture trust deed dated 14.06.2013 with VGN for the issuance of debentures aggregating to Rs. 280 crore, wherein it was agreed that to secure the debenture payments, VGN would create a first ranking exclusive mortgage and charge of the immovable property, which included the development rights over inter aim the subject Property. An escrow agreement 14.06.2013 was executed between VGN, Respondent No. 3 – IL&FS and HDFC Bank, whereby monies and other payments owed under the Debenture Trust Deed and the other transaction documents would be deposited in the escrow accounts assigned for each of the properties including the subject Property.

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14.6 Finally, an indenture of mortgage was executed by VGN in favourof IL&FS on 19.06.2013 in relation to the Subject Property, which indicated that the exclusive first ranking charge created on the subject Property would continue till the final settlement of the transaction. Annexed herewith are copies of the (a) Debenture Trust Deed dated 14.06.2013; (b) Escrow Agreement dated 14.06.2013; (c) Indenture of Mortgage dated 19.06.2013 for the subject Property; (d) Deed of Hypothecation dated 14.06.2013; and (e) Debenture Trustee Appointment Agreement dated 13.06.2013, which are collectively marked as Annexure - A4 (Colly).

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14.7 Thepayments were disbursed by the vendors towards itsshare in the investment, to the tune of approx. Rs. 140 crore in midJune 2013 and VGN commenced with developmentof the subject Property. Meanwhile, construction work in relation to the project located at the subject Property has commenced. Infact, VGN, had received bookings andconsequent advances from over 450 customers for the flats/ apartments currently under construction in the residential complex being built on the subject Property.

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14.8 VGN has even been granted governmental NOC's in respect of each flat that has been registered in favour of the individual buyers by the lenders relinquishing their proportionate charge in the subject Property in relation to each specific allotment. In the normal and ordinary course of the transaction, funds are released (including from the relevant escrow accounts), for development of the subject Property and for meeting other liabilities (including the outstandings towards the repayment of the financing made available by the lenders. The Adjudicating Authority has failed to appreciate that since they have

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been and continue tooperate as an independent as third party and is entitled to protect its interests as against the VGN by invoking the terms of the various agreements, the PAO could not have been confirmed, it is an admitted fact that the source of their funds do not constitute „proceeds of crime‟.

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14.9 End of 2014, as the projects had received certain approvals and since the project seemed more attractive and could start generating cash flows, VGN wanted to refinance the debenture facility of Rs. 280 crore. Accordingly, it entered into further discussions with PHL for an enhanced and revised debenture facility of Rs. 400 crore. Subsequent thereto, a term sheet was issued by PHL to VGN for Rs. 400 crore debenture facility.

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14.10 Towards the end of January 2015, IL &FS was again appointed as Debenture Trustee and fresh documents for the Rs. 400 crore transaction were entered into. Thereafter, PHL subscribed to the debentures in the first week of February 2015. Subsequently, the earlier debenture issue of Rs. 280 crore was repaid and the new Rs. 400 crore debenture issue came to be the only debt in respect of the subject Property. Based on the diligence reports made available, advanced approval status of theprojects, better financial closure for the project with additionalproject funding, security provided by VGN over the projects, as well as securing guarantees from VGN, purchased the debentures aggregating to Rs. 150 crore from PHL (out of the total issuance of Rs. 400 crore) on a secondary basis in the last week of March 2015. Copies of the (a) Debenture Trust Deed dated 31.01.2015; (b) Escrow Agreement dated 17.02.2015; and (c) Deed of Hypothecation dated 31.01.2015 are filed and marked as Annexure - A5 (Colly).

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As per M/s. VGN Property Developers P. Ltd. and its pleadings in Appeal no. 2498/2018, the relevant facts are as under:-

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15.1 On 28.12.2016 after more than three years of the purchase and development of the subject property on the basis of information received by the Central Bureau of Investigation (hereinafter referred to as “CBI”), Anti-Corruption Branch (hereinafter referred to as “ACB”) Chennai, an FIR being FIR No. RC MA1 2016 A0050 (hereinafter referred to as “CBI FIR”) was registered by the CBI. The allegation was broadly, that wrongful gain to the Appellant and wrongful loss to the Government of India of Rs. 115 Crores has been caused, by sale of the property admeasuring about 10.46 Acres in Guindy Village, Chennai (hereinafter referred to as the “the said property”) at a sale price of Rs. 272 Crores whereas the Guidelines value for the same was Rs. 387 Crores (and hence the loss). The same is merely a notional gain and notional loss. It was alleged that the sale was wrongly done by private treaty instead of by public auction and that sufficient time, paper publication and other guidelines for private treaty sale were not followed. It was alleged that this was done by collusion and connivance of the officials of State Bank of India (hereinafter referred to as “SBI”), Egmore, Chennai branch (SBI being the lead bank in the consortium of Banks that had financed HTL) with officers of M/s Hindustan Teleprinters Ltd. (hereinafter referred to as “HTL”) (HTL being the debtor) and the Appellant Company (being the successful bidder and Vendee of the said property).

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15.2 M/s. VGN filed a Writ Petition in Feb 2018 being WP No. 4194 of 2018 before the Hon‟ble High Court of Judicature at Madras challenging the PAO dated 13.2.2108. However, the said Petition was rejected by the

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Hon‟ble High Court by order dated 26.02.2018 on the ground that since FPA-PMLA-2534, 2533 & 2498/CHN/2018 Page 11 of 33

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statutory remedy was available, the Appellant should go before the Adjudicating Authority. The said order was confirmed by the Division Bench vide order dated 27.04.2018 in W.A. No. 1009 of 2018.

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On 06.03.2018, Respondent No. 1/ ED relying on its PAO filed the present OC, before the Adjudicating Authority under Section 8 of the PMLA, praying for confirmation of PAO. Lastly, it is stated that at the best if ED has any case against VGN, it would have attached the other properties of VGN in order to cover the gap of Rs. 115 crores.

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15.3 There was no mention of about the lenders in relation to the Subject Transaction and even till date, no chargesheet has been filed, despite observations of the Hon'ble Supreme Court in SLP (Crl.) Diary No. 15196 of 2018 in its order dated 07.05.2018, directing the CBI to expedite its investigation.

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15.4. A Petition being Criminal OP No. 21905 of 2017 to quash the CBI FIR had been filed by the Petitioner before the Hon‟ble High Court of Judicature at Madras. The same was rejected by the Hon‟ble High Court vide its order dated 05.12.2017, mainly on the ground that since the investigation is under way, it would be improper to quash the FIR at that stage.

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It is stated by the respondent no. 1 that the lenders cannot absolve from their liability as they had conducted due diligence with the records of the subject property. The subject property has been mortgaged immediately in order to create an encumbrance with an intention to escape the clutches of law.

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FPA-PMLA-2534, 2533 & 2498/CHN/2018

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However, it is not denied by the respondent no. 1 that beinga party lent financial support to VGN Property Developers P Ltd. for Rs. 140 Crore each to acquire the 10.46 acres of land along with M/s. PHL Finance Pvt. Ltd., with the assistance of common Debenture Trustee M/s. IL & FS Trust Company Limited under registered mortgaged deed entered between M/s. IL & FS Trust Company Limited for Rs. 280 Crore vide Doc. No. 2358/2013 dated 19.06.2013 under SRO, Alandur where M/s. VGN Developers P Ltd. have created a first ranking exclusive mortgage and charge of the immovable property, including the development rights over the properties covered under the agreement.

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It is pertinent herein to mention that the immovable property purchased for Rs.272 Crores was mortgaged as above on the same day of purchase, for an amount of Rs.280 Crores.

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M/s. IL & FS Trust Company Limited was appointed as Debenture Trustee for the benefit of the Debenture Holders viz. Appellant and M/s. PHL Finance Pvt. Ltd. In relation to the same the appellant had proportionate first mortgage and charge on the subject property and consequential sale proceeds from the developments.

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It was also alleged by the respondent no. 1 that the sale was wrongly done by private treaty instead of bypublic auction and that sufficient time, paper publication and other guidelines for private treaty sale were not followed. It was also alleged that this was done by collusion and connivance of the officials of State Bank of India, Egmore, Chennai branch (SBI being the lead bank in the consortium of Banks that had financed M/s Hindustan Teleprinters Ltd ( “HTL” )) with officers of HTL (being the debtor) and the Appellant Company (being the successful bidder and Vendee of the said property).

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In nut-shell, the main argument on behalf of ED is that as per the State Revenue records the prevailing guideline value of the property during 2013 was Rs. 387 Crore and the property was bidded for Rs.298 Crore in the online auction held in 2007. On the reasonable belief that the above mentioned persons conspired among themselves and sold the prime land having a guideline value of Rs.387 crore and the market value would be double that of the Guideline value, for only Rs.272 Crore and thus caused a wrongful loss to the Government exchequer to the tune of not less than Rs.115 Crore thereby obtained corresponding wrongful gain to M/s. VGN Developers P Ltd.

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It is submitted by the respondent that the appellant i.e. Financial Institutions if they have a right in the provisionally attached property, may claim the same from the Special Court in accordance with Section 8(8) of the Prevention of Money Laundering Act, 2002. It is also submitted that the complainant/ respondent no. 1 has also recorded some statements of one Shri Ganeshraj and N. Ramadoss after the confirmation of PAO which clearly reveal the conspiracy between VGN and SBI officials. It is also submitted that in the entire transaction, the interest of SIDCO was ignored which should have been protected before the entire transaction was finalized.

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It is submitted on behalf of ED that the case was registered by CBI disclosed commission of criminal offences by above mentioned persons and other unknown public servants or private persons punishable under Section 120-B, 420 IPC and Section 13(2) r/w 13(1) (d) of PC Act, 1988 and hence the Central Bureau of Investigation, Anti-Corruption Branch, Chennai has taken up for investigation vide FIR RC MA1 2016 A0050 dated 28.12.2016. The immovable property derived as a consequence of the aforesaid criminal activities itself is “proceeds of crime” as defined under Section 2(1) (u) of PMLA,2002 and involved in money laundering. It is submitted that by virtue of

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sub-section (1) of Section 5 of the PMLA. The respondent no. 1 is authorized to attach the proceeds of crime possessed “any person” and as per Rule 3 of the Prevention of Money Laundering (Issuance of Provisional Attachment Order) Rules, the respondent no. 1 herein, had issued the Provisional Attachment Order in PAO No. 02/2018 dated 13.02.2018. While issuing the said provisional attachment order, the respondent no. 1 had recorded the reasonable belief on the basis of the materials placed on record and relied upon therein, in detail.

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It is also a matter which is not denied on behalf of respondent no. 1 that VGN filed a Petition being Criminal OP No. 21905 of 2017 to quash the CBI FIR had been filed by the Petitioner before the Hon‟ble High Court of Judicature at Madras.In response to the Criminal OP No. 21905 of 2017, the CBI had filed a counter affidavit wherein it is stated that a mistake had been made in the FIR inasmuch as since HTL was not a government company (the Government having sold 74% out of its 100% shareholding to M/s Himachal Futuristic in the year 2001), there was no loss of Rs 115 Crores to the Government of India. It was stated that rather, the loss was caused to the SBI, due to wrongful waiver of interest by SBI, amounting to Rs. 53.50 Crores. Subsequently, since some of the offences mentioned in the CBI FIR were scheduled offences under the PMLA, an ECIR No. ECIR/CEZO/01/2017 was registered under the PMLA.

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On 05.12.2017, High Court rejected the aforesaid quashing Petition on the ground that since the investigation is under way, it would be improper to quash the FIR at that stage.

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As mentioned that the entire case of ED is that there is a loss of Rs. 115 crores which is a notional loss, though the property has been purchased with bank funds, so the sources of the funds for buying the property is untainted.

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It is the case of the ED that the money received from 461 home buyers is layered. However, at the same time, there is no denial that the money received from home buyers are home loans which they have taken from banks like SBI, HDFC, ICICI, Axis Bank, India Bulls, Indian Bank, Indian Overseas Bank, Andhra Bank, Canara Bank & LIC.

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It is admitted position that after registration of the subject ECIR, despite learningduring investigation that the lenders had a first charge on the subject Property, ED/Respondent No. 1 never called upon the lenders to participate during the course of its investigation, nostatement of any person connected with the lenders wasrecorded under Section 50(2) and Section 50(3) of the PMLA, and noneof the documents in relation to financing of the Subject Propertywere called upon by the Respondent no. 1.

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As per the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016, being the Secured Creditor has a priority over the rights of the Central or Sate Government or any other Local Authority. It is the settled legal position that the above amendment has been introduced to facilitate the rights of the Secured Creditors which are being hampered by way of attachment of properties, belonging to the Financial Institutions/ Secured Creditors, done by/in favor of the Government Institutions.

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The Full Bench of the Hon‟ble High Court of Judicature at Madras in The Assistant Commissioner (CT) Anna Salai-III Assessment Circle Vs. The Indian Overseas Bank &OrsMANU/TN/3743/2016 while acknowledging

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the amount of losses suffered by the Banks and while approving the latest amended Section 31B of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, Hon‟ble High Court held that;

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“ There is, thus, no doubt that the rights of a Secured Creditor to realize secured debts due and payable by sale of assets over which security interest is created, would have priority over all debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or Local Authority. This section introduced in the Central Act is with ''notwithstanding'' clause and has come into force from 01.09.2016. Further it was also held that the law having now come into force, naturally it would govern the rights of the parties in respect of even a lis pending.”

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That the dictum laid down by the Hon‟ble High Court of Judicature at Madras in Dr. V.M. Ganesan Vs. The Joint Director, Director of Enforcement, MANU/TN/2475/2014 is squarely applicable in the present case . In the aforesaid judgment, Hon‟ble High Court rightly considered and explained the various grievances faced by the financial institutions in PMLA cases. Relevant extract of the judgment is as follows;

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“For instance, if LIC Housing Finance Limited, which has advanced money to the Petitioner in the first Writ Petition and which consequently has a right over the property, is able to satisfy the Adjudicating Authority that the money advanced by them for purchase of the property cannot be taken to be the proceeds of crime, then the Adjudicating Authority is obliged to record a finding to that effect and to allow the provisional order of attachment to lapse. Otherwise, a Financial Institution will be seriously prejudiced. I don’t think that the Directorate of Enforcement or the Adjudicating Authority would expect every Financial Institution to check up whether the contribution made by the Borrowers towards their share of the sale consideration was lawfully earned or represent the proceeds of crime. Today, if the Adjudicating Authority confirms the provisional order of attachment and the property vests with the Central Government, LIC Housing Finance Limited will also have to undergo dialysis due to the illegal kidney trade that the Petitioner in the Writ Petition is alleged to have indulged in. This cannot be purported of the Act.”

¶106

This Appellate Tribunal by judgment dated 2^nd August, 2018 in Standard Chartered Bank Vs. The Deputy Director, Directorate of

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Enforcement, Mumbai (FPA-PMLA-1604/MUM/2017) held that the provisions

¶110

of the amended SARFAESI Act prevails over the provisions of the PML Act because the Amended SARFAESI Act is the subsequent legislation to the PML Act. Section 26 E of the SARFAESI (Amendment) Act, 2002 is relevant which is extracted hereunder;

¶111

“26 E. Notwithstanding anything contained in any other law for the time being in force, after the registration of security interest, the debts due to any secured creditor shall be paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or localauthority.”

¶112

The right of the lenders over the said land is not contrary to proviso to Section 5 of the PML Act, 2002, because the encumbrance over the said property in favor of the Appellant was not created to defeat the purpose of PMLA. In the present case, there is no allegation to this effect. By virtue of the proviso the said land being charged in favour of the lenders and they have the primary right over the said land which cannot be hampered by an order of attachment.

¶113

The lenders are reputed lending institutions and are innocent victims of the proceedings initiated under PMLA Act. Admittedly the lendersis not an accused named in the FIR or the ECIR. There is not even a whisper in relation to the Appellant participation in the alleged scheduled offence. On perusal of the PAO, complaint and notice issued to the Appellant proves that the Appellant has been arraigned as a Respondent in the proceedings, only in view of its prior charge over the said land.

¶114

This Appellate Authority in State Bank of India Vs. Joint Director, Directorate of Enforcement (FPA-PMLA-2121/DLI/2017) dated 06.02.2018

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while considering a similar issue wherein SBI on the basis of a loan had been vested with a prior charge to the attached property, in that case, strucked down the Provisional Attachment Order confirmed by the Adjudicating Authority. This Hon‟ble Appellate Tribunal in the said case held that;

¶117

“ 51.The Ld. Adjudicating Authority has failed to understand that Appellant Bank has heavy stakes in the properties as they have lent its valuable money to the borrowers. The property is mortgaged to the Appellant Bank. If borrower fails to repay the loan, the Bank has a legal right to bring the properties to sale and recovery its due. Valuable right will be lost for the Appellant, by order of attachment and eventual confiscation.

¶118

52.The bank in the present case are just victim and not accused. If the attachment would continue against the mortgaged property of the banks in this matter, the economy of the country would suffer. The banks in the present case have proceeded with the matter in good faith and are not involved in the offence of money laundering.

¶119

53.In the present case, even though the Ld. Adjudicating Authority had all the reasons to believe that the abovementioned were mortgaged to the Appellant Bank and that the Appellant/ SBI had prior charge over the subject matter/ five properties; still the Ld. Adjudicating Authority confirmed the provisional attachment order of the Respondent No.1 and have caused huge loss to the Appellant/SBI. Both ED and Adjudicating Authority have failed to apply the law on the subject. Had the consulted the law and provisions of PML Act, 2002, in meaning of manner, the PAO and impugned order not to have been passed.

¶120

54. The Adjudicating Authority has not examined the law on mortgage and securities. The Appellant Bank is liable to recover huge amounts in the above loan accounts and the appellant bank being the mortgagee/ transferee of the interest in the properties is entitled to recover its dues with the sale of the properties. The properties stood transferred by way of mortgage to the Appellant Bank much before the alleged criminal action. The alleged proceeds of crime has not been used for acquiring the mortgage properties.

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57. The property of the Appellant Bank cannot be attached or confiscated when there is no illegality or unlawfulness in the title of the Appellant and there is no charge of money laundering against the Appellant. The mortgage of property is the transfer under the Transfer of Property Act as there is no dispute as regards the origin of funds or the title of the properties. The bank had to recover its out-standing dues by taking over the possession of the mortgaged properties in case the borrowers are not able to pay back the amount.

¶124

58. The Respondent No.1 has no lien over the said properties as the Appellant Bank is now the legal transferee of said properties. The said recipient cannot retain the property over which he has no legal title and the property should be returned to the lawful owners because the bank is victim and even after trial, he is to receive back the said properties being victim party u/s 8(8) of the Act. However since the averment is carried out in law, the bank is entitled to dispose the mortgaged property without any delay.”

¶125

The above dictum are squarely applicable in the case of the Respondent No. 2 also and hence the impugned Order is liable to be set aside. It is further submitted that the dictum is reaffirmed by this Hon‟ble Appellate Tribunal in the case Standard Chartered Bank Vs. The Deputy Director, Directorate of Enforcement, Mumbai (FPA-PMLA-1604/MUM/2017) .

¶126

It is submitted on behalf of lenders that the Adjudicating Authority erred in ignoring the judgment of this Appellate Tribunal in Indian Performing Right Society Ltd Vs. The Deputy Director, Directorate of Enforcement, Mumbai in FPA-PMLA-1302/MUM/2016 dated 22.06.2017. In the said judgment this Appellate Tribunal held that;

¶127

“It is clear that innocent person can approach the Adjudicating Authority of any competent Court to demonstrate his innocence that he has not received any proceeds of crime. The consequence of this is that while considering whether all or any of the properties provided under notice issued u/s 8(1) are involved in money laundering, the Adjudicating Authority can take into consideration the plea of innocence raised

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by any person and also the fact as to whether the property which has been attached has any nexus whatsoever with that of money laundering or not if the person before the Tribunal/Adjudicating Authority is liable to demonstrate that he neither directly nor indirectly has attempted to indulge nor with knowledge or ever assisted any process or activity in connection with proceeds or crime and the question of his involvement does not arise as he is third party, then the Tribunal/ Adjudicating Authority can consider the said plea depending upon whether there exist bonafide in the said plea or not and proceed to adjudicate the plea of innocence of the said party.”

¶131

It is submitted on behalf of VGN that the Adjudicating Authority failed to appreciate that the whole basis of the CBI FIR as well as the registration of the ED‟s ECIR and all subsequent proceedings, is that loss has been caused to the Government by selling of the said property at Rs 272 Crore whereas the Guideline value is Rs 387 Crore.

¶132

Buying a property at less than the guideline value is not a crime and therefore does not constitute proceeds of crime.

¶133

It is settled law that the guideline value of a property is issued under the relevant Stamp Act and is only for the purpose of ensuring that even if the actual consideration paid by a buyer for conveyance of an interest in immovable property is less than the guideline value (also called Circle Rate), the stamp duty on the transaction is paid as per the Circle Rate.

¶134

It is also well settled as held by the Hon‟ble Supreme Court in R. Sai Bharathi v alalitha (2004) 2 SCC (9) Para 22 to 24 as well as in Ramesh Chand Bansal v District Magistrate, Ghaziabad (1999) 5 SCC 62that guideline value/circle rate notified by the State Government is only a guide to help the registering officer to have the requisite “reason to believe” that the property is

¶135

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¶136

under-valued, has to register it and then refer the matter to the Collector to determine its market value.

¶137

As per practice in the trade, it is not an absolute or infallible guide to determine market value and it is statutorily open for the parties to the transaction to show that the actual market value of the property is less than the guideline value. Guideline value is not sacrosanct but only a factor to be taken note of, if at all available in respect of an area in which the property transferred lies. By no stretch of the imagination can a sale at less than guideline value be construed as causing a loss.

¶138

It is well settled that, in land acquisition proceedings, the market value for the acquired land are to be fixed by the land Acquisition Collector and the valuation fixed under section 47A of the Indian Stamp Act cannot be the market value and it will be a guideline value only. This clearly shows that the Guideline value is only relevant for the purposes of registration of the instrument effecting the conveyance under the relevant Stamp Act. The Guideline value under the Stamp Act cannot be used, even as a guide, to judge the sufficiency of valuation of a property determined under another law, as held by the Hon‟ble Supreme Court in JawajeeNagnathan v. Revenue Divisional Officer (1994) 4 SCC 595 and K.S. Shivadavamma v. Assistant Commissioner& Land Acquisition Officer (1996) 2 SCC 62 (See Para 5) as well as in UP Jal Nigam, Lucknow vs Kalra Properties (P) Ltd., Lucknow (1996) 3 SCC 124 (See Para 5).

¶139

The Adjudicating Authority has also failed to appreciate that the guideline value of Rs 387 Crore, even otherwise was on the basis of the said property being a commercial property, whereas admittedly the said property had been converted to residential use by GOM dated 16.4.2012. Therefore even this guideline value of Rs. 387 Crore is incorrect for the said property and FPA-PMLA-2534, 2533 & 2498/CHN/2018 Page 22 of 33

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ought to have been much lower.

¶141

It is argued on behalf of VGN that the Adjudicating Authority erred in disagreeing with the Appellant‟s contention that the State Government has subsequently revised the guideline value and reduced the price by 33% on 9.6.2017 and therefore no loss has been occasioned.

¶142

Prima facie, it is evident that the Adjudicating Authority failed to appreciate that even no prima facie is made out the offence of money laundering.It is a primary and crucial requirement as per Section 3 of the PMLA Act, that the proceeds of crime or “tainted” money must be projected as untainted. In other words, there must be conversion/projection of ill-gotten money into money from legitimate sources. For this it is obvious that there must be some connection between the tainted money and the untainted money.

¶143

In the present case, the gain to the Appellant is presumably alleged to be Rs 115 Crore (which in any case is only notional gain), being the difference between the guideline value and the sale price of the said land to the Appellant. A fortiori, this would mean money illegally saved (and therefore earned) by the Appellant which it would have normally paid. This saved amount, then, would be the “proceeds of crime”. It is not understood as to how the ED has treated the said property as the proceeds of crime or how the same has been allegedly projected as untainted.

¶144

No doubt, for the sake of argument, if the property was purchased at lesser value with the connivance of bank officer, at the best the complaint filed by the CBI would be decided as per its own merit. However, as far as amount spent on sale of plot was untainted amount which was paid by lenders against the security.

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¶147

There is no denial that after the clarification made by the CBI in its Counter Affidavit filed before the High Court, the only allegation that remained was of causing loss to the SBI by waiver of interest of Rs. 53.50 crores. This waiver admittedly and can only possibly benefit HTL which took the loan from SBI and not the Appellant which has nothing to do with the transaction between SBI and HTL.

¶148

It is not explained in PAO by the ED and the Adjudicating Authority as to which transaction has occasioned this loss, who are the parties to the transaction, what was the rate of interest, who authorized the waiver of interest, whether such a power existed or not, the procedure for exercise of this power, whether or not this procedure was followed, who has benefitted from the waiver of interest and above all, what exactly is the illegality, if any and if at all such a interest waiver was actually done or not.

¶149

The Adjudicating Authority failed to appreciate that the said property was sought to be auctioned as many as 5 times between 2011 and 2013, out which twice the reserve price was Rs. 209.54 Crores and thrice the price was Rs. 250 Crores. Each of these five auctions was unsuccessful due to lack of interested bidders. It was only in such desperate circumstances that the consortium of banks decided to go for a sale by private treaty.

¶150

Mr. Nikhil Rohtagi has tried to explain us that due process of role has been followed as per norms. The question of protecting the interest of SIDCO does not arise as there is no privity of contract between them. The property was also not purchased from SIDCO. If any dues are there, it was to be cleared by the seller not the purchaser. He has referred number of documents in support of his argument.

¶151

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from an approved valuer (this was done) and then in consultation with the secured creditor, fix the reserve price (this was also done). It further provides for 4 methods of sale, including public auction and private treaty. Both the methods are at par with each other.

¶153

The Adjudicating Authority failed to appreciate that the subject land was bought by the Appellant with the loan of a total of Rs 280 Crores raised from financial Institutions Namely M/s. Piramal Finance P Ltd. and M/s. Altico Capital India Private Limited who are pro-forma Respondents herein. The said property was purchased at Rs. 272 Crores out of the availed sum of Rs. 280 Crores by providing the company‟s other assets as collateral Security.

¶154

In the present case, the reserve price of the said property was fixed as Rs.250 Crores by a properly constituted Stressed Asset Management Credit committee of the SBI in accordance with its guidelines and circulars as assessed by the approved valuers of the SBI . The same is a standard procedure and is followed in every case in which a stressed asset has to be sold. The same is evident from the statement of Shri N. Ramadass, Chief Manager, SAM Branch, Coimbatore, SBI. One is also failed to understand that after expiry of 3 years, the issue was raised.

¶155

After the conversion of the said property to residential use (which was done because of lack of interest in auctions), RMZ (which had earlier made a bid of 298 Crores) was contacted and it refused to participate in further auctions saying they are interested in commercial, not residential land. This was the reason that there was no going back to RMZ‟s earlier offer of Rs 298 Crores

¶156

The Adjudicating Authority has not complied with the mandatory requirement of section 8(2) (a) of the PMLA, as per which the Adjudicating FPA-PMLA-2534, 2533 & 2498/CHN/2018 Page 25 of 33

¶157

Authority has to deal with the reply to the show cause notice filed by the person whose property has been provisionally attached. The Hon‟ble Delhi High Court in its judgment dated 02.09.2015 in WP(C) 8266 of 2015 titled Farida Begum Biswas v UOI held that that the accused is entitled to explain the sources of income, earning or assets, out of which or by means of which he has acquired the property, lead evidence and furnish any other information in his possession to justify the legitimate means of acquiring the properties in dispute. It is only after taking all the submissions of the accused and documents brought on record to establish the sources of his property so attached that the adjudicating authority takes a final decision on the same.

¶158

As is evident from the impugned order, only the oral submission of the counsel have been considered and not the reply filed by the Appellant. This has caused detriment to the Appellant, inasmuch as certain important facts/contentions which were made in the Reply have not been considered. One such example is the contention at Para 6.3 of the Reply, relating to the Guideline value being for commercial properties whereas the said property had been converted to residential, which has not even been considered by the Adjudicating Authority.

¶159

It is relevant to mention herein that a sum of Rs. 29 lakhs was collected from the Appellant due to interest on delayed payment which shows that no favours were shown to the Appellant.

¶160

It is stated on behalf of appellants that due to the ongoing attachment by the ED, there is an encumbrance on the property attached, reflecting in the sub-registrar‟s office. Unfortunately, pursuant thereto, banks which have given home loans to the home buyers have stopped disbursing money. This money was one of the sources being utilized for construction by the Appellant.

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¶163

It is also submitted that theAdjudicating Authority failed to appreciate that a sale by private treaty is eminently legal and is specifically allowed by Section 13(4) of the SARFAESI Act, 2002 read with Rule 8(5) of the Security Interest (Enforcement) Rules 2002. In fact, there is no requirement to even publish the same in a newspaper as per Rule 8(6); the same only arises in case of sale by public auction or inviting tenders from the public. The stand of lenders has not been discussed either in PAO or in the impugned order.

¶164

It is alleged on behalf of VGN that as of now, the construction has come to a crawl resulting in huge inconvenience to the Appellant as well as the home buyers. As pointed out in various application filed by the Appellant before this Tribunal, the home buyers are understandably agitated and have been turning up at the construction site and at the registered office of the Appellant shouting slogans, demanding action.

¶165

It is argued by Mr. Rohtagi that theVGN apparently unable to register sale deeds, constructions agreements after collecting money from innocent middle class home buyers who have invested their hard earned money. Therefore, the fund flow has stopped completely and the Appellant is unable to service its own interest and principal payments to its lenders.The Appellant has entered into registered construction agreements with the customers and have legal obligations to deliver the project by September 2019 as per the Real Estate (Regulation and Development) Act, 2016 ( „RERA‟ ) which now looks difficult as a result of the attachment by the ED.

¶166

It is submitted on behalf of the appellant that in view of the said attachment of the flats of 461 buyers, they have become angry/frustrated & irritate and are disturbed in view of attachment and unreasonable and

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groundless threat of taking the possession of all flats by the respondent no. 1. They have spent the amount from their retirement benefits.

¶170

Many of them have taken loan from the banks to purchase the flats. Photographs are shown to us that they are trying to commit suicide in front of the construction place. Due to attachment order, the construction has been stopped. It is alleged that VGN is a very old and well respected real estate compay.

¶171

The buyers have spent their savings for purchase of flats in the building. They want to see some progress of the construction of the building as they have invested their hard earned money. The buyers are victim and innocent parties. They are not involved in any matters. They are admittedly not involved in any offence either under the scheduled offence or under the PMLA. They are not the parties. They were never served with any notice as per the mandatory notice under section 8(1) of the Act. Admittedly the plot was purchased after taking the loan from financial institutions who are the secured creditors. The question of proceed of crime for purchasing the plot does not arise.

¶172

The amount of hundreds crores of rupees have been involved by purchasing the land and construction carried out on the flats. The amount was disbursed by the financial institutions (who are the secured creditors). If cse the buyers will stop paying the remaining amount, the entire project would be collapsed. The property has already been mortgaged with the lenders. They have purchased the flat after spending their life time saving. Some of them invested their retirement benefits.

¶173

The respondent no. 1 was fully aware on the date of passing the PAO that the property in question is also mortgaged with the lenders but despite of

¶174

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that, the respondent no. 1 failed to trace out other property of VGN in order to secure the amount of Rs.115 crores if any caseat all is made out.

¶176

The important and vital issue is also involved in the present case which is to be determined while deciding the appeal is as to whether the ED (Respondent no. 1) has complied the second mandatory proviso of Section 5(1) the Act while passing the provisional attachment order.

¶177

The provisional attachment order was passed without filing the report under Section 173 of the Cr. P.C. against the appellant. The respondent no. 1/ ED has attached the property by invoking the 2^nd proviso of Section 5(1) of the Act where wide power is given to attach the property on the basis of material without filing the charge sheet or report under section 173 of Cr. PC / or a complaint.

¶178

In order to appreciate the same, Section 5(1) reads as under:-

¶179

5. Attachment of property involved in moneylaundering – (1) Where the Director or any other officer not below the rank of Deputy Director authorized by the Director for the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession that –

¶180

(a) any person is in possession of any proceeds of crime; and

¶181

(b) such proceeds of crime are likely to be considered, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter,

¶182

he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and eighty days from the date of the order, in such manner as may be prescribed:

¶183

Provided that no such order of attachment shall be made unless, it relation to the scheduled offences, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person

¶184

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authorised to investigate the offence mentioned in that Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or a similar report or complaint has been made or filed under the corresponding law of any other country.

¶187

Provided further that, notwithstanding anything contained in (first proviso), any property of any person may be attached under this section if the Director or any other officer not below the rank of Deputy Director authorized by him for the purposes of this section has reason to believe (the reasons for such belief to be recorded in writing), on the basis of material in his possession, that if such property involved in money laundering is not attached immediately under this Chapter, the non-attachment of the property is likely to frustrate any proceedings under this Act.)

¶188

No reasons to believe are produced before us in order to satisfy us that the property was attached under second proviso if the same is not attached immediately, the purpose would be frustrated any proceedings. It is alsonot stated either in PAO or in impugned order that the respondent no. 1 has made any efforts to trace out the other property of VGN and respondent no. 1 is unable to find out any other property of the Managing Director/ Director of the Company in view of impugned mortgaged property. The respondent no. 1 has failed to discuss the interest of the buyers who have stake in the attached property.

¶189

The pre-requisite for ordering attachment is that the property to be attached should constitute the proceeds of crime. In the present case, the said project in question prima facie may not be termed as proceeds of crime since the same was acquired by utilizing the money advanced from the appellant and respondent no. 4. Unless the property comes within the definition of the expression „ proceeds of crime’ under Section 2(1)(u) of PMLA, it could not have been attached under Section 5(1)(a) of PMLA. A careful look at the definition of the expression “proceeds of crime” would show that to come within the definition of the said expression, the following pre-requisites are to be satisfied:

¶190

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a. that the same should be any property or the value of any such property;

¶192

b. that it should have been derived or obtained directly or indirectly;

¶193

c. that it should have been obtained or delivered by any person as a result of criminal activity relating to a Scheduled Offence.

¶194

The lenders are admittedly not covered in any of the above propositions as they have stake in the said land since they had jointly lent more than 90% towards the consideration for the said land along with the money lent for construction purposes in the said property.

¶195

Sections 8(2) and 8(3) of the PMLA enjoin the Adjudicating Authority must to “record a finding” as to the involvement of properties in question in money laundering.

¶196

73 The mandate of Section 8(2) cast a stringent duty upon the Respondent no. 1 which is as under:

¶197

“ taking into account all the relevant materials placed on record before him, by an order record a finding whether all or any of the properties referred to in the notice under sub section 1 are involved in money laundering ….”

¶198

The Respondent no. 1 did not follow the mandate of Section 8(2) and the finding was given. No cogent and cohesive reason was given for rejection of the submissions in writing. The impugned order is mechanical, without application of judicious mind and as such is liable to be set at naught. In fact, the replies and material produced by the appellants have not been considered by the Adjudicating Authority. There were no discussions about the stand taken by them in their replies.

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¶201

The respondent no. 1 despite being aware that thelendersthat they prior in time interest in the subject Property, Respondent No. 1 - ED proceeded to pass a PAO No. 02/2018 dated 13.02.2018, wherebyattachedthe subject Property to the value of Rs. 115 crore as proceeds of crime. In the PAO, in the column „Present Status of theproperties‟, the ED identified that the Subject Property wasmortgaged in favour of the lenders and IL&FS i.e.Piramal.

¶202

In the light of above and in the interest of justice, the order passed by the Adjudicating Authority is set-aside by allowing the present appealsfiled by the lenders. The findings are not sustainable in law and the facts of the appeals of lenders.

¶203

With regard to the appeal of VGN is concerned, we wish to impose certain terms and we pass the order to seucre a sum of Rs.115 crores as per the version of the ED and direct the VGN to give a surety of the equal amount . As a matter of fact, at the interim stage, VGN has already offered security of the land having value more than Rs.119 crores situated at Sekkadu Village, Avadi Taluk, Tiruvallur District ad-measuring 10.21 acres, the other property is attached which is owned by the Managing Director/Chairman of VGN.The relevant papers alongwith the affidavit have been filed at the interim stage. If the criminal complaints are finally decided by the Special Court in favour of VGN, the said property shall be released. Till that time, VGN shall not dispose the said property directly or indirectly. Subject to above, the impugned property is releasedforthwith which was attached under the provisional attachment order i.e.admeasuring about 10.46 acres in Guindy Village, Chennai at VGN Fairmont, Thiru Vi Ka Industrial Estate, Guindy, Chennai32and the impugned order of confirmation was passed.

¶204

The following three appeals are allowed.

¶205

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i. FPA-PMLA-2534/CHN/2018

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ii. FPA-PMLA-2533/CHN/2018

¶209

iii. FPA-PMLA-2498/CHN/2018

¶210

It is clarified that this order shall have no bearing in any criminal complaint pending before the Special Court against the VGN. The same shall be decided as per its own merit without any influence of our order. It is admittedpositionthat on the date of passing of PAO, no charge-sheet was filed and even charges are not framed in schedule offence. Thus, we do not wish to express opinion about the stand of the parties.

¶211

In the light of above, the provisional attachment order and impugned order are set-aside/modified. All the three appeals and pending applications are disposed of.

¶212