Allowed

FPA-PMLA-1530/DLI/2016 of Indian Overseas Bank & Others. v/s The Joint Director, Directorate of Enforcement, New Delhi & Ors.

ATFP20 Jan 2020FPA-PMLA-1530/DLI/2016

Case brief

AI extract

What is this about?

The Appellate Tribunal allowed appeals filed by multiple banks seeking to quash the provisional attachment of mortgaged properties by the Enforcement Directorate under PMLA. The court held that the attachment of properties acquired by banks as secured creditors prior to the criminal activity must yield to their legitimate interest, and set aside the orders confirming the attachment, remanding the

What did the court decide?

Impugned order dated 22.09.2016 set aside; Provisional Attachment Order quashed in respect of mortgaged properties; matter restored to Adjudicating Authority.

FPA-PMLA-1530/DLI/2016 of Indian Overseas Bank & Others. v/s The… — Money Laundering | ATFP (2020)

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APPELLATE TRIBUNAL, PREVENTION OF MONEY LAUNDERING ACT AT NEW DELHI

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Date of Decision: 20.01.2020

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1. FPA-PMLA-1530/DLI/2016
Indian Overseas Bank & Others.	…	Appellants
Versus
The Joint Director, Directorate of Enforcement, New Delhi & Ors.	…	Respondents
2. FPA-PMLA-1550/DLI/2016 Andhra Bank	…	Appellant
Versus
The Joint Director, Directorate of Enforcement, New Delhi & Ors.	…	Respondents
3. FPA-PMLA-1551/DLI/2016 State Bank of Hyderabad	…	Appellant
Versus
The Joint Director, Directorate of Enforcement, New Delhi & Ors.	…	Respondents
4. FPA-PMLA-1552/DLI/2016
Canara Bank	…	Appellant
Versus
The Joint Director, Directorate of Enforcement, New Delhi & Ors.	…	Respondents
5. FPA-PMLA-1553/DLI/2016
Vijaya Bank	…	Appellant
Versus
The Joint Director, Directorate of Enforcement, New Delhi & Ors.	…	Respondents
6. FPA-PMLA-1554/DLI/2016 Bank of Baroda	…	Appellant
Versus
The Joint Director, Directorate of Enforcement, New Delhi & Ors.	…	Respondents
7. FPA-PMLA-1555/DLI/2016
State Bank of India	…	Appellant
Versus
The Joint Director,
Directorate of Enforcement, New Delhi & Ors.	…	Respondents

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FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016

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Page 1 of 32

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8. FPA-PMLA-1556/DLI/2016
Oriental Bank of Commerce	…	Appellant
Versus
The Joint Director,
Directorate of Enforcement, New Delhi & Ors.	…	Respondents
9. FPA-PMLA-1566/DLI/2016
Punjab National Bank	…	Appellant
Versus
The Joint Director,
Directorate of Enforcement, New Delhi & Ors.	…	Respondents
10. FPA-PMLA-1581/DLI/2016
Union Bank of India	…	Appellant
Versus
The Joint Director,
Directorate of Enforcement, New Delhi & Ors.	…	Respondents

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Advocates/Authorized Representatives who appeared

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For the Appellants	: Mr. Karan Khanna, Advocate
	Ms. Asmita Kumar, Advocate
For the Respondent no.1 (ED)	: Mr. Naveen Kumar Matta, S.P.P.
JUDGEMENT
SHRI G.C. MISHRA	: ACTING CHAIRMAN

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FPA-PMLA-1530/DLI/2016, FPA-PMLA-1550-1556/DLI/2016, FPAPMLA-1566/DLI/2016 & FPA-PMLA-1581/DLI/2016

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The Hon’ble High Court of Delhi at New Delhi in the matter of Crl. A. 1090/2018 and Crl.M.A. 34832/2018 filed by the Deputy Director, Directorate of Enforcement against the Indian Overseas Bank and others on dated 01.11.2019 passed the following order as below:

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“ It is agreed between the parties that in view of the judgment passed by a coordinate bench of this court in the case bearing Crl. A. 143/2018 in Deputy Director Directorate of Enforcement Delhi vs. Axis Bank and Ors. And other batch matters, the present case be remanded back to Appellate Tribunal for PMLA and the tribunal shall restore the appeal and after hearing both the parties, decide the same within six weeks from the receipt of this order.

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FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016

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Page 2 of 32

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The appeal is disposed of, accordingly. Pending application stands disposed of. ”

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In compliance to the aforesaid order of the Hon’ble Delhi High Court the appeals are restored to file by fixing 28.11.2019 on which date both the parties were present and they were allowed to file written synopsis. Since, the matter is remanded to the tribunal and since the appeal is restored, the present appeals are to be decided in the light of orders passed in Crl. Appeal No. 143/2018 & Crl.M.A. 2262/2018 in the matter of Deputy Director, Directorate of Enforcement, Delhi vs. Axis Bank and other batch matters.

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In view of the above, the appeals are heard afresh. Since, the properties are involved in the present appeals are same and the pleadings are also same, so all the appeals are taken up for hearing together and the present common order is passed.

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The facts of the appeals as per records are as follows: The main allegations in the complaint against borrowers which are recorded in the impugned order are as under:

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(a) M/s. Century Communication Ltd. (hereinafter also referred to as “CCL”), was originally incorporated on 03.05.1995 as Private Limited Company, with Registration No. 55-68152 (PAN AABCC5986H) and converted into Public Limited Co. on 18.12.1996. M/s. CCL is having its registered office at M-14A, Lajpat Nagar, Part-2, New Delhi-24 and Corporate office at Plot No. 17 B & C, Sector-16A, Film City, NOIDA, Uttar Pradesh and is engaged in the business of Media Industry and is providing Production and Post Production facilities like shooting of films, editing and graphic facilities etc.

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FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016

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Page 3 of 32

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(b) The directors of the company are; (i) Mr. Prabodh Kumar Tewari, Managing Director, (ii) Mr. Anand Kumar Tewari, Full Time Director, (iii) Mr. Abhishek Tewari, Full Time Director (iv) Mrs. Meena Tewari, Director and (v) Mr. Ishara Ram Babu, Director. M/s. CCL was banking with Indian Overseas Bank, Industrial Finance Branch, New Delhi since October, 2000 and later shifted to their Defence Colony branch on 30.04.2003.

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(c ) The M/s. CCL availed credit facilities i.e. Term Loan, Working Capital, and LC/LG by the consortium of 10 Banks i.e. Vijaya Bank, Oriental Bank of Commerce, State Bank of India, Canara Bank, State Bank of Hyderabad, Punjab National Bank, Union Bank of India, Bank of Baroda, Andhra Bank and Indian Overseas Bank (Lead Banker). Details of credit facilities availed by M/s. CCL are as under:

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i. On 06.03.2004, a Term Loan of Rs. 58.00 Crore by Consortium of Banks including Rs. 15.0 Crore of IOB was sanctioned by the Banks, for setting up a digital studio at Mumbai. Apart from above, Cash Credit limit was enhanced from Rs. 8.10 Crore to Rs. 12.60 Crore, LC limit from Rs. 1.80 Crore to Rs. 3.00 Crore and fresh LG limit of Rs. 0.60 Crore were sanctioned.

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ii. On 12.03.2005, another Term Loan of Rs. 30.00 Crore by the Consortium including Rs. 10.00 Crore of IOB was sanctioned by the Banks, for setting up a digital studio in company’s Regd. Office at Lajpat Nagar, Delhi, alongwith a Corporate Loan of Rs. 5.00 Crore was sanctioned under “Insta Fund Scheme” to part finance the company’s expenditure towards setting up of two representative offices abroad and towards meeting training expenses of their personnel. During the

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same year the Cash Credit Limit was enhanced from Rs.

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FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016

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12.60 Crore to Rs. 16.20 Crore. LC/LG limit from Rs. 3.60 Crore to Rs. 4.80 Crore. In 2006, the Cash Credit Limit was further enhanced from Rs. 16.20 Crore to Rs. 24.50 Crore and LC/LG limits from RS. 4.80 Crore to Rs. 10.00 Crore. iii. On 01.02.2007, a fresh Term Loan of Rs. 190.52 Crore was sanctioned by Consortium Members including Rs. 45.00 Crore of IOB for setting up another studio at Mumbai and a studio at Chennai. The balance loan amount was sanctioned by other member Banks.

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iv. On 21.08.2009, another Term Loan of Rs. 275.00 Crore was sanctioned by Consortium banks including Rs. 60.00 Crore by IOB for refurbishment of Studio at NOIDA and the expansion of Studio at Mumbai. The balance loan amount was sanctioned by other member Banks.

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v. Apart from above in 2010, Cash Credit Limit was also enhanced to Rs. 63.00 Crore, LC limit of Rs. 8.00 Crore and LG limit of Rs. 2.00 Core by IOB. Besides, onetime LG limit of Rs. 8.75 Crore was also sanctioned for advance payment to be received by SPV formed for post-production job abroad.

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(d) As on 09.01.2012 total outstanding of CCL towards all consortium banks was Rs. 615.56 Crore, out of which lead bank, i.e. IOB, share was Rs. 163.198 Crore.

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The ECIR was recorded on 20.06.2013 by the Enforcement Directorate, Delhi Zonal Office upon registration of an FIR No. RC.BD1/2012/E/0003 dated 23.02.2012, Bank Securities and Fraud Cell of CBI, against M/s. Century Communication Ltd. (CCL), under Section 120-B read with 420, 467, 468, 471 of IPC and under Section 13(2) read with 13(1)(d) of PC Act. The said FIR was filed on the basis of complaint dated 22.02.2012 of Shri G. Ravindra Kumar Gandhi, General FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016 Page 5 of 32

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Page 5 of 32

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Manager, Indian Overseas Bank Personnel Administration Department, Central Office, Annasalai, Chennai- 600 002.

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The Provisional Attachment Order (PAO) No. 02/2016 dated 29.03.2016 passed by the Deputy Director, Enforcement Directorate Delhi Zone New Delhi pursuant to which Original Complaint (O.C.) No. 588/16 is filed before this Authority. The principal Defendants are M/s. Century Communication Ltd. (D-1), Shri Prabodh Kumar Tewari (D-2), Shri Anand Tiwari (D-3), Shri Abhishek Tewari (D-4), Smt. Meena Tiwari (D-5) who are Directors/shareholders of M/s. Century Communication Ltd. (D-1). The D-6 & D-8 to D-16 (who are the appellant nos. 1 to 10 referred above herein) are the various banks, who have under various loan agreements extended diverse credit facilities to D-1.

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By virtue of aforesaid Provisional Attachment Order, the following properties are ordered to be attached belonging to D-1 in respect of the properties at Sr. No(s). 1 to 5. The property at Sr. No. 6 belongs to Shri P.K. Tiwari (D-2), Meena Tiwari (D-5), Anand Tiwari (D-3) and Abhishek Tiwari (D-4). The aggregate value of the detailed six properties is Rs. 111.96 crores.

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Sr. No.	Property Details	Value (Rs. Crore)
1	Plot No. FC-17 B & 17 C, Film City, Sector-16 A Noida, U.P.	52.25
2	Unit No. 1 to 7 on 8^thFloor, Lotus Nilkamal Business Park at Condminium Dalla Industrial Estate, Andheri (West), Mumbai	9.72
3	Unit No. 503 A on 5^thFloor &Entire 6^thFloor at Landmark Condominium 149-150, Pall Road, Bandra (West), Mumbai	23.13

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FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016

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4	Unit No. 201 & 202, 2^ndFloor, Carinthian Premises Owners Association, Plot No. 370, Link Road Khar, Mumbai	7.20
5	Property bearing at 4.0125% undivided share in land with area 2.183 acres in Old Sr. No. 32, 33/2, and 33/3, new serial no. 33/2B, 33/2C1 and 32/2C$ of Nandmbakkam Village, Tambaram Taluk, Kanchipura District at Mount Poonamallee Road, Chennai	7.16
6	Property of Shri P.K. Tewari, Smt. Meena Tewari, Shri Anand Tewari and Shri Abhishek Tewari situated at 6, Southern Avenue, Maharani Bagh, New Delhi	12.50
	Total	111.96

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The said provisional attachment order was confirmed by the Adjudicating Authority on 22^nd September, 2016 which has been challenged by the banks.

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M/s. Century Communications Ltd. filed appeal no. FPA-PMLA1528/DLI/2016 which was decided alongwith other bank matters on 28.06.2018. The said order of 28.06.2018 was challenged by the Enforcement Directorate vide Criminal Appeal No. 1090 of 2018 before the Hon’ble High Court of Delhi. In the said criminal appeal, the Enforcement Directorate made all the Appellant Banks as respondents whereas, M/s. Century Communications Ltd. was not made a party nor M/s. Century Communication Ltd. preferred any appeal against this Tribunal’s order dated 28.06.2018.

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The learned counsel for the Appellants argued the matter and has referred to Page No(s). 44 & 64 to 71 of the impugned order and submitted that nowhere it has been alleged that the properties have been acquired and mortgaged with the Banks out of proceeds of crime. The learned counsel for the Banks referred to the Memo of Appeal in Criminal Appeal

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FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016

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Page 7 of 32

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No.1090 of 2018 wherein, it was specifically pleaded by the Enforcement Directorate before the Hon’ble High Court of Delhi, that “the properties in question were provisionally attached by the Appellants under Section 5 of the Act being value thereof of the proceeds of crime, being investigated by the Appellant Department” .

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It is further contended by the Appellant Banks that the present case is squarely covered by the recent judgment of the Hon’ble Delhi High Court in Directorate of Enforcement vs. Axis Bank & Ors. reported in 2019 SCC Delhi 7854 dated 02.04.2019. The learned counsel has filed written submissions and also orally submitted his arguments. It is contended by the learned counsel for the appellants that;

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(i) Out of the 6 properties attached by the Enforcement Directorate, 5 properties at Serial No(s). 1 to 5 stands mortgaged with the tenbanks i.e. Appellants against the money lent by the said Appellant Banks. The charge of the valid mortgage stands registered with the Registrar since the inception of the transaction i.e. from the year 2000 and the same is still continuing.

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The first property i.e. (i) Land & Building, consisting of basement (area- 22,586 sq. ft.), ground floor (area-22910 sq. ft.), first floor (area-9216 sq. ft.), second floor (area- 3416 sq. ft.) and third floor (area- 3416 sq. ft.) situated at Plot No.17B & 17C, Sector-16A, Film City, Noida, District Gautam Budh Nagar, U.P.201301, there is no denial on behalf of respondent no.1 that the same was bought by the Borrower/Accused Company much before the enactment of the PMLA,2002 and also much before the Borrower/Accused Company approached the Appellants for financial assistance. The year of purchase being 1994, the said property clearly falls out of the preview of the act. The question of attachment of the said property of the borrowers does not arise.

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FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016

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Page 8 of 32

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(ii) The Enforcement Directorate/Respondent no.1, accepts, admits and acknowledges that fact that out of the 6 attached properties, purchase of 4 properties was part of the sanction letter given and the financial facilities made available by the Appellants to the Borrower/Accused Company.

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(iii) Though there is an allegation of availing some cash credit loans against fake documents in the name of non-existent firms but it could not be prima facie proved by the Respondent/ED that the properties mortgaged with the Appellant Banks are from tainted money/acquired out of proceeds of crime.

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(iv) It is not a situation that the money was lent for some other purpose and then the said funds have been diverted to purchase these attached properties. The credit facility was given for setting up offices/expansion of business by purchasing properties, setting up offices/studios.

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(v) The Enforcement Directorate/Respondent no.1 in its PAO dated 29.03.2016 has given the charts of flow of money which has been used to purchase properties from Serial No. 2 to Serial no. 5 and the same has been duly noted by the Adjudicating Authority in its confirmation order dated 22.09.2016 from page no. 37 to page no. 43 and the same are as follows:

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	CENTURY	COMMUNICA	TION LTD.
Name of Property	Amount of Property/	Date	Mode of Payment	Amount
(ii)	Registration
Property of	238,875,000.00	09.12.2009	By Ch. No.	11,375,000.00
Century			584444 dtd
Communication			09.12.09 issued
Ltd. 8^th floor,			to COSMOS CO-
Lotus Neel			OPERATIVE
Kamal Business			BANK LTD.
Park, Plot No.C-			A/C OF STAMP
18, 19, 20 & 21,			DUTY CHARGES
Oshiwara,			FROM CCL-OBC

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FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016

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Page 9 of 32

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Andheri (West) Mumbai (6000 Sq. Ft.) on 10.12.2009 (Ajay Devgan)		BANK A/C 1866(PISION MUMBAI)
	09.12.2009	By Ch. No. 584445 dtd 09.12.2009 issued to JOIND SUB REGISTRAR, ANDHERI IN RESPECT OF PROPERTY OF LOTUS CHARGES FROM CCL OBC BANK A/C 1866 (MUMBAI)	30,000.00
	10.12.2009	By Ch. No. 584454 dtd 10.12.2009 issued from CCL OBC BANK A/C 1866(MUMBAI)	96,000,000.00
	10.12.2009	By DD No. 414907 dtd 10.12.2009 issued to Ajay Devganj from CCL IOB Bank A/c New Delhi.	90,000,000.00
	10.12.2009	By DD No. 414906 dtd. 10.12.2009 issued to Ajay Devgan from CCL IOB Bank a/c New Delhi.	41,500,000.00
Amount Received Detail		TOTAL	238,905,000. 00
By RTGS Recd. From CCL-IOB Non Lien Bank A/c No. 011502000004910 to CCL-Pixion Mumbai OBC Bank A/c No. 1866 on 09.12.2009.		12,000,000.00
By RTGS Recd. From CCL-IOB CC Bank A/c No. 011502000004804 to CCL-Pixion Mumbai OBC Bank A/c No. 1866 on 09.12.2009.		96,000,000.00
By DD issued (for Ajay Devgan) From CCL-IOB Lien Bank A/c No. 011502000004910 to CCL-Pixion Mumbai OBC Bank A/c No. 1866 on 18.12.2009.		131,500,000.00

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FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016

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Page 10 of 32

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Name of Property (iii)	CENTUR Amount of Property / Registration	Y COMMUNICA Date	TION LTD. Mode of Payment	Amount
Property of Century Communication Ltd. Plot No. 370, 2^nd Floor, Linking Road, Khar (West) Mumbai (1300 Sq. Ft.) on	Rs.34,545,00 0.00	05.07.2007	By Ch. No. 699250 dated 05.07.2007 issued from CCL, OBC Bank A/c 1866	500,000.00
29.11.2006
		23.07.2007	By Ch. No. 723026 dated 21.07.2007 issued to Seagull (Sandeep Sharma) from CCL OBC Bank A/c 1866	10,000,000.00
		04.08.2007	By DD issued from CCL Non- Lien A/c No. 0115020000049 10	60,010.00
		04.08.2007	By DD issued in favour of ICICI Bank A/c from CCL Non-lien A/c No. 0115020000049 10 (For Stamp Duty Charges).	957,610.00
		08.08.2007 08.08.2007	By Ch. No. 458794 dated 04.08.2007 (DD No. 534587940) issued to Sandeep Sharma from CCL Non Lien A/c No. 0115020000049 10 By Ch. No. 458792 dated 04.08.2007 (DD No. 534587726) issued to JT Sub Registrar Andheri – 1, from CCL Non Lien A/c No. 0115020000491 0 for Registration h	9,500,000.00 30,000.00
		08.08.2007	carges. By Ch. No. 458793 dated 04.08.2007 (DD No. 534587933) issued to JT Sub Registrar Andheri – 1, from CCL, NON LIEN	5,000.00

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FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016

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		A/c No. 0115020000491 0 die Registration charges.
	08.08.2007	By Ch. No. 458791 dated 04.08.2007 (DD No. 534587919) issued to ICICI Bank A/c of Stamp Duty from CCL, NON LIEN A/c No. 0115020000491 0 die Registration charges	25,010.00
Amount Received Details		Total	21,077,630.0 0
By Ch. No. 619090 dated 03.07.2007 Received from Footcandles films Pvt. Ltd. to CCL OBC Bank A/c 1866 (CCL- PIXION MUMBAI) on 05.07.2007		500,000.00
By Ch. No. 921220 dated 21.07.2007, Received from Via Earth Pvt. Ld. To CCL-OBC Bank A/c No. 1866 (ICCL-Pixion Mumbai on 23.07.2007		10,000,000.00

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	CENTUR	Y COMMUNICA	TION LTD.
Name of Property (iv)	Amount of Property / Registration	Date	Mode of Payment	Amount
Property of Century Communication Ltd. 6^thFloor, No. 41, Jayanth Tech Park, Mount Poonamallec High Road, Chennai – 600089 (11835 Sq. Ft.) on 23.08.2007	73,157,594.00	28.07.2007	DD issued to Vishranhi Homes Pvt. Ltd. from CCL IOB Non Lien A/c No. 011502000004910	22,500,000.00
		22.08.2007	Amount paid to The Sub Registrar Alandur, Chennai (Vishranthi Homes Pt. Ltd.) From CCL IOB-NON Lien A/c No. 011502000004910	720,553.00
		22.08.2007	DD issued to Vishranhi Homes Pvt. Ltd. from CCL IOB Non Lien A/c No. 011502000004910	42,637,589.00
65,858,142.00

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Name of Property	CENTURY Amount of Property / Registration	COMMUNICA Date	TION LTD. Mode of Payment	Amount
(V)
Property of Century Communication Ltd. 5^th& 6^th Floor including 7^thFloor Terrace Portion Landmark, Bandra (West Mumbai – 400050) (1433 Sq. Ft. 1913 Sq. Ft. & 4319 Sq. Ft. Terrace Portion) on	6,08,42,700.00	19.10.2006	By Cheque No. 714171 issued to Sajal Kumar Jain from CCL OBC Bank A/c 1866 (Pixion Mumbai)	5,00,000.00
18.03.2004
		19.10.2006	By Cheque No. 714170 issued to S. K. Jain from CCI OBC Bank A/c 1866 (Pixion Mumbai)	6,00,000.00
		28.10.2006	By Cheque No. 741385 issued to Sajal Kumar Jain from CCL OBC Bank A/c 1866 (Pixion Mumbai)	18,00,000.00
		28.10.2006	By Cheque No. 741386 issued to Shreelekha Jain from CCL OBC Bank A/c 1866 (Pixion Mumbai)	23,00,000.00
		28.10.2006	By Cheque No. 741384 issued to Sushila Jain from CCL OBC Bank A/c 1866 (Pixion Mumbai)	27,00,000.00
		28.10.2006	By Cheque No. 741383 issued to Sushil Kumar Jain from CCL OBC Bank A/c 1866 (Pixion Mumbai)	21,00,000.00

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22.11.2006	By Cheque No. 493683 issued to Sajal Kumar Jain from CCL IOB Bank A/c 1530 (fund Trfd. From IOB Worli to CCL A/c in Favour of Bank of Rajasthan A/c Stamp Duty for Plot 2 at Khar Corinthian Bldg.	14,00,000.00
22.11.2006	By Cheque No. 493685 issued to Sushila Jain from CCL IOB Bank A/c 1530 (fund Trfd. From IOB Worli to CCL A/c in Favour of Bank of Rajasthan A/c Stamp Duty for Plot 2 at Khar Corinthian Bldg	16,45,000.00
29.11.2006 29.11.2006	By Cheque No. 695172 issued to Sajal Kumar Jain from CCL OBC Bank A/c 1866 (Pixion Mumbai) By Cheque No. 695173 issued to Sajal Kumar Jain from CCL OBC Bank A/c 1866 (Pixion Mumbai)	1,17,00,000.00 1,17,00,000.00
29.11.2006	By Cheque No. 695171 issued to Sushila Jain from CCL OBC Bank A/c 1866 (Pixion Mumbai)	1,37,00,000.00
29.11.2006	By Cheque	1,38,00,000.00

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	No. 695170 issued to Sushila Kumar Jain from CCL OBC Bank A/c 1866 (Pixion Mumbai)
Amount Received Details	Total:	6,39,45,000.00
By Cheque 577490 dated 20.10.2006 issued from CCL OBC CC Bank A/c 02174010000220 to OBC Bank A/c No. 1866 (Pixion Mumbai in Favour of S.K. Jain	5,00,000.00
By Cheque 577504 dated 30.10.2006 issued from CCL OBC Bank A/c No. 1866 (Pixion Mumbai) in favour of Sajal Kr. Jain, Shree Lekha Jain, Sushila Jain & Sushil Kr. Jain	90,00,000.00
By Cheque 493683, 493684, 493685 & 493686 dated 23.11.2006 issued from CCL – IOB Bank A/c – 1530 to OBC Bank A/c No. 1866 for (Rs. 1400000 + 30000 +1645000 + 30000 =3105000/- (Pixion Mumbai) in Favour of Sajal Kr. Jain & Sushila Jain and Stamp & Duty charges.	31,05,000.00
Cheque No. 442050 dated 27.11.2006 issued from Pearl Vision Pvt. Ltd. CITI Bank A/c No. 0802742223 to OBC Bank A/c No. 1866 for Rs. 17244877/-(Pixion Mumbai)	1,72,44,877.00
Cheque No. 442048 dated 27.11.2006 issued from Pearl Vision Pvt. Ltd. CITI Bank A/c No. 0802742223 to OBC Bank	2,65,00,477.80
A/c No. 1866 for Rs. 265000477.80 (Pixion Mumbai)

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On the other hand, the learned counsel for the respondent no.1 submitted that the properties mortgaged with the Banks have been acquired out of tainted money i.e. proceeds of crime. The Adjudicating Authority has rightly confirmed the Provisional Attachment Order after considering the materials made available to the Authority. It is further contended by him that since the properties in question are part of the prosecution complaint already filed before the Special Court, PMLA, the same cannot be released by this Tribunal. It is also contended by him FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016 Page 15 of 32

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that the Judgment of Hon’ble Delhi High Court passed in the matter of Deputy Director, Directorate of Enforcement Versus Axis Bank & Ors. in Criminal Appeal No. 143 of 2018 and batch matters is squarely applicable to the present facts and circumstances of the case. Particularly he has referred to Para No(s). 146-150, 159, 160 and subsequent para no(s). 165 to 170 & 171(vii) (vii) of the said judgment. He has also referred to Section 2(1) (u) of PMLA, 2002 and contended that the properties at Serial No(s). 2, 3, 4 & 5 are acquired from proceeds of crime, so there is no illegality in the impugned order, therefore, the attachments of the properties in question should continue. He has also drawn the attention of the undersigned at Page no(s).44 to 48 and 64 to 71 of the impugned order. He has also filed written submissions and a brief note in the matter. The same are perused.

¶79

Heard both the parties. Perused the materials available on record and also perused the judgment of Hon’ble Delhi High Court dated 02.04.2019 passed in the matter of Deputy Director, Directorate of Enforcement Versus Axis Bank & Ors. in Criminal Appeal No. 143 of 2018 and batch matters. The Hon’ble Delhi High Court has, in the aforesaid judgment, has observed and settled certain principles/guidelines. The relevant portions of the said judgment are reproduced below:

¶80

“ 146. A Resolution Professional appointed under the Insolvency Code does not have any personal stake. He only represents the interest of creditors, their committee having appointed and tasked him with certain responsibility under the said law. The moratorium enforced in terms of Section 14 of Insolvency Code cannot come in the way of the statutory authority conferred by PMLA on the enforcement officers for depriving a person (may be also a debtor) of the proceeds of crime. A view to the contrary, if taken, would defeat the objective of PMLA by opening an escape route. After all, a person indulging in money-laundering cannot be permitted to avail of the proceeds of crime to get a discharge for his civil liability towards his creditors for the simple reason such assets are not lawfully his to claim.

¶81

147. To sum up on the issue, the objective of the legislation in PMLA being distinct from the purposes of the three other

¶82

FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016

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enactments viz. RDBA, SARFAESI Act and Insolvency Code, the latter cannot prevail over the former. There is no inconsistency. The purpose, the text and context are different. This court thus rejects the argument of prevalence of the said laws over PMLA.

¶85

THE RIGHTS OF THIRD PARTY ACTING BONA FIDE

¶86

148. In view of the conclusions reached as above, rejecting the argument of prevalence of RDBA, SARFAESI Act and Insolvency Code over PMLA, the said laws (or similar other laws, some referred to above) must co-exist, each to be construed and enforced in harmony, without one being in derogation of the other, with regard to assets respecting which there is material available to show the same to have been "derived or obtained" as a result of "criminal activity relating to a scheduled offence" rendering the same "proceeds of crime", within the mischief of PMLA. The PMLA, declares, by virtue of Section 71, that it has over-riding effect over other existing laws, such provision containing non-obstante clause with regard to inconsistency apparently to be construed as referable to the dealings in "money-laundering" and "proceeds of crime" relating thereto.

¶87

149. An order of attachment under PMLA, if it meets with the statutory pre-requisites, is as lawful as an action initiated by a bank or financial institution, or a secured creditor, for recovery of dues legitimately claimed or for enforcement of secured interest in accordance with RDBA or SARFAESI Act. An order of attachment under PMLA is not rendered illegal only because a secured creditor has a prior secured interest (charge) in the subject property. Conversely, mere issuance of an order of attachment under PMLA cannot, by itself, render illegal the prior charge or encumbrance of a secured creditor, this subject to such claim of the third party (secured creditor) being bonafide. In these conflicting claims, a balance has to be struck. On account of exercise of the prerogative of the State under PMLA, the lawful interest of a third party which may have acted bonafide, and with due diligence, cannot be put in jeopardy. The claim of bonafide third party claimant cannot be sacrificed or defeated. A contrary view would be unfair and unjust and, consequently, not the intention of the legislature. The legislative scheme itself justifies this view. To illustrate, reference may be made to subsection (8) of Section 8 PMLA where-under a power is conferred on the special court to direct the Central Government to "restore" a property to the claimant with a legitimate interest even after an order of confiscation has been passed.

¶88

150. The legislation on money-laundering, as is the case of similarly placed other legislations providing for forfeiture or confiscation of illegally acquired assets, contains sufficient safeguards to protect the interest of such third parties as may have acted bonafide. Such safeguards and rights to secure their lawful interest in the property subjected to attachment (with intent to take it to confiscation) have already been noticed at length with reference to the statutory provisions. To recapitulate, and by way of illustration, reference may be made to the opportunity afforded by law (Section 8) to a person claiming "a legitimate interest" to approach the adjudicating authority and the appellate tribunal, as indeed the court, to prove that he had "acted in good faith", taking "all reasonable precautions", himself not being involved in money-laundering, to seek its "release" or "restoration". In this context, however, as also earlier noted, the

¶89

FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016

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presumptions that can be drawn in terms of Sections 23 and 24 of PMLA are to be borne in mind, the burden of proving facts contrary to the case of money-laundering being on the person claiming to have acted bonafide.

¶92

159. As noted earlier, there are three parts of the definition of the expression "proceeds of crime", the first clearly referring to a property respecting which there is material to show the same to have been "derived or obtained", directly or indirectly, by a person "as a result of criminal activity (of specified nature)". In case such property is held by the person who is "charged with the offence of money-laundering", there is a statutory presumption under Section 24(a) PMLA, using the expression "shall presume", about it being proceeds of crime involved in such money-laundering. It is a rebuttable presumption, the onus to prove facts to the contrary being on the person accused of such offence. If the acquisition of such property by such accused has involved more than one "inter-connected transactions", one of such transactions being proved to be involving money-laundering, a statutory presumption is raised under Section 23 PMLA that the other transactions form part of the former, the burden to prove facts to the contrary being again on the person claiming otherwise.

¶93

160. But, in cases where the enforcement authority seeks to attach other properties, suspecting them to be "proceeds of crime", not on the basis of fact that they are actually "derived or obtained" from criminal activity but because they are of equivalent “value” as to the proceeds of crime which cannot be traced, it is essential that there be some nexus or link between such property on one hand and the person accused of or charged with the offence of money-laundering on the other. In cases of this nature, the person accused of money-laundering must have had an interest in such property at least till the time of engagement in the proscribed criminal activity from which he is stated to have derived or obtained pecuniary benefit which is to be taken away by attachment or confiscation. It is with this view that PMLA provides for a possible presumption to be drawn, under Section 24(b) using the expression "may presume", about a property being "involved in money-laundering" in the case of person other than the one who is charged with the offence of money-laundering. There is no doubt that such presumption, if drawn, may also be rebutted by evidence showing facts to the contrary.

¶94

163. Having regard to the above scheme of the law in PMLA, it is clear that if a bonafide third party claimant had acquired interest in the property which is being subjected to attachment at a time anterior to the commission of the criminal activity, the product whereof is suspected as proceeds of crime, the acquisition of such interest in such property (otherwise assumably untainted) by such third party cannot conceivably be on account of intent to defeat or frustrate this law. In this view, it can be concluded that the date or period of the commission of criminal activity which is the basis of such action under PMLA can be safely treated as the cut-off. From this, it naturally follows that an interest in the property of an accused, vesting in a third party acting bona fide, for lawful and adequate consideration, acquired prior to the commission of the proscribed offence evincing illicit pecuniary benefit to the former, cannot be defeated or frustrated by attachment of such property to such extent by

¶95

FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016

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the enforcement authority in exercise of its power under Section 8 PMLA.

¶98

164. Though the sequitur to the above conclusion is that the bonafide third party claimant has a legitimate right to proceed ahead with enforcement of its claim in accordance with law, notwithstanding the order of attachment under PMLA, the latter action is not rendered irrelevant or unenforceable. To put it clearly, in such situations as above (third party interest being prior to criminal activity) the order of attachment under PMLA would remain valid and operative, even though the charge or encumbrance of such third party subsists but the State action would be restricted to such part of the value of the property as exceeds the claim of the third party.

¶99

165. Situation may also arise, as seems to be the factual matrix of some of the cases at hand, wherein a secured creditor, it being a bonafide third party claimant vis-a-vis the alternative attachable property (or deemed tainted property) has initiated action in accordance with law for enforcement of such interest prior to the order of attachment under PMLA, the initiation of the latter action unwittingly having the effect of frustrating the former. Since both actions are in accord with law, in order to coexist and be in harmony with each other, following the preceding prescription, it would be appropriate that the PMLA attachment, though remaining valid and operative, takes a back-seat allowing the secured creditor bonafide third party claimant to enforce its claim by disposal of the subject property, the remainder of its value, if any, thereafter to be made available for purposes of PMLA.

¶100

166. As already noted, the newly inserted provision contained in Sections 26-B to 26-E falling in Chapter (no. IV-A) on “registration by secured creditors and other creditors” of SARFEAESI Act are yet to be notified and brought into force. In the event of said statutory clauses coming into force, a creditor will not be entitled to exercise the right of enforcement, inter alia, of security interest over the property of borrower unless such “security interest” has been duly registered under the said law. Upon such amended law being enforced, a bona fide third party claimant seeking relief against an order of attachment under PMLA will also be obliged to show due compliance with such statutory requirements.

¶101

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 amenable 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.

¶102

168. An argument, however, was raised, by the appellants that the respondents herein should have approached the special

¶103

FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016

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court, instead of the appellate tribunal, for consideration of their respective claims.

¶106

169. In view of above-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.

¶107

170. But, the above exception cannot be applied to all cases of bona fide third party claimants so as to confer a general right to seek release of such property as last mentioned above from attachment even in cases where the encumbrance is created or interest acquired at a time around or after the date or period of criminal activity. In this category of cases, the third party will have the additional burden to prove that it had exercised due diligence having "taken all reasonable precautions" at the time of acquisition of such interest or creation of such charge, the jurisdiction to entertain and inquire into such claim and grant relief of release after order of attachment has attainted finality, or of restoration after order of confiscation, vesting only in the special court under Section 8(7) & (8) PMLA. The due diligence is to be tested amongst others, on the touchstone of questions as to whether the party had indulged in transaction after due inquiry about untainted status of the asset or legitimacy of its acquisition.

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SUMMARISING THE CONCLUSIONS

¶109

171. It will be advantageous to summarise the conclusions reached by the above discussion, as under :-

¶110

(i). The process of attachment (leading to confiscation) of proceeds of crime under PMLA is in the nature of civil sanction which runs parallel to investigation and criminal action vis-a-vis the offence of money-laundering.

¶111

(ii). The empowered enforcement officer is expected to assess, even if tentatively, the value of proceeds of crime so as to ensure such proceeds or other assets of equivalent value of the offender of money-laundering are subjected to attachment, the evaluation being open to modification in light of evidence gathered during investigation.

¶112

(iii). The empowered enforcement officer has the authority of law in PMLA to attach not only a "tainted property" - that is to say a property acquired or obtained, directly or indirectly, from proceeds of criminal activity constituting a scheduled offence - but also any other asset or property of equivalent value of the offender of money laundering, the latter not bearing any taint but being alternative attachable property (or deemed tainted property) on account of its link or nexus with the offence (or offender) of money-laundering.

¶113

(iv). If the "tainted property" respecting which there is evidence available to show the same to have been derived or obtained as a result of criminal activity relating to a scheduled offence is not traceable, or the same for some reason cannot be reached, or to the extent found is deficient, the empowered enforcement officer may attach any other asset ("the alternative attachable property" or

¶114

FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016

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"deemed tainted property") of the person accused of (or charged with) offence of money-laundering provided it is near or equivalent in value to the former, the order of confiscation being restricted to take over by the government of illicit gains of crime.

¶117

(v). If the person accused of (or charged with) the offence of money-laundering objects to the attachment, his claim being that the property attached was not acquired or obtained (directly or indirectly) from criminal activity, the burden of proving facts in support of such claim is to be discharged by him.

¶118

(vi). The objective of PMLA being distinct from the purpose of RDBA, SARFAESI Act and Insolvency Code, the latter three legislations do not prevail over the former.

¶119

(vii). The PMLA, by virtue of section 71, has the overriding effect over other existing laws in the matter of dealing with "money-laundering" and "proceeds of crime" relating thereto.

¶120

(viii). The PMLA, RDBA, SARFAESI Act and Insolvency Code (or such other laws) must co-exist, each to be construed and enforced in harmony, without one being in derogation of the other with regard to the assets respecting which there is material available to show the same to have been "derived or obtained" as a result of "criminal activity relating to a scheduled offence" and consequently being "proceeds of crime", within the mischief of PMLA.

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(ix). If the property of a person other than the one accused of (or charged with) the offence of money-laundering, i.e. a third party, is sought to be attached and there is evidence available to show that such property before its acquisition was held by the person accused of moneylaundering (or his abettor), or it was involved in a transaction which had interconnection with transactions concerning money-laundering, the burden of proving facts to the contrary so as to seek release of such property from attachment is on the person who so contends.

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(x). The charge or encumbrance of a third party in a property attached under PMLA cannot be treated or declared as "void" unless material is available to show that it was created "to defeat" the said law, such declaration rendering such property available for attachment and confiscation under PMLA, free from such encumbrance. (xi). A party in order to be considered as a "bonafide third party claimant" for its claim in a property being subjected to attachment under PMLA to be entertained must show, by cogent evidence, that it had acquired interest in such property lawfully and for adequate consideration, the party itself not being privy to, or complicit in, the offence of money-laundering, and that it has made all compliances with the existing law including, if so required, by having said security interest registered. (xii). An order of attachment under PMLA is not illegal only because a secured creditor has a prior secured interest (charge) in the property, within the meaning of the expressions used in RDBA and SARFAESI Act. Similarly, mere issuance of an order of attachment under PMLA does not ipso facto render illegal a prior charge or encumbrance of a secured creditor, the claim of the latter

¶123

FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016

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for release (or restoration) from PMLA attachment being dependent on its bonafides. (xiii). If it is shown by cogent evidence by the bonafide third party claimant (as aforesaid), staking interest in an alternative attachable property (or deemed tainted property), claiming that it had acquired the same at a time around or after the commission of the proscribed criminal activity, in order to establish a legitimate claim for its release from attachment it must additionally prove that it had taken “due diligence" (e.g. taking reasonable precautions and after due inquiry) to ensure that it was not a tainted asset and the transactions indulged in were legitimate at the time of acquisition of such interest. (xiv). If it is shown by cogent evidence by the bonafide third party claimant (as aforesaid), staking interest in an alternative attachable property (or deemed tainted property) claiming that it had acquired the same at a time anterior to the commission of the proscribed criminal activity, the property to the extent of such interest of the third party will not be subjected to confiscation so long as the charge or encumbrance of such third party subsists, the attachment under PMLA being valid or operative subject to satisfaction of the charge or encumbrance of such third party and restricted to such part of the value of the property as is in excess of the claim of the said third party.

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(xv). If the bonafide third party claimant (as aforesaid) is a "secured creditor", pursuing enforcement of "security interest" in the property (secured asset) sought to be attached, it being an alternative attachable property (or deemed tainted property), it having acquired such interest from person(s) accused of (or charged with) the offence of money-laundering (or his abettor), or from any other person through such transaction (or inter-connected transactions) as involve(s) criminal activity relating to a scheduled offence, such third party (secured creditor) having initiated action in accordance with law for enforcement of such interest prior to the order of attachment under PMLA, the directions of such attachment under PMLA shall be valid and operative subject to satisfaction of the charge or encumbrance of such third party and restricted to such part of the value of the property as is in excess of the claim of the said third party. (xvi). In the situations covered by the preceding two subparagraphs, the bonafide third party claimant shall be accountable to the enforcement authorities for the "excess" value of the property subjected to PMLA attachment. (xvii).If the order confirming the attachment has attained finality, or if the order of confiscation has been passed, or if the trial of a case under Section 4 PMLA has commenced, the claim of a party asserting to have acted bonafide or having legitimate interest in the nature mentioned above will be inquired into and adjudicated upon only by the special court.

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DECISION ON THE APPEALS

¶128

172. In view of the above conclusions, the impugned decisions of the appellate tribunal will have to be set aside. There is a need

¶129

FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016

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for further scrutiny particularly on facts, of the claims of the respondents, in their appeals which were presented before the said forum to challenge the orders of attachment, as confirmed by the adjudicating authority in the five cases. This may be illustrated hereinbelow.

¶132

173. It does appear that the assets which have been the subject matter of attachment in the appeals at hand are not “tainted property”, the same having been seemingly acquired prior to the criminal activity giving rise to accusations of moneylaundering. But, they are sought to be attached and subjected to eventual confiscation on account of they being the alternative attachable properties or deemed tainted properties, which is permissible in law. The audi car (subject matter of first appeal) was acquired by a transaction which has no direct connection with the case of money-laundering. However, there is no clarity as to the value of proceeds of crime which are to be confiscated as against value of the attached property as indeed the extent of the debt yet to be recovered by the secured creditor. The monetary gains made by the transactions which are subject matter of the accusations of money-laundering on account of illicit foreign exchange transactions (third appeal) or the case of cheating by use of fabricated defence supply orders (fourth appeal), both involving public servants, require closer scrutiny as to the claim of the respondent banks of bonafide action. Though there is no such element of complicity on part of any of the officials of the respondent banks in the case relating to fictitious hospital equipment (second appeal) or the one involving consortium of banks (fifth appeal), scrutiny respecting legitimacy and bonafide of the claim on the touchstone, inter alia, of the subsisting value of the secured interest and chronology of events leading to attachment would be necessary.

¶133

174. It will be appropriate that such further scrutiny as is necessary on the touchstone of above principles is undertaken by the appellate tribunal after calling for further responses (and inputs) from each side.

¶134

175. Ordered accordingly.

¶135

176. Thus, the appeals are allowed. The impugned decisions of the appellate tribunal are set aside. The matters arising out of the appeals of the respondents stand revived and restored for further consideration by the appellate tribunal. The parties are directed to appear before the said forum on 15.04.2019.

¶136

177. The appeals, and the applications filed therewith, stand disposed of in above terms. ”

¶137

During the course of hearing the learned counsel for the Appellant

¶138

Banks submitted the following;

¶139

a) All legal proceedings for recovery were initiated by the Banks prior to provisional attachment.

¶140

FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016

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b) That it is clear that the Appellant Banks as institutions are not privy to or complicity in, the offence of money-laundering as;

¶143

i. The criminal proceedings against the borrowers were set in motion at the instance of Indian Overseas Bank. The F.I.R. has not been registered against the Appellants.

¶144

ii. That the security interests of the Appellants in the properties in question have been acquired lawfully and for adequate consideration.

¶145

c) That, due diligence was exercised by the Banks in taking the properties in question as security.

¶146

d) The subject properties are not tainted properties.

¶147

The bonafide as well as due diligence in sanctioning the loans by the appellants to M/s. CCL have not been doubted by the respondent no.1 at any point of time. It could not be explained by the respondent no.1 as to how the properties in question are acquired out of proceeds of crime.

¶148

The learned counsel for the appellants submits that the appellant banks are victims and not an offender, the public money is stuck due to the proceedings under PMLA.

¶149

The appellants are secured creditors and bonafide claimants of the properties. The security interests have been created on the properties in question and there are legitimate banking transactions. There is no allegation that the appellants have not exercised due diligence in sanctioning loans to purchase the properties in question.

¶150

FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016

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¶152

The properties have been mortgaged much prior to the date of registering of FIR & ECIR. The Provisional Attachment Order has been passed on 29.03.2016.

¶153

The Hon’ble High Court of Delhi in the recent decision of “ The Deputy Director, Directorate of Enforcement, Delhi Vs. Axis Bank & Ors. ,” reported in 2019 SCC Online Del 7854 (hereinafter referred to as the “Axis Bank Decision ”) has rightly held that the interest of a third party in the property of an accused, acquired prior to the commission of the proscribed offence cannot be defeated or frustrated by attachment of such property under Section 8 of the Act.

¶154

The Hon’ble Delhi High Court further recognized the right of such third party to proceed with enforcement of its interest in accordance with law such that while the order of attachment under the Act would not be rendered irrelevant, yet it would take a backseat such that the State action would be restricted to such part of the value of the property as exceeds the claim of the third party, if any . (Reference Paragraph No. 162-164 of the Axis Bank Decision ) speak for itself.

¶155

In terms with the Axis Bank Decision , the claim of the Respondent to the properties would be restricted to such part of the aggregate value of the properties attached as exceeds the claim of the Appellants.

¶156

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 under Section 26 of the Act and then before the Hon’ble High Court under Section 42 of the Act against the order of this

¶157

Tribunal. Accordingly, under the legislative and statutory scheme of the FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016 Page 25 of 32

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¶159

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.

¶160

Therefore, this Tribunal is fully equipped and 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.

¶161

There is no force in the arguments of learned counsel appearing on behalf of Enforcement Directorate that claims of third parties are to be 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. The Tribunal has only to examine the impugned order and is empowered under Section 26 of the Act as to whether the attachment order has been passed as per law or not. This Tribunal has the exclusive jurisdiction on this issue. The Appellant Banks are otherwise entitled to approach the Special Court for release of properties even during the pendency of appeals or after allowing the appeals. The validity of the confirmation of attachment order is only to be considered by this Tribunal.

¶162

The impugned order confirming the provisional attachment order is passed without application of mind and without understanding the law, it is liable to be quashed with regards to mortgaged properties in question.

¶163

FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016

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¶165

No doubt, this tribunal is clear in its mind that if the properties in question acquired from proceeds of crime and at the time of creating security, the banks are aware and still the loans were sanctioned, then said properties can be attached even in lieu of value thereof if the borrowers has concealed or is concealing the proceeds of crime, but under those circumstances, there must be material or prima facie evidence on record before passing the provisional attachment order.

¶166

This order is being passed in relation to secured properties in favour of banks which are not purchased from proceeds of crime.

¶167

The appellants are always at liberty to approach the Special Court to initiate the proceedings for disposal of secured properties, if so desired, the appellants to deposit the excess amount if such situation will arise.

¶168

The Appellants have nothing to do and have no connection with the allegation of crime committed by the borrowers, so far as money transferred from bank accounts to acquire the properties in question directly. The secured properties are admittedly not derived from criminal activities or proceeds of crime. The scope of the PMLA is to punish the accused person and not to punish the innocent people who are not involved in the crime within the meaning of Section 2 (u) read with Section 3 of the Act.

¶169

There is no nexus whatsoever, between the alleged crime and the appellants who have secured properties by way of mortgage and are victims of the fraud and innocent party. The definition of proceeds of crime as per Section 2(1) (u) of the PML Act comprises of the property which is derived or obtained as a result of criminal activities. The FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016 Page 27 of 32

¶170

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¶171

secured property is not acquired from proceeds of crime either directly or indirectly.

¶172

From the materials available on record it becomes clear that the money have been advanced for the purchase of the properties by the Appellant Banks. Undisputedly, the money was paid directly from the Bank accounts to the seller and thereafter the mortgages were created. It is also not disputed that the money released by the Banks was sanctioned for the said purpose and were part of the financing the project.

¶173

The Enforcement Directorate (Respondent no.1) does not dispute the fact that the Appellant Banks had initiated action under the SARFAESI Act, 2002 much before the registration of the case under the PMLA Act. The copy of the ECIR No. DLZO/10/2013 is dated 20.06.2013, whereas the Appellant Banks had issued notice under Section 13(2) of SARFAESI Act, 2002 on 13.08.2012 and in furtherance to the same had issued possession notice under section 13(4) on 22.11.2012, 24.11.2012 and 03.12.2012 which is prior to registering the ECIR and the respondent no. 1 was fully aware about all factual position.

¶174

The other undisputed fact is when the PAO was passed by the Respondent no.1 in 2016, the recovery suits filed by the Banks before the Ld. Debt Recovery Tribunal and action under SARFAESI Act, 2002 were pending and a stay order passed by the Ld. DRT, Delhi was operational since, 2013.

¶175

It appears from record that Respondent no.1 and the Adjudicating Authority is quite evident from the fact that in the confirmation order of Adjudicating Authority at Page 41 wherein the payment with regard to the properties of M/s. Century Communication Ltd. at 5^th & 6^th Floor

¶176

FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016

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Page 28 of 32

¶178

including 7^th Floor Terrace Portion Landmark, Bandra (West Mumbai – 400050) (1433 Sq. Ft. 1913 Sq. Ft. & 4319 Sq. Ft. Terrace Portion) the payment trail is shown to be made in 2006, whereas the Enforcement Directorate, itself record the fact that the ownership of the said property is with Respondent No.4 M/s. Century Communication Ltd. since 18.03.2004. The said properties are under the control of the Appellant Banks throughout mortgage since 13.08.2004 and the said fact which has been stated by the Appellants in their appeals has not been disputed by the Respondent no.1.

¶179

The properties of the Appellant Banks cannot be attached or confiscated when there is no illegality or unlawfulness in the title of the Appellant Banks and there is no charge of money laundering against the Banks. During the course of arguments, the learned counsel for the respondent no.1 submitted that some of the bank officials were involved and they are being prosecuted by the CBI. But there is no allegation against the Banks as institutions. The Banks are victims.

¶180

The mortgage of properties 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. As far as the Appellant Banks are concerned, the Banks have to recover its outstanding dues by taking over the possession of the mortgaged properties in case the concerned borrowers are not able to pay back the credit facilities availed by them and by way of the SARFAESI provisions these properties are being taken in possession by the Appellant Banks so that recovery can be made.

¶181

From the discussion made above, I am of the view that there is no nexus whatsoever between the alleged offence and the Appellant Banks as institutions who are the mortgagee of the properties in question which were purchased from the bank’s money and mortgage of the same with FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016 Page 29 of 32

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Page 29 of 32

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them. Thus, no case of money laundering is made out against Appellant Banks who had sanctioned the amounts which are untainted and pure money.

¶184

The Adjudicating Authority has not appreciated the facts and law involved in the matter. The primary objective of Section 8 of PMLA is that the Adjudicating Authority to take a prima facie view on available material and facts produced. The contentions raised by the Respondent's Advocate have no substance. The provisional attachment order in the present matters is bad in law, hence liable to be set aside.

¶185

In the present appeals, it is an admitted position that the loans were given by the banks in good faith who have suffered loss because of non-payment of money by the borrower. The borrowers are also arrayed as respondents in the appeals filed by the banks. It is evident from the said proviso that incase the claimant would be able to satisfy the Special Court that it has acted in good faith and suffered the loss despite of having taken all the reasonable precautions and is also not involved in the offence of money laundering then the Special Court is empowered to restore such properties during the trial of the case. In the facts of the present case, the mortgaged properties are not purchased from the proceeds of crime.

¶186

If paras 167 to 169 are read co-jointly with paras 163 and 165 of the order of Hon’ble Delhi High Court order dated 02.04.2019, 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

¶187

FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016

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¶189

or any trial has commenced under the Section 4 of PMLA against the appellants. In fact, appellants are innocent parties and victims also. The trial against accused parties may take number of years.

¶190

In view of judgment passed by the High Court of Delhi, I am of the view that the Provisional Attachment Order dated 29.03.2016 passed by ED and impugned order dt. 22.09.2016 passed by the Adjudicating Authority, PMLA, confirming the Provisional Attachment Order is liable to be quashed and set aside.

¶191

The Hon’ble High Court of Delhi, vide order dated 06.12.2019 passed in Crl.A.1090/2018 in the matter of Directorate of Enforcement Versus Indian Overseas Bank & Ors. has clarified the “status quo” order of Hon’ble Supreme Court passed in the appeal against the order dated 02.04.2019 passed in the matter of Deputy Director, Directorate of Enforcement Versus Axis Bank & batch matters in CRL.A. No.143/2018. The order dated 06.12.2019 of Hon’ble High Court of Delhi is reproduced below:

¶192

“

¶193

ORDER 06.12.2019

¶194

Crl.M.A.42109/2019 (Exemption)

¶195

Allowed, subject to all just exceptions.

¶196

This application is, accordingly, disposed of.

¶197

Crl.M.A. 42108/2019

¶198

Vide the present application, the applicant/respondents seek clarification of the order dated 01.11.2019 as to whether the Tribunal shall proceed with the present matter.

¶199

Vide order dated 01.11.2019, this court remanded the matter to the Appellate Tribunal for PMLA and directed the said Tribunal to restore the appeal and after hearing both the parties decide the same within six weeks from the receipt of this order.

¶200

The said order was passed on the consent made by the parties and in view of the order passed by this court in Crl.A. 143/2018 in Deputy Director, Directorate of Enforcement, Delhi vs. Axix Bank & Ors. and other batch matters.

¶201

FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016

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Page 31 of 32

¶203

Learned counsel appearing on behalf of the nonapplicants/petitioner submits that the Hon’ble Supreme Court has granted status quo qua the property in question, however, there is no status quo to proceed with the matter by any court including the Appellate Tribunal of PMLA. This fact has not been disputed by counsel for the respondent.

¶204

Thus, it is clarified that the order of the status quo of the Supreme Court is regarding the disposal of the property, therefore, Appellate Tribunal of PMLA is directed to comply with the order dated 01.11.2019 passed by this court within six weeks from today.

¶205

In view of above directions, the application is disposed of.

¶206

Copy of the order be given dasti under the signatures of Court Master. ”

¶207

In view of the said clarificatory order no order in respect of disposal of the property can be passed by this Appellate Tribunal.

¶208

In the light of above, the present appeals are allowed in terms of the Judgment dated 02.04.2019 passed by the Hon’ble High Court of Delhi in Crl. A. No. 143/2018 in the matter of Dy. Director, Directorate of Enforcement, Delhi Vs. Axis Bank & other batch matters.

¶209

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

¶210