Disposed

FPA-PMLA-2191/CHN/2018 of Axis Bank v. The Deputy Director Director of Enforcement, Chennai

ATFP2 May 2024FPA-PMLA-2191/CHN/2018

Case brief

AI extract

What is this about?

The Appellate Tribunal held that the present appeal by Axis Bank regarding the attachment of S. Madhan's mortgaged property is devoid of merit since the fraud is admitted and criminal trials are pending. The bank is allowed liberty to approach the Special PMLA court to claim release of the property as a secured creditor, provided police charges are not compromised, with the ED restrained from taki

What did the court decide?

Suspended the Prohibition from 02.05.2024 until the conclusion of the trials. We also made it clear that nothing expressed herein will affect the merits of the criminal trials.

FPA-PMLA-2191/CHN/2018 of Axis Bank Vs. The Deputy Director… — Money Laundering | ATFP (2024)

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BEFORE RAJESH MALHOTRA, MEMBER; SINGLE BENCH: APPELLATE TRIBUNAL UNDER SAFEMA; AT NEW DELHI.

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FPA-PMLA-2191/CHN/2018

Axis Bank

… Appellant

Versus

The Deputy Director Director of Enforcement, Chennai

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… Respondent

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Advocates/Authorized Representatives who appeared

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For the Appellant : Sh. Ashwani Kumar, Advocate, For the Respondent : S/Sh. N. K Matta, A.R. Sharma Adv.

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FINAL ORDER

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02.05.2024

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Present appeal under Section 26 of Prevention of Money Laundering Act is filed against the impugned order dated 20.12.2017 passed by the Adjudicating Authority in Original Complaint No. 795/2017 vide which Provisional Attachment Order No. 15/2017 dated 29.06.2017 for attachment of properties was confirmed, including the following mortgaged property of the mortgagor/ appellant Sh. S Madhan:

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S.	Document	Address of the Property	Value of the
No.	No. & Date		Property
1.	1277/2016, 05.04.2016	1119.1250 Sq. Ft. undivided share of land in 60132 Sq. Ft., bearing	Rs. 4,25,00,000/-
		“Orchards YarlagaddaVenkkanna Chowdary
		Residential Park” in Saligramam Village, N.S.K. Salai,
		(Arcot Road),Salaigramam,Chennai-600093.

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As per the facts of the case, FIR No. 143 dated 04.06.2016 was registered by Central Crime Branch of Tamil Nadu at Chennai against the accused persons and the Management of SRM Group of Educational Institutions including the present appellant for the commission of offences under Section 406 & 420 IPC read with 34 IPC. The said FIR was registered on the basis of complaint dated 01.06.2016 lodged by K. Jayachandran for cheating him by the

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Rajesh Malhotra Member

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FPA-PMLA-2191/CHN/2018Axis Bank v. ED, Chennai

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appellant and others on account of getting his sons admission for MBBS in SRM Medical College, Katankulanthur, Chennai.

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As the offence under Section 420 of IPC is a schedule offence under Section 2 (1) (x) & (y) of PMLA, ECIR NO. 04/CEZO/2017 dated 17.03.2017 was registered by Directorate of Enforcement for investigation under the provisions of PMLA. During the course of investigation ED recorded the statement of many persons under Section 50(2) & (3) of PMLA and seized many documents for investigation.

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During investigation statement of present appellant S. Madhan was recorded wherein, he stated that during the year 2004 he met Shri Paarivendar, SRM Chancellor (Chairman of SRM Group of Educational Institutions) and made an agreement to give admission only to SRM Group, after which he slowly developed relationship with Shri Paarivendar. He stated that during the year 2007, he used to send near about 1000 students to SRM Group for various courses, for which he used to get commission of Rs. 2000/for each seat.During such time Shri Paarivendar started a party namely IndiayaJananayakaKatchi (IJK Party) and made him All India Youth Wing Leader, after which he stopped the Yatin Educational Consultancy and worked for party. Shri Babu used to bring students from various places for MBBS seats in SRM, Chennai and Tiruchi Medical Colleges on commission basis, who was arrested by police on the basis of complaints made by various students and parents. Shri Sudheer worked with him in Vendhar Movies and was in charge of production distribution as well as admission in MBBS seats. Shri Sudheer used to get the mark

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Rajesh Malhotra Member

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FPA-PMLA-2191/CHN/2018Axis Bank v. ED, Chennai

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sheets and other particulars from parents of students for scrutiny and handed over the list of students after scrutiny to him (Madhan), after which he (Madhan) used to take the list of students to Shri Paarivendar of SRM University and discuss about the seats and rates accordingly.In his further statement recorded on 19.04.2017,he admitted that the cash was given to him by the complainant for obtaining MBBS/PG seats in SRM University that he had received the cash in person from the parents and some payments were received by him through Shri Guna, an Accountant in M/s Vendhar Movies. In his further statement appellant S. Madhan had stated that during the year 2014, he received Rs. 40 Lakhs for each student for admission in to MBBS, in SRM University, totaling to the tune of Rs.16 crores, from around 40 students and gave the same amount to Shri Paarivendar.However, there was no recognition or approval obtained from Medical Council of India for Chennai Medical College, Trichy (SRM) that in the year 2015, the student‟s parents who had paid him money started pressurizing him to give admission in Chennai Medical College, Trichy or else to give back the money paid to him by them.In such situation the SRM Management was not in a position to refund the money and the pressure was mounted more from 40 parents. He refunded the amount for 20 parents and organized MBBS seats in SatyaSai Medical College, Mahabalipuram for remaining 20 students that simultaneously, he started collecting money for the admission for MBBS in Trichy Medical College for the year 20152016 from 133 parents and the money so collected was totaling to the tune of Rs. 91 Crores (approx.).The same amount was entirely paid to Shri Paarivendar of SRM University on weekly

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Rajesh Malhotra Member

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FPA-PMLA-2191/CHN/2018Axis Bank v. ED, Chennai

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basis,however, the Medical Council of India did not grant permission/approval for Chennai Medical College, Trichy, in the year of 2015 & 2016.The problem raised again and the parents forced them to give admission in SRM group, after which the SRM Management directly involved and informed the parents to wait for next year as the MCI recognition was received in the month of November 2015, but it was too late for the MBBS seat, therefore the parents accepted the management‟s words and waited for 20162017, after which the problem arose slowly between him and Shri Paarivendar.As per the directions of Shri Paarivendar, the amount totaling to Rs. 91 crores collected from 133 parents for the year of 2015 & 2016 for SRM Group Colleges was handed over to Shri Sukumar (PA to Shri Paarivendar, the Chancellor for SRM University), in approximately 15 times/instalments, which was paid in cash.He (Madhan) did not give any receipt to parents for the cash received from them, but he gave a slip mentioning student‟s name, course and year.He did not receive any receipt from Shri Paarivendar, after handing over the cash. He did not receive any commission for MBBS admission, but he used to get the commission of Rs. 10,000 for Engineering courses and had not utilized the money for his expenditure.

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Sh. S Madhan mortgage his property mentioned at serial no. 1 above with appellant bank at the time of purchase vide sale deed dated 05.04.2016 and the loan for the same was sanctioned on 07.03.2016 to facilitate of purchasing the said property. Appellant bank sanctioned the loan to the tune of Rs. 1,99,73,200/- and the outstanding amount as on 09.02.2018 was Rs. 1,95,01,115/-.

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Rajesh Malhotra Member

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FPA-PMLA-2191/CHN/2018Axis Bank v. ED, Chennai

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After going through the statements and material on record Adjudicating Authority confirmed the attachment of the properties including the mortgaged property of the mortgagor/appellant S. Madhan, as mentioned in para no. 1 above.

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Aggrieved by the said order appellant bank filed the present appeal.

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During the arguments, Learned Counsel for the Appellant submitted that appellant bank before sanctioning the loan and releasing the payment for purchase of the said property by mortgagor S. Madhan took all reasonable steps to verify the same. As per legal search report obtain from their advocate the said property was free from any encumbrance and fit for accepting as collateral security. Accordingly loan sanctioned and released, whereas, the impugned order for attachment was passed by the Adjudicating Authority on 20.12.2017. The impugned order was passed without appreciating the fact that this property is already mortgaged with the appellant bank and purchase from the loan amount. Hence, he stressed that question of attachment does not arise. Prayer is accordingly made to allow the present appeal and thereby set aside the impugned order.

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On the other hand, Learned Counsel for respondent ED submitted that S. Madhan played an active role in collecting the huge capitation fees from the parents of the students for getting admission in MBBS and Engineering Courses, through management quota in collusion with the college management. However, S. Madhan failed to fulfil his false promises and also failed to return the amount to the said parents. He argued that

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Rajesh Malhotra Member

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FPA-PMLA-2191/CHN/2018Axis Bank v. ED, Chennai

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quantum of fraud is about 100 crores. He further pointed out that S. Madhan and the other co-accused persons are facing trial for commission of predicate offences in police charge-sheet case, as well as prosecution complaint under PMLA. He pointed out that the part payment for purchasing this property was made by accused S. Madhan out of the proceeds of crime. He submitted that even the EMI for the said loan was apparently paid from the proceeds of crime and hence this property is also righlty attached by respondent ED along with the other properties of S. Madhan. Prayer is accordingly made to dismiss the present appeal being devoid of any merits.

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After hearing the rival submissions, I have given my thoughtful consideration to the same. Admittedly, S Madhan played an active part in commission of fraud for collecting the huge amount from the parents of students with promise to get their wards admitted in MBBS/Engineering Courses out of the management quota. S. Madhan has claimed that he only used to get nominal commission for bringing the students. The fact that FIR No. 143 of 2016 was registered as per direction of Hon‟ble High Court, against the main accused Pachamuthu, the owner of the colleges and he deposited sum of Rs. 75 crores, as security for getting bail. On this ground S. Madhan prayed for allowing his appeal No. 2175/2018, but the said appeal was disposed of by under signed vide separate order of even date. Therefore, at this stage there is no ground to release the mortgaged property of S. Madhan mortgaged with appellant bank. It is made clear that if predicate offence stands compromised and the criminal case stands compounded, then the appellant bank will be at liberty to move

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Rajesh Malhotra Member

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FPA-PMLA-2191/CHN/2018Axis Bank v. ED, Chennai

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application before Ld. Special Judge PMLA Court for releasing the said mortgaged property in its favor. Even otherwise, if S. Madhan is committed in PMLA case, even then appellant bank can file its claim before Ld. Special Judge over the mortgaged property, being a secured creditor.

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In sequel to my observations in the preceding para, the present appeal is devoid of any merits,and accordingly, appeal is disposed of with liberty to appellant bank to put its claim before learned Special Judge, PMLA Court. In case police charge sheet case is closed on account of any compromise with the complainants, then appellant bank will be at liberty to move appropriate application in PMLA Court and to apply for release of properties, as per law. It is made clear that nothing expressed herein will affect the merits of the criminal trials. It is made clear that in the meantime, respondent ED is hereby restrained from taking physical possession of the properties, till final conclusion of the trials.

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Appeal Disposed of with direction.

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Pronounced on 02^nd Day of May, 2024.

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Rajesh Malhotra Member

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„PS‟

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Rajesh Malhotra Member

FPA-PMLA-2191/CHN/2018 of Axis Bank v. The Deputy Director Director of Enforcement, Chennai

Case brief

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FPA-PMLA-2191/CHN/2018 of Axis Bank v. The Deputy Director Director of Enforcement, Chennai

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