Dismissed

FPA-PMLA-2406/DLI/2018 of Bank of Baroda v. The Joint Director Directorate of Enforcement, New Delhi & Ors.

ATFP26 May 2025FPA-PMLA-2406/DLI/2018

Case brief

AI extract

What is this about?

Appeal against confirmation of provisional attachment of mortgaged properties. Court held attached properties can be claimed by secured creditor before Special Judge under PMLA.

What did the court decide?

No immediate release of properties; appellant directed to move claim before Special Judge PMLA Court as secured creditor.

What the court decided

FPA-PMLA-2406/DLI/2018 of Bank of Baroda Versus The Joint… — Money Laundering | ATFP (2025)

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APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI

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FPA-PMLA-2406/DLI/2018

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Bank of Baroda … Appellant

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Versus

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The Joint Director Directorate of Enforcement, New Delhi & Ors.

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… Respondent

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Advocates/Authorized Representatives who argued

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For the Appellant : Mr. Pankaj Vivek, Advocate, For the Respondent : Ms. Anubha Bhardwaj, Advocate.

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CORAM

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SHRI G.C. MISHRA : MEMBER SHRI RAJESH MALHOTRA : MEMBER

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FINAL ORDER 26.05.2025

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Dictated by: Rajesh Malhotra

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Present appeal under Section 26 of Prevention of Money Laundering Act, 2002 (PMLA) is filed by the Appellant bank against the order dated 17.05.2018 passed by the Adjudicating Authority in Original Complaint No. 887/2018 (OC), whereby the properties attached by ED vide Provisional Attachment Order No. 01/2018 dated 03.01.2018 were confirmed including

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the mortgaged properties with the present Appellant Bank detailed as under:

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Sr. No.	Description of property	Belongs to	Property Value/ Balance (in₹)
1.	Land as Plot No. 8-2-684/J/3 (200.55 sq. yards), Plot No. 8-2-684/H/4 (250 sq. yards),	Sh. A.K. Reddy & Smt. A. Indira,	5,98,75,000 as on
	Plot No. 8-2-684/J/4/A (550 sq. yards) and house constructed on above lands as built-up area 7950 sq. ft.	W/o Sh. A.K. Reddy	29.11.2010
	and numbered as H. No. 8-2-684/J/3 (part)/ 4, Bhavani Nagar,BanjaraHills,RoadNo.12,Hyderabad.

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As per the facts of the case, CBI, New Delhi registered a case vide FIR dated 29.11.2010 for commission of offences punishable under sections 120B IPC r.w. 420 of IPC and also r.w. 13(2) r.w. 13(1)(d) of PC Act and substantive offences thereunder. After investigation, the CBI filed

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FPA-PMLA-2406/DLI/2018 Bank of Baroda v. E.D., New Delhi & Ors.

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chargesheet before the competent court against 11 persons for the aforesaid offences.

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It was alleged in the chargesheet that accused conspired amongst themselves for manipulating the tender process relating to Timing, Scoring and Resulting System (hereinafter referred as TSR) and caused wrongful loss to the tune of Rs. 95,60,64,729/- to the organizing committee and corresponding gain to M/s Swiss Timing Ltd. and its partners/ representatives. It was alleged in the chargesheet that official did not follow the proper bidding procedure and awarded tender to Swiss Timing despite their offer being highly overvalued.

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Accordingly, ECIR was recorded by Delhi Zonal Office of ED, New Delhi against Sh. V.K. Verma, Lalit Kumar Bhanot and M/s Swiss Timing Ltd. and other unknown persons for initiating investigation for the commission of offence u/s 3 of PMLA, 2002 punishable u/s 4 of PMLA, 2002.

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The investigation conducted by CBI revealed that for the installation of TSR system, all the officials of organizing committee Commonwealth Games 2010 conspired with private persons and abused their official positions for awarding the tender to M/s Swiss Timing Ltd. by manipulating entire tender process. Investigation also revealed that M/s Swiss Timing entered into a fraudulent contract dated 22.10.2009 with M/s Gem International, whose partners accused A.K. Madan and P.D. Aarya were in close contact with the accused officials of Organizing Committee (OC) of the Commonwealth Games (CWG)-2010 Delhi. As per this contract, M/s Swiss Timing was to pay various commissions ranging from 5-10% for vague activities such as consultancy, making presentations etc., besides reimbursing the expenditure incurred by M/s Gem International to any sub-contract for TSR related work awarded by M/s Gem International to any sub-contractor. In the garb of

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FPA-PMLA-2406/DLI/2018 Bank of Baroda v. E.D., New Delhi & Ors.

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this fraudulent contract between M/s Swiss Timing and M/s Gem International, M/s Gem International raised 5 bogus invoices for total amount of Rs. 23,21,19,334/-. These invoices do not contain details of any tangible and commensurate service provided by M/s Gem International to M/s Swiss Timing. Out of this amount received by M/s Gem International from M/s Swiss Timing, an amount of Rs. 11,28,36,412/- has been paid to M/s AKR Constructions Ltd. of Hyderabad with whom M/s Gem International had entered into an MOU on 29.06.2010 for laying of cables for the TSR contract.

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Investigation revealed that M/s AKR Constructions Ltd. had no experience in laying cables as it is a civil contractor company and it has had no prior business dealings with M/s Gem International. Investigation has also revealed that no commensurate work as actually executed by M/s AKR Constructions Ltd. and whatever work of cabling was done, it was got done only by M/s Gem International. Investigation has further revealed that accused A K Reddy, CMD of M/s AKR Constructions Ltd. has shown a bogus expenditure of Rs. 3,11,60,000/- towards payment for labour and Rs. 1,94,95,492/- for procurement for cables and he was not able to produce the two labour contractors to whom the payments of Rs. 3,11,60,000/- were made for providing labour, nor any invoices or muster roll of labour deployed at site maintained by them.

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Investigation conducted by CBI with the cable suppliers has revealed that the said suppliers knew only M/s Gem International and only for accounting purpose, the bills were raised in the name of M/s AKR Construction Ltd. which is also supported by the discovery that some of work orders raised by M/s AKR Constructions Ltd. are of dates later than the bills. During investigation, a costing analysis of cabling work was got done through experts of the Technology FA OC, who have valued the cabling

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FPA-PMLA-2406/DLI/2018 Bank of Baroda v. E.D., New Delhi & Ors.

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work, which was entirely of temporary nature, as approximately Rs. 75 Lakhs only. Therefore, the investigation has clearly established that M/s Gem International and M/s AKR Constructions Pvt. Ltd. have made a wrongful pecuniary gain of about Rs. 20 Crores out of the exorbitant price at which the deliberately short-listed single vendor M/s Swiss Timing had been awarded the contract for TSR.

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Investigation also revealed that M/s Gem International entered into a separate contract with M/s AKR Construction Pvt. Ltd. through its CMD Sh. A K Reddy on 29.06.2010, for the work of temporary cable laying for the operating TSR equipment and data transmission for about Rs. 12.88 crores. M/s AKR Construction Ltd was into civil construction having no expertise of high technology matters and they had not executed any such work in the past. M/s AKR Construction Ltd. did not carry out any work except preparing false documentation and participation in some bank transactions. Whatever little work was done, it was done by M/s Gem International although invoices were got raised by A K Madan and PD Arya in the name of M/s AKR Construction Ltd. Out of the total amount of 23,21,19,334 received by M/s Gem International from M/s Swiss Timing, an amount of 11,28,36,412/- has been paid to M/s AKR Construction Ltd.

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During investigation statements of following persons were recorded under section 50 of PMLA.

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(i) Sh. A K Madan, partner of M/s. Gem International,

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(ii) Shri P D Arya (iii) Sh. A K Reddy

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(iv) Smt. A. Indira

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(v) Sh. A Sashi Kumar Reddy

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(vi) Sh. Ajay Mathur (vii) Sh. Rajkumar Rawat

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(viii) Sh. Rajesh Kumar Goyal, partner of M/s Girish Radi Corporation.

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On the basis of the abovementioned FIR, ED recorded ECIR/01/DZ/ 2011, and initiated the investigation for the offence of money laundering and

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FPA-PMLA-2406/DLI/2018 Bank of Baroda v. E.D., New Delhi & Ors.

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to trace out the proceeds of crime. During investigation ED recorded statements of various suspects/accused persons & others and also collected the documents from the various sources and search conducted at various premises.

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On the basis of above incriminating material, statements on record collected during investigation, ED passed the PAO No. 01/2018 dated 03.01.2018, wherein the properties of the accused persons/company were provisionally attached, and thereafter, filed the Original Complaint No. 887/2018 before the Adjudicating Authority for confirmation of the said properties.

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The Adjudicating Authority being satisfied with the allegations made in the OC coupled with the statements recorded under Section 50 of PMLA and the relied upon documents, formed the reasonable belief and thereby issued the Show Cause Notice to all the defendants. After receiving the respective replies and hearing the rival submissions, the Adjudicating Authority confirmed the PAO vide its order dated 03.01.2018.

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Being aggrieved by the said order, qua the mortgaged properties as mentioned in para no. 1 above, the appellant bank filed the present appeal.

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During the arguments Ld. Counsel for the appellant pointed out that the abovementioned properties were mortgaged with the Appellant bank since 1998 against grant of various kinds of credit facilities. The properties at sr. no. 1 & 2 were initially mortgaged in 1998, and thereafter, various deeds of extension of mortgage were executed, as and when, the credit facilities were enhanced/modified. The property at sr. no. 3 above was mortgaged in favour of the bank on 17.08.2006.

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Ld. Counsel for the Appellant bank submitted that entire complaint pertains to the Respondent Nos. 2 to 5 during the Common Wealth Games,

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FPA-PMLA-2406/DLI/2018 Bank of Baroda v. E.D., New Delhi & Ors.

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2010 held in New Delhi. However, no allegation as such was attributed against the appellant bank. It is also seen from the record that none of the scheduled offences were committed prior to or at the time of purchasing of the immovable properties or creation of mortgage by the Respondents no. 2 to 5 in favour of the appellant bank.

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Ld. Counsel for the appellant bank submitted that the mortgaged properties with the appellant bank are not created by siphoning off of the bank’s fund (being purchased much prior to the period of commission of offence) and the same needs to be appropriated towards the dues of the appellant bank. Ld. Counsel submitted that the appellant bank is the victim on account of non-clearance of outstanding dues and now being made to lose its valuable security on account of attachment. Ld. Counsel submitted that the appellant bank is not holding the property on behalf of the other accused persons as the right of the bank are independent rights secured by mortgage only on the basis of advancing of legitimate funds by the bank, without being involved in any manner in commission of alleged offences.

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Ld. Counsel for the appellant bank submitted that the subject properties, having been mortgaged with the appellant bank are covered u/s 26E of the SARFAESI Act, 2002, introduced by an amendment in 2016 which gives the secured creditor, an overriding right over the same notwithstanding any other law. He stated that Section 71 of PMLA is of no avail, since the said provision even though it came into effect subsequent to the enactment of the SARFAESI Act, 2002, the provision of Section 26E of the SARFAESI Act, 2002, which are attracted to the subject properties was introduced by way of an amendment on 01.09.2016, and therefore, will prevail over the PMLA, 2002.

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FPA-PMLA-2406/DLI/2018 Bank of Baroda v. E.D., New Delhi & Ors.

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Prayer is accordingly made to allow the present appeal and release the aforementioned properties mortgaged with the appellant bank mentioned at para no. 1 above.

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On the other hand, Ld. Counsel for the Respondent ED strongly opposed the contention of the Ld. Counsel for the appellant bank and submitted that even if the properties were mortgaged prior to the commission of offence, even then, the properties of the accused persons and their companies can be attached as value thereof. Ld. Counsel for the respondent submitted that the contention of the appellant bank that SARFAESI provisions get precedence over provisions of PMLA is not correct, as PMLA is a Special Act and proceedings under PMLA get precedence over other Acts in terms of Section 71 of the Act.

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He further stressed that Ld. Special Judge, PMLA Court can dispose of the mortgaged properties after the conclusion of the trial, as per law. Prayer is accordingly made to dismiss the present appeal being devoid of any merits.

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We have considered the rival submissions and we have given our thoughtful consideration to the same. We agree with the contention of learned counsel for Respondent ED that the properties even acquired prior to the period of schedule offence can be attached as value thereof. However, being a secured creditor of the aforementioned immovable properties, the appellant bank is at liberty to stake its claim before learned Special Judge, PMLA Court, u/s 8(5) to section 8(8) of the PMLA, 2002. It is pertinent to mention here that the appellant bank can also move application even before the conclusion of trial under section 8 (7) of PMLA, 2002, for auction sale of the mortgaged immovable properties, being a secured creditor, alongwith an affidavit/undertaking that in case of excess amount realised during auction

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FPA-PMLA-2406/DLI/2018 Bank of Baroda v. E.D., New Delhi & Ors.

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sale, the same will be deposited with ED by way of FDRs. Before permitting auction sale Ld. Special Judge, PMLA Court, may invite the objection of the other interested parties, if so required. The said FDRs (if any) be disposed of as per law amongst the other claimants as per law, after conclusion of trial.

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In sequel to our discussion in the preceding para, the present appeal is hereby disposed of, with liberty as aforesaid. It is made clear that nothing expressed herein will affect the right of either party in the criminal trials.

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Appeal Disposed of with liberty.

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Pronounced on this 26^th Day of May, 2025.

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(Rajesh Malhotra) Member ‘AB’

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(G.C. Mishra) Member

FPA-PMLA-2406/DLI/2018 of Bank of Baroda v. The Joint Director Directorate of Enforcement, New Delhi & Ors.

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FPA-PMLA-2406/DLI/2018 of Bank of Baroda v. The Joint Director Directorate of Enforcement, New Delhi & Ors.

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