Disposed

FPA-PMLA-2556/MUM/2018 of The Cosmos Co-Operative Bank Ltd. v. E.D., Mumbai

ATFP20 Mar 2025FPA-PMLA-2556/MUM/2018

Case brief

AI extract

What is this about?

The Tribunal disposed of an appeal seeking release of mortgaged properties attached under the PMLA. It held that the appeal is not the appropriate forum to decide collusion but allowed the bank to stake its claim before the Special Judge under PMLA.

What did the court decide?

Appeal disposed with liberty to stake claim before Special Judge and apply for auction with undertaking to deposit excess proceeds.

FPA-PMLA-2556/MUM/2018 of The Cosmos Co-Operative Bank Ltd. v… — Money Laundering | ATFP (2025)

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APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI

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FPA-PMLA-2556/MUM/2018

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The Cosmos Co-Operative Bank Ltd. … Appellant

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Versus

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The Deputy Director Directorate of Enforcement, Mumbai … Respondent

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Advocates/Authorized Representatives who argued

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For the Appellant: Mr. Ninad Laud, Ivo D‟Costa, Zubin Dash & Aditya Pratap Swain, Advs.

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For the Respondent: Ms. N.K. Matta, Adv.

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CORAM

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

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FINAL ORDER 20.03.2025

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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 against the order dated 29.08.2018 passed by the Adjudicating Authority in Original Complaint No. 916/2018 (OC) Zone Delhi, whereby it confirmed the attachment of the properties attached by ED in Provisional Attachment Order No. 01/2018 (PAO) dated 13.03.2018, wherein the properties mortgaged with the appellant bank are detailed as under:-

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Sr. No.	Description of thepropertyasper the Complaint	Value in Rs.
1.	Office premises known as Office No. 8 to 14 total admeasuring	1,10,55,680
	134.24 Sq. mtr. situated at first floor of the building known as
	Pride Plaza at Survey No. 157, Hissa No. D/1A/1 CTS no. 5723, Kharalwadi, Pimpri Waghere, Taluka – Haveli, District – Pune, Maharashtra
2.	Flat No. 1202, Wing P-4, Empire Estate, CTS No. 4510/1,	74,13,244
	Chinchwad,District – Pune,Pin Code – 411019,Maharashtra

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As per the facts of the case, Deccan Police Station, Pune registered an FIR No. 323/2015 dated 31.10.2015 on the basis of complaint filed by one Mr. Sachin Sonawane, Assistant General Manager of the Securities and Exchange Board of India (SEBI), Mumbai for offences punishable under Section 420, 120-B & 188 of the IPC, 1860 against M/s Samruddha Jeevan Foods India Ltd. (SJFIL), Pune, Mahesh Kisan Motewar, Pune, Mrs. Vaishali

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FPA-PMLA-2556/MUM/2018 The Cosmos Co-Operative Bank Ltd. v. E.D., Mumbai

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Mahesh Motewar, Ghanshyam J. Patel, Pune, Rajendra Pandurang Bhandare, Solapur, all Directors of M/s Samruddha Jeevan Foods India Ltd.

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The SEBI had carried out the preliminary enquiry which revealed that SJFIL had collected money from the people under various schemes which were „Collective Investment Schemes‟ as per Section 11AA of the SEBI Act and the said company was collecting the deposits from the people without obtaining necessary permission from SEBI in violation of the provisions of Regulation 3 of SEBI (Collective Investment Schemes) Regulations, 1999. SJFIL, through its agents had offered more than 12% returns on the investments related to farming of goats & buffaloes and promised other number of benefits to their investors, which were not reasonable.

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During the investigations, it is revealed that SJFIL was prima facie engaged in fund mobilization activity from public by floating/sponsoring/ launching “collective investment scheme” without obtaining a certificate of registration from SEBI. It is further revealed that such schemes or arrangements were offered by SJFIL under the guise of „sale and purchase of livestock‟ and it was nothing but a smokescreen for its fund mobilization activity

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During the course of preliminary enquiry by SEBI, it is further revealed that M/s Samruddha Jeevan Foods India Ltd. and its directors had carried out their schemes and defrauded hundreds and thousands of innocent depositors from all over the country for the purpose of their hidden agenda. Mr. Mahesh Kisan Motewar, Mrs. Vaishali Mahesh Motewar, Rajendra Pandurang Bhandare and Ghanshyam J. Patel (now expired) were the then directors of SJFIL. They were looking after the day-to-day affairs of the company during the relevant period and had hatched a conspiracy in a planned manner and induced large scale illegal damage to the depositors

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FPA-PMLA-2556/MUM/2018 The Cosmos Co-Operative Bank Ltd. v. E.D., Mumbai

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and accrued illicit profit to themselves and hence, have committed offence under Section 420 and Section 120-B of the IPC, 1860.

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Furthermore, Chatushrungi Police Station, Pune had registered FIR No. 384/2014 on 20.11.2014 and the said case was transferred to Criminal Investigation Department, (CID), Pune for further investigation. CID after investigation have filed Chargesheets bearing C.S. No. 92/2016 on 27.06.2016 and C.S. No. 154/2016 on 07.11.2016 against Mr. Mahesh Kisan Motewar, Mrs. Leena Mahesh Motewar, Mrs. Vaishali Mahesh Motewar and Mr. Rajendra Bhandare for commission of offences punishable under Sections 406, 409, 420 and 120-B of IPC, 1860 and Section 3 of Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999 and Sections 3, 4, 5, 6 of Prize Chit and Money Speculation Schemes (Banning) Act, 1987.

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Accordingly, ED recorded ECIR No. 01/MBZO/2016 dated 12.01.2016 for initiating investigation for commission of offence of money laundering and trace out the proceeds of crime. During investigation, ED recorded the statement of the accused/suspected persons and others and also collected the documents from investigation agency, banks and other parties.

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The CID investigation revealed that the accused persons committed the fraud with the depositors to the tune of Rs. 3500 Crores and accordingly, ED attached the properties of the appellant to the extent of 101,30,61,441/(Rupees One Hundred and One Crore Thirty Lakh Sixty-One Thousand Four Hundred Forty-One), against the fraud of Rs. 3500 Crores. Thereafter, ED filed the Original Complaint No. 916/2018 before the Adjudicating Authority for confirmation of the PAO. Adjudicating Authority after perusal of the allegations mentioned in the OC coupled with the relied upon documents and statements u/s 50 issued the Show Cause Notice to the defendants.

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FPA-PMLA-2556/MUM/2018 The Cosmos Co-Operative Bank Ltd. v. E.D., Mumbai

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After receiving the replies and hearing the rival submissions, the Adjudicating Authority confirmed the PAO vide order dated 29.08.2018.

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Aggrieved by the said order, the present appellant bank filed the present appeal qua the mortgaged properties.

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Ld. Counsel for the appellant bank submitted that a company named M/s Samruddha Jeevan Foods India Limited formed by Mr. Mahesh Kisan Motewar s/o Kisan Motewar which was working in the areas of 9i) good forming (ii) Cattle farming, (iii) Bio Gas Plant, (iv) sales and purchase of goods and buffaloes etc. During the period between 2003-13, the company was involved in various investment plans, which would attract customers/ investors to invest in the company with the promise of good return.

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On 23.02.2011, Mr. Rajendra Singh Yadav, one of the Trustees of the Chaudhari Atar Singh Yadav Memorial Education Trust mortgaged an office premise of the trust to the appellant bank vide a composite deed of mortgage and hypothecation for creation of first and additional/ further charge for a loan amounting to Rs. 27.00 Crores. On 11.08.2011, Mr. Rajendra Singh Yadav availed a housing loan of Rs. 30.00 Lakhs from the appellant bank for purchasing a flat. The aforementioned flat was mortgaged for the said housing loan with the appellant bank on 24.10.2011 and as of date an amount of Rs. 15.00 lakh is outstanding of the said housing loan and that on 28.05.2012, Mr. Rajendra Singh Yadav sold the said premises to Mr. Mahesh Kisan Motewar without any consent or having obtained any NOC from the appellant bank.

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On 31.10.2013, SEBI passed an order directing M/s Samruddha Jeevan Foods India Limited to not collect any more money from the investors and not to dispose of any of his properties as it was prima facie found to be engaged in the fund mobilizing activity by floating „Collective Investment

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FPA-PMLA-2556/MUM/2018 The Cosmos Co-Operative Bank Ltd. v. E.D., Mumbai

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Schemes‟ as defined in Section 11AA of the Securities and Exchange Board of India Act, 1992.

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Ld. Counsel for the appellant bank submitted that a property mortgaged u/s 58 of Transfer of Property Act, 1882 cannot be attached provisionally u/s 5(1) of the PMLA, 2002 on the premise of it being mortgagors‟ property. Once the properties have been mortgaged by mortgagors, the mortgagor is left with the equity of redemption, the properties vested with the mortgagee.

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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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Ld. Counsel for the appellant bank submitted that the PAO in the aforesaid ECIR has prevented the appellant bank from selling the properties and recovering its money from the said properties.

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He further argued that appellant bank is a secured creditor and hence it is entitled to recover its dues from the mortgagees and guarantors by auctioning their properties. He further argued that appellant bank is ready to give an undertaking that in case any excess amount is realized after the auction of the mortgaged property, the same will be deposited with the ED by way of FDR. Prayer is accordingly made to allow the present appeal and

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FPA-PMLA-2556/MUM/2018 The Cosmos Co-Operative Bank Ltd. v. E.D., Mumbai

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release the aforementioned properties which have been mortgaged with the appellant bank.

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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 the properties were mortgaged during the period of commission of offence and the Respondent ED is entitled to attach the same. Ld. Counsel for the respondent ED submitted that the FIR was registered in the year 2015, when the loan was sanctioned by the appellant bank. Ld. Counsel for the respondent submitted that the statement 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 collusion of the officials of bank with the mortgagor M/s Samruddha Jeevan Foods India Limited and its directors is not ruled out. However, this issue needs to be decided by Ld. Special Judge, PMLA Court, whether the appellant bank was part and parcel of any conspiracy for sanctioning and releasing the loan by taking the title deeds of the properties or not. However, being a secured mortgagee of the aforementioned 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, with notice to the other secured and unsecured creditors and

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FPA-PMLA-2556/MUM/2018 The Cosmos Co-Operative Bank Ltd. v. E.D., Mumbai

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after seeing the role of present appellant bank, if any, for colluding with accused M/s Samruddha Jeevan Foods India Limited and its directors. Appellant bank is also at liberty to move application before Ld. Special Judge, PMLA Court, under section 8 (7) of PMLA, 2002, even before the conclusion of trial for auction of mortgaged properties, with an under taking to deposit the excess amount with ED by way of FDRs.

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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 direction.

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Pronounced on this 20^th Day of March, 2025.

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(Rajesh Malhotra) Member

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(G.C. Mishra) Member

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„AB‟

FPA-PMLA-2556/MUM/2018 of The Cosmos Co-Operative Bank Ltd. v. E.D., Mumbai

Case brief

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FPA-PMLA-2556/MUM/2018 of The Cosmos Co-Operative Bank Ltd. v. E.D., Mumbai

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