Disposed

FPA-PMLA-2896/CHN/2019 of M/s Nathella Sampath Jewelry Pvt. Ltd. (Under Liquidation) through- Liquidator Sh. R. Raghavendran v. The Deputy Director Directorate of Enforcement, Chennai

ATFP1 May 2025FPA-PMLA-2896/CHN/2019

Case brief

AI extract

What is this about?

The Tribunal disposed of an appeal by a liquidator challenging the confirmation of provisional attachment of the company's assets by the Enforcement Directorate. It held that the Special Judge must first decide the underlying conspiracy regarding loan sanctioning.

What did the court decide?

The appeal was disposed of with liberty to the liquidator and banks to move the Special Judge under Section 8(5) to 8(8) of the PMLA to seek auction of properties and secure realization of dues.

FPA-PMLA-2896/CHN/2019 of M/s Nathella Sampath Jewelry Pvt. Ltd. (Under… — Corruption | ATFP (2025)

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APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI

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FPA-PMLA-2896/CHN/2019

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M/s Nathella Sampath Jewelry Pvt. Ltd. (Under Liquidation) through- Liquidator Sh. R. Raghavendran …

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Appellant

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Versus

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The Deputy Director Directorate of Enforcement, Chennai

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… Respondent

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Advocates/Authorized Representatives who argued

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For the Appellant: Mr. Ashkrit Tiwari, Ms. Richa Singh

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& Mr. Rajendra Beniwal, Advs.

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For the Respondent: Mr. Chandra Prakash, 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 01.05.2025

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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) are filed by the appellant against the order dated 16.01.2019 passed by the Adjudicating Authority in Original Complaint No. 1015/2018 (OC), whereby the properties attached by ED vide Provisional Attachment Order No.11/2018 dated 31.07.2018 were confirmed. The properties of the appellant are mentioned in para no.1 of the impugned order from page no. 8 to14.

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As per the facts of the case, an FIR was registered by CBI, BS & FC/ BLR on 24.03.2018 vide no. RC-08/E/2018 against the following persons:

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i. M/s Nathella Sampath Jewelry Private Limited; ii. Shri N. Ranganath Gupta, Promoter cum Managing Director; iii. Shri N. Prasanna Kumar, Director; iv. Shri N. Prapanna Kumar, Director; v. Shri Sohun C.J., Partner of M/s Jeervla & Co., Chartered Accountant, Kilpauk Chennai & Statutory Auditor of M/s Nathella Sampath Jewelry Pvt. Ltd. and unknown public servants and unknown others for commission of offence under section 120B IPC read with section 409, 420, 467, 468, 471 IPC and also r.w.s. 13(2) r.w.

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FPA-PMLA-2896/CHN/2019 M/s Nathella Sampath Jewelry Pvt. Ltd. v. E.D., Chennai

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13(1)(d) of Prevention of Corruption Act, 2008 and the substantive offences thereunder.

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As per the allegations in the FIR, the accused persons in pursuance to conspiracy committed the offence in collusion with officials/officers of the non-banking finance company. M/s Nathella Sampath Jewelry Pvt. Ltd. (NSJPL) was engaged in the business of buying, manufacturing and selling of precious metals in the form of medallion, jewellery (Gold, Silver & Diamond) and other accessories. Shri N. Rangnath Gupta, N. Prasanna Kumar and N. Prapanna Kumar (both sons of Shri N. Rangnath Gupta) are the key persons involved in the affairs of M/s NSJPL in the status of its Promoter cum Managing Director & Promoter cum Directors respectively. M/s NSJPL was incorporated on 03.04.2007 by taking over three existing partnership firms viz. Nathella Sampath Jewelry; NSC & Co.; and M/s NSC Jewellers. M/s Jeeravla & Co. represented by its partner Shri Sohum C.J. are the statutory auditors of M/s NSJPL. M/s NSJPL was enjoying financial assistance in the form of working capital credit limits with IOB, ICICI, HDFC and Citi Bank to the tune of Rs. 71 Crores. During 2009, SBI took over the said loans by sanctioning Rs. 100 Crores to M/s NSJPL. The exposure of SBI was reduced from Rs. 100 Crores to Rs. 70 Crores during January, 2010 within an overall limit of Rs. 112 Crores (the balance exposure of Rs. 42 crores from HDFC). The limits of SBI subsequently increased during the period from 2010 to 2012 to Rs. 210 Crores. In February, 2013, the erstwhile State Bank of Travancore (e-SBT) sanctioned a limit of Rs. 40 Crores and thus the overall credit limits were Rs. 305 Crores (SBI 210 Crores, e-SBT 40 Crores & HDFC – Rs. 55 Crores) and all the banks were brought under consortium agreement with SBI being the lead bank. In 2015, Union Bank of India was inducted into the consortium and the said bank sanctioned a limit of Rs. 50 Crores. Further financial facilities viz. option to avail CC (Hyp)/Metal Gold

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FPA-PMLA-2896/CHN/2019 M/s Nathella Sampath Jewelry Pvt. Ltd. v. E.D., Chennai

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Loan were also permitted and M/s NSJPL purchased Gold in the form of Bullion either from the nominated banks in the consortium or in the Open Market by utilizing the limits and M/s NSJPL also purchased Bullion on the basis of BG issued by the consortium banks. As on 31.03.2017, three banks viz. SBI, HDFC and Union Bank of India were consortium members and the limits availed by M/s NSJPL from the said banks were Rs. 250 Crores, Rs. 40 Crores and Rs. 50 Crores respectively all totaling Rs. 340 Crores. The credit limits were permitted based on the drawing power available which were derived from the current assets as submitted by them from time to time. The M/s NSJPL’s banking exposure was periodically increased and the enhancement of working capital limits was based on the reported growth of the current assets and sales of the company. As on 31.01.2009, the Company’s current assets stood at Rs. 112.60 Crores, which has reportedly increased to Rs. 625.45 Crores as on 31.03.2016. The sales of the company have been steadily increasing from Rs. 350.99 Crores from 2008-09 to Rs. 1425.02 Crores in 2015. The amount of Rs. 250.00 Crore of SBI includes the limits of e-SBT taken over by SBI subsequent to the merger of the Banks. M/s Yes Bank was inducted as a new member in the consortium during March, 2017 and sanctioned a limit of Rs. 30.00 Crores to reduce the exposure of SBI and HDFC to an extent of Rs. 15.00 Crores each. Yes Bank released Rs. 15.00 Crores pending completion of consortium documentation whereby the exposure of HDFC reduced to Rs. 40.00 Crores. As the account became SMA and NPA subsequently, Yes Bank has sanctioned personal loans in the names of the Directors of M/s NSJPL and reduced their exposure to the company in its books. The credit facilities were secured by way of Primary Security, Collateral Security and Guarantees. The primary security includes Hypothecation of the entire goods, goods situated at all the show rooms of M/s NSJPL and the corporate office and also lying with the job workers.

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FPA-PMLA-2896/CHN/2019 M/s Nathella Sampath Jewelry Pvt. Ltd. v. E.D., Chennai

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Investigation revealed that on account of fraudulent activities M/s NSJPL had caused loss to the tune of Rs. 379.75 Crores to the banks as on 01.03.2018.

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On the basis of the above FIR, ED recorded ECIR No. ECIR/CEZO-I/ 09/2018 dated 09.04.2018 and initiated the investigation for the offence of money laundering and to trace out the trail of 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 searches were also conducted at various premises. Investigation revealed the trail of proceeds of crime and it was found that on many of instances round tripping of investment was done as mentioned in para 15 to 19 of the impugned order.

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On the basis of above incriminating material, statements on record collected during investigation, ED passed the PAO No. 11/2018 dated 31.07.2018, wherein 31 properties of the accused persons were provisionally attached and thereafter filed the Original Complaint No. 1015/2018 dated 14.08.2018 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 including the present appellant banks. After receiving the respective replies and hearing the rival submissions, the Adjudicating Authority confirmed the PAO vide its order dated 16.01.2019. Being aggrieved by the said order, appellant filed the present appeal.

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FPA-PMLA-2896/CHN/2019 M/s Nathella Sampath Jewelry Pvt. Ltd. v. E.D., Chennai

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During the arguments Ld. Counsel for the appellant submitted that previously present appeal was filed by Resolution Professional (RP) on behalf of appellant company. He pointed out that on 23.04.2018, the Hon’ble NCLT, Chennai vide order in CP(IB)/129/CHE/2018, the appellant company was admitted into Corporate Insolvency Resolution Procced (CIRP). Later on, Mr. Ramratan Konoongoo was appointed as RP, which was approved by NCLT vide order dated 21.06.2018. Accordingly, the RP took over the assets of MSJPL by virtue of Section 25 of IBC. On 31.07.2018 ED passed PAO No. 11/2018 and attached the entire assets of the appellant company, without appreciating the fact that the charge of the said company is already taken over by the RP. Thereafter, PAO was confirmed by the Adjudicating Authority vide order dated 16.01.2019 in OC No. 1015/2018. Aggrieved by the said order appellant filed the present appeal through RP for release of assets to facilitate RP to perform his duties. He pointed out that on 19.09.2018, the Committee of Creditors (COC) recommended to liquidate NSJPL. Accordingly, Hon’ble NCLT appointed Mr. Palaniappan as a liquidator of the Corporate Debtor. He argued that the liquidation proceedings could not be culminated for last five years on account of attachment and present appeal. The present liquidator was appointed on 21.03.2025 by Hon’ble NCLT vide order dated 21.03.2025.

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He argued that the assets of appellant company could not be liquidated till date to satisfy the interest of secured and unsecured creditors.

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The accounts had become Non-Performing Asset (NPA) and after due credit of all sums paid there became and still due to the borrower company and the Guarantors of the said loan.

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Ld. Counsel for the appellant company as liquidator submitted that the mortgaged properties are not created by siphoning of the bank’s fund

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FPA-PMLA-2896/CHN/2019 M/s Nathella Sampath Jewelry Pvt. Ltd. v. E.D., Chennai

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and the same needs to be appropriated towards the dues of the secured and unsecured creditors. The mortgagees are the victim of the fraud and now being made to lose their valuable security on account of attachment by ED.

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Ld. Counsel for the appellant submitted that the respondent ED has wrongly attached the aforesaid properties by giving them a color of tainted money or proceeds of crime by claiming that the aforesaid properties mortgaged by the borrowers are obtained from the proceeds of crime. Respondent ED, however, has not provided any details or evidence regarding the aforementioned claim that the said properties have been purchased from the proceeds of crime/siphoned.

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He further argued that the incriminating statements recorded by ED u/s 50 of PMLA, 2002 are in fact involuntary confessional statements, which needs to be discarded, in absence of any corroborative documentary evidence. Prayer is accordingly made to allow the present appeal and release the properties of the present appellant for the purpose of liquidating the assets to satisfy the interest of secured and unsecured creditors.

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On the other hand, Ld. Counsel for the Respondent ED strongly opposed the contention of the Ld. Counsel for the liquidator of the appellant company 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 2018, and the sanctioned loan pertain to the period of 2015. Ld. Counsel for the respondent submitted that the contention of the liquidator of the appellant company that IBC and 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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FPA-PMLA-2896/CHN/2019 M/s Nathella Sampath Jewelry Pvt. Ltd. v. E.D., Chennai

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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 banks and non-banking finance company with the mortgagor M/s NSJPL and its Directors Shri N. Rangnath Gupta, Prasanna Kumar and Prapanna Kumar, is not ruled out. However, this issue needs to be decided by learned Special Judge, conducting the trial with respect to predicate offence, whether the officials/ officers of the banks and non-banking finance company were part and parcel of any conspiracy for sanctioning and releasing the loan against the norms or not. Therefore, being secured creditors of the aforementioned immovable properties, the banks and non-banking finance companies are entitled to stake their claim either in person, or through, the liquidator of the appellant company 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 liquidator of the appellant company or the banks and financial company can also move application even before the conclusion of trial, under section 8 (7) of PMLA, 2002, for auction sale of the hypothecated movable properties and mortgaged immovable properties, being secured/unsecured creditors, alongwith an affidavit/undertaking that in case of excess amount realised during auction sale, the same will be deposited with ED by way of FDR. Before permitting auction sale Ld. Special Judge, PMLA Court, may invite the objection of the other interested parties, if so required. The said FDRs be disposed of as per law amongst the other claimants as per law, after conclusion of trial.

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FPA-PMLA-2896/CHN/2019 M/s Nathella Sampath Jewelry Pvt. Ltd. v. E.D., Chennai

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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 01^st Day of May, 2025.

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(Rajesh Malhotra) Member

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(G.C. Mishra) Member

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‘AB’

FPA-PMLA-2896/CHN/2019 of M/s Nathella Sampath Jewelry Pvt. Ltd. (Under Liquidation) through- Liquidator Sh. R. Raghavendran v. The Deputy Director Directorate of Enforcement, Chennai

Case brief

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FPA-PMLA-2896/CHN/2019 of M/s Nathella Sampath Jewelry Pvt. Ltd. (Under Liquidation) through- Liquidator Sh. R. Raghavendran v. The Deputy Director Directorate of Enforcement, Chennai

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