2017 (8) TMI 1075 - AT - Money Laundering

PMLA - provisional attachment order - property in the present case was attached for value of proceeds of crime involved in money laundering - whether applicant/appellant is a separate and distinct legal entity and its property could not be attached on account of alleged defaults by the KAL and Dr. Vijay Mallaya? - Held that - In case the provisions of section 8(4) and 8(5) of the PMLA are read together, it is evident that after the confirmation of the attachment by the Adjudicating Authority, the Enforcement Directorate is required to take the possession of the attached property. While the Tribunal, in exercise of its inherent powers of an appellate court during hearing appeals under the related acts, in suitable cases has granted interim relief including by way of stay of action for taking possession of attached properties confirmed in adjudication subject to such conditions as considered suitable in a particular case, for the reasons as mentioned above we do not consider the present case to be one where such discretion can be exercised. The attached property is a vacant property w.e.f. 31.03.2017 as informed by learned counsel for the appellant. The value of the property as as stated in the statement of Shri N.R Padamnabhan, Director in the appellant company appellant is approximately between ₹ 170-200 crores. Admittedly, Dr. Vijay Mallya has not cleared the loan amounts worth thousand of crores. He is declared as absconder. It is also not his case that he is not capable to pay the amounts due to the banks. The amount due in-fact is public money. There is no assurance on his behalf that in a particular period of time, he would clear the loan amount. He has not shown his willingness to join the proceedings pending against him in Indian courts. It also appears from the material placed on record that he was actively involved in the day to day activities of all the businesses carried out by him directly or indirectly when the loan was sanctioned. Merely by alleging that a particular company is an independent entity would not help the case of the appellant because he was the ring master of entire game. Thus the facts in the present case are peculiar than other cases referred on behalf of the appellant. It is also well settled position in law that the party who is absconding and carrying the public money and evading the process of law would not be entitled for discretionary relief from any court. Accordingly, and in the facts of the present case, we are not inclined to exercise the discretion in favour of the appellant who, prima facie , is controlled by Dr. Vijay Mallya. The application for stay is, therefore, dismissed. The respondent would be entitled to take the possession of the property under section 8(4) of the Act in the manner prescribed under the rules.

Issues Involved:
1. Legality of the provisional attachment order.
2. Distinct legal entity argument.
3. Control and involvement of Dr. Vijay Mallya.
4. Applicability of previous judgments on separate legal entity.
5. Conduct of Dr. Vijay Mallya and its implications.
6. Concept of "proceeds of crime" and "value thereof."
7. Entitlement to interim relief.

Detailed Analysis:

1. Legality of the Provisional Attachment Order:
The appellant sought a stay on the operation of the impugned order dated 22.02.2017, which confirmed the provisional attachment order (PAO) dated 03.09.2016. The attachment was based on allegations of money laundering involving a loan of ?6027.36 crores granted to Kingfisher Airlines Ltd. (KAL) by SBI and a consortium of banks.

2. Distinct Legal Entity Argument:
The appellant contended that it is a separate and distinct legal entity from KAL and has no connection to the loan granted to KAL. The appellant argued that its property, acquired prior to the loan, is not "proceeds of crime" and should not be attached. The appellant cited the case of Anita Kaur Vs. Universal Weather and Aviation India Pvt. Ltd., 2014 SCC OnLine Del 3137, emphasizing that a company is a distinct legal entity from its shareholders.

3. Control and Involvement of Dr. Vijay Mallya:
The respondent argued that the property attached is controlled by Dr. Vijay Mallya, who owes approximately ?9000 crores to various financial institutions and has been declared an absconder. The statement of Shri N.R. Padmanabhan, Director of the appellant company, indicated that Dr. Vijay Mallya controlled the appellant company. The shareholding pattern showed significant indirect control by Dr. Vijay Mallya and his family.

4. Applicability of Previous Judgments on Separate Legal Entity:
The Tribunal noted that while the legal principle that a company is distinct from its shareholders is well-established, the facts of this case are different. The Tribunal found that Dr. Vijay Mallya's control over the appellant company and his involvement in its day-to-day activities distinguished this case from the cited judgments.

5. Conduct of Dr. Vijay Mallya and Its Implications:
The Tribunal highlighted Dr. Vijay Mallya's conduct, including his declaration as an absconder and his failure to repay loans. The Tribunal noted instances of property disposal and structuring of payments to avoid legal consequences, indicating a clear intention to evade repayment.

6. Concept of "Proceeds of Crime" and "Value Thereof":
The Tribunal agreed with the Adjudicating Authority's interpretation that the concept of "proceeds of crime" includes the value of any such property. The Tribunal emphasized that money laundering is a continuing offence, and the attachment of property is justified until the investigation and trial are concluded.

7. Entitlement to Interim Relief:
The Tribunal concluded that the appellant, controlled by Dr. Vijay Mallya, is not entitled to interim relief. The Tribunal emphasized that a party absconding and evading legal processes cannot seek discretionary relief. The application for stay was dismissed, and the respondent was entitled to take possession of the property under section 8(4) of the Act.

Conclusion:
The application for stay was dismissed, and the respondent was authorized to take possession of the attached property. The Tribunal found that the appellant company, controlled by Dr. Vijay Mallya, could not claim protection under the principle of distinct legal entity due to the peculiar facts of the case and Dr. Vijay Mallya's conduct.

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