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2018 (5) TMI 329 - AT - Money LaunderingOffence under PMLA - Attachment orders of mortgaged properties with the Appellant Bank - Held that - The Borrower i.e. M/s. PRP Granites was repaying the loan amount to the Appellant Bank till 31.03.2013 whereafter in pursuance of frozen orders of the Deputy Superintendent of Police, Prohibition Enforcement Wing doing vide letter dated 31.08.2012, the loan account became NPA and the total outstanding demand was quantified ₹ 135.08 Crores on the date of NPA. Since the account of the respondent no.2 became NPA, the Appellant Bank had initiated recovery proceedings under the SARFAESI Act and issued Demand Notice under Section 13(2) of the Act, including the hypothecated goods. The Appellant Bank took possession of the charged immovable properties under Section 13(4) of the Act and thereafter, the same was also put on auction and the sale notice was issued on 06.01.2014. The action of the Bank was challenged by the respondent no.2 in S.A. No.39 of 2014 filed before DRT, Madurai. One Time Settlement was also proposed by the respondent no.2 but the respondent no.2 did not remit the OTS amount as per the terms and conditions. Since the OTS conditions were not fulfilled by the respondent no.2, the Appellant Bank cancelled the OTS. The Appellant Bank also filed an Original Application in O.A. No.456 of 2016 against the respondent no.2 and others before the DRT, Madurai and the same is pending adjudication. In the instant case also it is a matter of record that the attached properties as per Annexure R-1 and the list of hypothecated goods enclosed as Annexure R-2 of the appellant s letter dated 03.11.2017 have also been attached. Following the decision of the case of State Bank of India Versus The Joint Director, Directorate of Enforcement, Kolkata 2018 (4) TMI 1411 - ATPMLA, NEW DELHI and subsequent similar decisions in various cases, the Impugned Order dated 26.04.2017 and the Provisional Attachment Order dated 09.12.2016 in respect of the mortgaged properties with the Appellant Bank as per Annexure R-1 & the hypothecated goods as per Annexure R-2 of Appellant s letter dated 03.11.2017 is set aside.
Issues Involved:
1. Provisional Attachment Order under PMLA. 2. Secured creditor's rights over mortgaged properties. 3. Alleged illegal activities and their impact on secured assets. 4. Legal precedence and applicability of SARFAESI Act and RDDB Act. 5. Adjudicating Authority's decision and its validity. Detailed Analysis: Provisional Attachment Order under PMLA: The appeal was filed under Section 26 of the Prevention of Money Laundering Act, 2002 (PMLA) against the Impugned Order dated 26.04.2017, which confirmed the Provisional Attachment Order No. 22/2016. This order provisionally attached 1625 immovable properties and 4 FDRs in the name of PRP Granites, valued at ?102,95,57,710/- and ?32,57,275/- respectively. Secured Creditor's Rights over Mortgaged Properties: The appellant, Indian Bank, argued that many of the attached properties were mortgaged with them. The bank had provided credit facilities to PRP Granites based on these mortgages. The appellant contended that as a secured creditor, they had a paramount first charge over the assets. The bank's position was that the attachment order should not have included properties mortgaged to them, as they had a legal right to recover their dues by selling these secured assets. Alleged Illegal Activities and Their Impact on Secured Assets: The respondent No. 1, representing the Enforcement Directorate, argued that PRP Granites and its partners were involved in illegal quarrying and other statutory violations, which led to the registration of multiple FIRs. These illegal activities allegedly resulted in proceeds of crime, which were subsequently invested in acquiring the attached properties. The Enforcement Directorate maintained that the properties were involved in money laundering activities as defined under Section 2(1)(u) of PMLA. Legal Precedence and Applicability of SARFAESI Act and RDDB Act: The appellant cited the judgment in "State Bank of India v. The Joint Director, Directorate of Enforcement," which established that secured creditors have priority over government claims. The amendments to the SARFAESI Act, 2002, and the Recovery of Debts and Bankruptcy Act, 1993, provide that secured creditors' rights to realize secured debts have priority over all other debts and government dues. The appellant argued that these amendments should override the provisions of PMLA concerning the attached properties. Adjudicating Authority's Decision and Its Validity: The Adjudicating Authority confirmed the Provisional Attachment Order without addressing the appellant's contentions adequately. The appellant argued that the authority failed to appreciate that the bank, as a secured creditor, had a first charge over the mortgaged properties. The authority also did not consider that the properties were mortgaged before the alleged criminal activities, making the attachment under PMLA inappropriate. Conclusion: The Tribunal set aside the Impugned Order dated 26.04.2017 and the Provisional Attachment Order dated 09.12.2016 concerning the mortgaged properties. The decision was based on the precedence that secured creditors have priority over government claims and that the properties were mortgaged before the alleged criminal activities. The Tribunal emphasized that the banks, dealing with public money, should not suffer due to prolonged trials against the borrowers. The appeal was allowed, and the attachment orders were deemed untenable in law.
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