2018 (11) TMI 1398 - AT - Money Laundering

Offence under PMLA - provisional attachment order - whether the provisional attachment order and confirmation thereof have been passed as per well settled law or not? - Held that - There is no nexus whatsoever between the alleged crime and the bank is merely the secured creditor and was not aware that the borrower would avoid returning the loan-amount. Prima facie, no case of moneylaundering is made out against bank. The bank has the priority rights on assets of the secured creditors to recover the loan amount/debts by sale of assets over which security interest is created. The respondent no. 1 has merely brought the allegations made against the appellant which are to be decided by the Special Court. As far as issue of mortgage of property is concerned, the same has not been dealt by the respondent in accordance with the law. Therefore, I reject all the arguments alleged by the respondent no. 1 or its counsel. The property even could not have been attached in lieu of value thereof in view of the facts and circumstances of the case. As far as the allegation of the appellant on mortgage is concerned, the same is to be decided by the Special Court and this Tribunal does not wish to express any opinion about the outcome. As regards the tri-partite agreement, this Tribunal does not want to express any opinion with regard to the said agreement. Once the property is released from the attachment, it is for the Bank to decide the mode of recovery of the amount due. With regard to the attachment of the property is concerned, the attachment is not sustainable as the bank is mortgagee of the property and is entitled to recover the amount as per law. The entire impugned order passed by the adjudicating authority and the provisional attachment order is contrary to law and null and void. Both authorities have not followed the many judgements of Supreme Court and that various High Courts. The impugned order is wholly non-application of mind and noncompliance of mandatory provision and mechanical order has been passed. As per settled law, it is of the view that the respondent no. 1 and the Adjudicating Authority have failed to fulfil to comply the mandatory provisions. The impugned order even could be set-aside on this ground itself, however, during the course of hearing, counsel for the respondent no. 1 has correctly realized and agreed if the Bank of Baroda be impleaded as respondent no. 2 who was the main stakeholder of attached property in question - the impugned order is set-aside with regard to the property of the subject matter of the present appeal. The respondent no. 1 is enable to recover the amount as per law. The appellant cannot dispose of the property as the same is already mortgaged with the Bank.

Summary

Issues Involved:
1. Provisional attachment of properties under Section 8 of the Prevention of Money Laundering Act, 2002.
2. Mortgage of the property with Bajaj Finance and Bank of Baroda.
3. Non-impleadment of Bank of Baroda in the proceedings.
4. Determination of "proceeds of crime" under Section 2(u) of the Prevention of Money Laundering Act, 2002.
5. Priority of SARFAESI Act, 2002 over PMLA, 2002.

Detailed Analysis:

1. Provisional Attachment of Properties:
The Appellant challenged the judgment and order dated 13.09.2017, which confirmed the provisional attachment order dated 26.04.2017 under Section 8 of the Prevention of Money Laundering Act, 2002. The properties in question were:
- B-42, Ashok Vihar, Phase-I, New Delhi valued at INR 17,11,42,000/-.
- Factory of M/s SurgicoinMedequip Pvt. Ltd., 1703-04, HSIDC, Rai, Sonepat, Haryana valued at INR 5,50,00,000/-.

2. Mortgage of Property with Bajaj Finance and Bank of Baroda:
M/s Bajaj Finance filed an appeal on the grounds that the property in Ashok Vihar was mortgaged with them and they had the first charge over it. The Tribunal allowed the appeal by Bajaj Finance, noting that the property was acquired before the commission of the crime and was mortgaged with Bajaj Finance. Additionally, the Appellant had procured loans from Bajaj Finance and Bank of Baroda against the factory premises, which were used to pay off other loans.

3. Non-impleadment of Bank of Baroda:
The Respondent did not implead Bank of Baroda despite knowing that the factory premises were mortgaged with the bank. The Appellant agreed to file an application to implead Bank of Baroda, which was allowed. Bank of Baroda confirmed the equitable mortgage and the valuation of the property, asserting their right to recover the loan amount.

4. Determination of "Proceeds of Crime":
The Appellant argued that the properties were not procured from the proceeds of crime and there was no nexus with any alleged criminal activity. The properties were acquired before the Prevention of Money Laundering Act, 2002 came into effect. The Tribunal noted that the properties were acquired in 2001 and 2002, and the payments were made from the company's account, reflected in the balance sheet. Therefore, the properties could not be considered proceeds of crime under Section 2(u) of the Act.

5. Priority of SARFAESI Act, 2002 over PMLA, 2002:
The Tribunal emphasized that the SARFAESI Act, 2002, and RDDB Act, 1993, have priority over the PMLA, 2002, especially after the 2016 amendments. The Tribunal referred to several judgments, including those of the Supreme Court, which held that when two special Acts have non-obstante clauses, the later statute prevails. The Tribunal concluded that the properties were mortgaged before the alleged crime, and the bank had a legal right to recover the loan amount.

Conclusion:
The Tribunal set aside the impugned order dated 13.09.2017 and quashed the provisional attachment order dated 26.04.2017. The Tribunal held that the properties in question were not proceeds of crime and were mortgaged with the Bank of Baroda, which had the right to recover the loan amount. The appeal was allowed, and the provisional attachment was deemed null and void.