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2019 (7) TMI 116 - AT - Money LaunderingMoney Laundering - Provisional attachment order - reason to believe - nexus with the allegation of crime committed by the defendants/respondent no. 2 Bharat Bomb and other persons concerned involved for the offences of money-laundering - HELD THAT - From the facts of the present, it is evident that legal issues of the Appellant case are similar to the judgement rendered by Hon ble Delhi High Court in Directorate of Enforcement vs. Axis Bank Ors. 2019 (4) TMI 250 - DELHI HIGH COURT as (a) The Appellant is not an accused and is bona fide third party to the transactions complained of by the ED; (b) The Appellant disbursed a loan in accordance with law to the Respondents Accused and created a mortgage over the Secured Property prior to the commission of the Scheduled Offence in respect of the Secured Property; and (c) The Appellant commenced the proceedings under SARFAESI Act against the Secured Property prior to its provisional attachment. (d) The said property was not acquired from the proceed of crime. The appellant is always at liberty to approach the Special Court to initiate the proceeding for disposal of mortgaged property, if so desired, who is agreeable to deposit the excess amount if such situation will arise. Counsel for appellants after taking the instructions from his clients stated that his clients are duty bound to deposit the excess amount with the respondent - The Appellant has already initiated recovery proceedings under the SARFAESI and RDDBFI Act and insolvency proceedings under the I B Code for enforcement of its interest. S. 13 SARFAESI allows secured creditors to enforce security. The possession is already with the appellant. The impugned order is set-aside with regard to attachment of properties mortgaged with the appellant - rest of the attachment shall continue.
Issues Involved:
1. Legitimacy of the Provisional Attachment Order dated 16.05.2018. 2. Appellant's connection to the alleged crimes and the status of the mortgaged property. 3. Applicability of the Prevention of Money Laundering Act (PMLA) to the appellant. 4. Jurisdiction of the Appellate Tribunal to adjudicate the appeal. 5. Impact of the Delhi High Court judgment in Directorate of Enforcement vs. Axis Bank & Ors. on the appellant's case. 6. Rights of the appellant as a secured creditor. Detailed Analysis: 1. Legitimacy of the Provisional Attachment Order dated 16.05.2018: The appeal challenges the order dated 9th November 2018, which confirmed the provisional attachment order dated 16.05.2018. The attachment was based on allegations of money laundering involving multiple individuals and entities who allegedly diverted bank funds amounting to ?1055.79 Cr. through fraudulent activities. The attachment included various movable and immovable properties suspected to be proceeds of crime. 2. Appellant's connection to the alleged crimes and the status of the mortgaged property: The appellant, Rajasthan Financial Corporation, argued that it had no connection with the alleged crimes committed by the defendants. The appellant is a financial institution that granted a loan to M/s. Guman Builders & Developers (P) Ltd. for purchasing a property from Jaipur Development Authority (JDA). The loan was secured by an equitable mortgage, and the appellant took possession of the property after the borrower defaulted. 3. Applicability of the Prevention of Money Laundering Act (PMLA) to the appellant: The appellant contended that the mortgaged property was not acquired from proceeds of crime and that the PMLA aims to punish those involved in money laundering, not innocent parties. The appellant emphasized that it is not an accused in the case and has no objection to the respondent dealing with properties acquired from proceeds of crime. 4. Jurisdiction of the Appellate Tribunal to adjudicate the appeal: The Tribunal confirmed its jurisdiction to adjudicate the appeal under Section 26 of the PMLA. It emphasized that the Tribunal's role is to examine the validity of the impugned order and the provisional attachment order. The Tribunal noted that the appellant's claims could be adjudicated by the Special Court only if the attachment order had attained finality, which was not the case here. 5. Impact of the Delhi High Court judgment in Directorate of Enforcement vs. Axis Bank & Ors. on the appellant's case: The Tribunal referred to the Delhi High Court's judgment, which held that a bona fide third party claimant's interest in a property acquired before the commission of the criminal activity cannot be defeated by attachment under PMLA. The Tribunal recognized the appellant's right to enforce its security interest, given that the mortgage was created before the alleged criminal activities. The judgment also stated that the PMLA attachment should take a backseat to allow the secured creditor to enforce its claim. 6. Rights of the appellant as a secured creditor: The Tribunal acknowledged that the appellant, as a secured creditor, had initiated recovery proceedings under the SARFAESI Act and other relevant laws before the provisional attachment. The Tribunal emphasized that the appellant's statutory rights as a secured creditor could not be defeated by the attachment under PMLA. The Tribunal set aside the impugned order concerning the attachment of the mortgaged property, allowing the appellant to proceed with the enforcement of its security interest. Conclusion: The Tribunal set aside the impugned order regarding the attachment of properties mortgaged with the appellant, allowing the appellant to enforce its security interest. The rest of the attachment shall continue. No costs were awarded.
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