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2019 (9) TMI 939 - AT - Money LaunderingOffence under PMLA - attachment orders - funds with the bank that are secured for the Bank Guarantee issued by the Appellant bank attached - whether Appellant Bank holding any funds of the Accused/Respondents? - whether the property which has been attached has any nexus whatsoever with that of money laundering or not? - HELD THAT - Adjudicating Authority failed to appreciate that the fixed deposits have been taken as margin money for the bank guarantee issued by the Appellant Bank and as such bank has exclusive charge on them. The Authority has not recorded any reason as to why funds with the bank that are secured for the Bank Guarantee issued by the Appellant bank could be attached and there is no reason to believe placed on record by the ED. The banks cannot be harassed without their fault. Adjudicating Authority failed to appreciate that the Appellant Bank is not holding any funds of the Accused/Respondents whereas on the other hand the Appellant Bank itself has to recover more than 4.79 crores in Cash Credit Account and 31.18 Crores in Bank Guarantee as on 25.07.2018 from the company i.e. Respondent no. 2. Hence the bank being the secured creditor has priority over the rights of Central or State Government or any other Local Authority. The Adjudicating Authority failed to appreciate that the Adjudicating Authority has to take into consideration the plea of innocence of the bank and whether the property which has been attached has any nexus whatsoever with that of money laundering or not. The bank had advised by the letter dated 19.11.2016 the list of FDs outstanding in the name of the company which are encumbered and issued against BG facility sanctioned to the company as Cash Margin against BGs issued by the bank. The bank has neither directly nor indirectly attempted to indulge in any activity in connection with proceeds of crime hence the question of bank s involvement does not arise as they are third party and the bank cannot be asked to wait till the trial/proceeding are over. The Adjudicating Authority failed to appreciate that the Scheme of Prevention of Money Laundering Act clearly provides the mechanism whereby the innocent parties can approach the Adjudicating Authority for the purposes of release of properties which have been attached in terms of the provisions of Section 5 of the Act. This can be seen by reading Section 8(1) and the proviso to Section 8(2) of the Act whereby Adjudicating Authority has to rule whether all or any of the properties referred to in the notice are involved in money laundering or not and the authority while arriving at any conclusion has to give valid reasons. Adjudicating Authority has failed to establish a prima facie case against the appellant banks. There are no proofs on records that the bank is parking the proceeds of crime. It is incorrect to allege that the FDRs will be frustrated if they are not provisionally attached. The bank has exclusive charge over the margin money and the same is safely kept with the bank and cannot be used by the company. Further the Adjudicating Authority has failed to appreciate that the property attached under the provisional order is not acceptable to money laundering or that the property has been obtained out of proceeds of crime. The bank money/bank guarantees cannot be allowed to be attached in this fashion unless the banks have link and nexus in the criminal actively otherwise banking system would be collapsed. The most important point in the present case is that Magistrate (SPE) where CBI has held the total loss to government is 62, 75, 020/- which is nowhere close to the figure as alleged by ED in its reply to the present Appeal (i.e. in para 9.11 recovery of 23.92 crores) hence the total amount of 8, 05, 91, 575/- kept in the form of FDs with the appellant Dhan Laxmi bank has been erroneously attached by the ED in its impugned order. Presumption of innocence in presumptive reverse burden of proof cases proportionality and view of the Hon ble Supreme Court of India in decided cases. Whole case of the Respondent Directorate of Enforcement falls to the ground as the whole case of the Repondent till today proceeded on the figure of 23.9 Crore Approx which in reality as on today is nothing but an imaginary figure without any basis. The same figures are yet to be established at the time of trial and final arguments. It is a matter of record that on the basis of CBI allegation the respondent has passed the PAO. CBI has discussed each and every document in relation to the case in hand and has come to conclusion that the total loss is 62, 75, 020/- and it is pertinent to mention on the basis of same material the respondent says that loss is about 23.92 crores. The findings of respondent have to be tested at the time of trial. How the contrary figures have been mentioned by the respondent as per its own investigation of the same allegation. Without expressing any opinion in this regard we are of the view that all these contrary figures of two agencies are to be tested in evidence. The banks are innocent parties. One is failed to understand after filing the reply the banks are un-necessary dragged in the litigation. Their duty amount has to be secured. They cannot be harassed in this fashion. No civil death should be given to banks without their involvement. The banks money is a public money. The appeals filed by the banks are allowed and impugned order is set-aside against them. The attachment is not sustainable without application of mind and very harshful. There is no material of record that the banks have any nexus and link with the other appellants. Appellants without prejudice are liable to secured a sum of 62, 75, 020/- with the respondent. The rest of the attachments stand released. However it is clarified that the above said appeals are decided on the basis of charge-sheet filed by CBI and without going into merit of the case of criminal liabilities which would be considered as per its merit without the influence of this order. All appeals are disposed of. The appeals filed by the banks are allowed.
Issues Involved:
1. Legality of retention of seized documents and electronic equipment. 2. Legality of the provisional attachment order under the second proviso of Section 5(1) of PMLA. 3. Involvement of banks and their rights over attached properties. 4. Compliance with procedural requirements, including recording "reasons to believe." 5. Examination of the criminal conspiracy and money laundering allegations against the appellants. 6. Validity of the prosecution complaint and its timely filing. Issue-wise Detailed Analysis: 1. Legality of Retention of Seized Documents and Electronic Equipment: The first set of appeals (FPA-PMLA-1332/DLI/2016 & FPA-PMLA-1333/DLI/2016) challenged the order dated 10.05.2016, which allowed the respondent to retain documents and electronic equipment seized from the appellants' premises until further investigation. The Tribunal noted that the retention was allowed under Section 17(4) of the Act, which permits such retention if necessary for investigation. 2. Legality of the Provisional Attachment Order: The second set of appeals challenged the provisional attachment order dated 31.03.2017, confirmed by the Adjudicating Authority on 04.08.2017. The Tribunal emphasized that the second proviso of Section 5(1) requires the authorized officer to record "reasons to believe" that immediate attachment is necessary to prevent frustration of proceedings. The Tribunal found that no separate "reasons to believe" were recorded, rendering the attachment invalid. The Tribunal reiterated that recording reasons is mandatory and must be done independently for each person concerned. 3. Involvement of Banks and Their Rights Over Attached Properties: The appeals by State Bank of India and Dhanlaxmi Bank argued that the attached fixed deposits were margin money for bank guarantees and not "proceeds of crime." The Tribunal agreed, noting that the banks had exclusive charge over these deposits and were secured creditors with priority over government claims. The Tribunal found no evidence linking the banks to money laundering activities and held that the banks' rights must be protected. 4. Compliance with Procedural Requirements: The Tribunal criticized the respondent for failing to comply with procedural requirements, including recording "reasons to believe" and producing them during proceedings. The Tribunal highlighted that such reasons must be recorded independently and cannot be based solely on allegations in the FIR or charge-sheet. The failure to record and produce these reasons invalidated the provisional attachment order. 5. Examination of Criminal Conspiracy and Money Laundering Allegations: The Tribunal examined the allegations of criminal conspiracy and money laundering against the appellants, including the submission of forged documents and inflated bills. The Tribunal noted that the CBI's investigation revealed discrepancies and fraudulent activities by the appellants, leading to excess payments and losses to the government. However, the Tribunal emphasized that these findings must be tested at trial. 6. Validity of the Prosecution Complaint: The Tribunal found that the prosecution complaint was filed on 18.07.2018, more than two years after the initial retention order and 11 months after the confirmation order. The Tribunal criticized the delay in filing and removing objections, stating that it was not in line with the intent of Section 8(3)(a) of the Act. The Tribunal noted that the conduct of the Investigating Officer was improper and non-compliant with Tribunal orders. Conclusion: The Tribunal allowed the appeals filed by the banks, setting aside the attachment of their fixed deposits. The appeals by other appellants were partly allowed, with the Tribunal modifying the impugned orders. The Tribunal directed the appellants to secure a sum of ?62,75,020 with the respondent, corresponding to the loss calculated by the CBI. The Tribunal clarified that its decision was based on the CBI's charge-sheet and did not influence the criminal trial's merits. The Tribunal emphasized the importance of procedural compliance and the protection of innocent parties' rights.
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