2018 (12) TMI 1246 - AT - Money Laundering

Offence under PMLA - attachment of properties - properties which are not mortgaged with any bank but provisionally attached herein - overriding effect of IB&C 2016 over PMLA 2002 - Held that - The Punjab National Bank has moved the NCLT Ahmedabad Bench under IB&C. The properties which are not mortgaged with any bank but provisionally attached herein are undisputedly secured being the properties of the private appellants and M/s Accumen( also an appellant) who are the guarantors and loan amount is liable to be recovered from their properties attached herein. We have taken into consideration the stand of the enforcement directorate on the issue of overriding effect. We are not agreeing with their view hence their arguments that the PMLA, 2002 has overriding effect is negated. So far as the legal issue of overriding effect of IB&C 2016 over PMLA 2002 is concerned it is held that the IB&C has the overriding effect over the Prevention of Money Laundering Act as the PMLA is a statue which came into effect much prior to the coming into force of IB &C. The IB&C is a later statute which came into effect in the year 2016. The aim and object of both the statutes are not doubt different but they are in operation in their respective fields. The legislature while framing the IB&C is quite aware of the existence of PMLA and other statutes. Thus it is held it is held that the IB&C has overriding effect over PMLA. Whether the proceedings before Adjudicating Authority PMLA is a civil proceedings or a criminal proceedings? - Held that - The proceedings before the Adjudicating Authority(PMLA) are quasijudicial in nature. It is not bound by the procedure laid down by the Code of Civil Procedure(CPC) 1908 but shall be guided by the principles of natural justice and subject to the other provisions of this Act the Adjudicating Authority shall have powers to regulate its own procedure as provided under section 6(15) of PMLA. At the same time section 11 of PMLA has empowered the Adjudicating Authority to exercise certain powers (of civil courts under CPC) prescribed in section 11 of PMLA. It is held that the proceeding u/s 8 of PMLA, 2002 before the Adjudicating Authority is a civil proceeding and the Adjudicating Authority should have stayed the proceedings on passing of the moratorium order by the NCLT. The continuation of the proceedings from the date of commencement of the moratorium order is contrary to the intention of the legislature hence the consequential order of confirmation of PAO is contrary to law. Hence liable to be set aside. Therefore the period of continuation of proceedings before the Adjudicating Authority PMLA and before this Tribunal till the passing of the present judgment and order from the date of commencement of the moratorium order be treated as excluded while calculating limitation of the period of completion of the Corporate Insolvency Resolution Process. The appeals are allowed in terms of the order mentioned above.

Issues Involved:
1. Overriding effect of the Insolvency and Bankruptcy Code (IBC), 2016 over the Prevention of Money Laundering Act (PMLA), 2002.
2. Nature of proceedings before the Adjudicating Authority under PMLA (civil or criminal).
3. Applicability of moratorium under IBC to proceedings under PMLA.
4. Validity of the attachment of properties under PMLA when the properties are already under the moratorium declared by the National Company Law Tribunal (NCLT).

Detailed Analysis:

1. Overriding Effect of IBC, 2016 Over PMLA, 2002:
The Tribunal held that the IBC, 2016, being a subsequent legislation, overrides the PMLA, 2002. This is because Section 238 of the IBC contains a non-obstante clause that gives it precedence over other laws. The Tribunal cited various judgments, including the Supreme Court’s decision in "Allahabad Bank vs. Canara Bank" and "Ashoka Marketing Limited & Anr. vs. Punjab National Bank & Anr." to support this view. The Tribunal emphasized that the IBC was enacted to consolidate and amend laws relating to reorganization and insolvency resolution, and its provisions should prevail over earlier legislation like the PMLA.

2. Nature of Proceedings Before the Adjudicating Authority Under PMLA:
The Tribunal determined that proceedings before the Adjudicating Authority under PMLA are quasi-judicial and civil in nature, not criminal. This conclusion was supported by the Gujarat High Court in "Foziya Samir Godil vs. UOI & Ors." and the Kerala High Court in "Kavitha G. Pillai vs. Joint Director, Directorate of Enforcement." The Tribunal noted that the Adjudicating Authority under PMLA does not levy penalties or impose punishments; instead, it deals with the attachment and confiscation of properties, which are civil matters.

3. Applicability of Moratorium Under IBC to Proceedings Under PMLA:
The Tribunal found that the moratorium declared under Section 14 of the IBC applies to proceedings under PMLA. The moratorium prohibits the institution or continuation of suits or proceedings against the corporate debtor, including those under PMLA. The Tribunal referred to the NCLT order, which declared a moratorium on proceedings against the corporate debtor but allowed criminal proceedings under PMLA and CBI to continue. However, the Tribunal clarified that proceedings before the Adjudicating Authority under PMLA are civil and should be stayed during the moratorium.

4. Validity of Attachment of Properties Under PMLA:
The Tribunal concluded that the attachment of properties under PMLA is invalid if it conflicts with the moratorium declared by NCLT under IBC. The properties in question were mortgaged to banks before the alleged commission of the crime, and the banks had a legitimate claim over them. The Tribunal emphasized that the rights of secured creditors under IBC take precedence over the attachment orders under PMLA. The Tribunal cited the amendment to SARFAESI Act and RDDB Act, which provided priority to secured creditors over government dues, including those under PMLA.

Conclusion:
The Tribunal allowed the appeals, setting aside the impugned order of the Adjudicating Authority under PMLA and the provisional attachment orders. The Tribunal directed that the properties be released from attachment and emphasized the overriding effect of IBC over PMLA, the civil nature of proceedings before the Adjudicating Authority under PMLA, and the applicability of the IBC moratorium to such proceedings.

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