9911796707
TMI Blog2017 (9) TMI 1006X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals are identical to the facts and the legal issues involved in the groups of matter which has been decided by this tribunal on 14.07.2017 . Thus we are of the considered view that the Impugned Order dated 16.06.2016 and the Provisional Attachment Order dated 17.12.2015 are not legally correct and liable to be set aside. In the light of above, the schedule ‘A’, ‘B’ and ‘C’ properties are released from the attachment and the appellant Banks may take the possession of these properties mortgaged with them as secured assets. It is noted here that PNBHF Ltd. Bank and ICICI bank, appellants in FPA- PMLA-1388/JL/2016 and FPA-PMLA-1423/JL/2016 respectively, during the course of pendency of the appeal prayed this tribunal to allow them to sell the mortgaged properties i.e. scheduled ‘A’ & ‘B’ properties below and after selling and adjustment of their dues to deposit the surplus, if any, with the respondent i.e. Enforcement Directorate. The State Bank of Patiala has not filed any such application. However, in the interest of justice, it is hereby ordered that the appellant banks to sell the schedule ‘A’, ‘B’ & ‘C’ properties in the presence of nominated officers of the respondent. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... main contentions of these appellants are summarized below separately:- 2(A). Punjab National Bank Housing Finance Limited the bank did not receive any notice but filed their reply, inter-alia, contending before the Adjudicating Authority that:- a. The appellant had a housing loan for a sum of ₹ 30, 00,000/- vide loan advanced to Mr. Harpreet Singh as a borrower S/o Sh Baljit Singh R/o House No. 10 New Officer Colony, Patiala by deposition of original title deeds of mortgaging the property bearing-No. 10 situated in VPO Kheri Gujfaran Officer Colony Phase-1. Hence, as per sanction approval, a loan of ₹ 30,00,000/- was disbursed to borrowers. There was one Shri Yash pal Singh S/o Naresh Kumar stood as guarantor for borrowers and signed guarantee agreement dated 13/7/2010. b. That the loan of Harpreet Singh was irregular and there were defaults in making payments of equated monthly installments (EMI). The said Harpreet Singh had paid EMI to the tune of ₹ 17,44,329/- and majority of the said amount, in accordance with terms of the loan agreement and permissible policy of Reserve Bank of India was adjusted towards the interest and a minor portion to the exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Plot'-No. D-52, Ashok Marg, C- Scheme, Jaipur-302015 (Rajasthan) from the provisional attachment done by the Respondent. b. That this appelalnt has been served with show cause notice under section 8 (2) of PMLA and the objection was being filed under the proviso to sub section 2 of section 8 of PMLA-2002, since a SARFAES1 Act-2002 stands created in favour of ICICl Bank Limited and as such it would be in the interest of' justice that the provisional attachment order be not confirmed in regard to the aforesaid mortgaged scheduled B properties. c. That ICICI Bank Limited had advanced a Loan against scheduled B Properties for a sum of ₹ 2,50,00,000/- to Sh. Roy Bahadur Nirwal as a borrower and Sh. Devinder Singh Nirwal as co-borrower. By-deposition of original title deeds of the property bearing Shop Nos. 201to212 and 214 to 216, 2nd Floor, Plot No. D-52, Ashok Marg, C-Scheme, Jaipur-302015 (Rajasthan) an equitable mortgage was created. Hence, as per sanction approval, a Loan of ₹ 2,50,00,000/- was disbursed to the builder of the said property on behalf of the borrowers. d. That the loan of Sh. Roy Bahadur Nirwal became irregular and there were default ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onse to the replies filed by these appellant Banks the respondent filed their rejoinders only in the case of PNBHFL and ICICI Bank before the Adjudicating Authority. No Rejoinder has been preferred by the respondent in respect of reply filed by the State Bank of Patiala. 3. The stand taken by Respondent before Adjudicating Authority:- 3A. The main contentions of the respondent in their rejoinder to the reply filed by PNBHFL are as follows: i. That Harpreet Singh S/o Shri Baljit Singh had acquired the scheduled A property for an amount of ₹ 48 lakhs on 29.09.2010. He had taken a loan of ₹ 30 Lakhs from the appellant bank and ₹ 18 lakhs were made by the Demand Draft from his saving bank account with ICICI Bank, Pataila Branch in which cash amount exceeding ₹ 2,63,77,000/- were deposited by him from 20.06.2008 to 4.03.2013. He has paid the amount totaling ₹ 14,65,000/- in case against housing loan to the appellant bank for which no evidence of lawful source was submitted by him. Harpreet Singh was indulging in drugs smuggling and huge amount in cash have been deposited in his bank account which are proceeds of crime. The Scheduled A proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seas Bank and Ors. 10. The learned counsel for the appellants have also drawn our attention to the common decision dated 14.07.2017 passed by this Tribunal in the matter of FPA-PMLA-1023/KOL/2015 and 11 other appeals in which the overriding effect issue was under considered, discussed decided. 11. In reply, learned counsel for the respondent submits that the Judgment quoted are not applicable to the present fact and circumstances of the case as there is a procedure prescribed under the PMLA which has to be followed by the banks/financial institution to have their claim for the properties attached under the Act. 12. Admittedly, in the present case none of the appellant bank have been charge sheeted and there is no allegation of involvement of these appeals appellant Banks in the alleged illegal activates of the borrower, co-borrower and the account holders involved in the case. 13. The learned counsel for the respondent has also submitted the PMLA being a Special Act it will have overriding effect being the later Act and the proceedings against attachment can continue despite mortgaging the properties with the banks against the loan or even though no complaint is file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law, other than this Act, or in any decree or order of any Court, tribunal or other authority. 9. It is clear that both these Acts are special Acts. This Court has laid down in no uncertain terms that in such an event it is the later Act which must prevail. The decisions cited in the above context are as follows: Maharashtra Tubes Ltd. v. State Industrial investment Corpn. Of Maharashtra Ltd.; Sarwan Singh v. Kasturi Lal; AllahabadBankv.Canara Bank and Ram Narain v. Simla Banking Industrial Co. Ltd. 10. We may notice that the Special Court had in another case dealt with a similar contention. In Bhoruka Steel Ltd. v. Fairgrowth Financial Services Ltd. it had been contended that recovery proceedings under the Special Court Act should be stayed in view of the provisions of the 1985 Act. Rejecting this connection, the Special Court had come to the conclusion that the Special Court Act being a later enactment would prevail. The headnote which brings out succinctly the ration of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the consent of the Board for Industrial and Financial Reconstruction or the appellate authority under that Act. The Legislature being aware of the provisions of Section 22 under the 1985 Act still empowered only the Special Court under the 1992 Act of the 1992 Act to give directions to recover and to distribute the assets of the notified persons in the manner set down under Section 11 (2) of the 1992 Act. This can only mean that the Legislature wanted the provisions of Section 11(2) of the 1992 Act to prevail over the provisions of any other law including those of the Sick Industrial Companies (Special Provisions) Act, 1985. It is a settled rule of interpretation that if one construction leads to a conflict, whereas on another construction, two Acts can he harmoniously constructed then the latter must be adopted. If an interpretation is given that the Sick Industrial Companies (Special Provisions) Acy 1985, is to prevail then there would be a clear conflict. However, there would be no conflict if it is held that the 1992 Act is to prevail. On such an interpretation the objects of both would be fulfilled and there would be no conflict. It is clear that the Legislature intende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If the Legislature does not want the later enactment to prevail then it could and would provide in the later enactment that the provisions of the earlier enactment continue to apply. In the present case, the said Act is later. The said Act provides that its provisions are to prevail over any other Act. This would include the Sick Companies Act. If the legislature wanted to provide otherwise, they would have specifically so provided. 32. Recently, the Parliament has amended the twin legislations viz. (i) the SARFAESI Act, 2002 and (ii) the DRT Act, 1993(after amendment titled as the Recovery of Debts and Bankruptcy Act, 1993) by the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016 and its provisions have been given effect from 01.09.2016. 33. The amended provisions give overriding effect over any other law and priority to the secured condition for the time being in force including the provisions of PMLA in so far as recovery of the loan by the secured creditors is concerned. The amended provisions are reproduced as under: (i) Section 26E of the SARFAESI Act, 2002 : 26E. Priority to secured credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the secured creditors which are being hampered by way of attachments of properties, belonging to the financial institutions/secured creditors, done by/in favour of the government institutions. 36. The Full Bench of the Madras High Court while acknowledging the amount of losses suffered by the Banks and while approving the latest amended Section 31B of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 held in the case The Assistant Commissioner (CT), Anna Salai-III Assessment Circle Vs. The Indian Overseas bank and Ors. that There is, thus, no doubt that the rights of a secured creditor to realise secured debts due and payable by sale of assets over which security interest is created, would have priority over all debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or Local Authority. This section introduced in the Central Act is with ''notwithstanding'' clause and has come into force from 01.09.2016. Further it was also held that the law having now come into force, naturally it would govern the rights of the parties in respect of even a lis pending. 37. The As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udicating Authority that the money advanced by them for the purchase of the property cannot be taken to be the proceeds of crime, then, the Adjudicating Authority is obliged to record a finding to that effect and to allow the provisional order of attachment to lapse. Otherwise, a financial institution will be seriously prejudiced. I do not think that the Directorate of Enforcement or the Adjudicating Authority would expect every financial institution to check up whether the contribution made by the borrowers towards their share of the sale consideration was lawfully earned or represent the proceeds of crime. Today, if the Adjudicating Authority confirms the provisional order of attachment and the property vests with the Central Government, LIC Housing Finance Limited will also have to undergo dialysis, due to the illegal kidney trade that the petitioner in the writ petition is alleged to have indulged in. This cannot be purport of the Act. 39. In a case contested by one of the branches of the Appellant Bank, the High Court of Madras State Bank of India Vs. The Assistant Commissioner, Commercial Tax, Puraswalkam Assistant Circle and Ors. , while upholding the Amendment Act, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and other financial institutions. 55. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and the SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection. 56. Insofar as this case is concerned, we are convinced that the High Court was not at all justified in injuncting the appellant from taking action in furtherance of notice issued under Section 13(4) of the Act. In the result, the appeal is allowed and the impugned order is set aside. Since the respondent has not appeared to contest the appeal, the costs are made easy. In the subsequent changes in law and amendment in the another Special Act i.e. SARFAESI Act, 2002 the decisions referred by Mr. Matta in the case of Solidaire (Supra) and Bhoruka Steel (Supra) does not help the case of the respondent no. 1 because the effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ramed under section 120-b/420 ipc by the learned trial judge against the private parties. As far as bank officials are concerned, charges were framed under different provisions of the prevention of corruption of act, 1988. Being dissatisfied with the said order,, the cbi had preferred an appeal by obtaining special leave and in that context the court observed that the accused respondent had been charged under section 120-b/420 ipc and the civil liability of the respondent to pay the amount had already been settled and further there was no grievance on the part of the bank. Taking note of the fact that offence under section 420 of ipc is compoundable and section 120-b is not compoundable, the court eventually opined thus:- 11. In the present case, having regard to the fact that the liability to make good the monetary loss suffered by the bank had been mutually settled between the parties and the accused had accepted the liability in this regard, the High Court had thought it fit to invoke its power under Section 482 Cr.P.C. We do not see how such exercise of power can be faulted or held to be erroneous. Section 482 of the Code inheres in the High Court the power to make such o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclined to quash the proceedings pending against the petitioners, arising out of R.C. No. 4A/94/SIU(X) dated 23rd May, 1994, titled CBI vs. N. Bhojraj Shetty Ors. , being C.C. No.65/11, pending in the Court of Spl. Judge (CBI), Tis Hazari Courts, Delhi. The said decision has been upheld by the Hon ble Supreme Court. 46. In the present case, it is undisputed facts that the attached property were purchased much prior to the period when the facility of loan sanctioned to the borrowers. The banks while rendering the facilities were boanfide parties. It is not the case of the respondent that the attached properties were purchased after the loan was obtained. The mortgaged of the properties were done as bonafide purposes. None of the bank is involved in the schedule offence. No PMLA proceedings are pending except the complainant bank was arrayed as Column;- 11 at the time of framing charges. Union Bank of India has not granted sanction against its employee to proceed against him in criminal complaint. There is no criminal complaint under the schedule offence and PMLA is pending against the two banks. In case of failure on the part of borrowers to comply with the terms of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property as being held by a person on behalf of any other person, a copy of such notice shall also be served upon such other person: Provided further that where such property is held jointly by more than one person, such notice shall be served to all persons holding such property. (2) The Adjudicating Authority shall, after- (a) considering the reply, if any, to the notice issued under subsection (1); (b) hearing the aggrieved person and the Director or any other officer authorised by him in this behalf, and (c)taking into account all relevant materials placed on record before him, by an order, record a finding whether all or any of the properties referred to in the notice issued under sub- section (1) are involved in money-laundering: Provided that if the property is claimed by a person, other than a person to whom the notice had been issued, such person shall also be given an opportunity of being heard to prove that the property is not involved in money-laundering, section 58 B or sub-section (2 A) of section 60 by the Adjudicating Authority (4) Where the provisional order of attach 56. There are judicial pronouncements whereby it has been laid down that the innocent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property which has been attached has any nexus whatsoever with that of money laundering or not if the person before the Tribunal/ Adjudicating Authority is able to demonstrate that he neither directly nor indirectly has attempted to indulge nor with knowledge or ever assisted any process or activity in connection with proceeds or crime and the question of his involvement does not arise as he is third party, then the Tribunal/ Adjudicating Authority can consider the said plea depending upon whether there exist bona fide in the said plea or not and proceed to adjudicate the plea of innocence of the said party. 57. This is due to the reason that Section 8 allows the Adjudicating Authority to only retain the properties which are involved in money laundering which means as to whether properties attached are involved in money laundering or not is a pre-condition prior to confirming or attachment by Adjudicating Authority. Therefore, at that time, if the plea is raised that the party whose property is attached is innocent or is without knowledge of any such transaction with respect to money laundering, then the Tribunal can consider the said plea and proceed to release the said prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , oral or documentary, to show any such 'intention' and 'attempt' on the part of any of the petitioners. B. RE: KNOWINGLY ASSISTS OR KNOWINGLY IS A PARTY: In JotiParshad v. State of Haryana, MANU/SC/0161/1993 : 1993 Supp (2) SCC 497 the Hon'ble Supreme Court has held as follows- 5. Under the Indian penal law, guilt in respect of almost all the offences is fastened either on the ground of intention or knowledge or reason to believe . We are now concerned with the expressions knowledge and reason to believe . Knowledge is an awareness on the part of the person concerned indicating his state of mind. Reason to believe is another facet of the state of mind. Reason to believe is not the same thing as suspicion or doubt and mere seeing also cannot be equated to believing. Reason to believe is a higher level of state of mind. Likewise knowledge will be slightly on a higher plane than reason to believe . A person can be supposed to know where there is a direct appeal to his senses and a person is presumed to have a reason to believe if he has sufficient cause to believe the same. The same test therefore applies in the instant case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being the participant in the said transaction ever, cannot be penalized for no fault of his. Therefore, it cannot be the Scheme of the Act whereby bona fide person without having any direct/ indirect involvement in the proceeds of the crime or its dealings can be made to suffer by mere attachment of the property at the initial stage and later on its confirmation on the basis of mere suspicion when the element of mens rea or knowledge is missing. 60. Similar principle has been laid down by Chennai High Court in the case of C. Chellamuthu (Appellants) Vs The Deputy Director, Prevention of Money Laundering Act, Directorate of Enforcement (Respondent) MANU/TN/4087/2015 decided on 14.10.2015, relevant portion of which are reproduced below:- 20. The said sections read as follows:-- 23. Presumption in inter-connected transactions Where money-laundering involves two or more interconnected transactions and one or more such transactions is or are proved to be involved in money-laundering, then for the purposes of adjudication or confiscation (under section 8 or for the trial of the money-laundering offence, it shall unless otherwise proved to the satisfaction of the Adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he persons to whom they have sold the GloriosaSuperba seeds and produced Bank statements. Some of the Appellants have stated that they sold their lands and borrowed monies to purchase the property in question. There is nothing on record to show that the respondent had verified these statements. Especially, the respondent has not verified the Bank statement produced by the Appellants to ascertain the genuineness of the same and whether the money deposited came from genuine purchasers or from the persons involved in fraud and Money Laundering. The respondent does not allege that Appellants are Benamies of G. Srinivasan or no sale consideration passed to the vendor. 23. Considering the materials on record and judgments reported in MANU/MH/1011/2010: 2010 (5)Bom CR 625 [supra] and : [2011] 164 Comp Cas 146(AP) [supra], I hold that appellants have rebutted the presumption that the property in question is proceeds of crime. The respondent failed to prove any nexus or link of Appellants with G. Srinivasanand his benamies. Once a person proves that his purchase is genuine and the property in his hand is untainted property, the only course open to the respondent is to attach sale proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the same is tainted could be subjected to Provisional Attachment Order. 23. In the instant case the only point to be decided is whether the properties bought by any person against clean money and without any knowledge that properties have been acquired directly or indirectly through scheduled offence could be subject matter of provisional attachment order. 24. It is an admitted position that the Defendants (D-2 to D-8) had no knowledge that the properties in the hands of the vendor was proceeds of crime. They have also verified the papers relating to these properties before the deal. No point has been raised with regard to the financial capability of these Defendants to buy these properties. However, the Bombay High Court decision in Radha Mohan Lakhotia has been pressed into service to make out a plea that the properties could be attached in such circumstances under the PMLA. Provisional attachment was sought to be continued only based on the judgment of Bombay High Court in Radha Mohan Lakhotia's case. 25. A reading of paragraphs 21 to 24 clearly reveals that both the Adjudicating Authority as well as Appellate Authority failed to properly appreciate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired in ways illegal and corrupt, at the cost of the people and the state, hence these properties must justly go back where they belong, the state. In the present case as the money belongs to the Appellant bank it is public money. The appellant bank has the right to property under the Constitution of India. The property of the appellant bank cannot be attached or confiscated if there is no illegality in the title of the appellant and there is no charge of money laundering against the appellant. The mortgage of property is the transfer under the transfer of property act. 53. The objective of Prevention of Money Laundering Act, 2005 has a greater relation to crimes connected with reference to Illicit Traffic in Narcotic Drugs and Psychotropic Substances, drug crimes and other connected activities. None of the provisions are applicable in the facts of the present case. As far as the borrowers are concerned, we are not expressing any opinion with regard to matters pending before the Special Court in relation to schedule offences and the complaint under this Act. These matters are to be considered as per law. 54. There is no .PML Act i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra 40 that the International Conventions and Norms are to be read into them in the absence of enacted Domestic Law occupying the field when there is no inconsistency between them. 61. The Ld. Adjudicating Authority has failed to considered that the ED has attached all the properties without examining the case of the banks. The evidence on record suggested that all the properties were acquired by the accused much-much before the alleged date of crime. No money disbursed by the Union Bank of India from its Loan Account, has been invested in acquiring his property. Furthermore, the Appellants Banks had mortgaged charge over the property prior to the date of the crime. The Bank has already filed the Suit for recovery and has also had taken the action under SARFAESI Act. The Ld. Adjudicating Authority failed to appreciate that depriving the Appellant Bank from its funds/property, without any allegations or involvement of the Bank in the alleged fraud would be unjustified. 62. The properties attached cannot be attached under Section 5 of the PML Act because the properties are not purchased from the alleged proceeds of crime. As per the provisions of Section 5(1) (c) the primary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... banks are victims and even after trial, they are to receive-back the said properties being victim party in normal types of cases u/s 8(8) of the Act. However in the present cases, the banks are innocent parties. They are not involved in any criminal proceedings. If they are asked to await till the trial is over, the systems in these types of cases, the economy would collapse. In the case, of Union Bank of India, no sanction against the employee was granted who is also not involved in any criminal proceedings. 65. From the entire gamut of the matter we are of the view that there is no nexus whatsoever between the alleged crime and the two bank who are mortgagee of all the properties which were purchased before sanctioning the loan. Thus no case of money-laundering is made out against banks who have sanctioned the amount which is untainted and pure money. They have priority to the secured creditors to recover the loan amount/debts by sale of assets over which security interest is created, which remains unpaid. The Ld. Adjudicating Authority has not appreciated the facts and law involved in these matters and the primary objective of section 8 of PMLA is that the Adjudicating Aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the course of pendency of the appeal prayed this tribunal to allow them to sell the mortgaged properties i.e. scheduled A B properties below and after selling and adjustment of their dues to deposit the surplus, if any, with the respondent i.e. Enforcement Directorate. The State Bank of Patiala has not filed any such application. However, in the interest of justice, it is hereby ordered that the appellant banks to sell the schedule A , B C properties in the presence of nominated officers of the respondent. The appellant banks after sell and adjustment of dues shall deposit the surplus amount with the respondent. Accordingly, the misc. application nos. MP-PMLA-3318/JL/2017 MP-PMLA-3318/JL/2016 are disposed off. 21. In the circumstance, the allegation of money laundering prima facie found to be unsustainable for the purpose of attachment under the PMLA, 2002. 22. Accordingly, the appeals are allowed. SCHEDULED PROPERTIES Appellant No. 1. PNB Housing Finance Ltd. Scheduled A Property House no. 10, Officers Enclave-1, (Village Kheri Gujran), Patiala, Punjab. Appellant No. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
