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TMI Blog2014 (11) TMI 1168X X X X Extracts X X X X X X X X Extracts X X X X ..... t upon the appellant to approach the Adjudicating Authority to seek the relief claimed by the appellant, in case the appellant has any right on the properties which have been attached by the respondent. Therefore, the appropriate remedy of the appellant is to invoke the power of Adjudicating Authority to hear the appellant. In case the appellant files an appropriate application before the Adjudicating Authority, the appellant will be liable to prima facie satisfy the Adjudicating Authority that it has the rights in the properties which have been attached. The Adjudicating Authority will determine, in case the appellant approach the Adjudicating Authority, whether the appellant, prima facie has any rights or lien on the properties which are sought to be attached and thereafter on being satisfied about the right of the appellant to give hearing to the appellant as contemplated under proviso to Section 8(2) of the Act. - MP-PMLA No. 36/LKW/2011 (SP) & FPA-PMLA No. 205/LKW/2011 - - - Dated:- 12-11-2014 - Anil Kumar, Chairperson and Dr. Rabi Narayan Dash, Member Shri S.L. Gupta, Advocate, for the Appellant. Shri Rajsekhar Rao and M.P. Sahay, Advocates, for the Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther cost to manufacture the final product, the Appellant Bank sanctioned a Cash Credit Limit of ₹ 7.50 Crores to the Borrower Company. 4. The borrower company availed and enjoyed the term loan and procured the wheel-based mounted Mobile Iron Ore crusher from M/s. METSO India Pvt. Ltd. at the cost of ₹ 3.20 crores and the said payment to the supplier was made by the appellant bank, SBI on the behalf of the borrower company. The Company availed the Cash Credit Limit of ₹ 7.50 crores out of which the Company paid a sum of ₹ 4.50 crores as advance to the Lessor of the Mines, M/s. Shriram Mineral Company and the balance amount was used by the borrower Company to meet the other costs for preparing the finished goods i.e. Crushed Iron Ore. The Cash Credit account of the borrower company with appellant Bank is a running and operational account of the borrower Company. 5. According to the appellant at present a sum of ₹ 7.56 crores in the cash credit account and a sum of ₹ 1.22 crores in the term loan account (total ₹ 8.78 crores) which include the interest up to 31-5-2011 is due, outstanding and payable by the borrower company to the bank an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of ₹ 80 lacs. Out of these entries, only the one entry of ₹ 30,00,000/- appears in the entries of 2007 and rest are the fresh deposits/loans received by the Company. 8. The appellant bank contended that it had examined the financial data submitted by the borrower company at the time of making the advance and had not found anything unusual. The borrower company was a running unit and had approached the bank for expansion. On the receipt of the complaint, the Bank had again examined the accounts of the borrower company with the Bank and had found that the operation in the accounts are in the ordinary course and the borrower company had been regularly paying the instalments of the term loan and depositing the interest in the cash credit account. As per the stock inspection by the Bank, the borrower company had the stock/book debt worth ₹ 14.22 crores available with it. 9. According to the appellant bank the provisional attachment order and the complaint do not have such specific allegations with regard to the borrower company which will entail provisional attachment of the assets of the borrower company and confirmation of attachment by the Adjudicating Autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Act, the appellant bank has the priority of charge over the assets of the borrower company. 13. The appellant bank has alleged that it has the first right to recover its dues from the assets which are specifically charged to the Bank and the said charge is registered with ROC. The shareholders charge over the asset for the investment/share money comes at a much later priority. Even the promoters/sharesholder of the company cannot supersede the charge of the Bank over the assets of the company. In case any investment made by the shareholders is laundered money, the respondent at the maximum can have the rights as that of the shareholders. 14. That appellant contended that the Prevention of Money Laundering Act does not empower the respondent to supersede the transfer of property/duly recorded charge of the lender. It is not the case of respondent that the Bank has not granted the loans and the assets are not created with the same still on account of some shareholders giving loans allegedly out of proceeds of crime, all the assets of the borrower company will be tainted and will be liable for attachment. According to the appellant bank the current assets of the borrower compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant bank has also alleged that even no proper and reasonable opportunity has been given to the borrower company as is evident from the impugned order. The plea is that the Adjudicating Authority has erred in forming its opinion on the basis of the statements of various persons recorded and the reasons of the Adjudicating Authority do not constitute good and sufficient evidence to conclude that part of ill gotten money of Shri Madhu Koda has been passed on to Shri Binod Sinha, his brothers and other associates, which ended up as investments in their hands and in various companies including the borrower company. 18. The appellant bank has alleged that there is no corroborative evidence to conclude that the borrower company is involved in any manner with the proceeds of crime and that the borrower company has not committed any scheduled offence and is not involved in laundering of proceeds of crime of Mr. Madhu Koda. Appellant has contended that sine qua non for attaching the assets is that the such assets must have been acquired out of the proceeds of crime . In the present case, no link or nexus has been established to show that the fixed assets attached are acquired out of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 to 4 be returned to the appellant bank. Nor on such ALLEGED admission of CBI the impugned order dated 27th June, 2011 is liable to be set aside. If the appellant is claiming some relief on such admissions made by the CBI or on the basis of the civil proceedings initiated by the appellant, then appellant is first required either to obtain a decree for the said sum of money in their civil suit filed by the appellant or to obtain some order before the Special Judge, where such alleged concession has been made by the CBI. In any case, since the appellant was not given any notice under Section 8(1) before confirmation of the provisional attachment order and the appellant is claiming an opportunity of being heard, will it be appropriate to entertain the appeal of the appellant and give a hearing regarding his pleas and contentions. It is more appropriate for the appellant bank in the facts and circumstances to seek hearing before Adjudicating Authority under proviso to sub-section (2) of section 8 of PMLA after establishing that the appellant has rights in the properties which have been attached. 21. The borrower company was impleaded as respondent no. 2 in the present appeal. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d photocopies of the document which are not even endorsed to be the true copies. 24. The respondent No. 1 also contended that the Prevention of Money Laundering Act does not contemplate creation of any charge on account of attachment of properties under the provisions of said Act as those provisions provide for attachment of properties as interim measure before confiscation or release as the case may be in accordance with the procedure contemplated therein. The plea of the respondent No. 1 is that charges/mortgages/hypothecation created under any other statue do not affect the powers of authorities constituted under the Prevention of Money Laundering Act, 2002. Reliance was placed on Radha Mohan Lakhotia v. The Deputy Director, First Appeal Nos. 527-559 of 2010. With these pleas the respondent No. 1 has sought dismissal of the appeal of the appellant bank. 25. The respondent No. 2, borrower company, filed a reply dated 6th May, 2013, contending inter alia, that the pleas and contentions raised by the appellant are not disputed. The said respondent contended that the documents filed by the witnesses were not given under oath and therefore, they cannot be considered as legal ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e why all or any of such properties should not be declared to be the properties involved in money-laundering and confiscated by the Central Government : Provided that where a notice under this sub-section specifies any 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 sub-section (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion moved by the Director or a person claiming to be entitled to possession of a property in respect of which an order has been passed under sub-section (3) of section 8, pass appropriate orders regarding confiscation or release of the property, as the case may be, involved in the offence of money-laundering after having regard to the material before it. 28. Perusal of the said Section reveals that if a property is held by any person on behalf of any other person, a copy of notice as contemplated under Section 8(1) of the Act is to be served on such a person. The said Section also contemplates that if a property is held jointly by more than one person, such notice has to be served on all the person holding such property. Proviso to sub-section (2) of the said Section further contemplates 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. In the present appeal, admittedly, the appellant Bank has claimed rights in the properties which were provisionally attached and which provisional attachment order has als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of PMLA shall cease to have effect after the expiry of the period specified in Section 5(1) or on the date, an order is made under sub-sections (2) and (3) of Section 8, whichever is earlier. The time limit of 180 days or 150 days as may be applicable is for the benefit of the person whose property is provisionally attached on the basis of the reasons to believe which are reduced into writing by the Enforcement Directorate that such person is in possession of proceeds of crime which are likely to be concealed, transferred or dealt with in such manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime. The limited life of the provisional attachment as has been prescribed is to safeguard the interest of the person against whom provisional order is passed so that it may not continue for an undue long period. The objective appears to be that such provisional attachment may not continue for long period which is passed only on the basis of reason to believe of the Enforcement Directorate without giving any opportunity to the person whose property is attached. Section 5(4) of the Act also provides that nothing in this Section shall prevent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he property who has to be heard under proviso to section 8(2) and who has not been given any notice u/s 8(1) of the Act and who is not a party to the complaint filed by the Enforcement Directorate. 35. The time as prescribed under Section 5(1)(b) does not curtail the powers of the Adjudicating Authority to give hearing to a person who has not been heard before confirmation of attachment of his assets. Provisions of Section 5(3) of the Act mandates that a provisional attachment order shall cease to have effect, if the same is not confirmed within the time as contemplated under said Section. This time limit as contained in Section 5(1)(b) of the Act cannot be construed to the detriment of a party whose property is sought to be attached on the ground that he has raised his right to be heard after the provisional attachment order has been confirmed. 36. The scheme of the Act, therefore, cannot be construed in a manner that on confirmation of provisional attachment order the Adjudicating Authority will become functus officio and will not have any power to do anything, though the Adjudicating Authority is mandated to give hearing under the Act to a person who has not been given a n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though proviso to Section 8(2) contemplates that the hearing shall be given to the person to whom the notice has not been given under Section 8(1) and who has a right in the property which is sought to be attached. No precedent of any Hon ble High Court or Hon ble Supreme Court has also been relied on by any of the parties for such an interpretation of said Section. 38. It was also feebly argued that the Adjudicating Authority does not have the power to review its order of confirmation and therefore, the hearing cannot be given to a person who had not been given a notice under Section 8(1) of the Act. A distinction is apparent and should be drawn between an application for review and an application seeking hearing by a person who has not been given any notice under Section 8(1) of the Act but who has rights in the property in respect of which provisional attachment order has been passed which has also been confirmed without giving any hearing to him. A Tribunal or adjudicatory body should be considered to be endowed with such ancillary or incidental powers as are necessary to discharge its functions effectively for the purpose of doing justice between the parties. If that be so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e left only with invoking his right of second appeal as contemplated under Section 42 of the Act. When an efficacious remedy is available to the appellant, then whether it will be appropriate to entertain his appeal in the facts and circumstances. 41. This Tribunal is not exercising the power under Article 226 or Article 32 of the Constitution of India. The appellate Tribunal, normally, will not invoke its power under Section 26 of the Act, when the party has equally efficacious remedy available to him. While invoking the jurisdiction of the Hon ble Courts in writ petitions, the Courts insist on exhaustion of alternative remedy except in three contingencies i.e. (i) where the writ petition seeks enforcement of any of the fundamental rights; (ii) where there is failure of principles of natural justice; or (iii) where the orders or proceedings are wholly without jurisdiction or vires of an Act is challenged. However, this Tribunal which does not have such powers as the Hon ble High Court or Hon ble Supreme Court, there are no exceptions to this proposition. Therefore, normally if the Adjudicating Authority has power to give an opportunity of hearing to a person whose properties ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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