9911796707
TMI Blog2018 (5) TMI 329X X X X Extracts X X X X X X X X Extracts X X X X ..... ai. One Time Settlement was also proposed by the respondent no.2 but the respondent no.2 did not remit the OTS amount as per the terms and conditions. Since the OTS conditions were not fulfilled by the respondent no.2, the Appellant Bank cancelled the OTS. The Appellant Bank also filed an Original Application in O.A. No.456 of 2016 against the respondent no.2 and others before the DRT, Madurai and the same is pending adjudication. In the instant case also it is a matter of record that the attached properties as per Annexure R-1 and the list of hypothecated goods enclosed as Annexure R-2 of the appellant’s letter dated 03.11.2017 have also been attached. Following the decision of the case of “State Bank of India Versus The Joint Director, Directorate of Enforcement, Kolkata” [2018 (4) TMI 1411 - ATPMLA, NEW DELHI ] and subsequent similar decisions in various cases, the Impugned Order dated 26.04.2017 and the Provisional Attachment Order dated 09.12.2016 in respect of the mortgaged properties with the Appellant Bank as per Annexure R-1 & the hypothecated goods as per Annexure R-2 of Appellant’s letter dated 03.11.2017 is set aside. X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.00 7. Bank Guarantee (For disputed liability with SBI) (Fresh) 35.00 8. Forward Contract 288.12 d) Subsequently, at the request of the respondent no.2, the Appellant Bank sanctioned the renewal/ enhancement of the existing facilities vide sanction ticket dated 24.08.2011 and sanctioned the following credit facilities:- S.No. Type of facility Limit Sanctioned (Rs. In Crores) 1. Export Packing Credit 93.00 2. PCFC (Sub limit of EPC) (50.00) 3. FBP/FBN (DA 180 days) 93.00 4. Import/Inland LC (DA 180 days) & 50.00 Buyers Credit Import LC (Capital Goods) as Sub limit (5.00) 5. Bank Guarantee 5.00 6. Forward Contract 288.12 e) The Respondent no.2 was repaying the loan amount to the Appellant Bank. However, vide letter dated 31.08.2012 it was intimated that all the accounts held by the respondent no.2 were frozen upon order of Deputy Superintendent of Police, Prohibition Enforcement Wing. Thereafter, the loan account became NPA with effect from 31.03.2013 and the total amount outstanding against the respondent no.2 and the guarantors and mortgagors was ₹ 135.08 Crores on the date of NPA. f) It needs to be mentioned that al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal Attachment Order being PAO No.22 of 2016 dated 09.12.2016 was passed by the respondent no.1 herein. The copy of the Provisional Attachment Order being PAO No.22 of 2016 dated 09.12.2016 is filed as ANNEXURE-2. 6. Thereafter, the Appellant Bank was served with a notice to show cause dated 06.01.2017 under section 8 of the PMLA, 2002. The Appellant Bank filed its reply on 02.03.2017 in OC No.671 of 2017 and prayed that the attachment order should not be confirmed since some of the properties were mortgaged with the appellant and Plant-Machinery, finished and semi-finished goods; Raw materials were hypothecated in favour of the appellant. 7. It was also stated that the outstanding dues were around ₹ 196 Crores (as on 31.12.2016) and since the properties were charged/mortgaged/hypothecated in favour of the Appellant as a security; the Provisional Attachment order qua such charged properties was untenable in law. The respondent no.1 also filed a rejoinder dated NIL/3/2017 to the reply of the Appellant Bank. The copy of the Reply filed by the Appellant on 02.03.2017 along-with documents before the Adjudicating Authority is filed as ANNEXURE-3 (COLLY). 8. The Adjudicating Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they are entitled to recover their dues by the sale of the secured assets in accordance with applicable law. The State itself had accorded no objection qua the mortgaged properties and as such, the impugned order has been passed in contradiction and is inconsistent with the stand taken before DRT, Madurai on 06.03.2014. The Adjudicating Authority, while passing the impugned order, failed to appreciate that order of the Provisional Attachment dated 09.12.2016 and the consequential Show Cause Notice dated 06.01.2017 with appreciation of law and facts. In terms of Section 31-B of the Recovery of Debts due to Banks and Financial Institutions Act, 1993, the Appellant Bank is empowered to realize its dues from the secured assets notwithstanding any claim of the Central/State Government or any other authority under any Act. c) That while passing the impugned order failed to appreciate that the Respondent no.2 owes to the Appellant Bank about ₹ 196.00 crores (as on 31.12.2016) and the properties offered as securities need to be sold to recover the dues. If the Appellant bank is prevented from proceeding with the recovery process, it will ensue irreparable hardship, financial strai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of the Respondent no. 1 in its pleadings is that the Tamil Nadu State Authorities through Police Department of Keelavalavu Police Station, Madurai, during the year 2013, registered three FIRs in Cr No. 155/2012, 171/2012 & 175/2012 against M/s PRP Exports, M/s PRP Granites and their partners on the basis of complaint received from Village Administrators, Government Agencies etc., that the partners have jointly and severally conspired to illegal quarrying and removing the multi-color granite stones by trespassing into the neighbouring lands and Government poromboke lands that are not covered under the licensed mining area and using explosive substances without adhering to statutory obligations and safety precautions causing harm to human lives thereby liable for offence punishable under Sections 120B,447,379,420,467,468,471,304(ii), 430, 109, 114, 511 of Indian Penal Code, 1860 and Sec 6 r/w Sec. 3(a) and 4 (a) of the Explosive Substances Act, 1908. Subsequently, around 48 FIRs were filed against M/s PRP Exports, M/s PRP Granites and its partners by various Police stations falling under the jurisdiction of the Superintendent of Police, Madurai District on the basis of complaints ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the Granites and in the export of processed dimensional granite blocks. The partners of M/s PRP Granites since 1995 were its founder partner S/Shri/Smt P. Palanisamy, P. Senthil Kumar, P. Suresh Kumar and P. Selvi W/o Palanisamy. The firm obtained 100% EOU status on 22.10.2002 and continued their exports upto 2006-07. The total foreign exchange earnings for the period from 2001-02 to 2006-07 was equivalent to ₹ 438.91 Crore. Similarly, M/s PRP Exports have commenced their business operations from 2004-05 as registered partnership firm engaged in quarrying the granite and in the export of processed dimensional granite blocks, slabs, tiles, monuments and other articles of granites manufactured from their factory situated at Melur Taluk, Madurai District. The partners of M/s PRP Exports during the period from 2003-04 - 2010-11 were Shri P. Palanisamy, Smt S. Chandralekha W/o Senthil Kumar, Smt Sivaranjani W/o A Maharajan, Smt P. Selvi W/o Palanisamy. From 2010, the partnership was reconstituted with S/Shri P. Palanisamy, P. Senthil Kumar, P.Suresh Kumar and A. Maharajan as Partners of M/s PRP Exports. The firm obtained 100% EOU status on 12.01.2004 and continued their export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrying and the clandestine removal of granites thereby causing huge loss to the State exchequer. The report exposed the realities and facts on how farmers and other rural people had been deprived of their livelihood and how it became possible for the granite companies to continue their operation in connivance with officials of the Departments of Revenue and Geology & Mining for several years. Accordingly, the District Collector on 2nd August, 2012 formed 18 fact finding teams to inquire 175 quarries in the Madurai District. In the course of their investigation, Shri P. Palanisamy of M/s PRP Exports surrendered to the police. In September 2012, Vigilance Officials searched 34 places in Tamil Nadu, on consequence of filing two cases against two Indian Administrative Service (IAS) officers and a group of state officials, for the irregularities in quarrying. Following the above actions, mining operations of 78 quarries were suspended and 87 cases were registered by the District Police authorities. 13.9 The Public Works Department (PWD), Water Resource Department (WRD), Madurai District conducted survey of the water canals adjoining the lease hold lands and non-lease hold areas occupie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permitted depth in the lease hold area, not followed the scientific and Systematic Quarrying thereby caused damage to adjoining Government Parai Paramboke lands, quarried unauthorisedly in poromboke land adjoining to the lease hold land, quarried in unlease hold lands without permission, quarried without leaving 50 mts safety distances as per the special conditions imposed in the G.O at the time of grant of quarry lease and not maintained boundary stones properly and the quarrying operations were not carried out as per approved mining plan and without ensuring the protection of environment and conservation of granite deposit. The Geology and Mines Department have stated that M/s PRP Exports, M/s PRP Granites and their partners have caused huge loss to the Government Exchequer by suppressing the actual quantity of granites recovered ie., the actual recovery from the quarry lease hold lands would be 90% marketable granite slabs as against the contentions of M/s PRP Exports, M/s PRP Granites and their partners, that only 15% to 20% marketable granite recoverable while quarrying. It is evident from the Evaluation Reports that M/s PRP Exports have obtained excess transport permit for 57 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing explosion likely to endanger life or property) and Sec. 4 (Attempt to cause explosion, or for making or keeping explosives with intent to endanger life or property) under the Explosive Substances Act, 1908. 13.13 In view of the above, the persons accused in the charge sheet of the Madurai District Police, having committed a "scheduled offences" as defined under Section 2(1) (x) and Section 2(1) (y) of PMLA in the illegal quarrying of granite slabs/blocks and trading of the same and have caused wrongful loss of ₹ 2830.98 Crore ( Rupees Two Thousand Eight Hundred and thirty Crore and Ninety Eight Lakh only) to the Government Exchequer and corresponding wrongful gain to themselves are subjected to further investigation under PMLA for offence of money laundering. Further, by committing the said scheduled offences, Shri P. Palanisamy and other partners /accused persons subsequent to the gaining of the wrongful loss in each of the said Mining Lease agreements, sold the granites in the international / domestic market in excess of the declared quantity and realised the sale proceeds. The generation of pecuniary benefits by the aforesaid persons through their indulgence in the af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue from those business/operations of M/s PRP Exports and M/s PRP Granites also becomes the proceeds of crime. And, therefore, the export proceeds of M/s PRP Exports and M/s PRP Granites so derived as well as the benefits /earnings gained from accounted and unaccounted funds also incubates the taint of crime proceeds and thereby the entire funds, either out of the accounted transactions or from the unaccounted dealings, used for the acquisition of immovable properties during the period from 2006-07 to 2012-13 aggregating to ₹ 102.95 Crores (Rupees One hundred and two Crore and ninety five lakhs only) and the 4 term deposits accounts held with State bank of India, Commercial Branch, Madurai for ₹ 32,57,275/- as detailed in Schedule of property to the PAO / complaint would fall under the ambit of "proceeds of crime" as defined under Section 2(1) (u) of PMLA. As per the definition, proceeds of crime are either the property derived or obtained as a result of criminal activities relating to a scheduled offence or the value of such property. The statute thus entitles the attachment of proceeds of crime which are either generated as a result of criminal activity relating t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sub-Registrar under Rule 5(1), publication in local new paper under Rule 6(1) and in the process of completing other procedures prescribed under above said Rules. The present Appeal is filed against the Adjudication Authority, PMLA Order in OC No. 671/2017 dated 26.04.2017. 14. As far as criminal complaint and the complaint filed under this act is concerned, we do not wish to express any opinion about the merit. Rather, we are of the view that the said complaints must be proceeded with against the borrowers as per law. We are only concerned here that how the respondent no. 1 can stall the process of selling of mortgaged properties by the banks who are dealing with the public money. 15. During the course of hearing, the counsel for the respondent no. 1 does not deny that the banks are victim and innocent parties and they are entitled to recover the loan amount. It is also denied that many of the immovable properties are mortgaged with the banks and in case the borrowers are declared NPA, their said assets must be sold in order to recover the amount. The only submission is that the banks should wait to the final out-come of trial against the borrowed by the Special Court and after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Import/Inland LC (DA 180 days) & Buyers Credit Import LC (Capital Goods) as Sub limit 50.00 (5.00) 5. Bank Guarantee 5.00 6. Forward Contract 288.12 21. The respondent no.2 was repaying the loan amount to the appellant Bank. However, vide letter dated 31.08.2012 it was intimated that all the accounts held by the respondent no.2 were frozen upon order of Deputy Superintendent of Police, Prohibition Enforcement Wing. Thereafter, the loan account became NPA with effect from 31.03.2013 and the total amount outstanding against the respondent no.2 and the guarantors and mortgagors was ₹ 135.08 Crores on the date of NPA i.e. 31.03.2013. 22. All the finished goods, semi-finished goods and stocks are hypothecated to the appellant Bank and the appellant Bank is having exclusive charge over the hypothecated goods. Apart from the hypothecation of Plant and Machinery, Finished and Semi Finished goods and Raw-Materials, the respondent no.2 Firm mortgaged the immovable properties by way of Equitable Mortgage by Deposit of Title Deeds on 31.03.2009 and executed a Registered Mortgage Deeds on 02.07.2009 bearing Doc. Nos.3351/2009 & 3352/2009. This mortgage is relating to 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 196 Crores (as on 31.12.2016) and since the properties were charged/mortgaged/hypothecated in favour of the Appellant as a security; the Provisional Attachment order qua such charged properties was untenable in law. 27. The Adjudicating Authority, without appreciating the contentions urged on behalf of the Appellant, vide impugned Order dated 26.04.2017 confirmed the Provisional Attachment Order to the utmost detriment of the Appellant Bank herein which is a Nationalized Bank. It must be stated that no plausible reason or justification has been accorded in the impugned order while rejecting the contentions of the Appellant Bank herein. The impugned order was received by the Appellant Bank on 02.05.2017 and hence this appeal is being preferred within the period of prescribed limitation. 28. The issues involved in the present appeal are squarely covered by judgment dated 14.07.2017, passed by this Hon'ble Tribunal in "State Bank of India v. The Joint Director, Directorate of enforcement". The relevant paragraphs of the aforesaid judgment are reproduced hereinafter for ready reference: "32. Recently, the Parliament has amended the twin legislations viz. (i) the SARFAESI A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication", "and includes any liability towards debt securities which remains unpaid in full or part after notice of ninety days served upon the borrower by the debenture trustee or any other authority in whose favour security interest is created for the benefit of holders of debt securities or;" is added which makes the said amendment or the 1993 Act applicable to all the debts which remains unpaid. 35. Thus, it is very clear from above that the secured creditor, get a priority over the rights of Central or State Government or any other Local Authority. The amendment has been introduced to facilitate the rights of 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. xxxxxxxxx 41. The Supreme Court in (2010)8 Supreme Court Cases 110 (Before G.S. Singhvi and A.K. Ganguly, JJ) in the case of United Bank of India V/s. Satyawati Tondon and Ors. In paras no.6, 55 & 56 has held as under:- 6. To put it differently, the DRT Act has not only brought into existence special procedural mechanism for speedy recovery of dues of banks a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (AIR 1994 SC 2179) while dealing with the matter under conservation of foreign exchange and prevention of smuggling activities act has defined the illegally acquired properties and held that such properties are earned and acquired 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. xxxxxxxxx 56. That the definition of proceeds of crime as per section 2(u) of the pml act comprises of the property which is derived or obtained as a result of criminal activity. In the present case, all the properties have been purchased by the Respondents and have been mortgaged with the Appellant Bank much prior to the date of alleged offence which shows that no proceeds of crime are i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant Bank. Thus, making the Appellant Bank the rightful owner of the said properties which are already in the possession of the Appellant Bank under the SARFAESI Act. The origin of the funds is not illegal or unlawful in any manner. The funds were only deposited in the accounts with the Appellant Bank against the drawings already availed or availed subsequently. 60. We also find that the Adjudicating Authority has not examined the law on mortgage and securities. The Appellants Banks are liable to recover huge amounts in the above loan accounts and the appellant bank being the mortgagee/transferee of the interest in the properties is entitled to recover its dues with the sale of the properties. The properties stood transferred by way of mortgage to the Appellant Bank much before the alleged criminal action. The alleged proceeds of crime has not been used for acquiring the mortgage properties. It is even not the allegation of respondent no. 1 that the accused has acquired the mortgage properties with the proceeds of crime. The meaning of money laundering as mentioned in the objects of the Act will have to be read as part of the statute because as per Supreme Court of India in Vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to be recovered by the Appellants Banks. 63. The property of the Appellant Bank cannot be attached or confiscated when there is no illegality or unlawfulness 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 as there is no dispute as regards the origin of funds or the title of the properties. As far as the bank is concerned, the bank had to recover its outstanding dues by taking over the possession of the mortgaged properties in case the Respondents are not able to pay back the credit facilities availed by the Respondents and by way of the SARFAESI provisions these properties are being taken in possession by the appellant bank so that recovery can be made from the accounts which have become NPA. 64. The respondent has no lien over the said properties as the Appellants banks are now the Legal transferee of said properties. Even in the criminal jurisprudence the stolen property when it is in the hands of unauthorized person that person cannot claim title to the property. The said recipient cannot retain the property over which he has no legal title and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst charge over the assets hypothecated/mortgaged to the Bank. It is submitted that the granite blocks and finished products lying in the premises of the borrower are absolutely and exclusively hypothecated/charged with the Bank and the Bank as secured creditor, has first preference to bring the said granite blocks and finished products, etc. for sale to recover their outstanding dues. 31. The Adjudicating Authority while passing the impugned order failed to appreciate that the Appellant Bank enters into loaning transactions in its ordinary course of Banking business and has no role in the alleged irregularities/ proceeds of crime generated by the respondent no.2/its partners. It is to be stated that the Appellant has advanced credit facilities to the respondent no.2 on the basis of the Mortgage/Hypothecation and thus, such secured/ charged assets cannot be brought within the purview of PMLA, 2002. If this is allowed to happen, it shall have very wide ramifications and could have adverse implications. The respondent no.1 cannot have any prior claim over the secured assets mortgaged/hypothecated to the Appellant Bank. 32. The Adjudicating Authority, while passing the impugned orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 37. During the course of hearing on 20.02.2018, it has been submitted by the appellant that no relief has been pressed against respondent nos. 2 to 11 and the only request of the appellant is to set aside the impugned order dated 26.04.2017. The counsel for the appellant has also submitted that the names of the respondent nos. 2 to 11 be deleted. 38. A perusal on the facts of the record shows that the Appellant Bank sanctioned the renewal/ enhancement of the existing facilities vide sanction ticket dated 24.08.2011 and sanctioned the following credit facilities:- S.No. Type of facility Limit Sanctioned (Rs. In Crores) 1. Export Packing Credit 93.00 2. PCFC (Sub limit of EPC) (50.00) 3. FBP/FBN (DA 180 days) 93.00 4. Import/Inland LC (DA 180 days) & Buyers Credit Import LC (Capital Goods) as Sub limit 50.00 (5.00) 5. Bank Guarantee 5.00 6. Forward Contract 288.12 39. The Borrower i.e. M/s. PRP Granites was repaying the loan amount to the Appellant Bank till 31.03.2013 whereafter in pursuance of frozen orders of the Deputy Superintendent of Police, Prohibition Enforcement Wing doing vide letter dated 31.08.2012, the loan account became NPA ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
