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TMI Blog2018 (5) TMI 925X X X X Extracts X X X X X X X X Extracts X X X X ..... Adjudicating Authority because of the amendment of 2016 made in SARFAESI Act RDDB Act. The IDBI Bank is the rightful claimants of the said property which are already in its possession under SARFAESI Act. Even recovery certificate has been issued by DRT. 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, both the properties have been purchased by the Respondent Sh. Arun Suri and have been mortgaged with the IDBI much prior to the date of alleged offence which shows that no proceeds of crime are involved in the acquiring of these properties and hence the same cannot be attached. Adjudicating Authority has failed to consider that the ED has attached the properties without examining the case of the bank. The evidence on record suggests that the properties were acquired by the borrowers much before the alleged date of crime. No money disbursed by the Bank from its loan account, has been invested in acquiring these properties. Furthermore, the Appellant Bank had created charge over the property prior to the date of the crime. The Bank has already filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lot no. 307, 3rd Floor, 6 DLF Industrial Area, Moti Nagar, New Delhi-110015 Sh. Arun Suri 1.50 crores 5. Plot no. 8, DLF Industrial Area, Moti Nagar, New Delhi- 110015 M/s S.T. Enterprises, a partnership firm of Sh. Arun Suri and his wife Smt. Shallu Suri 9.71 Crores 6. Plot no. 34, IInd Floor, DLF Industrial Area, Moti Nagar, New Delhi-110015 Mrs. Shallu Suri w/o Sh. Arun Suri 1.67 Crores 7. Shop No. 4,6, DLF Industrial Area, Moti Nagar, Delhi Sh. Arun Suri 1 crore 8. Shop No. 128, 1st Floor, 6, DLF Industrial Area, Moti Nagar, Delhi Sh. Arun Suri 34.32 Lacs 9. House No. 255, Sainik Vihar, Pitampura, New Delhi Sh. Arun Suri and his mother Smt. Viran Wali Suri 5.18 crores to the extent of 50% (2.59 crores) Total Value 17.52 crores 2. Out of the aforesaid properties, properties at sr. no. 7 & 8 above are the subject matter in the appeal before us. The properties at Sr. no. 7 & 8 are specifically mentioned below to avoid confusion. (a) Shop No.4, 6 DLF Industrial Area, Moti Nagar, New Delhi and (b) Shop No. 128, Ist Floor, 6 DLF Industrial Area, MotiNagar, New Delhi. Fact in Brief 3. It is revealed from the material available on record th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t no. 2. That Respondent no. 2 had executed various security documents and in order to secure the said facilities had also created a mortgage in respect of six properties including the two properties attached in terms of section 5 by the Adjudicating Authority i.e.:- (a) Shop No.4, 6 DLF Industrial Area, Moti Nagar, New Delhi and (b) Shop No. 128, Ist Floor, 6 DLF Industrial Area, Moti Nagar, New Delhi. 6.2 That upon execution of the security documents, the equitable mortgage was created by Respondent No.2 on 16.01.2009 and the title deeds dated 23.07.2003 with respect to shop No. 4 and title deed dated 18.03.2003 with respect to shop No. 128 were deposited with the Appellant Bank to secure the said Facility. 6.3 Subsequently on the request of Respondent No.2, the said Facility was enhanced from ₹ 300 Lacs to ₹ 500 Lacs on the basis of sanction letter bearing Reference No. IDBI/SME/84/AE dated 23.10.2009. And subsequently the said facility was further enhanced up to ₹ 750 Lacs on the basis of sanction letter bearing Reference No. IDBI/SME/2010-11/2035 dated 10.07.2010. The charge over the properties, by way of equitable mortgage were extended in order to secure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Baroda, CBI registered a case/FIR No. RC.BD.F1/2015 dated 09.10.2015 against 59 current account holders as proprietor/directors/companies as per the list mentioned in the impugned order and unknown bank officials/private persons for commission of offences under section 420 read with 120 B of IPC 1860 and under section 13(2) read with Section 13(1)(d) of P.C. Act. On the account of the same, the aforesaid act amounted to Scheduled Offence under PMLA Act and thus, ECIR vide No. DLZO/20/2015 was registered on 09.10.2015 by Enforcement Directorate. During the pendency, the Enforcement Directorate vide attachment bearing No. 06/2017 dated 28.07.2017 had attached all the properties belonging to Respondents No. 2 to 6 herein including the aforesaid two properties already mortgaged with the Appellant Bank. 6.8 Thereafter, the Respondent No.1 filed a complaint before the Adjudicating Authority in terms of Section 5(5) of the Act against Respondent herein, bearing OC No.809/2017. 6.9 That upon the receipt of show cause notice from the Adjudicating Authority, the Appellant Bank had filed detailed response dated 11.11.2017 along with supporting Annexures. However, after seeking response f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of these properties, i.e. prior to 01.06.2009. Thus, the impugned order dated 27.11.2017 is liable to be set aside on this short score alone. 6.12 That on account of Amendment in SARFAESI Act by way of addition of Section 26(E) to the said Act and in Recovery of Debt Due to Banks and Financial Institutions Act by Section 31B of the Amended Act, the Appellant Bank would have superior right of recovery of debt dues and the debt due to the Secured Creditors shall be paid in priority of all other debts and other revenue/taxes/cess payable to the Central Government/State Government/Local Authorities. 6.13 That the Ld. Adjudicating Authority failed to appreciate the fact that the Appellant Bank is a Public Sector Institution and by initiating the action is only recovering public exchequer and hence the Appellant is within its right to enforce the dues and thus, the impugned order is liable to be set aside. 6.14 That after the promulgation of PMLA Act, amendments were brought to the SARFESI Act by the Legislature whereby Section 26(E) was introduced to the SARFASI Act and Section 31B Recovery of Debt Due to Banks and Financial Institutions Act and the said Acts reads as under :- "2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated above. That since two of the properties of the Respondent no. 2 that have been attached by the Respondent no. 1 have been lying mortgaged with the Appellant Bank since 2009 and the Appellant has also initiated proceedings before the DRT under section 19 of the RDDBFI Act. Therefore, the decision of this Hon'ble Tribunal in SBI vs. Joint Director would squarely apply to the facts and circumstances of the present case and the APO would have to be set aside. 6.16 That the Adjudicating Authority failed to appreciate that while issuing a provisional attachment order under section 5 of the PMLA, both clauses (a) and (c) of sub-section (1) need to be fulfilled. It is submitted that in the instant case clause (c) is not attracted because the Respondent had no "reason to believe" that the alleged proceeds of crime "are likely to be concealed, transferred or dealt with in any manner which result in frustrating any proceedings relating to confiscation of such proceeds of crime." This is because the attached properties (Specifically two properties mentioned above) are already lying mortgaged with the Appellant, and Appellant is in possession of original title dee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g) of the NDPS Act includes even those properties that were acquired by a person before or after commencement of Chapter VA. This Chapter, which was inserted by virtue of an amendment in 1989, provides for the forfeiture of properties acquired from the income/earnings attributable to the contravention of any provisions of the NDPS Act. Such provisions in the SAFEMA and NDPS Act are conspicuously absent in the PMLA, and it is a well settled rule of statutory interpretation that statutes are to be construed prospectively unless expressly provided otherwise. That the Learned Adjudicating Authority failed to appreciate the above fact and had wrongly upheld the PAO and therefore, the impugned order is liable to be set aside on this short score. 6.19. It has been wrongly held by the Adjudicating Authority that the Respondent no. 2 to 6 have committed scheduled offences and generated the Proceeds of Crime and laundered them and thus the properties are liable to be attached. Moreover, the properties attached by way of the impugned order, were wrongly held by the Adjudicating Authority to be proceeds of crime. it may be submitted that the order passed by the Adjudicating Authority has igno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) The debts, (2) all Govt. dues including, (i) revenues (ii) taxes, (iii) cesses, (iv) other rates due to the Central Government and local authority. Thus there is no priority conferred on the secured creditors under the said Acts, in respect of the proceeds of crime in their hands. The PMLA is a Special Act and is an Act to prevent money- laundering and to provide for confiscation of property derived from, or involved in money laundering and for matters connected there with or incidental thereto. Section 3 of Act defines money laundering as whosever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in an)' process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money- laundering. 7.3 Ld. Adjudicating Authority in the above order further held that PMLA law has been made under international obligation pursuant to the United Nation General Assembly resolution and therefore it will prevail over other laws. The 3 Member Bench of Hon'ble Supreme Court overruling the two Member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rewith or incidental thereto. It only lays down a procedure for recovery of debts due to banks. The Prevention of Money Laundering Act vests the statutory authorities with a power to forfeit proceeds of crime involved in money laundering to the State. There is thus no apparent conflict between the two statutes. The two statutes operate in their exclusive fields. The question is only who will have his claim on any property where the claim of the State concurs with the claim of any person. Halsbury explaining the Crown's rights, in relation to property states that the Crown's right and that of a subject under it meet at one end and at the same time the Crown in general is preferred". 7.6 The Hon'ble High Court of Andhra Pradesh in the case of B. Ramaraju s/o B. Ramlinga Raju v. Union of India, [2011] 164 Comp Case 149 (AP) has held that purchase of movable or immovable property of inducting or integrating proceeds of crime with legitimate money are all covered under section 3. The Hon'ble Court observed as follows: "49. The object of the Act is to prevent money laundering and connected activities and confiscation of "Proceeds of Crime" and Preve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anner as may be prescribed may also direct the Central Government to restore such confiscated property or part thereof of a claimant with a legitimate interest in the property, who may have suffered a quantifiable loss as result of the offence of money laundering. 8. Both the parties have made their submission and they have also referred various documents and cited judgments in their written arguments and para wise reply respectively. We have heard the submission made by the appellant and the respondent no. 1 with regards to the aforesaid two properties involved in the present appeal and considered the materials available on records. 9. Before going into various legal issues raised herein it is felt necessary to deal first with the most important issue i.e. overriding effect of the two special Acts. 10. It is the admitted fact that the appellant bank neither an FIR name accused nor any of the officials are involved either in the Scheduled offence or offence committed under the provisions of PMLA. 11. On perusal of the impugned order we could not find any material that the aforesaid two properties of this appeals have been acquired out of proceeds of crime nor it has been establ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money- laundering. Thus the secured creditors does not and cannot have any priority over the attachment, confirmation and confiscation of proceeds of crime. It would be against a public policy to permit the possession of proceeds of crime and its utilization, save and except in the manner provided under the PMLA. 59. It is However pleaded by the counsel for ED that amendments in the SARFAESI Act/DRT Act deal with the priority of creditors right, bank dues and Government dues intense. The present case is pertaining to the proceeds of crime and fundamental principle is that Government has exclusive right over the proceeds of crime and therefore the said amendment of 2016 SARFAESI Act & Recovery of Debts and Bankruptcy Act in 2016 will not help the defendants. 60. Further PMLA law has been made under International Obligation pursuant to the United Nation Genral Assembly resolution and therefore it will prevail over other laws. The 3 Member Bench of Hon'ble Supreme Court overruling the two Member Bench de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciation of an industrial company or in any other instrument having effect by virtue of any /law other than this Act." 8. The effect of this provision is that the said Act will have effect notwithstanding anything inconsistent therewith contained in any other law except to the provisions of the Foreign Exchange Regulation Act, 1973 and the Urban Land (Ceiling and Regulation) Act, 1976. A similar non obstante provision is contained in Section 13 of the Special Court Act which reads as follows: "13. Act to have overriding effect.-The provisions 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets which have to be collected by the Special Court for the purposes of distribution under Section 11(2). The distribution can only take place provided the assets are first collected. The whole aim of these provisions is to ensure that monies which are siphoned off from hanks and financial institutions into private pockets are returned to the banks and financial institutions. The time and manner of distribution is to be decided by the Special Court only. Under Section 22 of the 1985 Act, recovery proceedings can only be with 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 interpreta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad as under: 15. To be noted that in both the judgments, relied upon by counsel, the Supreme Court has held that generally where there are two special statues, which contain non- obstante clauses, the later statute must prevail. This is because at the time of enactment of the later statute, the Legislature was aware of the earlier legislation and its non-obstante clause. If the Legislature still confers the later enactment with a non-obstante clause it means that the Legislature wanted that enactment to prevail. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red creditor having the benefit of the mortgaged property." 38. In another Madras High Court judgment in the case of "Dr. V. M. Ganesan vs. The Joint Director, Directorate of Enforcement" has explained the grievances faced by the financial institutions while holding that "For instance, if LIC Housing Finance Limited, which has advanced money to the petitioner in the first writ petition and which consequently has a right over the property, is able to satisfy the Adjudicating 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 and financial institutions, but also made provision for ensuring that defaulting borrowers are not able to invoke the jurisdiction of the civil courts for frustrating the proceedings initiated by the banks 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 issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tigation pertaining to the culpability of the accused in the crime, the concerned bank had instituted suits for recovery of the amount claimed to be due from the respondents and the said suits were disposed of in terms of the consent decrees. On the basis of the said consent decrees an application for discharge was filed which was rejected by the trial court but eventually was allowed by the High Court. The charges in the matter were framed 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 cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd circumstances. No useful purpose would be served if such oppressive trial may continue for many more years. Thus, ends of justice are served by quashing such a proceeding, as the parties cannot be allowed to go through the rigmarole of criminal prosecution for long numbers of years in a matter, it is doubtful in the mind of the Court in whose favour it would be decided." "71. In view of above mentioned reasons, this Court is inclined 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttached under sub-section (1) of section 5, or, seized or frozen under section 17 or section 18, the evidence on which he relies and other relevant information and particulars, and to show cause 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 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Authority of any competent court to demonstrate his innocence that he has not received any proceeds of crime. The consequence of this is that while considering whether all or any of the properties provided under notice issued u/S 8(1) are involved in money laundering, the Adjudicating Authority can take into consideration the plea of innocence raised by any person and also the fact as to whether the 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 pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust be an act during the course of committing that offence." Thus, an "attempt to indulge" would necessarily require not only a positive "intention" to commit the offence, but also preparation for the same coupled with doing of an act towards commission of such offence with such intention to commit the offence. Respondent failed to produce any material or circumstantial evidence whatsoever, 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 thin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principle should be applied while judging the involvement of any property of any person in money laundering. This is due to the reason that if the property has no direct involvement in the proceeds of the crime and has passed on hands to the number of purchasers which includes the bona fide purchaser without notice, the said purchaser who is not having any knowledge about the involvement of the said property with the proceeds of the crime nor 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:- " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n; whether he was connected with G. Srinivasan or the sale consideration is legitimate or not the property in the hands of Gunaseelan cannot be termed as proceeds of crime. 22. Further, the appellants have given statements under Section 50 of the Act. They have categorically stated that they possess agricultural lands, cultivate GloriosaSuperba seeds and sell the same and derive considerable income. They have named the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st the above arguments vehemently raised by the defendants, the complainant without disputing that the deals are bona fide heavily relied on the judgment of the Bombay High Court, dated 05.08.2010 in Mr. Radha Mohan Lakhotia Vs. Deputy Director, PMLA, Directorate of Enforcement, Mumbai in first appeal No. 527/2010. In this case it held by the Bombay High Court that the property bought without the knowledge 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 though 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon'ble Supreme court in KSL & Industries Ltd. vs. Arihant Threaders Ltd. & Ors. (supra). "47. In a subsequent decision in Allahabad Bank Vs. Canara Bank, this Court held that with reference to the Companies Act, the RDDB Act should be considered as a "special law" though both laws could be treated as "special laws" in respect of recovery of dues by banks and financial institutions. In a later case the question arose in the context of Special Court (Trial of offences Relating to Transactions in Securities) Act, 1992 and SICA. It was contended that in view of the special provisions contained in SICA no proceedings could have been initiated under the Special Court Act. The Court observed that though Section 32 of the SICA contained a non-obstante clause, there was a similar non-obstante clause in Section 13 of the Special Court Act. The Court observed:- "9… This Court has laid down in no uncertain terms that in such an event it is the later Act which must prevail." 48. This Court approved the observations of the Special Court to the effect that if the legislature confers a non-obstante clause on a later enactment, it means that the legislature intends that the late ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d where actions under the two laws may seem to be in conflict, Parliament has wisely preserved the proceedings under the SICA, by specifically providing for sub- section (2), which lays down that the later Act RDDB shall be in addition to and not in derogation of the SICA. 52. We might add that this conclusion has been guided by what is considered to be one of the most crucial principles of interpretation viz. giving effect to the intention of the Legislature. The difficulty arose in this case mainly due to the absence of specific words denoting the intention of Parliament to cover applications for recovery of debts under the RDDB Act while enacting Section 22 of the SICA. As observed earlier, the obvious reason for this absence is the fact that the SICA was enacted earlier. It is the duty of this Court to consider SICA, after the enactment of the RDDB Act to ascertain the true intent and purpose of providing that no proceedings for execution or distraints or suits shall lie or be proceeded with. Undoubtedly, in the narrower sense an application for recovery of debt can be giving a restricted meaning i.e. a proceeding which commences on filing and terminates at the judgment. Howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .. We shall therefore proceed to examine the provisions of the Act on the footing that the test for determining whether the Government is bound by a statute is whether it is expressly named in the provision which it is contended binds it, or whether it "is manifest that from the terms of the statute, that it was the intention of the legislature that it shall be bound", and that the intention to bind would be clearly made out if the beneficent purpose of the statute would be wholly frustrated unless the Government were bound." 54. Having answered the reference, we hold that the provisions of SICA, in particular Section 22, shall prevail over the provision for the recovery of debts in the RDDB Act. In these circumstances, as already directed by the two-Judge Bench of this Court, the Judgment and Order dated 23.02.06 of the High Court of Delhi is set aside. As far as the writ petitions are concerned, whether on the ground that Section 22 of the SICA acts as a bar to the recovery proceedings under the RDDB Act or whether the protection of SICA is not available to the appellant company since the recovery proceedings under the RDDB Act had been concluded, the writ petitions would have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the money laundering which was considered necessary to deprive persons engaged in serious illegal activities and have thereby been increasing their resources for operating in clandestine manner. The Act was created to forfeit illegal properties and to prevent the money laundering activities which are threat to financial system of the country and its integrity and sovereignty. Further the question of prevalence of a subsequent legislation will only come into picture when there is a conflict between the two statutes. The Securitization Act has been enacted for the purpose of establishing a expeditious system for recovery of debts due to Banks and for matters connected therewith or incidental thereto. It only lays down a procedure for recovery of debts due to Banks. The Prevention of Money Laundering act vests the statutory authorities with a power to forfeit proceeds of crime involved in money laundering to the State. There is thus no apparent conflict between the two statues. The two statues operate in their exclusive fields. The question is only who will have his first claim on any property where the claim of the State concur with the claim of any other person. In the light of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re withdrawn from bank for personal gain of Shri Gopinath Das and companies owned and managed by him. Out of these funds, Sh. Gopinath Das has acquired several immovable properties as detailed in the impugned order and mortgaged them with Syndicate Bank, Salt Lake Branch, Kolkata, the present appellant for availing credit facilities to the extent of ₹ 10 crores and got ₹ 4.5 crores fraudulently released from the appellant against fake and forged documents. As the amount of loan given by the appellant was not repaid the account became Non Performing Asset (NPA) and the appellant proceeded u/s 13 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short Securitisation Act) for recovery of its dues and claimed to have taken possession of the properties on 30.11.2006. 20. Neither of the aforesaid judgments relied on by the Respondent no. 1 is of any help to their case in the given facts and circumstances of the case. The facts in the referred cases are not similar. 21. It is an admitted fact that the properties herein are mortgaged with the appellant Bank. It is also a fact that the mortgaged properties are not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal outcome of criminal matters against the barrowers. We do not agree with the argument in this regard in view of amendment in the two statutes. Even otherwise the trail would take number of years. The public money cannot be stalled otherwise Banking system would be collapsed. 24. 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, both the properties have been purchased by the Respondent Sh. Arun Suri and have been mortgaged with the IDBI much prior to the date of alleged offence which shows that no proceeds of crime are involved in the acquiring of these properties and hence the same cannot be attached. 25. The Ld. Adjudicating Authority has failed to consider that the ED has attached the properties without examining the case of the bank. The evidence on record suggests that the properties were acquired by the borrowers much before the alleged date of crime. No money disbursed by the Bank from its loan account, has been invested in acquiring these properties. Furthermore, the Appellant Bank had created charge over the property prior to the da ..... X X X X Extracts X X X X X X X X Extracts X X X X
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