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TMI Blog2018 (8) TMI 426X X X X Extracts X X X X X X X X Extracts X X X X ..... rder would create a chaos in banking industries and would be against the interest of nation as a whole ad would also be against the public policy. Hundreds of borrowers have taken the loans against the securities and mortgaged properties and are not returning the legal debts. They are simply adopting all sort of tactics by raising defense that their properties are attached by ED. Even they have stopped paying the installments due by raising the plea that why should pay debts once the attachment orders are passed. By way attachment, their properties are also safe so as the due amount. They are happy if the attachment would continue against the mortgaged properties despite of passing the decrees by the DRT in favor of banks and against borrowers. By this mean, the attachment-orders amounting to interference with the judicial system as the Adjudicating authority in many cases has ignored judgments of the Supreme Court, Full bench of Madras High Court and many High Courts and even of this tribunal. At present, total outstanding as per Recovery Certificate is ₹ 4687,04,04,315.29 (Rupees Four Thousand Six Hundred Eighty Seven Crore Four Lakh Four Thousand Three Hundred Fiftee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Title (i) Appeal No. 1604 of 2017 Standard Chartered Bank. v. The Joint Director Directorate of Enforcement, Mumbai (ii) Appeal No. 1711 of 2017 Winsome Diamonds Jewellery Ltd. v. The Joint Director Directorate of Enforcement, Mumbai (PNB is R.-2 SCB is R.-3) (iii) Appeal No. 1760 of 2017 M/s. Kohinoor Diamonds Pvt. Ltd. v. The Joint Director Directorate of Enforcement, Mumbai (PNB is R.-2 SCB is R.-3) (iv) Appeal No. 1761 of 2017 M/s. Bombay Diamond Company. Pvt. Ltd. v. The Joint Director Directorate of Enforcement, Mumbai (PNB is R.-2 SCB is R.-3) 2. Admitted position is the following properties belonging to M/s. Winsome Diamonds Jewellery Ltd., M/s. Kohinoor Diamonds Pvt. Ltd. and M/s. Bombay Diamonds Company Pvt. Ltd., along with a company named Forever Diamond Pvt. Ltd. were mortgaged to the Consortium of banks led by Standard Chartered Bank. 3. The detailed list of various properties along with their estimated value is as fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, Unit No. 1, Ground Floor, Unit No.-4, Ground Floor, Unit No.-1, First Floor, Unit No.-5, First Floor, Unit No.-1, Third Floor, Unit No.-1, Fourth Floor, Unit No.-1, Fifth Floor, Unit No.-1, Sixth Floor, Unit No.-1, Seventh Floor, Unit No.-1, Eight Floor.) Kohinoor Diamonds P. Ltd. (Corporate Guarantee extended by the directors of the company to the banks) 5. Land and building at Plot No. 1 and 1-A, Tivim Industrial Estate, Survey No. 500 (Part) and 502 (Part) Mapusa Municipal Council, Taluka and Regn. Sub. Dist.- Bardez, Dist. North Goa, Goa. Winsome Diamonds and Jewellery Ltd. Land 5400 Sq. Mtrs. Bldg. 5396.20 Sq. Mtrs. 8,87,42,000/- 6. Unit No. -1 NW, First Floor, SDF Buidling, Gem and Jewellery Park, Manikanchan, Plot No. -1, Block CN, Sector V, Bidhan Nagar, Salt Lake, Kolkata- 700 091 Su-Raj Diamonds and Jewellery Ltd. [Winsome] 3498.30 Sq. Ft. (Leased Property) 1,88,91,000/- 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Road, Mumbai property, as follows: - Unit No. Date of Acquisition 801 27th February, 1990 802 21st March, 1990 803 23rd January, 1990 804 29th March, 1990 805 28th March, 1990 806 29th November, 1989 807 28th March, 1990 808 22nd January, 1990 809 24th January, 1990 810 29th November, 1989 811 20th March, 1990 812 19th February, 1990 813 19th March, 1990 814 17th March, 1990 815 27th November, 1989 816 21st March, 1990 817 27th March, 1990 818 27th March, 1990 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s follows: - The Defendant no . 1 shall pay an amount of Rs . 4,061,589,537 . 00 to applicant no . 1, an amount of Rs . 714,743,985 . 00 to applicant no . 2, an amount of Rs . 1,636,021,974 . 00 to applicant no . 3, an amount of Rs . 6,722,236,193 . 00 to applicant no . 5, an amount of Rs . 1,277,706,509 . 00 to applicant no . 6, an amount of Rs . 10,521,187,766 . 00 to applicant no . 7, an amount of Rs . 1,448,174,130 . 00 to applicant no . 8, an amount of Rs . 7,465,886,346 . 00 to applicant no . 9, an amount of Rs . 2,803,341,974 . 00 to applicant no . 10, an amount of Rs . 474,953,920 . 00 to applicant no . 11, an amount of Rs . 463,330,128 . 00 to applicant no . 12, an amount of Rs . 1,147,875,362 . 00 to applicant no . 13, and an amount of Rs . 906,139,200 . 00 to applicant no . 14 along with contractual rate of interest agreed between the parties from date of filing of application under Section 19 ( 1 ) of the Recovery of Debt Due to Banks and Financial Institutions Act 1993 till realization to the applicant bank within a period of one month from date of rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 46.50 12 State Bank of Mauritius Ltd. 30.00 Barclays Bank PLC 27.00 13 IDBI Bank Ltd 50.00 Total 2325.00 Additional 465.00 Total 2790.00 14. The limits were revised in the year 2010 as follows: - Rupees in Crore Old Limits (2009) New Limits (2010) Applicant No. Banks Total Total 1 Standard Chartered Bank 189.00 264.00 2 Export import Bank of India 70.00 85.00 3 Oriental Bank of Commerce 100.00 120.00 4 Canara Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 138.00 7 Punjab National Bank 655.00 880.00 8 Vijaya Bank 123.50 152.00 9 Central Bank of India 435.00 600.00 10 Union Bank of India 185.00 206.00 11 Axis Bank Ltd. 46.50 50.00 12 State Bank of Mauritius Ltd. 35.00 45.00 13 IDBI Bank Ltd 70.00 125.00 14 BANK of India 50.00 50.00 Total 2850.00 3845.00 Additional 570.00 769.00 Total 3420.00 4614.00 16. Based on claim of each bank sought to recover the said follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Penal Interest --- --- --- Total 176,45,52,527.51 176,45,52,527.51 Applicant No.4 Rupees in Crore Canara Bank Details of Facilities Total Fund Based Non-Fund Based Ledger Balance 93,89,23,379 530,27,42,691 624,16,66,070 Unapplied Interest 11,91,92,702.80 101,51,59,161.78 113,43,51,864.58 Penal Interest 49,06,430.19 11,31,09,655.91 11,80,16,086.10 Total 106,30,22,511.99 643,10,11,508.69 749,40,34,020.68 Applicant No.5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... --------------- 10,63,04,31,397.58 Applicant No.8 Rupees in Crore Vijaya Bank Details of Facilities Total Fund Based Non-Fund Based Ledger Balance 145,92,99,745.00 ----- 145,92,99,745.00 Unapplied Interest 4,98,28,065.00 ----- 4,98,28,065.00 Penal Interest ----------------------------- ----- ---------------- Total 150,91,27,810.00 ----- 150,91,27,810.00 Applicant No.9 Rupees in Crore Central Bank of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 52,80,62,127 Applicant No.12 Rupees in Crore State Bank of Mauritius Ltd. Details of Facilities Total Fund Based Non-Fund Based Ledger Balance 46,29,17,557.28 --------- 46,29,17,557.28 Unapplied Interest 6,17,92,927.70 --------- 6,17,92,927.70 Penal Interest ------------------ --------- ---------- Total 52,47,10,484.98 --------- 52,47,10,484.98 Applicant No.13 Rupees in Crore IDBI Bank Ltd. Details of Facilities Total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry, 1989, Plant Machinery hypothecated goods. 20. The current status of the Consortium of Bank has to recover an amount of ₹ 4687,04,04,315.29 (Rupees Four Thousand Six Hundred Eighty Seven Crore Four Lakh Four Thousand Three Hundred Fifteen and Paisa Twenty Nine only) and it is admitted situation that the Original Application before DRT, Ahmedabad was filed in the year 2014 around the same time the Appellants and Punjab National Bank (PNB) filed a complaint with the Enforcement Directorate, Mumbai. 21. There is no denied or any allegation by the Enforcement Directorate (Mumbai) during the hearing as to that the properties in question are acquired from the money laundering activity or are the proceeds of crime. 22. As per record, no allegation has been made against Standard Chartered Bank or Punjab National Bank or any of the Consortium bank that anyone or more bank helped/assisted either of the three companies i.e. M/s. Winsome Diamonds Jewellery Ltd., M/s. Kohinoor Diamonds Pvt. Ltd. and M/s. Bombay Diamonds Company Ind. Pvt. Ltd. or Mr. Jatin Mehta in the Money Laundering activity carried out by them. 23. As per settled law and facts in the matter, all th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2002 by Respondent No. 1; Enforcement Directorate, Mumbai the mortgaged properties are lying unsold. 31. It is not at all disputed by any of the Respondents including the three defaulter companies that these Properties are mortgaged to the Consortium led by Appellant bank and they have a first charge on the same. 32. The Appellant bank and the consortium led by them and has nothing to do and has no connection with the said allegation or crime (if any) committed by M/s. Winsome Diamonds Jewellery Ltd., M/s. Kohinoor Diamonds Pvt. Ltd. and M/s. Bombay Diamonds Company Ind. Pvt. Ltd., being Respondent Nos. 3, 5 6 or any other person/s. 33. It is undisputed fact that the Appellant Bank is not holding any funds of the accused/ Respondents, on the other hand, the Appellant Bank itself has to recover more than ₹ 464,54,70,592.63 (Rupees Four Hundred and Sixty Four Crore Fifty Four Lakhs Seventy Thousand Five Hundred Ninety Two and Paise Sixty Three Only) from the Respondent Nos. 3, 5 6. 34. The mortgaged property with Appellant Bank is of much prior to the date of crime. The allegation of the respondent no. 1 that these properties may have been purchased from the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ging to the Financial Institutions/Secured Creditors, done by/in favour of the Government institutions. 40. 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 . MANU / TN / 3743 / 2016 that There is, thus, no doubt that the rights of a Secured Creditor to realize 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 . 41. In a case contested by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct is the subsequent legislation to the PML Act as held by the Hon‟ble Supreme Court in the case of Solidaire India Ltd . Vs Fairgrowth Financial Services Ltd . Ors . , (2001) 3 SCC 71. 44. Therefore, the said judgment is not applicable infavor of the respondent in view of amendment brought by in the respective statues. Rather now the said judgment can be applied against the arguments of Respondent No. 1. 45. 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. SatyawatiTondon 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 remedie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of the proviso the properties being charged in favor of the Appellant led consortium, should be permitted to be sold and Sale proceeds be permitted to be adjusted against the bonafide dues of the consortium led by the bank. 48. The Section 26E of the SARFAESI (Amendment) Act, 2002 is reproduced herein below for ready reference:- 26E . Notwithstanding anything contained in any other law for the time being in force, after the registration of security interest, the debts due to any secured creditor shall be paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authority . 49. This Tribunal in the case of IPRS in appeal no. FPA-PMLA- 1302/MUM/2016 decided on 22.06.2017 had dealt with the similar issue as to whether the innocent party whose immovable properties are attached by the ED can approach the Adjudicating Authority for release of the same in para no. 55 to 60 the same read as under:- 55 . Whether innocent party whose properties i . e . movable or immovable are attached can approach the Adjudicating Authority for release of attached property . The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han 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 parties can approach the Adjudicating Authority for release of property by showing their bonafides in their dealings with the property . In the case of Sushil Kumar Katiyar ( Appellants ) Vs UOI and Ors . ( Respondents ) MANU / UP / 0777 / 2016 decided on 10 . 05 . 2016 by Allahabad High Court, it has been observed by the Ld . Single Judge after noticing the judgment of Karnataka High Court that the element of knowingly or mens rea have been provided under the Act so that the aspect of implicating any innocent person can be ruled out . Relevant para 26 of judgment is reproduced below :- 26 . Thus, upon consideration of the law laid down by the Hon'ble Karnataka High Court, it is clear that the amendment incorporated in the M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 property out of the properties by holding that the said property is not involved in money laundering . 58 . For the purposes of determining whether the property is involved in money laundering, the Court may consider the ingredients of Section 3 which define offence of money laundering . The aspect of knowledge or involvement has been discussed by Ld . Single Judge of Gujarat High Court in the case of Jafar Mohammed Hasanfatta and Ors ( Appellants ) Vs Deputy Director and Ors . ( Respondents ) MANU / GJ / 0219 / 2017 wherein Ld Single Judge has observed as under :- 37 . A holistic reading of this definition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und 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 where there is absolutely no material or circumstantial evidence whatsoever, oral or documentary, to show that any of the petitioners, 'Knowingly', assisted or was a party to, any offence . C . Actually involved : Actually, involved would mean actually involved into any process or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Adjudicating Authority or the Special Court ) , be presumed that the remaining transactions form part of such inter - connected transaction . 24 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s always bona-fide all the time. The bank is an innocent party who is legally entitled to inform the Adjudicating Authority about its innocence, but the contention was rejected as appeared from the impugned order. 52. From the scheme of the Prevention of Money Laundering Act, 2002 and its object, it is clear that the intention of the legislation is not to apply the Act to the nature transaction involved in the present case. 53. The Enforcement Directorate in its provisional order as well as in the complaint before the Adjudicating Authority admitted that the properties which are subject matter are mortgaged with the appellant bank. The borrowers acquired the properties much before the borrowers availed the loan from the appellant bank and therefore no proceeds of crime were invested in these properties. The copies of the title deed of the properties would show that the same were acquired prior to dates of alleged fraud crime, if any, committed even as per the case of the Respondent No. 1. 54. The mortgaged properties are security to the loans and cannot be subject matter of attachment particularly when the same were purchased and mortgaged prior to the events of funds dive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icating Authority vide Impugned Order 16th November, 2016. The Adjudicating Authority failed to understand that the Appellant Bank has stakes in the said properties at para no. 13 (listed from 01 to 10). The Appellant Bank has the right to recover the loan amount against the mortgaged properties under law. The valuable right will be lost if the Order of attachment would continue. The impugned order passed by Adjudicating Authority would cause miscarriage of justice if it is not set-aside. 59. If the attachment would continue against the mortgaged property of the banks in this matter, the economy of the country would suffer. The banks in the present case have proceeded with the matter in good faith and are not involved in the offence of money laundering. 60. The Adjudicating Authority had all the reasons to believe despite of aware that abovementioned were mortgaged to the Appellant Bank and that the Appellant/consortium had prior charge over the subject matter/properties; inspite of this the Ld. Adjudicating Authority confirmed the provisional attachment order issued by the Respondent No. 1 and it has caused huge loss to the Appellant/ consortium. It is submitted that both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fy the proviso to section 9 of the Act. 64. The mortgaged properties of the Appellant Bank cannot be attached or confiscated unless link and nexus directly or indirectly established. From the facts of the present appeal filed by the bank, I find that there is no illegality or unlawfulness in the title of the Appellant Bank 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. It is submitted that; the bank needs to recover its outstanding dues by taking over the possession of the mortgaged properties in case the borrowers are not able to pay back the amount. 65. The Respondent No.1 cannot have any lien over the said properties as the Appellant bank is now the Legal transferee of said properties. The Respondent No. 1 cannot retain the property over which they have no legal title and the property is to be be returned to the personslawfullyentitled as the bank is the victim and even after trial, bank needs to receive back the said properties being a victim party u/s 8(8) of the Act. 66. There is no nexus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subject matter of the Appeal, are mortgaged with the Appellant Bank were acquired by the alleged accused/mortgagor much prior to the date of crime. It is also the stand of the ED that the banks are the victim parties. They are entitled to recover the amount, most are public sector banks. It is a public money and accused/borrowers are liable to face trial in criminal complaint. The trial may take number of years. The main accused is absconding. He has left India. 73. Non performing assets (NPA) are choking the banking system and the system is already struggling for some time and banking conditions are deteriorating day by day. It is submitted that such order would create a chaos in banking industries and would be against the interest of nation as a whole ad would also be against the public policy. 74. As a matter of fact, hundreds of borrowers have taken the loans against the securities and mortgaged properties and are not returning the legal debts. They are simply adopting all sort of tactics by raising defense that their properties are attached by ED. Even they have stopped paying the installments due by raising the plea that why should pay debts once the attachment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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