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TMI Blog2018 (8) TMI 1023X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant is become stake-holder as the amount paid by the appellant was not proceed of crime. The appellant is also not involved in the money laundering. The question of link and nexus in the criminal activities directly or indirectly does not arise. As far as the impugned order dated 11.2.2016 is concerned, the said order is not sustainable in law and the facts of the present case. The same is set-aside against the appellant with regard to flat in question. The provisional order is also quashed accordingly by allowing the appeal. However, it is clarified that this tribunal has decided the appeal pertaining to the order passed on the attachment of flat allegedly purchased by the appellant. The finding shall have no bearing with regard to merit of other proceedings pending against the accused parties including extradition proceedings. It is alleged that the flat in question is one of the assets in which the Official Liquidator is appointed, therefore, the appellant, the respondent nos. 3, 5 and 8, unless the final order is passed in her favour, shall not create third party interest directly or indirectly. X X X X Extracts X X X X X X X X Extracts X X X X ..... ereof, Respondent No. 5 agreed to transfer to Respondent No. 8, 45% or such portion of undivided share of said land as would be proportionate to the saleable super built-up area falling to the share of Respondent No. 8 in the said project. 7. After discussions and negotiations, the appellant entered into six agreements with Respondent No. 5 & 8 for the purchase of the one apartment bearing No. 24A in the said project (hereinafter collectively referred to as "said flat") and the proportionate undivided area in the said land. The following agreements were executed among the appellant, Respondent Nos. 5 and 8 (hereinafter collectively referred to as the "said agreements"): a. Two Agreements to sell dated 05.04.2012 for the said flat; b. Construction Agreements dated 05.04.2012 for the said flat. 8. By the aforesaid Agreement to Sell, the appellant acquired under such Agreement, 8321/767870th undivided right, title and interest and ownership in the said Lands (hereinafter referred to as 'the proportionate undivided area in the said land') and vide the aforesaid Construction Agreement, the appellant acquired the right to get the said flat constructed by the Respondent No. 5 and Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormal/legal banking channels from the overseas account of the appellant. It is claimed that in light of the execution of the said Agreements and the payment of full consideration by the appellant, the latter became the beneficial owner of the said flat and the proportionate undivided area in the said land and acquired rights in the said flats, inter alia, highlighted in the Agreement to Sell dated 05.04.2012. Copies of the Receipts dated 12.09.2012, 23.09.2013, 28.02.2014, 24.09.2014 and 09.03.2015 and copies of cheques issued by Respondent No. 5 in respect of payment of purchase consideration by the appellant are filed along with the appeal. 12. From the documents placed on record, it is evident that the appellant paid the entire purchase consideration from her personal bank account. She has no family relation whatsoever with any of the respondents named above. Even the purchase consideration part of, directly or indirectly, any transaction(s) with the respondents named above. The appellant has filed confirmation issued by the bankers HSBC confirming the details of the cheques issued in favour of UB Holdings - HDFC Bank Escrow Account and cleared from her account. 13. The respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A, 2002, which empowers the Complainant (an authority under PMLA) to attach properties of equivalent value of Proceeds of crime of the offender. Hence, during the course of investigation, various properties held/owned/acquired by Shri Vijay Mallya, including those through various companies and/or special purposes vehicle, which were controlled directly or indirectly by him, through dummy directors appointed by him were identified, which included the subject property held in the name of M/s United Breweries (Holdings) Ltd (UBHL). 20.1 In the appeal, oral arguments are addressed and written submission is also filed on behalf of respondent no. 1, the case in nut-shell is that the properties mentioned in the aforesaid Provisional Attachment Order have been provisionally attached under Section 5(5) of PMLA, 2002 and the same has been duly confirmed by the Adjudicating Authority in its Order in Original Complaint No. 612/2016 dated 01.12.2016, which also includes the property as mentioned by the appellant. 20.2 Appellant has no locus standi to file the present appeal as appellant was neither the defendant before Adjudicating Authority nor has any rightful and legal claim. 20.3 The app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and the same is pending adjudication, therefore, the appellant cannot be allowed to go for forum hunting. 20.10 The UBHL has also filed the interlocutory application before Karnataka High Court prosing to sell the assets to repay the debts and in the list of assets UBHL has also included the present flat then how the appellant making any claim over it. 20.11 The Official Liquidator had filed its reply in response to the application filed by the appellant before the Karnataka High Court opposing their application. 20.12 During the course of investigation, it was observed that the appellant had entered into an "Agreement to Sell" to purchase a flat in the said tower and had alleged made payments the same as was agreed between them with the developers of 'Kingfisher Towers'. The appellant based on their "Agreement to Sell" claimed to have 8321/767870" undivided right, title, interest and ownership in the said Lands i.e. the proportionate undivided area in the said land where the tower is located. The towers have not yet been completely constructed. There is no sale deed entered into, nor the said agreement was registered with the Statutory Authority authenticating the genuinity o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement of sale entered between the appellant and M/s. UBHL, which only denotes about the intention of selling of the Flat to the appellant. However, there is no registered Sale Deed nor the appellant is in possession of the impugned property/Flat in the Kingfisher Tower. Thus, it appears that the appellant does not have any legal ground to claim any title or interest in the said property i.e. the flat or the land on which it is being constructed. Appellant therefore cannot claim any relief from the Appellate Tribunal. Thus, learned counsel appearing on behalf of respondent no. 1 has supported the impugned order and rely-upon the submission made by him as well as written- argument. 25. From the material available on record and as per submissions made on behalf of respondent no. 1, it appears very clearly that the appellant was the claimant of the ownership of apartment/Flat bearing number 24A, along with the proportionate undivided area in the underlying land in a real estate project being jointly developed by Respondent No. 5 (M/s United Breweries (Holdings) Ltd.) and Respondent No. 8 (M/s Prestige Estates Projects Pvt. Ltd.). 26. It has also come to record that the total pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration was paid from the Appellant's own income. The same is supported by the Appellant's Banker's Confirmation Letter and her bank account statements. 31. It is argued by the appellant that she is an innocent bona fide purchaser, and the said Property could not have been attached under Section 5, PMLA. It is also not the case of respondent no. 1 that the consideration paid by her is a tainted amount or it was belonged to Vijay Mallya, as admittedly all the amount was paid through banking channel. 32. The proviso of Section 8(1) and 8(2) of PMLA, 2002 are read as under:- "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, it any, to the notice issued under sub- section (1); (b) hearing the aggrieved person and the Director or any other officer authorized by him in this behalf, and (c) taking into acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1 failed to fulfill its statutory duty, in terms of Rule 3(2) PML (Issuance of Provisional Attachment Order) Rules, 2013, to supply a copy of the Provisional Attachment Order to the Appellant at the time of the issuance of the same to the best reason known to respondent no. 1. It appears that after realizing its mistakes, the respondent no. 1 is now trying to justifying its lapse. The mandatory provision of Special Act line PML Act, 2002 cannot be ignored even different meaning cannot be given to the said provision. 35. Respondent No. 1 was having the details regarding the purchase of the said Property and was in possession of the relevant documents. Thus, the said Property could not have been attached as "proceeds of crime", even if one were to invoke the concept of "equivalent value" as the consideration paid for the purchase of the said Property had been remitted to HDFC Bank Ltd. (Respondent No. 9 herein), which was Defendant No. 8 before the Adjudicating Authority and Respondent No. 1 was aware of this fact at the time of issuing the provisional attachment order. 36. It is argued on behalf of appellant that the respondent no. 1 has already attached the other properties of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and clarified that the Appellant has not received any other amounts/pecuniary benefits, in any manner whatsoever, from UBL. Further, the amounts received by the Appellant can be confirmed from the Annual Reports of UBL, which are available in the public domain. Relevant extracts of the Annual Reports of UBL for the Financial Years 2009-10 to 2016-17 are already filed with the Appellant's aforesaid Affidavit. vii. It is further submitted that the Appellant was been appointed as an Independent Director in view of her qualification and experience (and for no other reason). Reliance is placed on pages 10, 15, 19, 23, 34, 38 of the Affidavit filed on 09.07.2018. viii. It is further submitted that the Appellant has also been an Independent Director of M/s Infosys Ltd., a public limited company and a global leader in the IT business and in various other companies, which are completely unrelated to the UBHL and KAL. 40. Section 149(6) (a) to (d) of the Companies Act, 2013 says that "(a) who, in the opinion of the Board, is a person of integrity and possesses relevant expertise and experience;" "(b) (i) who is or was not a promoter of the company or its holding, subsidiary or ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmission cannot be set-up. There is no allegation that the money deposited in the bank by the appellant was tainted money or any cash deposit was made. All the payments were made through banking channel. 44. Many of contentions raised in the written submissions are not part of the pleadings of respondent no.1. Some of the plea have been taken first time in the written-submissions. 45. It appears from the material that the Appellant has executed Agreements to Sell, Construction Agreements and has also paid the full purchase consideration. Furthermore, all these documents were executed much prior to the registration of ECIR and FIR in the captioned Original Complaint. The Appellant has paid sufficient Stamp Duty on the Agreements to Sell and the Construction Agreements. It is not a civil dispute. It is also a matter of fact and it has come on record that the entire amount has already been paid. In the present case, the appellant definitely is a claimant and the flat was attached without any notice and hearing of the appellant nor any opportunity was given to raise her stand. 46. Even at the stage of Section 8(8), PMLA, that is, confiscation, the only requirement upon a claimant to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s UBHL is dated 05.04.2012 (i.e. prior to even the initiation of the winding-up proceedings) and the entire purchase consideration was duly paid by 28.02.2015 ( i.e.much prior to the subject Provisional Attachment Order). It is not even the Respondent ED's case that the purchase of the subject Property vide inter alia the Agreement to Sell dated 05.04.2012 is not an arms-length transaction. 54. In Vannarakkal Kallalathil Sreedharan Vs. Chandramaath Balakrishnan & Anr. (1990 (3) SCC 291) a Bench of two Judges considered a question identical to the question raised before us. The question was whether the sale prevailed over the attachment. The facts were that 80 cents of land were agreed to be sold in favour of the appellant under an agreement dated October 9, 1978. Before the sale deed was executed, a third party in execution of a decree got the property attached on November 16, 1978. The sale deed was executed on November 23, 1978. 55. On the above facts, it was held as under : "We may first draw attention to some of the relevant statutory provisions bearing on the question. Order XXXVIII Rule 10 of the Code of Civil Procedure provides that attachment before judgment shall no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in Mohinder Singh's case." 56. In the above case this Court has gone even to the extent that not only a sale deed but even an agreement of sale will prevail over attachment before judgment made subsequent to such agreement for sale. I do not want to express any opinion with regard to the case of an agreement for sale, but I am of the confirmed opinion that a sale deed having been executed prior to attachment before judgment, though registered subsequently will prevail over attachment before judgment. 57. Even in the case of B. Rama Raju Vs. UOI decided by (DB) of High Court of Judicature, Andhra Pradesh at Hyderabad, the Judgment reported in 2011 S.C.C on lines AP-152 in para - 103 and 104, it was hold as under:- "103 Since proceeds of crime is defined to include the value of any property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence, where a person satisfies the adjudicating authority by relevant material and evidence having a probative value that his acquisition is bona fide, legitimate and for fair market value paid therefor, the adjudicating authority must carefully consider the material and evidence on re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determination of which, this Tribunal ought only to determine the following: i) Issue 1 - Whether the Appellant has committed any offence under Section 3 of the Prevention of Money Laundering Act, 2002 ("Act")? ii) Issue 2-Whether the subject property is proceeds of crime and the Appellant is in possession of proceeds of crime? 61. With regard to issue 1, it is not even the case of the Respondent that the Appellant has committed any offence under Section 3 or is in any manner involved in the commission of the same. The Appellant is the purchaser of the subject property, for which she paid the complete consideration through duly documented legal banking channels, even prior to the date of registration of the FIR or the ECIR. 62. On second issue, it is admitted position that the subject property has been attached as 'value thereof'. The Appellant has vested rights in the subject property prior to the attachment by Respondent-ED. It is the case of the appellant the same could never have been attached as "value thereof" of the proceeds of crime. At the time of issuance of the Provisional Attachment Order there is no Confirmation Order that any proceeds of crime have flowed to UBH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not registered either with the Ministry of Companies Affairs or the jurisdictional Registrar of Assurances and hence no public knowledge can be imputed to the Appellant. 71. In the present case, HDFC bank had given 'No-Objection' in respect of the subject-property which is placed on record at pg. 297 of the Appeal. The Property was mortgaged with HDFC Bank and not with the banks who are concerned with MDRA and the Corporate Guarantee. Since the entire payment was received by HDFC bank, the flat in question was released from the condition of mortgaged property. The contents of the said 'No objection' issued reads as under:- "HSBC To Date: 18 February 2007 Ms. Kiran Mazumdar Biocon India Pvt. Ltd. 20th KM Hosur Road Hebbagudi Bangalore-560100 Sir/Madam Sub: Cheque favouring details Ref: 071-060123-006 We confirm that Ms. Kiran Mazumdar has been maintaining the captioned account with us since 08 Aug 1994 Please find the cheques issued in favour of United Breweries (Holdings) limited, HDFC Bank Escrow a/c: 00090350002126 as enclosed. Sl. No. Cheque No. Cheque Date Clearing Date Debit Amount 1 704165 05 Apr 2012 09 Apr 2012 3,006,597 2 704166 05 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be executed by M/s UBHL in favour of the Appellant. The scope of the present Appeal is limited to the determination as to whether the subject Property are involved in money-laundering or not. 75. In the present case, the Agreement to Sell entered into by the appellant with M/s. UBHL is dated 05.04.2012 (i.e. prior to even the initiation of the winding up proceedings) and the entire purchase consideration was duly paid by 28.02.2015 (i.e. much prior to the subject Provisional Attachment Order). It is the case of the appellant that the purchase of the subject property vide inter alia the Agreement to Sell dated 05.04.2012 is an arms-length transaction. 76. As regard to plea as to whether right of the appellant would prevail over the rights of the other secured creditors, no opinion is being expressed. The said aspect would be considered by the Court where the prayer of execution of sale deed is pending or before the Special Court who is also empowered to pass such order under the proviso of amended provision of section 8(8) of the Act (Act of 2018). All secured creditors including DRT and banks are at liberty to raise the objection as per law as admittedly this tribunal is not deci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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