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TMI Blog2018 (9) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... certain terms and conditions as stipulated in the sanction letter dated 11.5.2012. Copy of the said sanction letter dated 11.5.2012 is annexed with the appeal. 3. The properties in the present dispute were mortgaged with the appellant bank in terms of the 1st charge and as a secured assets in the hands of the appellant bank as per the sanction letter dated 11.5.2012, the details of the same are mentioned in para 5 of the impugned order, which are as under:- 1. Mouza - Saheed Nagar, Bhubaneshwar, Unit 11, Plot no. 1468/1898, Khata no. 2/254, Area - Ac 0.090 Dec. 2. Mouza - Khaira plot no. 1112, Khata no. 336 Area - ac 0.630 Dec. 3. Mouza - Khaira plot no. 1113, Khata no. 390 Area - ac 0.640 Dec. 4. Mouza - Imam nagar plot no. 909, Khata no. 403/96 Area - ac 0.260 Dec. 5. Mouza - Imam nagar plot no. 910, Khata no. 403/95 Area - ac 0.100 Dec. 6. Mouza - Imam nagar plot no. 921, Khata no. 403/94 Area - ac 0.440 Dec. Total = Ac. 2.160 Dec 4. The said account became NPA (Non-performing asset) on 29.06.2013. 5. Consequently, the appellant bank issued statutory notice dated 6.7.2013 under S.13(2) of the Securitisation and Reconstruction of Financial Assets and Enforceme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir liability and dues towards the appellant bank and the same is pending adjudication. 12. On 17.10.2014, an interim application being no. 01/2013 has been filed by the State of Odisha under S.4(3) of the OPID Act, 2011 before the 1st Additional District Judge-cum-Designated Court, Cuttack praying inter-alia to make absolute the order dated 02.12.13. Copy of the said application as well as reply filed by the bank are filed with the appeal. 13. By its order dated 13.13.14, the said writ petition no. 27849/13 was disposed of with liberty to file before appropriate forum. 14. In pursuance to the same, on 9.1.2015, the Joint Director, Enforcement Directorate, Kolkata Zonal Office passed a provisional attachment order under S.5(1) of the PMLA Act, 2002 directing inter-alia: ".... NOW THEREFORE, I hereby order Provisional Attachment of the immoveable properties as detailed in Annexure -IP1 to IP-2 having consideration value of Rs. 2,94,19,500/-(for land) and Rs. 8,00,000/- (approximately of the building of BIT).... Thus, I order provisional attachment of both immoveable and moveable properties.... for a period of 180 days in terms of the provisions of S.5 of the PMLA and its proviso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in aforesaid appeals are re-produced below:- "FPA-PMLA-1026/KOL/2015 7. Coming to the second question, there is no doubt that the 1985 Act is a special Act. Section 32(1) of the said Act reads as follows: "32. Effect of the Act on other laws.-(1) The provisions of this Act and of any rules or schemes made there under shall have effect notwithstanding anything inconsistent therewith contained in any other law except the provisions of the Foreign Exchange Regulation Act, 1973 (46 of 973) and the Urban Land (Ceiling and Regulation) Act, 1976 (33 of 1976) for the time being in force or in the Memorandum or Articles of Association 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 ExchangeRegulation 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 shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the Sick Companies Act. Under Section 3 of the 1992 Act, all properly of notified persons is to stand attached. Under Section 3(4), it is only the Special Court which can give directions to the Custodian in respect of property of the notified party. Similarly, under Section 11(1), the Special Court can give directions regarding property of a notified party. Under Section 11(2), the Special Court is to distribute the assets of the notified party in the manner set out thereunder. Monies payable to the notified parties are assets of the notified party and are, therefore, assets which stand attached. These are assets 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Urban Land (Ceiling and Regulation) Act is not excluded. It is clear that in the instant case there was no intention of the legislature to permit the 1985 Act to apply, notwithstanding the fact that proceedings in respect of a company may be going on before the BIFR. The 1992 Act is to have an overriding effect notwithstanding any provision to the contrary in another Act." 31. The similar view was taken by the Bombay High Court in the case of Bhoruka Steel Ltd. Vs. Fairgrowth Financial Services Ltd. The judgment rendered on 09.02.2016 reported in 1997 (89) company cases 547 (BOM) para 15 of the said judgment read 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 prev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to secured creditors in payment of debt shall be subject to the provisions of that Code." 34. In Section 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993after the words "the date of the application","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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebts 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" "4 The law having now come into force, naturally it would govern the rights of the parties in respect of even a lis pending." "5 The aforesaid would, thus, answer question (a) in favour of the financial institution, which is a secured 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to establish his earnings, assets or means to justify the bona fides in the acquisition of the property); and if satisfied as to the bona fide acquisition of the property, relieve such property from provisional attachment by declining to pass an order of confirmation of the provisional attachment; either in respect of the whole or such part of the property provisionally attached in respect whereof bona fide acquisition by a person is established, at the stage of the section 8(2) process..." 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. 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... borrowers and for sum of the properties, possession were with the bank. The mortgaged deeds are also not disputed or/and validity of the same are not challenged on behalf of ED. 44. It is settled law that generally when the civil dispute between the parties are settled before the court particularly pertaining to the recovery of out-standing amount, on joint petition, the High Court while exercising its discretion may quash the criminal petition u/s 482 Cr. P.C. at the joint request of the parties. 45. Three Judge Bench in Narendra Lal Jain &Ors., (supra) held that during the investigation 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 prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rated the petitioners, but for all intents and purposes given up the perusal of the complaint and having no grievance against them in any other proceeding whether civil or criminal on the same set of issues." "70. There is no doubt that the trial has been proceeding for offences for the last about 20 years ago. The dispute between the petitioner and complainant Bank 33 years old. A long time has in fact been elapsed since the alleged commission of offences. Still the trial continues. The present petition is maintainable as the same has been filed also on additional grounds and 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.6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are involved in money laundering or not." "8. Adjudication.- (1) On receipt of a complaint under sub- section (5) of section 5, or applications made under sub- section (4) of section 17 or under subsection (10) of section 18, if the Adjudicating Authority has reason to believe that any person has committed an offence under section 3 or is in possession of proceeds of crime, he may serve a notice of not less than thirty days on such person calling upon him to indicate the sources of his income, earning or assets, out of which or by means of which he has acquired the property attached 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be filed against such person, but if ultimately the person is acquitted of the charge for the scheduled offence, his prosecution under section 3 of the Act for the offence of Money-Laundering would also come to an end. It has also been kept open by the Karnataka High Court that a person against whom complaint under section 3 of the PML Act has been filed and he is being prosecuted for the offence of money-laundering, he can show before the court that he is innocent and has not received any proceeds of crime." It is clear that innocent person can approach the Adjudicating 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 indirectl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ECT OR INDIRECT ATTEMPT: In State of Maharashtra v. Mohd.Yakub, MANU/SC/0239/1980 : (1980) 3 SCC 57, the Hon'ble Supreme Court observed that- "13. Well then, what is an "attempt"? ...In sum, a person commits the offence of "attempt to commit a particular offence" when (i) he intends to commit that particular offence and (ii) he, having made preparations and with the intention to commit the offence, does an act towards its commission; such an act need not be the penultimate act towards the commission of that offence but must 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 Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid that whether any person or any property is involved in money laundering or not. If there is no direct / indirect involvement of any person or property with the proceeds of the crime nor there is any aspect of knowledge in any person with respect to involvement or assistance nor the said person is party to the said transaction, then it cannot be said that the said person is connected with any activity or process with the proceeds of the crime. The same 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 attach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of respondent that the said Gunaseelan is a Benami or employee of G. Srinivasan and that Gunaseelan did not pay any amount as sale consideration or the sale consideration paid by Gunaseelan was not legitimate money. There is no material to show nexus and link of Gunaseelan with G. Srinivasan and his Benamies. In the absence of any verification or investigation by respondent with regard to genuineness or otherwise of the purchase by Gunaseelan; 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... knowledge, whatsoever, that these properties were derived or obtained through criminal activities relating to schedule offence. It has been demonstrated by them that they verified the title deeds relating to the properties and after due verification of every details entered into the sale transactions as such these are bona fide deals entered by them against proper sale considerationand the money paid to the seller is also well explained. 22. Against 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 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the SARFAESI Act, RDDB Act and PMLA are special Acts. The SARFAESI Act and RDDB Act are enacted earlier to PMLA. The RDDB Act and PMLA have non-obstante clause. Recently in 2016 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 Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016 and its provisions have been given effect from 01.09.2016. The Parliament in its wisdom has not excluded the application of the amended provisions to the proceedings under PMLA. In other words, had the Parliament intended to exclude the application of non-obstante clause of SARFAESI Act and RDDB Act to PMLA then it would have done so expressly as has been specifically prescribed in the amended provisions. It may also be noted here that the judgment of Hon'ble Supreme Court in the matter of KSL & Industries Ltd (supra) has been delivered in the year 2014 whereas the amendment in aforesaid two Acts have been brought in the year 2016. 21. The Hon'ble Supreme Court in the aforesaid case KSL & Industri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid properties a legal right has been accrued in favour of the Appellant Bank over the said properties which cannot be taken away in the given facts and circumstance of the case. As far as borrowers are concerned (who are the accused parties) even we stress that as per law, they must face the trial in the chargesheet filed against them. 23. 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 acquired out of any "proceeds of crime". It has come on record that the properties mortgaged were acquired prior to the alleged commission of crime. It appears that the only thing was in his mind that section 71 of PMLA has an overriding effect. The provisions of PMLA shall have effect and prevail over provisions of any other Act or its provisions. To this we are not in agreement with the Adjudicating Authority because of the amendments of 2016 made in SARFAESI Act RDDB Act and discussion made in the preceding paras. 24. The Hon'ble Supreme Court of India in the case of Attorney General of India and Ors. (AIR 1994 SC 2179) while dealing with the matter under Conservation of Foreign Exchange and P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly unjustified. 27. The properties attached cannot be attached under Section 5 of the PML Act because the properties are not purchased from the alleged proceeds of crime. As per the provisions of Section 5(1) (c) the primary requirement for the attachment is that the proceeds of crime are likely to be concealed, transferred or dealt with in any manner. In this case there was absence of such requirement. The said properties are already in the symbolic possession of the Appellant Bank under the SARFAESI Act. 28. The property of the Appellant Bank cannot be attached or confiscated when there is no illegality or unlawfulness in the title of the Appellant Bank and there is no charge of money laundering against the Bank. 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 Appellant Bank is concerned, the Bank has to recover its outstanding dues by taking over the possession of the mortgaged properties in case the concerned Respondents are not able to pay back the credit facilities availed by them and by way of the SARFAESI provisions these properties are being tak ..... X X X X Extracts X X X X X X X X Extracts X X X X
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