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TMI Blog2018 (10) TMI 1011X X X X Extracts X X X X X X X X Extracts X X X X ..... fter being mortgaged and under personal guarantee of said properties with them. It is further gathered from the materials on record that the appellants have already initiated proceedings under SARFAESI Act against the properties of Respondent no. 4 Company and Shri G. EswaraRao due to nonpayment of loan advanced by the appellants. In view of the aforesaid reasons we are of the view that the appellants who are mortgagees of the properties in question which were purchased before sanctioning the loan, no case of money laundering is made out so far as these properties in question are concerned. The appellants have priority of right to recover the loan amount/debts. In the given facts and circumstances of the case, the Provisional Attachment in the present matter is bad and against the law. In the circumstances the allegation of money laundering, prima facie, so far as present appellants and properties are involved in these appeals are concerned, we find that the impugned order is not sustainable under law, for the purpose of attachment under the PMLA, 2002. We have not gone into other legal issues such as retrospective application of provisions of PMLA. We set aside the impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney Laundering Act (PMLA), 2002, the Directorate of Enforcement (ED) registered ECIR No. 03/HZO/2010being authorized in terms of Sections 48 49 of PMLA read with notification GSR 441 (E) dated 01.07.2005 and initiated investigation. 6. According to the allegation in the charge sheet filed by CBI,Shri G.EswaraRao, Chairman Managing Director of M/s. SSIL fraudulently availed various loans in the nature of working capital,demand loan, cash credit hypothecation, cash credit book debt and letters of credit in the year 2000 for various purposes. 7. During the course of investigation, the ED attached following properties vide the aforesaid PAO no. 1 of 2014 under Section 5 (1) of PMLA, 2002 (i) The fixed assets of M/s. ER Textiles Limited as per the balance sheet as on 31.03.2013, as WDV (Written Down Value) as on 31.03.2013, consists of Land, Building, plant and machinery, office equipment, vehicles etc., valued around ₹ 63.28 crores. Among these the value of the land is ₹ 2,52,07,905/- and the value of the Buildings is ₹ 13,32,50,887/-, under pledge with the Banks and Financial Institutions, to the extent of ₹ 5,33,02,680/-, which is due to SSIL from M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am, Dt, AP. -Do- 1,87,500 10. 1215/1986 Dry Land 0.25c Sy No. 34/6, Bondapalle, cheepurupally, Garividi, Vijayanagaram, Dt, AP. -Do- 62,500 11. Dry Land 0.46c Sy No. 34/8, Bondapalle, cheepurupally, Garividi, Vijayanagaram , Dt, AP. -Do- 1,15,000 12. 1214/1986 Dry Land 0.25c Sy No. 34/6, Bondapalle, cheepurupally, Garividi, Vijayanagaram, Dt, AP. -Do- 62,500 13. 1169/1986 Dry Land 1.38 acres Sy No. 35/4, Bondapalle, cheepurupally, Garividi, Vijayanagaram, Dt, AP. -Do- 3,45,000 14. 310/1992 Dry Land 2.35c Sy No. 33/1, Bondapalle, cheepurupally, Garividi, Vijayanagaram, Dt, AP. -Do- 5,87,500 15. 310/1992 Dry Land 0.32c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as MP-PMLA-1367/HYD/2015. The said application has been allowed vide order dated 22.07.2015. IV. The appellants have filed written synopsis as well as list of dates and events from which, inter-alia , it is revealed that:- a) On 10.05.2001, IDBI granted financial assistance to ER Textiles Ltd. (Respondent no. 4) comprising of termed loan of ₹ 150,00,00,000/-for setting up facilities of composite textile unit as 100% EOU with modern processing and finishing facilities for manufacture of high value cotton shirts and trouser fabric. On the same day R-4 had created security interest in favour of IDBI Bank (A-2) by way of hypothecation deed of movable property. b) On 24.04.2002, R-4 had also mortgaged immovable properties situated in HosurTaluk, Krishnagiri District in the state of Tamil Nadu by depositing title deeds with A-2. Guarantee agreement dated 10.05.2001 was executed by ShriGrandhiEswaraRao, Smt. GrandhiSarswathi and Ku. GrandhiSarita in favour of IDBI. The properties of Borrower Company which are mortgaged to IDBI the Appellant no.2 is not sufficient to recover the dues of the Appellant. Hence the Appellant had invoked the Guarantees of ShriGrandhiEswaraR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Show Cause Notice received by the Appellant from the Adjudicating Authority. k) On 12.08.2014, Adjudicating Authority passed the impugned order confirming the PAO. l) The appellant is neither an FIR named accused nor charge sheeted nor involve either in the Schedule Offence or offence committed under the provisions of PMLA. m) Respondent no. 4 Company has not been made accused in the ECIR, than the properties of Respondent no. 4 Company as mortgaged to the appellant could not have been attached under PMLA as the same cannot by any stretch of imagination be termed as proceeds of crime. n) In terms of Section 41 of Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016, Section 31B of the Recovery of Debts and Bankruptcy Act, 1993 provides as under:- 31B. Priority to secured creditors:- Notwithstanding anything contained in any other law for the time being in force, the rights of the secured creditors to realize secured debts due and payable to them by sale of assets over which security interest is created, shall have priority and shall be paid in priority over all other debts and Government dues including ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IDBI in the favour of the appellant SASF herein, unconditionally and irrevocably sold, assigned, transferred and released the loan sanctioned by IDBI to M/s.ER Textiles Ltd.to SASF. f) On 26.05.2006, at the request of M/s. ER Textiles Ltd., the Appellant LIC approved the Restructuring Proposal of the M/s. E R Textiles Ltd., however the payment was still not made. g) In 2006, since the Respondent no. 4 was defaulting in payment in accordance with the restricted proposal also, LIC approached DRT Mumbai but the same could not be proceeded as the Respondent No. 4 approached BIFR in 2008 and sought OTS. h) On 31.12.2007, Charge Sheet was filed under Section 120(b) read with Section 420, 467, 471 of IPC and Section 13(2) of the Prevention of Corruption Act, 1988 by CBI against the Respondent no. 2 herein. M/s. ER Textiles Ltd. is not named as an accused in the Charge Sheet. i) On 05.02.2001, Consultant of Respondent no. 4 made statement before BIFR that an improved OTS has been sent to the SASF for approval and a similar improved OTS will be sent to LIC for its outstanding amount towards Respondent no. 4 shortly, but the same has not been received till date. j) On 13.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I was grossly misused by SSIL repainted by Shri G. EswaraRao, C MD of SSIL in conspiracy with other accused. The LCs stated to be established in favour of RINL for the purchase of raw materials were found to be false and fabricated and without any actual purchase or movement of goods, false and forged bills of exchange purported to be of RINL were fabricated and discounted against the LCs. The fraudulent LC transactions and failure of the company to repay the term loans resulted in outstanding liability of ₹ 10.27 Crores plus accrued interest and other charges aggregating to ₹ 15.95 Crores. Against the above liability a compromise payment of ₹ 7.14 Crores was made by the accused under the One Time Settlement Scheme. The compromise payment accepted by the bank involved write off of ₹ 3.13 Crores and waiver of notional interest and charges of ₹ 5.68 Crores, totaling to ₹ 8.81 Crores. The charge sheet filed by CBI cites this amount. The other accused have actively participated in the above mentioned fraud, as detailed in the above mentioned CBI charge sheet. IV. It is also the case of R-1 that during the course of investigation the statement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money was made by SS IL, in their sister concern M/s. ER Textiles Ltd., and share have been not allotted so far and M/s. ER Textiles has to return the investment statutorily to the major shareholder in M/s. ER Textiles Ltd., Shri G. EswaraRao with 77% and is in control of the affairs of the company; that the details of the fixed assets of M/s. ER Textiles Limited as per the balance sheet as on 31.03.2013, are submitted as WDV(Written Down Value) as on 31.03.2013, and it consists of Land, Building, plant and machinery, office equipment, vehicles etc., valued around ₹ 63.28 crores; that the share application monies received are statutorily refundable and the same has been specifically mentioned in Note No. 2.5 of the balance sheet for the year ending 2012-13. VI. The Respondent no. 1, in the PAO at Para nos. 9, 10 12, so far as it relates to M/s. E R Textiles Ltd., has stated as below:- 9. Investigation revealed that SSIL, as of now is a company on paper. The Proceeds of Crime amounting to ₹ 8.81 crore has mingled with the other legitimate sources of amounts of SSIL/Shri G. EswaraRao and has been used over a period of time. But for this amount, an equal am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these the value of the land is ₹ 2,52,07,905/- and the value of Buildings is ₹ 13,32,50,887/-. However, M/s. E R Textiles had taken term loans from different financial institutions and charge exist on the company s assets with Industrial Development Bank of India, IDBI Towers, Mumbai, Life Insurance Corporation of India, Yogakshema, Mumbai, Bank of Punjab Limited, Mumbai, State Bank of India, Industrial Finance Branch, Kolkata, Union Bank of India, Khairtabad, Hyderabad and Central Bank of India, Hosur. c. Sixteen lands/properties held in the name of Shri G. EswaraRao, the then Chairman and Managing Director of M/s. E R Textiles Ltd., and in the name of his wife Smt. Late G. Saraswati, valued around ₹ 28,29,519/- have been identified. These details of these landed properties have been got confirmed from the concerned Sub-Registrars of the Department of Stamps Regsitration, Govt. of Andhra Pradesh. Shri G. EswaraRao and his only daughter Smt. B. Saritha are the legal heirs to Smt. Late G. Saraswati, and Shri G. EswaraRao is entitled to fifty percent share of the properties held in the name of his wife Smt. Late G. Saraswati. 11.1 . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y tangible assets and without any operations. The investigation under PMLA, conducted so far had located such projected money to the tune of ₹ 5.33 Crore lining with their another group company, M/s. E R Textile Ltd. defendant no. 3 herein. The Provisional Attachment Order and the complaint and the documents relied therein, had clearly brought out the fact of receipt of these amounts from defendant no.1, who is also accused in the CBI charge sheet to the defendant no. 3, the group company of defendant no. 2. The statutory financial returns of defendant companies no. 1 3, the statements recorded under Sec.50 of PML Act, 2002, of defendant no. 2, who is in control of the affairs of both these defendant companies and the statutory auditors of both these defendant companies, clearly shows that the fact of receipt of these amounts from defendant no.1, to defendant no.3. ii). Contents to the extent of mortgage of the properties of the defendant company no.3 is not disputed. IDBI, the defendant no.5 herein has been made as a defendant as charge holder only. As per Sec.71 of PMLA 2002, the provisions of PMLA shall have overriding effect notwithstanding anything inconsiste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase may be and become final after an order of confiscation is passed under sub-section (5) or sub-section (7) of section 8 or section 58 B or sub-section 2A or section 60. 12. DISCUSSIONS/FINDINGS a) It is seen from the record that the IDBI Bank and LIC extended various loans to M/s. E R Textiles Ltd., as mentioned above, in 2001. From the pleadings it appears that, against the loan, movable and immovable properties of M/s. E R Textiles Ltd. and of Shri G. EswaraRao have been mortgaged and personal guarantee with both the IDBI and LIC. b) Out of the aforesaid 16 properties, properties at serial no. 1 to 6 are in the name of Shri G. EswaraRao valued at ₹ 5,52,019/- and properties at serial no. 7 to 16 are in the name of his wife Smt. Late G. Saraswathi which is valued at ₹ 22,77,500/-. The ED has taken value of 50% of the said properties of Smt. Late G. Saraswathi, being the share of Shri G. EswaraRao after her death. The Respondent no. 1 has valued the property of Shri G. EswaraRao including the value of 50% of his share of properties in the name of his deceased wife to the tune of ₹ 16,90,769/-in total. c) We have carefully gone through the mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid two Acts have been brought in the year 2016. f) This Tribunal has dealt with the aforesaid legal issue i.e., regarding priority of SARFAESI Act, 2002 (after the aforesaid amendment) in various cases and it is the consistent view that, in the light of the aforesaid amendments, the SARFAESI Act, 2002has priority over PML Act, 2002. The full Bench of this Tribunal, in the matter of State Bank of India Ors. Versus Joint Director, Directorate of Enforcementin FPA-PMLA-1026/KOL/2015 dt,14.07.2017 and also in the matter of Smt. NasreenTaj vs. Dy, Director,ED in FPA-PMLA-382/BNG/2012 vide common order dt. 18.09.2017 held the aforesaid view. Subsequentto the aforesaid judgments this Tribunal has passed several judgments on the same issue. In the said judgments this Tribunal discussed judgments delivered by Hon‟ble Supreme Court and various High Courts as well as the relevant provisions of law. On a recent judgment of this Tribunal, on the aforesaid issue, in the matter of IDBI Bank Ltd. Versus The Deputy Director, Directorate of Enforcement Ors. in FPA-PMLA-1247/DLI/2018 dated 10.05.2018 . The Relevant paras of this judgment are reproduced below: 13. The releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly the ration of the said decision is as follows: Where there are two special statutes 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. The Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992, provides in Section 13 that its provisions are to prevail over any other Act. Being a later enactment, it would prevail over the Sick Industrial Companies (Special Provisions) Act, 1985. Had the Legislature wanted to exclude the provisions of the Sick Companies Act from the ambit of the said Act, the Legislature would have specifically so provided. The fact that the Legislature did not specifically so provide necessarily means that the Legislature intended that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear that the Legislature intended that public monies should be recovered first even from sick companies. Provided the sick company was in a position to first pay back the public money, there would be no difficulty in reconstruction. The Board for Industrial and Financial Reconstruction whilst considering a .scheme for reconstruction has to keep in mind the fact that it is to be paid off or directed by the Special Court. The Special Court can, if it is convinced, grant time or installments. There can, therefore, be no stay of any proceedings for recovery against a sick company so far as the Special Court under the 1992 Act is concerned. 11. We are in agreementwith the aforesaid decision of the case, more so when we find that whenever the legislature wishes to do so it makes appropriate provisions in the Act in that behalf. Mr Shiraz Rustomjee has drawn our attention to Section 34 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 wherein after giving an overriding effect to the 1993 Act it is specifically provided that the said Act will be in addition to and not in derogation of a number of other Acts including the 198.5 Act. Similarly under Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 : 26E. Priority to secured creditors 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. Explanation : For 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. (ii) Section 31B of the Recovery of Debts and Bankruptcy Act, 1993 : 31B. Priority to secured creditors Notwithstanding anything contained in any other law for the time being in force, the rights of secured creditors to realise secured debts due and payable to them by sale of assets over which security interest is created, shall have priority and shall be paid in priority over all other debts and Government dues inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties in respect of even a lis pending. 37. The Assistant Commissioner (CT) Vs. The Indian Overseas Bank, Madras High Court, WP No. 2675 of 2011 (Full Bench) 2 We are of the view that if there was at all any doubt, the same stands resolved by view of the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016, Section 41 of the same seeking to introduce Section 31B in the Principle Act, Which reads as under:- 31B. Notwithstanding anything contained in any other law for the time being in force, the rights of secured creditors to realize secured debts due and payable to them by sale of assets over which security interest is created, shall have priority and shall be paid in priority over all other debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or local authority. Explanation. for the purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016, in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sistant Circle and Ors. , while upholding the Amendment Act, 2016 to Section 26E of the SARFAESI Act and reaffirming the view of the Full Bench of the same court in The Assistant Commissioner (CT), Anna Salai-III Assessment Circle (supra) lifted the attachment entry and held that- In other words, not only should the amendment apply to pending lis, but the declaration that the right of a secured creditor to realise the secured debts, would have priority over all debts, which would include, Government dues including revenues, taxes, etc., should hold good qua 2002 Act as well. 40. B. RAMA RAJU V. UOI AND ORS. Reported in (2011) 164 company case 149(AP)(DB) who has dealt with the aspect of bonafide acquisition of property in para 103. The same read 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra) does not help the case of the respondent no. 1 because the effect of overrding the PMLA looses its validity once the amendment is made which even has been interpreted subsequently by the Full-Bench of the Chennai High Court in the case of Assistant Commissioner CT (Supra) and other decision in the nature of the facts in the present matter. 42. It is also a matter of fact that after passing the impugned order the borrowers have also settled the loan amount with the complainant i.e. Union of India in order to pay the remaining outstanding amount. The undertaking in this regard is recorded in Court. It is written agreement and the statement of the parties were recorded. Counsel for the borrowers has also informed us that his client also intent to pay the remaining out-standing amount to the State Bank of India in order to clear their liabilities once the attached properties are sold and even otherwise. Copy of the settlement of the borrowers and the complainant Bank of India was filed before us. As far as the schedule offence is concerned, we do not wish to make any comment. But we can only observe that in case of settlement, joint petition for quashing of FIR in the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Code inheres in the High Court the power to make such order as may be considered necessary to, inter alia, prevent the abuse of the process of law or to serve the ends of justice. While it will be wholly unnecessary to revert or refer to the settled position in law with regard to the contours of the power available under Section 482 CR.P.C.it must be remembered that continuance of a criminal proceeding which is likely to become oppressive or may partake the character of a lame prosecution would be good ground to invoke the extraordinary power under Section 482 Cr. P.C. In Sanjay Bhandari V/s. CBI, Crl. M.C. M.C. 5798/2014, Delhi High Court, dated 29.06.2015 69 .. By consent the parties have settled all disputes in the recovery suit, the consent decree of DRT stood to be disposed off as duly satisfied. There is hence no force in the submission of respondents that the complainant bank has not exonerated the petitioners, first being the Civil Procedure Code, and the second being the OTS Scheme of the Reserve Bank of India, which the petitioners have extensively referred to in the original petition. The provisions of OTS Scheme prevent the complainant bank fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the part of borrowers to comply with the terms of settlement, the contempt proceedings are maintainable in the Court where the settlement was recorded. 47. In view of the entire gamut of the dispute, we are of the considered opinion that the conduct of the banks are always bonafide. Both banks are innocent parties. They were legally entitled to inform the Adjudicating Authority about their innocence and they rightly did so but their contention was rejected as appeared from the impugned order. 48. 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 Scheme of Prevention of Money Laundering Act clearly provides the mechanism whereby the innocent parties can approach the Adjudicating Authority for the purposes of release of properties w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uncements 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 mensrea 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 Money Laundering Act was not held unconstitutional and ultra virus, but it was observed by the Karnataka High Court that the property of a person can be attached without there being any prosecution for the offence of Money Laundering, but so far as the prosecution of a person for the offence of money laundering is concerned, the proceedings under section 3 of the PML Act can be initiated only in case the person is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsider 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 'proceeds of crime' and the penal provision under Section 3 of PMLA, which uses conjunctive 'and', makes it luminous that any persons concerned in any process or activity connected with such proceeds of crime relating to a scheduled offence including its concealment, possession, acquisition or use can be guilty of money laundering, only if both of the two prerequisites are satisfied i.e.- (i) Firstly, if he- (a) directly or indirectly 'attempts' to indulge, (b) knowingly either ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 activity connected with the proceeds of crime and thus scheduled offence, including its concealment, possession, acquisition or use. There is absolutely no material or circumstantial evidence whatsoever, oral or documentary, to substantiate any such allegation qua the petitioners, D. Neither any of the petitioners is arraigned as accused in the 'Scheduled Offences' punishable under Indian Penal Code for direct or indirect involvement, abetment, conspiracy or common intention, nor is any such case made out even on prima facie basis against any of them. 39. The second of the two pre-requisite to attract Section 3 of PMLA would be satisfied only if the person also projects or claims proceeds of crime as untainted property. For making such claim or to project 'proceeds of crime' as untainted, the knowledge of tainted nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erwise 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. Burden of proof In any proceeding relating to proceeds of crime under this Act, (a) in the case of a person charged with the offence of money-laundering under Section 3, the Authority or Court shall, unless the contrary is proved, presume that such proceeds of crime are involved in money-laundering; and (b) in the case of any other person the Authority or Court, may presume that such proceeds of crime are involved in money-laundering. 21. In the present case, one G. Srinivasan is accused of having played fraud and obtained a loan of ₹ 15,00,00,000/- by producing bogus and fabricated documents. From and out of the said amount, the property in question was purchased by him in the names of his Benamies. One Ayyappan was appointed as their Power Agent. One Gunaseelan purchased the property through the Power Agent Ayyappan. The said Gunaseelan was examined and his statement was recorded Under Section 50 of the Act. He had stated that he purchased the property for cultivation. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly course open to the respondent is to attach sale proceeds in the hands of vendor of the appellants and not the property in the hands of genuine legitimate bona fide purchaser without knowledge. 24. Before the Adjudicating Authority it was admitted by complainant that appellants had no knowledge that properties in the hands of their vendor was proceeds of crime. It was also not disputed by complainant that the appellants did not have financial capacity to buy properties. Paragraphs 21, 22, 23 and 24 of order of Adjudicating Authority is extracted herein for better appreciation. 21. The CBIBS FC (BLR) has filed a charge sheet in the court of Spl. Judge for CBI cases Coimbatore, against Sh. Arivarasu, Sh. R. Manoharan, Sh. R. Selvakumar, Sh. G. Srinivasan, Sh. K. Martha Muthu, Sh. V. InduNesan, Sh. K. Vignesh, Sh. A. Sainthil Kumar, Sh. M. Ram Krishnan, for the offences punishable under Section 120-B read with 420, 467, 471 IPC and section 13(2) read with 13(1)(d) of PC Act 1988. The offences punishable under section 120-B, 420, 471 are schedule offence under Section 2(1)(y) of the PMLA and therefore on of the condition for issuing provisional attachment order is satis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority as well as Appellate Authority failed to properly appreciate the facts and findings in Radha Mohan lakhotia's case. In that case, the Department had placed substantial and acceptable facts to prove that the property in the hands of third party was proceeds of crime. It is pertinent to note that in Mr. Radha Mohan Lokatia's case, Department had proved the nexus and link between the person possessing the property and person accused of having committed an offence. All the persons involved in that case were close relatives. 26. In the present case, the respondent failed to prove that the appellants did not have sufficient financial capacity to buy the property or that the money paid by them as sale consideration was not legitimate money derived by agricultural activities. No material was produced to show that the appellants are close relatives of person, who involved in criminal activities and the person, who sent monies to purchase the property did not possess financial capacity to provide such huge amounts and that they are not genuine purchasers of agricultural products of appellants. The respondent has not made any such investigation and has not produced any such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on by the learned counsel for the parties we find that, the purpose of the two enactments is entirely different. As observed earlier, the purpose of one is to provide ameliorative measures for reconstruction of sick companies, and the purpose of the other is to provide for speedy recovery of debts of banks and financial institutions. Both the Act s are special in this sense. However, with reference to the specific purpose of reconstruction of sick companies, the SICA must be held to be a special law, though it may be considered to be a general law in relation to the recovery of debts. Whereas, the RDDB Act may be considered to be a special law in relation to the recovery of debts and the SICA may be considered to be a general law in this regard. For this purpose we rely on the decision in LIC Vs. Vijay Bahadur (supra). Normally the latter of the two would prevail on the principle that the Legislature was aware that it had enacted the earlier Act and yet chose to enact the subsequent Act with a non- obstante clause. In this case,however, the express intendment of Parliament in the non-obstante clause of the RDDB Act does not permit us to take that view. Though the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that Section 22 clearly covers and interdicts such an application for recovery made under the provisions of the RDB Act. We might remind ourselves of the oftquoted statement of the principles of contextual construction laid down by this Court in Reserve Bank of India Versus Peerless General Finance and Investment Co. Ltd. Ors.[6], where this Court has observed:- 33. Interpretation must depend on the text and the context. They are the bases of interpretation. One may well say if the text is the texture, context is what gives the colour. Neither can be ignored. Both are important. That interpretation is best which makes the textual interpretation match the contextual. A statute is best interpreted when we know why it was enacted. With this knowledge, the statute must be read, first as a whole and then section by section, clause by clause, phrase by phrase and word by word. If a statute is looked at, in the context of its enactment, with the glasses of the statute-maker, provided by such context, its scheme, the sections, clauses, phrases and words may take colour and appear different than when the statute is looked at without the glasses provided by the context. Wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltd. (supra) we do not find any departure. When two special Acts have non-obstante clauses, the later statue will prevail over the earlier statute. At the same time the aim and object of both the special Acts are to be looked into to decide such issue in the manner and harmoniousconstruction has to be arrived. 16. In the present 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, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B Act in 2016 will prevail over PML Act, 2002 because the properties involved in the present appeal were untainted when the same were acquired. Even when the properties were mortgaged with the appellant Bank the same were not tainted. The allegation of commission money laundering is after the mortgage of the said properties with the appellant Bank. After the mortgage of the aforesaid 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 trail in the complaint filedagainst them. 19. The Respondent has also heavily relied on the judgment or order passed by this Tribunal in the matter of Chief Manager, Syndicate Bank Vs. Dy. Director , PMLA in Appeal no. FPA-PMLA-A-34/CAL/2009 . We have gone through the said order from which it appears that the facts of that appeal are quite different from the facts of the present appeal. In the said appeal proceeds of crime were used to acquired properties and those acquired properties were mortgaged with the Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f acquisition is much prior to the date of alleged commission of crime in the present case. 22. In the present case the Adjudicating Authority has come to a conclusion at para nos. 61, 63 65 of the impugned order that the defendants are in possession of proceeds of crime and are involved in money laundering. The aforesaid conclusion has not be elucidated by the Ld. Adjudicating Authority in his order. 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 Ld. 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. 23. 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 Prevention of Smuggling Activities Act has defined the illegally acquired properties and held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank from its funds/property, without any allegations or involvement of the Bank in the alleged fraud would be legally unjustified. 26. 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 possession of the Appellant Bank under the SARFAESI Act. 27. 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 bank is concerned, the bank had to recover its outstanding dues by taking over the possession of the mortgaged properties in case the Respondent no 3 to 5 are not able to pay back th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereof. h) The properties in question which are already under mortgaged and under personal guarantee with the appellants cannot be attached as value thereof. Since right of appellantshave already been created over the questioned properties after being mortgaged and under personal guarantee of said properties with them. It is further gathered from the materials on record that the appellants have already initiated proceedings under SARFAESI Act against the properties of Respondent no. 4 Company and Shri G. EswaraRao due to nonpayment of loan advanced by the appellants. i) In view of the aforesaid reasons we are of the view that the appellants who are mortgagees of the properties in question which were purchased before sanctioning the loan, no case of money laundering is made out so far as these properties in question are concerned. The appellants have priority of right to recover the loan amount/debts. In the given facts and circumstances of the case, the Provisional Attachment in the present matter is bad and against the law. j) In the circumstances the allegation of money laundering, prima facie, so far as present appellants and properties are involved in these appeals are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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