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TMI Blog2018 (10) TMI 1012X X X X Extracts X X X X X X X X Extracts X X X X ..... es Act has defined the illegally acquired properties and held that such properties are earned and acquired in ways illegal and corrupt, at the cost of the people and the state, hence these properties must justly go back where they belong. In the present case as the money belongs to the Appellant bank it is public money. In view of settled law on the subject the appellant bank is the rightful claimant who have already obtained decree against the borrower from DRT under the SARFAESI Act and has a priority rights to recover the loans amount forthwith. The Respondent No.1 is not having any lien over the said properties as the Appellant banks are now the Legal transferee of said properties. The Respondent No. 1 may not retain the said property till the trial is over. They have no legal title and the property is to be returned to the persons lawfully entitled to recover the debts as they are the victim. Being a victim party u/s 8(8) of the Act, second proviso which is incorporated very recently in April, 2018, the banks are entitled to dispose of the properties if they are victim and sufferer due to non-return of loan amount by the borrowers. There is no nexus whatsoever betw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vable properties of the Respondent Nos. 2 to 5. 2. The State Bank of India and other banks have also filed the appeal under Section 26 of the PMLA against the order dated 1.12.2016 passed in O.C. No. 612/2016 issued by the Adjudicating Authority, New Delhi (under the Prevention of Money Laundering Act, 2002) inter alia confirming the Provisional Attachment Order bearing PAO No.11/2016 dated 11.06.2016 passed by the Respondent No.1 in the criminal case bearing ECIR No. ECIR/03/MBZO/2016 inter alia attaching immovable properties of the Respondent No. 4. 3. Along with the appeal, the appellants have also filed three applications for condonation of delay, seeking exemption from filing certified copy of the impugned order dated 1.12.2016 passed in O.C. No. 612/2016 and stay of the impugned order dated 1.12.2016 passed in O.C.NO. 612/2016 bearing no. MP-PMLA-4933/MUM/2018, MP-PMLA-4934/MUM/2018 and MP-PMLA-4935/MUM/2018. By this Order, common order is being passed as facts and legal points are almost same. In the present Order, the facts are taken from appeal no.2538/2018. 4. The case of the appellants is that the appellants herein have prior right over the movable and immova ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellants have sought to intervene in the said appeal and for release of the movable and immovable properties of Respondent Nos. 2 to 5 attached by the Respondent No. 1 in favour of the Appellants for recovery of the outstanding dues pursuant to the Final Order passed by the DRT in O.A. No. 766/2013. 6. The Appellants have immediately thereafter taken steps to file the instant appeal. 7. Admittedly, no notice under section 8(1) was issued to the appellant, nor any opportunity was granted to the banks before passing the impugned order. 8. This Tribunal in Amanpreet Singh Gandhi vs. Deputy Director, Enforcement Directorate,FPA-PMLA-582/JL/2014 has held as follows: The second proviso to section 8(1) requires that in case the property is held by more than one person, the show-cause notice shall be served to all persons holding such property Section 8(2) empowers the Adjudicating Authority to record a finding by an order whether all or any of the properties referred to in the show-cause notice are involved in money-laundering and the proviso to sub-section (2) of section 8 lays down if the property is claimed by a person, other than the person to whom the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees of the attached properties. One is failed to understand why have not done so when they were full aware. Thus, the prayer made in the application for condonation of delay is liable to be allowed as the sufficient cause has been shown, the Misc. Petition is disposed of. (i) MP-PMLA-4931/MUM/2018 (EXEM.) (ii) MP-PMLA-4932/MUM/2018 (STAY) in FPA-PMLA-2538/MUM/2018 11. Issue notice in the appeals as well as in the stay application. The learned counsel for the respondent no.1 accepts the notice. Reply be filed by respondent no. 1 within 6 weeks. Notice be issued to the other respondents for the next date. Exemption is allowed. M.P. 4931/2018 is disposed of. 12. With regard to stay application, the facts are that the Respondent No. 2 to 5 are M/s Kingfisher Airlines Ltd., Shri Vijay Mallya, M/s United Breweries (Holding) Ltd., Kingfisher Finvest India Ltd. The respondent no. 6 to 16 are the other parties which are as follows: (6) The Chief Manager, Standard Chartered Bank (7) M/s Pharma Trading. (8) Devi Investment Pvt. Ltd. (9) Kamsco Industries (10) Gem Investment and Trading (11) Mallya Pvt. Ltd. (12) Chief Manager, HDFC Ltd., HDFC House (13) Chief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he parties concerning the Various Facilities, and superseded all previous proposals, agreements, understandings, negotiations and other written and oral communications in relation thereto. 7. The Respondent No.2, the Appellants and SBICAP Trustee Company Ltd., entered into a Security Trustee Agreement dated 21.12.2010 under which the Respondent No.2 settled a trust and appointed SBICAP Trustee Company Ltd. as the security trustee for the benefit of the Appellants and to, inter alia, hold the Encumbrances created/ to be created pursuant to the Security Documents in accordance with the respective terms thereof, for the benefit of the Appellants (excluding Appellant No.7). It is pertinent to note that Respondent No.2 created, the Securities in favour of SBICAP Trustee Company Ltd. for the benefit of the Appellants. 8. Due to the common interests of the Appellants in providing the various facilities to Respondent No.2 and in line with such understanding of common interests in the Borrower i.e. the Respondent No.2, an Inter Creditor Agreement dated 21.12.2010 was entered into between the Appellants and SBICAP Trustee Company Ltd. for the purpose of inter alai setting out the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MDRA and other Financing Documents by executing the Personal Guarantee Agreement dated December 21, 2010 with Appellant No.1. A copy of the Personal Guarantee Agreement dated 21.12.2010 is herewith produced and marked as Annexure No. A-5. 14. It is pertinent to note that amongst the Appellants herein Appellant No. 7 is on different footing in comparison to the other Appellant Banks as it had separate securities solely in its favour. However, they are also covered under the Corporate Guarantee Agreement and the Personal Guarantee Agreement executed by Respondent No.4 and Respondent No.3 respectively on December 21, 2010 and was a party to the MDRA. The details of the separate securities solely in their favour to secure their loans as follows: Pledgor Name of company whose shares are pledged No. of Shares pledged United Breweries (Holdings) Limited Kingfisher Airlines Limited 51,02,041 United Breweries (Holdings) Limited United Spirits Limited 6,27,170 United Breweri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal is to whether the banks should wait till the trial is over or recover the amount by enforcing the decree forthwith once decree is become final. 18. The main active-director Shri Vijay Mallya who himself has chosen to leave the country without paying debts to the creditors. Though in connecting appeal, he has offered to clear the entire amount after disposing of assets attached and such issue is also pending before the Hon‟ble Karnataka High Court. 19. However, the fact of the matter is that as of today the banks are going pillar to post to recover the amount against the decree passed in their favour. 20. Earlier, the State Bank of India and other banks have appreciated the investigation of the ED and were also satisfied with the Provisional Attachment Order passed by the ED and the confirmation order. Once the State Bank of India and other banks have come to the notice that the ED may not agree to dispose of the properties by the banks (in view of the decree passed) till the completion of trial under Section 5(5) of the Act, the banks have decided to challenge the impugned order before this Tribunal. 21. It is undisputed fact that in the connected appeal no. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture 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. 25. The amendment prima facie gives the Secured Creditor, a priority over the rights of Central or State Government or any other Local Authority. 26. It is evident that the amendment has been introduced to facilitate the rights of the Secured Creditors which are being hampered by way of attachments of properties, belonging to the Financial Institutions/Secured Creditors, done by/in favour of the Government institutions. 27. 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 secu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the proceeds of crime. Today, if the Adjudicating Authority confirms the provisional order of attachment and the property vests with the Central Government, LIC Housing Finance Limited will also have to undergo dialysis, due to the illegal kidney trade that the Petitioner in the Writ Petition is alleged to have indulged in. This cannot be purport of the Act. 30. 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. Satyawati Tondon and Ors. In paras no. 6, 55 56 has held as under:- 6. To put it differently, the DRT Act has not only brought into existence special procedural mechanism for speedy recovery of dues of banks and financial institutions, but also made provision for ensuring that defaulting borrowers are not able to invoke the jurisdiction of the civil courts for frustrating the proceedings initiated by the banks and other financial institutions. 55. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and the SARFAESI Act and exercise jurisdiction unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, 2018, the banks are entitled to dispose of the properties if they are victim and sufferer due to non-return of loan amount by the borrowers. 36. There is no nexus whatsoever between the alleged crime and the banks who are merely the secured creditor and were not aware that the borrowers would avoid returning the loan-amount. Prima facie, no case of money-laundering is made out against banks. The banks have priority rights on assets of the secured creditors to recover the loan amount/debts by sale of assets over which security interest is created. 37. As far as the appeal is concerned, the same will be considered on the next date of hearing. At present, this Tribunal is only concerned with the interim order as prayed by the appellants. 38. In view of facts and nature of the present case, I am of the opinion that once the banks are secured creditors and have obtained the final decree from the court which has attained finality, the banks are bound to receive the default loan amount from Vijay Mallya and his companies. He was/is the active person of the companies. The loans amount has to be paid by the borrowers. It is a banks money. It must come to the banks. These are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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