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TMI Blog2018 (12) TMI 1245X X X X Extracts X X X X X X X X Extracts X X X X ..... firmed the provisional attachment Order No. MBZO-II/05/2017 dated 08.06.2017 and addendum dated 13.06.2017. 4. The Case of the Bank of BARODA 4.1 The Appellant Bank is a leading Nationalised Bank who is routinely involved in financing large scale projects both on an individual level, and as part of multi bank consortiums. 4.2 M/s Siddhi Vinayak Logistic Limited (M/s SVLL/Borrowers) was dealing with the Appellant Bank since 2008. The Appellant Bank, on the request of its Director, Shri. Rupchand Baid had granted, restructured and sanctioned various credit facilities to M/s SVLL - viz. (1) Review with decrease in Term Loan-IV of Rs. 10.52 Crores, (2) Review with decrease in Term Loan-V of Rs. 53.36 Crores, (3) Review with decrease in Term Loan-VI of Rs. 79.76 Crores, (4) Review of Term Loan-VII of Rs. 76.46 Crores, (5) Review with increase in various Term Loans for purchase of Cars of Rs. 1.49 Crores, (6) FITL-(I) (interest part of TL-IV) of Rs. 1.30 Crores, (7) FITL-(II) (interest part of TL-V) of Rs. 6.60 Crores, (8) FITL-(III) (interest part of TL-VI) of Rs. 9.87 Crores, (9) FITL-(IV) (interest part of TL-VII) of Rs. 9.46 Crores, (10) Cash Credit (Hypo. of stocks & book debts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/09/2015 (inclusive interest applied up to 30/06/2015), (6) FITL-II Account showing the debit balance of Rs. 6,84,97,566/- as on 30/09/2015 (inclusive interest applied up to 30/06/2015), (7) FITL-III Account showing the debit balance of Rs. 10,24,34,971/- as on 30/09/2015 (inclusive interest applied up to 30/06/2015), (8) FITL-IV Account showing the debit balance of Rs. 9,81,78,336/- as on 30/09/2015 (inclusive interest applied up to 30/06/2015), (9) Car Loan Accounts (20 Cars) showing the debit balance of Rs. 1,02,80,867/- as on 30/09/2015 (inclusive interest applied up to 30/09/2015), FPA-PMLA-2115, 2117 &2189/MUM/2017 Page 5 of 27 (10) Cash Credit (Working Capital) Account showing the debit balance of Rs. 31,55,72,840/- as on 30/09/2015 (inclusive interest applied up to 30/09/2015), (11) Sub-Limit (WCDL) Account showing the debit balance of Rs. 12,29,50,772/- as on 30/09/2015 (inclusive interest applied up to 30/09/2015) and (12) Bank Guarantee showing the debit balance of Rs. 2,17,00,000/- as on 30/09/2015 which are the true entries of above referred Accounts maintained by the Defendant No:10 bank during the ordinary course of its banking business. 4.6 The Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayak Logistics Ltd, its Director ShriRupchandBaid, Shri. Deepak Kumar Baid, ShriRajkumarBaid, Smt. Laxmi Devi Baid all Directors of M/s Siddhi Vinayak Logistics Ltd and others. This FIR revealed that the persons mentioned therein were, during the period from September 2012 to March 2015, party to the criminal conspiracy to cheat the Bank of Maharashtra in the garb of seeking finance for their "Chaalak se Maalak" Scheme. 4.11 Since the offences mentioned above fall under the scheduled offences covered in Paragraph 1 and 8 of Part A of the schedule to the PMLA, 2002, respectively, the Directorate of Enforcement, (Respondent herein) Mumbai Zonal Office recorded an ECIR bearing No. MBZO/10/2016 dated 16.11.2016. 4.12 The Provisional Attachment Order No. MBZO-II/05/2017 was passed on 08.06.2017 by the Respondent. A further addendum to the said provisional attachment order dated 08.06.2017 was issued by the Respondent on 13.06.2017. 4.13 The Respondent filed Original Complaint No.787 of 2017 before the PMLA, Adjudicating Authority. The Appellant Bank was made a party to the said Complaint as Defendant No. 10 being the mortgagee of the properties provisionally attached by the Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LL, and its Directors besides other guarantors, corporate guarantors, personal guarantors etc. The DRT-II, Ahmedabad FPA-PMLA-2115, 2117 &2189/MUM/2017 Page 9 of 27 granted a status-quo order in respect of the securities in the hands of the Bank as on the date of the order dated 02.08.2016. 4.20 The Respondent filed its rejoinder to the reply filed by the Appellant in the said O.C. No:787/2017 on 28.09.2017. In the said rejoinder, the Respondent admitted that though the said properties mortgaged with the Bank were acquired prior to the date of commission of fraud, however, it was erroneously urged by the Respondent that as per the definition of proceeds of crime is either the property derived or obtained as a result of criminal activities relating to a schedules offence or value thereof. 4.21 Accordingly, the Respondent attached the properties mortgaged with the Appellant Bank being the value thereof u/s 2 (1) (u) of PMLA. 5. FPA-PMLA-2189/MUM/2017 5.1 The above-named Appellant has filed this appeal under Section 26 of the Prevention of Money-Laundering Act, 2002 against the common Order dated 24.10.2017 in O. C. No. 787 of 2017 passed by the Adjudicating Authority, PMLA. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding amount to be recovered from the borrower are as under: (A) 1. Account no. with the UBI-311206350000001 (FITL) 2. Name of the account holder-M/s. Siddhi VinayakLogistics Limited 3. Loan facility as availed - Commercial 4. Outstanding Amount - Rs. 10,11,63,133.00 as on 31.07.2017. (B) 1. Account no. with the UBI-311206580000001 (Term Loan Rent Discounting) 2. Outstanding Amount - Rs. 1,99,37,302.16 as on 31.07.2017. (C) 1. Account no. with the UBI-311206120043016 (Term Loan) 2. Outstanding Amount - Rs. 100,72,02,710.00 as on31.07.2017. 5.11 That the said property or the aforesaid units are mortgaged as securities with the Union Bank of India, Salabatpura, Surat Branch by Respondent no.3 for availing various financial facilities. Therefore,the attachment order dated 08.06.2017 is illegal & bad in law. 5.12 That the Commercial loan amount which was sanctioned to the Respondent no.3 is a public money, which the Respondent no.3 has to repay to the UBI, therefore, this complainant has no right to attach the said properties which is mortgaged with the UBI. So, only the Appellant bank has right on the loan amount out of mortgaged properties. 5.13 That the UBI has ini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcement Directorate /respondent no. 1 the aforementioned properties which are mortgaged with the UBI (Appellant) are attached in terms of provision of section 2(1)(u) being value of such property. (iii) That, as per section 71 of PMLA, 2002, the provisions of PMLA shall have overriding effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force, including SARFAESI Act. The above proposition has been upheld by the Apex Court in the case of Solidaire India Ltd. AIR 2001 SC 958:JT 2001(2) SC 642 (MANU/SC/009/2001), Bank of India Vs. Ketan Parekh-2008(8) SCC 148:AIR 2008 SC 2361 (MANU/SC/009/2001) and Narcotic Control Bureau Vs. Krishnalal in C.A. Nos. 810-811/1989 (MANU/SC/0152/1992). The Prevention of Money Laundering Act is aimed at preventing money laundering and to provide confiscation of property derived from or involve in money laundering and for matters concerned therewith and incidental thereto. 5.16 We have gone through the impugned order and the material available on record. So far as the present appellant, who is the defendant no. 13 in the in the O.C. 787/2017, there is no dispute that the property in question has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l bank of Commerce was forced to recall the loans and the credit facilities granted Under SARFAESI. The Bank Filed ORIGINAL APPLICATION NO. 767 OF 2015 titled as "Oriental Bank of Commerce, Ring Road Branch, SuratANDM/s. Siddhi Vinayak Logistic Ltd& 17 others" at Debts Recovery Tribunal, Ahmadabad and the matter is pending adjudication by Debts Recovery Tribunal, Ahmadabad. 6.8 It is stated that in the year 2017 Oriental Bank Of Commerce was informed of initiation of proceeding against M/s SVLL under the Prevention of Money Laundering Act, 2002 wherein it is alleged that M/s SVLL represented by RupchandBaid, who introduced himself as Promoter of M/s SVLL, in the month of September 2012 , M/s SVLL financial facilities by Bank of Maharashtra, that M/s SVLL had also availed the same. It is further alleged that in September 2012 ShriRupchandBaid introduced a Scheme "Chalak Se Maalak" and under that scheme Bank of Maharashtra had sanctioned financial facilities to M/s SVVL. 6.9 It is stated that the Deputy Director, Enforcement Directorate vide Provisional Attachment Order no.MBZO-II/05/2017 dated 08.06.2017 and further addendum dated 13.06.2017 purportedly issued under Section 5(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeds of Crime. 6.10 It is submitted that the properties attached have been purchased prior to the date of purported crime committed by Roop Chand Baid and others has no nexus with the mortgage of the properties acquired before the said crime was committed and therefore, are not the proceeds of crime and have been attached erroneously. 7. Case of the Respondent no. 1, (i) It is stated that the above mentioned properties which are mortgaged with Appellant bank are provisionally attached in terms of the provisions of the section 5(1) of the PMLA, 2002, (ii) These properties have been attached in terms of the provisions of the section 2(1)(u) being value of such property as such contention of the appellant bank that the subject properties were not proceeds of crime is not maintainable, 8. Following facts are common in above mentioned appeals:- 8.1. On the complaint of the Bank of Maharastra an FIR bearing no. RCBSM2015E2007 dated 06.08.2015 was registered by CBI, BS & FC, Mumbai invoking section 420,468,471,120(B) of IPC and sections 13(2) r/w 13(1)(d) of PC Act, 1988 against M/s SVLL, S/ShriRupchand Bail, Deepak Kumar Baid, RajkumarBaid, Smt. Laxmi Devi Baid& otherson the al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that none of the properties which are mortgaged with the aforesaid appellants are either acquired out of proceeds of crime and that were purchased and mortgaged before the commission of alleged crime. 8.8 The appellant Banks have taken steps under sections 13(2) & 13(4) of SARFAESI Act,2002 and also took over symbolic possession of the secured mortgaged/charged/hypothecated properties dues to recover their dues. Even, the appellant Banks i.e. Bank of Baroda and Oriental Bank of Commerce have moved DRTs of the respective jurisdictions vide O.A. nos. 86/2016 and 767/2015 respectively. 8.9 The contention of the appellant Banks have been dealt with by the Adjudicating Authority in the discussion/conclusion part of its order available at para 50, 53 & 55 at internal page 102 & 103 of the impugned common order, which are re-produced below:- " 50. By virtue of section 71 of PMLA, the PMLA has overriding effect. It need to be borne in mind that the amendment by way of introduction of section 26(e) of the SARFAESI Act 2002 and section 31(b) Recovery of Debt and Bankruptcy Act 1993 does not come into play with regard to the liability of attachment, confirmation and confiscation of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olved in money laundering. The Defendant are in possession of "Proceeds of Crime" within the meaning of provisions of Prevention of Money Laundering Act, 2002 and accordingly it is ordered that the attachment of the property shall continue during the pendency of the proceedings relating to any offence under this Act before a court or under corresponding law of any other country, before the competent court or criminal jurisdiction outside India, as the case may be; and become final after an order of confiscation is passed under sub-section (5) to sub-section (7) of section 8 or section 58(B) or sub-section (2A) of section 60. 54......... 55. Conclusion: On a through perusal of the PAO, compliant, relied upon documents, the investigations conducted by the ED and the statements recorded u/s 50 of the PMLA and on careful consideration of the arguments advanced on behalf of the Complainant and Defendants undersigned comes to the prima facie conclusion that the defendant have committed the Scheduled Offences, generated proceeds of crime and laundered them. No doubt the properties attached are proceeds of crime or value thereof and are involved in money laundering. Undersigned there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty 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 of 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 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 other rates due to the Central Government, State Government or local authority. Explanation: for the purposes of this section, it is hereby clarifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime, and then base its jurisdiction on the wrong application of the Act. 17. The Section 2 of the Recovery of Debts and Bankruptcy Act, 1993 after the words "date of the applications" and includes any liability towards debt securities which remain 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 remained unpaid. 18. This Tribunal, in the judgment dated 14.07.2017 in FP-PMLA- 1026/KOL/2017 titled as „State Bank of India vs The Joint Director, Directorate of Enforcement‟ in the identical facts of the case, has held that : "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 to the financial institutions/secured creditors, done by/in favour of the government ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant Banks admittedly are not involved in the scheduled offence. There is no criminal complaint under the schedule offence and PMLA is pending against the Bank. 23. The Respondent no 1 has not fulfilled its duty of carrying out a thorough investigation and attached only such properties which were already mortgaged and held as securities with the Banks against the loans granted by them. Even the car bearing BMW-0005MH43AP was bought by the M/s SVLL out of the loan borrowed by it from the appellant Bank (Bank of Baroda) and was hypothecated to the Bank (Bank of Baroda). Since the M/s SVLL failed to refund the same, the said car has become the property of the Bank (Bank of Baroda)and cannot be said be bought out of the proceeds of crime as alleged. 24. This Tribunal in the matter of FPA-PMLA-1848/DLI/2017 titled as Axis Bank vs the Deputy Director, DOE, Delhi dated 25.10.2017 has held that: "22. It is settled law that the assets hypothecated to the Bank must be protected from attachment by the Respondent No.1. Despite the fact that the asset/vehicle was purchased prior to the acts alleged to the accused- Respondents and that admittedly there was no taint on the monies used partly t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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