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TMI Blog2019 (1) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... The ED and Adjudicating Authority did not understand the real issue of the mortgages executed in favour of the Appellant - Bank by its Customer. The Bank had, while executing the mortgages in its favour, already parted with its own money as loans to its Customer-Shri Bimal Ramgopal Agarwal and his wife-Barkha Bimal Agarwal. The Impugned Order as well as the Provisional Attachment Order are set-aside qua the present appellant as the same are bad and passed against the law - appeal allowed - decided in favor of appellant. - FPA-PMLA-2503/DLI/2018 - - - Dated:- 2-1-2019 - Justice Manmohan Singh Chairman For the Appellant : Shri L.S. Shetty, Advocate For the Respondent : Ms. Shilpi Satyapriya Satyam, Advocate JUDGEMENT FPA-PMLA-2503/DLI/2018 1. The appellant has filed this appeal under Section 26 of the Prevention of Money Laundering Act, 2002 against the Order dated 24.7.2018 passed by the adjudicating authority under PMLA in O.C. no. 896/2018 confirming the Provisional Attachment Order (PAO)n No. 02/2018 dated 07.02.2018 in ECIR No. ECIR/02/DIZO-II/2018 dated 17.03.2017. 2. The impugned order has been passed against Bimal Ramgopal Agarwal and 4 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l and his wife, Barkha Bimal Agarwal on the alleged ground that Bimal Agarwal derived or obtained proceeds of crime as a result of criminal activity relating to a scheduled offence by assisting the Joint Director in taking bribes/illegal gratifications. 6. The appellant Bank says that it is not aware of any criminal acts alleged to have been committed by the said Bimal Ramgopal Agarwal between 28.07.2015 and 22.09.2016.The appellant is pressing the relief only to the extent that the attachment order must be lifted against the respondent ED. 7. By virtue of attachment, the property was attached i.e. the Pent House No. 2001/2101 fully described in the Provisional Attachment Order was mortgaged by Bimal Ramgopal Agarwal to the appellant bank for the first time on 19.01.2011 against the enhancement of the Cash Credit Limit from the then existing ₹ 5 Crores to ₹ 10 Crores and enhancement of composite Bank Guarantee Limit and Letter of Credit Limit from ₹ 10 Crores to ₹ 15 Crores. 8. The said property was mortgaged as per supported by the following legal documents created in favour of the appellant bank: i. Sanction Letter No. BCB/GGE/CC-650/3642/2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imit of ₹ 10 Crores dated 04.03.2011. ix. Demand Promissory Note for Bank Guarantee/ Letter of Credit Limit of ₹ 10 Crores dated 04.03.2011. 8.2. The said Pent House No. 2001/2101 was again mortgaged by Bimal Ramgopal Agarwal to the Appellant - Bank for the Third time on 19.12.2011 against the enhancement of the Cash Credit Limit from the then existing ₹ 15 Crores to ₹ 25 Crores and renewal of composite Bank Guarantee Limitand Letter of Credit Limit of ₹ 10 Crores. The said mortgage is duly supported by the following legal documents created in favour of the Appellant Bank:- i. Sanction Letter No. BCB/GGE/CC-650/1917/2011 dated 13.12.2011 issued by the Bank. ii. Loan Agreement for Cash Credit of ₹ 25 Crores dated 19.12.2011. iii. Letter of General Lien and Set Off for Cash Credit of ₹ 25 Crores dated 19.12.2011 iv. Demand Promissory Note for Cash Credit Limit of ₹ 25 Crores dated 19.12.2011 v. Borrowers Forwarding Letter dated 19.12.2011 confirming the deposit and continuation of title deeds in respect of the said Pent House and other properties. vi. Memorandum of Entry dated 19.12.2011 by the Branch Manager of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /1713/2011 dated 20.08.2013 issued by the Bank. ii. Loan Agreement for Cash Credit of ₹ 30 Crores dated 23.08.2013 iii. Letter of General Lien and Set Off for Cash Credit of ₹ 30 Crores dated 23.08.2013. iv. Demand Promissory Note for Cash Credit Limit of ₹ 30 Crores dated 23.08.2013. v. Borrowers Forwarding Letter dated 23.08.2013 confirming the deposit and continuation of title deeds in respect of the said Pent House and other properties. vi. Memorandum of Entry dated 23.08.2013 by the Branch Manager of Goregaon (E) Branch of the Bank, by paying requisite amount of stamp duty in respect of the said Pent House. vii. Loan Agreement for Bank Guarantee/ Letter of Credit Limit of ₹ 10 Crores dated 23.08.2013. viii. Letter of General Lien and Set Off for Bank Guarantee/ Letter of Credit Limit of ₹ 10 Crores dated 23.08.2013 ix. Demand Promissory Note for Bank Guarantee/ Letter of Credit Limit of ₹ 10 Crores dated 23.08.2013. 8.5. It was also mortgaged by Bimal Ramgopal Agarwal to the Appellant - Bank for the Sixth time on 15.09.2016 against the reduction of the Cash Credit Limit from ₹ 30 Crores to ₹ 21 Crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on 31.01.2018 alongwith applicable interest thereon. Hence, as a Secured Creditor, this Appellant Bank has issued Notice dated 17.02.2018 under the provision of Section 13(2) of SARFAESI Act directing Bimal Ramgopal Agarwal, Barkha Bimal Agarwal, its Directors Manoharlal Khandelwal, Kishore Kumar Ramgopal Agarwal, Co-Borrowers and their Company M/s. Technotrade Impex India Pvt. Ltd. to discharge in full all their liabilities, failing which the Appellant - Bank would exercise all or any of its rights under the provisions of subsection (4) of Section 13 and other applicable provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as SARFAESI Act ) for the purpose of taking possession of the property, appointing any person to manage the property, etc. Exhibit J is a copy of the said Notice dated 17.02.2018 issued under Section 13(2) of SARFAESI Act as the Appellant - Bank was fully empowered to take recourse under the SARFAESI Act for dealing with the said secured assets in order to recover its outstandings against the said borrower, viz : Bimal Ramgopal Agarwal. 10. It is a matter of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CE OF REASON TO BELIEVE 12. The Respondent - Deputy Director himself has admitted in Para 25 of his Complaint at Page No. C 57 that the Penthouse No.2001/2101 attached by him was purchased by Bimal Ramgopal Agarwal and his wife - Barkha Agarwal in the year 2010. If the attached property had already been purchased by Bimal Ramgopal Agarwal and his wife, Barkha Agarwal in the year 2010 itself, the Respondent Deputy Director cannot have any reason to believe that Bimal Ramgopal Agarwal and his wife purchased the said property with the proceeds of crime derived by Bimal Ramgopal Agarwal by his criminal activities relating to the scheduled offences allegedly committed between 28.07.2015 and 22.09.2015 and that they are in possession of the proceeds of crime as mandated by Section 5(1)(a) of PMLA. Hence, the Respondent Deputy Director has no power at all to attach the property purchased by Bimal Ramgopal Agarwal and his wife in the year 2010 on the ground that the same was acquired by proceeds of crime. 13. The Appellant has submitted that the Respondent Deputy Director has failed to furnish to this Appellant - Bank either before or after issuing the Impugned Provisiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant states that as mentioned in Clause E of Paragraph 41 under the heading GROUNDS in the Memo of Appeal, in the face of the admission made by the Deputy Director himself, in the Impugned Provisional Attachment Order dated 07.02.2018 and in the Rejoinder dated 09.07.2018 filed by him before the Adjudicating Authority, the property having been purchased as far back in the year 2010, coupled with the fact that the Bank had lent its own money to its Customer - the Predicate Offender while creating the mortgage against the property in question by way of collateral security, it was totally erroneous to conclude and to hold that Bimal Ramgopal Agarwal has acquired the said property by committing the alleged criminal activities in the year 2015 and the same represents the proceeds of crime. In the light of the said admission which goes unrebutted by bringing on record any relevant material to prove its veracity, the concerned transaction ought to be held as a bona fide transaction executed and for valuable consideration. In the set of these facts it was totally illegal and invalid on the part of the Respondents to have arrived at the conclusion that either it is derived from the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prayer made in the ground of appeal filed by the bank is allowed. 19. The amended provisions of Section 26E of the SAR-FAESI Act, 2002 as amended by the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016 which reads as under:- 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 StateGovernment or local authority. 20. The amended provisions of Section31B of the Recovery of Debts due to Banks and Financial' InstitutionsAcc 1993 as amended by the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment)Act, 2016 which reads as under:- 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 inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the Special Court, as appearing at Para 10 of the said Supreme CourtJudgment:- 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 nonobstante 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 inthe later enactment that the provisions of the earlier enactment continue to apply. 24. The afore-stated principle laid down by the Hon'ble Supreme Court has been followed by the Full Bench of the Hon'ble Madras High Court in a recent decision dated 10.11.2016 in W.P. Nos. 2675, etc. [TheAssistant Commissioner (Commercial Taxes) vs. Indian Overseas Bank], in which the Hon'ble High Court upheld the provisions of the amended Section 31B of Recovery of Debts due to Banks and Financial Institutions Act, 1993. The following is the relevant portion of the said decision:- 3. There is, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 thereof the adjudicating authority must carefully consider the material and evidence on record (including the Reply furnished by a noticee in response to a notice issue under Section 8(1) and the material or evidence furnished along therewith to establish his earnings, assests 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. 29. In the present case, the mortgagors - BimalRamgopal Agarwal and his wife - Barkha Bimal Agarwal had admittedly purchased the Penthouse in the year 2010 bona fidely and for valuable consideration i.e. long before the mortgagors are alleged to have committed the Scheduled Offencein the year 2015. This fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are of the considered opinion that the conduct of the banks are always bona fide. Both banks are innocent parties. 58. Thus in the present case even thoughthe Ld. Adjudicating Authority had all the reasons to believe that the above mentioned were mortgaged to the Appellant Bank and that the Appellant/SBI had prior charge over the subject matter - 5 properties ;still the Ld. Adjudicating Authority confirmed the provisional attachment order of the respondent no. 1 and thus causing huge loss to the appellant SBI. 60. We also find that the Adjudicating Authority has not examined the law on mortgages and securities. 63. The property of the Appellant bank cannot be attached and confiscated when there is no illegality or unlawfulness in the title of the appellant. 64. The respondent has no lien over thesaid properties as the appellant banks are now the legal transferees ofthe saidproperties. 65. From the entire gamut of the matter, we are of the view that there is no nexus whatsoever between the alleged crime and the two banks who are mortgagees of all the properties which were purchased before sanctioning the loan. Thus no case of moneylaundering is made out agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating Authority has observed as follows :- 2 The case of the Appellant is closely similar to the case decided by this Tribunal on dated 14.07.2017 in State Bank of India and Ors. Vs. The Joint Director, Directorate of Enforcement, Kolkata. In Paragraphs 46 and 47 of the Judgment, this Tribunal found that the attached property was purchased much prior to the period when the facility of offending loans were sanctioned to the borrowers. Further, the Bank was not involved in the schedule offence. It was further observed that the mortgaged properties are security to the loans and cannot be subject matter of attachment particularly when the same were purchased and mortgaged prior to theevents of funds diversion and frauds committed by the borrowers. A completely same scenario exists in the present case also where the Appellant is a bona fide lender and the properties in question have been originally purchased, much before offending transactions took place. The contents of. said properties 46 and 47 are reproduced:- 46. In the present case, it is undisputedfacts that the attached property were purchased much prior to the period when the facility of loan sanctioned to the borrow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd confirmation thereof does not arise and the victims/innocent party i.e., innocent party would be entitled to dispose ofthe saidproperty. 36. In the fact and circumstances and material available in the present case, the allegation of money laundering, so far as present appellant properties involved in this appeal are concerned, found to be unsustainable for the purpose of attachment under the PMLA, 2002.Both set of appeal are allowed . 37. Thus, for reasons recorded above, I set aside the Impugned Order dated 29.12.2017 and the Provisional Attachment Order dated 17.07.2017. 40. This Tribunal has reiterated time and again and also taken the same view in its very recent decision dated 19.07.2018 in the case of Punjab National Bank vs. Deputy Director, Directorate of Enforcement, Lucknow. The relevant portion of the said decision reads as under :- 41. I am also of the view that once it was found that the appellant is a innocent party who is not involved in the money laundering directly or indirectly or assist any party and the mortgaged property is also not purchasedfrom the proceeds of crime then the question ofprovisionalattachmentorder andconfirmation ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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