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TMI Blog2019 (6) TMI 1206X X X X Extracts X X X X X X X X Extracts X X X X ..... t was held that the directions of such attachment under PMLA shall be valid and operative subject to satisfaction of the charge or encumbrance of such third party and restricted to such part of the value of the property as is in excess of the claim of the said third party. The rights of Appellant Bank being the secured creditor would survive in spite of the order of the attachment under PMLA remains operative. Therefore, the Appellant being the lawful mortgagee/transferee of the interest in the Subject Properties are entitled to recover its dues with the sale of the Subject Properties. The acquisition of such interest cannot be presumed to have been created with mala fide intent to defeat and/ or frustrate the proceeding under the PMLA Act and hence the said properties can be held to be tainted property . Since in the present case, the bona fide third party claimant, secured creditor, had initiated action in accordance with law for enforcement of interest prior to the order of attachment under PMLA, the PMLA attachment takes a back seat allowing the secured creditor to enforce its claim and only the remainder to be made available for purposes of PMLA. The properties in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titutions and NCD holders ( Appellant ) challenging the Impugned Order dated 1st October, 2018 (hereinafter referred to as the ( Impugned Order ) passed by the Adjudicating Authority in O.C. No. 977/2018( Complaint ). The Adjudicating Authority has confirmed the Provisional Attachment Order ( PAO ) No.02/2018 dated 24th April, 2018 ( Attachment Order )issued by the Deputy Director, Directorate of Enforcement, Ahmadabad in File No. ECIR/AMZO/03/2018 ( ECIR ). 2. The allegations against the borrowers are as under:- Central Bureau of Investigation (CBI), Gandhinagar has registered FIR no. 0292018A0006 dated 26.03.2018 against M/s. Diamond Power Infrastructure Ltd., Vadodara (DPIL), Shri Suresh Narain Bhatnagar, Founder of DPIL, Shri Amit Suresh Bhatnagar, Managing Director, DPIL, Shri Sumit Suresh Bhatnagar, Joint Managing Director of DPIL, Unknown Public Servants of various banks and unknown others for commission of offence under Section 420, 467, 468, 471 r/w 120-B of IPC and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988. The said FIR inter alia reveals that: (a) M/s. DPIL has caused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese accounts. By doing so they diverted the funds to the tune of ₹ 70 Crore. (f) DGGSTI, Vadodara has issued a Show Cause Notice to M/s. DPIL for fraudulently availing CENVAT credit to the tune of ₹ 100.80 Crore by submitting bogus purchase invoices even though no material had been received. This indicates that fictitious purchases to the tune of ₹ 500 Crore were shown by DPIL to avail the said CENVAT credit and bank credits. (g) The above modus operandi involving forged documents and diversion of funds has resulted in availability of stock to the tune of ₹ 338.44 Crore only which is hugely inadequate for repayment of loans to the tune of ₹ 2654.40 Crore. 3. The Appellant has nothing to do and has no connection with the allegation of crime committed by the borrowers and other persons concerned involved for the offences of money-laundering. The Appellant is not holdings any funds of any of the defendant/respondent. The mortgage properties are admittedly not derived from criminal activities or proceed of crime. The scope of the PMLA is to punish the accused person and not to punish the innocent person wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 198.40 133.00 331.40 7. 20-02-2013 230.00 200.00 430.00 8. 23-05-2014 355.00 327.00 682.00 9. Post restructuring 30-03-2015 432.29 229.37 661.88* *Including ECB loan of INR 50.00 Crore at New York Branch Apart from the credit facilities sanctioned by the Appellant, the members of the Consortium including various financial institutions have also lent to Respondent No. 2 the Working Capital, Rupee Term Loan, External Commercial Borrowing and Non-Convertible Debentures for running its business. The facilities sanctioned by various members of the Consortium are detailed herein below:- WORKING CAPI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hedule Part A of MOE dated 21.10.2015) S.No. Name of Rupee Term Loan Lender Total Amount Rs. (In Crores) 1. Allahabad Bank 56.71 2. Axis Bank 79.81 3. Bank of Baroda 91.51 4. Bank of India 215.88 5. Corporation Bank 120.53 6. Dena Bank 75.63 7. ICICI Bank 178.61 8. State Bank of Hyderabad 19.25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited 19.49 TOTAL 105.97 7. It is evident from above in terms of the Master Restructuring Agreement dated 29th May, 2015 as amended by the First Supplemental and Amendatory Agreement dated 10th August, 2015 ( Loan Agreement ), facilities of a total and aggregate amount of ₹ 2859,58,00,000/- (Rupees Two Thousand Eight Hundred Fifty Nine Crore Fifty Eight Lakh Only) were availed of by Respondent No.2. It also appears that subsequently upon invocation of the Strategic Debt Restructuring Scheme, part of debt to the tune of ₹ 224,34,00,000/- (Rupees Two Hundred Twenty Four Crore Thirty Four Lakh Only) in the cash credit account was converted by the Appellant into equity. Copy of the Loan Agreement dated 29th May, 2015 along with other documents are marked as ANNEXURE A1 at page no. 1 to 373 of appellants documents. Copy of the Agreement for Strategic Debit Restructuring Dated 29th December, 2016 are marked as ANNEXURE A2 at page no. 374 to 377 of Appellants documents. Copies of the Sanction Letters issued by the various consortium ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 Wind Turbine Generator JMD 260 , Cap acity 2.1 MW Installed at MojeCHarp odi Nani Tal Abdasa ,Dist Kutch (Owned by DPIL ) Diamond Power Infrastructure Ltd 21.10.15 Detailed in Schedule 11 12 (Page 482 485) 27.2.2012 3 Wind Turbine Generator JMD 260 , Cap acity 2.1 MW Installed at MojeCHarp odi Nani Tal Abdasa ,Dist Kutch (Owned by DPIL ) Diamond Power Infrastructure Ltd 21.10.15 Detailed in Schedule 11 12 (Page 482 485) 27.2.2012 4 Wind Turbine Generator JMD 260 , Cap acity 2.1 MW Installed at MojeCharp odi Nani Tal Abdasa ,Dist Kutch (Owned by DPIL ) Diamond Power Infrastructure Ltd 21.10.15 Detailed in Schedule 11 12 (Page 482 485) 27.2.2012 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ency and Bankruptcy Code, 2016 before the Hon ble NCLT, Ahmedabad for initiating Corporate Insolvency Resolution process against Respondent No. 2 which was duly admitted by the Hon ble NCLT Ahmedabad on 24th August, 2018. Copy of the order passed by NCLT Ahmedabad is annexed and marked as ANNEXURE A7. 12. However, in the meanwhile, vide the Provisional Attachment Order No. 02/2018 dated 24th April, 2018 issued by Respondent No. 1 in File No. ECIR/AMZO/03/2018, the Subject Property was provisionally attached on the pretext that the Subject Property was a proceed of crime within the meaning of Section 2(u) of the PMLA, 2002. 13. It is stated on behalf of appellant that as on 7th June, 2018 approximately an amount of ₹ 2400 Crore (Rupees Two Thousand Four Hundred Crores) along with uncharged interest that is due and payable by Respondent No. 2 to the Appellant Consortium together with further interest till the date of payment and/or realization of thereof. It is also submitted that the outstanding amount due to the Appellant is public money and that the Appellant has the right to deal with the Subject Properties. 14. The Adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid) is a secured creditor , pursuing enforcement of security interest in the property (secured asset) sought to be attached, it being an alternative attachable property (or deemed tainted property), it having acquired such interest from person(s) accused of (or charged with) the offence of money-laundering (or his abettor), or from any other person through such transaction (or inter-connected transactions) as involve(s) criminal activity relating to a scheduled offence, such third party (secured creditor) having initiated action in accordance with law for enforcement of such interest prior to the order of attachment under PMLA, the directions of such attachment under PMLA shall be valid and operative subject to satisfaction of the charge or encumbrance of such third party and restricted to such part of the value of the property as is in excess of the claim of the said third party. 19. In the present appeal, the Subject Properties mentioned at serial number 1 and 5 of the Complaint belong to Respondent No. 2 after carrying out due compliances were mortgaged with the Appellant in the year July 2008 and thereafter were extended from time to time on various da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perative subject to satisfaction of the charge or encumbrance of such third party and restricted to such part of the value of the property as in is excess of the claim of the said third party . 24. The acquisition of such interest cannot be presumed to have been created with mala fide intent to defeat and/ or frustrate the proceeding under the PMLA Act and hence the said properties can be held to be tainted property . Since in the present case, the bona fide third party claimant, secured creditor, had initiated action in accordance with law for enforcement of interest prior to the order of attachment under PMLA, the PMLA attachment takes a back seat allowing the secured creditor to enforce its claim and only the remainder to be made available for purposes of PMLA. The properties in the present case are thus not liable to be attached even as alternative attachable property , as held in Para 165 of the judgment of Hon`ble Delhi High Court in the case of Deputy Directorate of Enforcement Delhi and Ors. vs Axis Bank in CRL.A. 143/ 2018 Crl.M.A. 2262 of 2018 dated April 02, 2019. 25. As already mentioned in the present case, it has come on record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisional attachment order. 30. It appears from the material available on record that in the present appeal, the Appellant at the request of Respondent No. 2 had sanctioned Term Loan Facilities to Respondent No. 2 for construction of 3 windmills at MojeCharpodi Nani Tal Abdasa , Dist Kutch. The Appellant upon being conducting a due diligence had sanctioned to Respondent no. 2 the term loan facilities. The Respondent No. 2 in order to secure the facilities sanctioned by the Appellant had mortgaged the properties mentioned in serial number 2, 3, 4, 11 and 14 of the Complaint. 31. The properties mentioned at serial number 2,3 and 4 were acquired by Respondent No. 2 on 27th February, 2012. The details of the acquisitions are mentioned at Annexure A4Page 482 and 483 of documents filed by the Appellant . Similarly, the properties mentioned at 11 and 14 of the Complaint were acquired by the promoters of Respondent No. 2 on 17th March, 2015, the details of acquisitions are mentioned at Annexure A4 page 478 and 480 . 32. It is the case of appellant that the appellant before seeking to create a mortgage of the aforementioned propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncy process. The Appellant in order to recover its outstanding dues has to sell the assets of the Respondent No. 2 and its promoters that were mortgaged to the Appellant at the time of sanctioning of various credit facilities to the Respondent from time to time for running its business. The facilities sanctioned by the Appellant after conducting due diligence and in strict compliance of the letter of sanction issued by each member bank. 36. Therefore, it is not possible to hold that the mortgaged properties claimed by the Appellant in no way can be considered to be Proceed of Crime under Section 2(u) of PMLA. The impugned order does not disclose any reasoning. There is no application of mind whatsoever and it is assumed that the properties in question are the proceeds of the crime. There is no reasoning to show as to how the attached properties mortgaged prior to the date of alleged offence are the subject matter of proceeds of crime. The Adjudicating Authority has not analysed the facts at all. The order suffers from a fundamental error. There is no understanding by the Adjudicating Authority of the contents of the statute, much less its applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 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, 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 40. The Appellant undert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and without consulting the facts and law. 44. It is a matter of fact that ED has registered the ECIR and passed the provisional attachment order after the moratorium order is passed by the NCLT. Thus, on the face of record, it is evident that the ED and the Adjudicating Authority have not understood the legal issues involved rather they have ignored the settled law and passed the impugned order. The serious situation is that ED has registered ECIR on the basis of FIR which was registered at the request of banks complaint as borrowers who failed to pay the loan amount. The banks have now become victim. Therefore, both the impugned order and provision attachment order are set-aside qua the appellant bank. 45. The period of continuation of proceedings before the Adjudicating Authority, PMLA, and before this Tribunal till the passing of the present judgment and order, from the date of commencement of the moratorium order, be treated as excluded while calculating limitation of the period of completion of the Corporate Insolvency Resolution Process. 46. The appeals are allowed. The impugned order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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