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TMI Blog2019 (9) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... failed to consider that it has attached all the properties without properly examining the case of the Appellant. The mortgaged properties of the Appellant cannot be attached or confiscated unless link and nexus directly or indirectly established and there is no illegality or unlawfulness in the title of the Appellant and there is no charge of money laundering against the Appellant. The mortgaged of properties are under the Transfer of Property Act as there is no dispute as regards the origin of funds or the title of the Property. The Respondent does not have any lien over the said properties as the Appellant is now the Legal transferee of said Properties. The Respondent cannot retain the properties over which they have no legal title and the property is to be returned to the persons lawfully entitled as the Appellant is the victim. As such the properties acquired by Appellant before the initiation of the proceeding under PML Act and properties in respect of which security interest has been created in favour of the bona-fide secured creditor ought not be subjected to attachment in view of the aforesaid observations of the Hon ble Delhi High Court and the State Action would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tations and assurances given by the promoters and senior management of National Spot Exchange Limited (hereinafter referred to as NSEL) with a deliberate intention to dishonestly misappropriate his funds and had been cheated by NSEL. 3. As Sections 120-B, 467 and 471 of IPC are Scheduled Offences under PMLA, an ECIR bearing no. F.No. MZO/ECIR/14/2013 dated 14.10.2013 has been registered by Enforcement Directorate and investigation was undertaken under PMLA. Consequent to the investigation, Provisional Attachment Order No. 24/2014 dated 31.12.2014 was passed by the Deputy Director, Enforcement Directorate, Mumbai Zonal Office. In the said order the following properties are attached: Sr. No. Description of property Sub-Description of Property Value (Rs. Crore) Extent of POC value (Rs.) 1. Plant of M/s. Naraingarh Sugar Mills Ltd. comprising Land, building, plant machinery situated at Village: Banondi, PO Shahzadpur, Tehsil Naraingarh, District ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s financed the sugar project which are nationalised banks and none of the alleged funds raised out of alleged money laundering were either raised or available with the accused at that point of time. As such all those assets were built out of the due and valid legal modes. These assets are under the charge of the Appellant as of now, as security for the Term Loan of ₹ 10,339 Lacs for setting up of Cogeneration project. c) The loan amount was disbursed and all the securities were obtained by the Appellant after carrying out due diligence and compliance of all KYC requirements. d) The land of the Company M/s. Naraingarh Sugar Mills (Respondent No.4) mortgaged with Appellant IREDA was purchased in the year 1995 i.e. much prior to the commission of the alleged offence of money laundering in the year 2013. e) The offence is alleged to have been committed/surfaced on or about 2013 whereas the Appellant herein had sanctioned the loan amount for ₹ 10,339 Lacs on 12.09.2012 and consequently disbursed ₹ 76.84 Crores for the co-generation power plant of M/s. Naraingarh Sugar Mills Ltd. Thus, at the time of disbursement of loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt i.e. land, plant and machinery has been in existence since 1995 in terms of the submissions in the foregoing paragraphs, it is submitted that the entire Co-generation projects has been constructed and built up, out of the loan funds of the appellant and under no stretch of imagination these assets can be held as proceeds of crime. i) The Appellant is Government of India Company and not a party to any of the alleged money laundering activities. Any attachment of the aforesaid assets will result into the loss of the Public Exchequer. 7. That the role of the Appellant in the present matter is confined to the fact that in the year 2012 on the application of Respondent no.4 herein i.e. M/s. Naraingarh Sugar Mills Ltd. for grant of financial assistance for setting up the 25 MW Bagasse based Cogeneration project in their existing sugar mill capacity of 2500 TCD (to be expanded to 5500 TCD) at Village- Banondi, Taluka- Naraingarh, District- Ambala, Haryana, the Appellant vide sanction letter dated 12.09.2012 and Loan Agreement dated 07.03.2013 sanctioned the loan to the tune of ₹ 10,339 Lacs (₹ 6,709 Lacs main loan and ₹ 3,630 Lacs Add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d tainted has been transferred instead of the aforementioned property mortgaged with the Appellant which has nothing to do with the crime proceeds. (iii) No substantial evidence has been produced by Respondent no. 1 to prima facie show much less establish that the tainted money allegedly received by Respondent no.4 have been invested in the attached plant by way of bank loan repayments, purchase of raw materials/ working capital requirement. (iv) In fact the loan sanctioned by the Appellant was for the purpose of the setting up of the Co-generation project of the Respondent no.4 and it is that loan amount only which has been used to expand the said project for purchase, installation and building of Co-generation project and therefore the attached land and plant machinery cannot be construed to be crime proceeds. (v) The title deeds of the aforementioned property are in the possession of the Appellant, since the attached property is mortgaged by way of equitable mortgage with the Appellant. All the charges have been created much prior to the impugned order and order of provisional attachment. It is submitted that the rights of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeds. (xi) It is case of the ED that the amount received by M/s Yathuri is used for bank loan repayments, business activities of the plant of M/s. Naraingarh Sugar Mills Ltd. It is pertinent to mention that the Respondent No.1 admitted that they were able to trace the tainted money used for bank loan repayment. As such, the Respondent No.1, if at all, should attach the said the accounts in which such tainted money has been deposited whereas without considering that the subject land of the said property was purchased in the year 1995 and expansion of the project was done by the loan sanctioned by the Appellant, the ED has proceeded on basis of conjectures and surmises to attach the subject land along with the plant and machinery. 11. The Appellant has relied upon the following Judgments: (i) The Deputy Director, Directorate of Enforcement, Delhi v. Axis Bank Ors. in CRL.A. 143/2018 Crl.M.A. 2262/2018 and connected matters. Date of Judgment: 02.04.2019. (ii) Standard Chartered Bank v. Deputy Director of Enforcement: 2018 SCC Online ATPMLA 15. Date of Judgment: 02.08.2018. 12. This appeal was fix ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith a Scheduled Bank for servicing Appellant/IREDA. (d) 2nd pari passu charge on current assets of Respondent No. 4, along with other Consortium lenders; and (e) Personal Guarantees of: (i) Shri Onkar Anand (ii) Shri Jitendra Anand (iii) Smt. Renu Anand (iv) Shri Rahul Anand (after death of Shri Onkar Anand). All these charges have been registered with ROC, Ministry of Corporate Affairs, Government of India under Form 8. 16. There is no allegation nor there is any evidence that the properties attached hereunder have been acquired out of proceeds of crime, nor there any allegation against the Appellant that they are involved in money laundering. The Appellant is a Government Company which has lent public money to the Respondent no.4 against security. There is also no allegation that the Appellant knew about the involvement of the Respondent no.4 in any money laundering. It is the case of the Respondent ED that proceeds of crime have been used for repayment of Bank loans. Therefore, it appears that the properties attached herein are attached as value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 . 21. 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 PML Act and hence the said properties can not 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 ( supra ). 22. As already mentioned in the present case, it has come on record that the security interest in respect of the aforesaid properties were created before the date of registration of FIR. 23. The Hon ble Delhi High Court on the Axis Bank Judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the case of the Appellant. The mortgaged properties of the Appellant cannot be attached or confiscated unless link and nexus directly or indirectly established and there is no illegality or unlawfulness in the title of the Appellant and there is no charge of money laundering against the Appellant. The mortgaged of properties are under the Transfer of Property Act as there is no dispute as regards the origin of funds or the title of the Property. 28. The Respondent does not have any lien over the said properties as the Appellant is now the Legal transferee of said Properties. The Respondent cannot retain the properties over which they have no legal title and the property is to be returned to the persons lawfully entitled as the Appellant is the victim. 29. As such the properties acquired by Appellant before the initiation of the proceeding under PML Act and properties in respect of which security interest has been created in favour of the bona-fide secured creditor ought not be subjected to attachment in view of the aforesaid observations of the Hon ble Delhi High Court and the State Action would be restricted to such part of the value of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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