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TMI Blog2020 (1) TMI 900X X X X Extracts X X X X X X X X Extracts X X X X ..... sted its remedies in appeal right up to the Hon ble High Court, an order confirming the attachment cannot be said to have attained finality - Therefore, this Tribunal is fully equipped and possesses the requisite jurisdiction in terms with the Act as the court of first appeal, to adjudicate upon the pleas of the Appellant and determine the bonafides and legitimacy of its claims as well as the legality of the Provisional Attachment Order. The impugned order confirming the provisional attachment order is passed without application of mind and without understanding the law, it is liable to be quashed with regards to mortgaged properties in question - there is no nexus whatsoever between the alleged offence and the Appellant Banks as institutions who are the mortgagee of the properties in question which were purchased from the bank s money and mortgage of the same with them. Thus, no case of money laundering is made out against Appellant Banks who had sanctioned the amounts which are untainted and pure money. The Provisional Attachment Order passed by the Adjudicating Authority, PMLA, confirming the Provisional Attachment Order is liable to be quashed and set aside - Appeal allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. (hereinafter also referred to as CCL ), was originally incorporated on 03.05.1995 as Private Limited Company, with Registration No. 55-68152 (PAN AABCC5986H) and converted into Public Limited Co. on 18.12.1996. M/s. CCL is having its registered office at M-14A, Lajpat Nagar, Part-2, New Delhi-24 and Corporate office at Plot No. 17 B C, Sector-16A, Film City, NOIDA, Uttar Pradesh and is engaged in the business of Media Industry and is providing Production and Post Production facilities like shooting of films, editing and graphic facilities etc. (b) The directors of the company are; (i) Mr. Prabodh Kumar Tewari, Managing Director, (ii) Mr. Anand Kumar Tewari, Full Time Director, (iii) Mr. Abhishek Tewari, Full Time Director (iv) Mrs. Meena Tewari, Director and (v) Mr. Ishara Ram Babu, Director. M/s. CCL was banking with Indian Overseas Bank, Industrial Finance Branch, New Delhi since October, 2000 and later shifted to their Defence Colony branch on 30.04.2003. (c ) The M/s. CCL availed credit facilities i.e. Term Loan, Working Capital, and LC/LG by the consortium of 10 Banks i.e. Vijaya Bank, Oriental Bank of Commerce, State Bank of India, Canara Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was ₹ 615.56 Crore, out of which lead bank, i.e. IOB, share was ₹ 163.198 Crore. 5. The ECIR was recorded on 20.06.2013 by the Enforcement Directorate, Delhi Zonal Office upon registration of an FIR No. RC.BD1/2012/E/0003 dated 23.02.2012, Bank Securities and Fraud Cell of CBI, against M/s. Century Communication Ltd. (CCL), under Section 120-B read with 420, 467, 468, 471 of IPC and under Section 13(2) read with 13(1)(d) of PC Act. The said FIR was filed on the basis of complaint dated 22.02.2012 of Shri G. Ravindra Kumar Gandhi, General Manager, Indian Overseas Bank Personnel Administration Department, Central Office, Annasalai, Chennai- 600 002. 6. The Provisional Attachment Order (PAO) No. 02/2016 dated 29.03.2016 passed by the Deputy Director, Enforcement Directorate Delhi Zone New Delhi pursuant to which Original Complaint (O.C.) No. 588/16 is filed before this Authority. The principal Defendants are M/s. Century Communication Ltd. (D-1), Shri Prabodh Kumar Tewari (D-2), Shri Anand Tiwari (D-3), Shri Abhishek Tewari (D-4), Smt. Meena Tiwari (D-5) who are Directors/shareholders of M/s. Century Communication Ltd. (D-1). The D-6 D-8 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2018. The said order of 28.06.2018 was challenged by the Enforcement Directorate vide Criminal Appeal No. 1090 of 2018 before the Hon ble High Court of Delhi. In the said criminal appeal, the Enforcement Directorate made all the Appellant Banks as respondents whereas, M/s. Century Communications Ltd. was not made a party nor M/s. Century Communication Ltd. preferred any appeal against this Tribunal s order dated 28.06.2018. 9. The learned counsel for the Appellants argued the matter and has referred to Page No(s). 44 64 to 71 of the impugned order and submitted that nowhere it has been alleged that the properties have been acquired and mortgaged with the Banks out of proceeds of crime. The learned counsel for the Banks referred to the Memo of Appeal in Criminal Appeal No.1090 of 2018 wherein, it was specifically pleaded by the Enforcement Directorate before the Hon ble High Court of Delhi, that the properties in question were provisionally attached by the Appellants under Section 5 of the Act being value thereof of the proceeds of crime, being investigated by the Appellant Department . 10. It is further contended by the Appellant Banks that the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up offices/studios. (v) The Enforcement Directorate/Respondent no.1 in its PAO dated 29.03.2016 has given the charts of flow of money which has been used to purchase properties from Serial No. 2 to Serial no. 5 and the same has been duly noted by the Adjudicating Authority in its confirmation order dated 22.09.2016 from page no. 37 to page no. 43 and the same are as follows: CENTURY COMMUNICATION LTD. Name of Property (ii) Amount of Property/ Registration Date Mode of Payment Amount Property of Century Communication Ltd. 8th floor, Lotus Neel Kamal Business Park, Plot No.C-18, 19, 20 21, Oshiwara, Andheri (West) Mumbai (6000 Sq. Ft.) on 10.12.2009 (Ajay Devgan) 238,875,000.00 09.12.2009 By Ch. No. 584444 dtd 09.12.09 issued to COSMOS COOPERATIVE BANK LTD. A/C OF STAMP DUTY CHARGES FROM CCL-OBC BANK A/C 1866(PISION MUMBAI) 11,375,000.00 09.12.2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 866 10,000,000.00 04.08.2007 By DD issued from CCL Non-Lien A/c No. 011502000004910 60,010.00 04.08.2007 By DD issued in favour of ICICI Bank A/c from CCL Non-lien A/c No. 0115020000049 10 (For Stamp Duty Charges). 957,610.00 08.08.2007 By Ch. No. 458794 dated 04.08.2007 (DD No. 534587940) issued to Sandeep Sharma from CCL Non Lien A/c No. 011502000004910 9,500,000.00 08.08.2007 By Ch. No. 458792 dated 04.08.2007 (DD No. 534587726) issued to JT Sub Registrar Andheri 1, from CCL Non Lien A/c No. 01150200004910 for Registration charges. 30,000.00 08.08.2007 By Ch. No. 458793 dated 04.08.2007 (DD No. 534587933) issued to JT Sub Registrar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment Amount Property of Century Communication Ltd. 5th 6 th Floor including 7th Floor Terrace Portion Landmark, Bandra (West Mumbai 400050) (1433 Sq. Ft. 1913 Sq. Ft. 4319 Sq. Ft. Terrace Portion) on 18.03.2004 6,08,42,700.00 19.10.2006 By Cheque No. 714171 issued to Sajal Kumar Jain from CCL OBC Bank A/c 1866 (Pixion Mumbai) 5,00,000.00 19.10.2006 By Cheque No. 714170 issued to S. K. Jain from CCI OBC Bank A/c 1866 (PixionMumbai) 6,00,000.00 28.10.2006 By Cheque No. 741385 issued to Sajal Kumar Jain from CCL OBC Bank A/c 1866 (Pixion Mumbai) 18,00,000.00 28.10.2006 By Cheque No. 741386 issued to Shreelekha Jain from CCL OBC Bank A/c 1866 (Pixion Mumbai) 23,00,000.00 28.10.2006 By ChequeNo. 741384issued to Sushila Jain from CCL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 1400000 + 30000 +1645000 + 30000 =3105000/- (Pixion Mumbai) in Favour of Sajal Kr. Jain Sushila Jain and Stamp Duty charges. 31,05,000.00 Cheque No. 442050 dated 27.11.2006 issued from Pearl Vision Pvt. Ltd. CITI Bank A/c No. 0802742223 to OBC Bank A/c No. 1866 for ₹ 17244877/-(Pixion Mumbai) 1,72,44,877.00 Cheque No. 442048 dated 27.11.2006 issued from Pearl Vision Pvt. Ltd. CITI Bank A/c No. 0802742223 to OBC Bank A/c No. 1866 for ₹ 265000477.80 (Pixion Mumbai) 2,65,00,477.80 11. On the other hand, the learned counsel for the respondent no.1 submitted that the properties mortgaged with the Banks have been acquired out of tainted money i.e. proceeds of crime. The Adjudicating Authority has rightly confirmed the Provisional Attachment Order after considering the materials made available to the Authority. It is further contended by him that since the properties in question are part of the prosecution complaint already filed before the Special Court, PMLA, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other enactments viz. RDBA, SARFAESI Act and Insolvency Code, the latter cannot prevail over the former. There is no inconsistency. The purpose, the text and context are different. This court thus rejects the argument of prevalence of the said laws over PMLA. THE RIGHTS OF THIRD PARTY ACTING BONA FIDE 148. In view of the conclusions reached as above, rejecting the argument of prevalence of RDBA, SARFAESI Act and Insolvency Code over PMLA, the said laws (or similar other laws, some referred to above) must co-exist, each to be construed and enforced in harmony, without one being in derogation of the other, with regard to assets respecting which there is material available to show the same to have been derived or obtained as a result of criminal activity relating to a scheduled offence rendering the same proceeds of crime , within the mischief of PMLA. The PMLA, declares, by virtue of Section 71, that it has over-riding effect over other existing laws, such provision containing non-obstante clause with regard to inconsistency apparently to be construed as referable to the dealings in money-laundering and proceeds of crime relating thereto. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so earlier noted, the presumptions that can be drawn in terms of Sections 23 and 24 of PMLA are to be borne in mind, the burden of proving facts contrary to the case of money-laundering being on the person claiming to have acted bonafide. 159. As noted earlier, there are three parts of the definition of the expression proceeds of crime , the first clearly referring to a property respecting which there is material to show the same to have been derived or obtained , directly or indirectly, by a person as a result of criminal activity (of specified nature) . In case such property is held by the person who is charged with the offence of money-laundering , there is a statutory presumption under Section 24(a) PMLA, using the expression shall presume , about it being proceeds of crime involved in such money-laundering. It is a rebuttable presumption, the onus to prove facts to the contrary being on the person accused of such offence. If the acquisition of such property by such accused has involved more than one inter-connected transactions , one of such transactions being proved to be involving money-laundering, a statutory presumption is raised under Section 23 PMLA t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity in exercise of its power under Section 8 PMLA. 164. Though the sequitur to the above conclusion is that the bonafide third party claimant has a legitimate right to proceed ahead with enforcement of its claim in accordance with law, notwithstanding the order of attachment under PMLA, the latter action is not rendered irrelevant or unenforceable. To put it clearly, in such situations as above (third party interest being prior to criminal activity) the order of attachment under PMLA would remain valid and operative, even though the charge or encumbrance of such third party subsists but the State action would be restricted to such part of the value of the property as exceeds the claim of the third party. 165. Situation may also arise, as seems to be the factual matrix of some of the cases at hand, wherein a secured creditor, it being a bonafide third party claimant vis-a-vis the alternative attachable property (or deemed tainted property) has initiated action in accordance with law for enforcement of such interest prior to the order of attachment under PMLA, the initiation of the latter action unwittingly having the effect of frustrating the former. Sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oted legislative scheme, it must be clarified that if the order confirming the attachment has attained finality, or if the order of confiscation has been passed or, further if the trial of a case for the offence under Section 4 PMLA has commenced, the claim of a party asserting to have acted bonafide or having legitimate interest will have to be inquired into and adjudicated upon only by the special court. 170. But, the above exception cannot be applied to all cases of bona fide third party claimants so as to confer a general right to seek release of such property as last mentioned above from attachment even in cases where the encumbrance is created or interest acquired at a time around or after the date or period of criminal activity. In this category of cases, the third party will have the additional burden to prove that it had exercised due diligence having taken all reasonable precautions at the time of acquisition of such interest or creation of such charge, the jurisdiction to entertain and inquire into such claim and grant relief of release after order of attachment has attainted finality, or of restoration after order of confiscation, vesting only in the spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not acquired or obtained (directly or indirectly) from criminal activity, the burden of proving facts in support of such claim is to be discharged by him. (vi). The objective of PMLA being distinct from the purpose of RDBA, SARFAESI Act and Insolvency Code, the latter three legislations do not prevail over the former. (vii). The PMLA, by virtue of section 71, has the overriding effect over other existing laws in the matter of dealing with money-laundering and proceeds of crime relating thereto. (viii). The PMLA, RDBA, SARFAESI Act and Insolvency Code (or such other laws) must co-exist, each to be construed and enforced in harmony, without one being in derogation of the other with regard to the assets respecting which there is material available to show the same to have been derived or obtained as a result of criminal activity relating to a scheduled offence and consequently being proceeds of crime , within the mischief of PMLA. (ix). If the property of a person other than the one accused of (or charged with) the offence of money-laundering, i.e. a third party, is sought to be attached and there is evidence availabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bonafide third party claimant (as aforesaid), staking interest in an alternative attachable property (or deemed tainted property) claiming that it had acquired the same at a time anterior to the commission of the proscribed criminal activity, the property to the extent of such interest of the third party will not be subjected to confiscation so long as the charge or encumbrance of such third party subsists, the attachment under PMLA being valid or 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. (xv). If the bonafide third party claimant (as aforesaid) 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, suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f money-laundering on account of illicit foreign exchange transactions (third appeal) or the case of cheating by use of fabricated defence supply orders (fourth appeal), both involving public servants, require closer scrutiny as to the claim of the respondent banks of bonafide action. Though there is no such element of complicity on part of any of the officials of the respondent banks in the case relating to fictitious hospital equipment (second appeal) or the one involving consortium of banks (fifth appeal), scrutiny respecting legitimacy and bonafide of the claim on the touchstone, inter alia, of the subsisting value of the secured interest and chronology of events leading to attachment would be necessary. 174. It will be appropriate that such further scrutiny as is necessary on the touchstone of above principles is undertaken by the appellate tribunal after calling for further responses (and inputs) from each side. 175. Ordered accordingly. 176. Thus, the appeals are allowed. The impugned decisions of the appellate tribunal are set aside. The matters arising out of the appeals of the respondents stand revived and restored for further con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a third party in the property of an accused, acquired prior to the commission of the proscribed offence cannot be defeated or frustrated by attachment of such property under Section 8 of the Act. 19. The Hon ble Delhi High Court further recognized the right of such third party to proceed with enforcement of its interest in accordance with law such that while the order of attachment under the Act would not be rendered irrelevant, yet it would take a backseat such that the State action would be restricted to such part of the value of the property as exceeds the claim of the third party, if any. (Reference Paragraph No. 162-164 of the Axis Bank Decision) speak for itself. In terms with the Axis Bank Decision, the claim of the Respondent to the properties would be restricted to such part of the aggregate value of the properties attached as exceeds the claim of the Appellants. 20. In terms with the statutory safeguards incorporated in the Act, any party aggrieved by the confirmation of the Provisional Attachment Order by the Adjudicating Authority may challenge such confirmation in an appeal to this Tribunal under Section 26 of the Act and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record before passing the provisional attachment order. 24. This order is being passed in relation to secured properties in favour of banks which are not purchased from proceeds of crime. 25. The appellants are always at liberty to approach the Special Court to initiate the proceedings for disposal of secured properties, if so desired, the appellants to deposit the excess amount if such situation will arise. 26. The Appellants have nothing to do and have no connection with the allegation of crime committed by the borrowers, so far as money transferred from bank accounts to acquire the properties in question directly. The secured properties are admittedly not derived from criminal activities or proceeds of crime. The scope of the PMLA is to punish the accused person and not to punish the innocent people who are not involved in the crime within the meaning of Section 2 (u) read with Section 3 of the Act. 27. There is no nexus whatsoever, between the alleged crime and the appellants who have secured properties by way of mortgage and are victims of the fraud and innocent party. The definition of proceeds of crime as per Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sputed by the Respondent no.1. 32. The properties of the Appellant Banks cannot be attached or confiscated when there is no illegality or unlawfulness in the title of the Appellant Banks and there is no charge of money laundering against the Banks. During the course of arguments, the learned counsel for the respondent no.1 submitted that some of the bank officials were involved and they are being prosecuted by the CBI. But there is no allegation against the Banks as institutions. The Banks are victims. 33. The mortgage of properties is the transfer under the Transfer of Property Act as there is no dispute as regards the origin of funds or the title of the properties. As far as the Appellant Banks are concerned, the Banks have to recover its outstanding dues by taking over the possession of the mortgaged properties in case the concerned borrowers are not able to pay back the credit facilities availed by them and by way of the SARFAESI provisions these properties are being taken in possession by the Appellant Banks so that recovery can be made. 34. From the discussion made above, I am of the view that there is no nexus whatsoever between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22.09.2016 passed by the Adjudicating Authority, PMLA, confirming the Provisional Attachment Order is liable to be quashed and set aside. 39. The Hon ble High Court of Delhi, vide order dated 06.12.2019 passed in Crl.A.1090/2018 in the matter of Directorate of Enforcement Versus Indian Overseas Bank Ors. has clarified the status quo order of Hon ble Supreme Court passed in the appeal against the order dated 02.04.2019 passed in the matter of Deputy Director, Directorate of Enforcement Versus Axis Bank batch matters in CRL.A. No.143/2018. The order dated 06.12.2019 of Hon ble High Court of Delhi is reproduced below: ORDER 06.12.2019 Crl.M.A.42109/2019 (Exemption) Allowed, subject to all just exceptions. This application is, accordingly, disposed of. Crl.M.A. 42108/2019 Vide the present application, the applicant/respondents seek clarification of the order dated 01.11.2019 as to whether the Tribunal shall proceed with the present matter. Vide order dated 01.11.2019, this court remanded the matter to the Appellate Tribunal for PMLA and directe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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