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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 ..... te of Enforcement Delhi vs. Axis Bank and Ors. And other batch matters, the present case be remanded back to Appellate Tribunal for PMLA and the tribunal shall restore the appeal and after hearing both the parties, decide the same within six weeks from the receipt of this order. The appeal is disposed of, accordingly. Pending application stands disposed of." 2. In compliance to the aforesaid order of the Hon'ble Delhi High Court the appeals are restored to file by fixing 28.11.2019 on which date both the parties were present and they were allowed to file written synopsis. Since, the matter is remanded to the tribunal and since the appeal is restored, the present appeals are to be decided in the light of orders passed in Crl. Appeal No. 143/2018 & Crl. M.A. 2262/2018 in the matter of Deputy Director, Directorate of Enforcement, Delhi vs. Axis Bank and other batch matters. 3. In view of the above, the appeals are heard afresh. Since, the properties are involved in the present appeals are same and the pleadings are also same, so all the appeals are taken up for hearing together and the present common order is passed. 4. The facts of the appeals as per records are as follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Limit was enhanced from Rs. 12.60 Crore to Rs. 16.20 Crore. LC/LG limit from Rs. 3.60 Crore to Rs. 4.80 Crore. In 2006, the Cash Credit Limit was further enhanced from Rs. 16.20 Crore to Rs. 24.50 Crore and LC/LG limits from Rs. 4.80 Crore to Rs. 10.00 Crore. iii. On 01.02.2007, a fresh Term Loan of Rs. 190.52 Crore was sanctioned by Consortium Members including Rs. 45.00 Crore of IOB for setting up another studio at Mumbai and a studio at Chennai. The balance loan amount was sanctioned by other member Banks. iv. On 21.08.2009, another Term Loan of Rs. 275.00 Crore was sanctioned by Consortium banks including Rs. 60.00 Crore by IOB for refurbishment of Studio at NOIDA and the expansion of Studio at Mumbai. The balance loan amount was sanctioned by other member Banks. v. Apart from above in 2010, Cash Credit Limit was also enhanced to Rs. 63.00 Crore, LC limit of Rs. 8.00 Crore and LG limit of Rs. 2.00 Core by IOB. Besides, onetime LG limit of Rs. 8.75 Crore was also sanctioned for advance payment to be received by SPV formed for post-production job abroad. (d) As on 09.01.2012 total outstanding of CCL towards all consortium banks was Rs. 615.56 Crore, out of which lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... namallee Road, Chennai 7.16 6 Property of Shri P.K. Tewari, Smt. Meena Tewari, Shri Anand Tewari and Shri Abhishek Tewari situated at 6, Southern Avenue, Maharani Bagh, New Delhi 12.50 Total 111.96 The said provisional attachment order was confirmed by the Adjudicating Authority on 22nd September, 2016 which has been challenged by the banks. 8. M/s. Century Communications Ltd. filed appeal no. FPA-PMLA- 1528/DLI/2016 which was decided alongwith other bank matters on 28.06.2018. 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be prima facie proved by the Respondent/ED that the properties mortgaged with the Appellant Banks are from tainted money/acquired out of proceeds of crime. (iv) It is not a situation that the money was lent for some other purpose and then the said funds have been diverted to purchase these attached properties. The credit facility was given for setting up offices/expansion of business by purchasing properties, setting 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 die Registration charges. 5,000.00 08.08.2007 By Ch. No. 458791 dated 04.08.2007 (DD No. 534587919) issued to ICICI Bank A/c of Stamp Duty from CCL, NON LIEN A/c No. 01150200004910 die Registration charges 25,010.00 Amount Received Details Total 21,077,630.00 By Ch. No. 619090 dated 03.07.2007 Received from Footcandles films Pvt. Ltd. to CCL OBC Bank A/c 1866 (CCLPIXION MUMBAI) on 05.07.2007 500,000.00 By Ch. No. 921220 dated 21.07.2007, Received from Via Earth Pvt. Ld. To CCL-OBC Bank A/c No. 1866 (ICCL-Pixion Mumbai on 23.07.2007 10,000,000.00 CENTURY COMMUNICATION LTD. Name of Property (iv) Amount of Property / Registration Date Mode of Payment Amount Property of Century Communication Ltd. 6th Floor, No. 41, Jayanth Tech Park, Mount Poonamallec High Road, Chennai -600089 (11835 Sq. Ft.) on 23.08.2007 73,157,594.00 28.07.2007 DD issued to Vishranhi Homes Pvt. Ltd. from CCL IOB Non Lien A/c No. 011502000004910 22,500,000.00 22.08.2007 Amount paid to The Sub Registrar Alandur, Chennai Vishranthi Homes Pt. Ltd.) From CCL IOB-NON Lien A/c No. 011502000004910 720,553.00 22.08.2007 DD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Kr. Jain, Shree Lekha Jain, Sushila Jain & Sushil Kr. Jain 90,00,000.00 By Cheque 493683, 493684, 493685 & 493686 dated 23.11.2006 issued from CCL - IOB Bank A/c - 1530 to OBC Bank A/c No. 1866 for (Rs. 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 Rs. 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 Rs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctments 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. 149. An order of attachment under PM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that the other transactions form part of the former, the burden t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Since both actions are in accord with law, in order to coexist and be in harmony with each other, following the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 special court under Section 8(7) & (8) PMLA. The due diligence is to be tested amongst others, on the touchstone of questions as to whether the party had indulged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 available to show that such property before its acquisition was held by the person accused of moneylaundering (or his abettor), or it was involved in a transaction which had interconnection with transactions concerning money-laundering, the burden of proving facts to the contrary so as to see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscation 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, 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 consideration by the appellate tribunal. The parties are directed to appear before the said forum on 15.04.2019. 177. The appeals, and the applications filed therewith, stand disposed of in above terms. " 13. During the course of hearing the learned counsel for the Appellant Banks submitted the following; a) All legal proceedings for recovery were initiated by the Banks prior to provisional attachment. b) That it is clear that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 then before the Hon'ble High Court under Section 42 of the Act against the order of this Tribunal. Accordingly, under the legislative and statutory scheme of the Act, unless a party has exhausted 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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 2(1) (u) of the PML Act comprises of the property which is derived or obtained as a result of criminal activities. The secured property is not acquired from proceeds of crime either directly or indirectly. 28. From the materials available on record it becomes clear that the money have been advanced for the purchase of the properties by the Appellant Banks. Undisputedly, the money was paid directly from the Bank accounts to the seller and thereafter the mortgages were created. It is also not disputed that the money released by the Banks was sanctioned for the said purpose and were part of the financing the project. 29. The Enforcement Directorate (Respondent no.1) does not dispute the fact that the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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 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. 35. The Adjudicating Authority has not appreciated the facts and law involved in the matter. The primary objective of Section 8 of PMLA is that the Adjudicating Authority to take a prima facie view on available material and facts produced. The contentions raised by the Respondent's Advocate have no substance. The provisional attachment order in the present matters is bad in law, hence liable to be set aside. 36. In the present appeals, it is an admitted position that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondents 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 directed the said Tribunal to restore the appeal and after hearing both the parties decide the same within six weeks from the receipt of this order. The said order was passed on the consent made by the parties and in view of the order passed by this court in Crl.A. 143/2018 in Deputy Director, Directorate of Enforcement, Delhi vs. Axix Bank & Ors. and other batch matters. Learned counsel appearing on behalf of the nonapplicants/ petitioner submits that the Hon'ble Supreme Court has granted status quo qua the property in question, however, there is no status quo to proceed with the matter by any court including the Appellate Tribunal of PMLA. This fact has not been disputed by counsel for the respondent. Thus, it is clarified that the order of the status quo of the Supreme Court is regarding the disposal of the property, therefore, Appellate Tribunal of PMLA is directed to comply with the order dated 01.11.2019 passed by this court within six weeks fro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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