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TMI Blog2023 (3) TMI 1509X X X X Extracts X X X X X X X X Extracts X X X X ..... cash flow and the sales in the project. That the Petitioner has a first ranking charge cannot be disputed. It is correctly said that this kind of an approach defeats the purpose of the establishment and formation of SWAMIH, the centrally funded project meant to assist desperate home buyers. There is no involvement of any Mantri Group entity in this at all and it cannot transfer any interest in the attached units. No such transfer would be recognized or valid in law. The second charge, that of Piramal, continues and is for Rs. 650 crores. Now there is a hypothecation of the receivables in favour of the Petitioner and the Piramal Group. From where this theory is derived that the Mantri Group might transfer an interest is unclear; and it is only speculation The Mantri Group must have an interest to be able to transfer it. Absent that interest there is nothing for the Mantri Group to transfer. There are no provision of the PMLA that has, combined with the non obstante clause, an overriding charge that would defeat, efface or render subservient the rights of a secured creditor. It is even unclear whether the attachment by the PMLA constitutes a sovereign debt in a case like this. Even i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken a development of a project known as Mantri Serenity valued at over Rs. 285 crores. SBICAP had a first charge over certain units in that project. Because of the 11th August 2022 order, that first charge of SBICAP is compromised and has directly affected the funding being sought by flat purchasers in respect of those units. There is, in paragraph 5, a mention of orders of 2020 and 2022 by the Karnataka High Court staying the operation of the FIR of the predicate offence under the PMLA. The FIR regarding the predicate offence was thus, it is submitted, not in effect or operational at the time of the 11th August 2022 impugned order. 6. A brief background about the investment of SBICAP in the project is from paragraph 6. In 2019, the Union Government approved the setting up of a Special Window in the form of an Alternate Investment Fund ( AIF ). This was to provide priority debt financing specifically to complete housing projects that had been interrupted or stalled and which were meant for the affordable or middle income housing sector. SBICAP is the Investment Manager of the first AIF established under the Special Window. It formed a fund called the Special Window for Affordable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the Government of India and other public sector financial institutions including Life Insurance Corporation and SBI itself. There is thus a clear fiduciary responsibility. 8. In December 2004, Castles Vista was incorporated. Mantri Developers held the majority stake. Sushil Mantri and his wife held the remainder. There was a Joint Development Agreement of 29th September 2010 with one Gokulam Shelters Pvt Ltd for the development of a residential project called Mantri Serenity. The agreement contemplated that another entity in the Mantri Group, Krishna Lila Park Foundation, and Gokulam would respectively receive 27% and 3% from the sale proceeds. The project had five phases. Each phase had a separate Real Estate Regulatory Authority ( RERA ) registration. Castles Vista made an investment of Rs. 650 crores which it obtained with financing from Piramal Capital and Housing Finance Ltd. 9. Ten years went by. Castles Vista could not complete the project. Only about 50% work was done. Last mile funding was necessary. Castles Vista came to SBICAP for funding through SWAMIH. After a due diligence, SBICAP agreed to fund Rs.360 crores through a subscription of 36000 non-convertible deben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended a credit or a loan to Mantri Developers at all, but to Castles Vista which was a wholly owned subsidiary of Mantri Developers and that the loan was by SWAMIH, a fund sponsored by the Union of India and managed by SBICAP. The issuance of debentures was also pointed out. 14. There appears to have been no further correspondence from the Respondents. 15. Then came the 11th August 2022 impugned order, a copy of which is at page 53. It is issued under Section 5(1) of the PMLA. The reasons to believe are that the Mantri Group diverted funds received from customers or home buyers to other projects and that this constitutes criminal breach of trust. Since Castles Vista did not complete the Mantri Serenity project in a timely manner, this caused anxiety and stress. As regards the SBICAP rights, the impugned order itself says that Mantri Developers collected funds partly either from loans or from home buyers and then diverted these. 16. But SWAMIH is sponsored by the Central Government for rescuing or resuscitating stressed or stalled projects by providing much needed funding. SWAMIH is the initial debenture holder and it has sanctioned an investment of Rs. 360 crores to Castles Vista ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Mantri Group might transfer an interest is unclear; and it is only speculation The Mantri Group must have an interest to be able to transfer it. Absent that interest there is nothing for the Mantri Group to transfer. 21. This may be a classic case of the Enforcement Directorate s reach exceeding its grasp. The impugned order seems to proceed on the footing that since the project was once being taken up by the Mantri Group , therefore that group still has divestible rights. This is supposition. It then goes on to say that the Mantri Group might transfer assets, which is guesswork. It implies that whatever rights the Mantri Group once had, these are immutable for all time, which is a presumption. And it more of less insinuates that the SBICAP and SWAMIH involvement is not lawful, is a planned-in-advance as some kind of smokescreen or a nefarious subterfuge and this last, we believe, belongs in the realm of fantasy. 22. This is not a matter of the assets of a private entity shown to be engaged in money laundering. What the impugned order has thrown into jeopardy are extraordinary amounts of public funds raised from the Central Government, LIC, SBI and nine public sector banks. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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