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TMI Blog2025 (2) TMI 747X X X X Extracts X X X X X X X X Extracts X X X X ..... n, Dehradun Vijay Kumar Kushwaha 28,00,000/- Facts in brief 2. The Directorate of Enforcement, Sub Zonal Office, Dehradun registered a case vide ECIR/08/PMLA/DNSZO/2013 on 26.06.2013 under provisions of PMLA, 2002, on the basis of FIR No. 389/2012, registered at Police Station, City Kotwali, Dehradun on 23.11.2012 under section 420 of IPC against Sanjay Minocha, Vijay Kushwaha and others for having received the proceeds of the fraudulent transactions to the tune of Rs.4 Cr. each, involving the South Indian Bank (SIB), Dehradun Branch, in the accounts of their firms, namely, M/s Minocha Furniture, Dehradun (A/c No. 00750210000724 maintained with UCO Bank, Pritam Castle, Paltan Bazar, Dehradun) and M/s Computer Mart, Haridwar (A/c No. 01144015000188 maintained with Oriental Bank of Commerce, Nidhan Niketan, Kharkari Branch, Haridwar) by means of Pay Orders No. 157752 & 157753, both dated 15.05.2012, paid on 16.05.2012 & 18.05.2012, respectively. 3. Investigations revealed the involvement of Sh. Manoj Kumar R., the then Branch Manager & Senior Manager of SIB and Sh. Jacob Kovoor, Ex. Additional Manager of SIB in the said crime for alleged transfer of public funds, by way of fraud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose is as below: (i) By crediting a customer's A/c without presenting any genuine Instrument in Outward Clearing; (ii) By issuing Pay Orders fraudulently; (iii) By honouring cheques issued from various accounts of firms/ individuals controlled by/related to Sh. Sanjay Minocha and others in inward clearing without making due debits to their respective accounts; (iv) By creating fake loans against Fixed Deposits without consent/demand of original depositors like Uttaranchal State Co-Operative Bank Ltd etc.; (v) By routing transactions through Overdraft Account of District Co- operative Bank maintained with South Indian Bank, Dehradun; (vi) By not crediting an A/c even though instrument is presented in Outward Clearing; (vii) By debiting an A/c without receiving any instrument in Inward Clearing. 6. As per the investigation report of the bank dt.10.01.2013, prima facie loss identified by the bank was Rs. 33,97,55,319/-. However, vide letter dated 01.01.2014, the internal investigator of SIB, Sh. Ranjith J., stated that the loss suffered by the bank has been calculated to be Rs. 30,68,38,618/-. 7. Further investigation revealed that Mr. Vinay Kumar Kushwaha is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the funds were routed through accounts of individuals/firms or by way of cash withdrawal from one account and depositing the same in the otheraccounts of his firms, while some funds were transferred directly to the loan accounts. 11. After detection of fraud in the bank, to avoid the clutches of law, Vijay Kumar Kushwaha deposited a total of Rs.80,34,000/- in five transactions in the South Indian Bank in lieu of/ against the proceeds of crime possessed by him. 12. It is alleged that Sh. Vijay Kumar Kushwaha & his associated firms, i.e., M/s I.T. Computer Park, M/s Uttarakhand IT Services & Trading Co. & M/s Computer Mart subtly utilized the proceeds of crime to repay the interest accrued on various loans taken by them, to repay the temporary over draft facility availed from time to time and to close the various cash credit limits, housing loan availed from different banks, thereby keeping the loan facilities, taken from various banks in running standard. They have utilised the proceeds of crime in maintaining the limit of the cash credit account and for purchasing of immovable properties. Had they not repaid the amount on the aforesaid loans by using the proceeds of crime, all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as collateral security in the OD accounts. The details of the transactions can be found in Tables 1 to 6 of the PAO. 18. Based on the above facts, the Deputy Director, Directorate of Enforcement (ED) entertained the reason to believe that during the period April, 2009 to June, 2012, Sh. Vijay Kumar Kushwaha and his associated firms, in connivance with Shri Manoj Kumar R, the then Branch Manager and Shri Jacob Kovoor Ex- Additional Manager of South Indian Bank, Rajpur Road, Dehradun siphoned off and received the funds of Rs. 10,71,08,800/- from the South Indian Bank Dehradun without availability of adequate funds in their respective accounts and generated proceeds of crime from the bank to the tune of Rs.10,71,08,800/- and mainly utilized the same to settle quantum of loans taken in the name of the firms, to pay off the interest amount accrued on loans, adjustments of temporary over draft taken in the firms from time to time and purchase of immovable properties. Proceeds of crime were transferred from one account to another account for the purpose of layering/laundering in an attempt to project it as untainted. The said proceeds of crime were invested/used to pay off several liabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.2013, additional sections were also added to the FIR No. 389/2012 u/s 120B, 409, 467, 468, and 471 of the IPC. 25. On 26.06.2013 the Enforcement Directorate registered the ECIR/08/PMLA/DNSZO/2013 on the basis of the FIR which was registered on the Complaint of the Appellant Bank. The Appellate Bank had also filed the Writ Petition (Crl.) 182/2013 before the Hon'ble High Court of Uttarakhand at Nainital, seeking fair and speedy investigation in the FIR. The Hon'ble High Court of Uttarakhand at Nainital was pleased to direct that the investigation in the FIR be handed over to the Central Bureau of Investigation, vide its Order dated 11.09.2014.A copy of Order dated 11.09.2014 passed by the Hon'ble High Court of Uttarakhand at Nainital in Writ Petition (Crl.) 182/2013 titled South Indian Bank Lid. v. State of Uttarakhand & Ors.has been brought on record by the appellant Bank. 26. It is submitted that a valid equitable mortgage was created on the attached properties in favour of the Appellant Bank u/s 58(F) of the Transfer of Property Act, 1882, to make good on the losses suffered by the Appellant Bank and secure the public money siphoned off from the Appellant Bank. Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kushwaha filed a Review Application against the Order dated 16.09.2016 and the same was allowed, thereby recalling the said Order. Accordingly, the OA No. 224 of 2015 was restored to its original position and was tagged along with the counter claim TCC No. 02/19 filed by Mr. Vijay Kushwaha. Further, Mr. Vijay Kushwaha has filed an appeal before Hon'ble Debt Recovery Appellate Tribunal, Allahabad in one of the connected matters, and the Hon'ble DRAT, Allahabad was pleased to stay the complete proceedings. 31 Coming to the legal contentions, it is firstly argued that the Appellant Bank is a bonafide third party which was defrauded by Mr. Vijay Kumar Kushwaha who had colluded with the other accused individuals, including the Bank's own staff. The bonafides of the appellant Bank are clearly reflected from the fact that the Bank in the instant case is both the complainant and the victim. The Appellant Bank is not an accused in the scheduled offence and in no manner has it colluded in the fraud and has a bonafide claim over the attached properties mortgaged with the Appellant Bank and attached by the Respondent as proceeds of crime or equivalent value of the proceeds of crim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of PMLA." 33. It is submitted that the above-quoted paragraphs make it abundantly clear that the Appellant Bank is entitled to the release of the Attached properties which were deposited/mortgaged with the Appellant bank to secure the loss of public money suffered by the Appellant Bank and the remainder of its value thereafter may be made available to the Respondent after the Appellant bank has enforced its claim by disposal of the Attached Properties. 34. It is also argued that the Appellant Bank, being a bonafide third party claimant, acquired interest in the attached properties lawfully without being complicit in the offence of money-laundering, and initiated action in accordance of law for enforcement of such interest on 23.03.2015 prior to the attachment by the Respondent on 28.09.2016, the impugned order is ex- facie, ultra vires the powers of the statute and totally illegal and arbitrary to the extent of the attachment of the said properties. 35. It is further argued that the Enforcement Directorate has made a factually wrong claim that the attached properties represent the proceeds of crime generated by Mr. Vijay Kumar Kushwaha and are part of the offence of money launde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 141 of the order of the Hon'ble High Court dated 02.04.2019 is cited, which is as below: "This court finds it difficult to accept the proposition that the jurisdiction conferred on the State by PMLA to confiscate the proceeds of crime" concerns a property the value whereof is "debt" due or payable to the Government (Central or State) or local authority. The Government, when it exercises its power under PMLA to seek attachment leading to confiscation of proceeds of crime, does not stand as a creditor, the person alleged to be complicit in the offence of money-laundering similarly not acquiring the status of a debtor. The State is not claiming the prerogative to deprive such offender of ill-gotten assets so as to be perceived to be sharing the loot, not the least so as to levy tax thereupon such as to give it a colour of legitimacy or lawful earning, the idea being to take away what has been illegitimately secured by proscribed criminal activity." 40. Further, in para 147-149, it was held as follows: "147. To sum up on the issue, the objective of the legislation in PMLA being distinct from the purposes of the three other enactments viz. RDBA, SARFAESI Act and Insolvency Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the parties. The facts material to the decision on these appeals are not in dispute. The properties which have been attached by the Respondent Directorate in exercise of powers under section 5 of the PMLA, 2002 were, admittedly, already under mortgage with the appellant bank. The Appellant Bank has argued that it is the victim of a fraud and has the first charge over the property. As such, it is entitled to appropriate the properties in view of the charge created on the properties in its favour. The Appellant has inter alia placed reliance on the judgement titled Deputy Director, Directorate of Enforcement. Delhi v. Axis Bank. 44. Having considered the above submissions of the Appellant and the arguments advanced in favour thereof, I find that the underlying issue is squarely covered by the judgement of this Appellate Tribunal in the case of JM Financial Asset Reconstruction Company Ltd. FPA-PMLA-3223/MUM/2019 (order dated 26.04.2024). Relevant part of the said judgement is extracted below for ready reference: "9. The sub section (8) of section 8 provides for settlement of rights of the claimants having legitimate interest in the properties even if it is attached an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... another bank and therein also the same accused committed default in making the payment. In fact, subsequent loan with mortgage of property was by creation of forged documents. In that case, claim for the property was made by two different financial institutions based on the mortgage of the property with them to secure the loan. If it is interfered at the instance of one financial institution leaving the other, it would be nothing but to affect the rights of other institution. 23. To save the situation aforesaid, the safeguard is available under section 8(8) of the Act of 2002 on the confiscation of the property. The property would be settled in favour of the rightful claimant in case of claim by two financial institutions. The Special Court and Central Government can take appropriate decision to secure both the financial institution appropriately and proportionately. 24. The above illustration has been given only to show significance and relevance of section 8(8). It was brought by the legislature for the purpose sought to be achieved. 25. In the light of the aforesaid, the interference in the order of the attachment order, on a challenge by the financial institution, should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... realization of the amount at the earliest. But, there can be an exception, as given above. 30. In the light of the aforesaid, we do not find reason to allow the appeal at the instance of the assignee. 31. For all the reasons given above, the appeal is dismissed. 32. It is however clarified that the outcome of the appeal would not affect the right of the appellant ultimately if the subject property is taken under section 8 (8) of the Act of 2002, rather they would be at liberty to make rightful claim under section 8 (8) of the Act of 2002. In case of acquittal of the accused, resulting in release of property from attachment, again the appellants can pursue their rights for which this order would not come in their way." 45. The ratio of the aforesaid judgement of this Appellate Tribunal is squarely applicable to the present case. Accordingly, following the ratio of the judgement in JM Financial as extracted above, the present appeal is hereby dismissed. Pending applications, if any, shall also stand disposed of. 46.The Appellant shall, of course, be at liberty to move an appropriate claim before the Ld. Special Court, under Section 8(8), as has been made clear in para 32 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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