2017 (11) TMI 838 - AT - Money Laundering

Tribunal grants appellant escrow access, upholds recovery rights from attached properties.

The Tribunal allowed the appellant to operate the escrow accounts and withdraw amounts owed by the borrowers, modifying the impugned order. The attachment ... Provisional attachment - Recovery of loan amount against the three-mortgaged properties - Appellant undertakes that after recovering the EMI due, from the attached Escrow accounts, the Appellant shall release the necessary amounts due, towards the ‘amenities charges’ to its borrowers - Held that:- As submitted that the appellants in the said appeals are not able to deposit service tax for the period April-September, 2016-17 for which it has received a notice from the office of Assistant Commissioner, Service Tax, Mumbai and it is directed to file the return within two days showing its self assessed tax and payment particulars. The appellants have also received a letter from Brihan Mahanagar Palika for payment of arrears of outstanding towards the property tax amounting to ₹ 16,60,400/- for the period 01.04.2016 to 31.03.2017. They have also received a letter from Ferani Developers for payment of maintenance charges of the property. The details of calculations required to be paid per month are given in the application. As the appellant in the present appeal has agreed to release the said amount due and undertake to pay the borrowers on regular basis once the past rent is released as deposited by the tenant. The impugned Order records that although the interest of the appellant herein needs to be protected, but in the larger national interest, the properties are being attached. Even otherwise if the Special Court trying the offences under Section 3 comes to the conclusion that the properties are not liable to be confiscated, then the same shall stand released the appellant in terms of Section 8(8) of the Act. It is thus sought to canvassed that the interest of the appellant is secured. When the properties do not even remotely or prima facie bear a link with the proceeds of crime or the criminal activity, then the said properties are not liable to be attached under the false pretext of ‘national security.’ This Tribunal by order dated 27.07.2017 had directed the tenant to deposit the rent in the new designated accounts of the Appellant in terms of para 17 of the Order. This Tribunal in its order dated 27.07.2017 had recorded the Appellant’s undertaking to the extent that, in the event Appellant loses the present appeal then the Appellant shall pay back/restitute all the withdrawn amounts to the concerned authority. The Appellant seeks to clarify that the Appellant shall be liable only to restitute the amounts withdrawn towards repayment of EMIs and not the amenities charges as they are actual expenses payable on behalf of the borrowers and not retained by the Appellant Bank. There is a force in the submission of the appellant. The clarification sought by the appellant is allowed. The appellant is now permitted to operate the Escrow Accounts, being Accounts No. 200999779905 and 200999779912, IndusInd Bank, Lower Parel Branch, Mumbai and withdraw the amounts lying in such Escrow Accounts, which comprises only of the instalments that were legitimately owed to the appellant by the borrowers for the loans advanced to them. The past amount deposited by the tenants be released to the appellant forthwith. The prayer present appeal as well as stay applications are allowed. The impugned order against the present appellant is modified. The appellant is granted the liberty to move application in the appeals filed by the borrowers appeals in case the appellant is not to recover the loan amount against the three-mortgaged properties. Till the decision of the said appeals of the borrowers the attachment of immovable properties shall continue. The impugned order is modified accordingly. Issues Involved:1. Legitimacy of the Provisional Attachment Order (PAO) dated 29.06.2016.2. Validity of the loans sanctioned by the appellant.3. Connection of the attached properties with the alleged money laundering activities.4. Rights of the appellant as a bona fide lender.5. Adherence to due process by the appellant before sanctioning loans.6. Entitlement of the appellant to recover dues from the attached properties.7. Application of the Prevention of Money Laundering Act (PMLA) provisions.Issue-wise Detailed Analysis:1. Legitimacy of the Provisional Attachment Order (PAO) dated 29.06.2016:The appeal challenges the Impugned Order dated 21.03.2017, confirming the PAO issued by the Enforcement Directorate. The PAO attached properties mortgaged to the appellant, Aditya Birla Finance Ltd., which were acquired by Defendants No. 4, 5, and 6 in 2005, well before the alleged fraudulent activities occurred between 2007 and 2013.2. Validity of the loans sanctioned by the appellant:On 28.10.2014, the appellant sanctioned three loans totaling Rs. 46 Crores to three companies against properties acquired in 2005. The appellant followed due diligence by obtaining necessary documents and security before approving the loans.3. Connection of the attached properties with the alleged money laundering activities:The properties attached were acquired in 2005, predating the alleged fraudulent activities. The respondent did not present evidence connecting the appellant or its borrowers to the siphoning of funds by Tayal Group of Companies. The rent in the escrow accounts, which is the subject of attachment, does not come from any accused in the FIRs.4. Rights of the appellant as a bona fide lender:The appellant, a bona fide lender, followed due process and exercised diligence in sanctioning loans. The properties were mortgaged to the appellant by virtue of assignment of loan, and the appellant is entitled to recover its dues from these properties.5. Adherence to due process by the appellant before sanctioning loans:The appellant adhered to due process by obtaining various documents such as acceptance of sanction letters, loan agreements, promissory notes, board resolutions, and security documents, including title searches and legal opinions, before sanctioning the loans.6. Entitlement of the appellant to recover dues from the attached properties:The Tribunal recognized the appellant's right to recover dues from the attached properties, as these were mortgaged to the appellant before the alleged fraudulent activities occurred. The Tribunal allowed the appellant to operate the escrow accounts and withdraw amounts owed by the borrowers.7. Application of the Prevention of Money Laundering Act (PMLA) provisions:The Tribunal referred to Rule 8 of The Prevention of Money Laundering (Taking Possession of Attached or Frozen Properties Confirmed by the Adjudicating Authority) Rules, 2013, which allows a mortgagee bank to retain funds until recovery of dues or final determination by the Special Court. The Tribunal cited previous judgments, emphasizing that properties mortgaged before the alleged fraudulent activities cannot be subjected to attachment under PMLA.Conclusion:The Tribunal allowed the appellant to operate the escrow accounts and withdraw amounts owed by the borrowers, modifying the impugned order. The attachment of immovable properties shall continue until the decision of the appeals filed by the borrowers. The appellant's entitlement to recover its dues from the attached properties was upheld, recognizing its status as a bona fide lender.