2019 (1) TMI 328 - AT - Money Laundering

Tribunal allows appeal, sets aside order, releases property. Borrower's case proceeds to Special Court for loan amount decision.

The Tribunal allowed the appeal, set aside the impugned order, and released the attached property forthwith. The proceedings against the borrower would ... Provisional attachment of mortgaged property - priority over other debtors - continuation of attachment during the pendency of the proceedings relating to the Offence under the said Act - Section 26E of the SARFAESI Act, 2002 - Held that:- The Appellant-Bank being a Secured Creditor, is entitled to priority over all other debts and government dues, including revenues, taxes, cesses and rates due to the Central Government, State Government or local authority. Even Hon‘ble Andhra Pradesh High Court in the case of B. Rama Raju Vs. Union of India & Ors. [2012 (5) TMI 240 - HIGH COURT OF ANDHRA PRADESH] in which the Hon'ble High Court has held that if the Adjudicating Authority is satisfied as to the bona fide acquisition of property, it should relieve such property from provisional attachment by declining to pass an Order of confirmation of the provisional attachment. As admitted by the respondent that the Appellant-Bank is an innocent party and the property, in question, which is provisionally attached by the Respondent-Deputy Director ought to have been released by the Adjudicating Authority under Section 8(2) of PMLA, but despite of the same, the impugned order is passed which is against the law. The Respondent has since the Reply dated 24.09.2018 filed who is silent except stating that the PMLA has got overriding effect in the matter of attachment of any property, as value of proceeds of crime, by virtue of the non-obstante clause contained therein, as against the legal dictum created in all other enactments, the Department had failed to address as to how the property (mortgaged property) can be attached in the facts of present case - It appears that it is mere case of harassment to the financial institution. If it will continue which bank and financial institution would lend the loan against the mortgaged property. The order has been passed without appreciating the law and the judgement rendered by the Supreme Court. The attached property is released forthwith - impugned order set aside - appeal allowed. Issues Involved:1. Delay in filing the appeal.2. Legality of the provisional attachment order.3. Priority of secured creditors under SARFAESI Act and RDDBFI Act.4. Bona fide acquisition of property and its release from attachment.5. Precedent cases and their applicability.Detailed Analysis:1. Delay in Filing the Appeal:The Appellant acknowledged a delay of 17 days in filing the appeal, which was not deliberate or intentional but due to bona fide reasons. The delay was condoned as sufficient cause was shown.2. Legality of the Provisional Attachment Order:The Deputy Director, Directorate of Enforcement, Chennai, passed a Provisional Attachment Order under Section 5 of the Prevention of Money Laundering Act, 2002 (PMLA), attaching immovable and movable properties, including a Fixed Deposit Receipt (FDR) of Rs. 50,00,000/- held by Defendant No. 3 with the Appellant Bank. The Adjudicating Authority confirmed the provisional attachment, concluding that the attached property was involved in money laundering.3. Priority of Secured Creditors under SARFAESI Act and RDDBFI Act:The Appellant Bank argued that under the amended provisions of Section 26E of the SARFAESI Act, 2002, and Section 31B of the Recovery of Debts due to Banks and Financial Institutions Act, 1993, the debts due to secured creditors shall be paid in priority over all other debts and government dues. The Tribunal noted that the amended provisions, effective from 16.08.2016, empowered the Appellant Bank to have priority over the mortgaged property.4. Bona Fide Acquisition of Property and Its Release from Attachment:The Appellant Bank contended that the FDR was a secured asset, and a legally sustainable lien was created in favor of the Bank. The Tribunal referenced the Andhra Pradesh High Court's decision in B. Rama Raju Vs. Union of India, which held that if the Adjudicating Authority is satisfied with the bona fide acquisition of property, it should relieve such property from provisional attachment. The Tribunal found that the Appellant Bank was an innocent party, not involved in money laundering, and the mortgaged property was not purchased from the proceeds of crime.5. Precedent Cases and Their Applicability:The Tribunal cited several precedent cases, including Solidaire India Ltd. vs. Fairgrowth Financial Services Ltd., where the Supreme Court held that the non-obstante clause in the later enactment prevails over the earlier one. The Tribunal also referred to its own decisions in cases like State Bank of India vs. The Joint Director, Directorate of Enforcement, and Aditya Birla Finance Ltd. vs. The Deputy Director, Directorate of Enforcement, where it was held that secured creditors have priority over all other debts and government dues. The Tribunal emphasized that the Adjudicating Authority must follow higher authorities' judgments and respect the legal principles established by the Supreme Court and High Courts.Conclusion:The Tribunal allowed the appeal, set aside the impugned order, and released the attached property forthwith. It clarified that the proceedings against the borrower would continue before the Special Court and be decided on their own merit. The Tribunal also noted that the issue of the quantum of loan amount due is to be decided by the appropriate court. No costs were imposed.