TaxTMI 
TaxTMI 
TaxTMI 
2017 (8) TMI 754
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....Shri S.L. Gupta, Advocate For the Respondent : Shri N.K. Matta, Advocate JUDGEMENT FPA-PMLA-1026/KOL/2015, FPA-PMLA-1072/KOL/2015, FPA-PMLA- 1153/KOL/2015, FPA-PMLA-1148/KOL/2015, FPA-PMLA-1149/KOL/2015, FPA-PMLA-1150/KOL/2015, FPA-PMLA-1151/KOL/2015, FPA-PMLA-1152/KOL/2015, FPA-PMLA-1154/KOL/2015, FPA-PMLA-1155/KOL/2015 & FPA-PMLA-1156/KOL/2015, 1. By this common single Judgement we propose to decide the above- mentioned appeals as the facts and legal issues in all the appeals are connected with each other. 2. The brief relevant facts are that:- (a) on the basis of written complaint filed by Chief Vigilance Officer. Union Bank of India, Central Office, Union Bank of India, Union Bank Bhawan, 239, Vidhan Bhawan Marg, Mumbai-400021 vide reference no. VIG/NKA/RCEZ-PC-94/937 dated 1st September, 2009, Central Bureau of Investigation, BS&FC, Kolkata registered FIR No. RCBSK2009E008 against the following accused persons under section 120B read with Section 420, 409 of IPC Section 13(2) read with 13(1)(c ) & (d) of Prevention of Corruption Act. (i) Shri S. Govindan, the then Dy. GM, Nodal Regional Office, Union Bank of India, Kolkata, Presently Retd. (ii) Shri Bharat Jain, Direct....
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....ffence under Section 420 & 120B of IPC are Scheduled offences as mentioned in section 2(1)(y) of PMLA, 2002 (as amended). 5. The ED investigated the case and issued Provisional Attachment Order (PAO) dt. 04.02.2015 with the attachment of 08 (eight) Nos. of immovable properties concluding that these properties are involved in money laundering. 6. The Respondent/Department, based on the material collected and with reasonable belief recorded in writing, has issued the Provisional Attachment Order on 04.02.2015 under sub-Section (1) of Section 5 of the PMLA in respect of the immovable properties, as detailed below, to the tune of Rs. 10.82 Crore. Immoveable Properties S. No. Name of Property Year of possession Attached with the company Value 1. Flat No. 9C, Paramount Building, 25, Ballygunge Circular Road, Kolkata- 700 019 2000 Flat owned by Shri Bharat Jain, Director of M/s. Nik Nish Retail Ltd. and other companies Rs. 56 lakhs 2. Flat No. 9D, Paramount Building, 25, Ballygunge Circular Road, Kolkata- 700 019 (Area: 3215 Sq. ft.) 2000 Flat owned by Smt. Eela Jain, Director of M/s. Nik Nish Retail Ltd. and other companies & W/o of Shri Bharat Jain Rs. 2.30 ....
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....ellant bank i.e. State Bank of India were acquired and possessed by the respective owners since 2000 which is much before the respondents availed the loan from Union Bank of India and therefore no proceeds of crime are invested in these properties and even prior to the coming in force of the Act of 2002. Serial no. 6-8 are mortgaged with Union Bank of India. 10. The provisional attachment orders were confirmed by the impugned order dated 02.07.2015. The order is challenged by banks as well as the borrowers on various grounds by filing of above-referred relevant appeals. The borrowers are also arrayed as respondents in the appeals filed by the two banks as mentioned in serial no. 1 and 2. The appeals at serial no. 2 to 11 are independently filed by the borrowers challenging the impugned orders. 11. State Bank of India The appellant at serial no. 1 i.e. State Bank of India has filed the above appeal u/s 26 of the Money Laundering Act, 2002 against the order dated 22nd July, 2015 in OC No. 421/2015 passed by the Adjudicating Authority confirming the Provisional Attachment Order dated 04.02.2015 in the case filed No. ECIR/41/2009/KOL/PMLA of the Joint Director Enforcement Directorat....
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.... Jain, Smt. Neera Bhojnagarwala and the officer of the Union Bank, Shri S. Govindan. In the complaint the allegations were that the accused persons had availed various credit facilities/overdrafts from Union Bank of India in the names of their various concerns. The loan amount was withdrawn on transferred to the accounts maintained with the Appellant/State Bank of India; the amounts diverted to the accounts of the Sister concerns; the limits sanctioned to M/s Nik Nish Retails Ltd., M/s Vishi Commercial Pvt. Ltd. and M/s NB Services E.com to the benefit of Shri Bharat Jain of M/s Nik Nish Retail Ltd. have all turned NPA and from the investigation that Shri Bharat Jain in active connivance with Shri S. Govindam, diverted the bank"s funds through his connected accounts and outstanding in the accounts, where credit facilities are sanctioned as on 23.07.2009 was claimed as Rs. 1428.24 lacs. (x) On the registration of the FIR by CBI and further investigations the Respondent no. 1 also recorded Enforcement Case Information Report (ECIR) and observed that there was a prima facie case for commission of offence under Section 3 of the PMLA. 13. The details of following properties which are ....
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.... for sanctioning of the credit facilities and take over the Loan/ Credit facilities from State Bank of India. The Appellant/State Bank of India on 11.05.2005 has sanctioned the limits. The question of money-laundering or any amount paid by it as proceeds of crime does not arise within the meaning of Section 3 of the Act. 15. Union Bank of India The above mentioned appeal in serial no. 2 has been filed by the Union Bank of India under section 26 of Prevention of Money Laundering Act, 2002 against the order dated 2nd July, 2015 in O.C. No. 421/2015 passed by the Adjudicating Authority thereby upholding the Provisional Attached Order dated 4th February, 2015. 16. The Appellant Bank i.e. Union Bank of India who is appellant in appeal no. 1072/2015 provided the following loan facilities in the year 2008 to its borrowers against the mortgage over the properties mentioned below: Account No. with the UBI Name of the account holder Loan facility as availed Amount of loan Outstanding as on 31.03.2015 301501010995780. Loan sanctioned by Ezra Street Branch, Kolkata. M/s. Vishi Commercial (P) Ltd. The company has two directors namely Shri Pawan Kumar Jain and Shri Pradip Kumar Jain. ....
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....s N.B. Services E.Com through its proprietor Ms. Neera Bhojnagarwala in reference to A/c No. 301506310008018 whereby the appellant bank demanded an amount of Rs. 1,56,66,812.00 together with interest till the date of realization from the respondents and their companies within 60 days failing which it was apprised that the appellant shall take steps under section 13(4) of the SARFAESI act including taking of possession of the mortgaged properties. 18.2. The second notice under 13(2) of the SARFAESI Act, 2002 dated 09.10.2009 bearing reference no. adv:erza:506103:09 was issued to M/s Nick Nish Retail Ltd. as well as M/s Akhil Orchards Pvt. Ltd. and M/s Bansilal Credits Pvt. Ltd. whereby the appellant bank demanded an amount of Rs. 10,28,74,036.24.00 together with interest till the date of realization from the respondents and their companies within 60 days failing which it was apprised that the appellant shall take steps under section 13(4) of the SARFAESI Act including taking of possession of the mortgaged properties. 18.3. As the borrowers did not make any payment as per demand of the appellant, the appellant bank took possession of all the mortgaged properties on 20.05.2013 and 2....
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....the banks i.e. State Bank of India and Union Bank of India) is that they obtained the loan from the two banks i.e. appellants at Sr. No. 1 & 2 and however as far as the attached properties Sr. No. 1 to 5 are concerned they admit that they were mortgage to the State Bank of India (SBI) towards loan provided by the SBI. These properties were not part of the collateral securities towards loan given by the Union Bank of India. With regard to properties at serial no. 6 to 8 it is stated that the property at serial no. 6 is a Flat which was given as a collateral security by M/s NB Services to the Union Bank of India. Properties at Serial no. 7 & 8 were given as collateral securities to the Union Bank of India against the loan obtained by M/s NikNish Retail Ltd. Infact the borrower are not disputing the facts stated by two banks. 19.1. It is submitted that the Provisional Attachment Order dated 04.02.2015 has been confirmed by the learned Adjudicating Authority by its order dated 02.07.2015 in a mechanical manner. All the attached properties were acquired/purchased by the Appellants much prior to the Prevention of Money Laundering Act, 2002 (PMLA) coming into force and even before availm....
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....e appellants in any manner. These transactions are normal business transactions; b. The unsecured loans at the time of sanction was Rs. 5.15 crore as on 31.03.2007 which increased to Rs. 7.16 crore on 31.03.2008. This shows that money has actually been infused and not withdrawn and allegations of the respondent to this effect do not survive. Infusion of the funds is duly reflected in the respective Balance sheets. It is pertinent to note that the Short Term loans / Inter corporate loans were obtained as and when required in order to meet the additional fund requirements of the appellants; c. As regards payments to M/s Bansilal Credit Ltd. / Eco Orchards, it is submitted that the payments were made towards purchase of goods. For instance, Rs. 1.40 crore was paid to Bansilal Leisure Parks Ltd. towards payment of outstanding dues against purchase of goods. The purchase transactions are reflected in the Balance Sheet for the Assessment Year 2007 - 2008 which clearly establishes the fact that such payments were regular business transactions and cannot be termed as diversion of funds as alleged ; d. The allegation of the respondent that an amount of Rs. 1.40 crore was diverted towards....
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....e, the impugned order is also liable to be quashed and set aside on this ground alone. 20. It is stated by the counsel appearing on behalf of borrowers that since the account became irregular and was classified as NPA on 30.11.2008. These properties of Sh. Bharat Jain are mortgaged with the Bank since 11.05.2005 and even before this date, It was mortgaged with State Bank of India. This property has been acquired by Sh. Bharat Jain on 04.12.2001 i.e. much-much before the alleged date of crime. No money disbursed by the Union Bank of India from its Loan Accounts, has been invested in acquiring his property. Furthermore, the Appellant/State Bank of India had mortgaged charge over the property prior to the date of the crime. 21. It is admitted by the borrowers that the Bank had already filed the Suit for recovery and has also taken the action under SARFAESI Act. Notice under Section 13(2) was served on 14.08.2009 and 17.12.2009 and possession was taken over on 22.11.2011, however, the mortgagor approached the DRT and because of the same, any further action could not be taken. The Notice of the Bank cannot interfered by the Court/Tribunal. 22. Admittedly the ED has attached the prope....
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....hence, cannot be attached. Even before the date of occurrence of crime, the Defendant State Bank of India already has charge over the properties. 24. In the case of properties of M/s Midvale Systems Pvt. Ltd., the mortgage charge in favor of the Bank is also duly recorded with the Registrar of Companies. The Bank obtained the Search Report of the records of the Registrar of Companies which duly shows the Registration of Charge in favor of the appellants. The documents showing the creation of the mortgage of the property, much prior to the date of the crime, as alleged. The original title deeds of all the 5 properties are lying with the Bank. 25. Admittedly the banks had taken action under SARFAESI Act, 2002 prior to the registering of complaint by the PMLA authorities, be that as it may even before attachment the said aspect of nature in which the security was acquired and mortgaged to the banks. 26. Mr. Matta learned counsel appearing on behalf of department admits that both appellant bank have not been charge sheeted and they are also not involved in the criminal complaint of schedule offence and under complaint filed u/s 3 of this Act. However submits that it is the Union Ban....
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....nge Regulation Act, 1973 (46 of 973) and the Urban Land (Ceiling and Regulation) Act, 1976 (33 of 1976) for the time being in force or in the Memorandum or Articles of Association of an industrial company or in any other instrument having effect by virtue of any /law other than this Act." 8. The effect of this provision is that the said Act will have effect notwithstanding anything inconsistent therewith contained in any other law except to the provisions of the Foreign Exchange Regulation Act, 1973 and the Urban Land (Ceiling and Regulation) Act, 1976. A similar non obstante provision is contained in Section 13 of the Special Court Act which reads as follows: "13. Act to have overriding effect.-The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law, other than this Act, or in any decree or order of any Court, tribunal or other authority." 9. It is clear that both these Acts are special Acts. This Court has laid down in no uncertain terms that in such an event it is the later Act which must prevail. The decisions cited in the above ....
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....e manner set out thereunder. Monies payable to the notified parties are assets of the notified party and are, therefore, assets which stand attached. These are assets which have to be collected by the Special Court for the purposes of distribution under Section 11(2). The distribution can only take place provided the assets are first collected. The whole aim of these provisions is to ensure that monies which are siphoned off from hanks and financial institutions into private pockets are returned to the banks and financial institutions. The time and manner of distribution is to be decided by the Special Court only. Under Section 22 of the 1985 Act, recovery proceedings can only be with the consent of the Board for Industrial and Financial Reconstruction or the appellate authority under that Act. The Legislature being aware of the provisions of Section 22 under the 1985 Act still empowered only the Special Court under the 1992 Act of the 1992 Act to give directions to recover and to distribute the assets of the notified persons in the manner set down under Section 11 (2) of the 1992 Act. This can only mean that the Legislature wanted the provisions of Section 11(2) of the 1992 Act to....
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..... Vs. Fairgrowth Financial Services Ltd. The judgment rendered on 09.02.2016 reported in 1997 (89) company cases 547 (BOM) para 15 of the said judgment read as under: 15. To be noted that in both the judgments, relied upon by counsel, the Supreme Court has held that generally where there are two special statues, which contain non-obstante clauses, the later statute must prevail. This is because at the time of enactment of the later statute, the Legislature was aware of the earlier legislation and its non-obstante clause. If the Legislature still confers the later enactment with a non- obstante clause it means that the Legislature wanted that enactment to prevail. If the Legislature does not want the later enactment to prevail then it could and would provide in the later enactment that the provisions of the earlier enactment continue to apply. In the present case, the said Act is later. The said Act provides that its provisions are to prevail over any other Act. This would include the Sick Companies Act. If the legislature wanted to provide otherwise, they would have specifically so provided." 32. Recently, the Parliament has amended the twin legislations viz. (i) the SARFAESI Act....
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....he application", "and includes any liability towards debt securities which remains unpaid in full or part after notice of ninety days served upon the borrower by the debenture trustee or any other authority in whose favour security interest is created for the benefit of holders of debt securities or;" is added which makes the said amendment or the 1993 Act applicable to all the debts which remains unpaid. 35. Thus, it is very clear from above that the secured creditor, get a priority over the rights of Central or State Government or any other Local Authority. The amendment has been introduced to facilitate the rights of the secured creditors which are being hampered by way of attachments of properties, belonging to the financial institutions/secured creditors, done by/in favour of the government institutions. 36. The Full Bench of the Madras High Court while acknowledging the amount of losses suffered by the Banks and while approving the latest amended Section 31B of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 held in the case "The Assistant Commissioner (CT), Anna Salai-III Assessment Circle Vs. The Indian Overseas bank and Ors." that " "There is, th....
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....ding." "5 The aforesaid would, thus, answer question (a) in favour of the financial institution, which is a secured creditor having the benefit of the mortgaged property." 38. In another Madras High Court judgment in the case of "Dr. V. M. Ganesan vs. The Joint Director, Directorate of Enforcement" has explained the grievances faced by the financial institutions while holding that "For instance, if LIC Housing Finance Limited, which has advanced money to the petitioner in the first writ petition and which consequently has a right over the property, is able to satisfy the Adjudicating Authority that the money advanced by them for the purchase of the property cannot be taken to be the proceeds of crime, then, the Adjudicating Authority is obliged to record a finding to that effect and to allow the provisional order of attachment to lapse. Otherwise, a financial institution will be seriously prejudiced. I do not think that the Directorate of Enforcement or the Adjudicating Authority would expect every financial institution to check up whether the contribution made by the borrowers towards their share of the sale consideration was lawfully earned or represent the proceeds of crime. ....
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......." 41. The Supreme Court in (2010)8 Supreme Court Cases 110 (Before G.S. Singhvi and A.K. Ganguly, JJ) in the case of United Bank of India V/s. Satyawati Tondon and Ors. In paras no. 6, 55 & 56 has held as under:- 6. To put it differently, the DRT Act has not only brought into existence special procedural mechanism for speedy recovery of dues of banks and financial institutions, but also made provision for ensuring that defaulting borrowers are not able to invoke the jurisdiction of the civil courts for frustrating the proceedings initiated by the banks and other financial institutions. 55. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and the SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection. 56. Insofar as this case is concerned, we are convinced that the High Court was ....
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....es. 45. Three Judge Bench in Narendra Lal Jain & Ors., (supra) held that during the investigation pertaining to the culpability of the accused in the crime, the concerned bank had instituted suits for recovery of the amount claimed to be due from the respondents and the said suits were disposed of in terms of the consent decrees. On the basis of the said consent decrees an application for discharge was filed which was rejected by the trial court but eventually was allowed by the High Court. The charges in the matter were framed under Section 120-B/420 IPC by the learned trial Judge against the private parties. As far as bank officials are concerned, charges were framed under different provisions of the Prevention of Corruption of Act, 1988. Being dissatisfied with the said order,, the CBI had preferred an appeal by obtaining special leave and in that context the court observed that the accused respondent had been charged under Section 120-B/420 IPC and the civil liability of the respondent to pay the amount had already been settled and further there was no grievance on the part of the bank. Taking note of the fact that offence under Section 420 of IPC is compoundable and Section 1....
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....ition is maintainable as the same has been filed also on additional grounds and circumstances. No useful purpose would be served if such oppressive trial may continue for many more years. Thus, ends of justice are served by quashing such a proceeding, as the parties cannot be allowed to go through the rigmarole of criminal prosecution for long numbers of years in a matter, it is doubtful in the mind of the Court in whose favour it would be decided." "71. In view of above mentioned reasons, this Court is inclined to quash the proceedings pending against the petitioners, arising out of R.C. No. 4A/94/SIU(X) dated 23rd May, 1994, titled ‗CBI vs. N. Bhojraj Shetty & Ors.', being C.C. No.65/11, pending in the Court of Spl. Judge (CBI), Tis Hazari Courts, Delhi." The said decision has been upheld by the Hon'ble Supreme Court. 46. In the present case, it is undisputed facts that the attached property were purchased much prior to the period when the facility of loan sanctioned to the borrowers. The banks while rendering the facilities were boanfide parties. It is not the case of the respondent that the attached properties were purchased after the loan was obtained. The mortgaged o....
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....ng or assets, out of which or by means of which he has acquired the property attached under sub-section (1) of section 5, or, seized or frozen under section 17 or section 18, the evidence on which he relies and other relevant information and particulars, and to show cause why all or any of such properties should not be declared to be the properties involved in money-laundering and confiscated by the Central Government: Provided that where a notice under this sub-section specifies any property as being held by a person on behalf of any other person, a copy of such notice shall also be served upon such other person: Provided further that where such property is held jointly by more than one person, such notice shall be served to all persons holding such property. (2) The Adjudicating Authority shall, after- (a) considering the reply, if any, to the notice issued under subsection (1); (b) hearing the aggrieved person and the Director or any other officer authorised by him in this behalf, and (c)taking into account all relevant materials placed on record before him, by an order, record a finding whether all or any of the properties referred to in the notice issued under sub-section (1)....
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....rime." It is clear that innocent person can approach the Adjudicating Authority of any competent court to demonstrate his innocence that he has not received any proceeds of crime. The consequence of this is that while considering whether all or any of the properties provided under notice issued u/S 8(1) are involved in money laundering, the Adjudicating Authority can take into consideration the plea of innocence raised by any person and also the fact as to whether the property which has been attached has any nexus whatsoever with that of money laundering or not if the person before the Tribunal/ Adjudicating Authority is able to demonstrate that he neither directly nor indirectly has attempted to indulge nor with knowledge or ever assisted any process or activity in connection with proceeds or crime and the question of his involvement does not arise as he is third party, then the Tribunal/ Adjudicating Authority can consider the said plea depending upon whether there exist bona fide in the said plea or not and proceed to adjudicate the plea of innocence of the said party. 57. This is due to the reason that Section 8 allows the Adjudicating Authority to only retain the properties ....
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....fence but must be an act during the course of committing that offence." Thus, an "attempt to indulge" would necessarily require not only a positive "intention" to commit the offence, but also preparation for the same coupled with doing of an act towards commission of such offence with such intention to commit the offence. Respondent failed to produce any material or circumstantial evidence whatsoever, oral or documentary, to show any such 'intention' and 'attempt' on the part of any of the petitioners. B. RE: KNOWINGLY ASSISTS OR KNOWINGLY IS A PARTY: In JotiParshad v. State of Haryana, MANU/SC/0161/1993 : 1993 Supp (2) SCC 497 the Hon'ble Supreme Court has held as follows- "5. Under the Indian penal law, guilt in respect of almost all the offences is fastened either on the ground of "intention" or "knowledge" or "reason to believe". We are now concerned with the expressions "knowledge" and "reason to believe". "Knowledge" is an awareness on the part of the person concerned indicating his state of mind. "Reason to believe" is another facet of the state of mind. "Reason to believe" is not the same thing as "suspicion" or "doubt" and mere seeing also cannot be....
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.... of any person in money laundering. This is due to the reason that if the property has no direct involvement in the proceeds of the crime and has passed on hands to the number of purchasers which includes the bona fide purchaser without notice, the said purchaser who is not having any knowledge about the involvement of the said property with the proceeds of the crime nor being the participant in the said transaction ever, cannot be penalized for no fault of his. Therefore, it cannot be the Scheme of the Act whereby bona fide person without having any direct/ indirect involvement in the proceeds of the crime or its dealings can be made to suffer by mere attachment of the property at the initial stage and later on its confirmation on the basis of mere suspicion when the element of mens rea or knowledge is missing. 60. Similar principle has been laid down by Chennai High Court in the case of C. Chellamuthu (Appellants) Vs The Deputy Director, Prevention of Money Laundering Act, Directorate of Enforcement (Respondent) MANU/TN/4087/2015 decided on 14.10.2015, relevant portion of which are reproduced below:- " 20. The said sections read as follows:-- "23. Presumption in inter-connecte....
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.... or not the property in the hands of Gunaseelan cannot be termed as proceeds of crime. 22. Further, the appellants have given statements under Section 50 of the Act. They have categorically stated that they possess agricultural lands, cultivate GloriosaSuperba seeds and sell the same and derive considerable income. They have named the persons to whom they have sold the GloriosaSuperba seeds and produced Bank statements. Some of the Appellants have stated that they sold their lands and borrowed monies to purchase the property in question. There is nothing on record to show that the respondent had verified these statements. Especially, the respondent has not verified the Bank statement produced by the Appellants to ascertain the genuineness of the same and whether the money deposited came from genuine purchasers or from the persons involved in fraud and Money Laundering. The respondent does not allege that Appellants are Benamies of G. Srinivasan or no sale consideration passed to the vendor. 23. Considering the materials on record and judgments reported in MANU/MH/1011/2010: 2010 (5)Bom CR 625 [supra] and : [2011] 164 Comp Cas 146(AP) [supra], I hold that appellants have rebutted ....
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....ng that the deals are bona fide heavily relied on the judgment of the Bombay High Court, dated 05.08.2010 in Mr. Radha Mohan Lakhotia Vs. Deputy Director, PMLA, Directorate of Enforcement, Mumbai in first appeal No. 527/2010. In this case it held by the Bombay High Court that the property bought without the knowledge that the same is tainted could be subjected to Provisional Attachment Order. 23. In the instant case the only point to be decided is whether the properties bought by any person against clean money and without any knowledge that properties have been acquired directly or indirectly through scheduled offence could be subject matter of provisional attachment order. 24. It is an admitted position that the Defendants (D-2 to D-8) had no knowledge that the properties in the hands of the vendor was proceeds of crime. They have also verified the papers relating to these properties before the deal. No point has been raised with regard to the financial capability of these Defendants to buy these properties. However, the Bombay High Court decision in Radha Mohan Lakhotia has been pressed into service to make out a plea that the properties could be attached in such circumstances ....
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....e no proceeds of crime were invested in these properties and even prior to the coming in force of the act of 2002. The copies of the sale deed/title deed of the properties show the date of acquisition to be prior to dates of alleged fraud committed in 2008-2009 as per the case of the respondent no. 1. Hence, it cannot be said the claim in any manner that these properties have been acquired out of the funds/loans availed from Union Bank of India. 51. The mortgaged properties are security to the loans and cannot be subject matter of attachment particularly when the same were purchased and mortgaged prior to the events of funds diversion and frauds committed by the respondents. The appellants Banks have to recover huge amounts in the above loan accounts and the appellant bank being the mortgagee/transferee of the interest in the properties is entitled to recover its dues with the sale of the properties. The properties stood transferred by way of mortgage to the appellant bank much before the alleged criminal action. 52. The appellant banks is the rightful claimants of the said properties which are already in the possession of the appellant bank under the SARFAESI Act. The Hon"ble Su....
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....e lying with the Appellant Bank. The Appellant Banks are having the mortgage charge over the properties. 56. That the definition of "proceeds of crime" as per Section 2(u) of the PML Act comprises of the property which is derived or obtained as a result of criminal activity. In the present case, all the properties have been purchased by the Respondents and have been mortgaged with the Appellant Bank much prior to the date of alleged offence which shows that no proceeds of crime are involved in the obtention of these properties and hence the same cannot be attached by the ED because the same would result in hampering the interest of the Appellant Bank. 57. The Ld. Adjudicating Authority has failed to understand that Appellant Banks have heavy stakes in the properties as they have lent its valuable money to the borrowers. The property is mortgaged to the Appellant Bank. If tomorrow any borrower fails to repay the loan, the Bank has a legal right to bring the properties to sale and recover its dues. Valuable right will be lost for the Appellant, by order of attachment and eventual confiscation. As a matter of fact, the borrowers may not be interested in repaying the loan, since they....
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....ransferred by way of mortgage to the Appellant Bank much before the alleged criminal action. The alleged proceeds of crime has not been used for acquiring the mortgage properties. It is even not the allegation of respondent no. 1 that the accused has acquired the mortgage properties with the proceeds of crime. The meaning of money laundering as mentioned in the objects of the Act will have to be read as part of the statute because as per Supreme Court of India in Vishaka and others Vs. State of Rajasthan reported in AIR1997SC3011 lays down at para 40 that the International Conventions and Norms are to be read into them in the absence of enacted Domestic Law occupying the field when there is no inconsistency between them. 61. The Ld. Adjudicating Authority has failed to considered that the ED has attached all the properties without examining the case of the banks. The evidence on record suggested that all the properties were acquired by the accused much-much before the alleged date of crime. No money disbursed by the Union Bank of India from its Loan Account, has been invested in acquiring his property. Furthermore, the Appellants Banks had mortgaged charge over the property prior....
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....session by the appellant bank so that recovery can be made from the accounts which have become NPA. 64. The respondent has no lien over the said properties as the Appellants banks are now the Legal transferee of said properties. Even in the criminal jurisprudence the stolen property when it is in the hands of unauthorized person that person cannot claim title to the property. The said recipient cannot retain the property over which he has no legal title and the property should be returned to the lawful owners because the both banks are victims and even after trial, they are to receive-back the said properties being victim party in normal types of cases u/s 8(8) of the Act. However in the present cases, the banks are innocent parties. They are not involved in any criminal proceedings. If they are asked to await till the trial is over, the systems in these types of cases, the economy would collapse. In the case, of Union Bank of India, no sanction against the employee was granted who is also not involved in any criminal proceedings. 65. From the entire gamut of the matter we are of the view that there is no nexus whatsoever between the alleged crime and the two bank who are mortgag....