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2017 (10) TMI 1128
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....n Agreement dated September 13, 2014, as amended from time to time, and Irrevocable Power of Attorney dated December 4, 2014 executed by the Respondent No. 7 in favour of the Appellant bank. 3. The ECIR, being ECIR/11/DLZO/2016 dated November 30, 2016 ("ECIR"), was registered by the Respondent No. 1 on November 30, 2016 on the basis of case FIR No. 416 of 2016, dated November 29, 2016, registered under Section 420 read with Section 120B IPC by the Kashmere Gate Police Station. Thereafter, during investigation Section 409, 419, 467, 468, 471 IPC and Section 7 and 13(1)(d) of the Prevention of Corruption Act, 1988 were added to the FIR. 4. The Respondent No. 1 in the said ECIR had, interalia, alleged that the Respondent No. 6, 7 and 8 had conspired with Respondent No. 2 and 4, i.e. the officials of the appellant bank, to launder an amount of Rs. 39.17 Crores in the form of demonetized currency by depositing the same in the account of front companies controlled and managed by Respondent No. 7. The Respondent No. 1 further alleged that the above amount was deposited into account of various front companies by way of furnishing of false and forged documents. In the light of the abo....
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.... dated April 19, 2017, confirmed that all such properties in their possession/control belonging to the Respondent No. 7 were frozen/suspended in compliance of the directions passed by the Respondent No. 1 vide the Provisional Order. 10. In compliance of the Notice dated December 03, 2016 received from the respondent no. 1, the appellant bank also marked a debit freeze on the account bearing No. 912010029255251 opened in the name of Respondent No. 7 with the Appellant bank. 11. It is a matter of the fact that the Respondent No. 7 had also availed the Loan Facility from the Appellant bank for the purpose of purchasing the said Vehicle. The said Loan Facility was secured by way of Loan Cum Hypothecation Agreement dated September 13, 2014, as amended from time to time, and Irrevocable Power of Attorney dated December 4, 2014 executed by the Respondent NO. 7 in favour of the Appellant bank. 12. The Ld. Adjudicating Authority (PMLA), vide the Impugned Order, confirmed the Provisional Order passed by the Respondent No. 1 by observing that the said Vehicle fell within the purview of "proceeds of crime" which includes not only the proceeds of crime but also the "value thereof". ....
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....that the said vehicle, in any manner, was involved in the said predicate offence or the appellant has any causal linkage and nexus between the said predicate offence with the alleged accused party so that if the answer in this regard is affirmative than the question of the attachment of the said Vehicle by Respondent No. 1 has been rightly attached. Rather, it is not denied on behalf of respondent no. 1 that the bank is victim and innocent and ultimately after trial, the bank is entitled to recover the loan amount towards the said vehicle. 16. It is pertinent to mention that under the SARFAESI Act; we have dealt with similar issue in the case of State Bank of India Vs. Joint Director, Directorate of Enforcement, Kolkata in appeal no. FPA-PMLA- 1026/KOL/2015 decided on 14th July, 2017. The view taken in the said matter has also been re-confirmed in various other appeals. The relevant paras from the said judgement the said appeals FPA-PMLA- 1026/KOL/2015 and FPA-PMLA-1072/KOL/2015 from para 30 to 41 are reproduced here below:- "30. We may point out that the aspect of overriding effect between the two special Act i.e. PMLA, 2002 and SARFAESI Act has been widely discussed b....
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....jecting this connection, the Special Court had come to the conclusion that the Special Court Act being a later enactment would prevail. The head note which brings out succinctly the ration of the said decision is as follows: "Where there are two special statutes 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. The Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992, provides in Section 13. that its provisions are to prevail over any other Act. Being a later enactment, it would prevail over the Sick Industrial Companies (Special Provisions) Act, 1985. Had the Legislature wanted to exclude the provisions of the Sick Companies Act from the ambit of the sai....
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....ere would be no conflict if it is held that the 1992 Act is to prevail. On such an interpretation the objects of both would be fulfilled and there would be no conflict. It is clear that the Legislature intended that public monies should be recovered first even from sick companies. Provided the sick company was in a position to first pay back the public money, there would be no difficulty in reconstruction. The Board for Industrial and Financial Reconstruction whilst considering a .scheme for reconstruction has to keep in mind the fact that it is to be paid off or directed by the Special Court. The Special Court can, if it is convinced, grant time or installments. There can, therefore, be no stay of any proceedings for recovery against a sick company so far as the Special Court under the 1992 Act is concerned." 11. We are in agreement with the aforesaid decision of the case, more so when we find that whenever the legislature wishes to do so it makes appropriate provisions in the Act in that behalf. Mr Shiraz Rustomjee has drawn our attention to Section 34 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 wherein after giving an overriding e....
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....he provisions of PMLA in so far as recovery of the loan by the secured creditors is concerned. The amended provisions are reproduced as under: (i) Section 26E of the SARFAESI Act, 2002 : "26E. Priority to secured creditors - Notwithstanding anything contained in any other law for the time being in force, after the registration of security interest, the debts due to any secured creditor shall be paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authority. Explanation : For the purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to secured creditors in payment of debt shall be subject to the provisions of that Code." (ii) Section 31B of the Recovery of Debts and Bankruptcy Act, 1993 : 31B. Priority to secured creditors - Notwithstanding anything contained in any other law for the time being in force, the rights of secure....
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....he Central Act is with ''notwithstanding'' clause and has come into force from 01.09.2016. Further it was also held that the law having now come into force, naturally it would govern the rights of the parties in respect of even a lis pending." 37. The Assistant Commissioner (CT) Vs. The Indian Overseas Bank, Madras High Court, WP No. 2675 of 2011 (Full Bench) "2 We are of the view that if there was at all any doubt, the same stands resolved by view of the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016, Section 41 of the same seeking to introduce Section 31B in the Principle Act, Which reads as under:- "31B. Notwithstanding anything contained in any other law for the time being in force, the rights of secured creditors to realize secured debts due and payable to them by sale of assets over which security interest is created, shall have priority and shall be paid in priority over all other debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or local authority. Explanation. - for the purposes of this secti....
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....alleged to have indulged in. This cannot be purport of the Act." 39. In a case contested by one of the branches of the Appellant Bank, the High Court of Madras "State Bank of India Vs. The Assistant Commissioner, Commercial Tax, Puraswalkam Assistant Circle and Ors." while upholding the Amendment Act, 2016 to Section 26E of the SARFAESI Act and reaffirming the view of the Full Bench of the same court in The Assistant Commissioner (CT), Anna Salai-III Assessment Circle (supra) lifted the attachment entry and held that "In other words, not only should the amendment apply to pending lis, but the declaration that the right of a secured creditor to realise the secured debts, would have priority over all debts, which would include, Government dues including revenues, taxes, etc., should hold good qua 2002 Act as well." 40. B. RAMA RAJU V. UOI AND ORS. Reported in (2011) 164 company case 149(AP)(DB) who has dealt with the aspect of bonafide acquisition of property in para 103. The same read as under:- "103. Since proceeds of crime is defined to include the value of any property derived or obtained directly or indirectly as a result of criminal act....
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.... Since the respondent has not appeared to contest the appeal, the costs are made easy." In the subsequent changes in law and amendment in the another Special Act i.e. SARFAESI Act, 2002 the decisions referred by Mr. Matta in the case of Solidaire (Supra) and Bhoruka Steel (Supra) does not help the case of the respondent no. 1 because the effect of overrding the PMLA looses its validity once the amendment is made which even has been interpreted subsequently by the Full- Bench of the Chennai High Court in the case of Assistant Commissioner CT (Supra) and other decision in the nature of the facts in the present matter. 17. Under the Loan Cum Hypothecation Agreement, on the occurrence of event of default, inter alia, failure on the part of Respondent No. 7 to repay the installment/s on the Loan Facility, the Appellant Bank is entitled to recover the entire outstanding Loan Facility along with interest from the Respondent No. 7 and further take physical possession the said Vehicle for the purpose of recovery of the Loan Facility. The relevant portion of the Loan Cum Hypothecation Agreement is reproduced hereunder for the convenience of this Hon‟ble Appellate Tribunal; ....
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....epresentatives of the Bank shall be entitled to break open the lock and enter the premises for the purpose herein stated. III. The Borrower agrees to procedure for recovery or enforcement of the security which shall be as follows: 1) The bank shall be giving normally a notice of 7 (seven) days to repay the entire dues of Loan, failing upon which the Bank shall be entitled to repossess the vehicle through Bank's representative or any other person as may be appointed by the Bank from time to time. However in case of emergency and non-availability of borrower's details and/or whereabouts, the Bank shall be entitled to take possession of the vehicle without any notice. ....... That the Bank shall after taking the possession send a final notice of 7 (seven) days to the Borrower to repay the entire dues along with the interest, repossession charges and any other changes as may be applicable, failing upon which the Bank shall be entitled to sale the said vehicle by public or private auction or private treaty as it may deem fit." ( emphasis supplied ) 18. After availing the Loan Facility, the Respondent NO. 7 had failed to repay the loan installment a....
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....le vests with the Respondent No. 7 and that the same therefore falls within the definition of "proceeds of crime". It appears that the relevant documents of loan and relevant clauses of agreement have not been read at the time of PAO or by the Adjudicating Authority while confirming the PAO. 24. On the face of the said agreement that the ownership of the attached vehicle which is secured by a Loan Cum Hypothecation Agreement would not pass to the borrower until the borrower has repaid the entire amount due and payable to the Lender in accordance with the terms and conditions of the Loan Cum Hypothecation Agreement. In view of the default on the part of Respondent No. 7 to repay the loan amount, the Appellant has every right to enforce the security clause for recovery of the Loan Facility granted by the Appellant bank to the Respondent no. 7. 25. The Adjudicating Authority (PMLA), while passing the Impugned Order, did not consider the judicial precedents cited by the appellant on the above propositions of law asserting the supremacy and priority of the charge/rights of the appellants (being Secured inconsistency between the two, before giving an overriding effect to the non ob....