TaxTMI 
TaxTMI 
2017 (11) TMI 838
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....as filed. 3. The entire case of the Respondent's case is that Tayal group of Companies wrongly and fraudulently availed loan facilities from UCO Bank during the period 2007-2013 and siphoned off the funds through certain entities for various purposes, including but not limited to Bank of Rajasthan. The Respondent has sought to explain the entire matrix of transactions by identifying the borrowers of such loan amounts, the entities through which such alleged funneling and siphoning off the funds took place. The names of the appellant or its borrower/co- borrowers or the tenant, M/s Multi Media Pvt. Ltd. do not feature in this route of siphoning off and funneling of funds. 4. Admittedly on 28.10.2014, the appellant sanctioned three separate loans, totaling to Rs. 46 Crores to three Companies, i.e.: (i) M/s Oak Leasing and Infotech [Loan of Rs. 15 crores]-against property No. 301, Building no. 7, Link Road, Mumbai (ii) M/s Rosette Leasing and Infotech [Loan of Rs. 15 crores]-against property no. 201, Building No. 7, Link Road, Mumbai (iii) M/s Upright Leasing and Infotech [Loan of Rs. 16 crores]-against property no. 401, Building no. 7, Link Road, Mumbai 5. It is not denied b....
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....loan from DHFCL. Later in 2014, this loan was assigned to the appellant as alleged by the counsel for the appellant. 12. Three separate tripartite Escrow Agreements dated 31.10.2014 were executed between the appellant, the three companies and IndusInd Bank Ltd. whereby the rent from the three mortgaged properties was to be deposited in escrow accounts and to be appropriated by the appellant for repayment of loan. 13. Before the sanctioning of all the three Terms Loans to these Borrowers and its disbursement, the appellant has followed the due process of law and exercised all possible diligence by asking for and receiving the following documents before approval of loan: a) Acceptance of sanction letter by borrower and co-borrower b) Execution of loan agreement by borrower and co-borrower c) Demand promissory note alongwith letter of continuity by borrower and co-borrower d) Board resolution by borrower and co-borrower e) 7 UDCs of not more than 3 Crores in favour of Aditya Birla Finance Ltd. alongwith an undertaking letter f) Recent net worth statement documentary proof for the borrower, authorized signatories and guarantors h) Original signature verification of the ....
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....d in the Escrow Accounts, being Escrow Accounts No. 200999779905 and 200999779912, Induslnd Bank, Lower Parel Branch, Mumbai. ii. The Appellant permitted to operate the Escrow Accounts, being Escrow Accounts No. 200999779905 and 200999779912, Induslnd Bank, Lower Parel Branch, Mumbai and withdraw the amounts lying in the Escrow Account, which comprises only of the instalments that were legitimately owed to the Appellant by the borrowers for the loans advanced to them. 20. Vide para 17 of the Order dated 27.07.2017, this Tribunal had granted the following reliefs to the Appellant: "(a) M/s Multi Screen Media Pvt. Ltd. To deposit the rent for the two immoveable properties in question to the below mentioned accounts of the appellant, which till now were being deposited in the Escrow Accounts, being account No. 200999779905 and 200999779912, Induslnd Bank, Lower Parel Branch, Mumbai: * Rentals from Oak Leasing and Infotech Pvt. Ltd. Presently deposited in Escrow A/c No. 200999779905 with Induslnd Bank can in future be deposited with Account No. 02321300001205 with DCB Bank Limited, Nariman Point Branch, Mumbai. * Rentals from Rosette Leasing and Infotech Pvt. Ltd. Presently de....
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....r pledged to any bank, financial institution, etc., the authorised officer shall direct such bank, financial institution, etc. that such property and any interest or dividend payable thereon shall be retained subject to further orders of the authorised officer". 25. In view of the above provision, this Hon'ble Tribunal has the power to direct that the Mortgagee Bank [Appellant herein] may be allowed to access and retain the funds till the recovery of their dues or final determination by the Special Court whichever is earlier. The said position is not disputed by the appellant. 26. The case of the Appellant is closely similar to the case decided by this Tribunal on dated 14.07.2017 in State Bank of India and Ors. Vs. The Joint Director, Directorate of Enforcement, Kolkata. In Paragraphs 46 and 51 of the Judgment, this Tribunal found that the attached property was purchased much prior to the period when the facility of offending loans were sanctioned to the borrowers. Further, the Bank was not involved in the schedule offence. It was further observed that the mortgaged properties are security to the loans and cannot be subject matter of attachment particularly when the same were pu....
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....days on such person calling upon him to indicate the sources of his income, earning 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 a....
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.... court that he is innocent and has not received any proceeds of crime." 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....
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....te act towards the commission of that offence 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, 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 me....
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....he involvement of any property 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) decided on 14.10.2015, relevant portion of which are reproduced below:- "20. The said sections read as follows:-- "23. Presumption in ....
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....ation is legitimate 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 2010 (5)Bom CR 625 [supra] and : [2011] 164 Comp Cas 146(AP) [supra], I hold that appellants have rebutte....
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....sputing 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 circums....
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....and therefore 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." 27. It is also important to quote the observations of the Madras High Court in the case of Dr. V. M. Ganesan Vs. The Joint Director, 2014 SCC Online Mad 10....
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....tech Pvt. Ltd- Escrow A/c ABFL respectively. Induslnd Bank Ltd, as Escrow Account Bank, have no objection if the future rentals are routed through a separate account of ABFL. We are the Account Bank for benefit of Lender i.e. Aditya Birla Finance Ltd. as per the said Escrow Agreements. Yours Sincerely, For Induslnd Bank Ltd. Authorised Signatory" 31. It is argued by the counsel for the appellant herein and counsel for the borrowers that the source of acquisition of the attached properties and the source of income from such attached properties, therefore cannot possibly have any connection whatsoever with the alleged criminal activities for it to be liable for attachment by the Respondent. Thus, the Loans advanced by Appellant can neither be said to be reflective of "proceeds of crime" nor "value thereof". 32. They argued that neither the Appellant, nor any of its borrowers - Oak Leasing, Rosette Leasing and Upfront Leasing have been named in the F.I.R.s/Chargesheets/E.C.I.R.s. Further, there is not a single statement given by any person under Section 50 of the Act wherein any wrongdoing has been alleged against Appellant or any of the three borrowers. The said arguments are....
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.... alongwith applications filed in their respective appeals. It is 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 Rs. 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. 38. 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. 39. 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 Spe....