TaxTMI 
TaxTMI 
2014 (11) TMI 1168
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....2011 without summoning, without hearing, the appellant Bank to whom the assets attached had been transferred by way of mortgage to secure the due repayment of all the amounts which are due and outstanding in various loans/credit facilities. The appellant has alleged that the respondent has always been aware about the financing of the project by the appellant Bank and still had not issued any notice to the Bank in the matter. The present appeal has been filed on coming to know about the order of the Adjudicating Authority from the borrower company on 19-5-2011. 3. According to the appellant M/s. Shivans Steel Pvt. Ltd., borrower company was incorporated in the year 2006 to install the units for Iron Ore crushing at Navamandi District-Chaibasa, Jharkhand. The company in the year 2009 had entered into an arrangement with M/s. Shriram Mineral Company who had the Mining Lease of Iron Ore and Manganese at Village Khas Jamda for the supply of Iron Ore for Crushing and then sale of Crushed Iron Ore in the Market. The borrower company decided to install Mobile Iron Ore crusher at the mine site to save the transportation cost and for better profit prospects. The borrower company appr....
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....hu Koda after being elected as an MLA was first the Minister of Mines and then the Chief Minister of the State of Jharkhand. During his tenure as Minister of Mines and then as Chief Minister, Shri Madhu Koda and his associates while adopting the corrupt practices amassed wealth disproportionate to their known sources of income by corrupt and illegal means. According to the respondent Shri Madhu Koda acquired huge properties, movable and immovable through close associates Shri Binod Sinha, Shri Sunil Kumar Singh, Shri Vikas Sinha, Shri Sanjay Chaudhary, Shri Dhananjay Chaudhary, Shri Manoj Kumar Punamiya, Shri Arvind Vyal, Shri Lalit Jain, Shri Vijay Joshi and Shri Rohitash Krishnan. Shri Binod Sinha and Shri Sanjay Chaudhary established the borrower company M/s. Shivans Steel (P) Ltd. To substantiate this allegation, the respondent has relied from various statements recorded by it during investigation. The respondent has attached by the Provisional Attachment Order the fixed assets of the borrower Company as on 31-3-2009 of Rs. 1,20,99,491/- and the entire Share Capital of Rs. 54,15,300/- being proceeds of crime. 7. That pursuant to the provisional attachment order, a compl....
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....cts, that all the accounts of the company are only with the S.B.I., the appellant bank, the Enforcement Directorate as well as the Adjudicating Authority have not served any notice/summons to the appellant bank, though the appellants have the rights in the assets which have been attached nor has given any reasonable hearing to the appellant bank before confirming the provisional attachment order. Even no clarification has been sought from appellant bank with regard to the affairs of the borrower company. 11. It is further alleged that sometime in the year 2009 i.e. much before the passing of the order of attachment, the officers of the Enforcement Directorate had obtained the copies of the statements of accounts of the borrower company with the Appellant Bank, SBI and therefore, the Enforcement Directorate cannot say that it was not aware about the dealings of the borrower Company with the appellant bank and that the Appellant bank has the charge over entire assets of the borrower Company. 12. According to the appellant bank, at the maximum the case of the respondent can be that the ill-gotten money or the proceeds of crime has been loaned to the borrower company. A....
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....and therefore the impugned order is liable to be set aside. 16. The appellant bank has contended that it has the first priority/charge over the mortgaged property and the hypothecated current assets for recovery of its dues and the charge of respondent over the property is subservient and inferior to the charge/transfer in favour of the appellant bank and therefore the attachment of assets of borrower company could not be provisionally attached nor could be confirmed by the Adjudicating Authority. 17. According to the appellant bank no order of attachment could be passed against the appellant Bank without providing an opportunity of being heard to the Appellant. In the present case, the Directorate of Enforcement cannot deny their knowledge regarding the finance granted by the appellant bank and the transfer by way of mortgage of the fixed assets and hypothecation of the current assets by the borrower company in favour of the appellant bank. It is alleged that if the assets were acquired by the borrower company from the funds provided by the bank, they will not become the assets acquired from the proceeds of crime and therefore, could not be attached by the responde....
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....s have been diverted to the borrower company as the borrower company is an independent entity. It is also alleged that it has not been clarified whether such funds remained with the borrower company or were transferred or withdrawn. 19. With these pleas the appellant has prayed that the provisional attachment order No. 4/2010, dated 10-11-2010 passed by the respondent be set aside with regard to the entire fixed and current Assets of M/s. Shivans Steel Pvt. Ltd., the borrower company and the Impugned Order dated 6-4-2011 passed by Adjudicating Authority be also set aside. 20. The respondent no. 1 in reply to the pleas and contentions of the appellant, who was not issued any notice under Section 8(1) of PMLA by the Adjudicating Authority and who had not filed any reply, has filed the copies of Bank Statements of Shri N. Kumar; Shri G. Padmanabhan and M/s. Krishna Traders and M/s. Krishna Builders. The respondent no. l contended that the copies of these statements were also produced by the respondent no. l before the Adjudicating Authority. No cogent plea has been raised by the appellant bank to refute the plea of the respondent no. 1 that the money lying in the accou....
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....tachment order without giving hearing to the appellant bank. It is alleged that the pleas taken by the bank that the assets of the borrower company are not the proceeds of crime makes the acts of the appellant bank, though a Nationalized Bank, highly suspicious. The respondent No. 1 contended that the appeal is not maintainable. 22. The respondent No. 1 also contended that the principal ground of the appellant bank is that it has the first charge over the assets of the borrower company, respondent No. 2 and the charge of the respondent No. l is subservient to the appellant bank and the appellant bank ought to have been notified and heard prior to confirmation of provisional attachment order and should have been heard. 23. According to the respondent No. 1, appellant has no right to be heard under the scheme of the Prevention of Money Laundering Act because Section 8 makes it clear that the right to be heard extends only to the person who has allegedly committed offence under Section 3 of the PMLA, and not the holder/possessor of disputed properties. It is for the holder of the properties which are to be attached to justify the circumstances under which such properti....
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....nvolvement of Shri Binod Sinha in the affairs of the company. 26. The other respondents, the defendants in the original complaint who were also impleaded as parties to the present appeal, did not file any reply though they had been served and some of them had been represented by the counsel. 27. This Tribunal had heard and reheard the counsel for the parties. The admitted fact is that the appellant bank was not given any notice under Section 8(1) of the PMLA nor any notice was given before confirmation of the provisional attachment order of the properties which are alleged to have been mortgaged with the appellant bank. The appellant is claiming rights in the properties which have been provisionally attached and which provisional attachment order has been confirmed by the Adjudicating Authority by the impugned order which is challenged under Section 26 of the PMLA by filing the present appeal. Section 8 of the PMLA is as under : Section 8. Adjudication. - (1) On receipt of a complaint under sub-section (5) of Section 5, or applications made under sub-section (4) of Section 17 or under sub-section (10) of Section 18, if the Adjudicating Authority has reason t....
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....nder this Act before a court or under the corresponding law of any other country, before the competent court of criminal jurisdiction outside India, as the case may be; and (b) become final after an order of confiscation is passed under sub-section (5) or sub-section (7) of Section 8 or Section 58B or sub-section (2A) of Section 60 by the Adjudicating Authority. (4) Where the provisional order of attachment made under sub-section (1) of Section 5 has been confirmed under sub-section (3), the Director or any other officer authorised by him in this behalf shall forthwith take the possession of the property attached under Section 5 or frozen under sub-section (1A) of section 17, in such manner as may be prescribed : Provided that if it is not practicable to take possession of a property frozen under sub-section (1A) of Section 17, the order of confiscation shall have the same effect as if the property had been taken possession of. (5) Where on conclusion of a trial of an offence under this Act, the Special Court finds that the offence of money-laundering has been committed, it shall order that such property involved in the money-laun....
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.... the appellant is that the opportunity of hearing cannot be sought from the Adjudicating Authority under proviso to Section 8(2) though the appellant may have a right in the property which is attached by the respondent and which attachment order is confirmed by the Adjudicating Authority, as after confirmation of the attachment order Adjudicating Authority becomes functus officio. According to appellant, the Adjudicating Authority will not give any hearing to the appellant after confirmation of provisional attachment order. 31. The appellant has not approached the Adjudicating Authority nor any precedent or the order of the Adjudicating Authority has been cited which would show that after passing confirmation order under Sections 8(3) and (4) of the Act, opportunity of hearing will not be given to a person or a party which have a right in the property and which had not been given any notice. The plea of the appellant that Adjudicating Authority will not give an opportunity of hearing is without any basis and an assumption which cannot be accepted by this Tribunal. 32. The respondent No. 1 though in its reply had taken the plea that the appeal is not maintainable, ho....
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....judicating Authority under the Act, the obligation to perform that duty will become redundant and otiose after the provisional attachment order is confirmed by the Adjudicating Authority. The Section 8 of the Act does not state directly or indirectly that the duty to give hearing to a person who has not been given a notice under Section 8(1) of the Act would be only before the confirmation of the provisional attachment order and not thereafter. No limitation or any other embargo has been prescribed under the said Section in its proviso to give hearing to party who has a right in the property which has been provisionally attached and to whom no notice under Section 8(1) of the Act is given. The procedure before the Adjudicating Authority for confirmation of the provisional attachment order is prescribed in Section 8 of the Act. This Section details the procedure of adjudication. After the official passing the provisional attachment order forwards a complaint u/s 5(5) or an application u/s 17(4) or u/s 18(10) of the Act to the Adjudicating Authority, if the Adjudicating Authority has reason to believe, it may serve a show cause notice of not less than thirty days to the concerned per....
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.... the property and who has not been given notice under Section 8(1) of the Act must seek his right to be heard before confirmation of provisional attachment order. Such a construction of the scheme of the Act will lead to irrational classification, one class of persons who would approach the Adjudicating Authority before confirmation order and those who are not able to meet the alleged deadline of 180 days or before confirmation of the provisional attachment order for the purpose of claiming hearing under proviso to Section 8(2) of the Act. Such a classification would not have any reasonable nexus to the object of the proviso to Section 8(2) of the Act which is that the property of no person shall be attached unless such a person is given a reasonable opportunity of being heard and no person should be condemned unheard because the attachment proceedings can have severe consequences as the possession of attached property can be recovered by the Enforcement Directorate. Such a classification is not founded on any intelligible criteria nor such a differentia has any rational relation to the object sought to be achieved by such classification. 37. The words of the statute contai....
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....any notice under Section 8(1) of the Act, the Adjudicating Authority has to be satisfied that such a person has a tangible right in the property which is attached and if prima facie he is able to show his right, the Adjudicating Authority will give hearing to such a person and thereafter will have to decide whether the order of confirmation of the property is to be sustained or modified or vacated. 39. In the circumstances, the plea of the appellant that he has no other right before any other forum to agitate his right except to file the present appeal under Section 26 of the Act cannot be accepted. In the circumstances the appropriate course for the appellant would have been to file an appropriate application invoking his right to be heard under proviso to Section 8(2) of the Act and to establish before the Adjudicating Authority that he has a right in the property which has been provisionally attached and for which provisional attachment order has also been confirmed and not to file an appeal in the facts and circumstances of the present case. The appellant has not only canvassed his superior rights in the property but has also alleged that the property which has been att....
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....de even the appellant, however, it may not be appropriate to entertain the appeal of the appellant in the facts and circumstances. Therefore, in the present facts and circumstances it is incumbent upon the appellant to approach the Adjudicating Authority to seek the relief claimed by the appellant, in case the appellant has any right on the properties which have been attached by the respondent. 42. Therefore, in the present facts and circumstances, the appropriate remedy of the appellant is to invoke the power of Adjudicating Authority to hear the appellant. In case the appellant files an appropriate application before the Adjudicating Authority, the appellant will be liable to prima facie satisfy the Adjudicating Authority that it has the rights in the properties which have been attached. The Adjudicating Authority will determine, in case the appellant approach the Adjudicating Authority, whether the appellant, prima facie has any rights or lien on the properties which are sought to be attached and thereafter on being satisfied about the right of the appellant to give hearing to the appellant as contemplated under proviso to Section 8(2) of the Act. 43. The learned....