TaxTMI 
TaxTMI 
2018 (8) TMI 1023
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....remier biopharmaceutical company. 4. The appellant is a well renowned business woman. She is popular in work of Biotechnology Sector and has earned numerous national awards including prestigious Padma Shree in 1989 and Padma Vibhushan in 2005 from the Government of India. 5. The appellant desirous of owning a residential property in Bangalore came across a real estate project by the name of 'Kingfisher Towers', being jointly developed by Respondent No. 5 and 8 (herein referred to as the "said project"). The said project was being developed at property bearing number Municipal No. 24 (Old Nos. 24 and 33), situated in Grant Trunk, now known as Vittal Mallya Road, Corporate Division No. 61, Ward No. 76 of Shanthi Nagar Range, Bangalaore-560001 and admeasuring about 17,953.76 sq. mtrs. 6. The case of the appellant is that she entered into discussions and negotiations with Respondent No.5 for the purchase of flat(s)/apartment(s) in the said project. In the course of the aforesaid negotiations and discussions Respondent No. 5 represented and assured the appellant that it was the full and absolute owner and in possession of all the part and parcel of the said land (including the ....
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....ed twenty five only) towards construction of flat. The entire total consideration payable by the appellant towards acquiring the legal and complete right, title and interest of the said flat and the proportionate undivided area in the said land was Rs. 26,12,00,000/- (Rupees twenty six crore twelve lakh only). 10. As per the said Agreements, the appellant paid the entire purchase consideration from time to time as per details set out hereunder:- Sl. No. Cheque No. Date Drawn on Amount Details of Receipts issued by Respondent No.5 1. 704165/ 704166 April 5, 2012 HSBC 15,000,000 UBHL/KFT/004 Dt.23.09.2013 2. 011887 Sept. 1, 2012 HSBC 43,545,635 UBHL/KFT/002 Dt.12.09.2013 and UBHL/KFT/004 Dt.23.09.2013 3. 066208 March 12, 2013 HSBC 43,545,635 UBHL/KFT/004 Dt.23.09.2013 4. 096567 Sept. 02, 2013 HSBC 43,110,175 UBHL/KFT/004 Dt.23.09.2013 5. 131197 February 24, 2014 HSBC 43,110,175 UBHL/KFT/007 Dt.2....
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....dmittedly, the appellant was not named in the FIR. There is not even an allegation against the appellant in the FIR nor about link and nexus directly or indirectly as a result of criminal activity relating to a schedule offence. 15. On the basis of FIR and allegation on 29.1.2016, ECIR No. ECIR/03/MBZO/2016 was registered on the basis of FIR. The appellant was not named in the ECIR. Admittedly, the appellant was not named in the ECIR. From a perusal of the PAO and the record of the Adjudicating Authority, she was not summoned nor any notice u/s 8(2) was issued. 16. Provisional Attachment Order No. 11/2016 was passed on 11.6.2016. No role attributed to the Appellant in the PAO. 17. Confirmation Order was passed by the Adjudicating Authority on 11.2.2016. There is no role attributed towards crime to the Appellant in the Confirmation Order. The said order has been challenged by the appellant. 18. The Enforcement Directorate, Mumbai has registered a case against Shri Vijay Mallya, M/s Kingfisher Airlines Ltd. (KAL) and others under Prevention of Money Laundering Act (PMLA), 2002 in matter of IDBI Loan of Rs. 900 Crore. 19. In the impugned order, it was held by the respon....
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....pondent during investigation found that the appellant was the director in one of the company UBL from 26.10.2009 onwards and taken due advantage by purchasing one of the flat in question in Kingfisher Towers. 20.6 Connivance of the appellant with accused Vijay Mallya is apparent from the fact that the winding up petitions filed by the consortium bank 26.03.2012 in COP No. 57/2012, before the Hon'ble Karnataka High Court which were widely published both in print as well as electronic media. The appellant, therefore, must be aware about the said fact that the fraud committed by Vijay Mallya. The appellant did not care about it rather entered into an agreement dated 05.04.2012 after coming to know about the winding up petition and paid money between 2012-15, thus it shows that the present transaction was entered with a view to help Mr. Vijay Mallya, otherwise inspite of coming to know about the pendency of winding up petition and other action against Vijay Mallya, she would not have been paid the money. 20.7 Agreement dated 05.04.2012, there is an arbitration clause and if the appellant has any grievances against Mallya she must invoke arbitration clause and merely by entering i....
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....Union of India & Ors. 2011 SCC Onlie AP 152, in which the constitutional validity of Section 5 and 8 of the PMLA was challenged, the Division Bench of Andhra High Court while rejecting the Writ Petition, observed as follows:- "37 It further requires to be noticed that not only from the second proviso to Section 9 of the Act but on general principles of law as well, a person deprived of the property in his ownership, control or possession on account of confiscation proceedings under the Act, has a right of action against the transferor of such property to recover the value of such property". 23. And also the case of Suraj Lamp & Industries vs. State of Haryana & Ors. [(2012) 1 SCC 656] very aptly observed as follows:- "18. It is thus clear that a transfer of immovable property by way of sale can only be by a deed of conveyance (duly stamped and registered as required by law), no right, title or interest in an immovable property can be transferred. 19. Any contract of sale (agreement to sell) which is not a registered deed of conveyance (deed of sale) would fall short of the requirements of Section 54 and 55 of the Transfer of Property Act and will not c....
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....he predicate offence and the registration of the ECIR. The said factual position is available on record. It has also come on record that at the request of Respondent Nos. 5 and 8, the entire purchase consideration was remitted to an escrow account of HDFC Bank Limited (Respondent no. 9), since it was represented to the Appellant, that Respondent No. 9 was a creditor of Respondent No. 5. The 'No-Objection' from HDFC Bank 4.05.2012 is filed as 'A-6' of the Appeal. 27. It is argued on behalf of the appellant that once the entire payment of the purchase consideration was made, the Appellant became owner of the said Property and had acquired proprietary rights and title a 'claimant' to the said Property in terms of the Proviso to Section 8(2), Prevention of Money Laundering Act, 2002 being interested/aggrieved party. 28. It is also correct that the Appellant is not even named/ mentioned in the FIR or the ECIR or the captioned Original Complaint. It was not even the case of the Enforcement Directorate/Respondent No. 1 that at the time of the PAO was issued and at the time of filing of the captioned O.C., that the Appellant is involved or connected in any offence or with the alleged....
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....of being heard to prove that the property is not involved in money-laundering. 33. It is evident from the material available on record and from the Impugned Confirmation Order that the Enforcement Directorate/Respondent No. 1 and the Adjudicating Authority were aware that the Appellant was a 'Claimant' to the said Property in terms of proviso to Section 8(2), PMLA. The alleged claim in the property by the appellant is not denied on behalf of the respondent no. 1 during hearing, except it was stated that the appellant was not necessary party, therefore no notice was required to be issued. The said arguments are wholly contrary to law and facts involved in the present appeal as the respondent no. 1 was aware who failed to investigate further in the matter. 34. Despite of having full knowledge about the transaction, Respondent No. 1 and the Adjudicating Authority failed to issue notice to the Appellant or to afford a hearing to her, during the adjudication proceedings. Thus, the Respondent No. 1 and the Adjudicating Authority have failed to comply with the mandatory statutory requirement of the Proviso to Section 8(2), PMLA. The mandatory notice has not been issued. After record....
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....r the sake of argument that the appellant has received the said amount from main accused and thereafter it was deposited with the bank in order to help him. No such findings are rendered. 38. The Respondent-ED even prima facie is not able to establish any collusion/connection of the Appellant with UBHL or Kingfisher Airlines Ltd. or Mr. Vijay Mallya. The main allegation of the Respondent is that the Appellant was a Director in a company associated with the aforesaid companies appointed by Mr. Vijay Mallaya. 39. In this regard the Appellant has filed a detailed Affidavit, alongwith documents, on 09.07.2018; the contents of the same may be read as under- i. The Appellant has no connection whatsoever with UBHL or M/s Kingfisher Airlines Ltd., which are the companies alleged to be involved in the FIR and the ECIR in the present case. ii. The Appellant has never been a Shareholder or Director in UBHL or KAL, at any point of time. The Appellant has no other direct, or indirect interest, financial or otherwise, in UBHL or KAL. iii. The Appellanthas never received any remuneration or any pecuniary advantage from UBHL or KAL, at any point of time. i....
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....s, during the two immediately preceding financial years or during the current financial year; "(d) none of whose relatives has or had pecuniary relationship or transaction with the company, its holding, subsidiary or associate company, or their promoters, or directors, amounting to two per cent. or more of its gross turnover or total income or fifty lakh rupees or such higher amount as may be prescribed, whichever is lower, during the two immediately preceding financial years or during the current financial year;" 41. It appears to me that the applicant was not active director of the company. She was merely an independent director and used to visit the company in the meeting conducted against the reasonable charges in view of her qualification and experience. She was not handling any business of any company of Vijay Mallya or of any activities. Hence, the arguments of the respondent no. 1 are without any substance. It has also come on record that she is also independent director of other well-known companies in Bangalore. It is not the case of respondent no. 1 that she has earned profits of any company of Vijay Mallya at any point of time or she was promoter and shareho....
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....old in the case of Vannarakkal Kallalathil Sreedharan v. Chandramaath Balakrishnan & Anr., (1990) 3 SCC 291. 47. The respondent's contention that the flat is not constructed and possession has not been handed over. It is stated by the appellant who specifically made the statement that the subject-property/Flat has been fully constructed and is ready for delivery and even the vendor is ready to hand-over possession of the subject property, but it could not be given due to attachment order. The winding up was only passed in the year 2017. In 2012, merely the said petition was passed. It is even prima facie established by the respondent no. 1 that she had the knowledge or the respondent no. 1 has informed her. 48. Even otherwise, it is settled law that the rights in any asset of a company acquired by any person prior to initiation of the winding-up proceedings against the said company are absolute and cannot be defeated by the winding- up proceedings, subject to the transaction being an arms-length transaction. 49. There is also no force in the submission of the respondent no. 1 that there was a connivance between the appellant and the accused parties as the filing of the win....
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....gation arising out of that contract and it provides that that obligation may be enforced inter alia against a transferee with notice. Sec. 91 of the Trusts Act also recognises this principle that the transferee with notice of an existing contract of which specific performance can be enforced must hold the property for the benefit of the party to the contract. These are equitable rights though not amounting to interest in immovable property within the meaning of Sec. 54 of the Transfer of Property Act which declares that a contract of sale does not create an interest in the property. On this line of reasoning it has been held by the Madras High Court that the purchaser of (sic under) an antecedent agreement gets good title despite attachment." Their Lordships then considered that the same view has been taken by the Bombay and Calcutta High Courts. The view taken by Punjab & Haryana High Court in Mohinder Singh Vs. Nanak Singh ( AIR 1971 P & H, 381) was overruled. It was observed as under : "In our opinion, the view taken by the High Courts of Madras, Bombay, Calcutta and Travancore Cochin in the aforesaid cases appears to be reasonable and could be accepted as correct. T....
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....to justify the bona fides in the acquisition of the property); and if satisfied as to the bona fide acquisition of the property, relieve such property from provisional attachment by declining to pass an order of confirmation of the provisional attachment; either in respect of the whole or such part of the property provisionally attached in respect whereof bona fide acquisition by a person is established, at the stage of the Section 8(2) process. A further opportunity of establishing bona fide acquisition of property or that the property in question is not proceeds of crime involved in money-laundering is available and mandated, prior to the adjudicating authority passing an order of confiscation, under Section 8(6). 104. Proceedings for attachment and confiscation of proceeds of crime are a process distinct and dissimilar to the process for prosecution of the offence of money-laundering. Deprivation of property involved in money-laundering is the sanction in the first process while deprivation of personal liberty is the sanction enjoined in conviction for the offence. Mens rea is not a jurisprudentially non- derogable adjunct for visitation of civil consequences and theref....
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....herefore, the matter should not be heard. 64. It is true that the appellant has filed the following two applications in O.S.A. No. 5/2017 before the Hon'ble Karnataka High Court: a. Interlocutory Application bearing No. 11 of 2017 seeking impleadment in O.S.A. No. 5/2017; and b. Interlocutory Application bearing No. 8 of 2017 seeking directions from the Hon'ble Karnataka High Court to UBHL and the Official Liquidator to execute the Sale Deed(s) in the Appellant's favour pursuant to the Agreement to Sell dated 05.04.2012. 65. The above two applications are pending before the Hon'ble High Court of Karnataka and are to be decided by the Hon'ble High Court of Karnataka. This tribunal shall never pass an order by-passing the order of execution of sale deed or to pass any direction to hand over the possession to the appellant as this tribunal has no jurisdiction of the same. 66. This tribunal is only to determine whether the subject Property falls within the ambit of the Act or to whether the subject Property is involved in money laundering. Thus, there is no force in submission of the respondent no. 1 this tribunal has no jurisdiction to even cannot ....
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....3,403 3 011887 01 Sept 2012 07 Sept 2012 43,545,635 4 066208 12 Mar 2013 16 Mar 2013 43,545,635 5 096567 02 Sept 2013 03 Sept 2013 43,11,0175 6 131197 24 Feb 2014 03 Mar 2014 43,110,175 7 745088 27 Aug 2014 26 Sept 2013 43,110,175 8 171592 28 Feb 2015 11 Mar 2015 28,187,105 This letter is being issued at the specific request of the customer without any risk or responsibility on the part of the bank or any of its signing officials. Assuring you of our best services For the Hongkong and Shanghai Banking Corporation Limited Sd/- Manager Pallavi Kulkarni Emp No. 195082 PPRM Bangalore The Hongkong and Shanghai Banking Corporation Limited" 72. The next submission of the respondent ED is that if the Appellant has any grievances against Mr. Vijay Mallya, the appellant must invoke the arbitration clause contained in the agreement. The said submission has no force as the Agreement to Sell has been entered into by the Appellant with M/s UBHL and not with Mr. Vijay Mallya. The Appellant may invoke the said arbitration cla....