TaxTMI 
TaxTMI 
2018 (8) TMI 1116
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....rovisionally under Provisional Attachment Order No. 11/2016 dated 11.06.2016, under Section 8(3) of the PMLA, 2002. 4. Admittedly, 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 the matter of IDBI Loan of Rs. 900 Crore. 5. The properties mentioned in the aforesaid Provisional Attachment Order have been provisionally attached under Section 5(5) of PMLA, and the same has been duly confirmed by the Adjudicating Authority in its order in Original Complaint No. 612/2016 dated 01/12/2016, which also includes the property as mentioned by the Appellant. 6. It is submitted on behalf of respondent no. 1 that the impugned provisional attachment has been made by invoking provision of Section 2(1)(u) of PMLA, 2002, which empowers the Complainant (an authority under PMLA) to attach properties of equivalent value of Proceeds of crime to the offender. Hence, during the course of investigation, various properties held/owned/acquired by Shri Vijay Mallya, including those through various companies and/or special purpose vehicle, which were controlled d....
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....desirous of developing the same, had entered into a joint Development Agreement dated 26.04.2010 with Respondent No. 5, undertaking to develop the said project and to deliver 55% of the total saleable super built-up area in the proposed buildings/structures to Respondent No. 5, and in consideration thereof, Respondent No. 5 agreed to transfer to Respondent No. 8, 45% or such portion of undivided share of said land as would be proportionate to the saleable super built-up area falling to the share of Respondent No. 8 in the said project. iv) Consequently, after arms-length discussions and negotiations, the appellant entered into six agreements with Respondent No. 5 & 8 for the purchase of the two apartments bearing No. 17B and 19B in the said project (hereinafter collectively referred to as "said flatss") and the proportionate undivided area in the said land. The following agreements were executed among the appellant, Respondent No. 5 and 8 (hereinafter collectively referred to as the "said agreements"): a. Two Agreements to sell dated 30.01.2012, one each for the said flatss; b. Two Construction Agreements dated 30.01.2012, one each for the said flatss; an....
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.... to Sell dated 30.01.2012. Copies of the Certificate of Foreign Inward Remittance bearing serial number 1332982 dated 23.02.2012, Receipt dated 24.02.2012 issued by Respondent No. 5 and the Party Advice dated 23.02.2012 in respect of payment of purchase consideration by the appellant are filed. vii) The appellant paid the entire purchase consideration from his own personal bank account having funds from his independent sources and earnings, which had no relation whatsoever with any of the respondents named above nor was the purchase consideration part of, directly or indirectly, any transaction(s) with the respondents named above. In this regard, the appellant has filed Confirmation of Transfer dated 14.02.2017 issued by the banker of the appellant confirming that the purchase consideration was paid by the appellant from his personal bank account consisting of his personal funds. viii) The appellant paid the entire purchase consideration upfront to lock the purchase price at the time of execution of the said Agreements and to ensure that the consideration is not subjected to any escalation in the future. Further, the entire purchase consideration was made....
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....titioner alongwith interest at 18% per annum from the date of receipt, i.e., 22.02.2012 till date of award; b. To render to the petitioner proper accounts of actual VAT and service tax paid in respect of the Schedule Property; c. To refund the amounts equivalent to the reduction in the super built-up area due to the alleged sale of common area to the proposed purchasers of apartment, alongwith interest at 18% per annum from the date of receipt, i.e., 22.02.2012 till date of award; d. Pay interest at 18% per annum on the above amounts from the date of award till date of payment; e. To award cost/s towards arbitration proceedings; f. Pass such other order/s as this Hon'ble Arbitrator deems fit to grant in the circumstances of the case, including the costs of the petition, in the interest of justice and equity." Therefore, at the conclusion of the arbitration proceedings, the same were decided by the Arbitral Tribunal against the appellant herein, vide its Final Award dated 22.04.2016. Copies of the appellant's petition dated 10.09.2013 under the Arbitration and Conciliation Act, 1996, separate Defence Statements dated 05.12.2013 f....
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....o the MDRA and as contemplated under the MDRA (Financing Documents). 11.7 Any encumbrance created in favour of any third party is breach of such undertaking is non-est and void. The agreement, therefore, is null and void in view of the corporate guarantee. 11.8 The appeal is no maintainable in view of the decree dated 19.01.2017 is passed by the Debt Recovery Tribunal against these very assets including the flatss in question directing KAL, Dr. Vijay Mallya and KFIL to jointly and severally pay the sum of Rs. 6203,35.03,879.42 alongwith further interest at 11.5% yearly. Therefore, the said decree which has attained finality as such cannot be interfered. There is an arbitration award in favour of the Consortium Bank. The appellant has prima facie not made out a case for this Court to consider the reliefs claimed in the instant appeal. In case the prayer is allowed, it would result in according priority to their claims over those of other secured creditors of the appellant which is impermissible in law. 11.9 Even the Hon'ble Division bench of Karnataka High Court wherein the order of winding up is challenged the Hon'ble High Court vide order dated 25.4.2017 observe that the ....
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....ons specified therein. It does not, of itself, create any interest in or charge on such property. On the strength of such an agreement a buyer does not become the owner of the property. The ownership remains with the seller. It will get transferred to the buyer only on execution of the sale deed by the seller. What the buyer gets from an agreement for sale is only a right to obtain a sale deed executed in his favour. If the seller refused to comply, the buyer is entitled to enforce that obligation by filing a suit for specific performance see Padma Nair v. The Deputy Collector, Valuation and Stamp Duty, W.P. No. 2586 of 1988 dated 28th July, 1993, since reported in 1994 Mh.L.J." 11.13 In the case of B. Rama Raju Vs. Union of India & Ors. 2011 SCC Online AP 152, in which the constitutional validity of Section 5 and 8 of the PMLA was challenged, the Division Bench of Andhra High Court 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 ri....
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....in the Kingfisher Tower. Thus, the appellant does not have any legal ground to claim any title or interest in the said property. Appellant therefore cannot claim any relief from the Hon'ble Appellate Tribunal. 11.16 An application under Section 19 of the Recovery Debts Due to Banks & Financial Institutions Act, 1993, bearing No. O.A. No. 766/2013 was filed by the consortium of banks consisting of 15 banks as the applicants against M/s Kingfisher Airlines Ltd., M/s United Breweries (Holdings) Ltd., Dr. Vijay Mallya & Ors., before the Debt Recovery Tribunal wherein inter-alia, they had prayed for certain interim orders to restrain the Respondents from selling their properties. However, the Debts Recovery Tribunal had neither considered the application on its merits nor had granted any ad-interim relief pending consideration of the application. The consortium of banks thereafter, filed Writ Petition Nos. 38870/2013, W.P. Nos. 39048-39052/2013 and W.P. No. 39053/2013 before the Hon'ble Karnataka High Court, Bangalore seeking an ad-interim order. Accordingly, the Hon'ble Court vide its order dated 03.09.2013 passed an ad-interim order of injunction against the Respondents No. 1 to 3 ....
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....case of appellant that he had purchased two apartments/flats bearing number 17B and 19B, along with the proportionate undivided area in the underlying land in a real estate project being jointly developed by Respondent No. 5 (M/s. United Breweries (Holdings) Ltd. ) and Respondent No. 8 (M/s. Prestige Estates Projects Pvt. Ltd.). It is alleged on behalf of appellant that arms-length discussions and negotiations between the parties for the aforesaid purchase was initiated in 2011 and all the relevant Agreements to Sell were executed on 31.01.2012. 13. It appears from the material on record that the entire purchase consideration (i.e. Euro 7,650,000/-, equivalent to Rs. 49,84,74,000/- ) was paid by the appellant on 22.02.2012, through banking channels from the overseas account of the appellant. It is alleged by the appellant that at the request of Respondent No. 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. It is stated that as on 22.02.2012, the appellant was a purchaser and beneficial owner of the said propert....
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....7.2016 • Appellant issued Legal Notice to Respondent No. 5 and 8, seeking specific performance of agreements regarding purchase of flatss and seeking supply of ED documents re attachment No response from either 12. 27.09.2016 • Appellant wrote to ED seeking details of the attachment No response from ED 13. 01.12.2016 Confirmation Order passed by the Adjudicating Authority 14. 20.12.2016 On gaining knowledge of the Confirmation Order, the Appellant applied for certified copy of the same 15. 30.12.2016 Certified copy received by the Appellant 16. 21.02.2017 Appeal filed before this Tribunal 15. It is submitted by the appellant that the appellant is an innocent bona fide purchaser of the said property. The complete transaction pertaining to the purchase of the said property stood concluded much prior to the registration of the FIR pertaining to the predicate offence and the registration of the ECIR. 16. The appellant is not even named/mentioned in the FIR or the ECIR or the captioned Original Complaint. It is not even the cas....
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....f Apartment No(s): 17B & 19B in "Kingfisher Towers", Vittal Mallya Road, Bangalore-560001 Through Wire Transfer on 22-02-2012 credited to our Escow Account No.00090350002126 Maintained with HDFC Bank Limited, Kasturba Road, Bangalore-560 001, INDIA For United Breweries (Holdings) Limited (Authorised Signatory) HDFC BANK Party Advice cum Date: 23 Feb 2012 Invoice No. 912022200148 Dear Customer In accordance with details shown below we have effected following transactions your Account 0009035000212 Particulars Amount in INR Transactions Reference no. 912022200148 Inward remittance details - [email protected] Remittance name 1/VIVEK MATHIAS Beneficiary Name UNITED BEWERIES(HOLDINGS)LIMITED 498,474,0 0.00 Credit Govt. Service Tax as per sub rule(7B) of Rule 6 of the Service Tax (Amendment) Rules 5,000.00 Debit Govt. Education Cess and Secondary & Higher Education Cess - 3% on Service Tax 150....
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....pellant 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. 27. 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 offence under PMLA or the predicate offence. 28. The respondent no. 1 cannot deny that at the time of passing the Provisional Attachment Order, the ED/Respondent No. 1 was aware of the purchase of the said Property by the Appellant, as is evident from the statement of Shri Manoj Kumar, an employee of M/S UB Group. Though the said fact has also been disputed by the ED, but the ED did not investigate the same or if it did investigate the same, otherwise the real position might have been different. 29. There is also no material on record to show that the Appellant has any link, ....
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....d. 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. 33. 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 recording the statement of Manoj Kumar, an employee of M/s. U.B. Group, no further investigation appears to have been done. The appellant had interest in the flat in question but no mandatory notice required under section 8(2) was served. Section 8(2) is a mandatory provision, it is mandated under the proviso that if property is claimed by a person other than accused, he shall also be given an opportunity of being heard to prove that the property is not involved in money laundering. Despite of clear language of the act, no notice was given. The prescribed period has already been expired. The ap....
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....s no sale deed, thus, the Appellant does not have any interest in the subject-property which is still under construction and possession has not been given to the Appellant. 39. The said arguments have no force as at the stage of adjudication under Section 8, PMLA and the onus upon any Claimant is only to show that the attached property is not involved in money laundering. It is not even the Respondent's case that the subject property is involved in money laundering, rather it is the 'value thereof'. It is not even the case of the Respondent that the Appellant is involved, in any manner, in the offence of money laundering. No such contention has been raised, except in the Written Submissions filed by the counsel of the respondent no. 1. New case in the written-submission cannot be set-up. There is no allegation that the money deposited in the bank by the appellant was tainted money or any cash deposit was made. All the payments were made through banking channel. Many of contentions raised in the written submissions are not part of the pleadings of respondent no.1. 40. It appears from the material that the Appellant has executed Agreements to Sell, Construction Agreements and h....
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....and presumption cannot be drawn under section 81 of the Evidence Act. 46. In the present, the presumption can be attached that the appellant was aware about the news published in 2012 about the pendency of winding up petition. The funds were paid during the period 2012 to 2017 and the prayer in the winding up petition was allowed in 2017. 47. In the present case, the Agreement to Sell entered into by the Appellant with M/s UBHL is of the year2012 (i.e. prior to even the initiation of the winding-up proceedings) and the entire purchase consideration was duly paid in the year 2015( i.e. much prior to the subject Provisional Attachment Order). It is not even the Respondent ED's has established prima facie case that the purchase of the subject Property vide inter alia the Agreements to Sell was not an arms-length transaction. 48. In Vannarakkal Kallalathil Sreedharan Vs. Chandramaath Balakrishnan & Anr. (1990 (3) SCC 291) a Bench of two Judges considered a question identical to the question raised before us. The question was whether the sale prevailed over the attachment. The facts were that 80 cents of land were agreed to be sold in favour of the appellant under an agreement ....
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....e allowed to prevail over the rights of the attaching creditor. The rights of the attaching creditor shall not be allowed to override the contractual obligation arising from an antecedent agreement for sale of the attached property. The attaching creditor cannot ignore that obligation and proceed to bring the property to sale as if it remained the absolute property of the judgment- debtor. We cannot, therefore, agree with the view taken by the Punjab & Haryana High Court in Mohinder Singh's case." 50. In the above case this Court has gone even to the extent that not only a sale deed but even an agreement of sale will prevail over attachment before judgment made subsequent to such agreement for sale. I do not want to express any opinion with regard to the case of an agreement for sale, but I am of the confirmed opinion that a sale deed having been executed prior to attachment before judgment, though registered subsequently will prevail over attachment before judgment. 51. Even in the case of B. Rama Raju Vs. UOI decided by (DB) of High Court of Judicature, Andhra Pradesh at Hyderabad, the Judgment reported in 2011 S.C.C on lines AP-152 in para - 103 and 104, it was hold as und....
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....ng, the impugned order cannot be interferred. The proceedings relied upon by the ED are the following: a. O.A. No. 766/2013 before the Hon'ble Debts Recovery Tribunal; b. Writ Petition No. 38870/2013, 39048-39052/2017 and 39053/2017; c. O.S.A. No. 5/2017; and d. Interlocutory Application No. 1/2018 in O.S.A. No. 5/2017, as referred in Para 21. 54. The said arguments have no force as the said proceedings have no bearing whatsoever on the adjudication of the present Appeal for the determination of which, this Tribunal ought only to determine the following: i) Issue 1 - Whether the Appellant has committed any offence under Section 3 of the Prevention of Money Laundering Act, 2002 ("Act")? ii) Issue 2-Whether the subject property is proceeds of crime and the Appellant is in possession of proceeds of crime? 55. With regard to issue 1, it is not even the case of the Respondent that the Appellant has committed any offence under Section 3 or is in any manner involved in the commission of the same. The Appellant is the purchaser of the subject property, for which he paid the complete consideration through duly documented legal bank....
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.... same has no relevance to the present Appeal. The corporate guarantee is executed between UBHL and certain secured creditors. The same is not registered either with the Ministry of Companies Affairs or the jurisdictional Registrar of Assurances and hence no public knowledge can be imputed to the Appellant. 64. 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 clause against M/s UBHL in the event of breach of any covenants of the said Agreement, including non-handing over of possession or non- execution of sale deed in favour of the Appellant in due course. The said aspect cannot be determined in the present proceedings. 65. The Appellant is not seeking any direction from this Tribunal that the Appellant be handed over the possession of the subject Property nor that the sale deed(s) in respect of the subject Property be executed by M/s UBHL in favour of the....