TaxTMI 
TaxTMI 
TaxTMI 
2018 (10) TMI 1011
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....erials available on record. 2. Both the appeals have been preferredby the appellants named above against order dated 12.08.2014 passed by Adjudicating Authority in O. C. No. 288/2014 confirming Provisional Attachment Order No. 01/HZO/2014 dated 19.03.2014 in ECIR No. 03/HZO/2010. 3. The facts and issues involve in both the appeals as well as the impugned order are same so both the appeals are taken up together for judgment and order. FACTS OF THE CASE: 4. It is revealed from the records that, CBI, BS & FC, Bangalore registered an FIR No. RC3(E)/05/BS&FC/BLR dated 04.04.2005 against M/s. Sarita Steels & Industries Ltd. (SSIL), its Chairman and Managing Director Shri G. EswaraRao& Others,for defaulting working capital and term loan and fraudulently availing LC Limits to the extent of Rs. 10.27 Crores. On completion of investigationthe CBI filed charge sheet on 31.12.2007 under Sections 120 B read with 420, 467, 468 & 471 of IPC, 1860 & Section 13 (2) read with 13 (1) (d) of the Prevention of Corruption Act, 1988 against M/s. SSIL, G. EswaraRao& Others. 5. As the offences under Section 120 B and 467 of IPC are Scheduled Offences, under paragraph 1 of Part B of the Schedule appen....
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....te. G. Saraswati w/o Shri G. EswaraRao 62,500 8. 1156/1986 Dry Land 0.75c Sy No. 34/6, Bondapalle, cheepurupally, Garividi, Vijayanagaram, Dt, AP. -Do- 1,87,500 9. Dry Land 0.75c Sy No. 34/7, Bondapalle, cheepurupally, Garividi, Vijayanagaram, Dt, AP. -Do- 1,87,500 10. 1215/1986 Dry Land 0.25c Sy No. 34/6, Bondapalle, cheepurupally, Garividi, Vijayanagaram, Dt, AP. -Do- 62,500 11. Dry Land 0.46c Sy No. 34/8, Bondapalle, cheepurupally, Garividi, Vijayanagaram , Dt, AP. -Do- 1,15,000 12. 1214/1986 Dry Land 0.25c Sy No. 34/6, Bondapalle, cheepurupally, Garividi, Vijayanagaram, Dt, AP. -Do- 62,500 13. 1169/1986 Dry Land 1.38 acres Sy No. 35/4, Bondapalle, cheepurupally, Garividi, Vijayanagaram, Dt, AP. -Do- 3,45,000 14. 310/1992 Dry Land 2.35c Sy No. 33/1, Bondapalle, cheepurupally, Garividi, Vijayanagaram, Dt, AP. -Do- 5,87,500 15. 310/1992 Dry Land 0.32c Sy No. 33/3, Bondapalle, cheepurupally, Garividi, Vijayanagaram, Dt, AP. -Do- 80,000 16. 310/1992 Dry Land 2.35c Sy No. 323/2, Bondapalle, cheepurupally, Garividi, Vijayanagaram, Dt, AP. -Do- 5,87,500 Sub-Total 22,77,500 ....
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....our of IDBI Bank (A-2) by way of hypothecation deed of movable property. b) On 24.04.2002, R-4 had also mortgaged immovable properties situated in HosurTaluk, Krishnagiri District in the state of Tamil Nadu by depositing title deeds with A-2. Guarantee agreement dated 10.05.2001 was executed by ShriGrandhiEswaraRao, Smt. GrandhiSarswathi and Ku. GrandhiSarita in favour of IDBI. The properties of Borrower Company which are mortgaged to IDBI the Appellant no.2 is not sufficient to recover the dues of the Appellant. Hence the Appellant had invoked the Guarantees of ShriGrandhiEswaraRao, Smt. GrandhiSaraswathi and Ms. GrandhiSarita and is in the process of taking measures to recover the dues of the Appellant from the properties of the said Guarantors. ER Textiles had availed disbursement of loan aggregating to Rs. 71.16 crore from time to time. The borrower company in terms of the amortization schedule contained in the agreement. c) During 2001-2003, financial assistance in form of the Funded Interest Term Loan by funding the interest fallen due during November, 2001 to April 2003 aggregating to Rs. 15.42 crore. This amount together with interest @ 14.50% p.a. was payable in 24 q....
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....ment of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016, Section 31B of the Recovery of Debts and Bankruptcy Act, 1993 provides as under:- 31B. Priority to secured creditors:- Notwithstanding anything contained in any other law for the time being in force, the rights of the 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 revenue, taxes, cesses and rates due to the Central Government, State Government or local authority" o) In view of the aforesaid non-obstante clause which came in effect on 01.09.2016, the rights of secured creditors have priority over the government dues and therefore, the attachment order deserves to be set aside. p) The appellant has referred to this Tribunal‟s order dated 14.07.2017 passed in the matter of State Bank of India Versus Joint Director, Directorate of Enforcement, Kolkata in FPAPMLA-1026/KOL/2015. 9. CASE OF THE LIC (FPA-PMLA-924/HYD/2015) This appellant is arrayed as Defendant no. 6 in O.C. No. 288 of 2014 an....
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....0(b) read with Section 420, 467, 471 of IPC and Section 13(2) of the Prevention of Corruption Act, 1988 by CBI against the Respondent no. 2 herein. M/s. ER Textiles Ltd. is not named as an accused in the Charge Sheet. i) On 05.02.2001, Consultant of Respondent no. 4 made statement before BIFR that an improved OTS has been sent to the SASF for approval and a similar improved OTS will be sent to LIC for its outstanding amount towards Respondent no. 4 shortly, but the same has not been received till date. j) On 13.09.2013, the appellant SASF, issued notice to the borrower company, under Section 13(2) of the SARFAESI Act, for repayment of their dues. If notice under Section 13(2) has been issued then the secured interest i.e. the mortgaged property shall be deemed as attached [Transcore v. Union of India &Anr., (2008) 1 SCC 125]. k) On 19.03.2014, PAO was passed provisionally attaching the properties of M/s. E R Textiles Ltd., ShriG. EswaraRao, Late Smt. G. Saraswathi through her daughter Smt. SaritaBorugu on the basis that R-4 have been termed as proceeds of crime for the reason that Rs. 5,30,55,500/- was allegedly advanced by SSIL(R-2) company in February, 2009 to R-4 company....
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....Settlement Scheme. The compromise payment accepted by the bank involved write off of Rs. 3.13 Crores and waiver of notional interest and charges of Rs. 5.68 Crores, totaling to Rs. 8.81 Crores. The charge sheet filed by CBI cites this amount. The other accused have actively participated in the above mentioned fraud, as detailed in the above mentioned CBI charge sheet. IV. It is also the case of R-1 that during the course of investigation the statement of S/Shri G. EswaraRao, N.Kamaraju, N.Subramaniam, V.SrinivasVaraprasad, B.U.Chandrasekhar, T.R.Rajagopalan and V.Veerasamy, have been recorded under Section 50 of the PMLA, 2002. V. The relevant portion of the statements of Shri G. EswaraRao and Shri P.S.C.NageswaraRao, M/s. Balaji Associates, statutory auditors of both SSIL(R-2) and M/s. E R Textiles Ltd. (R-4), as reflected in para no. 6.8& 6.9in PAO are reproduced below: "6.8. Shri G. EswaraRao is also the Chairman of M/s. ER Textiles Ltd. and had around 77% of share holding in M/s. ER Textile Ltd. and is in the control of the affairs of M/s. ER Textile Ltd. He in his statement dated 19.02.2014. further stated that the share application money amounting to Rs. 5,30,55,500/-....
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....VI. The Respondent no. 1, in the PAO at Para nos. 9, 10 & 12, so far as it relates to M/s. E R Textiles Ltd., has stated as below:- "9. Investigation revealed that SSIL, as of now is a company on paper. The Proceeds of Crime amounting to Rs. 8.81 crore has mingled with the other legitimate sources of amounts of SSIL/Shri G. EswaraRao and has been used over a period of time. But for this amount, an equal amount of negative balance would have existed in the books of account of SSIL/Shri G. EswaraRao, which is the value of any such property (proceeds of crime) constitutes property involved in money laundering within the meaning of "Property" as defined under Section 2(1)(v) of the PMLA, 2002. 10. Section 2(1)(u) of PMLA, 2002envisages any property derived or obtained, directly or indirectly by any person as a result of criminal activity relating to scheduled offence or the value of any such property (emphasis supplied) as "Proceeds of Crime". In view of this the value of any such movable or immovable property with SSIL/Shri G. EswaraRao equivalent to the proceeds of crime amounting to Rs. 8.81 crores would constitute proceeds of crime, in this case. The investigation conducted s....
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....oncerned Sub-Registrars of the Department of Stamps &Regsitration, Govt. of Andhra Pradesh. Shri G. EswaraRao and his only daughter Smt. B. Saritha are the legal heirs to Smt. Late G. Saraswati, and Shri G. EswaraRao is entitled to fifty percent share of the properties held in the name of his wife Smt. Late G. Saraswati. 11.1 ................................................................... 12. Investigation revealed in identification of the following immovable properties in the name of Shri G. EswaraRao, and M/s. E R Textiles Ltd., (to the extent of SSIL's amount lying with them) which would be considered to form the value of property equivalent to the proceeds of crime, as discussed above." VII. The Respondent no. 1 reflected the details of landed properties, as mentioned in Para no. 6 above, stated that, of the said properties, property at Serial no. 1 to 6 are in the name of Shri G. EswaraRao, valued at around Rs. 5,52,019/-. The properties at Serial no. 7 to 16 are in the name of G. EswaraRao‟s wife, Smt. Late G. Saraswati. Shri G. EswaraRao and his daughter Smt. B. Saritha are the legal heirs of Smt. Late G. Sarawati and Shri G. EswaraRao is entitled for fifty p....
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....om defendant no.1, to defendant no.3. ii). Contents to the extent of mortgage of the properties of the defendant company no.3 is not disputed. IDBI, the defendant no.5 herein has been made as a defendant as charge holder only. As per Sec.71 of PMLA 2002, the provisions of PMLA shall have overriding effect notwithstanding anything inconsistent there with contained in any other law for the time being in force, including SARFAESI Act. The above proposition has been upheld by the Apex Court in the cases of Solidaire India Ltd. AIR 2001 SC 958:JT 2001(2) SC 642 (MANU/SC/0009/2001), Bank of India VsKetan Parekh -2008(8) SCC 148:AIR 2008 SC 2361 (MANU/SC/0009/2001) and Narcotic Control Bureau Vs. Krishnalal in C.A. Nos. 810-811/1989 (MANU/SC/0152/1991). The Prevention of Money Laundering Act is aimed at preventing money laundering and to provide confiscation of property derived from or involved in Money laundering and for matters concerned therewith and incidental thereto." 11. We have gone through the impugned order. The Adjudicating Authority in his order, so far as the case of present appellants are concerned, has negated the contentions of the appellants herein on all legal iss....
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....f Smt. Late G. Saraswathi, being the share of Shri G. EswaraRao after her death. The Respondent no. 1 has valued the property of Shri G. EswaraRao including the value of 50% of his share of properties in the name of his deceased wife to the tune of Rs. 16,90,769/-in total. c) We have carefully gone through the materials on record. It is not the case of the Respondent no. 1 that the properties in question have been acquired out of proceeds of crime rather it is the admitted fact that the properties in question have been attached as value thereof equivalent to proceeds of crime. It is also an admitted fact that the properties in question have been mortgaged with the Appellant Banks. d) Both the parties have made their submissionsand various documents have been referred. It is an admitted fact that the appellant banks neither an FIR named accused nor any of their officials are involved either in the scheduled offences or offences committed under the provisions of PMLA. It is not the case of the Respondent no.1 that the properties in question in these appeals have been acquired out of proceeds of crime nor it has been established at this stage that the appellant banks or its offici....
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....relevant provisions of law. On a recent judgment of this Tribunal, on the aforesaid issue, in the matter of IDBI Bank Ltd. Versus The Deputy Director, Directorate of Enforcement &Ors. in FPA-PMLA-1247/DLI/2018 dated 10.05.2018. The Relevant paras of this judgment are reproduced below: "13. The relevant portions of the tribunal order in state Bank of India matter (Supra) are re-produced below: "7. Coming to the second question, there is no doubt that the 1985 Act is a special Act. Section 32(1) of the said Act reads as follows: "32. Effect of the Act on other laws.-(1) The provisions of this Act and of any rules or schemes made there under shall have effect notwithstanding anything inconsistent therewith contained in any other law except the provisions of the Foreign Exchange Regulation Act, 1973 (46 of 973) and the Urban Land (Ceiling and Regulation) Act, 1976 (33 of 1976) for the time being in force or in the Memorandum or Articles of Association of an industrial company or in any other instrument having effect by virtue of any /law other than this Act." 8.The effect of this provision is that the said Act will have effect notwithstanding anything inconsistent therewith conta....
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.... wanted to exclude the provisions of the Sick Companies Act from the ambit of the said Act, the Legislature would have specifically so provided. The fact that the Legislature did not specifically so provide necessarily means that the Legislature intended that the provisions of the said Act were to prevail even over the provisions of the Sick Companies Act. Under Section 3 of the 1992 Act, all properly of notified persons is to stand attached. Under Section 3(4), it is only the Special Court which can give directions to the Custodian in respect of property of the notified party. Similarly, under Section 11(1), the Special Court can give directions regarding property of a notified party. Under Section 11(2), the Special Court is to distribute the assets of the notified party in the manner set out thereunder. Monies payable to the notified parties are assets of the notified party and are, therefore, assets which stand attached. These are assets which have to be collected by the Special Court for the purposes of distribution under Section 11(2). The distribution can only take place provided the assets are first collected. The whole aim of these provisions is to ensure that monies....
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....l Institutions Act, 1993 wherein after giving an overriding effect to the 1993 Act it is specifically provided that the said Act will be in addition to and not in derogation of a number of other Acts including the 198.5 Act. Similarly under Section 32 of the 1985 Act the applicability of the Foreign Exchange Regulation Act and the Urban Land (Ceiling and Regulation) Act is not excluded. It is clear that in the instant case there was no intention of the legislature to permit the 1985 Act to apply, notwithstanding the fact that proceedings in respect of a company may be going on before the BIFR. The 1992 Act is to have an overriding effect notwithstanding any provision to the contrary in another Act." 31. The similar view was taken by the Bombay High Court in the case of Bhoruka Steel Ltd. Vs. Fairgrowth Financial Services Ltd. The judgment rendered on 09.02.2016 reported in 1997 (89) company cases 547 (BOM) para 15 of the said judgment read as under: "15. To be noted that in both the judgments, relied upon by counsel, the Supreme Court has held that generally where there are two special statues, which contain non-obstante clauses, the later statute must prevail. This is because ....
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....alise 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 other rates due to the Central Government, 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." 34. In Section 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993after the words "the date of the application","and includes any liability towards debt securities which remains unpaid in full or part after notice of ninety days served upon the borrower by the debenture trustee or any other authority in whose favoursecurity interest is created for the benefit of holders of debt securities or;" is added which makes the said amendment or the 1993 Act applicable to all the debts which ....
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....solvency and Bankruptcy Code, 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." "3 There is, thus, no doubt that the rights of a secured creditor to realize secured debts due and payable by sale of assets over which security interest is created, would have priority over all debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or Local Authority. This section introduced in the Central Act is with "notwithstanding" clause and has come into force from 01.09.2016" "4 The law having now come into force, naturally it would govern the rights of the parties in respect of even a lis pending." "5 The aforesaid would, thus, answer question (a) in favour of the financial institution, which is a secured creditor having the benefit of the mortgaged property." 38. In another Madras High Court judgment in the case of "Dr. V. M. Ganesan vs. The Joint Director, Directorate of Enforcement" has explained the grievances faced by the financial institutions while holding....
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....bative value that his acquisition is bona fide, legitimate and for fair market value paid therefor, the adjudicating authority must carefully consider the material and evidence on record (including the Reply furnished by a noticee in response to a notice issue under Section 8(1) and the material or evidence furnished along therewith to establish his earnings, assets or means 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..." 41. The Supreme Court in (2010)8 Supreme Court Cases 110 (Before G.S. Singhvi and A.K. Ganguly, JJ) in the case of United Bank of India V/s. SatyawatiTondon and Ors. In paras no. 6, 55 & 56 has held as under:- 6. To put it differently, the DRT Act has not only brought into existence special procedural mechanism for speedy recovery of dues of banks and financial i....
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....ny comment. But we can only observe that in case of settlement, joint petition for quashing of FIR in the High Court u/s 482 Cr. P.C. could be filed. 43. It is not denied on behalf of department that these provisional attachment was made, the proceedings of recovery of amount were pending before the DRT for recovery against the borrowers and for sum of the properties, possession were with the bank. The mortgaged deeds are also not disputed or/and validity of the same are not challenged on behalf of ED. 44. It is settled law that generally when the civil dispute between the parties are settled before the court particularly pertaining to the recovery of out-standing amount, on joint petition, the High Court while exercising its discretion may quash the criminal petition u/s 482 Cr. P.C. at the joint request of the parties. 45. Three Judge Bench in NarendraLal Jain &Ors., (supra) held that during the investigation pertaining to the culpability of the accused in the crime, the concerned bank had instituted suits for recovery of the amount claimed to be due from the respondents and the said suits were disposed of in terms of the consent decrees. On the basis of the said consent de....
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....n the original petition. The provisions of OTS Scheme prevent the complainant bank from entering into any compromise or settlement under the said OTS Scheme in the cases of willful default, fraud and malfeasance. The complainant bank in choosing to enter into such consent terms under the provisions of OTS Scheme has not only exonerated the petitioners, but for all intents and purposes given up the perusal of the complaint and having no grievance against them in any other proceeding whether civil or criminal on the same set of issues." "70. There is no doubt that the trial has been proceeding for offences for the last about 20 years ago. The dispute between the petitioner and complainant Bank 33 years old. A long time has in fact been elapsed since the alleged commission of offences. Still the trial continues. The present petition is maintainable as the same has been filed also on additional grounds and circumstances. No useful purpose would be served if such oppressive trial may continue for many more years. Thus, ends of justice are served by quashing such a proceeding, as the parties cannot be allowed to go through the rigmarole of criminal prosecution for long numbers of years i....
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....djudicating Authority for the purposes of release of properties which have been attached in terms of the provisions of Section 5 of the Act. This can be seen by reading Section 8(1) and the proviso to Section 8(2) of the Act whereby Adjudicating Authority has to rule whether all or any of the properties referred to in the notice are involved in money laundering or not. "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 subsection (10) of section 18, if the Adjudicating Authority has reason to believe that any person has committed an offence under section 3 or is in possession of proceeds of crime, he may serve a notice of not less than thirty 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 subsection (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 mone....
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....ML Act can be initiated only in case the person is held guilty of receiving proceeds of crime as a result of commission of scheduled offence. The Karnataka High Court has also held that the complainant in such a case is not required to wait for the result of trial being held for the scheduled offence. A complaint can still be filed against such person, but if ultimately the person is acquitted of the charge for the scheduled offence, his prosecution under section 3 of the Act for the offence of Money-Laundering would also come to an end. It has also been kept open by the Karnataka High Court that a person against whom complaint under section 3 of the PML Act has been filed and he is being prosecuted for the offence of moneylaundering, he can show before the 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 ....
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.... (b) 'knowingly' either assists or is a party, or (c) is 'actually involved' in such activity; and (ii) Secondly, if he also projects or claims it as untainted property;" 38. The first of the two pre-requisite to attract Section 3 of PMLA shall thus satisfy any of the following necessary ingredients- "A. RE: DIRECT OR INDIRECT ATTEMPT: In State of Maharashtra v. Mohd.Yakub, MANU/SC/0239/1980 : (1980) 3 SCC 57, the Hon'ble Supreme Court observed that- "13. Well then, what is an "attempt"? ...In sum, a person commits the offence of "attempt to commit a particular offence" when (i) he intends to commit that particular offence and (ii) he, having made preparations and with the intention to commit the offence, does an act towards its commission; such an act need not be the penultimate 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 ....
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....erty being 'proceeds of crime' derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence, would be utmost necessary, which however is lacking in the instant case." 59. These are four ingredients which are determinative factors on the basis of which it can be said that whether any person or any property is involved in money laundering or not. If there is no direct / indirect involvement of any person or property with the proceeds of the crime nor there is any aspect of knowledge in any person with respect to involvement or assistance nor the said person is party to the said transaction, then it cannot be said that the said person is connected with any activity or process with the proceeds of the crime. The same principle should be applied while judging the 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 t....
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....n that property will not yield proper income. In the circumstances, he sold the property to appellants. The respondent has not produced any document or material to disprove the statement of Gunaseelan. There is nothing on record to show that the transaction in favour of the said Gunaseelan, is not genuine. It is not the case of respondent that the said Gunaseelan is a Benami or employee of G. Srinivasan and that Gunaseelan did not pay any amount as sale consideration or the sale consideration paid by Gunaseelan was not legitimate money. There is no material to show nexus and link of Gunaseelan with G. Srinivasan and his Benamies. In the absence of any verification or investigation by respondent with regard to genuineness or otherwise of the purchase by Gunaseelan; whether he was connected with G. Srinivasan or the sale consideration 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 p....
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....erties attached vide Provisional attachment order are involved in money-laundering. The only defense or explanation raised by Defendants, particularly Def No. 2 to 8 is that the landed properties attached by the complainant are not proceeds of crime. These properties were purchased by these defendants without having any knowledge, whatsoever, that these properties were derived or obtained through criminal activities relating to schedule offence. It has been demonstrated by them that they verified the title deeds relating to the properties and after due verification of every details entered into the sale transactions as such these are bona fide deals entered by them against proper sale consideration and the money paid to the seller is also well explained. 22. Against the above arguments vehemently raised by the defendants, the complainant without disputing 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 ....
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....uced before it, but rejected the same on the ground that Appellants have not given any valid reasons for not filing the same before the Adjudicating Authority. Having considered the Additional documents, the appellate authority failed to give any finding on merits after verifying with the concerned Bank." 14. The Respondent no. 1 has heavily relied on the judgment of the Hon'ble Supreme Court passed in the matter of KSL & Industries Ltd. vs. ArihantThreades Ltd. & Others passed in the matter of Civil Appeal no. 5225 of 2008. The Hon'ble Three judges Bench of Hon'ble Supreme Court has discussed various decision of the hon'ble Supreme Court, the RDDB Act and SICA. It is important to refer/quote the relevant paras of the Judgment delivered by the Hon'ble Supreme court in KSL & Industries Ltd. vs. ArihantThreaders Ltd. &Ors. (supra). "47. In a subsequent decision in Allahabad Bank Vs. Canara Bank, this Court held that with reference to the Companies Act, the RDDB Act should be considered as a "special law" though both laws could be treated as "special laws" in respect of recovery of dues by banks and financial institutions. In a later case the question arose in ....
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....nder shall be in addition to, and not in derogation of, the other laws mentioned therein including SICA. 50. The term "not in derogation" clearly expresses the intention of Parliament not to detract from or abrogate the provisions of SICA in any way. This, in effect must mean that Parliament intended the proceedings under SICA for reconstruction of a sick company to go on and for that purpose further intended that all other proceedings against the company and its properties should be stayed pending the process of reconstruction. While the term "proceedings" under Section 22 did not originally include the RDDB Act, which was not there in existence. Section 22 covers proceedings under the RDDB Act. 51. The purpose of the two Acts is entirely different and where actions under the two laws may seem to be in conflict, Parliament has wisely preserved the proceedings under the SICA, by specifically providing for sub- section (2), which lays down that the later Act RDDB shall be in addition to and not in derogation of the SICA. 52. We might add that this conclusion has been guided by what is considered to be one of the most crucial principles of interpretation viz. giving effect to t....
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....scheme of the entire Act. No part of a statute and no word of a statute can be construed in isolation. Statutes have to be construed so that every word has a place and everything is in its place." 53. Moreover, we have found nothing contrary in the intention of the SICA to exclude a recovery application from the purview of Section 22, indeed there could be no reason for such exclusion since the purpose of the provision is to protect the properties of a sick company, so that they may be dealt with in the best possible way for the purpose of its revival by the BIFR. In State of Punjab Vs. The Okara Grain Buyers Syndicate Ltd.[7], the Court articulated the importance of preserving the beneficent purpose of the statute and observed:- "14. ........ We shall therefore proceed to examine the provisions of the Act on the footing that the test for determining whether the Government is bound by a statute is whether it is expressly named in the provision which it is contended binds it, or whether it "is manifest that from the terms of the statute, that it was the intention of the legislature that it shall be bound", and that the intention to bind would be clearly made out if the beneficen....
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....ent in aforesaid two Acts have been brought in the year 2016. 17. One more important thing to be noted that the Hon'ble Supreme Court in the aforesaid case KSL & Industries Ltd. (supra) matter has held that the provisions of SICA, in particular section 22, shall prevail over the provisions for the recovery of debts in the RDDB Act because of the fact that the non-obstante provision of RDDB Act has specifically excluded SICA from its application. 18. The conflict of non-obstante clause arising in respect of two or more enactments then the same have to be resolved by taking into consideration of policy underlying the enactment and the language used in them. The Prevention of Money Laundering Act has been enacted for forfeiture of crime involved in the money laundering which was considered necessary to deprive persons engaged in serious illegal activities and have thereby been increasing their resources for operating in clandestine manner. the Act was created to forfeit illegal properties and to prevent the money laundering activities which are threat to financial system of the country and its integrity and sovereignty. Further the question of prevalence of a subsequent legisl....
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....operated and maintained current a/c 01000051007 and 03921011000797 with State Bank of India, Overseas Branch, Kolkata (in short SBI) and Oriental Bank of Commerce, Stand Road Branch, Kolkata (in short OBC) respectively with the intention to defraud the bank and submitted fake and forged documents for export of goods such as Invoice, Packing List, Quality and Quantify Certificate, SDF Declaration, Undertaking, Origin of Good Certificate, Shipping Bill, Bill of lading etc. to the bank and god these bills discounted against L/C(s) and obtained an amount of Rs. 12,28,22,463/- and Rs. 1,30,43,433/- from State Bank of India and Rs. 6,76,65,000/- from Oriental Bank of Commerce. The funds which were credited to the above current accounts, were withdrawn from bank for personal gain of ShriGopinath Das and companies owned and managed by him. Out of these funds, Sh. GopinathDas has acquired several immovable properties as detailed in the impugned order and mortgaged them with Syndicate Bank, Salt Lake Branch, Kolkata, the present appellant for availing credit facilities to the extent of Rs. 10 crores and got Rs. 4.5 crores fraudulently released from the appellant against fake and forged docum....
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....ublic money. The IDBI Bank has the right to property under the Constitution of India. The property of the IDBI Bank cannot be attached or confiscated if there is no illegality in the title of the appellant and there is no charge of money laundering against the appellant. The mortgaged of property is the transfer under the Transfer of Property Act. Even the respondent is not denying the fact that the Bank is a victim party who is also innocent and is entitled to recover the loan amount. It is also not disputed by the respondent that the properties in dispute are mortgaged with Bank and it has to go to Bank ultimately. The only submission of the respondent that u/s 8(8) of PMLA, the possession be given to Bank after the trail and final outcome of criminal matters against the barrowers. We do not agree with the argument in this regard in view of amendment in the two statutes. Even otherwise the trail would take number of years. The public money cannot be stalled otherwise Banking system would be collapsed. 24. That the definition of "proceeds of crime" as per Section 2(u) of the PML Act comprises of the property which is derived or obtained as a result of criminal activity. In the p....
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....ew that there is no nexus whatsoever between the alleged crime and the Bank who is mortgagee of the properties in question which were purchased before sanctioning the loan. Thus no case of moneylaundering is made out against Bank who has sanctioned the amount which is untainted and pure money. They have priority right to recover the loan amount/debts by sale of assets over which security interest is created, which remains unpaid. The Ld. Adjudicating Authority has not appreciated the facts and law involved in the matter and the primary objective of section 8 of PMLA is that the Adjudicating Authority to take a prima facie view on available material and facts produced. The contentions raised by Mr. N.K. Mata, Advocate has no substance. The provisional attachment in the present matter is bad and against the law. 29. In view of the aforesaid reasons and our decision, we are not going into other legal issues such as "reason to believe", "retrospective application provisions of PMLA" etc. 30. In the circumstances available in the present case, the allegation of money laundering prima facie, so far as present appellant & properties involved in this appeal, found to be unsustainable f....