TaxTMI 
TaxTMI 
2018 (10) TMI 1011
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....ed to record our findings on the basis of the materials 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 Schedule....
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.... Sub-Total 5,52,019 7. 1154/1986 Dry Land 0.25c Sy No. 35/2, Bondapalle, cheepurupally, Garividi, Vijayanagaram, Dt, AP. Smt Late. 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, cheepurupa....
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.... assistance to ER Textiles Ltd. (Respondent no. 4) comprising of termed loan of Rs. 150,00,00,000/-for setting up facilities of composite textile unit as 100% EOU with modern processing and finishing facilities for manufacture of high value cotton shirts and trouser fabric. On the same day R-4 had created security interest in favour 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....
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....ed nor charge sheeted nor involve either in the Schedule Offence or offence committed under the provisions of PMLA. m) Respondent no. 4 Company has not been made accused in the ECIR, than the properties of Respondent no. 4 Company as mortgaged to the appellant could not have been attached under PMLA as the same cannot by any stretch of imagination be termed as proceeds of crime. n) In terms of Section 41 of Enforcement 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, th....
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....BI to M/s.ER Textiles Ltd.to SASF. f) On 26.05.2006, at the request of M/s. ER Textiles Ltd., the Appellant LIC approved the Restructuring Proposal of the M/s. E R Textiles Ltd., however the payment was still not made. g) In 2006, since the Respondent no. 4 was defaulting in payment in accordance with the restricted proposal also, LIC approached DRT Mumbai but the same could not be proceeded as the Respondent No. 4 approached BIFR in 2008 and sought OTS. h) On 31.12.2007, Charge Sheet was filed under Section 120(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 ....
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....r accused. The LCs stated to be established in favour of RINL for the purchase of raw materials were found to be false and fabricated and without any actual purchase or movement of goods, false and forged bills of exchange purported to be of RINL were fabricated and discounted against the LCs. The fraudulent LC transactions and failure of the company to repay the term loans resulted in outstanding liability of Rs. 10.27 Crores plus accrued interest and other charges aggregating to Rs. 15.95 Crores. Against the above liability a compromise payment of Rs. 7.14 Crores was made by the accused under the One Time 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.Veeras....
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.... Textiles has to return the investment statutorily to the major shareholder in M/s. ER Textiles Ltd., Shri G. EswaraRao with 77% and is in control of the affairs of the company; that the details of the fixed assets of M/s. ER Textiles Limited as per the balance sheet as on 31.03.2013, are submitted as WDV(Written Down Value) as on 31.03.2013, and it consists of Land, Building, plant and machinery, office equipment, vehicles etc., valued around Rs. 63.28 crores; that the share application monies received are statutorily refundable and the same has been specifically mentioned in Note No. 2.5 of the balance sheet for the year ending 2012-13." 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....
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.... taken term loans from different financial institutions and charge exist on the company's assets with Industrial Development Bank of India, IDBI Towers, Mumbai, Life Insurance Corporation of India, Yogakshema, Mumbai, Bank of Punjab Limited, Mumbai, State Bank of India, Industrial Finance Branch, Kolkata, Union Bank of India, Khairtabad, Hyderabad and Central Bank of India, Hosur. c. Sixteen lands/properties held in the name of Shri G. EswaraRao, the then Chairman and Managing Director of M/s. E R Textiles Ltd., and in the name of his wife Smt. Late G. Saraswati, valued around Rs. 28,29,519/- have been identified. These details of these landed properties have been got confirmed from the concerned 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 properti....
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....far had located such projected money to the tune of Rs. 5.33 Crore lining with their another group company, M/s. E R Textile Ltd. defendant no. 3 herein. The Provisional Attachment Order and the complaint and the documents relied therein, had clearly brought out the fact of receipt of these amounts from defendant no.1, who is also accused in the CBI charge sheet to the defendant no. 3, the group company of defendant no. 2. The statutory financial returns of defendant companies no. 1 & 3, the statements recorded under Sec.50 of PML Act, 2002, of defendant no. 2, who is in control of the affairs of both these defendant companies and the statutory auditors of both these defendant companies, clearly shows that the fact of receipt of these amounts from 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 SARFA....
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....tion (5) or sub-section (7) of section 8 or section 58 B or sub-section 2A or section 60." 12. DISCUSSIONS/FINDINGS a) It is seen from the record that the IDBI Bank and LIC extended various loans to M/s. E R Textiles Ltd., as mentioned above, in 2001. From the pleadings it appears that, against the loan, movable and immovable properties of M/s. E R Textiles Ltd. and of Shri G. EswaraRao have been mortgaged and personal guarantee with both the IDBI and LIC. b) Out of the aforesaid 16 properties, properties at serial no. 1 to 6 are in the name of Shri G. EswaraRao valued at Rs. 5,52,019/- and properties at serial no. 7 to 16 are in the name of his wife Smt. Late G. Saraswathi which is valued at Rs. 22,77,500/-. The ED has taken value of 50% of the said properties of 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 i....
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....unal has dealt with the aforesaid legal issue i.e., regarding priority of SARFAESI Act, 2002 (after the aforesaid amendment) in various cases and it is the consistent view that, in the light of the aforesaid amendments, the SARFAESI Act, 2002has priority over PML Act, 2002. The full Bench of this Tribunal, in the matter of State Bank of India &Ors. Versus Joint Director, Directorate of Enforcementin FPA-PMLA-1026/KOL/2015 dt,14.07.2017 and also in the matter of Smt. NasreenTaj vs. Dy, Director,ED in FPA-PMLA-382/BNG/2012 vide common order dt. 18.09.2017 held the aforesaid view. Subsequentto the aforesaid judgments this Tribunal has passed several judgments on the same issue. In the said judgments this Tribunal discussed judgments delivered by Hon‟ble Supreme Court and various High Courts as well as the 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 matt....
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.... follows: "Where there are two special statutes which contain non obstante clauses the later statute must prevail. This is because at the time of enactment of the later statute, the Legislature was aware of the earlier legislation and its non obstante clause. If the Legislature still confers the later enactment with a non obstante clause it means that the Legislature wanted that enactment to prevail. If the Legislature does not want the later enactment to prevail then it could and would provide in the later enactment that the provisions of the earlier enactment continue to apply. The Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992, provides in Section 13 that its provisions are to prevail over any other Act. Being a later enactment, it would prevail over the Sick Industrial Companies (Special Provisions) Act, 1985. Had the Legislature 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 w....
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....Legislature intended that public monies should be recovered first even from sick companies. Provided the sick company was in a position to first pay back the public money, there would be no difficulty in reconstruction. The Board for Industrial and Financial Reconstruction whilst considering a .scheme for reconstruction has to keep in mind the fact that it is to be paid off or directed by the Special Court. The Special Court can, if it is convinced, grant time or installments. There can, therefore, be no stay of any proceedings for recovery against a sick company so far as the Special Court under the 1992 Act is concerned." 11. We are in agreementwith the aforesaid decision of the case, more so when we find that whenever the legislature wishes to do so it makes appropriate provisions in the Act in that behalf. Mr Shiraz Rustomjee has drawn our attention to Section 34 of the Recovery of Debts Due to Banks and Financial 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 ....
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....SI Act, 2002 : "26E. Priority to secured creditors - Notwithstanding anything contained in any other law for the time being in force, after the registration of security interest, the debts due to any secured creditor shall be paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or 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." (ii) Section 31B of the Recovery of Debts and Bankruptcy Act, 1993 : 31B. Priority to secured creditors - Notwithstanding anything contained in any other law for the time being in force, the rights of secured creditors to realise 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 Gove....
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.... it would govern the rights of the parties in respect of even a lis pending." 37. The Assistant Commissioner (CT) Vs. The Indian Overseas Bank, Madras High Court, WP No. 2675 of 2011 (Full Bench) "2 We are of the view that if there was at all any doubt, the same stands resolved by view of the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016, Section 41 of the same seeking to introduce Section 31B in the Principle Act, Which reads as under:- "31B. Notwithstanding anything contained in any other law for the time being in force, the rights of 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 revenues, taxes, cesses and 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, in cases where insolvency or bankruptcy proceedings are pending in respect o....
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....f India Vs. The Assistant Commissioner, Commercial Tax, Puraswalkam Assistant Circle and Ors.", while upholding the Amendment Act, 2016 to Section 26E of the SARFAESI Act and reaffirming the view of the Full Bench of the same court in The Assistant Commissioner (CT), Anna Salai-III Assessment Circle (supra) lifted the attachment entry and held that- "In other words, not only should the amendment apply to pending lis, but the declaration that the right of a secured creditor to realise the secured debts, would have priority over all debts, which would include, Government dues including revenues, taxes, etc., should hold good qua 2002 Act as well." 40. B. RAMA RAJU V. UOI AND ORS. Reported in (2011) 164 company case 149(AP)(DB) who has dealt with the aspect of bonafide acquisition of property in para 103. The same read as under:- "103. Since proceeds of crime is defined to include the value of any property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence, where a person satisfies the adjudicating authority by relevant material and evidence having a probative value that his acquisition is bona fide, l....
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....t, 2002 the decisions referred by Mr. Matta in the case of Solidaire (Supra) and Bhoruka Steel (Supra) does not help the case of the respondent no. 1 because the effect of overrding the PMLA looses its validity once the amendment is made which even has been interpreted subsequently by the Full-Bench of the Chennai High Court in the case of Assistant Commissioner CT (Supra) and other decision in the nature of the facts in the present matter. 42. It is also a matter of fact that after passing the impugned order the borrowers have also settled the loan amount with the complainant - i.e. Union of India in order to pay the remaining outstanding amount. The undertaking in this regard is recorded in Court. It is written agreement and the statement of the parties were recorded. Counsel for the borrowers has also informed us that his client also intent to pay the remaining out-standing amount to the State Bank of India in order to clear their liabilities once the attached properties are sold and even otherwise. Copy of the settlement of the borrowers and the complainant Bank of India was filed before us. As far as the schedule offence is concerned, we do not wish to make a....
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....ower under Section 482 Cr.P.C. We do not see how such exercise of power can be faulted or held to be erroneous. Section 482 of the Code inheres in the High Court the power to make such order as may be considered necessary to, inter alia, prevent the abuse of the process of law or to serve the ends of justice. While it will be wholly unnecessary to revert or refer to the settled position in law with regard to the contours of the power available under Section 482 CR.P.C.it must be remembered that continuance of a criminal proceeding which is likely to become oppressive or may partake the character of a lame prosecution would be good ground to invoke the extraordinary power under Section 482 Cr. P.C. In Sanjay Bhandari V/s. CBI, Crl. M.C. M.C. 5798/2014, Delhi High Court, dated 29.06.2015 "69..... By consent the parties have settled all disputes in the recovery suit, the consent decree of DRT stood to be disposed off as duly satisfied. There is hence no force in the submission of respondents that the complainant bank has not exonerated the petitioners, first being the Civil Procedure Code, and the second being the OTS Scheme of the Reserve Bank of India, whi....
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.... in criminal complaint. There is no criminal complaint under the schedule offence and PMLA is pending against the two banks. In case of failure on the part of borrowers to comply with the terms of settlement, the contempt proceedings are maintainable in the Court where the settlement was recorded. 47. In view of the entire gamut of the dispute, we are of the considered opinion that the conduct of the banks are always bonafide. Both banks are innocent parties. They were legally entitled to inform the Adjudicating Authority about their innocence and they rightly did so but their contention was rejected as appeared from the impugned order. 48. This Tribunal in the case of IPRS in appeal no. FPA-PMLA-1302/MUM/2016 decided on 22.06.2017 had dealt with the similar issue as to whether the innocent party whose immovable properties are attached by the ED can approach the Adjudicating Authority for release of the same in para no. 55 to 60 the same read as under:- "55. Whether innocent party whose properties i.e. movable or immovable are attached can approach the Adjudicating Authority for release of attached property. The Scheme of Prevention of M....
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....oney-laundering, section 58 B or sub-section (2 A) of section 60 by the Adjudicating Authority (4) Where the provisional order of attach" 56. There are judicial pronouncements whereby it has been laid down that the innocent parties can approach the Adjudicating Authority for release of property by showing their bonafides in their dealings with the property. In the case of Sushil Kumar Katiyar (Appellants) Vs UOI and Ors. (Respondents) MANU/UP/0777/2016 decided on 10.05.2016 by Allahabad High Court, it has been observed by the Ld. Single Judge after noticing the judgment of Karnataka High Court that the element of knowingly or mensrea have been provided under the Act so that the aspect of implicating any innocent person can be ruled out. Relevant para 26 of judgment is reproduced below:- "26. Thus, upon consideration of the law laid down by the Hon'ble Karnataka High Court, it is clear that the amendment incorporated in the Money Laundering Act was not held unconstitutional and ultra virus, but it was observed by the Karnataka High Court that the property of a person can be attached without there being any prosecution for the offence of Money Laundering, but so....
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....me, if the plea is raised that the party whose property is attached is innocent or is without knowledge of any such transaction with respect to money laundering, then the Tribunal can consider the said plea and proceed to release the said property out of the properties by holding that the said property is not involved in money laundering. 58. For the purposes of determining whether the property is involved in money laundering, the Court may consider the ingredients of Section 3 which define offence of money laundering. The aspect of knowledge or involvement has been discussed by Ld. Single Judge of Gujarat High Court in the case of Jafar Mohammed Hasanfatta and Ors (Appellants) Vs Deputy Director and Ors. (Respondents) MANU/GJ/0219/2017 wherein Ld Single Judge has observed as under:- "37. A holistic reading of this definition of 'proceeds of crime' and the penal provision under Section 3 of PMLA, which uses conjunctive 'and', makes it luminous that any persons concerned in any process or activity connected with such "proceeds of crime" relating to a "scheduled offence" including its concealment, possession, acquisition or use can be guilty of money....
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....e" will be slightly on a higher plane than "reason to believe". A person can be supposed to know where there is a direct appeal to his senses and a person is presumed to have a reason to believe if he has sufficient cause to believe the same." The same test therefore applies in the instant case where there is absolutely no material or circumstantial evidence whatsoever, oral or documentary, to show that any of the petitioners, 'Knowingly', assisted or was a party to, any offence. C. Actually involved: Actually involved would mean actually involved into any process or activity connected with the proceeds of crime and thus scheduled offence, including its concealment, possession, acquisition or use. There is absolutely no material or circumstantial evidence whatsoever, oral or documentary, to substantiate any such allegation qua the petitioners, D. Neither any of the petitioners is arraigned as accused in the 'Scheduled Offences' punishable under Indian Penal Code for direct or indirect involvement, abetment, conspiracy or common intention, nor is any such case made out even on prima facie basis against any of them." 39. The second ....
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.... involves two or more interconnected transactions and one or more such transactions is or are proved to be involved in money-laundering, then for the purposes of adjudication or confiscation (under section 8 or for the trial of the money-laundering offence, it shall unless otherwise proved to the satisfaction of the Adjudicating Authority or the Special Court), be presumed that the remaining transactions form part of such inter-connected transaction. 24. Burden of proof In any proceeding relating to proceeds of crime under this Act, (a) in the case of a person charged with the offence of money-laundering under Section 3, the Authority or Court shall, unless the contrary is proved, presume that such proceeds of crime are involved in money-laundering; and (b) in the case of any other person the Authority or Court, may presume that such proceeds of crime are involved in money-laundering. 21. In the present case, one G. Srinivasan is accused of having played fraud and obtained a loan of Rs. 15,00,00,000/- by producing bogus and fabricated documents. From and out of the said amount, the property in question was purchased by him in the names o....
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....hold that appellants have rebutted the presumption that the property in question is proceeds of crime. The respondent failed to prove any nexus or link of Appellants with G. Srinivasanand his benamies. Once a person proves that his purchase is genuine and the property in his hand is untainted property, the only course open to the respondent is to attach sale proceeds in the hands of vendor of the appellants and not the property in the hands of genuine legitimate bona fide purchaser without knowledge. 24. Before the Adjudicating Authority it was admitted by complainant that appellants had no knowledge that properties in the hands of their vendor was proceeds of crime. It was also not disputed by complainant that the appellants did not have financial capacity to buy properties. Paragraphs 21, 22, 23 and 24 of order of Adjudicating Authority is extracted herein for better appreciation. '21. The CBIBS & FC (BLR) has filed a charge sheet in the court of Spl. Judge for CBI cases Coimbatore, against Sh. Arivarasu, Sh. R. Manoharan, Sh. R. Selvakumar, Sh. G. Srinivasan, Sh. K. Martha Muthu, Sh. V. InduNesan, Sh. K. Vignesh, Sh. A. Sainthil Kumar, Sh. M. Ram Krishnan, for ....
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....into service to make out a plea that the properties could be attached in such circumstances under the PMLA." Provisional attachment was sought to be continued only based on the judgment of Bombay High Court in Radha Mohan Lakhotia's case. 25. A reading of paragraphs 21 to 24 clearly reveals that both the Adjudicating Authority as well as Appellate Authority failed to properly appreciate the facts and findings in Radha Mohan lakhotia's case. In that case, the Department had placed substantial and acceptable facts to prove that the property in the hands of third party was proceeds of crime. It is pertinent to note that in Mr. Radha Mohan Lokatia's case, Department had proved the nexus and link between the person possessing the property and person accused of having committed an offence. All the persons involved in that case were close relatives. 26. In the present case, the respondent failed to prove that the appellants did not have sufficient financial capacity to buy the property or that the money paid by them as sale consideration was not legitimate money derived by agricultural activities. No material was produced to show that the appellants ....
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....egislature intends that the later enactment should prevail. Further, it is a settled rule of interpretation that if one construction leads to a conflict, whereas on another construction two Acts can be harmoniously construed, then the latter must be adopted. 49. In view of the observations of this Court in the decisions referred to and relied on by the learned counsel for the parties we find that, the purpose of the two enactments is entirely different. As observed earlier, the purpose of one is to provide ameliorative measures for reconstruction of sick companies, and the purpose of the other is to provide for speedy recovery of debts of banks and financial institutions. Both the Acts are "special" in this sense. However, with reference to the specific purpose of reconstruction of sick companies, the SICA must be held to be a special law, though it may be considered to be a general law in relation to the recovery of debts. Whereas, the RDDB Act may be considered to be a special law in relation to the recovery of debts and the SICA may be considered to be a general law in this regard. For this purpose we rely on the decision in LIC Vs. Vijay Bahadur (supr....
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..... a proceeding which commences on filing and terminates at the judgment. However, there is no need to give such a restricted meaning, since the true purpose of an application for recovery is to proceed to the logical end of execution and recovery itself, that is by way of execution and distraint. We thus have no hesitation in coming to the conclusion that Section 22 clearly covers and interdicts such an application for recovery made under the provisions of the RDB Act. We might remind ourselves of the oftquoted statement of the principles of contextual construction laid down by this Court in Reserve Bank of India Versus Peerless General Finance and Investment Co. Ltd. &Ors.[6], where this Court has observed:- "33. Interpretation must depend on the text and the context. They are the bases of interpretation. One may well say if the text is the texture, context is what gives the colour. Neither can be ignored. Both are important. That interpretation is best which makes the textual interpretation match the contextual. A statute is best interpreted when we know why it was enacted. With this knowledge, the statute must be read, first as a whole and then section by secti....
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.... since the recovery proceedings under the RDDB Act had been concluded, the writ petitions would have to be dismissed and are accordingly dismissed. The present appeal is allowed." 15. From the above i.e. the principle enunciated in the judgments discussed by us and the observations made by Hon'ble Supreme Court in the matter of KSL & Industries ltd. (supra) we do not find any departure. When two special Acts have non-obstante clauses, the later statue will prevail over the earlier statute. At the same time the aim and object of both the special Acts are to be looked into to decide such issue in the manner and harmoniousconstruction has to be arrived. 16. In the present case, the SARFAESI Act, RDDB Act and PMLA are special Acts. The SARFAESI Act and RDDB Act are enacted earlier to PMLA. The RDDB Act and PMLA have non-obstante clause. Recently, the parliament has amended the twin legislations viz. (i) the SARFAESI Act, 2002 and (ii) the DRT Act, 1993 (after amendment titled as the Recovery of Debts and Bankruptcy Act, 1993) by the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016 and its provisions hav....
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....who will have his first claim on any property where the claim of the State concur with the claim of any other person. In the light of above a harmonious construction has to be arrived that keeping in view the facts of the case vis. a vis the statues involved. In the present case the aforesaid principle suggest that the amendments carried out in SARFAESI Act and RDDB Act in 2016 will prevail over PML Act, 2002 because the properties involved in the present appeal were untainted when the same were acquired. Even when the properties were mortgaged with the appellant Bank the same were not tainted. The allegation of commission money laundering is after the mortgage of the said properties with the appellant Bank. After the mortgage of the aforesaid properties a legal right has been accrued in favour of the appellant Bank over the said properties which cannot be taken away in the given facts and circumstance of the case. As far as borrowers are concerned (who are the accused parties) even we stress that as per law, they must face the trail in the complaint filedagainst them. 19. The Respondent has also heavily relied on the judgment or order passed by this Tribunal in the matter....
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....admitted fact that the properties herein are mortgaged with the appellant Bank. It is also a fact that the mortgaged properties are not acquired out of any proceeds of crime. It has come on record that the properties mortgaged were acquired prior to the alleged commission of crime. The relevant sale deed of the mortgaged properties are of 2003 so the date of acquisition is much prior to the date of alleged commission of crime in the present case. 22. In the present case the Adjudicating Authority has come to a conclusion at para nos. 61, 63 & 65 of the impugned order that the defendants are in possession of proceeds of crime and are involved in money laundering. The aforesaid conclusion has not be elucidated by the Ld. Adjudicating Authority in his order. It appears that the only thing was in his mind that section 71 of PMLA has an overriding effect. The provisions of PMLA shall have effect and prevail over provisions of any other Act or its provisions. To this we are not in agreement with the Ld. Adjudicating Authority because of the amendment of 2016 made in SARFAESI Act RDDB Act. The IDBI Bank is the rightful claimants of the said property which are already in its posse....
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....o money disbursed by the Bank from its loan account, has been invested in acquiring these properties. Furthermore, the Appellant Bank had created charge over the property prior to the date of the crime. The Bank has already filed the suit for recovery and has also taken the action under SARFAESI Act. The Ld. Adjudicating Authority failed to appreciate that depriving the Appellant Bank from its funds/property, without any allegations or involvement of the Bank in the alleged fraud would be legally unjustified. 26. The properties attached cannot be attached under Section 5 of the PML Act because the properties are not purchased from the alleged proceeds of crime. As per the provisions of Section 5(1) (c) the primary requirement for the attachment is that the proceeds of crime are likely to be concealed, transferred or dealt with in any manner. In this case there was absence of such requirement. The said properties are already in the possession of the Appellant Bank under the SARFAESI Act. 27. The property of the Appellant Bank cannot be attached or confiscated when there is no illegality or unlawfulness in the title of the Appellant Bank and there is no charge of mo....