TaxTMI 
TaxTMI 
2018 (12) TMI 1245
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....id impugned order, the Adjudicating Authority has confirmed the provisional attachment Order No. MBZO-II/05/2017 dated 08.06.2017 and addendum dated 13.06.2017. 4. The Case of the Bank of BARODA 4.1 The Appellant Bank is a leading Nationalised Bank who is routinely involved in financing large scale projects both on an individual level, and as part of multi bank consortiums. 4.2 M/s Siddhi Vinayak Logistic Limited (M/s SVLL/Borrowers) was dealing with the Appellant Bank since 2008. The Appellant Bank, on the request of its Director, Shri. Rupchand Baid had granted, restructured and sanctioned various credit facilities to M/s SVLL - viz. (1) Review with decrease in Term Loan-IV of Rs. 10.52 Crores, (2) Review with decrease in Term Loan-V of Rs. 53.36 Crores, (3) Review with decrease in Term Loan-VI of Rs. 79.76 Crores, (4) Review of Term Loan-VII of Rs. 76.46 Crores, (5) Review with increase in various Term Loans for purchase of Cars of Rs. 1.49 Crores, (6) FITL-(I) (interest part of TL-IV) of Rs. 1.30 Crores, (7) FITL-(II) (interest part of TL-V) of Rs. 6.60 Crores, (8) FITL-(III) (interest part of TL-VI) of Rs. 9.87 Crores, (9) FITL-(IV) (interest part of TL-VI....
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....ance of Rs. 76,46,00,000/- as on 30/09/2015 (inclusive interest applied up to 30/06/2015), (5) FITL-I Account showing the debit balance of Rs. 1,34,92,546/- as on 30/09/2015 (inclusive interest applied up to 30/06/2015), (6) FITL-II Account showing the debit balance of Rs. 6,84,97,566/- as on 30/09/2015 (inclusive interest applied up to 30/06/2015), (7) FITL-III Account showing the debit balance of Rs. 10,24,34,971/- as on 30/09/2015 (inclusive interest applied up to 30/06/2015), (8) FITL-IV Account showing the debit balance of Rs. 9,81,78,336/- as on 30/09/2015 (inclusive interest applied up to 30/06/2015), (9) Car Loan Accounts (20 Cars) showing the debit balance of Rs. 1,02,80,867/- as on 30/09/2015 (inclusive interest applied up to 30/09/2015), FPA-PMLA-2115, 2117 &2189/MUM/2017 Page 5 of 27 (10) Cash Credit (Working Capital) Account showing the debit balance of Rs. 31,55,72,840/- as on 30/09/2015 (inclusive interest applied up to 30/09/2015), (11) Sub-Limit (WCDL) Account showing the debit balance of Rs. 12,29,50,772/- as on 30/09/2015 (inclusive interest applied up to 30/09/2015) and (12) Bank Guarantee s....
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....I Act were pending, the CBI, BS &FC, Mumbai, registered an FIR bearing no. RCBSM2015E2007 dated 06.08.2015 invoking Sections 420, 468, 471, 120(B) of Indian Penal Code, 1860 and 13(2) r/w 13(1)(d) of Prevention of Corruption Act, 1988 against M/s Siddhi Vinayak Logistics Ltd, its Director ShriRupchandBaid, Shri. Deepak Kumar Baid, ShriRajkumarBaid, Smt. Laxmi Devi Baid all Directors of M/s Siddhi Vinayak Logistics Ltd and others. This FIR revealed that the persons mentioned therein were, during the period from September 2012 to March 2015, party to the criminal conspiracy to cheat the Bank of Maharashtra in the garb of seeking finance for their "Chaalak se Maalak" Scheme. 4.11 Since the offences mentioned above fall under the scheduled offences covered in Paragraph 1 and 8 of Part A of the schedule to the PMLA, 2002, respectively, the Directorate of Enforcement, (Respondent herein) Mumbai Zonal Office recorded an ECIR bearing No. MBZO/10/2016 dated 16.11.2016. 4.12 The Provisional Attachment Order No. MBZO-II/05/2017 was passed on 08.06.2017 by the Respondent. A further addendum to the said provisional attachment order dated 08.06.2017 was issued by the Respondent....
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....u/s 13(4) of SARFAESI Act. 2002 also took over the symbolic possession of the Securities mortgaged/ charged/ hypothecated with it to recover its dues of over Rs. 307,73,40,872/-. 4.19 The Appellant Bank filed an O. A. No:86/2016 in the DRT-II, Ahmedabad for recovery of its dues from aforesaid Borrowers/ M/s SVLL, and its Directors besides other guarantors, corporate guarantors, personal guarantors etc. The DRT-II, Ahmedabad FPA-PMLA-2115, 2117 &2189/MUM/2017 Page 9 of 27 granted a status-quo order in respect of the securities in the hands of the Bank as on the date of the order dated 02.08.2016. 4.20 The Respondent filed its rejoinder to the reply filed by the Appellant in the said O.C. No:787/2017 on 28.09.2017. In the said rejoinder, the Respondent admitted that though the said properties mortgaged with the Bank were acquired prior to the date of commission of fraud, however, it was erroneously urged by the Respondent that as per the definition of proceeds of crime is either the property derived or obtained as a result of criminal activities relating to a schedules offence or value thereof. 4.21 Accordingly, the Respondent attached the properties mortga....
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....p of property in year 2011. 5.9 That the Union Bank of India claims its mortgage over given property i.e.:- "Office at "RIPPLE MALL", 2nd Floor, Near Rajhans Cinema Piplod, Surat-14". That the UBI in order to claim its right over the mortgaged property claims that the UBI has provided the loan facilities in the year 2011 to its borrowers. 5.10 Details of loan as well as the details of outstanding amount to be recovered from the borrower are as under: (A) 1. Account no. with the UBI-311206350000001 (FITL) 2. Name of the account holder-M/s. Siddhi VinayakLogistics Limited 3. Loan facility as availed - Commercial 4. Outstanding Amount - Rs. 10,11,63,133.00 as on 31.07.2017. (B) 1. Account no. with the UBI-311206580000001 (Term Loan Rent Discounting) 2. Outstanding Amount - Rs. 1,99,37,302.16 as on 31.07.2017. (C) 1. Account no. with the UBI-311206120043016 (Term Loan) 2. Outstanding Amount - Rs. 100,72,02,710.00 as on31.07.2017. 5.11 That the said property or the aforesaid units are mortgaged as securities with the Union Bank of India, Salabatpura, Surat Branch by Respondent no.3 for availing various financial facilities. ....
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.... Central or State or any other Local Authority. 5.14 That, there is no finding as to how the properties involved herein are proceeds of crime, particularly, when all the funds belong to the bank. 5.15 The followings are the contentions of the Enforcement Directorate (Respondent no. 1):- (i) That, no specific reply has been filed by the respondent no. 1. The learned counsel for the respondent no 1 has advanced his arguments orally. (ii) As it is seen from the record that the Enforcement Directorate /respondent no. 1 the aforementioned properties which are mortgaged with the UBI (Appellant) are attached in terms of provision of section 2(1)(u) being value of such property. (iii) That, as per section 71 of PMLA, 2002, the provisions of PMLA shall have overriding effect notwithstanding anything inconsistent therewith 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 case of Solidaire India Ltd. AIR 2001 SC 958:JT 2001(2) SC 642 (MANU/SC/009/2001), Bank of India Vs. Ketan Parekh-2008(8) SCC 148:AIR 2008 SC 2361 (MANU/SC/009/2001) and Narcotic Control ....
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....ed that as on 30.11.2017 Rs. 510,04,22,371.06 is outstanding against the Respondent no.2 namely M/s SVVL excluding expenses from the date of NPA.The bank has also initiated proceedings under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act,2002. 6.7 It is stated that M/s SVLL executed various documents to avail of the loaning facilities vide sanctions on various dated as enumerated above from Oriental Bank Of Commerce. M/s SVLL failed to adhere to the payment schedule even after availing restructuring. The Bank i.e. Oriental bank of Commerce was forced to recall the loans and the credit facilities granted Under SARFAESI. The Bank Filed ORIGINAL APPLICATION NO. 767 OF 2015 titled as "Oriental Bank of Commerce, Ring Road Branch, SuratANDM/s. Siddhi Vinayak Logistic Ltd& 17 others" at Debts Recovery Tribunal, Ahmadabad and the matter is pending adjudication by Debts Recovery Tribunal, Ahmadabad. 6.8 It is stated that in the year 2017 Oriental Bank Of Commerce was informed of initiation of proceeding against M/s SVLL under the Prevention of Money Laundering Act, 2002 wherein it is alleged that M/s SVLL represented by Rupch....
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...., Surat admeasuring 2051 Sq.ft. belonging to Mrs.Laxmi Devi Baid. 1.21 Also, the amount of Rs. 29,00,173/- lying in the a/c no. 0102113101069 with Oriental Bank of Commerce, being the lead bank, is the amount to be disbursed to the Members of Consortium namely Bank of Maharashtra and Bank of Baroda has been wrongly attached as the Complainant has failed to prove that the said amount is proceeds of Crime. The amount of Rs. 12,61,781/- lying in a/c no.1336 1131002825 and Rs. 2250/- lying in a/c no.12001131005983 with Oriental Bank of Commerce have been wrongly attached as the Complainant has failed to prove that the said amount is proceeds of Crime. 6.10 It is submitted that the properties attached have been purchased prior to the date of purported crime committed by Roop Chand Baid and others has no nexus with the mortgage of the properties acquired before the said crime was committed and therefore, are not the proceeds of crime and have been attached erroneously. 7. Case of the Respondent no. 1, (i) It is stated that the above mentioned properties which are mortgaged with Appellant bank are provisionally attached in terms of the provisions of the se....
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....e the Adjudicating Authority in the same P.A.O. and O.C. The State Bank of India had also preferred the appeal before this Tribunal against the same impugned order dated 24.10.2017 vide FPA-PMLA-2121/DLI/2017. This Tribunal had allowed the appeal vide order dated 06.02.2018 after discussing the entire facts and circumstances including the decisions of Hon‟ble Supreme Court and High Courts and also the judgment and order of full bench of this Tribunal passed in FPA-PMLA-1026/KOL/2015 dated 10.07.2017 in matter of State Bank of India v/s Enforcement Directorate. 8.6 In all the appeals mentioned above the banks are victims not involved in generating any proceeds of crime. 8.7 It is undisputed fact that none of the properties which are mortgaged with the aforesaid appellants are either acquired out of proceeds of crime and that were purchased and mortgaged before the commission of alleged crime. 8.8 The appellant Banks have taken steps under sections 13(2) & 13(4) of SARFAESI Act,2002 and also took over symbolic possession of the secured mortgaged/charged/hypothecated properties dues to recover their dues. Even, the appellant Banks i.e. Bank of Baroda a....
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....ey laundering as Whosever directly or indirectly attempts to indulge or knowingly assists or knowingly s a party or is actually involved in any process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money -laundering. Thus the secured creditors does not and cannot have any priority over the attachment, confirmation and confiscation of proceeds of crime. It would be against a public policy to permit the possession of proceeds of crime and its utilization, save and except in the manner provided under the PMLA. 51........ 52......... 53. It is held that the properties which have been attached under section 5 is involved in money laundering. The Defendant are in possession of "Proceeds of Crime" within the meaning of provisions of Prevention of Money Laundering Act, 2002 and accordingly it is ordered that the attachment of the property shall continue during the pendency of the proceedings relating to any offence under this Act before a court or under corresponding law of any other country, before the competent ....
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....the Hon‟ble DRT-II, in O.A. No. 86/2016 in respect of the same immovable securities in the hand of the Appellant Bank i.e. Bank of Baroda, is prior to the provisional attachment. 11. The Appellant Banks have a prior right under the special statutes enacted by the Central Govt. The SARFAESI Act, 2002 has been amended by the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act 2016 which has come into force w.e.f. 01.09.2016. Section 26(E) of the SARFAESI Act and Section 31(B) of the Recovery of Debts and Bankruptcy Act, 1993 after the amendment, reads as under: (i)Section 26E of the SARFAESI 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 of 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 Bankrup....
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....ent dues but were attached being proceeds of crime as defined under the provisions of Section 2 (1) (u) of the PMLA, 2002." 15. The Appellant Banks have never mentioned the attached properties as being "government dues". The Appellant Banks brought up the Statutes mentioned above, (and reiterates the same in these appeals) because of two reasons. Firstly, the properties attached are not proceeds of crime. Secondly, both Section 31B and 26E contain the words "priority over all other debts". Any claim which the ED would try to make over the said properties would be covered under "all other debts" and the Appellant Bank being a secured creditor would have priority over the same. 16. The SARFAESI and RD& B Acts have overriding effect on the PMLA 2002 needs to be applicable to a case in the first place. The Adjudicating Authority cannot declare any property as proceed of crime, and then base its jurisdiction on the wrong application of the Act. 17. The Section 2 of the Recovery of Debts and Bankruptcy Act, 1993 after the words "date of the applications" and includes any liability towards debt securities which remain unpaid in full or part after notice of ninety days served upon....
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....yable 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. Further it was also held that the law having now come into force, naturally it would govern the rights of the parties in respect of even a lis pending." 22. It is undisputed fact that the attached properties were purchased much prior to the period when the facility of loan sanctioned to the borrowers. The Banks while rendering the facilities were bonafide parties. It is not the case of the Respondent that the attached properties were purchased after the loan was obtained. The mortgage of the properties was done for bonafide purposes. The Appellant Banks admittedly are not involved in the scheduled offence. There is no criminal complaint under the schedule offence and PMLA is pending against the Bank. 23. The Respondent no 1 has not fulfilled its duty of carrying out a thorough investigation and attached only such pr....