TaxTMI 
TaxTMI 
2018 (12) TMI 1246
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....ilar questions of law and arising out of the same ECIR, P.A.O. O.C. and Impugned order, so taken up together for a common order. The Common facts of the appeal in brief are as follows:- 2. On the complaint of the Bank of Maharastra an FIR bearing no. RCBSM2015E2007 dated 06.08.2015 was registered by CBI, BS & FC, Mumbai invoking section 420,468,471,120(B) of IPC and sections 13(2) r/w 13(1)(d) of PC Act, 1988 against M/s SVLL, S/Shri Rupchand Baid, Deepak Kumar Baid, Raj kumar Baid, Smt. Laxmi Devi Baid & others on the allegation that M/s SVLL and other persons during the period from September 2012 to March, 2015 were parties to the criminal conspiracy to cheat the banks, Pune and in pursuance to the said criminal conspiracy, the accused directors/officials of M/s SVLL induced the Bank of Maharastra to sanction the disbursed 2804 vehicle loans (under "Chalak se Malak" scheme devised by M/s SVLL) to M/s SVLL and its employees and its drivers on the basis of the false assurances and forged vehicle registration documents, thereby availing credit facilities aggregating to Rs. 651.17 crore in the form of loans sanctioned to individuals drivers/employees of the said M/S. SVLL in Mo....
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....g to Rs. 651.17 crores and to sanction term loan of R. 160 crores sanctioned to appellant themselves and cash credit Limit (CC Limit) of Rs. 35 Crores. IV. On the passing of the order National Company Law Tribunal (NCLT), Ahmedabad, Moratorium is declared on the proceedings against the appellant with respect to all suits or proceedings before any court of law or authority V. All suits or proceedings against the appellant stands suspended during the Corporate Insolvency Resolution Process, accepts the criminal proceedings initiated under the PMLA and by the Central Bureau of Investigation (CBI). VI. The proceedings under sanctions 8,9 & 10 of the PMLA before the Adjudicating Authority are not criminal proceedings but quasi-judicial proceedings which is guided by the principal of natural justice, therefore, the present proceedings under sanctions 8, 9 & 10 of the PMLA against the appellant cannot continue pursuant to the order of the Moratorium passed by the NCTL. VII. The Appellant has quoted the provisions of U/Ss 6(15) and 11 of the PMLA and submitted that the Adjudicating Authority being quasi-judicial proceedings is largely guided in letter and spirit ....
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....pulates that the IRP shall control and custody of all assets of the company as recorded in the balance sheet or other records of the ownership. i. The appellant has relied upon the following judgments of Hon'ble Supreme Court in support of his contentions of overriding effect where there are two special laws with obstante clause:- (i) Allahabad Bank vs. Canara Bank dated 10.04.2000 (ii) Ashoka Marketing Limited & Anr. vs. Punjab National Bank & Anr. 6. Case of Sh. Rupchand Baid and others. (FPA-PMLA-2138/MUM/2017) 6.1. This joint appeal has been filed by Sh. Rupchand Baid, M/s P. R. Niryat Pvt. Ltd., M/s Siddhi Vinayak Farm Fresh Pvt. Ltd., M/s Raj Kamal Logistics Pvt. Ltd., M/s Yashrite Tour and Travels Pvt. Ltd. & Smt. Lakshmi Devi Baid. These appellants are original defendant no. 1,3 to 6 and 8 in the O.C. 787/2017. 6.2. These appellants are guarantors in all loans sanctioned in favour of SVLL(Appellant in appeal no. 1). It is the contention of the appellants that in case of the recovery proceedings, upon failure of principal borrowers to repay the debts even after attachment and sale of property, it shall be the personal liability....
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....efendant no. 9 in O.C. 787/2017. 8.2 It is his contention that the appellant is a guarantor in all loans sanctioned in favour of SVLL(Appellant in appeal no. 1). It is the contention of the appellant that in case of the recovery proceedings, upon failure of principal borrower to repay the debts even after attachment and sale of property, it shall be the personal liability of the guarantors i.e. the present appellant. 8.3 The relief sought by the appellant is same as prayed by appellants in appeal no. 2 & 3 above. The factual and legal issues raised in these appeal are verbatim same as contended by appellants in appeal no. 2 & 3. Hence, there is no repetition of the same. 9. In the aforesaid appeals the Enforcement Directorate is respondent no. 1. 9.1 The Enforcement Directorate has contested in all the appeals and verbally submitted its arguments before this Tribunal. The ED has not filed any reply in any of the appeals except in the appeal filed by Rajkumar Baid vide appeal no. FPA-PMLA-2137/MUM/2017. Since the factual and legal issues in all these appeals are same so we have taken the contents of the reply herein as the reply in all these appea....
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....t Appeal 1413/2017 was filed against the said decision and the Bombay High Court (Nagpur Bench) stayed the order of the PMLA Tribunal in respect of the appeal filed against the order of the PMLA Tribunal. 9.3.(g). That the respondent submitted that the term 'Proceeds of Crime' as has been defined under section 2(1) (u) of PMLA, 2002 is read as under: "proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property (or where such property is taken or held outside the country, then the property equivalent is value held within the country). As per the definition, Proceeds of crime are either the property derived or obtained as a result of criminal activities relating to a scheduled offence or the value of such property. In the present case the properties of the appellants were attached in terms of the provisions of the section 2(1)(u) being value of such property. 9.2.(h). That the respondent submitted that the Hon'ble Adjudicating Authority, NCLT is para 14 had held that, " The moratorium declared by ....
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....Commerce, which is arrayed as respondent no. 11, in appeal no. 1, above has filed their reply regarding the property of SVLL mortgaged with them. The Oriental Bank of Commerce has also filed a separate appeal against the impugned order. Union Bank of India and Bank of Baroda also have filed separate appeals. The appeals of aforesaid banks are taken up together for a common order as similar questions of Law involved in those appeals. 11. So far as the present appeals are concerned, the contentious legal issues raised by the appellant are the overriding effect of PMLA 2002 and the IB&C, 2016 and that whether the moratorium provisions/order under the IB&C can be extended or applicable to a proceeding pending before the Adjudicating Authority U/Ss 5,8 & 17 of PMLA, 2002. The third important legal issue raised for our consideration is whether the proceedings before Adjudicating Authority are civil or criminal proceedings. 12. It is seen from the impugned order that these questions were also raised by the appellants and contested by the Enforcement Directorate before the Adjudicating Authority under PMLA. 13. The appellants contended that the proceedings before the Adjudicating ....
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....by virtue of any such law in case of conflict. Though the PMLA and IBC are central legislation, since IBC is a recent legislation and having non obstante clause (section 238 of IB&C), the same shall override the PMLA which is the prior legislation having come in force since 2002. The appellants have relied upon the judgments of Hon'ble Supreme Court passed in (i) Allahabad Bank vs. Canara Bank dated 10.04.2000 (Supra) (ii) Ashoka Marketing Limited & Anr. vs. Punjab National Bank & Anr. (Supra). (iii) Solidaire India limited vs Fairgrowth Financial Service Ltd. Beside above the appellants have also relied upon the judgment and order passed by this Tribunal in the matter of "State Bank of India & Ors. Vs. Joint Director, Directorate of Enforcement, Kolkata. Dated 14.07.2017" 17. In reply to the contention of the appellants, with regards to overriding effect, the respondent(ED) has contended that; (a) In this connection, the objective of the IBC, 2016 and PMLA, 2002 are IBC, 2016 'An Act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individua....
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....nything contained in any other law for the time being in force, after the registration of security interest the debt due to any secure creditors shall be paid in priority over all other debts and all other revenue, taxes and cess and other rates payable to the Central Government and State Government and local authority. So what is referred are only (1) the other debts, (2) all (i) revenues(ii) taxes (iii) cesses (iv) other rates payable to the Central Government and the local authority. Similarly section 31(b) above referred provides that 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 over debts and government dues including revenues taxes, cesses and other rates due to the Central Government and State Government or local authority. So what is referred are only(1) the other debts, (2) all Govt. dues including, (I revenues (ii) taxes, (iii) cesses (iv) other rates due to the Central Government and the local authority. Thus there is no priority conferred o....
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....ments 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. 22. So far as the overriding effect of PMLA over the SARFAESI is concerned this tribunal has already dealt with and decided the issue in several appeals involving different banks. The first matter in this regard was decided in the matter of FPA-PMLA1026/KOL/2015 (State Bank of India vs. Joint Director, Enforcement Directorate) on 14.07.2017. A score of decisions followed thereafter wherein this tribunal had relied on several Hon'ble Supreme Court and High Court judgments on this issue. Recently this tribunal has decided the matter of The relevant paras of our common judgment and findings in the matter of "Stressed Assets Stabilization Funds (SASF) and Life Insurance Corporation of India vs. Joint Director, Directorate of Enforcement, Hyderabad (FPA0PMLA-664/HYD/2014& FPA-PMLA-924/HYD/2015) respectively. The relevant paras of this judgment are....
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....enactment would prevail. The headnote which brings out succinctly the ration of the said decision is as 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....
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....erpretation the objects of both would be fulfilled and there would be no conflict. It is clear that the 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 agreement with 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 additio....
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....oncerned. The amended provisions are reproduced 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 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 secu....
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.... 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." 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 ....
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....case contested by one of the branches of the Appellant Bank, the High Court of Madras "State Bank of 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 author....
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.... In the subsequent changes in law and amendment in the another Special Act i.e. SARFAESI Act, 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 out-standing 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 outstanding 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....
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....e accused had accepted the liability in this regard, the High Court had thought it fit to invoke its power 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 th....
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....yed as Column;-11 at the time of framing charges. Union Bank of India has not granted sanction against its employee to proceed against him 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 ....
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....the notice had been issued, such person shall also be given an opportunity of being heard to prove that the property is not involved in moneylaundering, 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 mens rea 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....
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....involved in money laundering or not is a pre-condition prior to confirming or attachment by Adjudicating Authority. Therefore, at that time, 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....
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.... "doubt" and mere seeing also cannot be equated to believing. "Reason to believe" is a higher level of state of mind. Likewise "knowledge" 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,....
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....oduced below:- "20. The said sections read as follows:-- "23. Presumption in inter-connected transactions Where moneylaundering involves two or more interconnected transactions and one or more such transactions is or are proved to be involved in moneylaundering, 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 moneylaundering 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 moneylaundering. 21. In the present case, one G. Srinivasan is accused of having played fraud and obtained a loan of Rs. 15,00,00,00....
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....rials on record and judgments reported in MANU/MH/1011/2010: 2010 (5)Bom CR 625 [supra] and : [2011] 164 Comp Cas 146(AP) [supra], I 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. S....
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....ility of these Defendants to buy these properties. However, the Bombay High Court decision in Radha Mohan Lakhotia has been pressed 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 ....
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.... observations of the Special Court to the effect that if the legislature confers a non-obstante clause on a later enactment, it means that the legislature 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....
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....its shall lie or be proceeded with. Undoubtedly, in the narrower sense an application for recovery of debt can be giving a restricted meaning i.e. 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 oft-quoted 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 sta....
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....f the SICA acts as a bar to the recovery proceedings under the RDDB Act or whether the protection of SICA is not available to the appellant company 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 harmonious construction 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 nonobstante 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,....
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.... to the State. There is thus no apparent conflict between the two statues. The two statues operate in their exclusive fields. The question is only 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 ....
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....nt no. 1 is of any help to their case in the given facts and circumstances of the case. The facts in the referred cases are not similar. 21. It is an 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. Adjudicati....
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....hout examining the case of the bank. The evidence on record suggests that the properties were acquired by the borrowers much before the alleged date of crime. No 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 pro....
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....peal are released from attachment forthwith." g) The properties in question have been mortgaged with the appellants much prior to commission of alleged offences. The main allegation against the SSIL and Shri G. Eswara Rao is that around a sum of Rs. 5,30,55,500/- have been paid to Respondent no.4 Company by Respondent no.2 Company in February, 2009 as share application money against which no shares were allotted as such the properties of Respondent no.4 has been termed as proceeds of crime and the property in question in the present appeals have been attached as value thereof. h) The properties in question which are already under mortgaged and under personal guarantee with the appellants cannot be attached as value thereof. Since right of appellants have already been created over the questioned properties after being mortgaged and under personal guarantee of said properties with them. It is further gathered from the materials on record that the appellants have already initiated proceedings under SARFAESI Act against the properties of Respondent no. 4 Company and Shri G. Eswara Rao due to non-payment of loan advanced by the appellants. i) In view of the af....
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.... Punjab National Bank filed an application under section 7 of said code r/w rule 4 of Insolvency & Bankruptcy (application to Adjudicating Authority) Rule, 2016 with a request to initiate Corporate Insolvency Resolution Process against the SVLL, treating it as "Corporate Debtor". It is further revealed from the said order that the said applicant bank sanctioned letter dated 13th June, 2013 sanctioned term loan facility of Rs. 100.00 crores to SVLL. The SVLL executed various documents for the facilities availed by it by hypothecating 335 commercial vehicles valuing of Rs. 125.37 crores to the PNB. The SVLL has also pledged fixed deposit of 10 crores with the bank. The SVLL also hypothecated the second-hand vehicles having re-sale value of Rs. 10 crores with the bank. A Joint Deed of Guarantee by the SVLL besides undertaking dated 25.06.2013. The charge so created was duly registered with the Registrar of Companies, Gujarat on 29.06.2013. 27. It is also revealed from the said order of the NCLT that:- (relevant paras of the order are reproduced below) "1................ 2................. 3................. " 4. On the ....
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....ent Company the loans were restructured. No doubt, there was a moratorium for payment of principal amount for 18 months and interest for 12 months. 8.4. It is contended by the learned counsel for the respondent that applicant bank treated the respondent company as 'NPA' on 23rd July, 2015 inspite of the moratorium granted in the Restructuring Agreement. 8.4(a) The moratorium was only in respect of the principal amount for 18 months and the interest for 12 months. But the Respondent committed default in payment of amount of interest and as well as principal amount and therefore the Applicant rightly classified the Respondent Company as *NPA\ The contention, that classification of the account of the Respondent as 'NPA' on 23rd July, 2015 is a breach of the terms of Sanction dated 10th March, 2015 and is in violation of RBI Guidelines, does not merit acceptance, for the simple reason that no Reply was given to the notice issued by the Applicant under the provisions of the SARFAESI Act. More over, any breach committed in repayment of the loan amount enables the Bankers to treat the amount as 'NPA\ No material is placed on record by the Respondent to show t....
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....icable to the transactions that may be notified by the Central Government in consultation with any financial sector regulator. (iii) The order of moratorium comes into force from the date of the order till the completion of corporate Insolvency Resolution Process subject to the Proviso under sub-section (4) of Section 14. 14. The moratorium declared by this Adjudicating Authority is not applicable to the criminal proceedings, if any, initiated under the provisions of Prevention of Money Laundering Act, 2002 by the Enforcement Directorate and to the criminal case, if any, initiated by the Central Bureau of Investigation against the Respondent Company. 15............................. 16.................................." 28. So far as the legal issue of overriding effect of IB&C, 2016 over PMLA 2002 is concerned, it is held that the IB&C has the overriding effect over the Prevention of Money Laundering Act as the PMLA is a statue which came into effect much prior to the coming into force of IB &C. The IB&C is a later statute which came into effect in the year 2016. The aim and object of both the statutes are not doubt different but they are in o....
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....ate and to the criminal case, if any, initiated by the Central Bureau of Investigation against the respondent Company." 31. The aforesaid orders of NCLT does not debar any criminal proceedings, if any, initiated under the provisions of PMLA by the ED and CBI. 32. So far as the principle of overriding effect of IB&C over PMLA is concerned, there are many judgments of Hon'ble Supreme Court. We have already discussed and relied on the judgments on Hon'ble Supreme Court about the above legal issue in the preceding para nos. 29. 33. Therefore in the giving circumstances, it is held that the IB&C has overriding effect over PMLA. 34. The next legal issue i.e. whether the proceedings before Adjudicating Authority PMLA is a civil proceedings or a criminal proceedings. 35. Section 5 of the PMLA reads as follow: "5. Attachment of property involved in money-laundering-[(1) Where the Director, or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material in his possession, that- (a) any person is in possession of....
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....such enjoyment. Explanation.- For the purposes of this sub-section "person interested", in relation to any immovable property, includes all persons claiming or entitled to claim any interest in the property. (5.) The Director or any other officer who provisionally attaches any property under sub-section (1) shall, within a period of thirty days from such attachment, file a complaint stating the facts of such attachment before the Adjudicating Authority." 36. Section 8 of PMLA reads as follow: "Adjudication-(1) (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 sub-section (10) of section 18, if the Adjudicating Authority has reason to believe that any person has committed an 13 [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 sub-section (1) of section 5, or, seized under section 17 or section 18, the evidence on which he relies and other ....
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....thwith take[ the possession of the attached property under section 5 or frozen under subsection( 1A) of section 17, in such manner as may be prescribed: Provided that if it is not practicable to take possession of a property frozen under sub-section(1A) of section 17, the order of confiscation shall have the same effect as if the property had been taken possession of.] 5. Where on conclusion of a trial of an offence under this Act, the Special Court finds that the offence of money-laundering has been committed, it shall order that such property involved in the moneylaundering or which has been used for commission of the offence of moneylaundering shall stand confiscated to the Central Government] [6. Where on conclusion of trail of an offence under this Act, the Special Court finds that the offence of money-laundering has not taken place or the property is not involve in money-laundering, it shall order release of such property to the person entitled to receive it.] [7. Where the trial under this Act cannot be conducted by reason of the death of the accused or the accused being declared a proclaimed offender or for any other reasons or having com....
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....take the case of ED in the matter of Special Criminal no. 1748 of 2014 filed by Foziya Samir Godil vs. Union of India and 2 Ors., (Supra) it appears that the ED had taken the stand before the Hon'ble High Court of Gujarat that the proceedings u/s 5 & 8 are civil proceedings. The contention of the ED has been upheld by the Hon'ble High Court. The Hon'ble High Court, after discussing different provisions of PMLA, 2002 concerning attachment, adjudication, confiscation and retention, has held that the proceedings before the Adjudicating Authority u/s 8 is authorized to undertake civil proceedings and adjudicate thereupon. 40. The Division Bench of Hon'ble Kerala High Court passed judgment dated 26.07.2017 in the matter of MFA-no. 11 of 2016 filed by Kavitha G. Pillai vs. Joint Director, Directorate of Enforcement has observed the following while dealing with the question i.e. Are the proceedings u/s of the 8 judicial proceedings:- "104. Are the proceedings under Section 8 of the Act judicial proceedings? First, we must acknowledge that the line between the judicial and quasi-judicial proceedings, if ever exists, is the thinnest. Almost invisible. Second, here whatever the l....