TaxTMI 
TaxTMI 
2019 (1) TMI 1182
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....y, renewed Consortium Finance of Rs. 2082.53/- Cr against the Hypothecation/mortgage of the property in issue in the present appeal. 4. On 22.08.2013 the Respondent No.2 Company created mortgage of the immovable property vide Declaration of Mortgage in favour of the Appellant Bank. i.e the All piece and parcel of Land being at block No.1,4,11-19 at village Karanj, Taluka Mandvi, District Surat, Gujarat in favour of the Consortium led by the Appellant Bank. 5. On 09.01.2014 the Respondent No.2 Company executed a Hypothecation Agreement in favour of the Consortium led by the Appellant Bank, wherein, the Moveable properties (Including the Plant and Machinery) of the Respondent No.2 Company stood hypothecated in favour of the Consortium led by the Appellant Bank. 6. On 31.05.2014 the Account of the Respondent No.2 was declared as NPA by the Appellant Bank as per the guidelines issued by the RBI 7. On 26.06.2015 the Appellant Bank filed O.A. bearing No. 417/2015 before the DRT Ahmadabad for the Recovery of a sum of Rs. 1937,61,10,029/- as on 31.05.2015. 8. On 21.08.2015, the Consortium Banks (13 in number) through the Appellant Bank have already taken possession of the pr....
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.... 19. The appellant at this stage is only pressing the relief pertaining to release of mortgaged of attached property. The bank will have to recover the amount as per law in another forum. It is not in dispute between the parties thatthe plant and machinery and construction of factory building for housing of the said plant and machinery (sought to be provisionally attached by the Enforcement Directorate) the same were secured property against out of the loan sanctioned by the Consortium Bank, which is evident from para 35 of the P.A.O. dated 13.04.2018. 20. The Respondent-Deputy Director is relying upon the non-obstante clause in Section 71 of PMLA to claim priority over their debts due to the Appellant Bank. Section 71 of PMLA reads as under:- "The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force." 21. There is no denial on behalf of respondent that appellant is a Secured Creditor and is entitled to priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or Local Authority. 22. The amended provisions o....
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.... is clear that both these Acts are special Acts. This Court has laid down in no uncertain terms that in such an event it is the later Act which must prevail" 27. The Hon'ble Supreme Court, while deciding this issue unequivocally, was pleased to uphold its own catena of decisions echoed earlier, which are reported in FPA- PMLA-2707/SURAT/2018 Page 7 of 17 (i) AIR 1956 SC 614 - Ramnarayan vs. Simla Banking and Industrial Company Ltd. (ii) (1977) I SCC 750 - Sarvan Singh vs Kasturi Lal (iii) (1993) 2 SCC 144 = Maharashtra Tubes Ltd. vs State Industrial Investment Corporation of Maharashtra Ltd. (iv) (2000) SCC 406 - Allahabad Bank vs. Canara Bank 28. The Hon'ble Supreme Court in the said case of Solidaire India Ltd. vs. Fairgrowth Financial Services Ltd. has approved the decision of the Special Court rendered by the Hon'ble Mr. Justice Variava, as he was then of the Bombay High Court reported in (1997) 89 Comp cases 547 clarifying that the non-obstante clause in the later enactment will prevail over the non-obstante clause in the earlier enactment. 29. The following is the relevant portion of the decision of the Special Court, as appearing at Para 1....
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....e material placed on record that the Appellant - Bank being a Secured Creditor, since it had lent its own money to the Predicate Offender earlier, is entitled to priority over all other debts and government dues, including revenues, taxes, cesses and rates due to the Central Government, State Government or local authority. Hence, the Respondent - Deputy Director has no power to attach the property of the mortgagors. 33. The Hon'ble Andhra Pradesh High Court in the case of B. Rama Raju vs. Union of India &Ors. reported in (2011) 164 Comp Cases 149 in which the Hon'ble High Court has held that if the Adjudicating Authority is satisfied as to the bona fide acquisition of property, it should relieve such property from provisional attachment by declining to pass an Order of confirmation of the provisional attachment. 34. The following isthe relevant portion of the Para 103 of the said decision passed by theHon'ble Andhra Pradesh High Court :- "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 adjudicatin....
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....rposes. None of the bank is involved in the scheduled offence. 47. In view of the entire gamut of the dispute, we are of the considered opinion that the conduct of the banks are always bona fide. Both banks are innocent parties. 58. Thus in the present case even though the Ld. Adjudicating Authority had all the reasons to believe that the above mentioned were mortgaged to the Appellant Bank and that the Appellant/SBI had prior charge over the subject matter - 5 properties ;still the Ld. Adjudicating Authority confirmed the provisional attachment order of the respondent no. 1 and thus causing huge loss to the appellant SBI. 60. We also find that the Adjudicating Authority has not examined the law on mortgages and securities. 63. The property of the Appellant bank cannot be attached and confiscated when there is no illegality or unlawfulness in the title of the appellant. 64. The respondent has no lien over the said properties as the appellant banks are now the legal transferees of the said properties. 65. From the entire gamut of the matter, we are of the view that there is no nexus whatsoever between the alleged crime and the two banks who are....
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....ons of SARFAESI Act, 2002, which are sought to be attached by the Respondent No.1 vide PAO No. 01/2018 dated 13.04.2018 i.e. much after the Possession Notice dated 21.08.2015 issued by the Appellant Bank on behalf of the Consortium Banks. 41. It is well settled law that the assets which are "secured assets‖ under the provisions of SARFAESI Act, 2002 and the provisions contained in RDDBFI Act, 1993, the Banks/ Secured Creditors have a first charge over such properties. This Hon'ble Appellate Tribunal has already taken this view in the judgment and order dated 14.07.2017 in the case of "State Bank of India vs. Joint Director, Directorate of Enforcement Kolkata", judgment and order dated 25.01.2018 in the case FPA - PMLA - 1373/GOA/2016 titled as "Punjab National Bank vs.Joint Director, Directorate of Enforcement Goa", judgment and order dated 02.08.2018 in the case FPA - PMLA - 1604/MUM/2017 titled as "Standard Charter Bank vs.The Deputy Director, Directorate of Enforcement Mumbai". 42. Therefore, the repayment of loan from the (alleged) proceeds of crime cannot make the property created out of the untainted money liable for attachment under the provisions of PMLA Act,....
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.... view that both Authorities are bound to respect the decisions of Supreme Court and High Court. Both have ignored the law by dis-respecting the same which is not proper and against the well established legal system. 47. Because the learned Adjudicating Authority did not understand that the afore mentioned moveable/Immoveable property cannot be said to have been acquired out of "proceeds of crime" as defined in section 2 (1) (u) of the Prevention of Money Laundering Act (PMLA), 2002 and therefore, the same (cannot be Attached under Section 5 of the PMLA by the Enforcement Directorate vide PAO No 01/2018 dated 13.04.2018. 48. The Adjudicating Authority has failed to understand that no case of money laundering is made out against the Appellant Bank who is an innocent party, who sanctioned Consortium Finance of Rs. 2082.53 Cr. (which is untainted and pure money) to the Respondent No.2 Company against the Hypothecation/Mortgage of the Movebale/Immoveable property in issue 49. By virtue of Section 4A Recovery of Debts due to Banks & Financial Institution Act, 1993 as amended by Enforcement of Security Interest & Recovery of Debts Laws & Miscellaneous Provisions (Amendment) Act, ....