TaxTMI 
TaxTMI 
2019 (3) TMI 822
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....perty No. 18 - 802 Prasad Chambers, Opera House, Mumbai. Property No. 19 - Office No. 6, B Wing, 1 Floor, Laxmi Towers, Plot No. C- 25, G Block, CTS NO 4207, Village Kolekalyan BKC, Bandra East, Mumbai. Property No. 20 - Office No. 3, B Wing, 3 Floor, Laxmi Towers, Plot No. C- 25, G Block, CTS NO 4207, Village Kolekalyan BKC, Bandra East, Mumbai. Property No. 21 - Office No. A/1, A Wing, 3 Floor, Laxmi Towers, Plot No. C- 25, G Block, CTS NO 4207, Village Kolekalyan BKC, Bandra East, Mumbai. Property No. 22 - Office No. 1, A Wing, 7 Floor, Laxmi Towers, Plot No. C- 25, G Block, CTS NO 4207, Village Kolekalyan BKC, Bandra East, Mumbai. Property No. 23 - Flat No. 3701, 37th Floor, Springs 1, G.D. Ambedkar Marg, Dadar East, Mumbai. Property No. 31 - Land and Bungalow at Gut No. 1355, Hissa No. 1, Village Awas, Taluka Alibaug, District Raigad. Property No. 32 - Commercial Building called Axis Multi Comples, Block A, Action Aria, 1 C, Plot No. CF-29, New Tower, Kolkata. Property No. 37 - 84. 13 Acres at Balwant Nagar at Munde Gao, Taluka Igatpuri, District Nasik, off NH3, Adjoining Railway Line. Property No. 39 - Land at Village Sanguli near village Shirdhon off Mumbai....
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....and Reconstruction of Financial Assets & Enforcement of Security Interest Act ("SARFAESI") to the borrowers and corporate and personal guarantors, as mentioned in Paragraph Nos. 4.9 and 4.12 of the Appeal. The Appellant mentioned a description of the Securities, which included the Properties (subsequently attached by the Respondent) which had been secured in favour of the Appellant, in Annexure III and II of the Recall Notices and Notices under SARFAESI respectively. (Annexure Nos. A8 (Colly) Recall Notice & Notice Under SARFAESI, A9(Colly) Demand Notice @ Pg 1209, 1232, 1255 respectively). 4.5. The Appellant in its individual capacity, has declared the account of GGL and GECL as Non-Performing Asset (NPA) with effect from 31.03.2018.The Appellant and the other Consortium Lenders have filed Original Applications before the Debt Recovery Tribunal ("DRT"), Mumbai being OA No. 408/2018 and OA No. 520/2018 on 05.07.2018 and 18.08.2018 U/s 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 ("RDDBFI") seeking recovery of debts advanced under the WC and ECB Facilities respectively. 4.6. The Appellant has also filed a Corporate Insolvency Resolution Process (....
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.... in the Country....Thereafter, the said funds were routed and diverted to various overseas companies out of country with the intention to launder the proceeds of crime....Therefore, the said three accused entities have acquired the proceeds of crime and layered the same out of country to hide its criminal origin. Therefore the said proceeds of crime is not available in the country for attachment" though admittedly the Appellant is has not been charged by the Respondent for the offence of money laundering. On similar lines the Adjudicating Authority, concludes in its order that the proceeds of crime generated were layered out of the country and were not available in the country for attachment. Erroneously, the Respondent then went ahead to take a diametrically opposite stand, which is noted in the Impugned Order, "As such, the said properties mentioned at Para 24 of the PAO are deemed to be proceeds of crime in lieu thereof generated as a result of criminal activities...". 8. In the present case, the Appellant, for itself and as the Lead Bank, despite of knowledge of ED, the Appellant was not given an opportunity to be heard before the passing of the Provisional Attachment Order. ....
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....t Shri Mehul Choksi is not co-operating with the investigation at all as he has not attended office of Enforcement Directorate despite of three summons having been issued to him under the provisions of the PMLA. The Deputy Director therefore, believed that the likelihood of selling and/or disposing of the said properties are extremely high. Therefore, the Director has reason to believe that the properties mentioned at Para 24 of PAO i.e the proceeds of crime are likely to be concealed, transferred or dealt with in such a manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under Chapter-III of the Prevention of Money Laundering Act." 14. However, if the Respondent is exercising such jurisdiction, the duty is also cast upon to attach properties in a very careful manner after consulting the law. In the present case, it is the admitted case of both authorities that the proceeds of crime has been siphoned off out of countries as the funds were routed and divested to various companies and layered the same out of countries to hide criminal origin, therefore, the said proceeds of criminal is not available. If that is the position, the ....
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.... passed against the law. As far as exercise of jurisdiction under the second proviso, no doubt, it empowers the respondent to attach the properties if all requirements prescribed are satisfied. Similarly, if the said proviso, the respondent were entitled to invoke the second proviso by attachment of all other properties, except mortgaged properties. 17. It appears from the Complaint as was filed by the Respondent, it would reveal there is no mentioning or investigation into the Charge of the Appellant over the Properties where the bank is the secured creditors. The investigation is on the basis of real facts and the steps of provisionally attaching properties for which the charge is already with the appellant who is otherwise secured creditators. There is no denial that the properties were purchased prior to the period when the alleged offences were committed, and thus cannot be a part of the alleged proceeds of crime. 18. Therefore, it is held that the 2nd proviso no doubt, the ED is empowered to attach the properties with filing the report under Section 173 of Code of Criminal Proceedings 1973, however at the same, such powers has to be exercised in very careful manner if the p....
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....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." 24. The Hon'ble Supreme Court, wherein it has been categorically held that if non-obstante clause is contained in two enactments, the nonobstante clause in the later enactment shall prevail over the nonobstante clause in the earlier enactment. In the case of Solidaire India Ltd. vs. Fairgrowth Financial Services Ltd. (2001) 3 SCC 71, the Supreme Court was considering the effect of the non-obstante clause contained in Section 32 of the Sick Industrial Companies (Special Provisions) Act, 1985 and Section 13 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992. 25. The Hon'ble Supreme Court has categorically held that the nonobstante clause in the later Act must prevail over the non-obstante clause in the earlier Act. The following is the relevant portion of the decision of the Hon....
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.... is, thus, no doubt that the right* of a secured creditor to realize secured debts due and payable by sale of assests 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." 30. The said principle laid down by the Hon'ble Supreme Court has also been followed by the Hon'ble Madras High Court in another decision dated 22.12.2016 in W.P. No.27504 of 2015 and has upheld the provisions of the amended Section 26E of SARFAESI Act. The following is the extract of the relevant portion of the said decision of the Madras High Court:- "8. Concededly, the mortgage in favour of the petitioner Bank was created on 26.05.2005, which was prior to the date of attachment. The date of attachment, as indicated above, was 19.01.2015. To be noted, attachment entry was made by respondent No. 3, on 13.08.2015. This apart, the matter is now put beyond the pale of doubt, as during the pendency of the writ petition, an amendment has been made to the 2002 Act with the insertion of Section 26E." 31. With respect to the factum of mortgage and the effe....
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....ce to the claim of the Appellant. Further, the Appellant Bank is a victim of the fraud perpetuated by Mr Mehul Choksi and the Gitanjali group companies including GGL and GECL, which is further aggravated by the effect of the Impugned Order, depriving it of pursuing its legal claims against properties mortgaged to it. Both orders passed by ED and Adjudicating Authority are contrary to law and facts. 34. The Adjudicating Authority has wrongly confirmed the Attachment The bank is as per agreement and documents is entitled for recovery by the Appellant-Bank from its borrower its own stressed Asset, since the Bank had already lent the money owned by it, which the Bank is entitled to recover the same. The impugned order has been passed without application of mind. Both authorities should have maintained judicial restraint while making much observations that the Adjudicating Authority cannot concur with the view of this tribunal. It appears to this tribunal that the Adjudicating Authority is carried away by its own personal presumption. It is the duty of every authority to decide the matter on merit and not on the basis of personal opinion. None of the authority can be allowed to ignore ....
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....fiscated 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 mortgagees of all the properties which were purchased before sanctioning the loan. Thus no case of money-laundering is made out against banks who have sanctioned the amount which is untainted and pure money. They have priority as secured creditors to recover the loanamount/debts by sale of assets over which security interest is created, which remains unpaid." This Tribunal in the above Judgment dated 14.07.2017 has also relied upon its own earlier Judgment dated 22.06.2017 in the case Indian Performing Right Society Ltd. vs. The Deputy Director, Directorate of Enforcement ,Mumbai, wherein the Tribunal held as follows :- "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 Money Launde....
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....the PAO in the impugned order. 42. The Adjudicating Authority did not appreciate that the provisions of The Prevention of Money-Laundering Act, 2002 do not constitute any overriding statutory charge so as to defeat and make sub servient the rights of the bank as a secured creditor. It is no longer res integra that crown debts have no priority over the claim of a secured creditor under a contract of loan. 43. The Prevention of Money-Laundering Act, 2002 does not override the provisions of The Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest. Act, 2002 should be construed harmoniously so as to give effect to both. The realization of public money through the Securitization& Reconstruction of Financial Asset & Enforcement of Security Interest Act, 2002 cannot be held to be, in any manner, inconsistent with and violative of the purpose and enforcement of provisions of The Prevention of Money-Laundering Act, 2002. 44. The PML Act cannot be applied to the detriment of the Appellant being a Secured creditor (Public Sector bank) as held by this tribunal in a catena of judgments. The Adjudicating Authority did not appropriate that even if the two Acts....
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....t that under the proviso to sub clause 1 and 2 of section 8 of the Act, prior to the confirmation of the PAO, the Adjudicating Authority is required to adjudicate over the claim of an innocent party who seeks claim over the attached property, apart from the person to whom notice had been issued. 49. Under Section 8(1), upon receipt of a Complaint u/s 5(5) of the Act, if this Authority has reason to believe that any person has committed an offence under section 3 or is in possession of proceeds of crime, he may serve a notice of not less than thirty days on such person calling upon him to indicate the sources of his income, earning or assets, out of which or by means of which he has acquired the property attached U/s 5(1) of the Act. 50. The words "reason to believe" used in S. 8(1) of the Act cast an onerous duty on the Adjudicating Authority, while deciding to act under the said Section. The Hon'ble Supreme Court and various Hon'ble High Courts have held that "reason to believe" is not the same thing as suspicion or doubt and merely seeing cannot be equated to believing. "Reason to believe" is a higher level of state of mind. 51. It is also a matter of fact that the PAO no. 0....
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....g Authority could not have confirmed the PAO bearing No. 03/2018 dated 28.03.2018 passed by the Respondent No.1. 56. The said process is promoted by the Government of India. Apex Court has also held in favour of the bank and the main provisions valid in order to recover the amount in the interest of public. One fails to understand why both authorities are against the said process of recovery. 57. In view of the non-obstante clause as contained in Section 238 of the IBC, 2016, the Adjudicating Authority could not have continued with the Attachment proceedings under the PMLA. 58. The Reasoning of the Adjudicating Authority is not wholly bias as it is a settled law that Non-Obstante clause of the later act shall prevail over the non-obstante clause of the prior act. The IBC, 2016 being a subsequent legislation than the PMLA, therefore, the Non-obstante clause of the IBC,2016 shall prevail over the PMLA. 59. The proceedings before the Adjudicating Authority are civil in nature, therefore, in view of the Section 14 of the IBC, 2016 the proceedings before the Adjudicating Authority cannot continue as there is clear prohibition under the said section of the IBC, 2016. 60. This Tribun....