TaxTMI 
TaxTMI 
2019 (6) TMI 1206
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....ed by the Deputy Director, Directorate of Enforcement, Ahmadabad in File No. ECIR/AMZO/03/2018 ("ECIR"). 2. The allegations against the borrowers are as under:- Central Bureau of Investigation (CBI), Gandhinagar has registered FIR no. 0292018A0006 dated 26.03.2018 against M/s. Diamond Power Infrastructure Ltd., Vadodara (DPIL), Shri Suresh Narain Bhatnagar, Founder of DPIL, Shri Amit Suresh Bhatnagar, Managing Director, DPIL, Shri Sumit Suresh Bhatnagar, Joint Managing Director of DPIL, Unknown Public Servants of various banks and unknown others for commission of offence under Section 420, 467, 468, 471 r/w 120-B of IPC and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988. The said FIR inter alia reveals that: (a) M/s. DPIL has caused a loss of Rs. 2654.40 crore to a consortium of 11 banks (including public as well as private sector banks) and Financial Institutions. (b) M/s. DPIL had resorted to exorbitant turnover projections for forthcoming years and submitted false stock statements to the lead bank in order to get more drawing power in their cash-credit accounts. They also showed the details of receivables from the date of payment instead....
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.... funds has resulted in availability of stock to the tune of Rs. 338.44 Crore only which is hugely inadequate for repayment of loans to the tune of Rs. 2654.40 Crore. 3. The Appellant has nothing to do and has no connection with the allegation of crime committed by the borrowers and other persons concerned involved for the offences of money-laundering. The Appellant is not holdings any funds of any of the defendant/respondent. The mortgage properties are admittedly not derived from criminal activities or proceed of crime. The scope of the PMLA is to punish the accused person and not to punish the innocent person who is not involved in the crime within the meaning of Section 2 (1)(u) read with Section 3 of the Act. The appellant is not charge-sheeted nor any prosecution complaint has been filed against the appellant. The appellant has also no objection if the borrowers properties, which were acquired from proceed of crime, be dealt with by the respondent in any manner. 4. There is no nexus whatsoever, between the alleged crime and the appellant, who is mortgagee of the properties and is a victim of the fraud and is innocent party. The definition of proceed of crime as per Section (....
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....ion Bank 120.53 6. Dena Bank 75.63 7. ICICI Bank 178.61 8. State Bank of Hyderabad 19.25 9. State Bank of Mysore 76.69 10. IFCI Limited 57.35 11. Exp ort - Import Bank of India 106.80 TOTAL 1078.21 EXTERNAL COMMERCIAL BORROWINGS OF Rs. 109.30 CRORE (Second Schedule Part B of MOE dated 21st October, 2015) S.No. Name if ECB Lenders Term Loans (USD Millions) 1. Axis Bank 9.63 2. Bank of India 8.00 TOTAL 17.63 (In Indian Rupees, taken as 109.30 Crore) NON CONVERTIBLE DEBENTURE HOLDERS (Second Schedule Part B of MOE dated 21st October, 2015) S.No. NCD Holder Amount (Rupees in Crore) 1. Bank of Maharashtra 11.47 2. Corporation Bank 9.17 3. CSEB Gratuity and Pension Fund 7.34 4. Dena Bank Employee Gratuity Fund 4.59 5. Dena Bank Employee Pension Fund 10.32 6. L&T Finance 34.40 7. Syndicate Bank 9.19 8. Tata Capital Financial Services Limited 19.49 TOTAL 105.97 7. It is evident from above in terms of the Master Restructuring Agreement dated 29th May, 2015 as amended by the First Supplemental and Amendatory Agreement dated 10th August, 2015 ("Loan Agreement"), faci....
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.... * Part XIX- 20.7.2012 * Part XX- 18.9.2012 * Part XXI - 21.9.12 * Part XXII- 20.7.12 * 26.9.2012 * 01.11.2012 * 10.2.2014 2 Wind Turbine Generator JMD 260 , Cap acity 2.1 MW Installed at MojeCHarp odi Nani Tal Abdasa ,Dist Kutch (Owned by DPIL ) Diamond Power Infrastructure Ltd 21.10.15 Detailed in Schedule 11 & 12 (Page 482 - 485) 27.2.2012 3 Wind Turbine Generator JMD 260 , Cap acity 2.1 MW Installed at MojeCHarp odi Nani Tal Abdasa ,Dist Kutch (Owned by DPIL ) Diamond Power Infrastructure Ltd 21.10.15 Detailed in Schedule 11 & 12 (Page 482 - 485) 27.2.2012 4 Wind Turbine Generator JMD 260 , Cap acity 2.1 MW Installed at MojeCharp odi Nani Tal Abdasa ,Dist Kutch (Owned by DPIL ) Diamond Power Infrastructure Ltd 21.10.15 Detailed in Schedule 11 & 12 (Page 482 - 485) 27.2.2012 5 Diamond Projects Ltd MojeHaripu ra Survey No 144 &146 ,TehSavli Dist Vadodara Building , plant & machinery Diamond Projects Ltd 29.07.08 which was extended on: 8.04.11 29.02.14 and 21.10.15 Detailed in Schedule 5& 6 (Page No. 476 - 477) 10.8.2000 11 Flat 102 , RS No. 4/Part , sheet no 12 , City Survey No. 500, Janki Apartment , 2nd floor, Alkapuri ,....
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.... payable by Respondent No. 2 to the Appellant Consortium together with further interest till the date of payment and/or realization of thereof. It is also submitted that the outstanding amount due to the Appellant is public money and that the Appellant has the right to deal with the Subject Properties. 14. The Adjudicating Authority vide the Impugned Order dated 1st October, 2018 has confirmed the Provisional Attachment Order No. 02/2018 dated 24th April, 2018 issued by the Respondent No.1 in File No. ECIR/AMZO/03/2018. 15. It is submitted on behalf of the appellants that in view of the recent judgment passed by the Hon'ble Delhi High Court in the matter of Deputy Directorate of Enforcement Delhi and Ors. vs Axis Bank ("Judgment"), the impugned order is liable to be set aside. 16. The Hon'ble High Court in its Judgment has held that "the charge or encumbrance of third party in property attached under PMLA cannot be treated or declared void unless material is available to show that it was created to defeat the PMLA, such declaration rendering such properties available for attachment and confiscation under PMLA, free from encumbrance." The Hon'ble High Court further held that "a p....
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....rial number 1 and 5 of the Complaint belong to Respondent No. 2 after carrying out due compliances were mortgaged with the Appellant in the year July 2008 and thereafter were extended from time to time on various dates till October 2015 for securing the facilities advanced by the Appellant. 20. The properties mortgaged to the Appellant were acquired by Respondent No. 2 between March 1993 and January 2008. The details of the acquisitions are mentioned in third schedule (Annexure A4 at page no. 461 to 464). 21. The interest in the Subject Properties stood transferred to the Appellant when the Respondent No. 2 had created a valid mortgage in favor of the Appellant which was much prior to the alleged offence committed by Respondent No. 2 under the PMLA. 22. The rights of Appellant Bank being the secured creditor would survive in spite of the order of the attachment under PMLA remains operative. Therefore, the Appellant being the lawful mortgagee/transferee of the interest in the Subject Properties are entitled to recover its dues with the sale of the Subject Properties as the Hon'ble High Court in the Judgment has also held that mere issuance of an attachment order does not ispo fac....
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....rl.M.A. 2262 of 2018 dated April 02, 2019. 25. As already mentioned in the present case, it has come on record that the that the security interest in respect of the of the aforesaid properties were created much before the date or period of the alleged criminal activity in respect of which the attachment order was passed. 26. The Hon'ble Delhi High Court on the Axis Bank Judgement (supra) had observed that "...the charge or encumbrance of third party in property attached under PMLA cannot be treated or declared void unless material is available to show that it was created to defeat the PMLA, such declaration rendering such properties available for attachment and confiscation under PMLA, free from encumbrance..." The Hon'ble Delhi High Court further observed that "a party in order to be considered as a bonafide third party claimant for its claim in a property being subjected to attachment under PMLA to be entertained must show, by cogent evidence, that it had acquired interest in such property lawfully and for adequate consideration, the party itself not being privy to, or complacent in, the offence of money laundering, and that it had made all compliances with the existing l....
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....he properties and upon being satisfied that the properties are in no way tainted and or benami got created mortgage in favour of the Appellant. No contrary evidence is available on record to show that the mortgaged properties were purchased from proceed of crime. 33. The term loan advanced to the Respondent No. 2 for construction of windmill in District Kutch were duly constructed and were mortgaged to the Appellant along with the land on which the 1said windmills were constructed since there is no negligence or involvement of any bank in any manner in the alleged offence. 34. Thus, the attachment of the encumbered property by Respondent No. 1 treating to be tainted is not valid argument if the bonafide third party claimant (as aforesaid) is a "secured creditor", pursuing enforcement of "security interest" in the property (secured asset) sought to be attached, it being an alternative attachable property (or deemed tainted property), it having acquired such interest from person(s) accused of (or charged with) the offence of money-laundering (or his abettor), or from any other person through such transaction (or inter-connected transactions) as involve(s) criminal activity relating....
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....involved in such activity connected with proceeds of crime and projects or claims it as untainted property can be guilty of the offence. S.5(1) shows that before any property can be provisionally attached there must be material prima facie to show any person is in possession of any proceeds of crime which are likely to be concealed, transferred or dealt with in a manner which may frustrate the confiscation proceedings thereof. The primary requirement for invoking S.5(1) is that there must be material to show that some proceeds of crime are in possession of any person. The requirement is that material must indicate that any property of whatever description in possession of any known person is "proceeds of crime" as defined in S. 2 (u). Finally adjudication proceedings are under S.8. Perusal of S.8 (1) shows that if any person has committed an offence under S. 3 or is in possession of proceeds of crimehe may be served notice to indicate the sources of his income etc. out of which or by means of which he has acquired the attached property. This obviously means that if in response to the notice, the person in possession discloses legitimate means for having acquired the property in que....
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....("SCN"). No reason to believe can be discerned from the SCN, or the provisional attachment order accompanying the SCN under Section 8 of the PMLA, as to how there was reason to believe that the Appellant was in possession of 'proceeds of crime'. Adjudicating Authority, in its discussions, did not even consider the reply of the Appellants. 42. The Adjudicating Authority is bound by the law laid down by the higher courts. No authority has any justification to ignore the law laid down by the Supreme Court and various High Courts and this Tribunal, who on the basis of decisions of Hon'ble Supreme Court and various High Courts, has delivered orders. Unless each and every judgment is distinguished or are on different facts, the different conclusion cannot be arrived. The facts and legal issues are almost same and the Adjudicating Authority has incorrectly passed the impugned order by not following the orders passed by this Tribunal.The appellant is a Public Sector Bank. The money must come to the public forthwith not after the trial of criminal case against the borrowers which may take many years. The banks are in crisis, no attempt should be made to block the loan amount in order to av....