TaxTMI 
TaxTMI 
TaxTMI 
2019 (9) TMI 943
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.... under process. 3. During the pendency of appeal, Intervener Application which is filed by the Committee of Creditors / Consortium of Banks through UCO Bank, Leader of Consortium of Banks. UCO Bank is a member of the Committee of Creditors (CoC) and it has total 33.97% voting rights in the CoC was allowed. CoC consortium of Banks have authorized and given consent to the UCO Bank Limited on behalf of Committee of Creditors / Consortium of Banks has been impleaded as appellant no. 2. 4. There are the following members of the committee of creditors; (Amount in Crore) Sr No. Bank / Financial Creditor Claimed Amount INR Admitted Amount INR % Voting 1 UCO Bank -Pimpri - WC 121.28 121.28 25.80% 2 UCO Bank - Hong Kong - ECB 33.40 30.23 6.43% 3 UCO Bank - Singapore - ECB 10.81 8.18 1.74% 4 Indian Bank - Pune - WC 7.36 7.36 1.57% 5 Indian Bank - Singapore - ECB 35.63 35.63 7.58% 6 JM Financial ARC (assigned by OBC) - WC 26.04 26.04 5.54% 7 HDFC Bank - WC 6.20 6.20 1.32% 8 L&T Financial Services Ltd - Corporate Loan 51.28 51.28 10.91% 9 Canara Bank - ECB 32.00 31.88 6.78% 10 Hua Nan Commercial Bank....
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....ervices Ltd vide Corporate Loan Agreement dated 21.04.2011 dated 15.04.2011. The Deed of Hypothecation dated 21.04.2011. Annexure-G: Copy of Corporate Loan Agreement dated 15.04.2011. Annexure-H: Copy of Hypothecation Deed dated 21.04.2011.[Page No.163-Schedule I- Hypothecated assets: All moveable fixed and current assets (Subservient Charge)] 4. Property No.2 land admeasuring 26.67 Acres was mortgaged in favor of the SREI Infrastructure Finance Limited vide Declaration dated 25.05.2012. The Rupee Term Loan Agreement dated 09.01.2015 was executed by the PMT Machines Limited and pursuant to which Deed of Mortgage dated 23.01.2017 and 20.02.2017 was executed. Annexure-I Copy of Declaration dated 25.05.2012.(Page 170: First Schedule- Land admeasuring about 26.79 acres situated at Kadachala, Taluk-Halol, District-Panchmahal, Gujarat) Annexure-J Copy of Rupee Term Loan Agreement dated 23.02.2017. Annexure-K Copy of Deed of Mortgage dated 23.01.2017 & 20.02.2017.(Page No.251:Schedule II- All the pieces and parcels of land property bearing Land/Block/Survey No.177P1, 177P2, 178,179,175P2, 182, 180 and 174 Paiki 1, admeasuring 124661 sq. meters at village kadachala, Taluka Halol, D....
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....ex-II and Serial No.HVL-18/2999/2007 in respect of Flat No.501 @ Index-II. (e ) Sl. No. 5 : 3rd and 4th Floor, Permesh Corporate Tower, Karkardooma, Community Centre, Delhi. Vehicles : (f) Sl. No. 12 : dated19-12-2007, Honda Civic DL-13-C-0764 having value of Rs. 12,60,364. It is submitted that the assets were acquired by the PMT Machines Limited much before the commission of the alleged offences and the assets are mortgaged with consortium of banks. 9. The Account of the PMT Machines Limited become NPA in the year 2011-12. The Consortium of Banks of ECB Facility filed Recovery Suit before the Debt Recovery Tribunal against the PMT Machines Limited On 17.06.2013. 10. On 05.08.2017, the Enforcement Directorate ('ED') conducted search and seizure under the provisions of FEMA and Income Tax Act at Mumbai, Vadodara premises of Sterling Group, its Promoters and Promoters' Companies. On 30.08.2017, CBI registered FIR bearing number RC 8(A)/AC-III/2017 under Sections 13(2) read with 13(1)(d) PC Act. An ECIR bearing number ECIR/HQ/15/2017 was registered by the Respondent ED under the provisions of PMLA. 11. On 25.10.2017, CBI BS and FC New Delhi registered FIR bearing number RC/B....
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....ar, Mercedes, Mahindra & Mahindra, Hero Honda, Ford, Bajaj etc. The above customers are regular customer of the Company and there are many on-going orders. The Company manufactures various customized machines, tools and parts of machines having national security and national importance i.e. tanks, nuclear reactor parts, tools for manufacturing ammunition, navy ship parts, machines/ tools for DRDO, ISRO etc. It takes several months to manufacture and deliver customized machines and tools after obtaining the Purchase Order. 16. It is informed that there are more than 1000 employees and workmen working with the Company. The fate of 1000 employees is hanging in a lurch as the due to the attachment Banks and Financial Creditors are unable to achieve objective under IBC. 17. The Appellant no. 2 Banks and Financial Creditors are pressing relief claimed in the appeal filed by the Resolution Professional and release the assets of the PMT Machines Limited to enable Banks and Financial Creditors to maximise the value of assets and made maximum recovery of public funds under the Corporate Insolvency Resolution Process in order to recover the debts. 18. It is submitted that by virtue of atta....
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....tion of Money Laundering Act, 2002 ("PMLA") was to deprive the offender (of money-laundering), the enjoyment of "illegally acquired" fruits of crime by taking away his right over property acquired through such means, and to obviate the threat of money laundering to the financial system of the country. The IBC on the other hand, has been enacted with the objective of consolidating and amending the laws "relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interest of all the stake holders including alteration in the order of priority of payment of government dues." 27. Section 5 of the PMLA prescribes for the attachment of the assets acquired by means of tainted money, and the same is reproduced as under: Section 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....
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.... of an order made under sub-section (2) of section 8, whichever is earlier. (4) Nothing in this section shall prevent the person interested in the enjoyment of the immovable property attached under subsection (1) from such enjoyment. Explanation. - For the purposes of this subsection "person interested", in relation to any immovable property, includes all persons claiming or entitled to claim any interest in the property. 28. Section 5 demonstrates that the objective of the attachment is to prevent the likelihood of concealment, transfer or dealing with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime. The Appellant no. 1 Company is undergoing CIRP under the provisions IBC and the aegis of the RP, who has filed the present Appeal on behalf of the creditors of the Appellant Company, who has inter alia sought the reliefs that the Order of attachment confirmed by the Adjudicating Authority be set aside, and that the assets attached thereby are released so as to be able to take steps to resolve the insolvency of the Appellant Company. As held by the Hon'ble Delhi High Court in Deputy Directorate of Enforcement Vs. Axi....
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....a secured creditor, it being a bonafide third party claimant vis-a-vis the alternative attachable property (or deemed tainted property) has initiated action in accordance with law for enforcement of such interest prior to the order of attachment under PMLA, the initiation of the latter action unwittingly having the effect of frustrating the former. Since both actions are in accord with law, in order to co-exist and be in harmony with each other, following the preceding prescription, it would be appropriate that the PMLA attachment, though remaining valid and operative, takes a back-seat allowing the secured creditor bonafide third party claimant to enforce its claim by disposal of the subject property, the remainder of its value, if any, thereafter to be made available for purposes of PMLA. 171. ... (viii) The PMLA, RDBA, SARFAESI Act and Insolvency Code (or such other laws) must coexist, each to be construed and enforced in harmony, without one being in derogation of the other with regard to the assets respecting which there is material available to show the same to have been "derived or obtained" as a result of "criminal activity relating to a scheduled offence" and consequen....
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.... fide 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 moneylaundering (or his abettor), or from any other person through such transaction (or inter-connected transactions) as involve(s) criminal activity relating to a scheduled offence, such third party (secured creditor) having initiated action in accordance with law for enforcement of such interest prior to the order of attachment under PMLA, the directions of such attachment under PMLA shall be valid and operative subject to satisfaction of the charge or encumbrance of such third party and restricted to such part of the value of the property as is in excess of the claim of the said third party." 12. 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 t....
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....le property", as held in Para 165 of the judgment of Hon`ble Delhi High Court in the case of Deputy Directorate of Enforcement Delhi and Ors. vs Axis Bank in CRL.A. 143/ 2018 & Crl.M.A. 2262 of 2018 dated April 02, 2019. 15. 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. 16. 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 lawfu....
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....roperty (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 to a scheduled offence, such third party (secured creditor) having initiated action in accordance with law for enforcement of such interest prior to the order of attachment under PMLA, the directions of such attachment under PMLA shall be valid and operative subject to satisfaction of the charge or encumbrance of such third party and restricted to such part of the value of the property as is in excess of the claim of the said third party. In the situations covered by the preceding, the bonafide third party claimant shall be accountable to the enforcement authorities for the "excess" value of the property subjected to PMLA attachment. Counsel for the appellant is agreeable to deposit the excess value with the respondent no. 1. Therefore, it is not possible to hold that the mortgaged properties claimed by the Appellant in no way can be considered to be "Proceed of Crime" under Section 2(u) of PMLA....
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.... whereas the mortgagor who is left only with the equity of redemption has only the right to make full payment of the dues of the mortgagee and then redeem the property. Otherwise the mortgager is not left with any vested right. In other words the mortgaged assets are essentially assets of the appellant Bank and not of the mortgager. 35. 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 authority by relevant material and evidence having a probative value that his acquisition is bona fide, legitimate and for fair market value paid therefor, the adjudicating authority must carefully consider the material and evidence on record (including the Reply furnished by a noticee in response to a notice issue under Section 8(1) and the material or evidence furnished along therewith to establish his earnings, assets or means to justify th....