TaxTMI 
TaxTMI 
2019 (12) TMI 1019
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....order. The appeal is disposed of, accordingly. Pending application stands disposed of." 2. Since the matter is remanded to this Tribunal and since the appeal is restored, the present appeal has to be decided in the light of the order passed in CRL.A. 143/2018 & Crl.M.A. 2262/2018 in the matter of The Deputy Director, Directorate of Enforcement, Delhi Versus Axis Bank & Ors. and four other batch matters. In view of the above, the matter is heard afresh. 3. In FPA-PMLA-1974/DLI/2017 filed by State Bank of India, none appeared. However, the materials available on record in respect of both the parties are considered. Since, the property involved in the present appeals is same and the nature of pleadings are also same, so the appeals are taken up together and a common order is passed. The facts are already recorded in the earlier order dated 15.03.2018 which may be read in the present order. However, the relevant Paras are reproduced below; "2. The Syndicate Bank (appellant in appeal no. 1) and the State Bank of India (SBI) (appellant in appeal no. 2) were defendant nos. 8 &7 respectively in O.C. no. 763/2017. 3. These two appellants have ....
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....ng its registered office at 308, Vishal Bhawan, 95, Nehru Place New Delhi. In order to collaterally secure the aforesaid loan a Tripartite Agreement dt. 18/07/2007 entered between M/s SSPL and "Vatika Greenfield Projects Pvt. Ltd." and Syndicate Bank. M/s SSPL agreed to create mortgage of the said property in favour of Syndicate Bank Consortium and further agreed not to transfer/alienate or to create any charge over the said property without the prior consent of the Syndicate Bank consortium. This is worth to submit here that Syndicate Bank Consortium was acting as leader of consortium with SBI. In Addition to above M/SSPL. also executed an agreement to mortgage dt. 29.03.2007 in favour of Syndicate Bank. Copy of Tripartite agreement dt. 18.7.2007 including agreement to mortgage dt. 29.03.2007 are placed on record. 6. It is also revealed that in connivance with other accused persons the R-2 defrauded the appellants in their cash credit loan account by dishonest means of inflating the value of stocks. They had also indulged in removal of hypothecated stocks without banks knowledge through illegal sale of cars. SSPL company account remains irregular since 6/12/2008 ....
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....nk, sold said three properties of the Respondent No. 2 M/s Surhit Services Pvt. Ltd. (M/s. SSPL) and shared the proceeds with the other Appellant State Bank of India and a sum of Rs. 3.22 Crores being the share of State Bank of India has been credited towards the loan account of SSPL. 10. Admittedly the property in question Flat No. 2/601, Type: Sovereign, Block No. II, 6th Floor, Vatika City, Sohna Road, Gurgaon is a secured asset of the Appellant Banks in terms of the Tripartite Agreement dt. 18.07.2007 r/w Agreement to Mortgage dt. 29.03.2007 being part of the security to the amount of Credit Facilities by Appellant Banks granted by Syndicate Bank to the Respondent No. 2 M/s SSPL. 11. The loan amounts were released by the Appellant Syndicate Bank in 5 installments, as and when demanded by the Builder M/s Vatika Land Base Ltd. (hereinafter referred to as "the Builder"), remitted a sum of Rs. 28,95,698/- between 03.05.2007 to 17.09.2008 towards the property in question. The said amount of Rs. 28,95,698/- was remitted by debiting/liquidating the Fixed Deposit kept by the Respondent No. 2 M/s SSPL much prior to 30.09.2008. 12. It is contended by t....
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....ted that the appellant Syndicate Bank suffered a loss of Rs. 26.24 crores and State Bank suffered a loss of Rs. 8.96 crores and stated as under:- "Since Syndicate Bank suffered a loss as above therefore, it may be allowed to recover its loss incurred due to the act of M/s Surhit Services Pvt. Ltd. After valuation of the flat/property as on date." The CBI Court vide order dated 04.03.2013, on an erroneous appreciation of the facts and circumstances of the case, held that the appellant Syndicate Bank shall be paid only the amount financed by it to purchase the property. 19. It is the case of the Syndicate Bank that there being no irregularity or illegality in Syndicate Bank taking the property in question as security and the appellant Syndicate Bank being entitled to sell the same and appropriate the proceeds towards the dues of the Respondent no. 2 M/s SSPL under Sec. 13 (4) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 the appellant Syndicate Bank filed Criminal Revision Petition No. 299 of 2013 in May, 2013 before the Hon'ble High Court of Delhi against the order of the CBI court dated 04.03.2....
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....gn, 6th Floor, Sector-49, Vatika City, Gurgaon, Sohna Road, Haryana. 25. Shri Rajesh Kumar Jain, on 28.04.2017, Deputy Director of Enforcement, New Delhi filed complaint no. OC-763 of 2017 before the Adjudicating Authority under the PMLA. 26. It is averred in the appeal that the Appellant is also a victim of fraud played by the above named persons. The Appellant Syndicate Bank had granted credit facilities to the extent of Rs. 26.50 Crores to M/s SSPL. Recovery Certificate for recovery of Rs. 28,27,18,238/- (Rupees twenty eight Crores twenty seven lakhs eighteen thousand two hundred thirty eight only) has been issued by the Debt Recovery Tribunal vide recovery Certificate No. 394/15 dated 23.09.2015 which the Appellant Syndicate Bank is not able to recover so far. 27. As per the Provisional Attachment Order No. 04/2017 in ECIR No. ECIR/05/DZ/2013/AD (AKS) dated 31.03.2017, a sum of Rs. 8.96 Crores is outstanding against M/s SSPL with State Bank of India against the amount of Loan of Rs. 13 Crore sanctioned to M/s SSPL by the State Bank of India on 30.09.2008. As per Deputy Director Enforcement, Delhi Zone-I, New Delhi, the accused persons named above, "ha....
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....by State Bank of India on 30.09.2008 was used for the purchase of the property in question. A sum of Rs. 5 Crores and Rs. 2.50 Crores is said to have been transferred to the account of the respondent no. 2 with the appellant Syndicate Bank on 12.06.2008 and 27.06.2008 respectively by the respondent no. 7 State Bank of India (SBI). (Para 7.3 at Page 6 of the Complaint). But this is prior to sanction of the loan by SBI on 30.09.2008. Therefore the transfer cannot be from the proceeds of the crime. 36. The amount of Rs. 5 Crore transferred to the Account of the respondent no. 2 on 12.06.2008 to the appellant Syndicate Bank was to clear another loan account with of the said respondent no. 2 with Syndicate Bank i.e. OSL 01/08. (Please see statement of account of the respondent no. 2 with Syndicate Bank entry for Rs. 4,97,62,012.19 dated 13.06.2008. Similarly, the amount of Rs. 2.5 Crores transferred to the account of the respondent no. 2 with the appellant Syndicate Bank was to reduce the overdrawn limit in the account (Please see statement of account of the respondent no. 1 with Syndicate Bank entry for Rs. 2.5 crores dated 27.06.2008. 37. Even borrower the (Responden....
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....uch interest in such property (otherwise assumably untainted) by such third party cannot conceivably be on account of intent to defeat or frustrate this law. In this view, it can be concluded that the date or period of the commission of criminal activity which is the basis of such action under PMLA can be safely treated as the cut-off. From this, it naturally follows that an interest in the property of an accused, vesting in a third party acting bona fide, for lawful and adequate consideration, acquired prior to the commission of the proscribed offence evincing illicit pecuniary benefit to the former, cannot be defeated or frustrated by attachment of such property to such extent by the enforcement authority in exercise of its power under Section 8 PMLA. 164. Though the sequitur to the above conclusion is that the bonafide third party claimant has a legitimate right to proceed ahead with enforcement of its claim in accordance with law, notwithstanding the order of attachment under PMLA, the latter action is not rendered irrelevant or unenforceable. To put it clearly, in such situations as above (third party interest being prior to criminal activity) the order of attachment ....
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....challenge to the orders of attachment (as confirmed) but, the law in PMLA, at the same time, also confers jurisdiction on the special court to entertain such claim for purposes of restoration of the property during the trial of the case [Section 8]. The jurisdiction to entertain objections to attachment conferred on the appellate tribunal on one hand and, on the special court, on the other, thus, may be co-ordinate, to an extent. 168. An argument, however, was raised, by the appellants that the respondents herein should have approached the special court, instead of the appellate tribunal, for consideration of their respective claims. 169. In view of above-noted legislative scheme, it must be clarified that if the order confirming the attachment has attained finality, or if the order of confiscation has been passed or, further if the trial of a case for the offence under Section 4 PMLA has commenced, the claim of a party asserting to have acted bonafide or having legitimate interest will have to be inquired into and adjudicated upon only by the special court. 170. But, the above exception cannot be applied to all cases of bona fide third party claimants so....
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....heduled offence is not traceable, or the same for some reason cannot be reached, or to the extent found is deficient, the empowered enforcement officer may attach any other asset ("the alternative attachable property" or "deemed tainted property") of the person accused of (or charged with) offence of money-laundering provided it is near or equivalent in value to the former, the order of confiscation being restricted to take over by the government of illicit gains of crime. (v). If the person accused of (or charged with) the offence of money-laundering objects to the attachment, his claim being that the property attached was not acquired or obtained (directly or indirectly) from criminal activity, the burden of proving facts in support of such claim is to be discharged by him. (vi). The objective of PMLA being distinct from the purpose of RDBA, SARFAESI Act and Insolvency Code, the latter three legislations do not prevail over the former. (vii). The PMLA, by virtue of section 71, has the overriding effect over other existing laws in the matter of dealing with "money-laundering" and "proceeds of crime" relating thereto. (viii). The PMLA, RDBA, SARF....
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....nt (as aforesaid), staking interest in an alternative attachable property (or deemed tainted property), claiming that it had acquired the same at a time around or after the commission of the proscribed criminal activity, in order to establish a legitimate claim for its release from attachment it must additionally prove that it had taken "due diligence" (e.g. taking reasonable precautions and after due inquiry) to ensure that it was not a tainted asset and the transactions indulged in were legitimate at the time of acquisition of such interest. (xiv). If it is shown by cogent evidence by the bonafide third party claimant (as aforesaid), staking interest in an alternative attachable property (or deemed tainted property) claiming that it had acquired the same at a time anterior to the commission of the proscribed criminal activity, the property to the extent of such interest of the third party will not be subjected to confiscation so long as the charge or encumbrance of such third party subsists, the attachment under PMLA being valid or operative subject to satisfaction of the charge or encumbrance of such third party and restricted to such part of the value of the property a....
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....fiscation on account of they being the alternative attachable properties or deemed tainted properties, which is permissible in law. The audi car (subject matter of first appeal) was acquired by a transaction which has no direct connection with the case of money-laundering. However, there is no clarity as to the value of proceeds of crime which are to be confiscated as against value of the attached property as indeed the extent of the debt yet to be recovered by the secured creditor. The monetary gains made by the transactions which are subject matter of the accusations of money-laundering on account of illicit foreign exchange transactions (third appeal) or the case of cheating by use of fabricated defence supply orders (fourth appeal), both involving public servants, require closer scrutiny as to the claim of the respondent banks of bonafide action. Though there is no such element of complicity on part of any of the officials of the respondent banks in the case relating to fictitious hospital equipment (second appeal) or the one involving consortium of banks (fifth appeal), scrutiny respecting legitimacy and bonafide of the claim on the touchstone, inter alia, of the subsisting va....
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....estion is a secured asset of the appellant being security to the amount of Credit Facilities granted by the appellant to M/s. SSPL. The said property is also security to Rs. 13 Crores sanctioned by SBI to the Respondent no.2 M/s.SSPL. 5. 17.09.2008 The appellant in 5 installments remitted a sum of Rs. 28,95,698/- between 03.05.2007 to 17.09.2008 toward the property in question. 6. 30.09.2008 The loan of Rs. 13 Crores was sanctioned to M/s. SSPL by State Bank of India. 7. 25.08.2009 The appellant issued notice under Section 13(2) of SARFAESI Act, 2002 to Respondent no.2 M/s. SSPL to pay the dues of the Bank. The Appellant sold three of the said four immovable properties of Respondent no.2 M/s. SSPL and adjusted the said amounts so realized towards the dues of M/s. SSPL. 8. 2010 The appellant and SBI lodge complaint of cheating with CBI against M/s. SSPL. 9. 06.09.2011 The FD kept by M/s. SSPL having been exhausted, the appellant paid the last installment demanded by the builder amounting to Rs. 8,44,864/- by debiting Overdraft Account of M/s. SSPL. 10. 26.09.2011 The appellant filed O.A. No. 143/2011 before DRT, Delhi. 11. ....
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....ould not have consented that the property in question confiscated by the CBI to be released to the Appellant Bank for being sold to recover its dues before the Hon‟ble High Court and Hon‟ble High Court on merits would not have released the property in favour of the Bank. 10. On the other hand the respondent has inter-alia submitted the following: a. That, Enforcement Directorate issued Provisional Attachment Order no. 04/2017 dated 31.03.2017 for property situated at address "601, type Sovereign, 6th Floor, Sector-49, Vatika City, Gurgaon, Sohna Road, Haryana". b. That, consequent to issuing of the Provisional Attachment Order, the Original Complainant vide no. 763/2017 was filed before the Hon‟ble Adjudicating Authority for adjudication. After hearing both the parties, the Ld. Adjudicating Authority has also confirmed the Provisional Attachment Order and allowed the Original Complaint filed by Enforcement Directorate vide its order dated 02.08.2017, confirming the provisional attachment of assets worth Rs. 80,50,549.80/-. c. That, the respondent Syndicate Bank preferred an appeal against the order dated 02.08.2017. The Hon‟ble ....
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....ing effect over other existing law in the matter dealing with money laundering. • Bonafide third party has to prove its claim and in case bonafide third party proves its claim even then the attachment under PMLA would not be invalid. • If order confirming the attachment has attained the finality or if the order of confiscation has been passed or if trial of a case under Section 4 of PMLA has commenced the claim of a party with regard to legitimate interest in the property will be inquired into and adjudicated upon only by the Special Court. h. In the instant case, as per Agreement to Mortgage dated 29.03.2007 between appellant bank and M/s. Surhit Services Pvt. Ltd., the property in dispute was actually never mortgaged to the appellant bank. The extract of the agreement in this regard is as below: "The First party shall mortgage the said property in favour of the Bank immediately after the execution of the sale deed in their favour by M/s Vatika Greenfields Projects Pvt. Ltd." Further, from Tripartite Agreement which was signed between Appellant Bank, Builder and M/s. Surhit Services Pvt. Ltd. dated 18.07.2007 the aforesaid fact ....
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....ent. (Annnexure A-2) v. The balance consideration amount of the property in question of Rs. 33,87,640/- was to be paid by the Respondent no.2 M/s. SSPL as and when demanded by M/s. VLBL. (Annnexure A-2) vi. M/s. SSPL agrees to create mortgage of the flat in question as soon as the sale deed is executed. (Annnexure A-2) vii. M/s. SSPL and M/s. VLBL agreed that the appellant bank will have unrestricted right of entry and taking possession of the flat in question. (Annnexure A-2) viii. M/s. SSPL agreed that in case of any default in payment of loan amount to appellant, the M/s. VLBL will accept the new person brought by the appellant as the purchaser and execute the document in their favour accordingly. (Annnexure A-2) ix. The said property is also security to Rs. 13 Crores sanctioned by SBI to the Respondent no.2 M/s.SSPL. x. On 17.09.2008, the appellant bank in 5 installments remitted a sum of Rs. 28,95,698/- between 03.05.2007 to 17.09.2008 toward the property in question. xi. On 30.09.2008, the loan of Rs. 13 Crores was sanctioned to M/s. SSPL by State Bank of India. xii. On 25.08.2009, the appellant issued no....
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....uffered a loss as above therefore, it may be allowed to recover its loss incurred due to act of M/s. Surhit Services Pvt. Ltd. after proper valuation of the flat/property as on date." (Annexure A-3) 14. Annexure A-6 is the copy of the order passed by the Hon‟ble High Court of Delhi in CRL. REV.P. 299/2013 & Crl. M.A. 8119/2013 filed by the Appellant against the order dated 04.03.2013 passed by the Ld. Special Judge, in complaint case no. 10/2011 filed by CBI. On the said Criminal Revision Petition the Hon‟ble High Court of Delhi has passed the following order: "Counsel for the petitioner has put in appearance. Parties have addressed arguments. Submission of the learned counsel for the petitioner is that the order dated 04.3.2013 passed in Complaint Case No.10 of 2011 is patently illegal and in gross violation of Section 13(4) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Record shows that M/s Surhit Services Pvt. Ltd. had mortgaged its property i.e. Flat No.2/601, Type: Sovereign Block No.II, 6th Floor, Vatika City, Sohna Road, Gurgaon on 29.3.2007 with the pet....
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....ding loan could not be made due to the present attachment proceedings. It is contended by the learned counsel for the appellant bank that the total outstanding amount is Rs. 28.27 Crores and there will be deficiency even after disposal of the property in question. The learned counsel for the appellant submits that the appellant bank is a victim and not an offender, the public money is stuck due to the proceedings under PMLA. 16. The appellant is a third party bonafide claimant of the property. The security interest has been created on the property in question and there are legitimate banking transactions. There is no allegation on the part of Enforcement Directorate that the appellant has not exercised due diligence in sanctioning loan. Such facilities were extended after conducting due diligence and the necessary checks and balances. 17. The security interest has been created in the year on 29.03.2007, whereas the ECIR has been registered much later and the Provisional Attachment Order has been passed on 24.03.2017. Much prior to the year 2017, Section 13(2) notice under SARFAESI Act, 2002 was issued on 25.08.2009 and the DRT proceedings have been finally concluded in the....
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....;ble High Court of Delhi in the Axis Bank Decision has held that the claim of a party asserting a bonafide and legitimate claim would be inquired into by the Special Court only if the order confirming the attachment "has attained finality". An order cannot be said to have attained finality until and unless all the remedies under the Act have been exhausted. The Tribunal has only to examine the impugned order and is empowered under Section 26 of the Act as to whether the attachment order has been passed as per law or not. This Tribunal has the exclusive jurisdiction on this issue. The Appellant Bank is otherwise if so may approach the Special Court for release of property even during the pendency of appeal or after allowing the appeal. The validity of the confirmation of attachment order is only to be considered by this Tribunal. 22. The plea of the Respondent that the submission of the Appellant of possessing a legitimate and bonafide claim as a third party to the property cannot be tackled at the stage of confirmation of the PAO and that the rights of the Appellate will be dealt with by the Special Court at the stage of Section 8(8) of the Act in incorrect. The said argument of....
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....tioned, then said property can be attached even in lieu of value thereof if the borrowers has concealed or is concealing the proceeds of crime, but under those circumstances, there must be material or prima facie evidence on record before passing the provisional attachment orders. 28. This order is being passed in relation to secured property in favour of bank which is not purchased from proceeds of crime. The same was purchased and secured with the bank prior to the of crime period. 29. SARFAESI Act, 2002 measure under Section 13(2) was initiated in the year 2009 and Bank‟s OA for recovery of dues under RDB, Act was filed in the year 2014 and DRT order dated 15.10.2015 restraining the Borrowers and Guarantors to deal with the secured property is much prior to the passing of the PAO order 24.03.2017 by the ED. 30. The appellant is always at liberty to approach the Special Court to initiate the proceeding for disposal of secured property, if so desired, who is agreeable to deposit the excess amount if such situation will arise. Counsel for appellants after taking the instructions from his clients stated that his clients are duty bound to deposit the excess amount w....
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....gainst the order of this Tribunal. Accordingly, under the legislative and statutory scheme of the Act, unless a party has exhausted its remedies in appeal right up to the Hon‟ble High Court, an order confirming the attachment cannot be said to have attained finality. This tribunal is only concerned with the validity of the impugned order and provisional attachment order which has been confirmed. 36. Therefore, this Tribunal possesses the requisite jurisdiction in terms with the Act as the court of first appeal, to adjudicate upon the pleas of the Appellant and determine the bonafide and legitimacy of its claims as well as the legality of the Provisional Attachment Order. Upon an argument being raised by the Enforcement Directorate that claims of third parties are to be solely adjudicated by the Special Court before whom trial is pending, the Hon‟ble High Court of Delhi in the Axis Bank Decision has held that the claim of a party asserting a bonafide and legitimate claim would be inquired into by the Special Court only if the order confirming the attachment "has attained finality". An order cannot be said to have attained finality until and unless all the remedies und....