TaxTMI 
TaxTMI 
2020 (1) TMI 900
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....ing Crl. A. 143/2018 in Deputy Director Directorate of Enforcement Delhi vs. Axis Bank and Ors. And other batch matters, the present case be remanded back to Appellate Tribunal for PMLA and the tribunal shall restore the appeal and after hearing both the parties, decide the same within six weeks from the receipt of this order. The appeal is disposed of, accordingly. Pending application stands disposed of." 2. In compliance to the aforesaid order of the Hon'ble Delhi High Court the appeals are restored to file by fixing 28.11.2019 on which date both the parties were present and they were allowed to file written synopsis. Since, the matter is remanded to the tribunal and since the appeal is restored, the present appeals are to be decided in the light of orders passed in Crl. Appeal No. 143/2018 & Crl. M.A. 2262/2018 in the matter of Deputy Director, Directorate of Enforcement, Delhi vs. Axis Bank and other batch matters. 3. In view of the above, the appeals are heard afresh. Since, the properties are involved in the present appeals are same and the pleadings are also same, so all the appeals are taken up for hearing together and the present common order is pas....
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....abroad and towards meeting training expenses of their personnel. During the same year the Cash Credit Limit was enhanced from Rs. 12.60 Crore to Rs. 16.20 Crore. LC/LG limit from Rs. 3.60 Crore to Rs. 4.80 Crore. In 2006, the Cash Credit Limit was further enhanced from Rs. 16.20 Crore to Rs. 24.50 Crore and LC/LG limits from Rs. 4.80 Crore to Rs. 10.00 Crore. iii. On 01.02.2007, a fresh Term Loan of Rs. 190.52 Crore was sanctioned by Consortium Members including Rs. 45.00 Crore of IOB for setting up another studio at Mumbai and a studio at Chennai. The balance loan amount was sanctioned by other member Banks. iv. On 21.08.2009, another Term Loan of Rs. 275.00 Crore was sanctioned by Consortium banks including Rs. 60.00 Crore by IOB for refurbishment of Studio at NOIDA and the expansion of Studio at Mumbai. The balance loan amount was sanctioned by other member Banks. v. Apart from above in 2010, Cash Credit Limit was also enhanced to Rs. 63.00 Crore, LC limit of Rs. 8.00 Crore and LG limit of Rs. 2.00 Core by IOB. Besides, onetime LG limit of Rs. 8.75 Crore was also sanctioned for advance payment to be received by SPV formed for post-production job abroad....
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....83 acres in Old Sr. No. 32, 33/2, and 33/3, new serial no. 33/2B, 33/2C1 and 32/2C$ of Nandmbakkam Village, Tambaram Taluk, Kanchipura District at Mount Poonamallee Road, Chennai 7.16 6 Property of Shri P.K. Tewari, Smt. Meena Tewari, Shri Anand Tewari and Shri Abhishek Tewari situated at 6, Southern Avenue, Maharani Bagh, New Delhi 12.50 Total 111.96 The said provisional attachment order was confirmed by the Adjudicating Authority on 22nd September, 2016 which has been challenged by the banks. 8. M/s. Century Communications Ltd. filed appeal no. FPA-PMLA- 1528/DLI/2016 which was decided alongwith other bank matters on 28.06.2018. The said order of 28.06.2018 was challenged by the Enforcement Directorate vide Criminal Appeal No. 1090 of 2018 before the Hon'ble High Court of Delhi. In the said criminal appeal, the Enforcement Directorate made all the Appellant Banks as respondents whereas, M/s. Century Communications Ltd. was not made a party nor M/s. Century Communication Ltd. preferred any appeal against this Tribunal's order dated 28.06.2018. 9. The learned counsel for the Appellants argued the matter and has referred to Page No(s). 44 &....
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....ppellants to the Borrower/Accused Company. (iii) Though there is an allegation of availing some cash credit loans against fake documents in the name of non-existent firms but it could not be prima facie proved by the Respondent/ED that the properties mortgaged with the Appellant Banks are from tainted money/acquired out of proceeds of crime. (iv) It is not a situation that the money was lent for some other purpose and then the said funds have been diverted to purchase these attached properties. The credit facility was given for setting up offices/expansion of business by purchasing properties, setting up offices/studios. (v) The Enforcement Directorate/Respondent no.1 in its PAO dated 29.03.2016 has given the charts of flow of money which has been used to purchase properties from Serial No. 2 to Serial no. 5 and the same has been duly noted by the Adjudicating Authority in its confirmation order dated 22.09.2016 from page no. 37 to page no. 43 and the same are as follows: CENTURY COMMUNICATION LTD. Name of Property (ii) Amount of Property/ Registration Date Mode of Payment Amount Property of Century Communication Ltd. 8th floor, Lotus....
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....; 08.08.2007 By Ch. No. 458792 dated 04.08.2007 (DD No. 534587726) issued to JT Sub Registrar Andheri - 1, from CCL Non Lien A/c No. 01150200004910 for Registration charges. 30,000.00 08.08.2007 By Ch. No. 458793 dated 04.08.2007 (DD No. 534587933) issued to JT Sub Registrar Andheri - 1, from CCL, NON LIEN A/c No. 0115020000491 0 die Registration charges. 5,000.00 08.08.2007 By Ch. No. 458791 dated 04.08.2007 (DD No. 534587919) issued to ICICI Bank A/c of Stamp Duty from CCL, NON LIEN A/c No. 01150200004910 die Registration charges 25,010.00 Amount Received Details Total 21,077,630.00 By Ch. No. 619090 dated 03.07.2007 Received from Footcandles films Pvt. Ltd. to CCL OBC Bank A/c 1866 (CCLPIXION MUMBAI) on 05.07.2007 500,000.00 By Ch. No. 921220 dated 21.07.2007, Received from Via Earth Pvt. Ld. To CCL-OBC Bank A/c No. 1866 (ICCL-Pixion Mumbai on 23.07.2007 10,000,000.00 CENTURY COMMUNICATION LTD. Name of Property (iv) Amount of Property / Registration Date Mode of Payment Amount Property of Century Communication Lt....
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....ila Jain from CCL OBC Bank A/c 1866 (Pixion Mumbai) 1,37,00,000.00 29.11.2006 By Cheque No. 695170 issued to Sushila Kumar Jain from CCL OBC Bank A/c 1866 (Pixion Mumbai) 1,38,00,000.00 Amount Received Details Total: 6,39,45,000.00 By Cheque 577490 dated 20.10.2006 issued from CCL OBC CC Bank A/c 02174010000220 to OBC Bank A/c No. 1866 (Pixion Mumbai in Favour of S.K. Jain 5,00,000.00 By Cheque 577504 dated 30.10.2006 issued from CCL OBC Bank A/c No. 1866 (Pixion Mumbai) in favour of Sajal Kr. Jain, Shree Lekha Jain, Sushila Jain & Sushil Kr. Jain 90,00,000.00 By Cheque 493683, 493684, 493685 & 493686 dated 23.11.2006 issued from CCL - IOB Bank A/c - 1530 to OBC Bank A/c No. 1866 for (Rs. 1400000 + 30000 +1645000 + 30000 =3105000/- (Pixion Mumbai) in Favour of Sajal Kr. Jain & Sushila Jain and Stamp & Duty charges. 31,05,000.00 Cheque No. 442050 dated 27.11.2006 issued from Pearl Vision Pvt. Ltd. CITI Bank A/c No. 0802742223 to OBC Bank A/c No. 1866 for Rs. 17244877/-(Pixion Mumbai) 1,72,44,877.00 Cheque No. 442048 dated 27.11.2006 issued from Pearl Vision Pvt. Ltd. CITI Bank A/c No. 0802742223 ....
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.... on the enforcement officers for depriving a person (may be also a debtor) of the proceeds of crime. A view to the contrary, if taken, would defeat the objective of PMLA by opening an escape route. After all, a person indulging in money-laundering cannot be permitted to avail of the proceeds of crime to get a discharge for his civil liability towards his creditors for the simple reason such assets are not lawfully his to claim. 147. To sum up on the issue, the objective of the legislation in PMLA being distinct from the purposes of the three other enactments viz. RDBA, SARFAESI Act and Insolvency Code, the latter cannot prevail over the former. There is no inconsistency. The purpose, the text and context are different. This court thus rejects the argument of prevalence of the said laws over PMLA. THE RIGHTS OF THIRD PARTY ACTING BONA FIDE 148. In view of the conclusions reached as above, rejecting the argument of prevalence of RDBA, SARFAESI Act and Insolvency Code over PMLA, the said laws (or similar other laws, some referred to above) must co-exist, each to be construed and enforced in harmony, without one being in derogation of the other, with regard t....
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....iscation) have already been noticed at length with reference to the statutory provisions. To recapitulate, and by way of illustration, reference may be made to the opportunity afforded by law (Section 8) to a person claiming "a legitimate interest" to approach the adjudicating authority and the appellate tribunal, as indeed the court, to prove that he had "acted in good faith", taking "all reasonable precautions", himself not being involved in money-laundering, to seek its "release" or "restoration". In this context, however, as also earlier noted, the presumptions that can be drawn in terms of Sections 23 and 24 of PMLA are to be borne in mind, the burden of proving facts contrary to the case of money-laundering being on the person claiming to have acted bonafide. 159. As noted earlier, there are three parts of the definition of the expression "proceeds of crime", the first clearly referring to a property respecting which there is material to show the same to have been "derived or obtained", directly or indirectly, by a person "as a result of criminal activity (of specified nature)". In case such property is held by the person who is "charged with the offence of money-lau....
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.... 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 under PMLA would remain valid and operative, even though the charge or encumbrance of such third party subsists but the State action would be restricted to such part of the value of the prope....
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.... 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 as to confer a general right to seek release of such property as last mentioned above from attachment even in cases where the encumbrance is created or interest acquired at a time around or ....
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....ative 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, SARFAESI Act and Insolvency Code (or such other laws) must co-exist, each to be construed and enforced in harmony, without one being in derogation of the other with regard to the assets respectin....
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....d 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 as is in excess of the claim of the said third party. (xv). If the bonafide third party claimant (as aforesaid) is a "secured creditor", pursuing enforcement of "security interest" in the prop....
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....ich 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 value of the secured interest and chronology of events leading to attachment would be necessary. 174. It will be appropriate that such further scrutiny as is necessary on the touchstone of above principl....
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....High Court of Delhi in the recent decision of "The Deputy Director, Directorate of Enforcement, Delhi Vs. Axis Bank & Ors.," reported in 2019 SCC Online Del 7854 (hereinafter referred to as the "Axis Bank Decision") has rightly held that the interest of a third party in the property of an accused, acquired prior to the commission of the proscribed offence cannot be defeated or frustrated by attachment of such property under Section 8 of the Act. 19. The Hon'ble Delhi High Court further recognized the right of such third party to proceed with enforcement of its interest in accordance with law such that while the order of attachment under the Act would not be rendered irrelevant, yet it would take a backseat such that the State action would be restricted to such part of the value of the property as exceeds the claim of the third party, if any. (Reference Paragraph No. 162-164 of the Axis Bank Decision) speak for itself. In terms with the Axis Bank Decision, the claim of the Respondent to the properties would be restricted to such part of the aggregate value of the properties attached as exceeds the claim of the Appellants. 20. In terms with the statutory safeguards incorpora....
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....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 order. 24. This order is being passed in relation to secured properties in favour of banks which are not purchased from proceeds of crime. 25. The appellants are always at liberty to approach the Special Court to initiate the proceedings for disposal of secured properties, if so desired, the appellants to deposit the excess amount if such situation will arise. 26. The Appellants have nothing to do and have no connection with the allegation of crime committed by the borrowers, so far as money transferred from bank accounts to acquire the properties in question directly. The secured properties are admittedly not derived from criminal activities or proceeds of crime. The scope of the PMLA is to punish the accused person and not to punish the innocent people who are not involved in the crime within the meaning of Section 2 (u) read with Section 3 of the Act. 27. There is no nexus whatsoever, between the alleged crime and the appellants who have secured....
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....the said fact which has been stated by the Appellants in their appeals has not been disputed by the Respondent no.1. 32. The properties of the Appellant Banks cannot be attached or confiscated when there is no illegality or unlawfulness in the title of the Appellant Banks and there is no charge of money laundering against the Banks. During the course of arguments, the learned counsel for the respondent no.1 submitted that some of the bank officials were involved and they are being prosecuted by the CBI. But there is no allegation against the Banks as institutions. The Banks are victims. 33. The mortgage of properties is the transfer under the Transfer of Property Act as there is no dispute as regards the origin of funds or the title of the properties. As far as the Appellant Banks are concerned, the Banks have to recover its outstanding dues by taking over the possession of the mortgaged properties in case the concerned borrowers are not able to pay back the credit facilities availed by them and by way of the SARFAESI provisions these properties are being taken in possession by the Appellant Banks so that recovery can be made. 34. From the discussion made above, I am of th....
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....rder dt. 22.09.2016 passed by the Adjudicating Authority, PMLA, confirming the Provisional Attachment Order is liable to be quashed and set aside. 39. The Hon'ble High Court of Delhi, vide order dated 06.12.2019 passed in Crl.A.1090/2018 in the matter of Directorate of Enforcement Versus Indian Overseas Bank & Ors. has clarified the "status quo" order of Hon'ble Supreme Court passed in the appeal against the order dated 02.04.2019 passed in the matter of Deputy Director, Directorate of Enforcement Versus Axis Bank & batch matters in CRL.A. No.143/2018. The order dated 06.12.2019 of Hon'ble High Court of Delhi is reproduced below: " ORDER 06.12.2019 Crl.M.A.42109/2019 (Exemption) Allowed, subject to all just exceptions. This application is, accordingly, disposed of. Crl.M.A. 42108/2019 Vide the present application, the applicant/respondents seek clarification of the order dated 01.11.2019 as to whether the Tribunal shall proceed with the present matter. Vide order dated 01.11.2019, this court remanded the matter to the Appellate Tribunal for PMLA and directed the said Tribunal to restore the appeal and after hearing both....