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Judgment
,,,,
FPA-PMLA-973/AHD/2015,,,,
The appellant has filed the above-referred Appeal under Section 26 of the Prevention of Money Laundering Act, 2002 (hereinafter referred to as",,,,
“PML Actâ€) against the Order dated 25.05.2015 (hereinafter referred to as “Impugned Orderâ€) in O.C. No. 403/2015 passed by the,,,,
Adjudicating Authority, whereby the Adjudicating Authority had confirmed the Provisional Attachment Order dated 26.12.2014 with respect to the",,,,
immovable properties.,,,,
Many FIRs were registered on the written-complaint by the banks.,,,,
The main contents of the said complaints are as follows:-,,,,
(i) RCBSM2011E0007 dated 13.10.2011 was registered by CBI, BS&FC, Mumbai under Sections 420, 467, 468 and 471 read with 120(B) of IPC on",,,,
the written complaint of Shri U Balkrishna Bhat, C.G.M. & Zonal Head, Corporation Bank, Greater Mumbai. The allegation in the complaint discloses",,,,
that S/Shri Bharat kumar M Kapadia, Chairman, Rajesh M Kapadia, Managing Director and others of Biotor Industries Limited, Vadodara entered",,,,
into a criminal conspiracy to commit the offence of cheating, forgery of valuable securities, forgery for the purpose of cheating and using forged",,,,
documents as genuine etc. against Corporation Bank and to cause pecuniary advantage to M/s Biotor Industries Limited in the matter of availing post-,,,,
harvest short term loans on the basis of forged and fabricated documents without any genuine trade transactions/genuine business. The accused,,,,
persons cheated the Corporation Bank thereby causing wrongful loss to the bank to the tune of Rs.50 crores.,,,,
(ii) RCBSM2011E0006 dated 17.06.2011 was registered by CBI, BS&FC, Mumbai under Sections 420, 467, 468, 471, 477-A read with 120 (B) of",,,,
IPC on the written complaint of Shri Rajnikant Diwan, D.G.M., Oriental Bank of Commerce, Ahmedabad. The allegations in the complaint discloses",,,,
that S/Shri Bharat Kumar M Kapadia, Chairman, Rajesh M Kapadia, Managing Director and others of M/s Biotor Industries Limited, Vadodara",,,,
alongwith 36 Village Level Aggregators (VLAs) entered into criminal conspiracy to commit the offence of cheating, forgery of valuable securities,",,,,
forgery for cheating and using false documents as genuine, falsification of accounts etc. against the Oriental Bank of Commerce and to cause undue",,,,
pecuniary advantage to M/s Biotor Industries Limited, Vadodara in the matter of availing post-harvest short term loans on the basis of forged and",,,,
fabricated documents without any genuine trade transactions/genuine business. The accused persons cheated the Oriental Bank of Commerce thereby,,,,
causing wrongful loss to the bank to the tune of Rs.100 crores (approx.).,,,,
(iii) RCBSM2011E0001 dated 05.01.2011 was registered by CBI, BS&FC, Mumbai under Sections 420, 467, 468, 471 read with 120 (B) of IPC on",,,,
the written complaint of Shri S. Bharatkumar, D.G.M., Bank of Maharashtra, Ahmedabad region. The allegations in the complaint discloses that S/Shri",,,,
Bharatkumar M. Kapadia, Chairman, Rajesh M Kapadia, Managing Director and others of M/s Biotor Industries Limited, Vadodara along with",,,,
Village Level Aggregators (VLAs) entered into criminal conspiracy to commit the offence of cheating, forgery of valuable securities, forgery for",,,,
cheating and using false documents as genuine etc. against the Bank of Maharashtra and to cause pecuniary advantage to M/s Biotor Industries,,,,
Limited, Vadodara in the matter of availing post-harvest short term loans on the basis of forged and fabricated documents without any genuine trade",,,,
transactions/genuine business. The accused persons cheated the Bank of Maharashtra in turn causing wrongful loss to the bank to the tune of,,,,
Rs.55.40 crores.,,,,
(iv) RCBSM2011E0003 dated 31.01.2011 was registered by CBI, BS&FC, Mumbai under Sections 420, 467, 468, 471, 477-A read with 120(B) of",,,,
IPC on the written complaint of Shri A.R. Shiravadekar, D.G.M., Agri Business Group, IDBI, Mumbai. The allegations in the complaint discloses that",,,,
S/Shri Bharatkumar M. Kapadia, Chairman, Rajesh M. Kapadia, Managing Director and others of M/s Biotor Industries Limited, Vadodara along with",,,,
Village Level Aggregators (VLAs) entered into criminal conspiracy to commit the offence of cheating, forgery of valuable securities, forgery for",,,,
cheating and using false documents as genuine etc. against IDBI Bank and to cause pecuniary advantage to M/s Biotor Industries Limited, Vadodara",,,,
in the matter of availing short term loans on the basis of forged and fabricated documents without any genuine trade transactions/genuine business.,,,,
Due to the aforesaid acts of accused persons, IDBI Bank suffered a loss of Rs.121.80 crores.",,,,
In the subject FIR, Charge Sheet No.13/2010 dated 01.07.2010, 23/2010 dated 22.12.2010 and Charge Sheet No.11/2011 dated 01.04.2011 was",,,,
filed by DCB police Station, Vadodara City before the designated Court under Sections 409, 420, 465, 467, 468, 471, 474, 477-A and 120(B) of IPC.",,,,
On the basis of FIR and charge-sheet ECIR was registered.,,,,
The main reasons given to the alleged allegations against the appellants, as mentioned while passing the impugned order are:-",,,,
(i) The accused charged in the subject charge sheets hatched a conspiracy to mis-appropriate the amount from M/s Biotor Industries Limited,,,,
(hereinafter referred to as “BIL) and different banks during the year 2007 to 2009, by preparing false bills, false invoices and through bogus",,,,
vehicles Nos. made sale â€" purchase of the goods viz. Castor Seeds and Castor Oil and prepared false documents and made payments to different,,,,
companies/firms, which had not sent the goods. On the basis of the false bills/invoices and by showing quantity of Castor Seeds receipts in the godown",,,,
though such quantity was not in existence and preparing the documents showing that such quantity is in existence and the quantity shown being more,,,,
than the quantity actually in existence and leasing the raw material and finished goods to different Banks and against the said raw material/finished,,,,
goods obtained finances in different manner. In this way, the charged persons hatched the conspiracy in connivance with each other by making false",,,,
documents and submitting them as a genuine to the banks and thereby misappropriated Rs.2,21,47,00,000/- or more and in this way committed the",,,,
offence;,,,,
(ii) That some of the accused persons working in the accounts department of M/s Biotor Industries Limited were authorized to sign cheques up to,,,,
Rs.1 crore as authorized signatory by the company and by misusing the authority, on the basis of the goods which was never received in the company,",,,,
made payments through cheques to different merchants which enabled M/s BIL to get farmer funding from the banks;,,,,
(iii) That M/s Biotor Industries Ltd. (M/s BIL) had obtained short term loan (Farmers Funding) in the name of bogus farmers from various banks viz.,,,,
Rs.100 crores from Oriental Bank of Commerce (OBC Bank), Ashram Road Branch, Ahmedabad â€" 380009, which was credited in the M/s",,,,
BILâ€s Management and Collection Agent Account (M&C account). Various accounts in the name of actual and bogus Village Level Aggregators,,,,
(herein after referred as “VLAâ€) were opened with the different banks viz. 10 bogus accounts of VLAs with OBC Bank in which some of the,,,,
persons have signed as identifier and loan account was transferred in these VLAs accounts from M & C A/c. Thus amount payable to the actual,,,,
farmers were credited in the bogus accounts opened by VLAâ€s thereby huge amount of misappropriation was carried out in connivance with other,,,,
accused who played an active role and thus have committed a serious offence.,,,,
The main ground on which the Enforcement Directorate has passed the provisional attachment order is on the basis of complaints filed by the banks,,,,
making allegation against the company for availment of Agri Loans by forged and fabricated documents, which were disbursed to the appellant no. 1",,,,
Bank,Sanction Date,Date of Disbursement,"Alleged period of
Conspiracy",
Corporation
Bank",16.05.2009,28.05.2009,2009,
Oriental Bank
of Commerce",22.03.2009,"27.03.2009
28.07.2009",2009,
Bank of
Maharasthra",04.08.2009,19.08.2009,2009,
IDBI Bank,07.02.2009,13.02.2009,2009,
Plot No. 14 and 14-A,
Petrochemical Complex (A &
B), Village Ranoli, District
Vadodara",2006,"08/09/2009
30/09/2009",25.10.2010,"05/11/2011
15/11/2011
Industrial Land and
Construction Property at
Block No. 558 Part, 560 Part,
561 Part, 562/A, 562/B, 563,
564, 566, 567 Part, 578, 580,
581 Admeasuring in all
1,42,523 Sq. Mtrs. And
Construction thereon
admeasuring 15,512 Sq. Mtrs.
Situated at Itola- Padra Road,
District- Vadodara",2005,"08/09/2009
30/09/2009",25.10.2010,"05/11/2011
15/11/2011
Ekalbara Block No. 495-P
and R.S. No. 369/1, Village
Ekalbara, Taluka-Padra,
District Vadodara",2006,"23.11.2006
24.07.2007
07.07.2009",25.10.2010,"05.11.2011
15.11.2011
Hill Park, Flat No. 4, 3rd Floor,
Bldg. No. 1, Alexandar
Graham Bell Road, Malabar
Hill, Mumbai",2004,09.08.2004,25.10.2010,09.08.2012
Makarpura Plot No. 117,
Village Vadsar, Makarpura
Industrial Estate, GIDC,
Vadodara",2005,29.12.2009,04.11.2010,"19/01/2011
16/11/2011
(Physical
possession was
taken by Bank)
Lenders (Consortium),Date of Mortgage Created,Amount Secured (in crores),,
State Bank of India (Lead
Bank)",23.11.2016,41.66,,
HDFC Bank,24.07.2007,12.00,,
Bank of India (2nd Charge
Holder)",07.07.2009,40.00,,
banks are innocent parties. They were legally entitled to inform the Adjudicating Authority about their innocence and they rightly did so but,,,,
their contention was rejected as appeared from the impugned order.â€,,,,
It is not denied by the respondent that before passing the provisional attachment order, ED was aware that the properties stood mortgaged with",,,,
the bank. The statement u/s 50 of the Act was recorded before passing the order of provisional attachment. No notice was given to the banks,,,,
concerned who are mortgagee of the property who becomes secured creditors as per agreement and having the charge of the properties. The said,,,,
banks are having interest in the properties.,,,,
Section 8(1) and 8(2) reads as under:-,,,,
Section 8 - Adjudication:- (1) On receipt of a complaint under sub-section (5) of section 5, or applications made under sub-section (4) of",,,,
section 17 or under sub-section (10) of section 18, if the Adjudicating 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",,,,
under sub-section (1) of section 5, or, seized under section 17 or section 18, the evidence on which he relies and other relevant information",,,,
and particulars, and to show cause why all or any of such properties should not be declared to be the properties involved in money-",,,,
laundering and confiscated by the Central Government:,,,,
Provided that where a notice under this sub-section specifies any property as being held by a person on behalf of any other person, a copy",,,,
of such notice shall also be served upon such other person:,,,,
Provided further that where such property is held jointly by more than one person, such notice shall be served to all persons holding such",,,,
property.,,,,
(2) The Adjudicating Authority shall, afterâ€"",,,,
(a) considering the reply, if any, to the notice issued under sub- section (1);",,,,
(b) hearing the aggrieved person and the Director or any other officer authorised by him in this behalf, and",,,,
(c) taking into account all relevant materials placed on record before him,",,,,
by an order, record a finding whether all or any of the properties referred to in the notice issued under sub-section (1) are involved in",,,,
money-laundering:,,,,
Provided that if the property is claimed by a person, other than a person to whom the notice had been issued, such person shall also be",,,,
given an opportunity of being heard to prove that the property is not involved in money-laundering.,,,,
The proviso of Section 8 (1) is clear that where any property held by a person on behalf of any other person, a copy of such notice shall also be",,,,
served.,,,,
Counsel for the respondent submits that no such notice was not required. We reject his argument, firstly on the reasons that ED and Adjudicating",,,,
Authority were fully aware before passing of their respective orders that the attached properties were mortgaged with the banks, despite of that no",,,,
notice under the mandatory provision was issued to the Banks who are also an aggrieved party. Secondly, the proviso of (2) 8 mandates that if any",,,,
notice is received and claim raised by said person other than a person to whom the notice had been issued such person (banks in the above matter),,,,
shall also be given an opportunity of being heard to prove that the property is not involved in money laundering. The argument of the counsel for the,,,,
respondent are without any force that no notice was required.,,,,
Admittedly, no notice was issued nor any opportunity was granted to the banks of being heard. Thus, the impugned order is liable to be set-aside.",,,,
Had any notice been issued to all the banks and opportunity was granted for hearing, the banks could have made their claim and argued that the",,,,
properties in question were not involved in the money laundering.,,,,
It is evident that ED as well as AD failed to considered the reply filed by the appellant contrary to 8(2) of the Act. The issue of mortgage of,,,,
properties was already available with ED while recording the statement of appellant under section 50 of the Act. Even the Adjudicating Authority,,,,
failed to considered the reply filed by the appellant where the full details were disclosed. However, both ED and Adjudicating Authority chose not to",,,,
discuss the main issue.,,,,
The impugned order is completely silent and has been passed without even considering the documents and explanation provided by the appellants,,,,
by way of reply and compilation as filed before the Adjudicating Authority.,,,,
Prima facie, the provisional attachment order as well as the impugned order is an arbitrary order passed by the Adjudicating Authority whereby",,,,
five (5) properties of the appellants have been attached, without any cogent reason or any basis.",,,,
It is a matter of fact that on default of repayment by the appellant company, the Banks had already on 25.10.2010 called upon appellant no. 1",,,,
company to repay the due amount, which the appellant no. 1 company failed to pay and thereby the banks became entitled to enforce the security",,,,
interest i.e. the immovable properties of appellant company in terms of Section 13(4) of SARFAESI Act. The banks have already taken the necessary,,,,
steps.,,,,
Counsel for the respondent gave the suggestion that this appellate tribunal may implead the all banks as parties and their concerns may be,,,,
considered. We are of the view that the said suggestion of the respondent cannot be accepted as there were no pleading of any nature either before,,,,
Adjudicating Authority or before us, as admittedly, neither any notice was issued nor any opportunity of hearing was granted to the banks.",,,,
In view of the above, the appeal is allowed the impugned order is set aside. The matter is remanded back to the Adjudicating Authority for re-",,,,
hearing after issuing the notice to all banks and shall consider and discuss the reply filed by the appellant and to be filed by the banks before passing,,,,
the order on merit. Since, it is an important matter, the final order be passed within 180 days from today.",,,,
It is clarified that as far as the merit of the case is concerned, we have not expressed any opinion. The fresh final order be passed by the",,,,
Adjudicating Authority after discussing all legal issues raised by the parties.,,,,
No costs.,,,,