AI Structured Summary
Not yet generated for this judgment
Judgment
S. No.,Type of facility,"Limit Sanctioned
(Rs. In Crores)
1.,"Export Packing Credit PCFC (Take
Over)",68.00
2.,FBP/FBN (Take Over),68.00
3.,"Import LC (Sub limit of EPC/FBN/FBP)
(Fresh)",20.00
4.,MTL (Take Over),31.84
5.,Import LC (Take Over),18.00
6.,Bank Guarantee (Take Over),2.00
7.,"Bank Guarantee (For disputed liability with
SBI) (Fresh)",35.00
8.,Forward Contract,288.12
g) Since the account of the respondent no.2 became NPA, the Appellant Bank had initiated recovery proceedings under the SARFAESI Act and",,
issued Demand Notice under Section 13(2) of the Act, including the hypothecated goods. The Appellant Bank took possession of the charged",,
immovable properties under Section 13(4) of the Act and thereafter, the same was also put on auction and the sale notice was issued on 06.01.2014.",,
The action of the Bank was challenged by the respondent no.2 in S.A. No.39 of 2014 filed before DRT, Madurai.",,
h) One Time Settlement was also proposed by the respondent no.2 but the respondent no.2 did not remit the OTS amount as per the terms and,,
conditions. Since the OTS conditions were not fulfilled by the respondent no.2, the Appellant Bank cancelled the OTS. The Appellant Bank also filed",,
an Original Application in O.A. No.456 of 2016 against the respondent no.2 and others before the DRT, Madurai and the same is pending",,
adjudication.,,
In FIRs, it was alleged by the appellant that all illegal quarrying and using explosive substances were in contravention of Statutory obligations†by",,
the respondent No.2 and its partners.,,
On the basis of said allegations, the Enforcement case was registered for investigation under PMLA, Act. Subsequently, a Provisional Attachment",,
Order being PAO No.22 of 2016 dated 09.12.2016 was passed by the respondent no.1 herein. The copy of the Provisional Attachment Order being,,
PAO No.22 of 2016 dated 09.12.2016 is filed as ANNEXURE-2.,,
Thereafter, the Appellant Bank was served with a notice to show cause dated 06.01.2017 under section 8 of the PMLA, 2002. The Appellant Bank",,
filed its reply on 02.03.2017 in OC No.671 of 2017 and prayed that the attachment order should not be confirmed since some of the properties were,,
mortgaged with the appellant and Plant-Machinery, finished and semi-finished goods; Raw materials were hypothecated in favour of the appellant.",,
It was also stated that the outstanding dues were around Rs.196 Crores (as on 31.12.2016) and since the properties were,,
charged/mortgaged/hypothecated in favour of the Appellant as a security; the Provisional Attachment order qua such charged properties was,,
untenable in law. The respondent no.1 also filed a rejoinder dated NIL/3/2017 to the reply of the Appellant Bank. The copy of the Reply filed by the,,
Appellant on 02.03.2017 along-with documents before the Adjudicating Authority is filed as ANNEXURE-3 (COLLY).,,
The Adjudicating Authority, without appreciating the contentions urged on behalf of the Appellant, vide impugned Order dated 26.04.2017",,
confirmed the Provisional Attachment Order to the utmost detriment of the Appellant Bank herein which is a Nationalized Bank. It must be stated that,,
no plausible reason or justification has been accorded in the impugned order while rejecting the contentions of the Appellant Bank herein. The,,
impugned order was received by the Appellant Bank on 02.05.2017 and hence this appeal is being preferred within the period of prescribed limitation.,,
In the present appeal, we are only concerned as to whether provisional attachment was sustainable as per law or not and thereafter confirmation of",,
the same by passing the impugned order.,,
The following is the case of the appellant in the present appeal:,,
a) That the impugned order is bad in law for want of cogent and plausible reasoning. The contentions advanced before the Adjudicating Authority,,
have not been dealt with. While passing the impugned order, the Adjudicating Authority erred in appreciating that the Appellant Bank, as secured",,
creditor, has paramount first charge over the assets hypothecated/mortgaged to the Bank. It is submitted that the granite blocks and finished products",,
lying in the premises of the borrower are absolutely and exclusively hypothecated/charged with the Bank and the Bank as secured creditor, has first",,
preference to bring the said granite blocks and finished products, etc. for sale to recover their outstanding dues.",,
b) That the Adjudicating Authority, while passing the impugned order failed to appreciate that the Appellant Bank enters into loaning transactions in its",,
ordinary course of business and has no role in the alleged irregularities/proceeds of crime generated by the respondent no.2/its partners. Infact, the",,
Appellant has advanced credit facilities to the respondent no.2 on the basis of the Mortgage/Hypothecation and thus, such secured/ charged assets",,
cannot be brought within the purview of PMLA, 2002. If this is allowed to happen, it shall have very wide ramifications and could have adverse",,
implications. The respondent no.1 cannot have any prior claim over the secured assets mortgaged/hypothecated to the Appellant Bank, who as a",,
secured creditor is having priority right/claim to bring all the secured assets for sale. The Appellant Bank is dealing with public money and they are,,
entitled to recover their dues by the sale of the secured assets in accordance with applicable law. The State itself had accorded no objection qua the,,
mortgaged properties and as such, the impugned order has been passed in contradiction and is inconsistent with the stand taken before DRT, Madurai",,
on 06.03.2014. The Adjudicating Authority, while passing the impugned order, failed to appreciate that order of the Provisional Attachment dated",,
09.12.2016 and the consequential Show Cause Notice dated 06.01.2017 with appreciation of law and facts. In terms of Section 31-B of the Recovery,,
of Debts due to Banks and Financial Institutions Act, 1993, the Appellant Bank is empowered to realize its dues from the secured assets",,
notwithstanding any claim of the Central/State Government or any other authority under any Act.,,
c) That while passing the impugned order failed to appreciate that the Respondent no.2 owes to the Appellant Bank about Rs.196.00 crores (as on,,
31.12.2016) and the properties offered as securities need to be sold to recover the dues. If the Appellant bank is prevented from proceeding with the,,
recovery process, it will ensue irreparable hardship, financial strain and loss of public money.",,
d) The Adjudicating Authority, while passing the impugned order failed to appreciate that the Appellant Bank accepted mortgage over the lands which",,
are not quarry sites and the basis of attachment and show cause notice is on the assumption that the lands offered as mortgage are quarry sites. This,,
assumption is erroneous and as such the impugned order confirming the Provisional Attachment cannot sustain in law.,,
e) The mortgaged properties were purchased much before the disputed claim period and therefore, it is inconceivable that ill-gotten fruits have gone",,
into purchase of these properties so as to attract the provisions of PMLA.,,
f) That the provisions of PMLA,2002 have to be read in harmony with the spirit of the Recovery of Debts and Bankruptcy Act 1993 and the",,
SARFAESI Act, 2002. The provisions of PMLA, 2002 cannot be interpreted in a manner so as to take away the statutory rights of the secured",,
creditor from realizing its outstanding dues.,,
g) The Adjudicating Authority, ought to have appreciated that since the appellant bank is the Govt. of India Undertaking dealing with the public money",,
and it is enforcing the recovery under the SARFAESI and RDBF Acts and issuance of notice by the Bank u/S. 13(2) of the SARFAESI Act amounts,,
to attachment, any subsequent attachment could be made by the Ld. Adjudicating Authority only against the properties not mortgaged / hypothecated",,
to the appellant bank, otherwise, it would defeat the very purpose of the special enactments.",,
h) The Adjudicating Authority, while passing the impugned order failed to appreciate that as per Section 34 of the Recovery of Debts due to Banks",,
and Financial Institutions Act, 1993 and Section 35 of the SARFAESI Act, 2002, the said special enactments are having overriding effect,",,
notwithstanding anything inconsistent therewith in any other law for the time being in force.,,
The respondent no. 1 has defended the impugned order and has made the similar contention as raised by the Adjudicating Authority.,,
The appellant in the present appeal is not pressing any relief against the other respondents except the respondent no.1. As per appellant, they are",,
formal parties.,,
In the present appeal, their main contention is that both orders are against the well settled law and are not sustainable and the same be set-aside",,
against the appellant bank.,,
The case of the Respondent no. 1 in its pleadings is that the Tamil Nadu State Authorities through Police Department of Keelavalavu Police,,
Station, Madurai, during the year 2013, registered three FIRs in Cr No. 155/2012, 171/2012 & 175/2012 against M/s PRP Exports, M/s PRP Granites",,
and their partners on the basis of complaint received from Village Administrators, Government Agencies etc., that the partners have jointly and",,
severally conspired to illegal quarrying and removing the multi-color granite stones by trespassing into the neighbouring lands and Government,,
poromboke lands that are not covered under the licensed mining area and using explosive substances without adhering to statutory obligations and,,
safety precautions causing harm to human lives thereby liable for offence punishable under Sections 120B,447,379,420,467,468,471,304(ii), 430, 109,",,
114, 511 of Indian Penal Code, 1860 and Sec 6 r/w Sec. 3(a) and 4 (a) of the Explosive Substances Act, 1908. Subsequently, around 48 FIRs were",,
filed against M/s PRP Exports, M/s PRP Granites and its partners by various Police stations falling under the jurisdiction of the Superintendent of",,
Police, Madurai District on the basis of complaints received from General Public, Village Administrators, Revenue Officers, Government agencies,",,
etc. In the course of investigation, the police authorities have taken the expert assistance of the Revenue Department Officials, Mines & Minerals",,
Department Officials, Public Works Department, Water Resource Department, etc., to ascertain the damage caused by way of illegal mining activities",,
and the estimated loss to Government to restore the damages. The Law Enforcing Agency upon completion of the investigation filed the final reports,,
under section 173(2) of Cr.P.C, 1973 before the Honâ€ble Judicial Magistrate Courts, Melur and Usilampatti for the FIRs registered against the 6th",,
respondent and its partners.,,
13.2 On the basis of the aforesaid information /copies of documents available with this Directorate, certain offences alleged in the aforesaid three",,
FIRs were covered under the list of scheduled offences of Section 2(1) (x) and Section 2(1)(y) of the Prevention of Money Laundering Act, 2002 (",,
herein after referred to as “PMLAâ€) and prima-facie, the persons accused in the said FIRs appeared to have committed an offence of money",,
laundering under Section 3 of PMLA, an Enforcement Case Information Report (ECIR) No. CEZO/15/2013 was registered on 13.12.2013 to",,
investigate the laundering of the crime proceeds under PMLA.,,
13.3 In the meantime, Shri K. R. Ramasamy @ Traffic Ramasamy filed Writ Petition No. 16841 of 2014 before the Honâ€ble High Court of Madras",,
praying to issue a WRIT OF MANDAMUS directing the officials of the Enforcement Directorate, Chennai to conduct investigation under PMLA and",,
pass appropriate orders for taking action against the illegal mines functioning in the State under PMLA. In view of the monitoring of the investigation,,
conducted into illegal mining cases by Honâ€ble Division Bench of High Court of Madras, periodical reports were filed with respect to the progress in",,
the investigation by this Directorate.,,
13.4 As the object of the PMLA are to prevent the offence of money laundering and to identify the crime proceeds, attach and confiscate the same",,
and also prosecute the Money Laundering offenders, the persons acquainted with the affairs of the company were enquired under Section 50(2) &",,
50(3) of the PMLA. It is ascertained that M/s PRP Granites have commenced their business operations from 1995 as registered partnership firm,,
engaged in quarrying the Granites and in the export of processed dimensional granite blocks. The partners of M/s PRP Granites since 1995 were its,,
founder partner S/Shri/Smt P. Palanisamy, P. Senthil Kumar, P. Suresh Kumar and P. Selvi W/o Palanisamy. The firm obtained 100% EOU status on",,
22.10.2002 and continued their exports upto 2006-07. The total foreign exchange earnings for the period from 2001-02 to 2006-07 was equivalent to,,
Rs. 438.91 Crore. Similarly, M/s PRP Exports have commenced their business operations from 2004-05 as registered partnership firm engaged in",,
quarrying the granite and in the export of processed dimensional granite blocks, slabs, tiles, monuments and other articles of granites manufactured",,
from their factory situated at Melur Taluk, Madurai District. The partners of M/s PRP Exports during the period from 2003-04 â€" 2010-11 were Shri",,
P. Palanisamy, Smt S. Chandralekha W/o Senthil Kumar, Smt Sivaranjani W/o A Maharajan, Smt P. Selvi W/o Palanisamy. From 2010, the",,
partnership was reconstituted with S/Shri P. Palanisamy, P. Senthil Kumar, P.Suresh Kumar and A. Maharajan as Partners of M/s PRP Exports. The",,
firm obtained 100% EOU status on 12.01.2004 and continued their exports till the date of sealing of their quarries and factory premises by the District,,
Authorities. The total foreign exchange earnings of the firms during the period from 2003-04 to 2010-11 was equivalent to Rs. 2053.92 Crore. M/s,,
PRP Exports vide their letter dated 23.07.2014, stated that the purchase of all movable and immovable assets, granite mineral deposits including land",,
were duly accounted for in their books of accounts and all these assets have been acquired out of lawfully earned income. M/s PRP Exports vide their,,
letter dated 25.08.2014, submitted the copies of the bank statements of the respective bank accounts and the ledger book for having made cash",,
payments and cheque payments for the period from 2007-08 to 2010-11 towards the purchase of immovable properties in the name of M/s PRP,,
Exports and others.,,
13.5 State Bank of India, Commercial Branch, Madurai, vide their letter dated 13.05.2016, informed that the credit facilities enjoyed by M/s PRP",,
Exports and M/s PRP Granites were taken over by Indian Bank, Madurai Main Branch on 31.12.2009 and that the current account No. 10420662452",,
of M/s PRP Exports holds fixed deposits for Rs.32,57,275/- (Rupees Thirty Two lakhs fifty seven thousand and two hundred and seventy five only).",,
13.6 M/s Indian Bank, Madurai Main Branch, Madurai, vide their letter dated 17.05.2016, have, inter alia, stated that they have granted credit facilities",,
to M/s PRP Exports and have obtained certain collateral securities in the form of landed properties. It is claimed that PRP Exports is having an,,
exposure of Rs. 160 Crore and have submitted the details of the immovable properties mortgaged.,,
13.7 M/s HDFC Bank, Aminjikarai, Chennai, vide their letter dated 18.05.2016 have, inter alia, stated that based on the application received from M/s",,
PRP Exports / M/s PRP Granites the bank have issued loan to the tune of Rs.31.66 Crore in the name of M/s PRP Exports, S/Shri P. Palanisamy, as",,
co-borrower and P. Suresh Kumar as guarantor for the purpose of purchasing construction equipments and that the bank have initiated recovery,,
proceedings before the Honâ€ble Debt Recovery Tribunal, Madurai, submitting the details of the credit facilities availed by the borrowers.",,
13.8 It is alleged that District Collector of Madurai, vide his inspection report dated 19.05.2012, charged the granite mining lease holders for illegal",,
quarrying and the clandestine removal of granites thereby causing huge loss to the State exchequer. The report exposed the realities and facts on how,,
farmers and other rural people had been deprived of their livelihood and how it became possible for the granite companies to continue their operation,,
in connivance with officials of the Departments of Revenue and Geology & Mining for several years. Accordingly, the District Collector on 2nd",,
August, 2012 formed 18 fact finding teams to inquire 175 quarries in the Madurai District. In the course of their investigation, Shri P. Palanisamy of",,
M/s PRP Exports surrendered to the police. In September 2012, Vigilance Officials searched 34 places in Tamil Nadu, on consequence of filing two",,
cases against two Indian Administrative Service (IAS) officers and a group of state officials, for the irregularities in quarrying. Following the above",,
actions, mining operations of 78 quarries were suspended and 87 cases were registered by the District Police authorities.",,
13.9 The Public Works Department (PWD), Water Resource Department (WRD), Madurai District conducted survey of the water canals adjoining",,
the lease hold lands and non-lease hold areas occupied by M/s PRP Exports, M/s PRP Granites and others to ascertain the allegations leveled in the",,
Police FIRs. It is reported that M/s PRP Exports and Group companies/persons have jointly and independently entered into a conspiracy and,,
trespassed into the adjoining Periyar main canal, damaged the boundaries of the canal, discarded the granite waste around the boundaries of the canal,",,
thereby interrupted the flow of water in the canal causing hardship to the survival of cattle in the surroundings and altered the ground water level in,,
the area affecting farming in the area and affecting the human habitation of the surrounding areas and committed the offences covered under Section,,
120B, 147, 430, 434, 447 of IPC, 1860 read with Section 3(i) (ii) of Tamil Nadu Public Property (Prevention of Damage and Loss) Act, 1992.",,
(TNPPDL Act) The Assistant Engineers, PWE/WRD, Periyar Main Canal and Assistant Executive Engineer, PWE/WRD, Periyar Main Canal Sub",,
Division No-2 quantified the cost of the damage caused to the public property by M/s PRP Exports and Others to the tune of Rs. 1520.05 Lakhs.,,
13.10 Revenue and Mines Officials have conducted joint field inspection of the area covered under the quarry lease granted to M/s PRP Exports, M/s",,
PRP Granites and their partners. Based on the observation of the physical orientation of the quarry, they came to a convincing conclusion that the",,
quarry pits in the leasehold areas and non-leasehold area were merged together and formed as a single basin. As the granite quarrying operation was,,
mechanized one, it was impossible to do the quarrying operation in the adjoining non-lease areas without the knowledge /without the active support of",,
the lessee. Therefore, it has been certified that the lessee viz., M/s PRP Exports and their partners alone were having access to the area and thereby",,
indulged in illegal quarrying in the lease hold and non-leased areas.,,
13.11 The Deputy Director, (Geology and Mining), Chennai, through the evaluation report recommended the District Collector of Madurai for issuance",,
of Show Cause Notice to M/s PRP Exports, M/s PRP Granites and their partners for violations of Tamil Nadu Minor Mineral Concession Rules, 1959,",,
Mines and Minerals (Development and Regulations) Act, 1957 and Granite conservation and Development Rules, 1999, with the allegations that M/s",,
PRP Exports and others have quarried more than the permitted depth in the lease hold area, not followed the scientific and Systematic Quarrying",,
thereby caused damage to adjoining Government Parai Paramboke lands, quarried unauthorisedly in poromboke land adjoining to the lease hold land,",,
quarried in unlease hold lands without permission, quarried without leaving 50 mts safety distances as per the special conditions imposed in the G.O at",,
the time of grant of quarry lease and not maintained boundary stones properly and the quarrying operations were not carried out as per approved,,
mining plan and without ensuring the protection of environment and conservation of granite deposit. The Geology and Mines Department have stated,,
that M/s PRP Exports, M/s PRP Granites and their partners have caused huge loss to the Government Exchequer by suppressing the actual quantity",,
of granites recovered ie., the actual recovery from the quarry lease hold lands would be 90% marketable granite slabs as against the contentions of",,
M/s PRP Exports, M/s PRP Granites and their partners, that only 15% to 20% marketable granite recoverable while quarrying. It is evident from the",,
Evaluation Reports that M/s PRP Exports have obtained excess transport permit for 57259.38 M³, more than the actual quantity quarried in the",,
lease hold area, which reveals that M/s PRP Exports have cleared the illegally quarried granite using the excess transport permit obtained. The total",,
quantity of illegal quarrying of Granite Slabs/blocks by M/s PRP Exports, M/s PRP Granites and their partners has been quantified as 873743.494",,
(M³) valued at Rs. 2830.98 Crore, by the Department of Geology and Mines.",,
13.12 Law Enforcing Agency on the basis of the Evaluation Reports submitted by the Deputy Director, (Geology and Mining), O/o the Commissioner",,
of G&M, Chennai, conducted investigation into the complaints relating to the FIRs registered against M/s PRP Exports, M/s PRP Granites and their",,
partners. On completions of investigation against the FIRs, separate charged sheet / final report under Sec. 173(2) of Cr P C, 1973 has been filed",,
before the Honâ€ble Judicial Magistrate Court at Melur and Usilampatti, Tamil Nadu against the 6th respondent and others for offence of conspiracy",,
to illegally quarry granite stones from the non-lease hold Government poramboke lands adjoining the lease hold land, without the permission of the",,
Tamil Nadu Geology & Mines Department, by removing the boundary stones erected by the Revenue Department, used poclain excavator machines",,
to clean the land surface to identify the granite stones, used drilling machines to make holes to insert explosive materials to break the granite stones for",,
easy removal of the same, used crane to load it in trailers for further processing, used forged and fabricated documents to cheat the statutory",,
authorities posing the materials as such of lawful quarrying from lease hold lands and thereby committed offences liable for punishment under Section,,
120 B,447,379, 420,434,465,467,468, 471,304(ii) r/w 511,109,114 IPC of IPC, 1860 and Section 6 r/w 3(a) & 4(a) of Explosive Substances Act, 1908",,
and Section 3(i) & 4 of Tamil Nadu Public Property (Prevention of Damage and Loss) Act, 1992 r/w Sec. 109 of IPC 1860, wherein in terms of",,
Section 2(1) (x) and Section 2 (1) (y) of PMLA the following offences are defined as scheduled offence viz., Section 120B (Criminal Conspiracy),",,
420(Cheating and dishonestly inducing delivery of property), 467 (Forgery of valuable security, will etc.), 471 ( Using as genuine a forged document or",,
electronic record) of Indian Penal Code, 1860, Section 3 (Causing explosion likely to endanger life or property) and Sec. 4 (Attempt to cause",,
explosion, or for making or keeping explosives with intent to endanger life or property) under the Explosive Substances Act, 1908.",,
13.13 In view of the above, the persons accused in the charge sheet of the Madurai District Police, having committed a “scheduled offences†as",,
defined under Section 2(1) (x) and Section 2(1) (y) of PMLA in the illegal quarrying of granite slabs/blocks and trading of the same and have caused,,
wrongful loss of Rs. 2830.98 Crore ( Rupees Two Thousand Eight Hundred and thirty Crore and Ninety Eight Lakh only) to the Government,,
Exchequer and corresponding wrongful gain to themselves are subjected to further investigation under PMLA for offence of money laundering.,,
Further, by committing the said scheduled offences, Shri P. Palanisamy and other partners /accused persons subsequent to the gaining of the wrongful",,
loss in each of the said Mining Lease agreements, sold the granites in the international / domestic market in excess of the declared quantity and",,
realised the sale proceeds. The generation of pecuniary benefits by the aforesaid persons through their indulgence in the aforesaid criminal activities,,
were re-invested in acquisition of the immovable properties and mining lease licence and thereby resulting in additional accruals.,,
13.14 In order to facilitate placement and layering of the funds derived out of the aforesaid criminal activities, the income generated out of illegal",,
quarrying by M/s PRP Exports and M/s PRP Granites, initially brought into the books of account and were instantly withdrawn in cash, in huge",,
tranches and moved into the Cash Ledger books of the company maintained in different places. Such rampant high value cash withdrawals by self-,,
cheques were effected from closely managed bank accounts of M/s PRP Exports and M/s PRP Granites held with different banks. Thus the above,,
funds derived as a consequence of the aforesaid criminal activities are “proceeds of crime†as defined under Section 2(1)(u) of PMLA. The,,
aforesaid ploy orchestrated by the Partners of M/s PRP Exports and PRP Granites assume the characteristic of placement and layering of the,,
“proceeds of crime†which then apparently reserved for their ultimate integration, which are altogether nothing but the ingredients of money",,
laundering.,,
13.15 Accordingly, Shri P Palanisamy and other Partners in their endeavour to disguise the “proceeds of crime†from its actual source and to",,
project the same as untainted, have indulged in devious process and transmitted a part of the aforesaid proceeds of crime to acquire 105 immovable",,
properties on payment of Cheque directly in the name of the executors for Rs. 48,62,43,461/- and to acquire 1359 immovable properties on payment of",,
cash as accounted in the ledger account cash books at different places for Rs. 11,42,55,968/- during the period from 2006-07 to 2012-13. Thus it is",,
evident from book of accounts of M/s PRP Exports that proceeds of crime to an extent of Rs. 60 Crore (Rupees Sixty Crores only) towards,,
investment in immovable properties including lands with potential granite resource in the name of M/s PRP Exports and M/s PRP Granites. The lands,,
were ultimately quarried for granite slabs/blocks and then exported in the name of M/s PRP Exports/ M/s PRP Granites as to clearly augment the,,
accruals of benefits/earnings of M/s PRP Exports and M/s PRP Granites. In as much as the investment made in the purchase of immovable,,
properties is attributable directly to the proceeds of crime, and so the further revenue from those business/operations of M/s PRP Exports and M/s",,
PRP Granites also becomes the proceeds of crime. And, therefore, the export proceeds of M/s PRP Exports and M/s PRP Granites so derived as",,
S.No.,Type of facility,"Limit Sanctioned
(Rs. In Crores)
1.,"Export Packing Credit PCFC (Take
Over)",68.00
2.,FBP/FBN (Take Over),68.00
3.,"Import LC (Sub limit of EPC/FBN/FBP)
(Fresh)",20.00
4.,MTL (Take Over),31.84
5.,Import LC (Take Over),18.00
6.,Bank Guarantee (Take Over),2.00
7.,"Bank Guarantee (For disputed liability with
SBI) (Fresh)",35.00
8.,Forward Contract,288.12
S. No.,Type of facility,"Limit Sanctioned
(Rs. In Crores)
1.,Export Packing Credit,93.00
2.,PCFC (Sub limit of EPC),(50.00)
3.,FBP/FBN (DA 180 days),93.00
4.,"Import/Inland LC (DA 180 days) & Buyers
Credit
Import LC (Capital Goods) as Sub limit","50.00
(5.00)
5.,Bank Guarantee,5.00
6.,Forward Contract,288.12
purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016 (31 of",,
2016), in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to secured",,
creditors in payment of debt shall be subject to the provisions of that Code.,,
In Section 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 after the words ""the date of the application"",",,
and includes any liability towards debt securities which remains unpaid in full or part after notice of ninety days served upon the borrower",,
by the debenture trustee or any other authority in whose favour security interest is created for the benefit of holders of debt securities or;""",,
is added which makes the said amendment or the 1993 Act applicable to all the debts which remains unpaid.,,
Thus, it is very clear from above that the secured creditor, get a priority over the rights of Central or State Government or any other",,
Local Authority. The amendment has been introduced to facilitate the rights of the secured creditors which are being hampered by way of,,
attachments of properties, belonging to the financial institutions/secured creditors, done by/in favour of the government institutions.",,
xxxxxxxxx,,
The Supreme Court in (2010)8 Supreme Court Cases 110 (Before G.S. Singhvi and A.K. Ganguly, JJ) in the case of United Bank of",,
India V/s. Satyawati Tondon and Ors. In paras no.6, 55 & 56 has held as under:-",,
To put it differently, the DRT Act has not only brought into existence special procedural mechanism for speedy recovery of dues of banks",,
and financial institutions, but also made provision for ensuring that defaulting borrowers are not able to invoke the jurisdiction of the civil",,
courts for frustrating the proceedings initiated by the banks and other financial institutions.,,
xxxxxxxxx,,
In the present case, it is undisputed facts that the attached property were purchased much prior to the period when the facility of loan",,
sanctioned to the borrowers. The banks while rendering the facilities were boanfide parties. It is not the case of the respondent that the,,
attached properties were purchased after the loan was obtained. The mortgaged of the properties were done as bonafide purposes. None of,,
the bank is involved in the schedule offence. No PMLA proceedings are pending except the complainant bank was arrayed as Column;-11,,
at the time of framing charges. Union Bank of India has not granted sanction against its employee to proceed against him in criminal,,
complaint. There is no criminal complaint under the schedule offence and PMLA is pending against the two banks. In case of failure on the,,
part of borrowers to comply with the terms of settlement, the contempt proceedings are maintainable in the Court where the settlement was",,
recorded.,,
In view of the entire gamut of the dispute, we are of the considered opinion that the conduct of the banks are always bonafide. Both",,
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.,,
xxxxxxxxx,,
The mortgaged properties are security to the loans and cannot be subject matter of attachment particularly when the same were,,
purchased and mortgaged prior to the events of funds diversion and frauds committed by the respondents. The appellants Banks have to,,
recover huge amounts in the above loan accounts and the appellant bank being the mortgagee/transferee of the interest in the properties is,,
entitled to recover its dues with the sale of the properties. The properties stood transferred by way of mortgage to the appellant bank much,,
before the alleged criminal action.,,
The appellant banks is the rightful claimants of the said properties which are already in the possession of the appellant bank under the,,
SARFAESI Act. The Honble Supreme Court of India in the case oAf ttorney General of India and Ors. (AIR 1994 SC 2179 )while dealing,,
with the matter under conservation of foreign exchange and prevention of smuggling activities act has defined the illegally acquired,,
properties and held that such properties are earned and acquired in ways illegal and corrupt, at the cost of the people and the state, hence",,
these properties must justly go back where they belong, the state. In the present case as the money belongs to the Appellant bank it is public",,
money. The appellant bank has the right to property under the Constitution of India. The property of the appellant bank cannot be attached,,
or confiscated if there is no illegality in the title of the appellant and there is no charge of money laundering against the appellant. The,,
mortgage of property is the transfer under the transfer of property act.,,
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That the definition of proceeds of crime as per section 2(u) of the pml act comprises of the property which is derived or obtained as a,,
result of criminal activity. In the present case, all the properties have been purchased by the Respondents and have been mortgaged with the",,
Appellant Bank much prior to the date of alleged offence which shows that no proceeds of crime are involved in the obtention of these,,
properties and hence the same cannot be attached by the ED because the same would result in hampering the interest of the Appellant Bank.,,
The Ld. Adjudicating Authority has failed to understand that Appellant Banks have heavy stakes in the properties as they have lent its,,
valuable money to the borrowers. The property is mortgaged to the Appellant Bank. If tomorrow any borrower fails to repay the loan, the",,
Bank has a legal right to bring the properties to sale and recover its dues. Valuable right will be lost for the Appellant, by order of",,
attachment and eventual confiscation. As a matter of fact, the borrowers may not be interested in repaying the loan, since they are not going",,
to enjoy the property. Therefore, ultimately, the action of the ED/Respondent No. 1 would make the Appellant, a much greater victim than",,
even the accused/Respondents. Though in the present case, the borrowers have a settled their disputes with the Union Bank of India. Terms",,
of settlement have already been recorded by the Court. Those terms are binding upon the parties. On behalf of borrowers, the statement has",,
been made that they are also ready to resolve their disputes with the State Bank of India on reasonable terms. As and when these properties,,
are sold, the banks would be able to receive the public money. The banks in the present case are just victim and not accused. If the",,
attachment would continue against the mortgage property of the banks in this matter, the economy of the country would suffer. The banks in",,
the present case has proceeded with the matter in good faith and are not involved in the offence of money launderingâ€,,
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Thus, in the present case, even though the Ld. Adjudicating Authority had all the reasons to believe that the abovementioned were",,
mortgaged to the Appellant Bank and that the Appellant/SBI had prior charge over the subject matter/five properties; still the Ld.,,
Adjudicating Authority confirmed the provisional attachment order of the Respondent No. 1 and thus causing huge loss to the,,
Appellant/SBI.,,
The Adjudicating Authority did not understand that the alleged illegal money received by the Respondents from the Union Bank of India,,
cannot overshadow the huge amount of credit facilities which were taken by the Respondents from the appellant bank in lieu of the,,
properties kept as security with the Appellant Bank. Thus, making the Appellant Bank the rightful owner of the said properties which are",,
already in the possession of the Appellant Bank under the SARFAESI Act. The origin of the funds is not illegal or unlawful in any manner.,,
The funds were only deposited in the accounts with the Appellant Bank against the drawings already availed or availed subsequently.,,
We also find that the Adjudicating Authority has not examined the law on mortgage and securities. The Appellants Banks are liable to,,
recover huge amounts in the above loan accounts and the appellant bank being the mortgagee/transferee of the interest in the properties is,,
entitled to recover its dues with the sale of the properties. The properties stood transferred by way of mortgage to the Appellant Bank much,,
before the alleged criminal action. The alleged proceeds of crime has not been used for acquiring the mortgage properties. It is even not the,,
allegation of respondent no. 1 that the accused has acquired the mortgage properties with the proceeds of crime.,,
The meaning of money laundering as mentioned in the objects of the Act will have to be read as part of the statute because as per Supreme,,
Court of India in Vishaka and others Vs. State of Rajasthan reported in AIR1997SC3011 lays down at para 40 that the International,,
Conventions and Norms are to be read into them in the absence of enacted Domestic Law occupying the field when there is no inconsistency,,
between them.,,
The Ld. Adjudicating Authority has failed to considered that the ED has attached all the properties without examining the case of the,,
banks. The evidence on record suggested that all the properties were acquired by the accused much-much before the alleged date of crime.,,
No money disbursed by the Union Bank of India from its Loan Account, has been invested in acquiring his property. Furthermore, the",,
Appellants Banks had mortgaged charge over the property prior to the date of the crime. The Bank has already filed the Suit for recovery,,
and has also had taken the action under SARFAESI Act. The Ld. Adjudicating Authority failed to appreciate that depriving the Appellant,,
Bank from its funds/property, without any allegations or involvement of the Bank in the alleged fraud would be unjustified.",,
The properties attached cannot be attached under Section 5 of the PML Act because the properties are not purchased from the alleged,,
proceeds of crime. As per the provisions of Section 5(1) (c) the primary requirement for the attachment is that the proceeds of crime are,,
likely to be concealed, transferred or dealt with in any manner. In this case it is clear by the order of the Adjudicating Authority that the",,
funds were transferred for the satisfaction of the bigger credit facilities taken by the respondents from the appellant bank which they could,,
not pay due to the losses suffered by the companies.,,
The said properties are already in the possession of the appellant bank under the SARFAESI Act. The Hon’ble Supreme Court of India,,
in the case of Attorney-General of India and others reported in AIR 1994 SC 2179 while dealing with the matter under Conservation of,,
Foreign Exchange and Prevention of Smuggling Activities Act has defined the illegally acquired properties and has held that the illegally,,
acquired properties are earned and acquired in ways illegal and corrupt, at the cost of the people and the state, the state is deprived of",,
legitimate revenue to that extent hence these properties must justly go back where they belong, the state. In the present case as the money",,
belongs to the Appellant Bank it is liable to be recovered by the Appellants Banks.,,
The property of the Appellant Bank cannot be attached or confiscated when there is no illegality or unlawfulness in the title of the,,
Appellant and there is no charge of money laundering against the Appellant. The mortgage of property 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 bank is concerned, the bank had",,
to recover its outstanding dues by taking over the possession of the mortgaged properties in case the Respondents are not able to pay back,,
the credit facilities availed by the Respondents and by way of the SARFAESI provisions these properties are being taken in possession by,,
the appellant bank so that recovery can be made from the accounts which have become NPA.,,
The respondent has no lien over the said properties as the Appellants banks are now the Legal transferee of said properties. Even in the,,
criminal jurisprudence the stolen property when it is in the hands of unauthorized person that person cannot claim title to the property. The,,
said recipient cannot retain the property over which he has no legal title and the property should be returned to the lawful owners because,,
the both banks are victims and even after trial, they are to receive-back the said properties being victim party in normal types of cases u/s",,
8(8) of the Act. However in the present cases, the banks are innocent parties. They are not involved in any criminal proceedings. If they are",,
asked to await till the trial is over, the systems in these types of cases, the economy would collapse. In the case, of Union Bank of India, no",,
sanction against the employee was granted who is also not involved in any criminal proceedings.,,
From the entire gamut of the matter we are of the view that there is no nexus whatsoever between the alleged crime and the two bank,,
who are mortgagee of all the properties which were purchased before sanctioning the loan. Thus no case of money-laundering is made out,,
against banks who have sanctioned the amount which is untainted and pure money. They have priority to the secured creditors to recover,,
the loan amount/debts by sale of assets over which security interest is created, which remains unpaid. The Ld. Adjudicating Authority has",,
not appreciated the facts and law involved in these matters and the primary objective of section 8 of PMLA is that the Adjudicating,,
Authority to take a prima facie view on available material and facts produced. All the contentions raised by Mr. Matta has no substance.,,
The provisional attachment in the present matter is bad and against the law.,,
In the circumstances available in the present case, the allegation of money laundering prima facie found to be unsustainable for the",,
purpose of attachment under the PMLA, 2002.â€",,
The Adjudicating Authority, while passing the impugned order failed to appreciate that order of the Provisional Attachment dated 09.12.2016 and",,
the consequential Show Cause Notice dated 06.01.2017 to the Appellant bank was arbitrary and had been passed by wrong appreciation of law and,,
facts. The Ld. Adjudicating Authority ought to have appreciated that in terms of Section 31-B of the Recovery of Debts due to Banks and Financial,,
Institutions Act, 1993, the Appellant Bank is empowered to realize its dues from the secured assets notwithstanding any claim of the Central/State",,
Government or any other authority under any Act.,,
The Adjudicating Authority did not understant that the Appellant Bank, as secured creditor, has paramount first charge over the assets",,
hypothecated/mortgaged to the Bank. It is submitted that the granite blocks and finished products lying in the premises of the borrower are absolutely,,
and exclusively hypothecated/charged with the Bank and the Bank as secured creditor, has first preference to bring the said granite blocks and",,
finished products, etc. for sale to recover their outstanding dues.",,
S.No.,Type of facility,"Limit Sanctioned
(Rs. In Crores)
1.,Export Packing Credit,93.00
2.,PCFC (Sub limit of EPC),(50.00)
3.,FBP/FBN (DA 180 days),93.00
4.,"Import/Inland LC (DA 180 days) & Buyers
Credit
Import LC (Capital Goods) as Sub limit","50.00
(5.00)
5.,Bank Guarantee,5.00
6.,Forward Contract,288.12
Order dated 09.12.2016 in respect of the mortgaged properties with the Appellant Bank as per Annexure R-1 & the hypothecated goods as per,,
Annexure R-2 of Appellantâ€s letter dated 03.11.2017 is set aside.,,
No costs.,,