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Judgment
S.
No.",FIR No.,FIR Date,Place,Name of Accused,Sections
1,347/2017,28.10.2017,"Shivaji Nagar
Police Station,
Pune","1. Deepak Sakharam
Kulkarni
Hemanti Deepak
Kulkarni","406, 420, 34
of IPC, Section
3 & 4 of
Maharashtra
Protection of
Interests of
Depositors
(MPID) Act,
1999
2.,373/2017,09.11.2017,"Rajarampuri
Police Station,
Kolhapur","1. Deepak Sakharam
Kulkarni
Hemanti Deepak
Kulkarni
Shirish Deepak
Kulkarni","406, 420, 34
of IPC, Section
3 & 4 of
Maharashtra
Protection of
Interests of
Depositors
(MPID) Act,
1999
3.,309/2017,03.11.2017,"Shivaji Park
Police Station,
Mumbai","1. D.S. Kulkarni and
Sons,
D.S.K. and
Associates
D.S.K.
Construction
Deepak Sakharam
Kulkarni
Hemanti Deepak
 Kulkarni
Shirish Deepak
Kulkarni
Other companies
of DSK Group","406, 420, 34
of IPC, Section
3 & 4 of
Maharashtra
Protection of
Interests of
Depositors
(MPID) Act,
1999
(ii) Flat bearing No. 501, 5th Floor, DSK Nupuri, Near Bairstoo Restaurant, Shivaji Park, Veer Savarkar Marg, Dadar (West Mumbai-400028.",,,,,
The Bajaj Finance Ltd., the Defendant no. 58 advanced a loan of Rs. 14,58,00,000/- (Rupees Fourteen Crore Fifty Eight Lakh only) vide loan",,,,,
agreement dated 28.04.2015 to Deepak Sakharam Kulkarni, Hemanti Deepak Kulkarni, Sirish Deepak Kulkarni and M/s. DSK Developers Ltd.",,,,,
Defendants No. 1, 2, 3 & 6 respectively in the O.C. before the Adjudicating Authority [herein referred to as “borrowersâ€].",,,,,
In order to secure the aforesaid loan facility, a secured interest was created by the borrowers on following properties:-",,,,,
• Flat No. 101, 1st Floor, DSK Nupuri, Near Bairstoo Restaurant, Shivaji Park, Veer Savarkar Marg, Dadar (West Mumbai)-400028",,,,,
• Flat No. 201, 2nd Floor, DSK Nupuri, Near Bairstoo Restaurant, Shivaji Park, Veer Savarkar Marg, Dadar, (West Mumbai) - 400028; and",,,,,
• Flat No. 501, 5th Floor, DSK Nupuri, Near Bairstoo Restaurant, Shivaji Park, Veer Savarkar Marg, Dadar (West Mumbai) â€" 400028.",,,,,
The borrowers account was classified as Non-Performing Asset (NPA) on 01.10.2017. A statutory demand notice dated 20.02.2018 under Section 13,,,,,
(2) of the SARFAESI Act, 2002 was served on the borrowers and in the meantime Original Defendant i.e. Bajaj Finance Ltd. assigned the debts due",,,,,
and payable by borrowers including the loan in the present case in favour of the appellant vide assignment agreement dated 26.03.2018 against loan,,,,,
account no. 402LAP09456809 alongwith all the rights, title security interests, benefits, financial documents and that this appellant stepped into the shoe",,,,,
of the Original Defendant no. 58 i.e. M/s. Bajaj Finance Ltd.,,,,,
It is also revealed from the record that the appellant has issued notice under Section 13(4) of the SARFAESI Act, 2002 and security interest",,,,,
(Enforcement) Rules, 2002 took constructive/symbolic possession of the mortgaged properties on 07.07.2018 and took the physical possession on",,,,,
23.04.2019 under the order 14.03.2019 passed by learned CMM, Mumbai under Section 14 of SARAESI Act, 2002 and, thereafter, a sale notice",,,,,
dated 15.05.2019 under Rule 8(6)of the Security Interest (Enforcement) Rules, 2002 was issued to the borrowers for auction of the mortgaged",,,,,
properties and the auction was scheduled to take place on 20.06.2019 but the auction could not be taken place as a notice was received from the,,,,,
Respondent on 10.06.2019 wherein the appellant was directed to refrain from dealing with the mortgaged properties.,,,,,
The aforesaid mortgaged properties were provisionally attached under Section 5 of PMLA, 2002 by the Respondent vide PAO No. 1/2019 dated",,,,,
14.02.2019 and thereafter Section 8 of PMLA, 2002 proceedings were initiated wherein M/s. Bajaj Finance Ltd. was arrayed as Defendant no. 58.",,,,,
It is also the case of the appellant that it has not received any notice prior to 31.05.2019 nor it was knowledge of the appellant that the borrowers has,,,,,
committed the scheduled offences as alleged by the Respondent. It is also pleaded that an application for substitution of the appellant in place of M/s.,,,,,
Bajaj Finance Ltd. was filed and also the reply to the O.C. as well as written submission was filed, however, the Adjudicating Authority without",,,,,
considering the submission of the appellant and in violation of the principles of natural justice passed the impugned order dated 05.08.2019 which has,,,,,
been assailed in the present appeal.,,,,,
Legal Submissions made by the appellant,,,,,
The mortgaged properties are not proceed of crime and have been attached either as “value thereof†or “property of equivalent valueâ€,,,,,
It is not clear from the O.C. and rejoinder whether the properties have been attached as “value thereof†or “property of equivalent valueâ€.,,,,,
The mortgaged properties i.e. Flat no. 101 and 501 were purchased in 20.07.2008 while the FIR was registered against the borrowers and other,,,,,
entities on 28.10.2017, 03.11.2017 and 09.11.2017 and ECIR was registered on 08.03.2018, therefore, it is clear that the mortgaged properties were",,,,,
purchased by the borrowers when no such alleged scheduled offence were in the picture and that the title deeds have duly been registered and,,,,,
stamped which makes it further clear that the properties were not acquired from the proceed of crime. The appellant has given the following chain,,,,,
with respect to the properties attached herein:-,,,,,
• Lease of 999 years in favour of Mrs. Kumudini Govindrao Rangenekar and her husband Govindrao Ganpatrao Rengenek granted by Municipal,,,,,
Corporation of City of Bombay vide the registered Lease Deed dated 06.01.1943 qua property being Plot no. 158 of 0/N Ward, admeasuring 476.59",,,,,
sq.mtrs, bearing C.S. No. 1867, Muxribai Municipal Corporation, Mahim Division situated at the junction of Veer Savarkar Marg, Dr. M.B, Raut",,,,,
Road, Shivaji Park, Mumbai 400028",,,,,
• After death of Govindrao Ganpatrao Rangenek, Mrs. Kumudini Govindrao Rangenek became sole owner.",,,,,
• Vide Will & Testament dated 21.10.1996 & a Codicil dated 25.12.1998 Mrs. Kumudini Govindrao Rangenekar granted bequest of said property in,,,,,
favour of her granddaughter Ms. Nupuri Prafullachandra Sukthankar as Sole executor and trustee thereof.,,,,,
• Ms. Nupuri Prafullachandra Sukthankar has obtained from the High Court at Bombay Letters of Administration dated 10.11.2020 with the,,,,,
Will/Codicil annexed in Testamentary Petition No. 296/2000.,,,,,
• The said Shri Prafullachandra Praliabkar Sukthankar, being the sole executor and the trustee of the said Will/Codicil, by a duly registered Deed of",,,,,
Transfer dated 17.04.2001 executed by him in his capacity as executor and trustee, has transferred the said property in favour Ms. Nupuri",,,,,
Prafullachandra Sukthankar.,,,,,
• Ms. Nupuri Prafullachandra Sukthankar has vide Development Agreement dated 13.12.2002 and Supplementary Development Agreement dated,,,,,
21.12.2006 entrusted development rights in respect of said property to DS Kulkarni & Company and also executed Irrevocable Power of Attorneys in,,,,,
favour of the said D.S. Kulkarni & Company.,,,,,
• DS Kulkarni & Company vide Agreement dated 15.07.2008 sold Flat No. 101 & 201 in favour of Mr. Shirlsh Deepak Kulkarni and Mrs. Hemanti,,,,,
Deepak Kulkarni in confirmation with Ms. Nupuri Prafullachandra Sukthankar. [Sale Deed dated 15.07.2008 of Flat No. 101 and 201],,,,,
• Similarly, DS Kulkarni & Company vide Agreement dated 24.09.2007 sold Flat No. 501 in favour of Mrs. Hemanti Deepak Kulkarni in",,,,,
confirmation with Ms. Nupuri Prafullachandra Sukthankar. [Sale deed dated 29.09.2007 of Flat 501],,,,,
It is further contended that the impugned order is passed mechanically and without the application of judicious mind and selectively attached the two,,,,,
properties i.e. Flat No. 101 and 501 and that the mortgaged properties cannot be attached as “value thereof†or “property of equivalent,,,,,
value†as held by the Division Bench of the Honâ€ble Punjab & Haryana High Court in ‘Seema Garg and Ors. Vs. The Deputy Director,",,,,,
Directorate of Enforcement’,,,,,
The second legal submissions made by the appellant is that it is a bonafide third party who has acquired interest in the properties in question at a time,,,,,
anterior to commission of alleged scheduled offence.,,,,,
Under this head of legal submissions it is pleaded that the loan was sanctioned and properties were mortgaged in the year 2015 which is much prior to,,,,,
the registration of FIRs and ECIR and by that time the assignor Bajaj Finance Ltd. had acquired interest in the mortgaged property and thus, as held",,,,,
by the Honâ€ble Delhi High Court in Deputy Director, Directorate of Enforcement Delhi and Ors. V/s. Axis Bank, interest of appellant cannot be",,,,,
defeated or frustrated by attachment by the Enforcement Authority in exercise of its power under Section 8 of PMLA and that there is no allegations,,,,,
of commissions of scheduled offences against the appellant or its assignor or any of the officials of the appellant and that the loan has been granted,,,,,
with due diligence by Bajaj Finance Ltd. i.e. assignor of the appellant and that the appellant is a bonafide third party and that the appellant has no,,,,,
knowledge regarding any illegality allegedly committed by the borrowers. The appellant has relied on the judgment passed by this Tribunal in the,,,,,
matter of JM Financial Asset Reconstruction Company v/s. The Deputy Director, Directorate of Enforcement, Delhi dated 30.08.2019.",,,,,
The third legal submissions made by the appellant is that the appellant is a secured creditor being a bonafide third party had initiated actions against the,,,,,
mortgaged properties under SARFAESI Act, 2002 and rule frames their under much prior to the order of the attachment under PMLA and thus, as",,,,,
held by Honâ€ble Delhi High Court in the case of Deputy Director, Directorate of Enforcement & Ors. v/s. Axis Bank and Ors, in such a situation the",,,,,
attachment under PMLA will take a back-seat allowing the secured creditor bonafide third party to enforce its claim by disposal of the mortgaged,,,,,
properties, the remainder of its value, if any, thereafter to be made available for the purpose of PMLA. The appellant has quoted the relevant",,,,,
observations of the Honâ€ble High Court of Delhi in the case of Axis Bank (Supra) particularly referring to para 163 & 165 of the judgment.,,,,,
The fourth legal submissions made by the appellant is that the FIR against the borrower registered in 2017 under provisions which were/are either not,,,,,
scheduled offences or were inserted much later from the date of purchase of mortgaged properties.,,,,,
In this regard, it is pleaded by the appellant that the mortgaged properties were purchased in 2007/2008 by the borrowers while the FIRs have been",,,,,
registered against the borrowers and other persons in 2017 under Sections 406, 420, 34 of IPC and section 3 & 4 of MPID Act, 1999. The Section",,,,,
406 of IPC and Section 3 & 4 of MPID Act, 1999 are not scheduled offences under PMLA, 2002. Section 420 of IPC was inserted in the schedule",,,,,
under PMLA vide Section 13 of the Prevention of Money Laundering (Amendment) Act, 2009 (w.e.f. 06.03.2009) and that in the scheduled offences",,,,,
charge sheet against the borrowers and other persons charged under Section 420, 406, 477(A), 120B of IPC and Section 3 & 4 of MPID Act, 1999",,,,,
out of it section 477(A) is not a scheduled offence and Section 120B of IPC was inserted in the schedule under PMLA w.e.f. 15.02.2013. These two,,,,,
sections i.e. 420 & 120B cannot be applied retrospectively and therefore, properties acquired before 2009/2013 cannot be called as a proceeds of",,,,,
crime of an offence which was not a scheduled offence at the relevant point of time. The appellant has relied on Obulapuram Mining Company Pvt.,,,,,
Ltd. v/s. Joint Director, Directorate of Enforcement passed by Honâ€ble Karnataka High Court and Mahanivesh Oils & Foods Pvt. Ltd. V/s.",,,,,
Directorate of Enforcement passed by Honâ€ble Delhi High Court.,,,,,
The fifth legal submissions made by the appellant is that the provisions of Prevention of Money Laundering Act, 2002 do not override the provisions of",,,,,
SARFAESI Act, 2002.",,,,,
In this regard, the appellant has placed reliance on Axis Bank (Supra) judgment.",,,,,
It is also submitted that the Honâ€ble Supreme Court in Special Leave Petition (Criminal) No. 2997/2020 filed against the judgment and order dated,,,,,
28.02.2020 passed by the Honâ€ble Punjab & Haryana High Court in “Deputy Director v/s. PNB Housing Finance Ltd.,,,,,
The sixth legal submissions made by the appellant is that there is no material for the formation of “reason to believe†under Section 5(1) of,,,,,
PMLA, 2002. The reliance has been placed on the following judgments:-",,,,,
(i) Judgment passed by Honâ€ble High Court in the case of ITO v/s. Lakhmani Mewal Das [1976] 103 ITR 437 SC and,,,,,
(ii) Decision of this Tribunal dated 21.05.2019 in Bajaj Finance Ltd. v/s. The Deputy Director Directorate of Enforcement, Jaipur & Ors.",,,,,
The seventh and the last legal submissions made by the appellant is that Section 3 of Prevention of Money Laundering Act, 2002 is not applicable in",,,,,
the present matter. The reliance has been placed on the judgment of Honâ€ble Gujarat High Court in the case of Jafar Mohammed Hasanfatta and,,,,,
Ors. v/s. Deputy Director and Ors.,,,,,
On the aforesaid grounds, the appellant has prayed for setting aside the impugned order dated 05.08.2019 and the mortgaged properties may be",,,,,
released with right to appellant to exercise its rights under SARFAESI Act, 2002.",,,,,
During the course of hearing, the learned counsel for the appellant submitted that this Tribunal is bound by the judgment passed by the Territorial",,,,,
Jurisdictional High Court and further submitted that since this,,,,,
Tribunal is situated in Delhi so the judgment of Honâ€ble High Court Delhi is binding and not the decision of the other High Court. The learned counsel,,,,,
for the appellant has placed on relying following judgments:-,,,,,
(i) J. Sekar v/s. Union of India & Ors. 2018 SCC OnLine Del 6523.,,,,,
(ii) Sita Ram Khemka v/s. K.K. Banerji & Ors. MANU/UP/0038/1958.,,,,,
(iii) Astik Dyestuff (P) Limited v/s. Commissioner of Central Excise & Customs, MANU/GJ/1062/2013.",,,,,
(iv) Income Tax officer, Ward-8(4), Ahmedabad v/s Upkar Retail Private Limited, 2018 SCC Online ITAT 12911.",,,,,
Respondent’s Case in brief:-,,,,,
On the other hand, the Respondent in their pleadings through reply to the appeal before this Tribunal, inter-alia, submitted that the ECIR was",,,,,
registered on the basis of three FIRs against Deepak Sakharam Kulkarni, Smt. Hemanti Deepak Kulkarni, Shirish Deepak Kulkarni and DSK Group",,,,,
of Companies/Partnership firms under Sections 406, 420, 34 of IPC and Section 3 & 4 Maharashtra Protection Interests of Depositors (MPID) Act,",,,,,
1999 and that these persons & Ors. firms eight partnership firms under the veil of DSKDL with the sole motive to collect the funds from gullible,,,,,
public based in Mumbai, Pune, Kolhapur and other cities of Maharashtra and that to lure the general public systematically in the guise of different",,,,,
deposit schemes through these eight partnership firms and collected crores of rupees during the period from 2006 to 2017 and as on the date amount,,,,,
of Rs. 1129.46 Crores is outstanding to the general public which is the “Proceeds of Crime†(POC) in the case.,,,,,
It is further contended by the Respondent that the funds collected by the partnership firms were diverted to accounts of DSKDL and Ms. Hemanti D.,,,,,
Kulkarni over the period directly as well through other firms and are utilized for the purchase of land, for operative expenditure of the companies, for",,,,,
repayment of bank loans, for tax payments, for self utilization etc., for payment of premium of high value life insurance policies and for conspicuous",,,,,
consumption.,,,,,
The reasonable ground that the properties amounting to Rs. 47440.02 Lakhs (Rs. 46490.29 Lakh (Immovable Properties) + Rs. 518.11 Lakhs (LIC) +,,,,,
Rs. 431.62 Lakhs (Bank Balance) were arising as a result of criminal activity to a scheduled offence, were provisionally attached under Section 5 (1)",,,,,
of PMLA, 2002 vide Provisional Attachment Order No. 01/2019 dated 14.02.2019.",,,,,
Further the properties valued at Rs. 43470.29 Lakhs acquired/held by the DSK Group of Companies (including DSKDL) and their,,,,,
Promoters/Directors/Partners and other persons were also provisionally attached vide above said PAO dated 14.02.2019 under Section 5(1) of,,,,,
PMLA, 2002, invoking the provision with reference to “value thereof†as defined under Section 2(1)(u) r/w Section 2(1)(v) of the PMLA which",,,,,
prescribed that “Proceed of Crime†means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity",,,,,
relating to a scheduled offence or the value of any such property.,,,,,
That thus after thorough investigation and on the basis of statements recorded, facts and evidence collected, the total property worth Rs. 90910.31",,,,,
lakh was provisionally attached on 14.02.2019 vide PAO No. 01/2019 and Original Complaint (OC) No. 1104/2019.,,,,,
It is further submitted that the said properties mentioned in Schedule to the PAO/OC involved and identified as involved in money laundering as,,,,,
described above if are not attached immediately under first proviso of Section 5(1) of Prevention of Money Laundering Act, 2002 and if the accused",,,,,
transfers these properties without the knowledge/intimation to this agency during the investigation under PMLA, then these properties would have",,,,,
been concealed, transferred or dealt with in any manner which could have resulted in frustrating the proceedings relating to confiscation of such",,,,,
properties involved in money laundering. Thus all the action taken in this regard was within the ambit of statutory provisions of law. Further,,,,,
investigation under PMLA with regard to further siphoning off funds and properties derived out of the same is on.,,,,,
It is also pleaded in the reply that out of the total proceeds of crime in the present case amounting to Rs. 1129.46 Crores, attachment of properties till",,,,,
date is for Rs. 909.10 Crores only and the balance proceeds of crime are yet remaining to be attached.,,,,,
In addition to above, the Respondent has filed a voluminous reply, the salient points of the reply in brief are as below:-",,,,,
(a) The investigation revealed that the offences were committed during the period 2006-2007 to 2016-2017. The amount of Rs. 8522.27 Crores were,,,,,
illegally collected by the accused persons through the eight firms out of which an amount of Rs. 1129.46 Crores is still outstanding which is the,,,,,
proceeds of crime.,,,,,
(b) The investigation reveals that the funds so collected in the guise of FD/unsecured loans, diverted to the account of Mrs. Hemanti D. Kulkarni",,,,,
maintained with Bank of Maharashtra, Bagirao Peth Branch which were further diverted by layering an integration by her with connivance of Deepak",,,,,
S. Kulkarni and their close relatives and directors/partners of the firms through high value sham transactions under guise of fraudulent directors loans,,,,,
to various group companies of DKS Group during the period 2006-2017. The summary payments and receipt as per the book of accounts of,,,,,
partnership firms for the period from FY 2006-07 to 2016-17. The details have been mentioned in the table at page 6 & 7 of the reply.,,,,,
(c) That out of the laundered funds the flats involved herein are purchased in the name of the appellants which were sourced from Ms. Hemanti,,,,,
Kulkarni account and were further sourced from partnership firms. Thus the flats are acquired out of proceeds of crime.,,,,,
(d) The Adjudicating Authority has passed the order after taking into account from both the sides and after coming to the conclusion that the,,,,,
properties are involved in money laundering.,,,,,
(e) That in view of Section 71 of PMLA of 2002 PMLA is having overriding effect SARFAESI Act, 2002 and RDDBFI Act, 1993. The Respondent",,,,,
has relied on the judgment in the matter “The Deputy Director of Enforcement v/s Axis Bank & Ors. passed by Honâ€ble High Court Delhi on,,,,,
2nd April, 2019 and judgment in the matter of CRA-S-4326-SB-2017(O&M) Deputy Director Vs PNB Housing Finance Ltd. passed by division",,,,,
bench of Hon'ble High Court of Punjab and Haryana vide its order dated 28th Feb, 2020.",,,,,
(f) That reason to believe have been incorporated in the PAO and O.C. supported by material.,,,,,
(g) That prosecution complaint has been filed in the PMLA, Special court, Mumbai on 03.08.2020. The appellant/bank can approach the special court",,,,,
under section 8(8) of the PMLA, 2002 for securing their interest and for restoration of property under new Rule 3A of the Prevention of Money",,,,,
Laundering PMLA, (Restoration of Confiscated Property) Amendment Rules, 2019.",,,,,
(h) That in para no. 16.37 the Respondent made submission with respect to reasons to believe which is a repetition of what is stated above. However,,,,,
it is to mention here that the appellant has relied on the following judgments to substantiate its submission on this legal point.,,,,,
(i) Three Judge bench of Honâ€ble Supreme Court in the case of S. Narayanappa Vs. The Commissioner of Income-tax reported in AIR,,,,,
1967 SC 523.,,,,,
(ii) Dr. Partap Singh and Another versus Director of Enforcement, Foreign Exchange Regulation Act and others reported in (1985) 3 SCC",,,,,
72,,,,,
(iii) Honâ€ble Supreme Court in the case of Calcutta Discount Company v. Income Tax Officer reported in 1961 SCR (2) 241,,,,,
(iv) Presidency Talkies Ltd., ... vs First Addl. Income-Tax Officer reported in AIR 1954 Mad 872, Division bench of the Honâ€ble Supreme",,,,,
Court,,,,,
(v) Brizo Reality Company Pvt. Ltd versus Aditya Birla Finance Ltd. - MANU/MH/0845/2014, Honâ€ble Bombay High Court",,,,,
(vi) Gautam Khaitan & another versus Union of India & another - 2015 Supreme (Del) 165), the Delhi High Court",,,,,
(vii) Madurai bench of Madras High Court in the case of G. Gopalakrishnan vs The Deputy Director vide its order dated 03.01.2019 in,,,,,
W.P.(MD) Nos.11454, 14860 and 14894 to 14899 of 2018 and W.M.P(MD)Nos.13450 to 13455, 10442, 10443 & 13399 of 2018.",,,,,
(i) Besides the reply the Respondent has filed the written arguments on 18.11.2020 wherein over and above the Respondent has submitted that the,,,,,
judgments passed by High Courtâ€s of States other than the High Court of Delhi is binding as this Tribunal is dealing with matters from across the,,,,,
country having sit only in New Delhi. The Respondent has referred section 42 of PMLA, 2002 and pleaded that the order of the Tribunal lies before",,,,,
the different jurisdictional High Courtâ€s, hence any arguments by the appellant that the order and judgment dated 28.02.2020 passed by Punjab &",,,,,
Haryana High Court is out of place, against the scheme of the Act and against settled judicial principles as this Tribunal is dealing with matters from",,,,,
across the country having sit only in New Delhi.,,,,,
On the aforesaid grounds the Respondent has sought the dismissal of the appeal.,,,,,
Discussion and Conclusion,,,,,
Heard both sides and perused the materials available on record including the reply, written arguments and the judgments cited by both the parties.",,,,,
It is seen from the record that M/s. Bajaj Finance Ltd. which had granted loan to Hemanti D. Kulkarni & Shirish D. Kulkarni got the aforesaid two,,,,,
properties mortgaged to secure the loan. The Provisional Attachment Order (PAO) is passed on 14.02.2019 and the O.C. No. 1104/2019 has been,,,,,
filed by the Respondent before the Adjudicating Authority on 15.03.2019 wherein M/s. Bajaj Finance Ltd. has been arrayed as Defendant no. 58. It is,,,,,
revealed from the list of events submitted by the appellant that M/s. Bajaj Finance Ltd. the original lender assigned, the debts due and payable by the",,,,,
borrower, in favour of the present appellant which goes to show that the appellant stepped into the shoe of M/s. Bajaj Finance Ltd. almost one year",,,,,
prior to the issue of PAO. It is also stated in the list of event that the Respondent had issued notice which was received on 10.06.2019 by the present,,,,,
appellant wherein the appellant was directed to refrain from dealing with the questioned mortgaged properties. Inspite of the knowledge of the,,,,,
appellantâ€s interest in the questioned properties the appellant was not made a party in the proceedings pending before the Adjudicating Authority.,,,,,
Be it as that may be, the appellant came to know about the proceedings before the Adjudicating Authority and filed substitution application on",,,,,
04.07.2019 seeking its substitution in place of M/s. Bajaj Finance Ltd. and further sought time to file its reply to the complaint. It is revealed from the,,,,,
paper that only one day time was granted to the appellant to file reply which was complied on the next day i.e. 05.07.2019. Even the appellant argued,,,,,
the matter on 18.07.2019. It is also revealed that on 23.07.2019 the appellant had filed written synopsis alongwith compilation of judgments.,,,,,
In the Appeal Memo at paras 3(viii) to 3(xv), the appellant has explained the details of how it was prevented from auctioning the property till the",,,,,
passing of the impugned order and other sequences. The same are reproduced below for convenience:-,,,,,
“(viii) That subsequently the appellant herein has issued a notice dated 15.05.2019 for sale of the mortgaged properties by e-auction,,,,,
under relevant provisions of SARFAESI Act read with, which was scheduled to take place on 20.06.2019. However, a few days prior to the",,,,,
said auction, a notice dated 31.05.2019 issued by the Deputy Director, Directorate of Enforcement, Mumbai Zone, was received by the",,,,,
Appellant on 10.06.2019 wherein the Appellant was directed to refrain from dealing with the questioned mortgaged properties. Copy of the,,,,,
sale notice dated 15.05.2019 alongwith the postal receipts and newspaper publications are annexed herewith.,,,,,
(ix) That is to be noted here that allegedly the mortgage properties in question were attached by the Enforcement Directorate under Section,,,,,
5 of PMLA, 2002 vide Provisional Attachment Order dated 14.02.2019 and subsequently, a show-cause notice under Section 8 of PMLA",,,,,
was issued to the assignor of the Appellant (Bajaj Finance Limited) calling upon to show cause why the properties provisionally attached,,,,,
should not be declared to be property involved in money laundering. It is pertinent to note here that no notice was served on the Appellant,,,,,
prior to 31.05.2019 nor it was within the knowledge of the Appellant that the original owners (the principal borrowers of assignor/original,,,,,
lender i.e. Bajaj Finance Ltd.) of properties in question are in any manner involved with any wrong doing.,,,,,
(x) That subsequently vide a letter dated 02.07.2019 the Advocate Mr. Kotla Harshvardhan on behalf of Bajaj Finance Limited supplied the,,,,,
Original complaint to the appellant and orally informed that the matter was listed on 04.07.2019. Thereafter, the appellant herein through",,,,,
its Authorized representative and Advocate appeared before the Ld. Adjudicating Authority and filed a substitution application seeking its,,,,,
substitution as Defendant No. 58 in place of the original Defendant No. 58 (Bajaj Finance Limited) and further, sought time to file its reply",,,,,
to original complaint filed by the Respondent. The Ld. Adjudicating Authority in light of the circumstances granted to the present appellant,,,,,
one-day to file its reply to original complaint filed by the Respondent. It is also relevant to mention herein that the original lender/Defendant,,,,,
No. 58 (Bajaj Finance Limited) has also filed an application before the Ld. Adjudicating Authority seeking its deletion from the array of,,,,,
parties since the financial assistance granted by it to the borrowers was assigned to the present Appellant. Copy of Application for,,,,,
Substituting the name of present appellant in place of original lender/Defendant No. 58 (Bajaj Finance Limited) filed by the present,,,,,
appellant before Ld. Adjudicating Authority is annexed herewith.,,,,,
(xi) That thereafter, in light of liberty granted to the present appellant by the Ld. Adjudicating Authority, the present Appellant has filed its",,,,,
reply to the original complaint and a copy of the same was served upon the Advocate of the Respondent through e-mail on 05.07.2019.,,,,,
Copy of the objections/reply filed by the present appellant to the complaint filed by the Respondent is annexed herewith and marked as,,,,,
Annexure-K while the copy of proof of service of the reply on the advocate for the Respondent is annexed herewith.,,,,,
(xii) That the Respondent/Directorate of Enforcement has filed a rejoinder to the reply of present appellant. Copy of rejoinder filed by the,,,,,
Respondent/Directorate of Enforcement was supplied to office of Advocate of the present appellant through email on 15.07.2019. Copy of,,,,,
the rejoinder filed by the respondent before the Adjudicating Authority is annexed herewith.,,,,,
(xiii) That the final arguments before the Ld. Adjudicating Authority took place on 18.07.2019 wherein the present appellant specifically,,,,,
brought it to the notice of the Ld. Adjudicating Authority that the attempts have been made by the Respondent/Directorate of Enforcement to,,,,,
apply the provisions of Prevention of Money Laundering Act, 2002 retrospectively and that the borrowers had purchased the mortgaged",,,,,
properties in 2007/2008 while the offences under Section 420 of Indian Penal Code, 1860 was inserted in the Schedule under Money",,,,,
Laundering Act in 2009 and Section 406 of Indian Penal Code, 1860 was insered in the Schedule under Money Laundering Act in 2013. It",,,,,
was also submitted by the present appellant that the borrowers had paid the purchase amount of the mortgaged properties through,,,,,
Cheques/Demand Draft.,,,,,
(xiv) That after taking into consideration the oral arguments made on behalf of the present Appellant, the Ld. Adjudicating Authority was",,,,,
pleased to direct the Appellant to file written submissions in support of its reply and oral arguments within five days. Thereafter, the",,,,,
Appellant had filed its detailed written submissions alongwith relevant judgments on 23.07.2019. Copy of written submissions alongwith,,,,,
compilation of relevant judgments filed before the Ld. Adjudicating Authority is annexed.,,,,,
(xv) That the Ld. Adjudicating Authority pronounced its Order on 05.08.2019 wherein the Ld. Adjudicating Authority while recording the,,,,,
fact that the present appellant has filed an application seeking its substitution failed to consider the reply, Oral submissions as well as",,,,,
written submissions made on behalf of the present appellant and erroneously confirmed the Provisional Attachment Order thereby causing a,,,,,
great prejudice to rights and interest of the present appellant and therefore, this appeal has been filed assailing the impugned order dated",,,,,
05.08.2019 passed by the Ld. Adjudicating Authority.â€,,,,,
In para T, Y & RR of the grounds in the appeal memo the appellant has stated as follows:-",,,,,
“T. Because the Adjudicating Authority failed to understand that the Appellant is the rightful claimant of the said properties. It is,,,,,
submitted that the Appellant has filed the copies of the sale deeds/title deed of the properties which shows that the dated of acquisition of all,,,,,
the properties. The Appellant is having the mortgaged charge over the property. It is submitted that the valuable right is lost for the,,,,,
Appellant, by order of attachment and eventual confiscation.",,,,,
Y. Because neither the fact of grant of financial assistance by assignor of Appellant to borrowers nor that the aforesaid properties are,,,,,
mortgaged with the assignor of Appellant is in dispute. Subsequent to assignment of said loan account, appellant has become secured",,,,,
creditor qua said property.,,,,,
RR. Because the Adjudicating Authority has failed to consider all relevant facts and grounds mentioned in the reply/objection filed by the,,,,,
appellant and has proceeded to pass the impugned attachment order which infact is without reasoning qua the property mortgaged with the,,,,,
appellant.â€,,,,,
As per the submission of appellant it appears that no order on appellantâ€s application for substitution has been passed nor the contention raised in the,,,,,
reply, oral arguments advanced and the written submissions filed by the appellant is found placed in the impugned order. The Adjudicating Authority in",,,,,
the internal page 306 to 311 of the impugned order has reflected only the reply/written submissions filed on behalf of Defendant No. 58 i.e. (M/s.,,,,,
Bajaj Finance Limited) wherein it is specifically mentioned in internal page no. 311 para (ix) that the present appellant has been assigned with the loan,,,,,
account and Bajaj Finance Co. Ltd. no longer has any rights, title interest in the Mumbai properties.",,,,,
Inspite of all the above the Adjudicating Authority neither passed any order of substitution of substituting the present appellant in place of Defendant,,,,,
No. 58.,,,,,
In view of the above, there appears to be non-compliance of the provisions of Sections 8(1) and 8(2)(b) of PMLA, 2002 read with proviso to Section",,,,,
8(2) of the PMLA, 2002 and also there is violation of principle of natural justice.",,,,,
Considering the above it appears that the Adjudicating Authority ought to have substituted the present appellant in place of M/s. Bajaj Finance Ltd.,,,,,
and should have considered the submissions made by the present appellant and should have dealt with the same in accordance with law. Having not,,,,,
done so the impugned order, qua the appellant and qua the properties involved herein, is illegal and, therefore, liable to be set aside.",,,,,
In view of the above, appeal is allowed. The Impugned order dated 05.08.2019 is set-aside and the case is remanded to the Adjudicating Authority for",,,,,
re-adjudication of the case qua the appellants and qua the properties involved herein. The appellant is directed to file appropriate application within 30,,,,,
days from the receipt of the copy of the order raising all the legal and factual issues, raised herein, before the Adjudicating Authority, who shall after",,,,,
giving due opportunity to both the parties decide all the legal issues and also record findings whether the properties attached herein are involved in,,,,,
money laundering within 150 days thereafter.,,,,,
This Tribunal has not expressed any opinion on merits of the source of income, earnings out of which or by means of which the appellants have",,,,,
acquired attached properties.,,,,,
However, the attachments shall continue till the completion of the proceedings before the Adjudicating Authority and both the parties shall maintain",,,,,
“status quo†in respect to the attached properties.,,,,,
In the circumstances, no order as to costs.",,,,,
The pending applications, if any, shall stand disposed of.",,,,,
Registry is directed to forward copy of this order to the office of the Adjudicating Authority under PMLA, 2002 for further necessary action.",,,,,