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Judgment
Sl. No.,"Date of acquisition of
the property","Description of the immovable
property",Area
1.,24.11.2008,"Hotel Oyster, Plot No. 30, behind
IBP petrol pump, Piplod, Surat (Plo
along with the construction erected
thereon)","Plot admeasuring 489.62 sq. mtrs.
talong with the construction erected
thereon.
2.,07.04.2010,"Duplex row house No. D/16 (A&B
in Block B2 in the scheme known as
“Emirates Hills†situated at S.
Nos. 13/2/1/1, 17, 18, within the
limits of Gram Panchayat of Village
Somatne, Taluka-Mawal, Pune",")4255 Sq. Fts. On the Ground Floo
(inclusive of chargeable garden area
429/3 Sq. Fts., chargeable parking
area 964/2 Sq. Fts. Terrace 822/2 Sq.
Fts. And Built up area 3219 Sq. Fts.
3.,23.10.2009,"Duplex row house No. D/16 (C&D
in Block B2 in the scheme known as
“Emirates Hills†situated at S.
Nos. 13/2/1/1, 17, 18, within the
limits of Gram Panchayat of Village
Somatne, Taluka-Mawal, Pune
building named “Kukreja
Centre†constructed on Plot No
13, Sector-11, CBD Belapur, Nav
Mumbai",")Total sealable area 4255 Sq. Fts. On
the Ground/First/Second Floo
(inclusive of chargeable garden area
429/3 Sq. Fts., chargeable parking
area 964/2 Sq. Fts. Terrace 822/2 Sq.
Fts. And Built up area 3219 Sq. Fts.)
.
i
4.,02.07.2010,"Office Unit No. 407 on the 4th Floo
of “A†wing in the building
named “Kukreja Centreâ€
constructed on Plot No. 13, Sector
11, CBD Belapur, Navi Mumbai","r230 Sq. Fts. build up area
-
5.,02.07.2010,"Office Unit No. 408 on the 4th Floo
of “A†wing in the building
named “Kukreja Centreâ€
constructed on Plot No. 13, Sector
11, CBD Belapur, Navi Mumbai","r230 Sq. Fts. build up area
-
6.,02.07.2010,"Office Unit No. 409 on the 4th Floo
of “A†wing in the building
named “Kukreja Centreâ€
constructed on Plot No. 13, Sector
11, CBD Belapur, Navi Mumbai","r230 Sq. Fts. build up area
-
7.,02.07.2010,"Office Unit No. 410 on the 4th Floo
of “A†wing in the building
named “Kukreja Centreâ€
constructed on Plot No. 13, Sector
11, CBD Belapur, Navi Mumbai","r230 Sq. Fts. build up area
-
The provision of PML Act is to punish the accused person involved in money laundering, but not to the innocent who is not involved in the crime.",,,
Counsel for the respondent no. 1 does not deny that the bank is a victim who is entitled to recover the money, however this sole argument is that",,,
the bank is entitled to sell the properties against loan amount after the trial of accused parties i.e. borrowers and final judgment is delivered by the,,,
Special Court. Thereafter u/s 8(8) of the Act, the mortgaged properties can be delivered to the bank who can recover the amount after selling the",,,
same. His only argument is that the mortgaged property should not be released at this stage, it should be released after trial and final judgment against",,,
the borrowers. It is not denied that the trial would take many years. The bank is not an accused and no criminal complaint is pending against the bank.,,,
As per “The Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016†which",,,
came into effect on 01.09.2016:,,,
a. a new Section 31B in the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 under the heading of “Priority of Secured",,,
Creditors†states that Notwithstanding anything contained in any other law for the time being in force, the rights of secured creditors to realise",,,
secured debts due and payable to them by sale of assets over which security interest is created, shall have priority and shall be paid in priority over all",,,
other debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or local authority.;",,,
b. 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 90 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.,,,
The amendment prima facie gives the Secured Creditor, i.e. the Appellant/State Bank of India, 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.",,,
The Full Bench of the Madras High Court while acknowledging the amount of losses suffered by the Banks and while approving the latest,,,
amended Section 31B of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 held in the caseâ €œThe Assistant Commissioner",,,
(CT), Anna Salai- III Assessment Circle Vs. The Indian Overseas bank and Ors. MANU/TN/3743/2016†that",,,
“There is, thus, no doubt that the rights of a Secured Creditor to realize secured debts due and payable by sale of assets over which",,,
security interest is created, would have priority over all debts and Government dues including revenues, taxes, cesses and rates due to the",,,
Central Government, State Government or Local Authority. This section introduced in the Central Act is with ''notwithstanding'' clause and",,,
has come into force from 01.09.2016. Further it was also held that the law having now come into force, naturally it would govern the rights",,,
of the parties in respect of even a lis pending.â€,,,
In a case contested by one of the branches of the Appellant Bank, the High Court of Madras “State Bank of India Vs. The Assistant",,,
Commissioner, Commercial Tax, Puraswalkam Assistant Circle and Ors. MANU/TN/3619/2016â€, while upholding the Amendment Act, 2016",,,
inserting Section 31B of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and Section 26E of the SARFAESI Act and",,,
reaffirming the view of the Full Bench of the same Court in The Assistant Commissioner (CT), Anna Salai-III Assessment Circle (supra) lifted the",,,
attachment entry and held that:,,,
“In other words, not only should the amendment apply to pending lis, but the declaration that the right of a Secured Creditor to realize",,,
the Secured Debts, would have priority over all debts, which would include, Government dues including revenues, taxes, etc., should hold",,,
good qua 2002 Act as well.â€,,,
In another Madras High Court judgment in the case of “Dr. V. M. Ganesan vs. The Joint Director, Directorate of Enforcement.",,,
MANU/TN/2475/2014†has explained the grievances faced by the financial institutions while holding that,,,
“For instance, if LIC Housing Finance Limited, which has advanced money to the Petitioner in the first Writ Petition and which",,,
consequently has a right over the property, is able to satisfy the Adjudicating Authority that the money advanced by them for the purchase",,,
of the property cannot be taken to be the proceeds of crime, then, the Adjudicating Authority is obliged to record a finding to that effect",,,
and to allow the provisional order of attachment to lapse. Otherwise, a Financial Institution will be seriously prejudiced. I do not think that",,,
the Directorate of Enforcement or the Adjudicating Authority would expect every Financial Institution to check up whether the contribution,,,
made by the Borrowers towards their share of the sale consideration was lawfully earned or represent the proceeds of crime. Today, if the",,,
Adjudicating Authority confirms the provisional order of attachment and the property vests with the Central Government, LIC Housing",,,
Finance Limited will also have to undergo dialysis, due to the illegal kidney trade that the Petitioner in the Writ Petition is alleged to have",,,
indulged in. This cannot be purport of the Act.â€,,,
The provisions of the amended SARFAESI Act prevails over the provision of the PML Act because the Amended SARFAESI Act is the,,,
subsequent legislation to the PML Act as held by the Honâ€ble Supreme Court in the case ofS olidaire India Ltd. Vs Fairgrowth Financial Services,,,
Ltd. & Ors., (2001) 3 SCC 71. Therefore the said judgement is now application if favour of the respondent in view of amendment brought by in the",,,
respective statues. Rahter now the said judgement can be applied against the arguments of respondent no. 1.,,,
In another Madras High Court judgment in the case of “Dr. V. M. Ganesan vs. The Joint Director, Directorate of Enforcement†has",,,
explained the grievances faced by the financial institutions while holding that,,,
“For instance, if LIC Housing Finance Limited, which has advanced money to the petitioner in the first writ petition and which",,,
consequently has a right over the property, is able to satisfy the Adjudicating Authority that the money advanced by them for the purchase",,,
of the property cannot be taken to be the proceeds of crime, then, the Adjudicating Authority is obliged to record a finding to that effect",,,
and to allow the provisional order of attachment to lapse. Otherwise, a financial institution will be seriously prejudiced. I do not think that",,,
the Directorate of Enforcement or the Adjudicating Authority would expect every financial institution to check up whether the contribution,,,
made by the borrowers towards their share of the sale consideration was lawfully earned or represent the proceeds of crime. Today, if the",,,
Adjudicating Authority confirms the provisional order of attachment and the property vests with the Central Government, LIC Housing",,,
Finance Limited will also have to undergo dialysis, due to the illegal kidney trade that the petitioner in the writ petition is alleged to have",,,
indulged in. This cannot be purport of the Act.â€,,,
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.,,,
It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability",,,
of statutory remedies under the DRT Act and the SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have,,,
serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High,,,
Courts will exercise their discretion in such matters with greater caution, care and circumspection.",,,
Insofar as this case is concerned, we are convinced that the High Court was not at all justified in injuncting the appellant from taking",,,
action in furtherance of notice issued under Section 13(4) of the Act. In the result, the appeal is allowed and the impugned order is set",,,
aside. Since the respondent has not appeared to contest the appeal, the costs are made easy.â€",,,
Counsel for the respondent no.-1 argues that what will happen to the criminal complaint pending before the special court if the borrower will settle,,,
the matter with the bank. I fail to understand the said argument firstly. No criminal matter is pending against the bank. On the complaint of the banks,",,,
the FIR was registered. The main concerned of mortgagee was that borrowers are not paying the amount which is due therefore the action under IPC,,,
be taken as per law against the borrowers. Their main concerned is that the money must come to bank. It is a public money. It is Government bank.,,,
Even Government is stressing that all borrwoers should pay the due amount so that the economy of this country must run smoothly. If the matter,,,
settled and bank as per settlement would received money. It is for the special court to take the call about the settlement.,,,
It is also settled law that generally when the dispute between the parties are settled in criminal matter pertaining to the recovery of out-standing,,,
amount, on joint petition, the High Court while exercising its discretion in criminal petition u/s 482 Cr. P.C. may or may not quash the FIR. On moving",,,
the joint request of the parties. Secondly, why the bank should want for number of years till the trial is over against the borrowers and final judgment is",,,
passed.,,,
Three Judge Bench in Narendra Lal Jain & Ors., (supra) held that during the investigation pertaining to the culpability of the accused in the crime,",,,
the concerned bank had instituted suits for recovery of the amount claimed to be due from the respondents and the said suits were disposed of in,,,
terms of the consent decrees. On the basis of the said consent decrees an application for discharge was filed which was rejected by the trial court but,,,
eventually was allowed by the High Court. The charges in the matter were framed under Section 120-B/420 IPC by the learned trial Judge against the,,,
private parties. As far as bank officials are concerned, charges were framed under different provisions of the Prevention of Corruption of Act, 1988.",,,
Being dissatisfied with the said order, the CBI had preferred an appeal by obtaining special leave and in that context the court observed that the",,,
accused respondent had been charged under Section 120-B/420 IPC and the civil liability of the respondent to pay the amount had already been settled,,,
and further there was no grievance on the part of the bank. Taking note of the fact that offence under Section 420 of IPC is compoundable and,,,
Section 120-B is not compoundable, the Court eventually opined thus:-",,,
“11. In the present case, having regard to the fact that the liability to make good the monetary loss suffered by the bank had been",,,
mutually settled between the parties and the accused had accepted the liability in this regard, the High Court had thought it fit to invoke its",,,
power under Section 482 Cr.P.C. We do not see how such exercise of power can be faulted or held to be erroneous. Section 482 of the,,,
Code inheres in the High Court the power to make such order as may be considered necessary to, inter alia, prevent the abuse of the",,,
process of law or to serve the ends of justice. While it will be wholly unnecessary to revert or refer to the settled position in law with regard,,,
to the contours of the power available under Section 482 CR.P.C.it must be remembered that continuance of a criminal proceeding which is,,,
likely to become oppressive or may partake the character of a lame prosecution would be good ground to invoke the extraordinary power,,,
under Section 482 Cr. P.C.,,,
In Sanjay Bhandari V/s. CBI, Crl. M.C. M.C. 5798/2014, Delhi High Court, dated 29.06.2015",,,
“69….. By consent the parties have settled all disputes in the recovery suit, the consent decree of DRT stood to be disposed off as duly",,,
satisfied. There is hence no force in the submission of respondents that the complainant bank has not exonerated the petitioners, first being",,,
the Civil Procedure Code, and the second being the OTS Scheme of the Reserve Bank of India, which the petitioners have extensively",,,
referred to in the original petition. The provisions of OTS Scheme prevent the complainant bank from entering into any compromise or,,,
settlement under the said OTS Scheme in the cases of willful default, fraud and malfeasance. The complainant bank in choosing to enter into",,,
such consent terms under the provisions of OTS Scheme has not only exonerated the petitioners, but for all intents and purposes given up",,,
the perusal of the complaint and having no grievance against them in any other proceeding whether civil or criminal on the same set of,,,
issues.â€,,,
“70. There is no doubt that the trial has been proceeding for offences for the last about 20 years ago. The dispute between the petitioner,,,
and complainant Bank 33 years old. A long time has in fact been elapsed since the alleged commission of offences. Still the trial continues.,,,
The present petition is maintainable as the same has been filed also on additional grounds and circumstances. No useful purpose would be,,,
served if such oppressive trial may continue for many more years. Thus, ends of justice are served by quashing such a proceeding, as the",,,
parties cannot be allowed to go through the rigmarole of criminal prosecution for long numbers of years in a matter, it is doubtful in the",,,
mind of the Court in whose favour it would be decided.â€,,,
“71. In view of above mentioned reasons, this Court is inclined to quash the proceedings pending against the petitioners, arising out of",,,
R.C. No. 4A/94/SIU(X) dated 23rd May, 1994, titled “CBI vs. N. Bhojraj Shetty & Ors.â€, being C.C. No.65/11, pending in the Court of",,,
Spl. Judge (CBI), Tis Hazari Courts, Delhi.â€",,,
The said decision has been upheld by the Honâ€ble Supreme Court.,,,
In the present case the attached properties were purchased which are mortgaged properties 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 against the bank. There is also no criminal complaint under the schedule offence,,,
and PMLA is pending against the bank.,,,
It is not denied by the respondent that the conduct of the bank was always bona-fide all the time. The bank is an innocent party who is legally,,,
entitled to inform the Adjudicating Authority about its innocence but the contention was rejected as appeared from the impugned order.,,,
This Tribunal in the case of IPRS in appeal no. FPA-PMLA-1302/MUM/2016 decided on 22.06.2017 had dealt with the similar issue as to,,,
whether the innocent party whose immovable properties are attached by the ED can approach the Adjudicating Authority for release of the same in,,,
para no. 55 to 60 the same read as under:-,,,
“55. Whether innocent party whose properties i.e. movable or immovable are attached can approach the Adjudicating Authority for,,,
release of attached property.,,,
The Scheme of Prevention of Money Laundering Act clearly provides the mechanism whereby the innocent parties can approach the,,,
Adjudicating Authority for the purposes of release of properties which have been attached in terms of the provisions of Section 5 of the Act.,,,
This can be seen by reading Section 8(1) and the proviso to Section 8(2) of the Act whereby Adjudicating Authority has to rule whether all,,,
or any of the properties referred to in the notice are involved in money laundering or not.,,,
“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 subsection (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 or frozen 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, after- (a) considering the reply, if any, to the notice issued under subsection (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, section 58 B or sub-section (2 A) of section 60 by the Adjudicating Authority (4) Where the provisional order of attach""",,,
There are judicial pronouncements whereby it has been laid down that the innocent parties can approach the Adjudicating Authority for,,,
release of property by showing their bonafides in their dealings with the property. In the case of Sushil Kumar Katiyar (Appellants) Vs UOI,,,
and Ors. (Respondents) MANU/UP/0777/2016 decided on 10.05.2016 by Allahabad High Court, it has been observed by the Ld. Single",,,
Judge after noticing the judgment of Karnataka High Court that the element of knowingly or mens rea have been provided under the Act so,,,
that the aspect of implicating any innocent person can be ruled out. Relevant para 26 of judgment is reproduced below:-,,,
“26. Thus, upon consideration of the law laid down by the Hon'ble Karnataka High Court, it is clear that the amendment incorporated in",,,
the Money Laundering Act was not held unconstitutional and ultra virus, but it was observed by the Karnataka High Court that the property",,,
of a person can be attached without there being any prosecution for the offence of Money Laundering, but so far as the prosecution of a",,,
person for the offence of money laundering is concerned, the proceedings under section 3 of the PML Act can be initiated only in case the",,,
person is held guilty of receiving proceeds of crime as a result of commission of scheduled offence. The Karnataka High Court has also held,,,
that the complainant in such a case is not required to wait for the result of trial being held for the scheduled offence. A complaint can still be,,,
filed against such person, but if ultimately the person is acquitted of the charge for the scheduled offence, his prosecution under section 3 of",,,
the Act for the offence of Money-Laundering would also come to an end. It has also been kept open by the Karnataka High Court that a,,,
person against whom complaint under section 3 of the PML Act has been filed and he is being prosecuted for the offence of money-,,,
laundering, he can show before the court that he is innocent and has not received any proceeds of crime.â€",,,
It is clear that innocent person can approach the Adjudicating Authority of any competent court to demonstrate his innocence that he has,,,
not received any proceeds of crime. The consequence of this is that while considering whether all or any of the properties provided under,,,
notice issued u/S 8(1) are involved in money laundering, the Adjudicating Authority can take into consideration the plea of innocence",,,
raised by any person and also the fact as to whether the property which has been attached has any nexus whatsoever with that of money,,,
laundering or not if the person before the Tribunal/ Adjudicating Authority is able to demonstrate that he neither directly nor indirectly has,,,
attempted to indulge nor with knowledge or ever assisted any process or activity in connection with proceeds or crime and the question of,,,
his involvement does not arise as he is third party, then the Tribunal/ Adjudicating Authority can consider the said plea depending upon",,,
whether there exist bona fide in the said plea or not and proceed to adjudicate the plea of innocence of the said party.,,,
This is due to the reason that Section 8 allows the Adjudicating Authority to only retain the properties which are involved in money,,,
laundering which means as to whether properties attached are involved in money laundering or not is a pre-condition prior to confirming,,,
or attachment by Adjudicating Authority. Therefore, at that time, if the plea is raised that the party whose property is attached is innocent or",,,
is without knowledge of any such transaction with respect to money laundering, then the Tribunal can consider the said plea and proceed to",,,
release the said property out of the properties by holding that the said property is not involved in money laundering.,,,
For the purposes of determining whether the property is involved in money laundering, the Court may consider the ingredients of",,,
Section 3 which define offence of money laundering. The aspect of knowledge or involvement has been discussed by Ld. Single Judge of,,,
Gujarat High Court in the case of Jafar Mohammed Hasanfatta and Ors (Appellants) Vs Deputy Director and Ors. (Respondents),,,
MANU/GJ/0219/2017 wherein Ld Single Judge has observed as under:-,,,
“37. A holistic reading of this definition of 'proceeds of crime' and the penal provision under Section 3 of PMLA, which uses conjunctive",,,
'and', makes it luminous that any persons concerned in any process or activity connected with such ""proceeds of crime"" relating to a",,,
scheduled offence"" including its concealment, possession, acquisition or use can be guilty of money laundering, only if both of the two",,,
prerequisites are satisfied i.e.-,,,
“(i) Firstly, if he-",,,
(a) directly or indirectly 'attempts' to indulge,",,,
(b) “knowingly†either assists or is a party, or",,,
(c) is “actually involved†in such activity; and,,,
(ii) Secondly, if he also projects or claims it as untainted property;""",,,
The first of the two pre-requisite to attract Section 3 of PMLA shall thus satisfy any of the following necessary ingredients-,,,
“A. RE: DIRECT OR INDIRECT ATTEMPT:,,,
In State of Maharashtra v. Mohd.Yakub, (1980) 3 SCC 57, the Hon'ble Supreme Court observed that-",,,
“13. Well then, what is an “attempt� ...In sum, a person commits the offence of ""attempt to commit a particular offence"" when (i)",,,
he intends to commit that particular offence and (ii) he, having made preparations and with the intention to commit the offence, does an act",,,
towards its commission; such an act need not be the penultimate act towards the commission of that offence but must be an act during the,,,
course of committing that offence.""",,,
Thus, an “attempt to indulge†would necessarily require not only a positive ""intention"" to commit the offence, but also preparation for",,,
the same coupled with doing of an act towards commission of such offence with such intention to commit the offence. Respondent failed to,,,
produce any material or circumstantial evidence whatsoever, oral or documentary, to show any such 'intention' and 'attempt' on the part of",,,
any of the petitioners.,,,
B. RE: KNOWINGLY ASSISTS OR KNOWINGLY IS A PARTY:,,,
In JotiParshad v. State of Haryana, 1993 Supp (2) SCC 497 the Hon'ble Supreme Court has held as follows-",,,
“5. Under the Indian penal law, guilt in respect of almost all the offences is fastened either on the ground of ""intention"" or ""knowledge""",,,
or ""reason to believe"". We are now concerned with the expressions “knowledge†and ""reason to believe"". “Knowledge†is an",,,
awareness on the part of the person concerned indicating his state of mind. “Reason to believe†is another facet of the state of mind.,,,
Reason to believe"" is not the same thing as “suspicion†or “doubt†and mere seeing also cannot be equated to believing.",,,
“Reason to believe†is a higher level of state of mind. Likewise “knowledge†will be slightly on a higher plane than “reason to,,,
believeâ€. A person can be supposed to know where there is a direct appeal to his senses and a person is presumed to have a reason to,,,
believe if he has sufficient cause to believe the same.â€,,,
The same test therefore applies in the instant case where there is absolutely no material or circumstantial evidence whatsoever, oral or",,,
documentary, to show that any of the petitioners, 'Knowingly', assisted or was a party to, any offence.",,,
C. Actually involved:,,,
Actually involved would mean actually involved into any process or activity connected with the proceeds of crime and thus scheduled,,,
offence, including its concealment, possession, acquisition or use. There is absolutely no material or circumstantial evidence whatsoever,",,,
oral or documentary, to substantiate any such allegation qua the petitioners,",,,
D. Neither any of the petitioners is arraigned as accused in the 'Scheduled Offences' punishable under Indian Penal Code for direct or,,,
indirect involvement, abetment, conspiracy or common intention, nor is any such case made out even on prima facie basis against any of",,,
them.""",,,
The second of the two pre-requisite to attract Section 3 of PMLA would be satisfied only if the person also projects or claims proceeds of,,,
crime as untainted property. For making such claim or to project 'proceeds of crime' as untainted, the knowledge of tainted nature i.e. the",,,
property being 'proceeds of crime' derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled offence,",,,
would be utmost necessary, which however is lacking in the instant case.""",,,
These are four ingredients which are determinative factors on the basis of which it can be said that whether any person or any property,,,
is involved in money laundering or not. If there is no direct / indirect involvement of any person or property with the proceeds of the crime,,,
nor there is any aspect of knowledge in any person with respect to involvement or assistance nor the said person is party to the said,,,
transaction, then it cannot be said that the said person is connected with any activity or process with the proceeds of the crime. The same",,,
principle should be applied while judging the involvement of any property of any person in money laundering. This is due to the reason that,,,
if the property has no direct involvement in the proceeds of the crime and has passed on hands to the number of purchasers which includes,,,
the bona fide purchaser without notice, the said purchaser who is not having any knowledge about the involvement of the said property",,,
with the proceeds of the crime nor being the participant in the said transaction ever, cannot be penalized for no fault of his. Therefore, it",,,
cannot be the Scheme of the Act whereby bona fide person without having any direct/ indirect involvement in the proceeds of the crime or its,,,
dealings can be made to suffer by mere attachment of the property at the initial stage and later on its confirmation on the basis of mere,,,
suspicion when the element of mens rea or knowledge is missing.,,,
Similar principle has been laid down by Chennai High Court in the case of C. Chellamuthu (Appellants) Vs The Deputy Director,",,,
Prevention of Money Laundering Act, Directorate of Enforcement (Respondent) MANU/TN/4087/2015 decided on 14.10.2015, relevant",,,
portion of which are reproduced below:-,,,
“ 20. The said sections read as follows:--,,,
“23. Presumption in inter-connected transactions Where money-laundering involves two or more interconnected transactions and one or,,,
more such transactions is or are proved to be involved in money-laundering, then for the purposes of adjudication or confiscation (under",,,
section 8 or for the trial of the money-laundering offence, it shall unless otherwise proved to the satisfaction of the Adjudicating Authority or",,,
the Special Court), be presumed that the remaining transactions form part of such inter-connected transaction.",,,
Burden of proof,,,
In any proceeding relating to proceeds of crime under this Act,",,,
(a) in the case of a person charged with the offence of money-laundering under Section 3, the Authority or Court shall, unless the contrary is",,,
proved, presume that such proceeds of crime are involved in money-laundering; and",,,
(b) in the case of any other person the Authority or Court, may presume that such proceeds of crime are involved in money-laundering.",,,
In the present case, one G. Srinivasan is accused of having played fraud and obtained a loan of Rs. 15,00,00,000/- by producing bogus",,,
and fabricated documents. From and out of the said amount, the property in question was purchased by him in the names of his Benamies.",,,
One Ayyappan was appointed as their Power Agent. One Gunaseelan purchased the property through the Power Agent Ayyappan. The said,,,
Gunaseelan was examined and his statement was recorded Under Section 50 of the Act. He had stated that he purchased the property for,,,
cultivation. He developed the property but geologist gave opinion that property will not yield proper income. In the circumstances, he sold",,,
the property to appellants. The respondent has not produced any document or material to disprove the statement of Gunaseelan. There is,,,
nothing on record to show that the transaction in favour of the said Gunaseelan, is not genuine. It is not the case of respondent that the said",,,
Gunaseelan is a Benami or employee of G. Srinivasan and that Gunaseelan did not pay any amount as sale consideration or the sale,,,
consideration paid by Gunaseelan was not legitimate money. There is no material to show nexus and link of Gunaseelan with G. Srinivasan,,,
and his Benamies. In the absence of any verification or investigation by respondent with regard to genuineness or otherwise of the purchase,,,
by Gunaseelan; whether he was connected with G. Srinivasan or the sale consideration is legitimate or not the property in the hands of,,,
Gunaseelan cannot be termed as proceeds of crime.,,,
Further, the appellants have given statements under Section 50 of the Act. They have categorically stated that they possess agricultural",,,
lands, cultivate GloriosaSuperba seeds and sell the same and derive considerable income. They have named the persons to whom they have",,,
sold the GloriosaSuperba seeds and produced Bank statements. Some of the Appellants have stated that they sold their lands and borrowed,,,
monies to purchase the property in question. There is nothing on record to show that the respondent had verified these statements.,,,
Especially, the respondent has not verified the Bank statement produced by the Appellants to ascertain the genuineness of the same and",,,
whether the money deposited came from genuine purchasers or from the persons involved in fraud and Money Laundering. The respondent,,,
does not allege that Appellants are Benamies of G. Srinivasan or no sale consideration passed to the vendor.,,,
Considering the materials on record and judgments reported in MANU/MH/1011/2010: 2010 (5)Bom CR 625 [supra] and : [2011] 164,,,
Comp Cas 146(AP) [supra], I hold that appellants have rebutted the presumption that the property in question is proceeds of crime. The",,,
respondent failed to prove any nexus or link of Appellants with G. Srinivasanand his benamies. Once a person proves that his purchase is,,,
genuine and the property in his hand is untainted property, the only course open to the respondent is to attach sale proceeds in the hands of",,,
vendor of the appellants and not the property in the hands of genuine legitimate bona fide purchaser without knowledge.,,,
Before the Adjudicating Authority it was admitted by complainant that appellants had no knowledge that properties in the hands of their,,,
vendor was proceeds of crime. It was also not disputed by complainant that the appellants did not have financial capacity to buy properties.,,,
Paragraphs 21, 22, 23 and 24 of order of Adjudicating Authority is extracted herein for better appreciation.",,,
“21. The CBIBS & FC (BLR) has filed a charge sheet in the court of Spl. Judge for CBI cases Coimbatore, against Sh. Arivarasu, Sh. R.",,,
Manoharan, Sh. R. Selvakumar, Sh. G. Srinivasan, Sh. K. Martha Muthu, Sh. V. InduNesan, Sh. K. Vignesh, Sh. A. Sainthil Kumar, Sh. M.",,,
Ram Krishnan, for the offences punishable under Section 120-B read with 420, 467, 471 IPC and section 13(2) read with 13(1)(d) of PC",,,
Act 1988. The offences punishable under section 120-B, 420, 471 are schedule offence under Section 2(1)(y) of the PMLA and therefore on",,,
of the condition for issuing provisional attachment order is satisfied. The other important point to be determined is whether the properties,,,
attached vide Provisional attachment order are involved in money-laundering. The only defense or explanation raised by Defendants,",,,
particularly Def No. 2 to 8 is that the landed properties attached by the complainant are not proceeds of crime. These properties were,,,
purchased by these defendants without having any knowledge, whatsoever, that these properties were derived or obtained through criminal",,,
activities relating to schedule offence. It has been demonstrated by them that they verified the title deeds relating to the properties and after,,,
due verification of every details entered into the sale transactions as such these are bona fide deals entered by them against proper sale,,,
consideration and the money paid to the seller is also well explained.,,,
Against the above arguments vehemently raised by the defendants, the complainant without disputing that the deals are bona fide",,,
heavily relied on the judgment of the Bombay High Court, dated 05.08.2010 in Mr. Radha Mohan Lakhotia Vs. Deputy Director, PMLA,",,,
Directorate of Enforcement, Mumbai in first appeal No. 527/2010. In this case it held by the Bombay High Court that the property bought",,,
without the knowledge that the same is tainted could be subjected to Provisional Attachment Order.,,,
In the instant case the only point to be decided is whether the properties bought by any person against clean money and without any,,,
knowledge that properties have been acquired directly or indirectly through scheduled offence could be subject matter of provisional,,,
attachment order.,,,
It is an admitted position that the Defendants (D-2 to D-8) had no knowledge that the properties in the hands of the vendor was proceeds,,,
of crime. They have also verified the papers relating to these properties before the deal. No point has been raised with regard to the,,,
financial capability of these Defendants to buy these properties. However, the Bombay High Court decision in Radha Mohan Lakhotia has",,,
been pressed into service to make out a plea that the properties could be attached in such circumstances under the PMLA.""",,,
Provisional attachment was sought to be continued only based on the judgment of Bombay High Court in Radha Mohan Lakhotia's case.,,,
A reading of paragraphs 21 to 24 clearly reveals that both the Adjudicating Authority as well as Appellate Authority failed to properly,,,
appreciate the facts and findings in Radha Mohan lakhotia's case. In that case, the Department had placed substantial and acceptable facts",,,
to prove that the property in the hands of third party was proceeds of crime. It is pertinent to note that in Mr. Radha Mohan Lokatia's case,",,,
Department had proved the nexus and link between the person possessing the property and person accused of having committed an offence.,,,
All the persons involved in that case were close relatives.,,,
In the present case, the respondent failed to prove that the appellants did not have sufficient financial capacity to buy the property or",,,
that the money paid by them as sale consideration was not legitimate money derived by agricultural activities. No material was produced to,,,
show that the appellants are close relatives of person, who involved in criminal activities and the person, who sent monies to purchase the",,,
property did not possess financial capacity to provide such huge amounts and that they are not genuine purchasers of agricultural products,,,
of appellants. The respondent has not made any such investigation and has not produced any such material. Further, the Appellate",,,
Authority in fact considered the additional documents produced before it, but rejected the same on the ground that Appellants have not given",,,
any valid reasons for not filing the same before the Adjudicating Authority. Having considered the Additional documents, the appellate",,,
authority failed to give any finding on merits after verifying with the concerned Bank.""",,,
From the scheme of the Prevention of Money Laundering Act, 2002 and its object, it is clear that the intention of the legislation was not to apply",,,
the Act to the nature transaction involved in the present case.,,,
The ED in its provisional order as well as in the complaint before the Adjudicating Authority admitted that the properties which are subject matter,,,
are mortgaged with the appellant bank. The borrowers acquired the properties much before the borrowers availed the loan from the appellant bank,,,
and therefore no proceeds of crime were invested in these properties. The copies of the title deed of the properties would show the same acquisition,,,
to be prior to dates of alleged fraud, if any committed even as per the case of the respondent no. 1.",,,
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 fraud committed by the borrowers. The appellant Bank is entitled to recover 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 bank is the rightful claimants of the said properties which are already in the possession of the appellant bank under the SARFAESI,,,
Act. The Honâ€ble Supreme Court of India in the case of Attorney 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.. In the present case as the money belongs to the Appellant bank it is public money. The appellant bank has the right to properties,,,
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.,,,
The objective of Prevention of Money Laundering Act, 2005 has a greater relation to crimes connected with reference to Illicit Traffic in Narcotic",,,
Drugs and Psychotropic Substances, drug crimes and other connected activities. None of the provisions are applicable in the facts of the present case.",,,
As far as the borrowers are concerned, we are not expressing any opinion with regard to matters pending before the Special Court in relation to",,,
schedule offences and the complaint under this Act. These matters are to be considered as per law.,,,
There is no money laundering in the present case as far as the bank is concerned. Due to the attachment proceedings by the ED the Appellant,,,
bank is not able to recover the public money by way of selling the properties. The proceedings for recovery are pending.,,,
The ED in its provisional order as well as in the complaint filed before the Ld. Adjudicating Authority has admitted and acknowledged that the,,,
Properties which are mortgaged with the Banks were acquired and possessed by the respective owners much before the Respondents availed the,,,
loan from the Appellant Banks and therefore no proceeds of crime are invested in these properties.,,,
From the entire impugned order, it was passed without application of mind and consulting the judgments of supreme court, full court of Madras",,,
High Court and various High Courts. The Adjudicating Authority does not want to read the amendment carried in the status as well as the judgements,,,
rendered by the higher court. The application of section 5 & 8 of the PML Act, 2002 wrongly applied by the Authority. The account of the borrowers",,,
is declared as Non-Performing Asset (NPA).,,,
Although the said decisions were relied upon as well as was vehemently argued by the counsel for Appellant Bank yet the Ld. Adjudicating,,,
Authority did not look into the facts and law involved in the contentions of the Appellant Bank.,,,
The legal right under SARFAESI is taken away from the Appellant Bank by the ED vide Attachment Order dated 08.06.2017 and by the Ld.,,,
Adjudicating Authority vide Impugned Order 24.10.2017. The Adjudicating Authority failed to understand that the Appellant Bank has stakes in the,,,
said properties at Sl. No. A & C (listed from 3to 8) of the Schedule of Properties (page Nos. 21-23) of the PAO. The Appellant Bank has the right to,,,
recover the loan amount against the mortgaged properties under law. The valuable right will be lost if the Order of attachment would continue. The,,,
impugned order passed by Adjudicating Authority would cause miscarriage of justice if it is not set-aside.,,,
Even ED as well as the Ld. Adjudicating Authority had fully aware but despite in the reason to believe that the said properties mortgaged to the,,,
Appellant Bank (SBI) had the superseding rights over the properties attached by the Enforcement Directorate; still the Ld. Adjudicating Authority,,,
confirmed the provisional attachment Order and has caused huge loss to the Appellant Bank. In case the legal-amount due which is not paid by the,,,
borrowers by the Enforcement Directorate and Adjudicating Authority has to take the matter seriously and apply the law strictly and not as per their,,,
whims and fancy and personal notions and presumption. If it would continue. The only God can help the future of banks.,,,
The present order has been deliberately while confirming the PAO despite of having the knowledge of earlier judgments passed by this Tribunal,,,
referring the various judgments of the Supreme Court and full bench of Madras High Court and other High Courts.,,,
The Ld. Adjudicating Authority has failed to understand that Appellant Bank has heavy stakes in the properties as they have lent its valuable,,,
money to the borrowers. The property is mortgaged to the Appellant Bank. If 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.",,,
The bank 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 have proceeded with the matter in good faith and are not involved in",,,
the offence of money laundering.,,,
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 have caused huge loss to the Appellant/SBI. Both ED and Adjudicating Authority have,,,
failed to apply the law on the subject. Had the consulted the law and provisions of PML Act, 2002 in meaning of manner, the PAO and impugned",,,
order not to have been passed.,,,
The Adjudicating Authority has not examined the law on mortgage and securities. The Appellant Bank is 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.,,,
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 before the alleged date of 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. The said properties are already in the possession of the appellant bank under the SARFAESI Act. The,,,
Honâ€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. The bank had to recover its outstanding dues by taking over the possession of the,,,
mortgaged properties in case the borrowers are not able to pay back the amount.,,,
The Respondent No.-1 has no lien over the said properties as the Appellant bank is now the Legal transferee of said properties. 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 bank is victim and,,,
even after trial, he is to receive-back the said properties being victim party u/s 8(8) of the Act. However since the averment is carried out in law, the",,,
bank is entitled to dispose the mortgaged property without any delay.,,,
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 bank who has sanctioned the amount which is untainted and pure money.,,,
The bank has 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. 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.",,,
The Adjudicating Authority has blindly relied upon the submissions made by the Respondent No. 1/ED and has not given due weightage to the,,,
facts brought before the eyes of law by the Appellant Bank. Also, the Ld. Adjudicating Authority has gone against the decision of this Honâ€ble",,,
Appellate Tribunal in the case of State Bank of India Vs The Joint Director, Directorate of Enforcement, Kolkata [FPA-PMLA-I026/KOL/2015]",,,
wherein it was held that the Banks are the Legal transferee of the mortgaged properties and such properties cannot be attached when there is no,,,
illegality or unlawfulness in the title of the Appellant and there is no charge of money laundering on the Appellant. It was held that the Banks are the,,,
secured creditors and as such they have the priority to recover the loan amount/debts by sale of assets over which security interest is created, which",,,
remains unpaid and if the Banks are asked to await till the trial is over, the systems in these types of cases, the economy would collapse.",,,
The complainant in the criminal case is the Bank who is victim. Had the Bank not filed a criminal complaint. If the security of the Bank, is treated",,,
as proceeds of crime and is confiscated under the Act, in future, no Bank in such circumstances would make a complaint to the authorities. The trial in",,,
the prosecution complaint would take number of years. The victim cannot wait for such a long period of time, although after trial and final",,,
determination, the victim is entitled to recover the amount by selling immovable properties u/s 8(8) of the Act.",,,
Non performing assets (NPA), choking the banking system who is already struggling for same time and banks condition are being deteriorated day",,,
by day. Lac of crores of rupees worth loans are classified as non-performing loans in India. The crises of banks in India is become worse.,,,
As a matter of fact, hundred of borrowers who have taken the loans against the securities and mortgaged properties, they are not returning the legal",,,
debts. They are simply adopting all sort of tactics by raising defense that their properties are attached by ED. Even they have stopped paying the,,,
installments due by raising the plea that why should pay debts once the attachment orders are passed. By way attachment, their properties are also",,,
safe so as the due amount. In fact they are happy if the attachment would continue against the mortgaged properties despite of passing the decrees by,,,
the DRT in favour of banks and against borrowers. By this mean, the attachment-orders amounting to interference with the judicial system as the",,,
Adjudicating authority in many cases has ignored judgements of the Supreme Court, Full bench of Madras High Court and many High Courts and",,,
even of this tribunal. Such order are being passed without consulting law and facts of the matter.,,,
The intention of the Act could not have been to block the loan amount against the mortgaged properties being innocent person as is sought to be,,,
done in the instant case. If the impugned order is taken as correct, it would be a patently absurd situation once substantial securities of the bank are",,,
not available for the benefit of Bank. Such a result does not advance the objects of the Act.,,,
The Bank relies on the case of Indian Bank Vs. Government of India and M/s Palpap Ichinichi Software International Ltd., decided by Madras",,,
High Court on 11.07.2012, wherein it was held in similar circumstances that Sections 5, 8 and 9 of the Act cannot be used by the authorities to inflict",,,
injury of the victim i.e. the Bank. As far as actual amount due from the borrowers are concerned, the out-standing amount would be decided by the",,,
appropriate authority. For the same, no figures are being determined by this judgment.",,,
For the above said reasons as mentioned above, the impugned order dated 24.10.2017 is set-aside, consequently the provisional attachment also",,,
does not survive and the same is quashed. This judgement & order is without prejudice to the matters pending against the borrowers before the,,,
Special Court. The attachment of mortgaged properties with the appellant bank is lifted.,,,
The appeal and pending application are disposed of accordingly.,,,
No costs.,,,