TMI Blog2017 (8) TMI 754X X X X Extracts X X X X X X X X Extracts X X X X ..... chedule offence and PMLA is pending against the two banks. In case of failure on the part of borrowers to comply with the terms of settlement, the contempt proceedings are maintainable in the Court where the settlement was recorded. In view of the entire gamut of the dispute, we are of the considered opinion that the conduct of the banks are always bonafide. Both banks are innocent parties. They were legally entitled to inform the Adjudicating Authority about their innocence and they rightly did so but their contention was rejected as appeared from the impugned order. There is no nexus whatsoever between the alleged crime and the two bank who are mortgagee of all the properties which were purchased before sanctioning the loan. Thus no case of money-laundering is made out against banks who have sanctioned the amount which is untainted and pure money. They have priority to the secured creditors to recover the loan amount/debts by sale of assets over which security interest is created, which remains unpaid. The Ld. Adjudicating Authority has not appreciated the facts and law involved in these matters and the primary objective of section 8 of PMLA is that the Adjudicating Authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esently Retd. (ii) Shri Bharat Jain, Director, M/s Nik Nish Retail Ltd., 11 Middleton Street, 1st Floor, Kolkata and also Director of M/s Bansilal Leisure Park, Kolkata. (iii) Shri Pradip Kumar Hirawat, Director, M/s Vishi Commercial Pvt. Ltd., 14/2, Old China Bazar Street, Room No. 54, Kolkata-700001. (iv) Shri Pawan Kumar Jain, Director, M/s Vishi Commercial Pvt. Ltd., 14/2, Old China Bazar Street, Room No. 54, Kolkata-700001. (v) Smt. Neera Bhojnagarwala, Propritrix Authorized signatory of M/s N.B. Services E.Com, P-10, Howrah Bridge Approach Road, Kolkat-700001. (vi) Shri Gopal Bhojnagarwala, Authorized signatory of M/s N.B Services E. Com, P-10, Howrah Bridge Approach Road, Kolkata-700001. (b) Subsequently, Central Bureau of Investigation, BS FC, Kolkata forwarded the copy of the Charge Sheet No. GR-2406/2011 dated 13.07.2011 in FIR No. RCBSK2009 E0008 dated, 11/09/09 issued against the following accused persons and Companies/Firms vide letter No. DPBSK2012/3277/RC.BSK.2009E.0009 dated 14.06.2012. (i) Shri Bharat Jain, Director, M/s Nik Nish Retail Ltd., Residential Address: Paramount Building, Flat No. 9D, 25, Ballygunge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nge Circular Road, Kolkata- 700 019 2000 Flat owned by Shri Bharat Jain, Director of M/s. Nik Nish Retail Ltd. and other companies ₹ 56 lakhs 2. Flat No. 9D, Paramount Building, 25, Ballygunge Circular Road, Kolkata- 700 019 (Area: 3215 Sq. ft.) 2000 Flat owned by Smt. Eela Jain, Director of M/s. Nik Nish Retail Ltd. and other companies W/o of Shri Bharat Jain ₹ 2.30 Crores 3. Flat No. 4B, Puspa Aparment, 4th Floor, 63A, Bright Street, Kolkata- 700 019.(Area: 919.25 Sq. ft. + 32.30 Sq. ft. Servant Qtr.) 2000 Flat owned by M/s. Midvale Systems Pvt. Ltd., owned by Shri Bharat Jain ₹ 35 lakhs 4. Flat No. 4C, Puspa Apartment, 4th Floor, 63A, Bright Street, Kolkata- 700 019 (Area: 1566.70 Sq. ft. + open terrace 896.70 Sq. ft. + 131 Sq. ft. Servant Qtr. + 134.55 Parking area) 2000 Flat owned by M/s. Midvale Systems Pvt. Ltd, owned by Shri Bharat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Bank of India were acquired and possessed by the respective owners since 2000 which is much before the respondents availed the loan from Union Bank of India and therefore no proceeds of crime are invested in these properties and even prior to the coming in force of the Act of 2002. Serial no. 6-8 are mortgaged with Union Bank of India. 10. The provisional attachment orders were confirmed by the impugned order dated 02.07.2015. The order is challenged by banks as well as the borrowers on various grounds by filing of above-referred relevant appeals. The borrowers are also arrayed as respondents in the appeals filed by the two banks as mentioned in serial no. 1 and 2. The appeals at serial no. 2 to 11 are independently filed by the borrowers challenging the impugned orders. 11. State Bank of India The appellant at serial no. 1 i.e. State Bank of India has filed the above appeal u/s 26 of the Money Laundering Act, 2002 against the order dated 22nd July, 2015 in OC No. 421/2015 passed by the Adjudicating Authority confirming the Provisional Attachment Order dated 04.02.2015 in the case filed No. ECIR/41/2009/KOL/PMLA of the Joint Director Enforcement Directorate interalia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar Hirawat, Shri Pawan Kumar Jain, Smt. Neera Bhojnagarwala and the officer of the Union Bank, Shri S. Govindan. In the complaint the allegations were that the accused persons had availed various credit facilities/overdrafts from Union Bank of India in the names of their various concerns. The loan amount was withdrawn on transferred to the accounts maintained with the Appellant/State Bank of India; the amounts diverted to the accounts of the Sister concerns; the limits sanctioned to M/s Nik Nish Retails Ltd., M/s Vishi Commercial Pvt. Ltd. and M/s NB Services E.com to the benefit of Shri Bharat Jain of M/s Nik Nish Retail Ltd. have all turned NPA and from the investigation that Shri Bharat Jain in active connivance with Shri S. Govindam, diverted the bank s funds through his connected accounts and outstanding in the accounts, where credit facilities are sanctioned as on 23.07.2009 was claimed as ₹ 1428.24 lacs. (x) On the registration of the FIR by CBI and further investigations the Respondent no. 1 also recorded Enforcement Case Information Report (ECIR) and observed that there was a prima facie case for commission of offence under Section 3 of the PMLA. 13. The detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the nut shell, the case of State Bank of India is that M/s Benison Impex Pvt. Ltd.; M/s Nik Nish Retail Ltd. and M/s Bansilal Leisure Park Ltd. had been availing the credit facilities/loans from various Branches of the Bank since 2005/2006. The account of M/s Bansilal Leisure Park Ltd. was transferred from Central Bank of India on 11.05.2005. In order to secure the loan, the mortgage of the properties has been created in favour of the Bank. The ED has attached the property at Serial No. 1 owned by Sh. Bharat Jain. This property is mortgaged with the Bank in the Loan Account of M/s Bansilal Leisure Park Ltd. M/s Bansilal Leisure Park Ltd. was availing the loan/credit facility from Central Bank of India. They approached the Appellant/State Bank of India for sanctioning of the credit facilities and take over the Loan/ Credit facilities from State Bank of India. The Appellant/State Bank of India on 11.05.2005 has sanctioned the limits. The question of money-laundering or any amount paid by it as proceeds of crime does not arise within the meaning of Section 3 of the Act. 15. Union Bank of India The above mentioned appeal in serial no. 2 has been filed by the Union Bank of Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntre, Durgapur, Distt.: Burdwan, Pin-713216 (Super built area 4765 sq. ft.) Lessee (99 years): Mortgagor and guarantor M/s Bansilal Credit Pvt. Ltd. in the account of M/s Nik Nish Retail Ltd. 17. It is the case of Union Bank of India that the owners of properties acquired possession and ownership of various properties as per Para no. 2 of the impugned order dated 2/7/2015 between the years 2000 to 2008. Properties at serial no. 1-5 were acquired in the year 2000, property at serial no. 6 was acquired in the year 2003, property at serial no. 7 was acquired in the year 2007 and the property at serial no. 8 was acquired in the year 2008. All these properties are subject matter of attachment before this authority. That the appellant is concerned with properties at serial no. 6-7 attached vide provisional attachment orders on which it claims mortgage. 18. In view of default in repayment of loan, the said appellant bank issued two different notices under section 13(2) of the SARFAESI Act, 2002. 18.1 The first notice under section 13(2) of the SARFAESI Act, 2002 dated 26.02.2009 bearing reference no. NRO:KOL:CRLD:2266-A was issued to M/s MSB Mercantiles Pvt. Ltd. and M/s N.B. Ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisional attachment order dated 04.02.2015 provisionally attaching the properties as described in the orders. 18.4. In between the two notices, the complaint dated, 1st September, 2009 was filed by Sri N.K. Agarwal, Chief Vigilance Officer, Union Bank of India, Mumbai-400021 before CBI, BS FC, Kolkata, the said agency registered FIR No. RCBSK2009E0008 u/s 120B r/w 420, 409 of IPC and u/s 13(2) r/w 13(1)(e) (d) of PCA against Shri S. Govindan, the then Dy. GM, Nodal Regional Office, Union Bank of India, Kolkata (now retired), Shri Bharat Jain, Director of M/s. Nik-Nish Retail Ltd. and other group of companies, Kolkata and other 4 (Four) Nos accused persons, who hatched a criminal conspiracy to cheat Union Bank of India by taking loan and other credit facilities and laundered a huge sum of money. 19. Case of borrowers The main case of the borrowers in appeals no. FPA-PMLA-1026/KOL/2015, FPA-PMLA-1072/KOL/2015, FPA-PMLA-1153/KOL/2015, FPA-PMLA-1148/KOL/2015, FPA-PMLA-1149/KOL/2015, FPA-PMLA-1150/KOL/2015, FPA-PMLA-1151/KOL/2015, FPA-PMLA-1152/KOL/2015, , FPA-PMLA-1154/KOL/2015, FPA-PMLA-1155/KOL/2015, FPA-PMLA-1156/KOL/2015, (who were also the respondents in the appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amount withdrawn was repaid, it cannot be alleged that there was any default or the funds were diverted or laundered. ii. M/s NB Services : An amount of ₹ 1.50 crore was requested to be sanctioned as Short Term Loan for the specific purpose of making payments to M/s NikNish Retail Ltd. against supply of goods. M/s NB Services is a distributor ofM/s NikNish Retail Ltd. The UBI itself has taken note of the said purpose while processing the Loan Application of the Appellant as well as in its Processing Note. This fact was misrepresented by CVO, UBI in his Complaint to the CBI (Page 30 of PAO). However, it is an admitted position that an amount of ₹ 1.45 crore obtained by M/s NB Services was paid to M/s NikNish Retail Ltd. against supply of goods. Therefore, the question of the said amount being laundered does not arise. iii. M/s NikNish Retail Ltd. : An amount of ₹ 10 crore and ₹ 5 crore was obtained as CC and LC respectively. The allegations of the respondent that an amount of ₹ 9crore approx. was laundered stand fully nullified for the following reasons: a. It is a matter of record that an amount of ₹ 3.61 crore was paid to unsec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. It is further submitted that during the pendency of appeal, the Appellant has entered into One Time Settlement (OTS) with the UBI, and substantial payments to the tune of more than ₹ 2.5 crores have already been made in compliance thereof. Accordingly, the DRT, Kolkata has accepted the Compromise Petition and the Recovery Proceedings shall be dropped upon satisfaction of the total settlement amount. Copy of the compromise-order recorded has been filed. 19.4 It is submitted that the judgment in the case of Radha Mohan Lakothia rendered by the Hon ble High Court of Bombay relied upon by the respondent is not applicable to the facts of the present case. The said Judgment relates to NDPS Act, 1985 wherein recovery of 200 kg of cocaine and its implications outside India were the major issues for consideration before the Court. 19.5. It is also submitted that the alleged period of commission of scheduled offence is January- August 2008 as is evident from the FIR/Charge sheet filed by the CBI. Even the date of acquisition and possession of the attached properties is admittedly prior to 01.06.2009 i.e. date of inclusion of section 420 and 120B of IPC as scheduled offences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt, has been invested in acquiring his property. Furthermore, the Appellant/State Bank of India had mortgaged charge over the property prior to the date of the crime. The Bank has already filed the Suit for recovery and has also had taken the action under SARFAESI Act. Notice under Section 13(2) was served on 17.12.2008 and possession was taken on 11.2.2010 and 26.11.2010, however, the mortgagor has approached the DRT and because of the same, the further action could not be taken. The Notice of the Bank is not interfered by the Court. 23. The ED has sought the attachment of the properties at sr. no. 3, 4 5 at Table 1 of the Complaint. All these three flats owned by M/s Midvale Systems Pvt. Ltd. were acquired in the year 2000. The ED has also filed the copies of the sale deeds/title deeds of the properties which shows about the date of acquisition. The alleged date of alleged if any is of subsequent dates, hence, it cannot be said that the claim in any manner that these properties has been acquired out of the funds/loans availed from Union Bank of India. There is no allegation even of diversion of funds to this Company. At para 6C of the Complaint, the ED has given a Chart of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred the decisions in support of his argument. He also referred the pleadings and documents placed before Adjudicating Authority. He argued that PMLA, 2002 is a Special Act. The proceedings against the attachment can continue despite of mortgaging the properties with the bank against the loan or even no complaint against bank under the schedule offence or complaint under Section 3 is filed. 29. Both parties have made their submissions, they have also referred large number of documents. The written-submissions have also been filed. 30. We may point out that the aspect of overriding effect between the two special Act i.e. PMLA, 2002 and SARFAESI Act has been widely discussed by the Supreme Court in the case of Solidaire India Ltd. V/s. Fair Growth Financial Services Ltd. Ors. Wherein after discussion in para 7-11 it was held that later enactment would prevail with a non- obstante clause. Paras 7-11 reads as under:- 7. Coming to the second question, there is no doubt that the 1985 Act is a special Act. Section 32(1) of the said Act reads as follows: 32. Effect of the Act on other laws.-(1) The provisions of this Act and of any rules or schemes made there under shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obstante clause it means that the Legislature wanted that enactment to prevail. If the Legislature does not want the later enactment to prevail then it could and would provide in the later enactment that the provisions of the earlier enactment continue to apply. The Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992, provides in Section 13. that its provisions are to prevail over any other Act. Being a later enactment, it would prevail over the Sick Industrial Companies (Special Provisions) Act, 1985. Had the Legislature wanted to exclude the provisions of the Sick Companies Act from the ambit of the said Act, the Legislature would have specifically so provided. The fact that the Legislature did not specifically so provide necessarily means that the Legislature intended that the provisions of the said Act were to prevail even over the provisions of the Sick Companies Act. Under Section 3 of the 1992 Act, all properly of notified persons is to stand attached. Under Section 3(4), it is only the Special Court which can give directions to the Custodian in respect of property of the notified party. Similarly, under Section 11(1), the Special Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid off or directed by the Special Court. The Special Court can, if it is convinced, grant time or installments. There can, therefore, be no stay of any proceedings for recovery against a sick company so far as the Special Court under the 1992 Act is concerned. 11. We are in agreement with the aforesaid decision of the case, more so when we find that whenever the legislature wishes to do so it makes appropriate provisions in the Act in that behalf. Mr Shiraz Rustomjee has drawn our attention to Section 34 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 wherein after giving an overriding effect to the 1993 Act it is specifically provided that the said Act will be in addition to and not in derogation of a number of other Acts including the 198.5 Act. Similarly under Section 32 of the 1985 Act the applicability of the Foreign Exchange Regulation Act and the Urban Land (Ceiling and Regulation) Act is not excluded. It is clear that in the instant case there was no intention of the legislature to permit the 1985 Act to apply, notwithstanding the fact that proceedings in respect of a company may be going on before the BIFR. The 1992 Act is to have an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n : For the purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to secured creditors in payment of debt shall be subject to the provisions of that Code. (ii) Section 31B of the Recovery of Debts and Bankruptcy Act, 1993 : 31B. Priority to secured creditors 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 other rates due to the Central Government, State Government or local authority. Explanation : For the purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uce Section 31B in the Principle Act, Which reads as under:- 31B. Notwithstanding anything contained in any other law for the time being in force, the rights of secured creditors to realize 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. Explanation. for the purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016, in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to secured creditors in payment of debt shall be subject to the provisions of that Code. 3 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. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ured debts, would have priority over all debts, which would include, Government dues including revenues, taxes, etc., should hold good qua 2002 Act as well. 40. B. RAMA RAJU V. UOI AND ORS. Reported in (2011) 164 company case 149(AP)(DB) who has dealt with the aspect of bonafide acquisition of property in para 103. The same read as under:- 103. Since proceeds of crime is defined to include the value of any property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence, where a person satisfies the adjudicating authority by relevant material and evidence having a probative value that his acquisition is bona fide, legitimate and for fair market value paid therefor, the adjudicating authority must carefully consider the material and evidence on record (including the Reply furnished by a noticee in response to a notice issue under Section 8(1) and the material or evidence furnished along therewith to establish his earnings, assets or means to justify the bona fides in the acquisition of the property); and if satisfied as to the bona fide acquisition of the property, relieve such property from provisional attachment by decl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so settled the loan amount with the complainant i.e. Union of India in order to pay the remaining out-standing amount. The undertaking in this regard is recorded in Court. It is written agreement and the statement of the parties were recorded. Counsel for the borrowers has also informed us that his client also intent to pay the remaining out-standing amount to the State Bank of India in order to clear their liabilities once the attached properties are sold and even otherwise. Copy of the settlement of the borrowers and the complainant Bank of India was filed before us. As far as the schedule offence is concerned, we do not wish to make any comment. But we can only observe that in case of settlement, joint petition for quashing of FIR in the High Court u/s 482 Cr. P.C. could be filed. 43. It is not denied on behalf of department that these provisional attachment was made, the proceedings of recovery of amount were pending before the DRT for recovery against the borrowers and for sum of the properties, possession were with the bank. The mortgaged deeds are also not disputed or/and validity of the same are not challenged on behalf of ED. 44. It is settled law that generally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir contention was rejected as appeared from the impugned order. 48. 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 secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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; 38. 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, MANU/SC/0239/1980 : (1980) 3 SCC 57, the Hon'ble Supreme Court obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossession, 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. 39. 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. 59. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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. 21. In the present case, one G. Srinivasan is accused of having played fraud and obtained a loan of ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 obt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted an offence. All the persons involved in that case were close relatives. 26. 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. 49. From the scheme of the Prevention of Money Laundering Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 53. 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. 54. There is no money laundering in the present case as far as the banks are concerned. Due to the attachment proceedings by the ED the Appellant banks are not able to recover the public money by way of selling the properties. The proceedings for recovery have been initiated back in the year 2009. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not accused. If the attachment would continue against the mortgage property of the banks in this matter, the economy of the country would suffer. The banks in the present case has proceeded with the matter in good faith and are not involved in the offence of money laundering 58. Thus, in the present case, even though the Ld. Adjudicating Authority had all the reasons to believe that the abovementioned were mortgaged to the Appellant Bank and that the Appellant/SBI had prior charge over the subject matter/five properties; still the Ld. Adjudicating Authority confirmed the provisional attachment order of the Respondent No. 1 and thus causing huge loss to the Appellant/SBI. 59. The Adjudicating Authority did not understand that the alleged illegal money received by the Respondents from the Union Bank of India cannot overshadow the huge amount of credit facilities which were taken by the Respondents from the appellant bank in lieu of the properties kept as security with the Appellant Bank. Thus, making the Appellant Bank the rightful owner of the said properties which are already in the possession of the Appellant Bank under the SARFAESI Act. The origin of the funds is not i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y manner. In this case it is clear by the order of the Adjudicating Authority that the funds were transferred for the satisfaction of the bigger credit facilities taken by the respondents from the appellant bank which they could not pay due to the losses suffered by the companies. The said properties are already in the possession of the appellant bank under the SARFAESI Act. The Hon ble Supreme Court of India in the case of Attorney-General of India and others reported in AIR 1994 SC 2179 while dealing with the matter under Conservation of Foreign Exchange and Prevention of Smuggling Activities Act has defined the illegally acquired properties and has held that the illegally acquired properties are earned and acquired in ways illegal and corrupt, at the cost of the people and the state, the state is deprived of legitimate revenue to that extent hence these properties must justly go back where they belong, the state. In the present case as the money belongs to the Appellant Bank it is liable to be recovered by the Appellants Banks. 63. The property of the Appellant Bank cannot be attached or confiscated when there is no illegality or unlawfulness in the title of the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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