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2019 (1) TMI 1182 - AT - Money LaunderingOffence under PMLA - provisional order of attachment of the properties made under sub-section (1) of Section 5 - Attachment of the Moveable/immoveable property which has been Hypothecated/Mortgaged with the Appellant Bank is that proceeds of crime received by the Respondent No.2 Company through circular rotation (As alleged by the Respondent No.1) was either used for repayment of loans or for repayment of its term loans as Advanced by the Appellant Bank, therefore, the entire Plant and Machinery of M/s NakodaLts and its factory building are “Proceeds of Crime" Held that:- There is no denial on behalf of respondent that appellant is a Secured Creditor and is entitled to priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or Local Authority. The Adjudicating Authority did not appreciate that a bare perusal of the afore mentioned section 2(1)(u) of PMLA very clearly stipulates that the property can be attached under the provisions ONLY WHEN, Such property has EITHER been derived or obtained, directly or indirectly as a result of a criminal activity relating to a scheduled offence. The complainant has failed to prove/establish that the immoveable property that has been lawfully Mortgaged with the Appellant Bank has EITHER been derived or obtained, directly or indirectly as a result of a criminal activity relating to a scheduled offence. The only reason given by the Respondent No.1 in the present OC 974/2018 is that proceeds of crime amounting to ₹ 827.98 Cr. received by the Respondent No.2 Company through circular rotation (As alleged by the Respondent No.1) was either used for repayment of loans or for repayment of its term loans as Advanced by the Appellant Bank, therefore, the entire Plant and Machinery of M/s Nakoda Ltd and its factory building are “Proceeds of Crime‖ and the Factory land of M/s Nakoda is also liable for attachment under PMLA as “Value of Such property." It is admitted position that the said movebale/immoveable property is not a property that has been derived or acquired, directly or indirectly through the “Proceeds of crime”. Thus, the said mortgaged property in which the bank is the secured creditor is not liable to be attached in lieu of even value therefore. Therefore, the OC 974/2018 is not maintainable as the Respondent No.1 had no jurisdiction to attach the aforementioned immoveable property under the provisions of the PMLA and that the PAO bearing No. 01/2018 is quashed against the appellant. The Adjudicating Authority did not consider that the provisions of The Prevention of Money-Laundering Act, 2002 cannot be construed and implemented to the detriment of third parties having no connection with and involvement in the scheduled offences which fall within the domain of the Act. The provisions of the Act can only entail penal consequences on those who are guilty of committing of scheduled offences. The rights of a third party having no involvement in the scheduled offences cannot be jeopardized and decimated by the operation of Act as the same would be violative of their legal right under bond fide contracts. Appeal allowed.
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