TMI Blog2017 (8) TMI 799X X X X Extracts X X X X X X X X Extracts X X X X ..... f the property in question. The confiscation or otherwise of the attached property is within the domain of the Special Court. However, the said provision does not in any way interfere with the power of the Tribunal in terms of section 26 (4) of the act to either uphold, set aside or modify the impugned order of the Adjudicating Authority including the provisional attachment order in question. In view of facts direct that as far as the immovable property including the factory under attachment is concerned, the same be released from attachment, subject however to the condition that the appellant shall furnish the Fixed Deposit Receipt (FDR) of ₹ 4.67 crores in the name of respondent no. 1 to the Enforcement Directorate within two months of this order as a security amount. The said FDR shall be furnished by the appellant without prejudice. In case the learned Special Court after trial holds that the said amount is not proceeds of crime, the appellant would be entitled to receive back the principal amount of the FDR as well as the interest accrued thereon. In case the finding of the special court is otherwise, the respondent no. 1 shall be entitled to the principal amount of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per agreement, the appellant invoked the arbitration and nominated an arbitrator in view arbitration clause in the agreement in case of any disputes. 8. The Arbitrator passed an award on 15.07.2009 in favour of the appellant and against the respondent no. 2. With regard to advance amount received by the appellant from the respondent no. 2, in para 13 of the Award, the issue was dealt by the Arbitrator in which it was observed as follows: Consequent on the abandonment of the contract by the Opposite Party and termination of the contract by the Petitioners, the Opposite Party has no rights to continue in possession of the company or to carry out the day-to-day operations. Hence he is liable to redeliver all the properties he had received from the petitioners. A question may arise whether the Opposite Party is entitled to get the amounts paid by him to the petitioners towards partial consideration. It may be of interest to note that the main agreement Ex. P1 and the subsequent supplementary agreements Ex. P5 and P6 do not contain any default or forfeiture clause in the event of breach of contract by the Opposite Party. There is nothing to hold that the petitioners shall re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard since the property is situated at Namakkal. 10. Separately, pursuant to the written complaint dated 06.10.2010 of Shri B. Surendran Vice President Branch Head, SBI Global Factors Limited 3rd Floor, Chamber Towers, 8/732, Avinashi Road. Coimbatore with regard to the fraudulent transactions in the trade finance accounts of M/s Sri Pamba Spinning Mill Private Limited (SPSMPL, in short), situated at 126, Main Building, V.M. Complex Backside, By-pass Road, Udumalpet, Tirupur District and M/s Paranthaman Spinning Weaving Mills Private Limited (PSWMPL, in short), having factory at SF. No.139, Moolipalli Village, Rayarpalayam Post, Thiruchengode, Namakkal District held with M/s Global Trade Finance Limited (GTFL, in short), Coimbatore Branch, the Central Bureau of Investigation, Bank Securities Frauds Cell (BS FC). Bangalore registered FIRs No.RC-6(E)/2010 No.RC- 7(E)/2010 both dated 07.10.2010 respectively in two criminal cases against persons/entities alleged therein and accordingly initiated their investigation. The CBI, BS FC, Bangalore, in respect of the case in FIR No. RC- 6(E)/2010 dated 07.10.2010, filed its Final Report before the Special Judge for CBI cases at C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the immovable property viz. the premises of the mill belonging to appellant company which was the subject matter of arbitration proceedings. 14. The Adjudicating Authority confirms the Order of Provisional attachment on 19.01.2015 i.e. the impugned order which is subject matter of present appeal which is filed by the appellant on 25.02.2015. 15. In the arbitration case, the respondent no. 2 had challenged the said judgment whereby his objections were dismissed on 05.08.2015, the Hon ble High Court of Madras in CMA 3109 of 2012 rejects the Second Appeal filed under Section 37 of the Arbitration Conciliation Act, 1996. 16. The Hon ble Supreme Court also dismisses SLP 33717 of 2015 on 11th December, 2015 filed by the respondent no. 2. There is no denial by any party that the award has certain attained finality. No suit for recovery of refund of advance amount had been filed by the respondent no. 2 against the appellant. As mentioned earlier, said amount was adjusted as per finding arrived in para 13 of the Award which has now become final between the parties. 17. It is not denied by the respondents that CBI registered the FIR against the respondent no. 2 on 7th Octo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the respondent no. 2. The appellant has received the tainted amount from the respondent no. 2. Therefore, it is immaterial if the award is passed in favour of the appellant as the said aspect was never dealt in the award, which is ex-parte award. Even the provision of PMLA, 2002 have overriding effect which would prevail upon to the general law. 24. Therefore the respondent no. 1 has rightly attached the property as it existed a case of money laundering , investigation was initiated under the provisions of PMLA, 2002 as during the course of investigation, the proceeds of crime were identified to have been launched in the form of sale consideration towards the purchase of subject property of the Provisional Attachment Order. As per the provisions of subsection (1) of Section 5 of the PMLA, the property that was derived out of the proceeds of crime and was involved in the offence of money laundering was provisionally attached and the same was confirmed based on the Complaint filed before this Hon ble Adjudicating Authority as per the provisions of Section 5(5) of PMLA, 2002 and the Provisional Attachment Order and its consequent confirmation are within the provisions of law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the property as untainted one. Therefore, it is evident that the property under the possession of the appellant is nothing but a tainted property embroiled with the proceeds of crime and being projected as untainted property as detailed in the subject Provisional Attachment Order. 29. Mr. Matta has referred the decision of Smt. Shobana and others Vs. the Asst. Director of Enforcement, Chennai in W.P. Nos. 14083 to 14085 of 2013, wherein the Hon ble High Court of Madras has held the Impact of Money Laundering as follows: Impact of Money Laundering: 49. The Evil act of money-laundering may create a parallel economic system in a particular country controlled by few persons. Undoubtedly, this will result in destabilization and also affect the prevailing economy. The act of moneylaundering has three ingredients, (a) In placement, it concerns the division of proceeds into smurfing so as to make movements thereof less suspectable. (b) In layering, the funds introduced in the financial system are rotated, transferred, remixed, and retransferred in a repeated fashion. The purpose of layering is to distance the fund from the origin so as to make it difficult to trace the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PMLA, the burden of proving that the property confirmed for attachment under section 8 of the PMLA is not illegally acquired/possessed property shall be on the person only. 32. It is also argued by Mr. Matta that the property, if involved in an offence of money laundering, is liable to be attached by the competent authority even if the person, under whose possession such property is lying, was not charged of having committed a scheduled offence. Therefore, to attach a property involved in an offence of moneylaundering, by the competent authority in terms of Section 3 5 of PMLA, 2002 it is not a necessity that the persons, who possess the property, should have been charged of a scheduled offence as contended by the Appellant. In other words, the crime proceeds in the form of the property could be in the name of any person, who was not involved in a scheduled offence. In this case, it is again reiterated that Shri G. Srinivasan had illegally availed loan facilities by falsification of documents and diverted the loan amounts to other than the intended purposes, invested in the property of the Appellants and subsequently projected the property as untainted one. It is evident that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on under Section 8 or for the trial of the money laundering offence, it shall unless otherwise proved to be the satisfaction of the adjudicating authority or the Special Court, be presumed that the remaining transactions form part of such inter connected transactions . It is then submitted that in the instant case it has been established in the investigation that part of the proceeds of crime received by R2 had been paid to the appellants in the form of part sale consideration of the subject property and hence, the attachment of the appellants subject immovable property including plant and machinery to the extent of the proceeds of crime so invested, which as per the departments contention is quantified to be around ₹ 5.01 crores, is correct in terms of the provisions of the PMLA. 37. As far as the Arbitration Award in favour of the appellant is concerned, it is submitted by R1 that the award of the arbitrator is an independent proceeding between the appellant and R2 which does not help the case of the appellant as far as the proceedings under the PMLA are concerned. While the Agreements entered into by the appellants with Shri G. Srinivasan stand nullified by the award of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re transfer the equity shares e) The 2nd respondent is liable to pay the accrued compensation till 30.06.2009 and further compensation till possession is handed over. 41. It is also a matter of fact that the mill was declared as a sick unit by the Hon ble Board for Industrial and Financial Reconstruction, New Delhi and as per their Order No.21/99dated 11.08.1999, the company should not alienate any of its assets without prior approval of BIFR. In spite of the said specific directions of the BIFR, Shri Karuppusamy, then Managing Director of M/s Sakthi Aiswarya Spinning Mills Pvt. Ltd., had entered into agreement with Shri G. Srinivasan on 23.02.2007 for transferring the said company for a consideration of ₹ 12.50 crores. 42. During the course of arguments on 1.3.2017, the Learned Counsel for the respondent no. 1 took the stand that the agreement entered into between the Appellant and the 2nd respondent was in violation of the Interim Order of BIFR which, vide its order 21/99 dated 11.08.99 order had directed that the company should not alienate any of its assets without prior approval of BIFR and as the appellant had entered into an agreement with R2 for transferring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants have argued that the effect of the civil proceedings i.e. the Award is that neither the money paid to the appellant can be treated as proceeds of crime nor the property which is the subject matter of attachment can be treated as acquisition of proceeds of crime. It is contended that the issue concluded between the appellants and the second respondent by way of the Award would be binding on the Enforcement Directorate and on this Tribunal. The appellant has also referred to cited extracts from the the judgment of the Hon ble Supreme Court in 2002 (8) SCC Page-87 (K.G. Premshanker Vs. Inspector of Police in Apl Crl 935 of 2002) and in Seth Ramdayal Jat vs. Laxmi Prasad reported in 2009 11 SCC 545,. The respondents on the other hand have contended that such contention is without merit in as much as the proceeds of crime derived by Shri G. Srinivasn (R2) admittedly stand invested in the subject property attached provisionally by the respondent by issuance of PAO No. 14/2004 which has been confirmed by the Adjudicating Authority and the same is in accordance with the provisions of the PMLA, 2005. 48. It is observed that the Arbitration Award is in relation to the civil di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned in sections 40 to 42, when relevant.- Judgments, orders or decrees, other than those mentioned in sections 40, 41 and 42, are irrelevant, unless the existence of such judgment, order or decree is a fact in issue, or is relevant under some other provision of this Act. 49. It is quite evident that the present matter would not be covered in either of the sections 40, 41 or 42 of the said Act. As far as section 43 is concerned, the existence of the Award and its finality is not a fact in issue. It is also not brought out by the appellant as to under which provision of an Act, it is relevant to the present matter. On the aspect of affect of civil proceedings on criminal of quasi criminal matters the proceedings under PMLA being quasi criminal in nature, and in support of the view that has been taken here in above, reference may be had to the following extracts from the said judgment of the Hon ble Supreme Court in the case of K.G. Premshanker Vs. Inspector of Police, Apl Crl 935 of 2002 reported in 2002 (8) SCC which reads as follows: Learned Additional Solicitor General Shri Altaf Ahmed appearing for the respondents submitted that the observation made by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which it is called upon to adjudicate but also of cases which it is not called upon to determine and over which it has really no control. The fact is that the issues in the two cases although based on the same facts (and strictly speaking even parties in the two proceedings) are not identical and there appears to be no sufficient reason for delaying the proceedings in the criminal Court, which, unhampered by the civil Court, is fully competent to decide the questions that arise before it for its decision and where in the nature of things there must be a speedy disposal. In view of the ratio of the above decision, it is difficult to agree to the argument put forth by the appellant that proceedings under the PMLA in respect of the subject property would be barred on account of the arbitration award between the parties and said Award having become final. It is also the admitted position that there are subsequent events after passing the award between the parties have happened. The relevancy of the Award would arise while deciding the amount received by the appellant from R2 in so far as it is relevant to the present matter under consideration and on which there is a dispute bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the money fraudulently obtained by R2 and others to the appellant in the present case for transfer of the subject property to them has been established - this is set out in Para-8 and 9 of the original complaint filed before the adjudicating authority while seeking confirmation of the related PAO. As the tainted money to the extent of ₹ 5.01 crore is established to have been invested in the subject property, provisional attachment of the same to the extent thereof, and its subsequent confirmation is in accordance with sections 3, 5 and 8 of PMLA/PMLA Law. 53. As mentioned earlier, the trial in the matter pertaining to Money Laundering against the respondent no. 2 and others is still pending. It is also a fact that the appellant during the pendency of appeal itself has earlier filed the application to deposit ₹ 3.59 crores with the respondent no. 1 if the property in question is released in order to sell the same to the third party. The said deposit offered by the appellant is without prejudice and subject to the final outcome of appeal. However, later on the application was withdrawn on 16.03.2016 as deal was not struck between the parties. While filing of the applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not charged of having committed a scheduled offence. The property involved in an offence of money-laundering is liable for attachment by the competent authority in terms of Section 3 5 of PMLA, 2002 and it is not a necessity that the persons, who possess the property, should have been charged of a scheduled offence as contended by the Appellant. 56. Under these circumstances, it appears to us that there are serious allegations against the respondent no. 2 which was that since June 2007, Shri G. Srinivasan had fraudulently availed loans from GTFL interalia, in the names of SPSMPL and PSWMPL by way of raising bogus bills in the name of fictitious/non-existing firms and out of the amounts so fraudulently obtained, funds to the tune of atleast ₹ 3.59 crores, as admitted by the appellant and ₹ 5.01 crore as contended by R2 and the department, had been paid to the appellant as part sale consideration for transfer of assets of M/s Sakthi Aisvarya Spinning Mills Pvt. Ltd., situated at Pachal, Salem-Namakkal, Road, Near Puduchatthiram, Namakkal District, Tamil Nadu by the said Shri G. Srinivasan. As proceeds of crime were invested in the said immovable property includi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son, charged of having committed a scheduled offence. The second category is of a person who has been charged of having committed a scheduled offence. Besides, being charged of having committed a scheduled offence, that person is found to be in possession of any proceeds of crime. In either case, it is open to take recourse to section 5 of the Act if the specified Authority has reason to believe and reason for such belief is recorded in writing that the proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime. 58. It is also pertinent to mention that the statement of Shri P. Karuppuswamy under section 50(2) (3) of PMLA has been recorded, the details of which are mentioned in para 13 of the criminal complaint filed by the respondent no. 1 against R2 and others under the PMLA. While it is true that Shri P. Karuppuswamy has not been arrayed as an accused in the complaint but the reference of the amount he has received from the respondent no. 2 has been mentioned therein. In case the said para 13 of PMLA complaint is read in the meaningful manner, it a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly, the proceeds of crime that may have been invested in the subject property is also required to be taken as ₹ 4.67 crores. Even otherwise in the written submissions field by the appellant, an admission is made having received the amount of ₹ 4.67 crores. 62. Before concluding, we may also refer to the submissions of the learned Advocate for the respondent that in terms of Section 8(5) of the PMLA, the matter of confiscation of the attached property is to be decided by the Special Court. He has also referred to the Provisions of the Section 8(8) ibid which provides that where a property stands confiscated the Central Govt u/s 8(5), the Special Court may also direct the central government to restore such confiscated property or part thereof of a claimant with a legitimate interest in the property, who may have suffered a quantifiable loss as a result of the offence of the money laundering. Further, in terms of the proviso to the said sub-section, such claims shall not be considered unless the Special Court is satisfied that the claimant has acted in good faith and has suffered the loss despite having taken all reasonable precautions and is not involved in the offenc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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