TMI Blog2017 (9) TMI 1446X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 - SUPREME COURT OF INDIA) Thus, the ED has no authority over the said vehicle as the Appellant is now the legal transferee of said vehicle. Even in the criminal jurisprudence, if the stolen property is in the hands of unauthorized person then that person cannot claim title to the property. The said recipient cannot retain the property over which he has no legal title and the property should be returned to the lawful owners. In view of above observations, the impugned order dated 29.08.2014 is set aside. The provisional attachment order dated 31.03.2014 also set aside. The bank is permitted to sell the said vehicle to recover part of its outstanding against dues of ₹ 12.45 Lacs. As far as the remaining balance amount is concerned the bank is entitled to recover the remaining amount by taking the appropriate action as per law. - MP-PMLA-2399/LKW/2016 (Misc.) & FPA-PMLA-1051/LKW/2015 - - - Dated:- 13-9-2017 - Justice Manmohan Singh Chairman And Shri Anand Kishore Member For the Appellant : Shri S.L. Gupta, Advocate For the Respondent : Shri Nitesh Rana, Advocate, Shri Dharam Dev, Advocate JUDGEMENT FPA-PMLA-1051/LKW/2015 1. State Bank of India h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dues against the Respondent No. 2. 5. The respondent no. 2 was unable to repay the said loan and the account soon turned into a Non-Performing Asset. On 11.08.2014, the Appellant Bank served the notice on Respondent no. 2 recalling the entire amount due of ₹ 10,38,788/-.After serving the recall notice, the Appellant Bank started the process of locating the said vehicle for taking the same into its custody. It was found that the said vehicle was lying with the Shastri Nagar Police Station. The Appellant Bank took the possession of vehicle from the police on 14.08.2014. 6. The Appellant Bank got the valuation of the said vehicle which was ₹ 7.50 Lacs as on 21.08.2014. The Appellant Bank issued the sale notice for selling the said vehicle on 24.08.2014. Before the Appellant Bank could sell the vehicle, the Appellant Bank received the call from Sh. U. K. Gautam, Asstt. Director, of the office of the ED on 23.08.2014 advising not to sell the said vehicle. 7. On 25.08.2014, the Appellant Bank received the letter dated 22.08.2014 from ED advising for the first time about the attachment of the vehicle under the PML Act by passing its provisional order attaching the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 8(8) of PML Act, 2002. 14. It is not denied by either side that even today if the vehicle is sold in the market by the Bank or ED, the bank may not be able to recover principle amount due. We agree with the counsel for the appellant that if the vehicle is not sold, after trial, and it would be merely a junk and its value would be almost nil. Counsel says that the bank may not be able to recover even half of the principle amount if the vehicle is sold by the ED today. 15. The title of the Appellant Bank over the said vehicle is also not questioned by either the ED or the Ld. Adjudicating Authority. The Right of Hypothecation which the Appellant Bank has exercised over the vehicle is also valid in the eyes of law. It shows that Appellant Bank is the rightful owner of the said vehicle and has got all the rights to recover its dues by selling the vehicle in open auction. But this right is taken away from the Appellant Bank by the ED vide its letter dated 10.10.2014 and also by the Ld. Adjudicating Authority vide the impugned order. 16. As per The Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016 which came ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 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. 18. 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. , 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. 19. The Ld. Adjudicating Authority failed to understand that Appellant Bank has stake in the said vehicle as it has lent its valuable money to the Respondent. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons to believe that the said vehicle was hypothecated to the Appellant Bank and that the Appellant/SBI had prior charge over the subject matter/said vehicle; still the Ld. Adjudicating Authority confirmed the provisional attachment order of the Respondent no. 1 and thus caused huge loss to the Appellant/SBI. 23. It may be stated here that the legal issue of overriding effect of the two Acts i.e. SARFAESI Act, 2002 and the PMLA Act, 2002 has since been decided by this Tribunal. In the aforesaid common judgment, dated 14.07.2017 (supra) passed in this tribunal in the case of State Bank of India Vs. Joint Director, Directorate of Enforcement in appeal no. FPAPMLA- 1026/KOL/2015 wherein the similar issue was involved. This Tribunal has held that SARFAESI Act, 2002 has over-riding effect over the PMLA Act, 2002 after discussing the said legal issues in details on the basis of the latest amendment of SARFAESI Act, 2002 in which section 31 (B) has been inserted in the year 2016 and judgment of Hon ble Supreme Court and the latest judgment of full bench of Madras High Court. We have also discussed several other judgments in the said common judgment dated 14.7.2017. The relevant para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourts will exercise their discretion in such matters with greater caution, care and circumspection. 56. 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. In the subsequent changes in law and amendment in the another Special Act i.e. SARFAESI Act, 2002 the decisions referred by Mr. Matta in the case of Solidaire (Supra) and Bhoruka Steel (Supra) does not help the case of the respondent no. 1 because the effect of overrding the PMLA looses its validity once the amendment is made which even has been interpreted subsequently by the Full-Bench of the Chennai High Court in the case of Assistant Commissioner CT (Supra) and other decision in the nature of the facts in the present matter. 42. It is also a matter of fact that after passing the impugned order the borrowers have also settled the loan amount with the complainant i.e. Union of India in order to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty 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:- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson 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 pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... J/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 observed that- 13. Well then, what is an attempt ? ...In sum, a person commits the offence of att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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 / indirect involvement of any person or property with the proceeds of the crime nor there is any asp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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. Srinivasan and that Gunaseelan did not pay any amount as sale consideration or the sale consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 moneylaundering. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 52. The appellant bank is the rightful claimants of the said properties which are already in the possession of the appellant bank under the SARF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 illegal or unlawful in any manner. The funds were only deposited in the accounts with the Appellant Bank against the drawings already availed or availed subsequently. The meaning of money laundering as mentioned in the objects of the Act will have to be read as part of the statute because as per Supreme Court of India in Vishaka and others Vs. State of Rajasthan reported in AIR1997SC3011 lays down at para 40 that the International Conventions and Norms are to be read into them in the absence of enacted Domestic Law occupying the field when there is no inconsistency between them. 61. The Ld. Adjudicating Authority has failed to considered that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty act as there is no dispute as regards the origin of funds or the title of the properties. As far as the bank is concerned, the bank had to recover its outstanding dues by taking over the possession of the mortgaged properties in case the Respondents are not able to pay back the credit facilities availed by the Respondents and by way of the SARFAESI provisions these properties are being taken in possession by the appellant bank so that recovery can be made from the accounts which have become NPA. 64. The respondent has no lien over the said properties as the Appellants banks are now the Legal transferee of said properties. Even in the criminal jurisprudence the stolen property when it is in the hands of unauthorized person that person cannot claim title to the property. 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 both banks are victims and even after trial, they are to receive-back the said properties being victim party in normal types of cases u/s 8(8) of the Act. However in the present cases, the banks are innocent parties. They are not involved in any criminal proc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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