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TMI Blog2018 (8) TMI 1023X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is a well renowned business woman. She is popular in work of Biotechnology Sector and has earned numerous national awards including prestigious Padma Shree in 1989 and Padma Vibhushan in 2005 from the Government of India. 5. The appellant desirous of owning a residential property in Bangalore came across a real estate project by the name of 'Kingfisher Towers', being jointly developed by Respondent No. 5 and 8 (herein referred to as the "said project"). The said project was being developed at property bearing number Municipal No. 24 (Old Nos. 24 and 33), situated in Grant Trunk, now known as Vittal Mallya Road, Corporate Division No. 61, Ward No. 76 of Shanthi Nagar Range, Bangalaore-560001 and admeasuring about 17,953.76 sq. mtrs. 6. The case of the appellant is that she entered into discussions and negotiations with Respondent No.5 for the purchase of flat(s)/apartment(s) in the said project. In the course of the aforesaid negotiations and discussions Respondent No. 5 represented and assured the appellant that it was the full and absolute owner and in possession of all the part and parcel of the said land (including the existing structure thereat) where the said project was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration payable by the appellant towards acquiring the legal and complete right, title and interest of the said flat and the proportionate undivided area in the said land was Rs. 26,12,00,000/- (Rupees twenty six crore twelve lakh only). 10. As per the said Agreements, the appellant paid the entire purchase consideration from time to time as per details set out hereunder:- Sl. No. Cheque No. Date Drawn on Amount Details of Receipts issued by Respondent No.5 1. 704165/ 704166 April 5, 2012 HSBC 15,000,000 UBHL/KFT/004 Dt.23.09.2013 2. 011887 Sept. 1, 2012 HSBC 43,545,635 UBHL/KFT/002 Dt.12.09.2013 and UBHL/KFT/004 Dt.23.09.2013 3. 066208 March 12, 2013 HSBC 43,545,635 UBHL/KFT/004 Dt.23.09.2013 4. 096567 Sept. 02, 2013 HSBC 43,110,175 UBHL/KFT/004 Dt.23.09.2013 5. 131197 February 24, 2014 HSBC 43,110,175 UBHL/KFT/007 Dt.28.02.2014 6. 745088 August 27, 2014 HSBC 43,110,175 UBHL/KFT/013 Dt.24.09.2014 7. 171592 February 28, 2015 HSBC 28,187,105 UBHL/KFT/017 Dt.09.03.2015 11. At the request of Respondent No. 5 and 8, the entire purchase consideration was remitted to an escrow account of HD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not named in the ECIR. Admittedly, the appellant was not named in the ECIR. From a perusal of the PAO and the record of the Adjudicating Authority, she was not summoned nor any notice u/s 8(2) was issued. 16. Provisional Attachment Order No. 11/2016 was passed on 11.6.2016. No role attributed to the Appellant in the PAO. 17. Confirmation Order was passed by the Adjudicating Authority on 11.2.2016. There is no role attributed towards crime to the Appellant in the Confirmation Order. The said order has been challenged by the appellant. 18. The Enforcement Directorate, Mumbai has registered a case against Shri Vijay Mallya, M/s Kingfisher Airlines Ltd. (KAL) and others under Prevention of Money Laundering Act (PMLA), 2002 in matter of IDBI Loan of Rs. 900 Crore. 19. In the impugned order, it was held by the respondent no. 1 prima facie that proceeds had been generated out of the criminal activities related to Scheduled Offences and that the same had been utilized by respondent no. 2 in inter alia servicing their existing debs and further that a significant amount there from had been siphoned out of India on false pretexts and on the basis of the aforesaid, respondent no. 1 also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Hon'ble Karnataka High Court which were widely published both in print as well as electronic media. The appellant, therefore, must be aware about the said fact that the fraud committed by Vijay Mallya. The appellant did not care about it rather entered into an agreement dated 05.04.2012 after coming to know about the winding up petition and paid money between 2012-15, thus it shows that the present transaction was entered with a view to help Mr. Vijay Mallya, otherwise inspite of coming to know about the pendency of winding up petition and other action against Vijay Mallya, she would not have been paid the money. 20.7 Agreement dated 05.04.2012, there is an arbitration clause and if the appellant has any grievances against Mallya she must invoke arbitration clause and merely by entering in to agreement that too unregistered she has no claim in attached property which is not even fully constructed, then how she can ask for possession or execution of sale deed. 20.8 Now nothing is left in the present appeal in view of the decree dated 19.01.2017 is passed by the Debt Recovery Tribunal against these very assets including the flats in question directing KAL, Dr. Vijay Mal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s ownership, control or possession on account of confiscation proceedings under the Act, has a right of action against the transferor of such property to recover the value of such property". 23. And also the case of Suraj Lamp & Industries vs. State of Haryana & Ors. [(2012) 1 SCC 656] very aptly observed as follows:- "18. It is thus clear that a transfer of immovable property by way of sale can only be by a deed of conveyance (duly stamped and registered as required by law), no right, title or interest in an immovable property can be transferred. 19. Any contract of sale (agreement to sell) which is not a registered deed of conveyance (deed of sale) would fall short of the requirements of Section 54 and 55 of the Transfer of Property Act and will not confer any title nor transfer any interest in an immovable property (except to the limited right granted under Section 53-A of the Transfer of Property Act). According to the Transfer of Property Act, an agreement of sale, whether this possession or without possession, is not a ....... Conveyance. Section 54 of the Transfer of Property Act enacts that the sale of immovable property can be made only by a registered instrument and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled as 'A-6' of the Appeal. 27. It is argued on behalf of the appellant that once the entire payment of the purchase consideration was made, the Appellant became owner of the said Property and had acquired proprietary rights and title a 'claimant' to the said Property in terms of the Proviso to Section 8(2), Prevention of Money Laundering Act, 2002 being interested/aggrieved party. 28. It is also correct that the Appellant is not even named/ mentioned in the FIR or the ECIR or the captioned Original Complaint. It was not even the case of the Enforcement Directorate/Respondent No. 1 that at the time of the PAO was issued and at the time of filing of the captioned O.C., that the Appellant is involved or connected in any offence or with the alleged offence under PMLA or the predicate offence. 29. The respondent no. 1 cannot deny that at the time of passing the Provisional Attachment Order, the ED/Respondent No. 1 was aware of the purchase of the said Property by the Appellant, as is evident from the statement of Shri Manoj Kumar, an employee of M/S UB Group. Though the said fact has also been disputed by the ED, but the ED did not investigate the same or if it did investigate the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the appellant was not necessary party, therefore no notice was required to be issued. The said arguments are wholly contrary to law and facts involved in the present appeal as the respondent no. 1 was aware who failed to investigate further in the matter. 34. Despite of having full knowledge about the transaction, Respondent No. 1 and the Adjudicating Authority failed to issue notice to the Appellant or to afford a hearing to her, during the adjudication proceedings. Thus, the Respondent No. 1 and the Adjudicating Authority have failed to comply with the mandatory statutory requirement of the Proviso to Section 8(2), PMLA. The mandatory notice has not been issued. After recording the statement of Manoj Kumar, an employee of M/s. U.B. Group, no further investigation appears to have been done. The appellant had interest in the flat in question but no mandatory notice required under section 8(2) was served. Section 8(2) is a mandatory provision, it is mandated under the proviso that if property is claimed by a person other than accused, he shall also be given an opportunity of being heard to prove that the property is not involved in money laundering. Despite of clear language of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. In this regard the Appellant has filed a detailed Affidavit, alongwith documents, on 09.07.2018; the contents of the same may be read as under- i. The Appellant has no connection whatsoever with UBHL or M/s Kingfisher Airlines Ltd., which are the companies alleged to be involved in the FIR and the ECIR in the present case. ii. The Appellant has never been a Shareholder or Director in UBHL or KAL, at any point of time. The Appellant has no other direct, or indirect interest, financial or otherwise, in UBHL or KAL. iii. The Appellanthas never received any remuneration or any pecuniary advantage from UBHL or KAL, at any point of time. iv. The Appellant hasbeen an 'Independent Director' on the Board of M/s United Breweries Ltd. ("UBL"), which is a public listed company, since 26.10.2009. Further, to the best of the Appellant's knowledge, UBL has neither been named in the FIR nor the ECIR. As per the Annual Report of UBL for FY 2016-17, which is available in the public domain, UBL has not received any communication from the Respondent ED in relation to the FIR and/or the ECIR in question. v. The fact that the Appellant is an Independent Director,by itself reflects that she ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was merely an independent director and used to visit the company in the meeting conducted against the reasonable charges in view of her qualification and experience. She was not handling any business of any company of Vijay Mallya or of any activities. Hence, the arguments of the respondent no. 1 are without any substance. It has also come on record that she is also independent director of other well-known companies in Bangalore. It is not the case of respondent no. 1 that she has earned profits of any company of Vijay Mallya at any point of time or she was promoter and shareholder of any of his company. 42. Next contention on behalf of respondent no. 1 is that the Agreement to Sell in favour of the Appellant is not registered. There is no sale deed, thus, the Appellant does not have any interest in the subject-property which is still under construction and possession has not been given to the Appellant. 43. The said arguments have no force as at the stage of adjudication under Section 8, PMLA and the onus upon any Claimant is only to show that the attached property is not involved in money laundering. It is not even the Respondent's case that the subject property is invol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the respondent no. 1 that she had the knowledge or the respondent no. 1 has informed her. 48. Even otherwise, it is settled law that the rights in any asset of a company acquired by any person prior to initiation of the winding-up proceedings against the said company are absolute and cannot be defeated by the winding- up proceedings, subject to the transaction being an arms-length transaction. 49. There is also no force in the submission of the respondent no. 1 that there was a connivance between the appellant and the accused parties as the filing of the winding of petition was published in the print as well as electronic media. 50. In the case of Laxmi Raj Shetty and another vs. Tamil Nadu reported in (1988) 3 S.C.C. 319 in para - 25 the Hon'ble Supreme Court hold that the courts cannot take judicial notice of the facts stated in a news item being in the nature of hearsay secondary evidence unless proved by evidence aliunde and presumption cannot be drawn under section 81 of the Evidence Act. 51. In the present, the presumption can be attached that the appellant was aware about the news published in 2012 about the pendency of winding up petition. The funds were paid during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court that the purchaser of (sic under) an antecedent agreement gets good title despite attachment." Their Lordships then considered that the same view has been taken by the Bombay and Calcutta High Courts. The view taken by Punjab & Haryana High Court in Mohinder Singh Vs. Nanak Singh ( AIR 1971 P & H, 381) was overruled. It was observed as under : "In our opinion, the view taken by the High Courts of Madras, Bombay, Calcutta and Travancore Cochin in the aforesaid cases appears to be reasonable and could be accepted as correct. The agreement for sale indeed creates an obligation attached to the ownership of property and since the attaching creditor is entitled to attach only the right, title and interest of the judgment-debtor, the attachment cannot be free from the obligations incurred under the contract for sale. Sec. 64 C.P.C. no doubt was intended to protect the attaching creditor, but if the subsequent conveyance is in pursuance of an agreement for sale which was before the attachment, the contractual obligation arising therefrom must be allowed to prevail over the rights of the attaching creditor. The rights of the attaching creditor shall not be allowed to override the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y passing an order of confiscation, under Section 8(6). 104. Proceedings for attachment and confiscation of proceeds of crime are a process distinct and dissimilar to the process for prosecution of the offence of money-laundering. Deprivation of property involved in money-laundering is the sanction in the first process while deprivation of personal liberty is the sanction enjoined in conviction for the offence. Mens rea is not a jurisprudentially non- derogable adjunct for visitation of civil consequences and therefore the legislative policy in this area is eminently within the domain of legislative choice. This challenge must therefore fail. Challenge to dispossession before conviction of the accused: 58. It is clear from the above that two proceedings, one is before this tribunal and other proceedings where the criminal complaint pending before the Special Court where the trial of schedule offence is being conducted are distinct 59. The next submission of the respondent no. 1 is that in view of other proceedings pending, the impugned order cannot be interferred. The proceedings relied upon by the ED are the following: a. O.A. No. 766/2013 before the Hon'ble Debts Recovery T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of execution of sale deed or to pass any direction to hand over the possession to the appellant as this tribunal has no jurisdiction of the same. 66. This tribunal is only to determine whether the subject Property falls within the ambit of the Act or to whether the subject Property is involved in money laundering. Thus, there is no force in submission of the respondent no. 1 this tribunal has no jurisdiction to even cannot consider the said issue and these proceedings should not continue till disposal of the said proceedings where the prayer for execution of sale deed is pending. 67. The proceedings before the Debt Recovery Tribunal were inter alia between the secured creditor banks and M/s United Breweries [Holdings] Ltd., under a special enactment for recovery of dues. 68. The appellant is not seeking relief of delivery of possession or registration of Sale Deed from this. As such also, all submissions regarding the Corporate Guarantee and the Master Debt Recast Agreement are wholly irrelevant at this stage. 69. Even respondent-ED has for the first time has argued about the issue of Guarantee and a Master Debt Recast Agreement ("MDRA") who has failed to pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llya, the appellant must invoke the arbitration clause contained in the agreement. The said submission has no force as the Agreement to Sell has been entered into by the Appellant with M/s UBHL and not with Mr. Vijay Mallya. The Appellant may invoke the said arbitration clause against M/s UBHL in the event of breach of any covenants of the said Agreement, including non-handing over of possession or non- execution of sale deed in favour of the Appellant in due course and even vice- versa. The said aspect cannot be determined in the present proceedings. 73. The Appellant is not seeking any direction from this Tribunal that the Appellant be handed over the possession of the subject Property nor that the sale deed(s) in respect of the subject Property be executed by M/s UBHL in favour of the Appellant as the scope of the present Appeal is limited to the determination as to whether the subject Property are involved in money- laundering or not. Thus, the existence of the said arbitration clause cannot, in any way, be an impediment to the adjudication of the present Appeal. 74. The Respondent ED's next submission is that if the present Appeal is entertained by this Tribunal, it would re ..... 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