TMI Blog2018 (8) TMI 1023X X X X Extracts X X X X X X X X Extracts X X X X ..... ndering. The question of link and nexus in the criminal activities directly or indirectly does not arise. As far as the impugned order dated 11.2.2016 is concerned, the said order is not sustainable in law and the facts of the present case. The same is set-aside against the appellant with regard to flat in question. The provisional order is also quashed accordingly by allowing the appeal. However, it is clarified that this tribunal has decided the appeal pertaining to the order passed on the attachment of flat allegedly purchased by the appellant. The finding shall have no bearing with regard to merit of other proceedings pending against the accused parties including extradition proceedings. It is alleged that the flat in question is one of the assets in which the Official Liquidator is appointed, therefore, the appellant, the respondent nos. 3, 5 and 8, unless the final order is passed in her favour, shall not create third party interest directly or indirectly. - MP-PMLA-3464/MUM/2017(STAY) MP-PMLA-3465/MUM/2017(STAY) & FPA-PMLA-1772/MUM/2017 - - - Dated:- 13-8-2018 - JUSTICE MANMOHAN SINGH : CHAIRMAN For the Appellant : Shri Sudhir Nandrajog, Sr. Advocate and Shri A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Respondent No. 5 agreed to transfer to Respondent No. 8, 45% or such portion of undivided share of said land as would be proportionate to the saleable super built-up area falling to the share of Respondent No. 8 in the said project. 7. After discussions and negotiations, the appellant entered into six agreements with Respondent No. 5 8 for the purchase of the one apartment bearing No. 24A in the said project (hereinafter collectively referred to as said flat ) and the proportionate undivided area in the said land. The following agreements were executed among the appellant, Respondent Nos. 5 and 8 (hereinafter collectively referred to as the said agreements ): a. Two Agreements to sell dated 05.04.2012 for the said flat; b. Construction Agreements dated 05.04.2012 for the said flat. 8. By the aforesaid Agreement to Sell, the appellant acquired under such Agreement, 8321/767870th undivided right, title and interest and ownership in the said Lands (hereinafter referred to as the proportionate undivided area in the said land ) and vide the aforesaid Construction Agreement, the appellant acquired the right to get the said flat constructed by the Respondent No. 5 and C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 HDFC Bank Limited (Respondent No. 9 herein), it was represented to the appellant, that the Respondent No. 9 was a creditor of Respondent No. 5. The property was mortgaged with the bank, therefore, the entire payment was made directly to the bank as per details mentioned in earlier para. The entire purchase consideration was remitted through normal/legal banking channels from the overseas account of the appellant. It is claimed that in light of the execution of the said Agreements and the payment of full consideration by the appellant, the latter became the beneficial owner of the said flat and the proportionate undivided area i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Vijay Mallya, M/s Kingfisher Airlines Ltd. (KAL) and others under Prevention of Money Laundering Act (PMLA), 2002 in matter of IDBI Loan of ₹ 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 formed prima facie opinion that the respondent no. 2 and 5 had projected the proceeds of crime as untainted, thus committing the offence of Money Laundering defined under section 3 of PMLA. 20. It is alleged on behalf of respondent no. 1 that the impugned provisional attachment was passed by invoking provision of Section 2(1)(u) of PMLA, 2002, which empowers the Complainant (an authority under PMLA) to attach properties of equivalent value of Proceeds of crime of the offender. Hence, during the course of investigation, various properties held/owned/acquired by Shri Vijay Mallya, including those throug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Mallya and KFIL to jointly and severally pay the sum of ₹ 6203,35,03,879.42 along with further interest at 11.5% yearly. Therefore, the said decree which has attained finality as such cannot be interfered. 20.9 The appellant for the same relief had already filed an application before the Hon ble Division Bench of Karnataka High Court and the same is pending adjudication, therefore, the appellant cannot be allowed to go for forum hunting. 20.10 The UBHL has also filed the interlocutory application before Karnataka High Court prosing to sell the assets to repay the debts and in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny 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 an agreement of sale does not create any interest or charge on its subject matter . 24. It is submitted on behalf of respondent no. 1 that there is no Registered Sale Deed nor there is any handing over of the possession of the flat/property to the appellant since the building is still under construction. There was only an agreement of sale entered between the appellant and M/s. UBHL, which only denotes about the intention of selling of the Flat to the appellant. However, there is no registered Sale Deed nor the appellant is in possession of the impugned prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forcement 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 same, otherwise the real position might have been different. 30. There is also no material on record to show that the Appellant has any link, nexus or association or relation with the respondent nos. 5 and 8. As per the case of the appellant that the purchase of the said Property was after negotiations. The entire consideration was paid from the Appellant s own income. The same is supported by the Appellant s Banker s Confirmation Letter and her bank account statements. 31. It is argued by the appellant that she is an innocent bona fide pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icating 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 the act, no notice was given. The prescribed period has already been expired. The appellant is no doubt claimant in the attached property. It is not understood why the requisite notice was not issued by the respondent no. 1 and Adjudicating Authority. Despite being Appellant s claim to the said Property, Respondent No. 1 failed to fulfill its statutory duty, in terms of Rule 3(2) PML (Issuance of Provisional Attachment Order) Rules, 2013, to supply a copy of the Provisional Attachment Order to the Appellant at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise, 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 has no relation whatsoever with UBL or any of its associate companies. Reliance is placed on section 149, Companies Act, 2013. vi. That, as an Independent Director, the Appellant received sitting fee and commission over the years, which is permissible under the provisions of the Companies Act, 2013. It is reiterated and clarified that the Appellant has not received any other amounts/pecuniary benefits, in any manner whatsoever, from UBL. Further, the amounts received by the Appellant can be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 involved in money laundering, rather it is the value thereof . It is not even the case of the Respondent that the Appellant is involved, in any manner, in the offence of money laundering. No such contention has been raised, except in the Written Submissions filed by the counsel of the respondent no. 1. New case in the written-submission cannot be set-up. There is no allegation that the money deposited in the bank by the appellant was tainted money or any cash deposit was made. Al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 the period 2012 to 2015 and the prayer in the winding up petition was allowed in 2017 only. 52. The respondent no. 1 therefore cannot be allowed to presume that the agreements were executed in order to have the accused and with mala fide intention. 53. In the present case, the Agreement to Sell entered into by the Appellant with M/s UBHL is dated 05.04.2012 (i.e. prior to even the initiation of the winding-up proceedings) and the entire purchase consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 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 contractual obligation arising from an antecedent agreement for sale of the attached property. The attaching creditor cannot ignore that obligation and proceed to bring the property to sale as if it remained the absolute property of the judgment- debtor. We cannot, therefore, agree with the view taken by the Punjab Haryana High Court in Mohinder Singh s case. 56. In the above case this Court has gone even to the extent that not only a sale dee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntially 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 Tribunal; b. Writ Petition No. 38870/2013, 39048-39052/2017 and 39053/2017; c. O.S.A. No. 5/2017; and d. Interlocutory Application No. 1/2018 in O.S.A. No. 5/2017, as referred in Para 21. 60. The said arguments have no force as the said proceedings have no bearing whatsoever on the adjudication of the present Appeal for the determination of which, this Tribunal ought only to determine the following: i) Issue 1 - Whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risdiction 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 place the same on record. 70. As far as the Corporate Guarantee is concerned, it is submitted on behalf of the appellant that HDFC bank was not even a party to the said Corporate Guarantee and therefore, the same has no relevance to the present Appeal. The corporate guarantee is executed between UBHL and certain secured creditors. The same is not registered either with the Ministry of Companies Affairs or the ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risk or responsibility on the part of the bank or any of its signing officials. Assuring you of our best services For the Hongkong and Shanghai Banking Corporation Limited Sd/- Manager Pallavi Kulkarni Emp No. 195082 PPRM Bangalore The Hongkong and Shanghai Banking Corporation Limited 72. The next submission of the respondent ED is that if the Appellant has any grievances against Mr. Vijay Mallya, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and is not involved in the offence of money laundering. Provided further that the Special Court may, if it thinks fit, consider the claim of the claimant for the purposes of restoration of such properties during the trial of the case in such manner as may be prescribed. 78. From the entire gamut of the matter, it is evident that the appellant was the claimant in the flat. By making the entire payment, the appellant is become stake-holder as the amount paid by the appellant was not proceed of crime. The appellant is also not involved in the money laundering. The question of link and nexus in the criminal activities directly or indirectly does not arise. 79. As far as the impugned order dated 11.2.2016 is concerned, the said order is not sustainable in law and the facts of the present case. The same is set-aside against the appellant with regard to flat in question. The provisional order is also quashed accordingly by allowing the appeal. 80. However, it is clarified that this tribunal has decided the appeal pertaining to the order passed on the attachment of flat allegedly purchased by the appellant. The finding shall have no bearing with regard to merit of other pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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