TMI Blog2018 (8) TMI 1116X X X X Extracts X X X X X X X X Extracts X X X X ..... these documents were executed much prior to the registration of ECIR and FIR in the captioned Original Complaint. The Appellant has paid sufficient Stamp Duty on the Agreements to Sell and the Construction Agreements. It is not a civil dispute. It is also a matter of fact and it has come on record that the entire amount has already been paid. In the present case, the appellant definitely is a claimant and the flats were attached without any notice and hearing of the appellant nor any opportunity was given to raise his stand. It is not even the case of the Respondent that the Appellant has committed any offence under Section 3 or is in any manner involved in the commission of the same. The Appellant is the purchaser of the subject property, for which he paid the complete consideration through duly documented legal banking channels, even prior to the date of registration of the FIR or the ECIR. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PMLA, and the same has been duly confirmed by the Adjudicating Authority in its order in Original Complaint No. 612/2016 dated 01/12/2016, which also includes the property as mentioned by the Appellant. 6. It is submitted on behalf of respondent no. 1 that the impugned provisional attachment has been made 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 to the offender. Hence, during the course of investigation, various properties held/owned/acquired by Shri Vijay Mallya, including those through various companies and/or special purpose vehicle, which were controlled directly or indirectly by him, through dummy Directors appointed by him were identified, which included the subject property held in the name of M/s United Breweries (Holdings) Ltd. 7. The Adjudicating Authority has confirmed the attachment order. The same has been challenged by the appellant on various grounds. 8. Admittedly, the appellant was not impleaded as defendant in the proceedings before the Adjudicating Authority by the Respondent no. 1 nor any notice was issued to the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 8 in the said project. iv) Consequently, after arms-length discussions and negotiations, the appellant entered into six agreements with Respondent No. 5 8 for the purchase of the two apartments bearing No. 17B and 19B in the said project (hereinafter collectively referred to as said flatss ) and the proportionate undivided area in the said land. The following agreements were executed among the appellant, Respondent No. 5 and 8 (hereinafter collectively referred to as the said agreements ): a. Two Agreements to sell dated 30.01.2012, one each for the said flatss; b. Two Construction Agreements dated 30.01.2012, one each for the said flatss; and c. Two Side Letters dated 30.01.2012, one each for the said flats. By the aforesaid two Agreements to Sell, the appellant acquired under each such Agreement, 8321/767870th Undivided right, title and interest and ownership in the said Lands (hereinafter referred to as the proportionate undivided area I the said land ) and vide the aforesaid two Construction Agreements, the appellant acquired the right to get the said flats constructed by the Respondent No. 5 and 8. Copies of the aforesaid six Agreements all dated 30.01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hase consideration part of, directly or indirectly, any transaction(s) with the respondents named above. In this regard, the appellant has filed Confirmation of Transfer dated 14.02.2017 issued by the banker of the appellant confirming that the purchase consideration was paid by the appellant from his personal bank account consisting of his personal funds. viii) The appellant paid the entire purchase consideration upfront to lock the purchase price at the time of execution of the said Agreements and to ensure that the consideration is not subjected to any escalation in the future. Further, the entire purchase consideration was made inclusive of existing VAT and Service Tax, as applicable on the purchase transaction and it was also agreed that the appellant shall not be liable to pay any additional taxes on the purchase transaction, including any upward revision to existing taxes and that in case of any upward revision, the same was to be paid by the purchase consideration. Therefore, to keep himself immune from any price escalation (which usually takes place in the construction sector) and from any upward revision in taxes, the appellant agreed to pay the entire purchase conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of award till date of payment; e. To award cost/s towards arbitration proceedings; f. Pass such other order/s as this Hon ble Arbitrator deems fit to grant in the circumstances of the case, including the costs of the petition, in the interest of justice and equity. Therefore, at the conclusion of the arbitration proceedings, the same were decided by the Arbitral Tribunal against the appellant herein, vide its Final Award dated 22.04.2016. Copies of the appellant s petition dated 10.09.2013 under the Arbitration and Conciliation Act, 1996, separate Defence Statements dated 05.12.2013 filed by the respondents 5 and 8 herein, and the Final Award dated 22.04.2016 passed by the Arbitral Tribunal are filed. 11. It is addressed the oral arguments on behalf of the respondent no. 1 in the present appeal and has also filed in its written-submission. The following issues are raised:- 11.1 The appellant has no locus standi to file the present appeal as appellant was neither the defendant before Adjudicating Authority nor he can any rightful claim. 11.2 The appellant has attempted to help the accused person by entering into the so-called agreement for the purchase of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, the said decree which has attained finality as such cannot be interfered. There is an arbitration award in favour of the Consortium Bank. The appellant has prima facie not made out a case for this Court to consider the reliefs claimed in the instant appeal. In case the prayer is allowed, it would result in according priority to their claims over those of other secured creditors of the appellant which is impermissible in law. 11.9 Even the Hon ble Division bench of Karnataka High Court wherein the order of winding up is challenged the Hon ble High Court vide order dated 25.4.2017 observe that the official liquidator is requested not to precipitate the matter during the pendency of the appeal. 11.10 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 shopping. The UBHL has filed the interlocutory application before Karnataka High court prosing to sell the assets to re pay the debts and in the list of assets UBHL has also included the present flats then how the appellant making any claim over it. The Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and Stamp Duty, W.P. No. 2586 of 1988 dated 28th July, 1993, since reported in 1994 Mh.L.J. 11.13 In the case of B. Rama Raju Vs. Union of India Ors. 2011 SCC Online AP 152, in which the constitutional validity of Section 5 and 8 of the PMLA was challenged, the Division Bench of Andhra High Court as follows:- 37. It further requires to be noticed that not only from the second proviso to Section 9 of the Act but on general principles of law as well, a person deprived of the property in his ownership, control or possession on account of confiscation proceedings under the Act, has a right of action against transferor of such property to recover the value of such property. 11.14 In 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 requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain interim orders to restrain the Respondents from selling their properties. However, the Debts Recovery Tribunal had neither considered the application on its merits nor had granted any ad-interim relief pending consideration of the application. The consortium of banks thereafter, filed Writ Petition Nos. 38870/2013, W.P. Nos. 39048-39052/2013 and W.P. No. 39053/2013 before the Hon ble Karnataka High Court, Bangalore seeking an ad-interim order. Accordingly, the Hon ble Court vide its order dated 03.09.2013 passed an ad-interim order of injunction against the Respondents No. 1 to 3 viz. M/s Kingfisher Airlines Ltd., M/s United Breweries (Holdings) Ltd. and Dr. Vijay Mallya from transferring, alienating disposing or creating third party rights in movable as well as immovable properties belonging to them until further orders. The property in dispute of the appellant is owned and in control of M/s United Breweries (Holdings) Ltd. Further, the Hon ble Karnataka High Court vide its order dated 13.11.2013 confirmed its interim order dated 03.09.2013 to ensure to the benefit of the petitioners till the applications are considered and disposed of by the Debts Recovery Tribunal. Finall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire purchase consideration (i.e. Euro 7,650,000/-, equivalent to ₹ 49,84,74,000/- ) was paid by the appellant on 22.02.2012, through banking channels from the overseas account of the appellant. It is alleged by the appellant that 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), since it was represented to the appellant, that Respondent No. 9 was a creditor of Respondent No. 5. It is stated that as on 22.02.2012, the appellant was a purchaser and beneficial owner of the said property and had acquired proprietary rights and title over the said property. As such, 22.02.2012 onward, the appellant was a claimant to the said property in terms of the Proviso to Section 8(2), Prevention of Money Laundering Act, 2002. 14. Counsel for the appellant during the course of hearing has handed over the list of dates and events. The same is reproduced below:- Sl. No. Date Particulars 1. 26.04.2010 Joint Development Agreement between M/s United Breweries Holdings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. 27.09.2016 Appellant wrote to ED seeking details of the attachment No response from ED 13. 01.12.2016 Confirmation Order passed by the Adjudicating Authority 14. 20.12.2016 On gaining knowledge of the Confirmation Order, the Appellant applied for certified copy of the same 15. 30.12.2016 Certified copy received by the Appellant 16. 21.02.2017 Appeal filed before this Tribunal 15. It is submitted by the appellant that the appellant is an innocent bona fide purchaser of the said property. The complete transaction pertaining to the purchase of the said property stood concluded much prior to the registration of the FIR pertaining to the predicate offence and the registration of the ECIR. 16. The appellant is not even named/mentioned in the FIR or the ECIR or the captioned Original Complaint. It is not even the case of the Enforcement Directorate/ Respondent N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived is in full and final settlement towards purchase of Apartment No(s): 17B 19B in Kingfisher Towers , Vittal Mallya Road, Bangalore-560001 Through Wire Transfer on 22-02-2012 credited to our Escow Account No.00090350002126 Maintained with HDFC Bank Limited, Kasturba Road, Bangalore-560 001, INDIA For United Breweries (Holdings) Limited (Authorised Signatory) HDFC BANK Party Advice cum Date: 23 Feb 2012 Invoice No. 912022200148 Dear Customer In accordance with details shown below we have effected following transactions your Account 0009035000212 Particulars Amount in INR Transactions Reference no. 912022200148 Inward remittance details EUR7650000@65.1600 Remittance name 1/VIVEK MATHIAS Beneficiary Name UNITED BEWERIES(HOLDINGS)LIMITED 498,474,0 0.00 Credit Govt. Service Tax as per sub rule(7B) of Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the case of respondent no. 1 that it was a tainted money or earned from the proceed of crime or by means of criminal activities. 26. 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. 27. 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. 28. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The interest in the property by the appellant is not denied on behalf of the respondent no. 1 during hearing, except it was stated that 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. 33. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred on behalf of respondent no. 1 are applicable to the facts of the present case. 38. 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. 39. 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. All the payments were made through banking channel. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 46. 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 2017 and the prayer in the winding up petition was allowed in 2017. 47. In the present case, the Agreement to Sell entered into by the Appellant with M/s UBHL is of the year2012 (i.e. prior to even the initiation of the winding-up proceedings) and the entire purchase consideration was duly paid in the year 2015( i.e. much prior to the subject Provisional Attachment Order). It is not even the Respondent ED s has established prima facie case that the purchase of the subject Property vide inter alia the Agreements to Sell was not an arms-length transaction. 48. In Vannarakkal Kallalathil Sreedharan Vs. Chandramaath Balakrishnan Anr. (1990 (3) SCC 291) a Bench of two Judges considered a que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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. 50. In the above case this Court has gone even to the extent that not only a sale deed but even an agreement of sale will prevail over attachment before judgment made subsequent to such agreement for sale. I do not want to express any opinion with regard to the case of an agreement for sale, but I am of the confirmed opinion that a sale deed having been executed prior to attachment before judgment, though registered subsequently will prevail over attachment before judgment. 51. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aint pending before the Special Court (where the trial of schedule offence is being conducted) are distinct 53. 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. 54. 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 the Appellant has committed any offence under Section 3 of the Prevention of Money Laundering Act, 2002 ( Act )? ii) Issue 2-Whether the subject property is proceeds of crime and the Appellant is in possession of proceeds of crime? 55. With regard to issue 1, it is not even the case of the Respondent that the Appellant has committed any offence under Section 3 or is in any manne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 jurisdictional Registrar of Assurances and hence no public knowledge can be imputed to the Appellant. 64. 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. The said aspect cannot be determined in the present proceedings. 65. The Appellant is not seeking any direction from this Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s tribunal is not deciding the fate of title of the flat in question. 69. The second proviso of sub-section 8 of section 8 has been incorporated by the Act, 13 of the 2018. Both proviso of section 8(8) are read as under:- Provided that the Special Court shall not consider such claim unless it is satisfied that the claimant has acted in good fath and has suffered the loss despite having taken all reasonable precautions 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. 70. From the entire gamut of the matter, it is evident that the appellant was the claimant in the flats. 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. 71. As far as the impugned order dated 1.12.2016 is concerned, the same is not sustainable in l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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