TMI Blog2019 (1) TMI 830X X X X Extracts X X X X X X X X Extracts X X X X ..... e system in smooth manner. At present, no-one is known when they would return back and when the extradition proceedings are initiated against them and who will pass the orders thereon. Trial may take number of years. Therefore, blocking the process to receive the loan cannot be stopped as suggested by the ED. The present case is a classic example as to how the public money has been swindled by these groups and individuals. No one knows when enquired why they have left the country and how they have managed to flee recently in pending investigation by various agencies, no one is aware whether they will ever return to home country and pay their debts, every one appearing is clueless on this question. Thus, the submission of ED can be accepted that unless the trial of accused parties is over, mortgage properties against the loan amount should not be dealt with. The borrowers will celebrate the said order if their properties to be kept in safe heaven for couple of decades In the light of above, till the next date of hearing, operation of the impugned order with regard to the mortgaged properties shall remain stayed. However, the Provisional Attachment Order dated 29th May, 2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 26 E and Section 31 B, which give priority to the secured debts over government debts, taxes, case etc. c. It is submitted that the Authority, while passing the Impugned order, has failed to appreciate the importance of the usage of as a result of criminal activity‖ contained in the definition of proceeds of crime‖ as provided in Section 2(u) of the PMLA. In fact, the Authority has proceeded on the basis that any property that was purchased by the entity/person accused of a scheduled offence would be liable to be confiscated under the provisions of the PMLA. However, a bare perusal of the definition of proceeds of crime‖ as provided for in the PMLA establishes that the property being attached must have been acquired as a result of criminal activity. d. The appellant only came to be associated with the account and assets of said sterling Entities prior to filing of any complaint/FIR or proceedings being initiated against the Sterling entities/Sandesara Group, by virtue of above referred assignment agreements. e. The appellant is completely disconnected from the alleged illegal acts committed by Sterling entities/Sandesara Group and/or its Directors/a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by Mr. Nitesh Rana, that the appellant in appeal no. 2751/DLI/2018 is a secured creditor and is a victim party. However he states that till the trial against the borrowers is concluded the financial institute is not entitled to recover the amount after disposing of the mortgaged properties. It is also stated that in case the financial intuition/appellant has any grievances, he will approach to the Special Court. Counsel for both appellants have read the mandatory provisions and submits that the jurisdiction only lies this tribunal to examine the issue with regard to the attached properties. It is stated even if the special court will pass the order of disposal of the properties the attachment order shall remain work against the appellant and no one will purchase the mortgaged property in situation of disposal of the properties will arise. 8. The present appeals have been filed on various grounds challenging the impugned order as well as the provisional attachment order. 9. This tribunal has held in many similar cases that the secured asset cannot be attached or confiscated when there is no illegality or unlawfulness in the title of the bank and that there is no charge of mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to Banks and Financial' Institutions Act, 1993 as amended by the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016 which reads as under:- 31B. - Priority to secured creditors. Notwithstanding anything contained in any other law for the time being in force, the rights of secured creditors to realize secured debts due and payable to them by sale of assets, over which security interest is created, shall have priority and shall be paid in priority over all other debts and government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or local authority. 16. The above mentioned provisions had come into force w.e.f. 16.08.2016, empowering this Appellant Bank to have priority over the mortgaged property. 17. The Hon'ble Supreme Court categorically held that if non-obstante clause is contained in two enactments, the non-obstante clause in the later enactment shall prevail over the non-obstante clause in the earlier enactment. In the case of Solidaire India Ltd. vs. Fairgrowth Financial Services Ltd. (2001) 3 SCC 71, the Supreme Court was considering the effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the said decision:- 3. There is, thus, no doubt that the right* of a secured creditor to realize secured debts due and payable by sale of assests over which security interest is created, would have priority over all debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or Local Authority. 22. The said principle laid down by the Hon'ble Supreme Court has also been followed by the Hon'ble Madras High Court in another decision dated 22.12.2016 in W.P. No.27504 of 2015 and has upheld the provisions of the amended Section 26E of SARFAESI Act. The following is the extract of the relevant portion of the said decision of the Madras High Court:- 8. Concededly, the mortgage in favour of the petitioner Bank was created on 26.05.2005, which was prior to the date of attachment. The date of attachment, as indicated above, was 19.01.2015. To be noted, attachment entry was made by respondent No. 3, on 13.08.2015. This apart, the matter is now put beyond the pale of doubt, as during the pendency of the writ petition, an amendment has been made to the 2002 Act with the insertion of Section 26E. 23 . It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectorate of Enforcement (and connected Appeals) against the Provisional Attachment Order. 27. The Tribunal has held that as per the amended provisions of Section 26E of SARFAESI Act and 31B of the Recovery of Debts due to Banks and Financial Institutions Act, 1993, a secured creditor will have priority over all other debts and government dues, including revenues, taxes, cesses and rates due to the Central Government, State Government or local authority and accordingly, set aside the Provisional Attachment Orders. 28. The following are the relevant paragaphs of the said Judgment dated 14.07.2017 46. In the present case, it is undisputed fact that the attached property were purchased much prior to the period when the facility of loan was sanctioned to borrowers. The Bank while rendering the facilities were bona fide parties. It is not the case of the respondent that the attached properties were purchased after the loan was obtained. The mortgage of the properties were done as bona fide purposes. None of the bank is involved in the scheduled offence. 47. In view of the entire gamut of the dispute, we are of the considered opinion that the conduct of the banks are alwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Predicate Offender and the property in question being mortgaged to the Bank which is provisionally attached by the Respondent- Deputy Director ought to have been released by the Adjudicating Authority under Section 8(2) of PMLA. 30. By virtue of conjoint effect of Sections 31B and 26E of The Recovery of Debts and Bankruptcy Act, 1993 and The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the secured creditor i.e. Appellant herein (Punjab National Bank) shall have priority to the secured asset to satisfy their respective dues which shall prevail over and supersede the other debts government dues, revenues, taxes, cesses and rates due to the Central Government, State Government and local authorities. 31. Admittedly, the National Company Tribunal vide its Order dated 11.6.2018 has initiated the Corporate Insolvency Resolution Process (CIRP). 32. I do not accept the argument of the learned counsel appearing on behalf of the ED that their properties should not be dealt with CIRP process under the Insolvency Code. 33. I also do not accept the argument that the said process should not continue, either to pay the ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess to receive the loan cannot be stopped as suggested by the ED. The present case is a classic example as to how the public money has been swindled by these groups and individuals. 39. No one knows when enquired why theys have left the country and how they have managed to flee recently in pending investigation by various agencies, no one is aware whether they will ever return to home country and pay their debts, every one appearing is clueless on this question. Thus, the submission of ED can be accepted that unless the trial of accused parties is over, mortgage properties against the loan amount should not be dealt with. The borrowers will celebrate the said order if their properties to be kept in safe heaven for couple of decades 40. In the light of above, till the next date of hearing, operation of the impugned order with regard to the mortgaged properties shall remain stayed. However, the Provisional Attachment Order dated 29th May, 2018 shall continue. 41. With regard to the other properties status quo shall be maintained by all the parties. It is directed that CIRF process under the Insolvency Code shall continue. 42. List these appeals on 18th March, 2019. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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