TMI Blog2019 (2) TMI 961X X X X Extracts X X X X X X X X Extracts X X X X ..... iction under the I and B Code. Two different enactments, i.e., the PMLA, 2002 and the I and B Code provide two different hierarchies of functionaries to decide the controversies that arise under the respective enactments. When such is the case one authority cannot interfere with the functions of the other authority under a different enactment. It is already said there is no repugnancy in procedure that is being followed for liquidation of the asset of the corporate debtor and the procedure to be followed in case of proceeds of crime, where an offence of money laundering has been committed. It is already said even if an offence of money laundering is committed, the claimant who are having security interest over the properties of the corporate debtor, can still ask for release of the properties, if they are able to establish they acted in good faith and they parted with valuable consideration in the form of sale consideration or debt and/or that the properties attached are not proceeds of crime. Therefore, the liquidator is at liberty to approach the Authorities under the PMLA and seek order to release the properties from the attachment on the ground that the properties attache ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P Mr. Anil Goel as the liquidator. 3. In contra it is stated by the respondent that the Directorate of Enforcement of Delhi Zonal Office-I has vide an ECIR No. 01/DLZO-I/2018 dated February 18, 2018 started investigation for commission of offence under section 3 of the Prevention of Money-laundering Act, 2002 (herein the PMLA, 2002), punishable under section 4 of the said Act on the basis of information/material as evident from CBI. RC. No. RC-BDI/2018/E/0001, CBI/BS and FC, dated February 18, 2018 under sections 420, 467, 471, 468 and 120B of the IPC and section 13(2) read with 13(1)(d) of the Prevention of Corruption Act, 1988. 4. It is further stated that the investigation done under the provisions of the PMLA, under section 13(2) revealed that the accused persons have misappropriated/diverted banks funds, committed criminal breach of trust and laundered the money so diverted. It is further stated that the accused persons worked for the interest rate differential in local and foreign currency in guise of merchant trading without having any genuine business transactions and defaulted in meeting its payments obligation to the bank by diverting and siphoning off the funds. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to deprive persons engaged in serious illegal activities and have thereby been increasing their resources for operating in clandestine manner. The Act was created to forfeit illegal properties and to prevent the money laundering activities which are threat to financial system of the country and its integrity and sovereignty. Further the question of prevalence of a subsequent legislation will only come into picture when there is a conflict between the two statutes. The Securitisation Act has been enacted for the purpose of establishing an expeditious system for recovery of debts due to banks and for matters connected therewith or incidental thereto. It only lays down a procedure for recovery of debts due to banks. The Prevention of Money-laundering Act vests the statutory authorities with a power to forfeit proceeds of crime involved in money laundering to the state. There is thus no apparent conflict between the two statutes. The two statutes operate in their exclusive fields. The question is only who will have his first claim on any property where the claim of the State con curs with the claim of any other person. Halsbury explaining the crown's rights, in relation to propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in any other law for the time being in force. 14. On the other hand, it is contended by learned counsel for the liquidator that the provisional attachment order issued by the respondent under the PMLA, 2002 is in violation of section 33(5) read with section 238 of the IBC, 2016. It is contended that no suit or other legal proceeding shall be instituted by or against the corporate debtor after the liquidation order has been passed in view of section 33(5) of the IBC. It is stated that the respondent instituted legal proceedings under the PMLA for attachment of properties after the liquidation order was passed. It is further stated that there exists a direct inconsistency between the provisions for liquidation of the corporate debtor provided in Chapter III of the IBC and the provisions for attachment/freezing/seizure of properties contained in the PMLA. 15. It is stated that the property which is part of the liquidation estate is provisionally attached by the respondent and therefore, it is not available for being included within the liquidation estate. It is contended that in view of the inconsistency between the PMLA, 2002 and the I and B Code, 2016 the provisions of the IB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trol thereof. The competent authority is thus required to be issued an order and direction to handover the physical possession, custody and control of all such properties standing in the name of the aforesaid companies in liquidation which are attached by the competent authority under the provisions of the MPID Act to the official liquidator expeditiously. 17. It is further stated that the interest of the creditors of the corporate debtor to recover their dues under special legislations has also been recognized in the Finance Act, 2018, section 208(c)(ii) has introduced amendment in section 8(8) of the PMLA to consider the claim of the claimant for the purpose of restoration even during trial in such manner as may be prescribed. The provision after the proposed amendment shall read as under : (8) Where a property stands confiscated to the Central Government under sub-section (5), the Special Court, in such manner as may be prescribed, may also direct the Central Government to restore such confiscated property or part thereof of a claimant with a legitimate interest in the property, who may have suffered a quantifiable loss as a result of the offence of money laundering : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisional attachment in the present matter is bad and against the law. In the circumstances available in the present case, the allegation of money laundering prima facie found to be unsustainable for the purpose of attachment under the PMLA, 2002. 66. In view of aforesaid facts and circumstances in the present case and for reasons referred above, we set aside the impugned order dated July 2, 2015 and the provisional attachment order dated February 4, 2015. All the eight properties are released from attachment forthwith. 21. Learned counsel for the applicant further relied upon the judgment of the National Company Law Tribunal, Kolkata Bench in the case of Surendra Kumar Joshi v. REI Agro Ltd. and Anil Goel v. Deputy Director, Directorate of Enforcement [2018] 4 Comp Cas-OL 260 (NCLT) in C. A. (IB) No. 453/KB/2018 in C. P. (IB) No. 73/KB/2017, wherein the National Company Law Tribunal, Kolkata Bench relying upon the decision of the hon'ble Supreme Court in the case of Solidaire India Ltd. v. Fairgrowth Financial Services Ltd. [2001] 104 Comp Cas 569 (SC) ; [2001] 3 SCC 71, held that the Adjudicating Authority has every power and jurisdiction to consider the aspect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PMLA is not bound by the procedure laid down by the Cr.P.C. 28. This Authority vide its order dated September 14, 2018 directed the liquidator to provide the details of the attached assets on which the bank has relinquished security interest reserving the question of validity of the provisional attachment order under the PMLA. 29. Pursuant to the said order, the liquidator filed additional affidavit, wherein assets attached by the Enforcement Directorate on which the secured creditors have charged and stating whether they have relinquished their security interest or not. The table is hereunder : Sl. No. Description of property being attached Charge on the property Status of relinquishment 1. Office No. 901 on 9th Floor, Raheja Complex , Nariman Point, Mumbai United Bank of India Relinquished 2. Office No. 401 and 402, Fourth Floor, Wing-C, Lotus Corporate Park, Western Express Highway, Goregaon (E), Mumbai United Bank of India Relinquished 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. Premises No. D-6, Industrial Area Panki, Site No. 3, Kanpur Nagar Working Capital Consortium of 7 Banks date 6-10-2015 Relinquished 16. Premises on Plot No. 788/P, Paiki National Highway No. 81, Gram-Moje Rojoda Bavla, Ahmedabad Working Capital Consortium of 7 Banks Relinquished 17. Premises on Plot No. 415, Paiki Village-Moraiya, Taluka-Sanand, Ahmedabad Working Capital Consortium of 7 Banks Relinquished 18. Plant and machinery including mould electricals at Ahmedabad Bank of India 6-9-2007) Relinquished 19. Plant and machinery including mould electricals at Kanpur Bank of India (6-9-2007) Relinquished 20. Other fixed assets such as office equipments, furniture and fixture, A.C., Vehicles (except Landrover), etc. Working Capital Consortium of 7 Banks Relinquished 21. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect provided in section 238 of the I and B Code would prevail over the other. 35. It is contended by learned counsel appearing for the liquidator relying upon the judgment of the hon'ble Supreme Court in Solidaire India Ltd. v. Fairgrowth Financial Services Ltd. [2001] 104 Comp Cas 569 (SC) ; [2001] 3 SCC 71, in that decision it is held that where two statutes contain nonobstante clause, later statute would prevail. No doubt, I and B Code is later in point of time. 36. Section 238 of the I and B Code contain non-obstante clause giving overriding effect over other laws in existence if there is a conflict between the provisions of the I and B Code and the other laws. 37. It is contended by learned counsel for the Enforcement Directorate relying upon the judgment of the hon'ble Appellate Tribunal, New Delhi under Prevention of Money-laundering Act in the case of Chief Manager, Syndicate Bank v. Deputy Director, PMLA referring the judgment of the hon'ble Supreme Court of India in the matter of (Sarwan Singh v. Kasturi Lal, AIR 1977 SC 265 and Kumaon Motor Owners' Union Ltd. v. State of Uttar Pradesh, AIR 1966 SC 785), that the question of prevalence of a sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions) Act, 1985 and section 13 of the Special Court (Trial of Offences Relating of Transactions and Securities) Act, 1992. In that case Securitisation Act is of the year 1995, whereas the Special Court (Trial of Offences Relating of Transactions and Securities) Act is of the year 1992. The hon'ble Supreme Court held that there is a conflict between the provisions of these two Acts and therefore held that the provisions of the Special Court (Trial of Offences Relating of Transactions and Securities) Act, 1992 would prevail over the other Act being a later enactment on the ground that the Legislature knowingly included non-obstante clause in the Special Court (Trial of Offences Relating of Transactions and Securities) Act, 1992 about the existence of section 31 of the SIC Companies Act. The hon'ble Kolkata Bench in C. A. (IB) No. 453/KB/2018 in C. P. (IB) No. 73/KB/2017 has not considered whether there is any inconsistency between the provisions of the PMLA and provisions of the I and B Code. Moreover, the decision of learned single Member is only having persuasive value but not binding precedent. 42. Therefore, it is settled position of law that where two statutes conta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances. Here the right of the secured creditor is nothing but encumbrance. Therefore, in case an order of confiscation is passed, the property vest in Central Government. (iii) Proviso to section 9 gives power to the Special Court to declare that the particular encumbrance has been created with a view to defeat the provisions of the PMLA. It may declare such encumbrances, after giving opportunity of hearing to the persons interested in the property. It creates an opportunity for the secured creditors through liquidator to represent that the encumbrance has not been created with a view to defeat the pro visions of the PMLA. (iv) Section 8 of the PMLA deals with adjudication, section 8(8) comes into picture after the property stands confiscated to the State under sub-section (5) of section 8. Even after the properties confiscated to the Central Government, the Special Court may direct the Central Government to restore the confiscated property or part thereof to a claimant with a legitimate interest in the property, who had suffered a quantifiable loss as a result of the offence of money laundering. However, the claimant has to establish that he has acted in good faith and has su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as laid down in section 11 of the Code. Further, a reading of the object of the PMLA and the punishment provided for the offences go to show that the proceedings are criminal in nature but not civil in nature. 48. The argument that moratorium comes into operation even in respect of the proceedings filed or pending before the Authorities under the PMLA can be raised before the Authority under the PMLA Act. 49. From the above discussion the conclusion is, that the properties attached in this case under the provisions of the PMLA, no doubt form part of the liquidation estate, irrespective of the fact, whether the secured creditor relinquished their security interest or not. Procedure is provided for distribution of the liquidation assets in the I and B Code. The manner in which the proceeds of crime has to be dealt with is provided in the provision of the PMLA. In other words, the procedure laid down under the PMLA deals with proceeds of crime in case of money laundering, whereas the procedure laid down under the I and B Code deals with distribution of liquidation assets. It is for the Authorities under the PMLA to finally decide that the money laundering has been committed or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en committed. It is already said even if an offence of money laundering is committed, the claimant who are having security interest over the properties of the corporate debtor, can still ask for release of the properties, if they are able to establish they acted in good faith and they parted with valuable consideration in the form of sale consideration or debt and/or that the properties attached are not proceeds of crime. 53. Therefore, the liquidator is at liberty to approach the Authorities under the PMLA and seek order to release the properties from the attachment on the ground that the properties attached are not proceeds of crime and the lenders are bona fide lenders and it is for the authorities under the PMLA Act to decide such issues based on the record of investigation and other material placed on record before then, uninfluenced by any of the findings or observations or opinion expressed in this order. 54. In view of the above discussion the reliefs prayed in the petition cannot be granted without the liquidator taking recourse to remedies provided under the PMLA. 55. The application (I. A. No. 150 of 2018) is disposed of accordingly. - - TaxTMI - TMITax - P ..... X X X X Extracts X X X X X X X X Extracts X X X X
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