TMI Blog2019 (4) TMI 137X X X X Extracts X X X X X X X X Extracts X X X X ..... o the terms and conditions contained in the working capital Consortium Agreement dated 13.03.2015 entered into by and among the borrower and the said banks. If the bank is an innocent party and victim from the hand of borrowers, who mortgaged the properties which were not acquired from the proceed of crime, being a secured creditors, the mortgaged properties cannot be attached equivalent to the value thereof if the said properties are not purchased from the proceed of crime or as a result of criminal activity at the time of sanctioning the loan. The finding of both authorities are against law for attaching the mortgaged properties without any valid reasons. Banking system cannot be destroyed in this manner. It is settled law that the money advanced by them for the purchase of the property cannot be taken to be the proceeds of crime. The Adjudicating Authority is obliged to record a finding to that effect and to allow the provisional order of attachment to lapse. Otherwise, a financial institution will be seriously prejudiced - impugned order of attachment is set aside. - FPA-PMLA-2340/MUM/2018 - - - Dated:- 28-3-2019 - Justice Manmohan Singh Chairman For the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the provisional attachment order dated 14.11.2017 should not be confirmed. 8. The appellant filed a detailed reply in Original Complaint No. 856/17 stating that 2 of the properties under the provisional attachment are mortgaged with the bank and are not proceeds of the crime, therefore cannot be attached. 9. It was also stated that the Appellant Bank has no role in the entire transaction whatsoever nor any charges are framed against the Appellant Bank. 10. From the impugned order, it is found that the contention of the Bank has not been considered as per law. Very casual approach is adopted in order to pass the confirmation order. 11. The legal issues involved in the matter are quite settled by the Hon ble Supreme Court, High Courts and this Tribunal. 12. This tribunal has, inter alia, time and again in large number of cases,held that the secured asset of a bank 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 money laundering against the bank. 13. It was also propounded that the bank would be entitled to recover its dues by proceeding against the mortgaged/hypothecated properti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this Tribunal that 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. 19. The Hon'ble Supreme Court, wherein it has been 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 effect of the non-obstante clause contained in Section 32 of the Sick Industrial Companies (Special Provisions) Act, 1985 and Section 13 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992. 20. The Hon'ble Supreme Court has categorically held that the non-obstante clause in the later Act must prevail over the non-obstante clause in the earlier Act. The following is the relevant portion of the decision of the Hon'ble Supreme Court :- 9. It is clear that both these Acts are special Acts. This Court has laid down in no uncertain terms that in such an event it is the later Act which must pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... priority over all debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or LocalAuthority. 25. 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 ofSection 26E. 26. It is clear from the material placed on record that the Appellant - Bank being a Secured Creditor, since it had lent its own money to the Predicate Offender earlier, is entitled to priority over all other debts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor Directorate of Enforcement (and connected Appeals) against the Provisional Attachment Order. 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. 31. The following are the relevant paragaphs of the said Judgment dated14.07.2017 46. In the present case, it is un-disputedfact 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy lent its own money 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. 33. The Adjudicating Authority did not appreciate that the afore mentioned moveable/Immoveable property cannot be said to have been acquired out of proceeds of crime‖as defined in section 2 (1) (u) of the Prevention of Money Laundering Act (PMLA), 2002 and therefore, the same (cannot be Attached under Section 5 of the PMLA by the Enforcement Directorate vide PAO No 03/2018 dated 28.03.2018. 34. Only this Tribunal has got the jurisdiction to examine the PAO or confirmation of attachment. It has come to the notice of this Tribunal that when many writ petitions are filed by aggrieved parties including banks in the High Courts, it is always the stand of the respondent that the jurisdiction of validity of attachment could be examined by this Tribunal. Accepting the stand of the respondent, writ petitions are disposed off with liberty to approach this Tribunal who is competent to decide the said issue. Thus, there is no f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t which is untainted and pure money. They have priority to the secured creditors to recover the loan amount/debts by sale of assets over which security interest is created, which remains unpaid. The Ld. Adjudicating Authority has not appreciated the facts and law involved in these matters and the primary objective of section 8 of PMLA is that the Adjudicating Authority to take a prima facie view on available material and facts produced. All the contentions raised by Mr. Matta have no substance. The provisional attachment in the present matter is bad and against the law. 39. Therefore, in order to recover the monies taken by the Respondent Nos. 5 6, the only recourse the Bank has is the Mortgaged properties and if the same is attached the Bank will have no other recourse and will lose large amounts without any fault of the Bank. The consequence of the attachment would be borne by the general public and depositors. 40. The Bank in its usual course of business provides finance and credit facilities to its customers. The Appellant Bank has therefore no reason to doubt the source for which the money has been borrowed by the Bank. 41. In the present case the Respondent No ..... X X X X Extracts X X X X X X X X Extracts X X X X
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