TMI Blog2019 (4) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. In the light of above, the impugned order is set-aside. Consequently, the provisional attachment order is also quashed as far as Bank is concerned. It is clarified that the Bank has only restricted his prayer qua attachment of mortgaged property. The complaints against the borrowers may continue as per law for which the Bank has no concerned. - FPA-PMLA-2376/MUM/2018 - - - Dated:- 28-3-2019 - Justice Manmohan Singh Chairman For the Appellant : Shri O.P. Gaggar, Advocate For the Respondent : Ms. Shilpi Satyapriya Satyam, Advocate JUDGEMENT FPA-PM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect of creation of equitable mortgage/mortgage by deposit of title deeds in favour of the objector bank. 4. A renewal of the above said sanction was further done on 2.6.2015 as per the prevailing practices of banking. The said loan account became a nonperforming asset (NPA) due to failure of the borrower to service interest and therefore the appellant bank on 30.4.2016 initiated proceedings under SARFAESI Act and issued notice U/s 13(2) and raised demand of total sum of ₹ 97,43,59.724.50. The effect of the said notice as per section 13(13) of SARFAESI Act is that it operates as a bar on the creators of the securities from creating any third party interest. 5. A total sum of ₹ 9589.70 lakhs (Rs.7174.68 Lakhs principal sum outstanding on date of NPA and interest of ₹ 2415.02 lakhs outstanding but not debited as per applicable guidelines) is due to the appellant Union Bank of India as on 30.09.2017 and ₹ 1271.54 lakhs + interest is due to the Bank of India. The total present dues of the two banks shall be more than ₹ 125 Cr. 6. Besides the SARFAESI action, the appellant bank has also initiated proceedings under the Recovery of Debts Due to Banks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retch of interpretation. (b). The right and title of the properties mortgaged to the bank vest in the bank and therefore they cannot be considered as the properties of borrowers and cannot be attached for any crime done by them. (c ). The bank had already initiated action under SARFAESI Act which, as held by the Hon ble Tribunal, has overriding effect. (d). The Holding on operation in the account were allowed by the bank with regard to loan accounts are duly permissible as per the recovery policy of the bank and are in consonance with the extant guidelines of the Reserve Bank of India. (e ). The bank has no role or connection with the alleged offences committed by the borrower punishable under Prevention of Money Laundering Act, 2002. (f). The banks present dues are more than ₹ 125 Crore and the available assets with them are valued at less than 10% of that amount. (g). The money lent by the bank is public money as the banks money is actually customers money held by the bank in trust. (h). The properties mortgaged with the bank could not have been purchased or acquired with the proceeds of alleged crime since the same had been purchased much earlier to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authority. 18. The amended provisions of Section31B of the Recovery of Debts due 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. 19. It was brought to our notice 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. 20. The Hon ble Supreme Court, wherein it has been categorically held that if non-obstante clause is contained in two enac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prevail, then it could and would provide in the later enactment that the provisions of the earlier enactment continue to apply. 25. The afore-stated principle laid down by the Hon'ble Supreme Court has been followed by the Full Bench of the Hon'ble Madras High Court in a recent decision dated 10.11.2016 in W.P. Nos. 2675 (authored by Hon ble Mr. Justice S.K. Koul, who is now the Hon ble Judge of Supreme Court). The Assistant Commissioner (Commercial Taxes) Vs. Indian Overseas Bank], in which the Hon'ble High Court upheld the provisions of the amended Section 31B of Recovery of Debts due to Banks and Financial Institutions Act, 1993. The following is the relevant portion of 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. 26. The said principle laid down by the Hon'ble Supreme Court has also been followed by the Hon'ble Madras High Court in another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty); and if satisfied as to the bona fide acquisition of the property, relieve such property from provisional attachment by declining to pass an order of confirmation of the provisional attachment. 30. The Adjudicating Authority also has no power to confirm the Attachment under Section8(2) of PMLA. Similarly, it is a simple case of recovery by the Appellant-Bank from its Borrower its own stressed Asset, since the Bank had already lent the money owned by it, which the Bank is entitled to recover the same. 31. The principle laid down in the above decisions of the Hon'ble Supreme Court and the Hon'ble Madras High Court has been followed by this Appellate Tribunal, Prevention of Money Laundering Act, New Delhi, in its catena of decisions, including the decision dated 14.07.2017 in a batch of Appeals filed by various Banks, namely, the State Bank of India vs. The Joint Director 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian Performing Right Society Ltd. vs. The Deputy Director, Directorate of Enforcement,Mumbai, wherein the Tribunal held as follows :- 55. Whether innocent party whose properties i.e.movable or immovable are attached can approach the Adjudicating Authority for release of attached property. The Scheme of Prevention of Money Laundering Act clearly provides the mechanism whereby the innocent parties can approach the Adjudicating Authority for the purpose of release of properties which have been attached in terms of the provisions of Section 5 of the Act. This can be seen by reading Section 8(1) and the proviso to Section 8(2) of the Act whereby Adjudicating Authority has to rule whether all or any of the properties referred to in the notice are involved in money laundering or not. 33. In the present case, this Appellant - Bank is an innocent party since it had already 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. The proceedings before the authority and this trib ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
