TMI Blog2019 (5) TMI 1463X X X X Extracts X X X X X X X X Extracts X X X X ..... iminal activities. The mortgaged properties are not acquired from proceed of crime. The scheme of the Act is such that is cannot apply to a transaction of the nature as in the present case against the appellant. Money of appellant is a public money and its right under SARFAESI cannot be taken away by the attachment order, in case the attachment continues against the mortgage property, in all matters the economy of the country would suffer. In the present case as the money belongs to the Appellant it is public money. The appellant has the right to property under the Constitution of India. The property of the appellant cannot be attached or confiscated if there is no illegality in the title of the appellant and there is no charge of money laundering against the appellant. The mortgage of property is the transfer under the transfer of property act. Under Section 8(1), upon receipt of a Complaint U/s 5(5) of the Act, if this Hon'ble Authority has reason to believe that any person has committed an offence under section 3 or is in possession of proceeds of crime, he may serve a notice of not less than thirty days on such person calling upon him to indicate the sources of his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he time of issue of the Show Cause Notice ( SCN ). No reason to believe can be discerned from the SCN, or the order dated 29.06.2018 accompanying the SCN under Section 8 of the PMLA, as to how there was reason to believe that the Appellant was in possession of proceeds of crime . Adjudicating Authority, in its discussions, did not even consider the reply of the Appellant, let alone discuss it. Appeal is allowed. The impugned order with regard to attached property (which is mortgaged with the appellant) is set-aside with regard to the appellant (as the attachment on face of it was bad and contrary to law). - MP-PMLA-5454/CHN/2019 (I.R.), MP-PMLA-5455/CHN/2019 (Exem.), FPA-PMLA-2790/JP/2019 - - - Dated:- 21-5-2019 - Justice Manmohan Singh Chairman For the Appellant : Shri Kotla Harshavardhan, Advocate, Ms. Mansi Sood Kshitij Maheshwari, Advocates For the Respondent : Shri Neeraj Atri, Advocate FPA-PMLA-2790/JP/2019 1. By this order, I propose to decide the present appeal which was filed against the order dated 9th November, 2018. 2. Before issuance of notice under Section 8(1) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were discounted without due (legal) authority. Accounts of M/s. Mobile Associa tes (Naresh Kanwarani), M/s. Everest Ashiana (Vineet Jain), M/s. Raj Minerals (Mahendra Meghwal), M/s. Padmawati Enterprises (Bhaskar Jain), M/s. Rameshwaram (Pradeep Nimawat), M/s. Dharma Putra Sansthan (Vipul Kaushik), M/s. Arihant Financial (Piyush Jain) and M/s. Ranu Motors (Nitin Parikh) were used for forged cheques discounting. Money was layered and transferred to different accounts of M/s. Guman Furniture Services, M/s. Guman Furniture Electronics, M/s. Guman Jewellers, Shankar Khandelwal, Tikam Khandelwal and others. c) The Deputy Director has analysed the details emerging from the subsequent FIRs filed. The investigation revealed that (1) Bharat Bomb, Chartered Accountant of Udaipur, (2) Shankar Lal Khandelwal, Builder of Jaipur, (3) Vipul Kaushik, Key Associate of Bharat Bomb (4) Santosh KumarGupta, then Bank Manager, Syndicate Bank, (5) Vineet Jain, (6) Piyush Jain and (7) Usha Gupta w/o Santosh Gupta are involved in criminal activities relating to the scheduled offences under section 120 B, 420, 467, 471, 472 of the Indian Penal Code and Section 13(2) r/w 13(1) (d) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raj Meena and their spourses are proceeds of crime or value thereof being derived or obtained as result of criminal activity relating to a schedule offence. e) The Deputy Director has elaborated in Para 11 of the OC the facts concerning the attached movable and immovable assets under separate captions (i) Land at village Champapura, Patwar Sarna Chaud, Teh.- Kalwar, Dist. Jaipur registered in the name of M/s. Charlie Tradelink Pvt. Ltd. (ii) Farm House at Khasra No. 204, 205, 206, 207 admeasuring 9600 Sq. Mtrs. At Village-Thikriya, Tehsil-Sanganer, Main Ajmer Road, Jaipur (iii) Unsold stock at projects Guman Eternity Block A and Guman Eternity Block-B of companies M/s. Shreenth Ji Business Venture Pvt. Ltd. And M/s. Sanwariaji Business Venture Pvt. Ltd. Respectively at Shastri Nagar, Subhash Nagar, Jaipur; (iv) Unsold stock at Guman Height, Plot No. 204, Krishna Sagar Colony, Jaipur, Rajasthan (v) Plot No. GH-1 Gokul Nagar, Gokulpura, Kalwar Road Jaipur (vi) Land and Building of Hotel Palak Paradise at Kalwar Road, Delhi Ajmer Express Highway, Jaipur (vii) Various immovable assets of Guman Group led by Shankar Lal Khandelwal (ix) Office of Fourth Floor, Solaris Bui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are admittedly not derived from criminal activities or proceed of crime. The scope of the PMLA is to punishing the accused person and not to punish the innocent person who is not involved in the crime within the meaning of Section 2 (v) read with Section 3 of the Act. The appellant is not charge sheeted nor any prosecution complaint has been filed against the appellant. The appellants have also no objection if the borrowers properties which were acquired from proceed of crime be dealt by the respondent in any manner. 4. There is no nexus whatsoever, between the alleged crime and the appellant who is mortgagee of the properties and is a victim of the fraud and is innocent party. The definition of proceed of crime as per Section (u) of the Act comprises of the property which is derived or obtained as a result of criminal activities. The mortgaged properties are not acquired from proceed of crime. 5. The scheme of the Act is such that is cannot apply to a transaction of the nature as in the present case against the appellant. Money of appellant is a public money and its right under SARFAESI cannot be taken away by the attachment order, in case the attach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 2018 was passed whereby, inter alia , the Secured Property was attached. The Secured Property is attached on the ground that ₹ 85,22,424/- is outstanding due against the fraudulent loan disbursed by Syndicate Bank against Secured Property. ( Serial No. 27 of the table of loans in the Impugned Order ). The basis of this attachment is the statement u/s 50 of the PMLA by Respondent No.4 that There is neither dispute nor any finance on these 44 flats and the Directorate may attach these flats . However, our of these flat no.701-702 in Block A is registered in the name of Guman Khandelwal, flat no.103 of Block B in the name of Renu Khandewal and flat no.104 of Block B is registered in the name of Tikam Khandelwal . It is alleged on behalf of appellant that a false statement was made by the Respondent No.4 in as much as the Secured Property i.e, Flat no.104 of Block B of Guman Eternity was mortgaged to the Appellant prior in time as in fact, the Respondent No.5 in its reply before the Adjudicating Authority disclosed the fact that the Secured Property was mortgaged to the Appellant. 13.06.2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the property which is being subjected to attachment at a time anterior to the commission of the criminal activity, the product whereof is suspected as proceeds of crime, the acquisition of such interest in such property (otherwise assumably untainted) by such third party cannot conceivably be on account of intent to defeat or frustrate this law. In this view, it can be concluded that the date or period of the commission of criminal activity which is the basis of such action under PMLA can be safely treated as the cut-off. From this, it naturally follows that an interest in the property of an accused, vesting in a third party acting bona fide, for lawful and adequate consideration, acquired prior to the commission of the proscribed offence evincing illicit pecuniary benefit to the former, cannot be defeated or frustrated by attachment of such property to such extent by enforcement authority in exercise of its power under Section 8 PMLA. 165. Situation may also arise, as seems to be the factual matrix of some of the cases at hand, wherein a secured creditor, it being a bonafide third party claimant vis-a-vis the alternative attachable property (or deemed tainted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings under the I B Code for enforcement of its interest. S. 13 SARFAESI allows secured creditors to enforce security. 12. In terms with the statutory safeguards incorporated in the Act, any party aggrieved by the confirmation of the Provisional Attachment Order by the Adjudicating Authority may challenge such confirmation in an appeal to this Tribunal U/s 26 of the Act and then before the Hon ble High Court U/s 42 of the Act against the order of this Tribunal. Accordingly, under the legislative and statutory scheme of the Act, unless a party has exhausted its remedies in appeal right up to the Hon ble High Court, an order confirming the attachment cannot be said to have attained finality. This tribunal is only concerned with the validity of the impugned order and provisional attachment order which has been confirmed. 13. Therefore, this Tribunal possesses the requisite jurisdiction in terms with the Act as the court of first appeal, to adjudicate upon the pleas of the Appellant and determine the bonafides and legitimacy of its claims as well as the legality of the Provisional Attachment Order. Upon an argument being raised by the En ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d a quantifiable loss as a result of the offence of money laundering .In view of the legal provisions above referred and the object sought to be achieved by the PMLA, I humbly and with great respect cannot concur with the view expressed by the Appellate Tribunal, PMLA in the Judgments of the Appellate Tribunal cited by D-21 and D-22. It is matter of fact and as per material available on record that the mortgaged property was not acquired from the proceed of crime. 15. This tribunal does not agrees with the argument of the respondent on this issue as the bank and financial institution cannot be asked to be a mute spectator to the confirmation of attachment of mortgaged properties at this stage without availing statutory remedy under this Act and await the conclusion of trial U/s 3, 4 of the Act to agitate and pursue its rightful legal claim over such mortgaged properties. Till the trial is over (which may take number of years). It would be futile to deny the Appellant his claim over the mortgaged properties at the stage of confirmation of the PAO itself. If the mortgaged properties are not acquired from the proceed of crime. The legislative intent for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. In the result, the appeal is allowed and the impugned order is set aside. Since the respondent has not appeared to contest the appeal, the costs are made easy. 19. B. RAMA RAJU V. UOI AND ORS. Reported in (2011) 164 company case 149(AP)(DB) who has dealt with the aspect of bonafide acquisition of property in para 103. The same read as under:- 103. Since proceeds of crime is defined to include the value of any property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence, where a person satisfies the adjudicating authority by relevant material and evidence having a probative value that his acquisition is bona fide, legitimate and for fair market value paid therefor, the adjudicating authority must carefully consider the material and evidence on record (including the Reply furnished by a noticee in response to a notice issue under Section 8(1) and the material or evidence furnished along therewith to establish his earnings, assets or means to justify the bona fides in the acquisition of the property); and if satisfied as to the bona fide acquisition of the property, relieve such property f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pertaining to the appellant 23. Counsel appearing on behalf of ED submits that it is not necessary to record the reasons to believe prior to passing the provisional attachment order and it could only be recorded in order of provisional attachment order itself. 24. Copy of the same is not be served to aggrieved party even at the stage of arguments in the main appeal or any subsequent proceedings. These cannot be shown to the appellant. 25. The guidelines of recording the reason to believe have been laid down in various judgements of Apex Court and High Courts. It is held time and again by the said Hon ble Courts directing that the approach should be not the subjective satisfaction of the officer concerned. Such power given to the officer concerned is not an arbitrary power and has to be exercised in accordance with the restraints imposed by law. The belief must be that of an honest and reasonable person based upon reasonable grounds, the officer concerned may act on direct or circumstantial evidence but not on mere suspicion or the allegations mentioned in the FIR or charge-sheet so that the same can be scrutinized in or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rated therein or are served separately along with the order on the affected party. Reasons for the order must be communicated to the affected party . [ The above referred to decision has been followed in various judgments by many High Courts, as well the Hon'ble Supreme Court of India in subsequent decisions. 28. a) In Kranti Associates v. Masood Ahmed Khan (2010) 9 SCC 496, the legal position was summarized as under:- a. In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially. b. A quasi-judicial authority must record reasons in support of its conclusions. c. Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well. d. Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power. e. Reasons reassure that discretion has been exercised by the decision maker on relevant grounds and by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must be given for judicial decisions . o. In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of Due Process . b) In Income Tax Officer v. LakhmaniMewaldas 1976 (3) SCR 956, the Supreme Court held that there should be a live link or close nexus ‖ between the material before the ITO and the formation of his belief that income had escaped assessment. More recently, in Aslam Mohd Merchant v. Competent Authority (2008) 14 SCC 186, the entire legal position has been explained elaborately by the Supreme Court as under: 28. It is, however, beyond any doubt or dispute that a proper application of mind on the part of the competent authority is imperative before a show cause notice is issued. Section 68- H of the Act provides for two statutory requirements on the part of the authority viz: (i) he has to form an opinion in regard to his `reason to believe'; and (ii) he must record reasons therefor. Both the statutory elements, namely, `reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng, if he has sufficient cause to believe that thing and not otherwise. 29. In the light of above, it is held that the provisional attachment order in the present case is bad as no valid reason to believe pertaining to appellant herein has been recorded within the meaning of the provision of Section-5(1) of the Act. Recording of reason to believe under the said provision is not a formality rather it is the duty of the authorized officer to record the valid reason to believe. As far as reason of believe within the meaning of Section 8(1) is concerned, if the Adjudicating Authority chooses to record the same, it must be recorded after having gone through the entire material and copy of complaint and provisional attachment order, the same shall have to be satisfied fully with the mandatory condition as to whether the person-concerned has committed the offence within the meaning of Section 3 of the Act or not or is in possession of proceed of crime. Only than, the notice under section 8(1) is to be issued, otherwise notice is to be declared as invalid. 30. In the present case, copy of reason to believe has not been filed. Counsel for the respondent submi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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