Indian Overseas Bank And Others v. Joint Director, Directorate Of Enforcement, New Delhi And Others

Deputy Director, Directorate of Enforcement Versus Axis Bank & Ors. in Criminal Appeal No. 143 of 2018 and batch matters is squarely applicable to the present facts and circumstances of the case. Particularly he has referred to Para No(s). 146-150, 159, 160 and subsequent para no(s). 165 to 170 & 171(vii) (vii) of the said judgment. He has also referred to Section 2(1) (u) of PMLA, 2002 and contended that the properties at Serial No(s). 2, 3, 4 & 5 are acquired from proceeds of crime, so there is no illegality in the impugned order, therefore, the attachments of the properties in question should continue. He has also drawn the attention of the undersigned at Page no(s).44 to 48 and 64 to

71 of the impugned order. He has also filed written submissions and a brief note in the matter. The same are perused.

12. Heard both the parties. Perused the materials available on record and also perused the judgment of Honble Delhi High Court dated 02.04.2019 passed in the matter of Deputy Director, Directorate of Enforcement Versus Axis Bank & Ors. in Criminal Appeal No. 143 of 2018 and batch matters. The Honble Delhi High Court has, in the aforesaid judgment, has observed and settled certain principles/guidelines. The relevant portions of the said judgment are reproduced below:

146. A Resolution Professional appointed under the Insolvency Code does not have any personal stake. He only represents the interest of creditors, their committee having appointed and tasked him with certain responsibility under the said law. The moratorium enforced in terms of Section 14 of Insolvency Code cannot come in the way of the statutory authority conferred by PMLA on the enforcement officers for depriving a person (may be also a debtor) of the proceeds of crime. A view to the contrary, if taken, would defeat the objective of PMLA by opening an escape route. After all, a person indulging in money-laundering cannot be permitted to avail of the proceeds of crime to get a discharge for his civil liability towards his creditors for the simple reason such assets are not lawfully his to claim.

147. To sum up on the issue, the objective of the legislation in PMLA being distinct from the purposes of the three other FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016 Page 17 of 32 enactments viz. RDBA, SARFAESI Act and Insolvency Code, the latter cannot prevail over the former. There is no inconsistency. The purpose, the text and context are different. This court thus rejects the argument of prevalence of the said laws over PMLA. THE RIGHTS OF THIRD PARTY ACTING BONA FIDE

148. In view of the conclusions reached as above, rejecting the argument of prevalence of RDBA, SARFAESI Act and Insolvency Code over PMLA, the said laws (or similar other laws, some referred to above) must co-exist, each to be construed and enforced in harmony, without one being in derogation of the other, with regard to assets respecting which there is material available to show the same to have been "derived or obtained" as a result of "criminal activity relating to a scheduled offence" rendering the same "proceeds of crime", within the mischief of PMLA. The PMLA, declares, by virtue of Section 71, that it has over-riding effect over other existing laws, such provision containing non-obstante clause with regard to inconsistency apparently to be construed as referable to the dealings in "money-laundering" and "proceeds of crime" relating thereto.

149. An order of attachment under PMLA, if it meets with the statutory pre-requisites, is as lawful as an action initiated by a bank or financial institution, or a secured creditor, for recovery of dues legitimately claimed or for enforcement of secured interest in accordance with RDBA or SARFAESI Act. An order of attachment under PMLA is not rendered illegal only because a secured creditor has a prior secured interest (charge) in the subject property. Conversely, mere issuance of an order of attachment under PMLA cannot, by itself, render illegal the prior charge or encumbrance of a secured creditor, this subject to such claim of the third party (secured creditor) being bonafide. In these conflicting claims, a balance has to be struck. On account of exercise of the prerogative of the State under PMLA, the lawful interest of a third party which may have acted bonafide, and with due diligence, cannot be put in jeopardy. The claim of bonafide third party claimant cannot be sacrificed or defeated. A contrary view would be unfair and unjust and, consequently, not the intention of the legislature. The legislative scheme itself justifies this view. To illustrate, reference may be made to sub- section (8) of Section 8 PMLA where-under a power is conferred on the special court to direct the Central Government to "restore" a property to the claimant with a legitimate interest even after an order of confiscation has been passed.

150. The legislation on money-laundering, as is the case of similarly placed other legislations providing for forfeiture or confiscation of illegally acquired assets, contains sufficient safeguards to protect the interest of such third parties as may have acted bonafide. Such safeguards and rights to secure their lawful interest in the property subjected to attachment (with intent to take it to confiscation) have already been noticed at length with reference to the statutory provisions. To recapitulate, and by way of illustration, reference may be made to the opportunity afforded by law (Section 8) to a person claiming "a legitimate interest" to approach the adjudicating authority and the appellate tribunal, as indeed the court, to prove that he had "acted in good faith", taking "all reasonable precautions", himself not being involved in money-laundering, to seek its "release" or "restoration". In this context, however, as also earlier noted, the FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016 Page 18 of 32 presumptions that can be drawn in terms of Sections 23 and 24 of PMLA are to be borne in mind, the burden of proving facts contrary to the case of money-laundering being on the person claiming to have acted bonafide.

159. As noted earlier, there are three parts of the definition of the expression "proceeds of crime", the first clearly referring to a property respecting which there is material to show the same to have been "derived or obtained", directly or indirectly, by a person "as a result of criminal activity (of specified nature)". In case such property is held by the person who is "charged with the offence of money-laundering", there is a statutory presumption under Section 24(a) PMLA, using the expression "shall presume", about it being proceeds of crime involved in such money-laundering. It is a rebuttable presumption, the onus to prove facts to the contrary being on the person accused of such offence. If the acquisition of such property by such accused has involved more than one "inter-connected transactions", one of such transactions being proved to be involving money-laundering, a statutory presumption is raised under Section 23 PMLA that the other transactions form part of the former, the burden to prove facts to the contrary being again on the person claiming otherwise.

160. But, in cases where the enforcement authority seeks to attach other properties, suspecting them to be "proceeds of crime", not on the basis of fact that they are actually "derived or obtained" from criminal activity but because they are of equivalent value as to the proceeds of crime which cannot be traced, it is essential that there be some nexus or link between such property on one hand and the person accused of or charged with the offence of money-laundering on the other. In cases of this nature, the person accused of money-laundering must have had an interest in such property at least till the time of engagement in the proscribed criminal activity from which he is stated to have derived or obtained pecuniary benefit which is to be taken away by attachment or confiscation. It is with this view that PMLA provides for a possible presumption to be drawn, under Section 24(b) using the expression "may presume", about a property being "involved in money-laundering" in the case of person other than the one who is charged with the offence of money-laundering. There is no doubt that such presumption, if drawn, may also be rebutted by evidence showing facts to the contrary.

163. Having regard to the above scheme of the law in PMLA, it is clear that if a bonafide third party claimant had acquired interest 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 FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016 Page 19 of 32 the enforcement authority in exercise of its power under Section 8 PMLA.

164. Though the sequitur to the above conclusion is that the bonafide third party claimant has a legitimate right to proceed ahead with enforcement of its claim in accordance with law, notwithstanding the order of attachment under PMLA, the latter action is not rendered irrelevant or unenforceable. To put it clearly, in such situations as above (third party interest being prior to criminal activity) the order of attachment under PMLA would remain valid and operative, even though the charge or encumbrance of such third party subsists but the State action would be restricted to such part of the value of the property as exceeds the claim of the third party.

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 property) has initiated action in accordance with law for enforcement of such interest prior to the order of attachment under PMLA, the initiation of the latter action unwittingly having the effect of frustrating the former. Since both actions are in accord with law, in order to co- exist and be in harmony with each other, following the preceding prescription, it would be appropriate that the PMLA attachment, though remaining valid and operative, takes a back-seat allowing the secured creditor bonafide third party claimant to enforce its claim by disposal of the subject property, the remainder of its value, if any, thereafter to be made available for purposes of PMLA.

166. As already noted, the newly inserted provision contained in Sections 26-B to 26-E falling in Chapter (no. IV-A) on registration by secured creditors and other creditors of SARFEAESI Act are yet to be notified and brought into force. In the event of said statutory clauses coming into force, a creditor will not be entitled to exercise the right of enforcement, inter alia, of security interest over the property of borrower unless such security interest has been duly registered under the said law. Upon such amended law being enforced, a bona fide third party claimant seeking relief against an order of attachment under PMLA will also be obliged to show due compliance with such statutory requirements.

167. As has been highlighted earlier, the provisional order of attachment is subject to confirmation by the adjudicating authority. The order of the adjudicating authority, in turn, is amenable to appeal to the appellate tribunal. The said forum (i.e. the appellate tribunal) may pass such orders as it thinks fit confirming, modifying or setting aside the order appealed against [Section 26(4)]. Undoubtedly, an aggrieved party is entitled in law to invoke the said jurisdiction of the appellate tribunal to bring a challenge to the orders of attachment (as confirmed) but, the law in PMLA, at the same time, also confers jurisdiction on the special court to entertain such claim for purposes of restoration of the property during the trial of the case [Section 8]. The jurisdiction to entertain objections to attachment conferred on the appellate tribunal on one hand and, on the special court, on the other, thus, may be co-ordinate, to an extent.

168. An argument, however, was raised, by the appellants that the respondents herein should have approached the special FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016 Page 20 of 32 court, instead of the appellate tribunal, for consideration of their respective claims.

169. In view of above-noted legislative scheme, it must be clarified that if the order confirming the attachment has attained finality, or if the order of confiscation has been passed or, further if the trial of a case for the offence under Section 4 PMLA has commenced, the claim of a party asserting to have acted bonafide or having legitimate interest will have to be inquired into and adjudicated upon only by the special court.

170. But, the above exception cannot be applied to all cases of bona fide third party claimants so as to confer a general right to seek release of such property as last mentioned above from attachment even in cases where the encumbrance is created or interest acquired at a time around or after the date or period of criminal activity. In this category of cases, the third party will have the additional burden to prove that it had exercised due diligence having "taken all reasonable precautions" at the time of acquisition of such interest or creation of such charge, the jurisdiction to entertain and inquire into such claim and grant relief of release after order of attachment has attainted finality, or of restoration after order of confiscation, vesting only in the special court under Section 8(7) & (8) PMLA. The due diligence is to be tested amongst others, on the touchstone of questions as to whether the party had indulged in transaction after due inquiry about untainted status of the asset or legitimacy of its acquisition. SUMMARISING THE CONCLUSIONS

171. It will be advantageous to summarise the conclusions reached by the above discussion, as under :-

(i). The process of attachment (leading to confiscation) of proceeds of crime under PMLA is in the nature of civil sanction which runs parallel to investigation and criminal action vis-a-vis the offence of money-laundering.

(ii). The empowered enforcement officer is expected to assess, even if tentatively, the value of proceeds of crime so as to ensure such proceeds or other assets of equivalent value of the offender of money-laundering are subjected to attachment, the evaluation being open to modification in light of evidence gathered during investigation.

(iii). The empowered enforcement officer has the authority of law in PMLA to attach not only a "tainted property" - that is to say a property acquired or obtained, directly or indirectly, from proceeds of criminal activity constituting a scheduled offence - but also any other asset or property of equivalent value of the offender of money laundering, the latter not bearing any taint but being alternative attachable property (or deemed tainted property) on account of its link or nexus with the offence (or offender) of money-laundering.

(iv). If the "tainted property" respecting which there is evidence available to show the same to have been derived or obtained as a result of criminal activity relating to a scheduled offence is not traceable, or the same for some reason cannot be reached, or to the extent found is deficient, the empowered enforcement officer may attach any other asset ("the alternative attachable property" or FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016 Page 21 of 32 "deemed tainted property") of the person accused of (or charged with) offence of money-laundering provided it is near or equivalent in value to the former, the order of confiscation being restricted to take over by the government of illicit gains of crime.

(v). If the person accused of (or charged with) the offence of money-laundering objects to the attachment, his claim being that the property attached was not acquired or obtained (directly or indirectly) from criminal activity, the burden of proving facts in support of such claim is to be discharged by him.

(vi). The objective of PMLA being distinct from the purpose of RDBA, SARFAESI Act and Insolvency Code, the latter three legislations do not prevail over the former.

(vii). The PMLA, by virtue of section 71, has the overriding effect over other existing laws in the matter of dealing with "money-laundering" and "proceeds of crime" relating thereto.

(viii). The PMLA, RDBA, SARFAESI Act and Insolvency Code (or such other laws) must co-exist, each to be construed and enforced in harmony, without one being in derogation of the other with regard to the assets respecting which there is material available to show the same to have been "derived or obtained" as a result of "criminal activity relating to a scheduled offence" and consequently being "proceeds of crime", within the mischief of PMLA.

(ix). If the property of a person other than the one accused of (or charged with) the offence of money-laundering, i.e. a third party, is sought to be attached and there is evidence available to show that such property before its acquisition was held by the person accused of money- laundering (or his abettor), or it was involved in a transaction which had interconnection with transactions concerning money-laundering, the burden of proving facts to the contrary so as to seek release of such property from attachment is on the person who so contends.

(x). The charge or encumbrance of a third party in a property attached under PMLA cannot be treated or declared as "void" unless material is available to show that it was created "to defeat" the said law, such declaration rendering such property available for attachment and confiscation under PMLA, free from such encumbrance.

(xi). A party in order to be considered as a "bonafide third party claimant" for its claim in a property being subjected to attachment under PMLA to be entertained must show, by cogent evidence, that it had acquired interest in such property lawfully and for adequate consideration, the party itself not being privy to, or complicit in, the offence of money-laundering, and that it has made all compliances with the existing law including, if so required, by having said security interest registered.

(xii). An order of attachment under PMLA is not illegal only because a secured creditor has a prior secured interest (charge) in the property, within the meaning of the expressions used in RDBA and SARFAESI Act. Similarly, mere issuance of an order of attachment under PMLA does not ipso facto render illegal a prior charge or encumbrance of a secured creditor, the claim of the latter FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016 Page 22 of 32 for release (or restoration) from PMLA attachment being dependent on its bonafides.

(xiii). If it is shown by cogent evidence by the bonafide third party claimant (as aforesaid), staking interest in an alternative attachable property (or deemed tainted property), claiming that it had acquired the same at a time around or after the commission of the proscribed criminal activity, in order to establish a legitimate claim for its release from attachment it must additionally prove that it had taken due diligence" (e.g. taking reasonable precautions and after due inquiry) to ensure that it was not a tainted asset and the transactions indulged in were legitimate at the time of acquisition of such interest.

(xiv). If it is shown by cogent evidence by the bonafide third party claimant (as aforesaid), staking interest in an alternative attachable property (or deemed tainted property) claiming that it had acquired the same at a time anterior to the commission of the proscribed criminal activity, the property to the extent of such interest of the third party will not be subjected to confiscation so long as the charge or encumbrance of such third party subsists, the attachment under PMLA being valid or operative subject to satisfaction of the charge or encumbrance of such third party and restricted to such part of the value of the property as is in excess of the claim of the said third party.

(xv). If the bonafide third party claimant (as aforesaid) is a "secured creditor", pursuing enforcement of "security interest" in the property (secured asset) sought to be attached, it being an alternative attachable property (or deemed tainted property), it having acquired such interest from person(s) accused of (or charged with) the offence of money-laundering (or his abettor), or from any other person through such transaction (or inter-connected transactions) as involve(s) criminal activity relating to a scheduled offence, such third party (secured creditor) having initiated action in accordance with law for enforcement of such interest prior to the order of attachment under PMLA, the directions of such attachment under PMLA shall be valid and operative subject to satisfaction of the charge or encumbrance of such third party and restricted to such part of the value of the property as is in excess of the claim of the said third party.

(xvi). In the situations covered by the preceding two subparagraphs, the bonafide third party claimant shall be accountable to the enforcement authorities for the "excess" value of the property subjected to PMLA attachment.

(xvii).If the order confirming the attachment has attained finality, or if the order of confiscation has been passed, or if the trial of a case under Section 4 PMLA has commenced, the claim of a party asserting to have acted bonafide or having legitimate interest in the nature mentioned above will be inquired into and adjudicated upon only by the special court. DECISION ON THE APPEALS

172. In view of the above conclusions, the impugned decisions of the appellate tribunal will have to be set aside. There is a need FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016 Page 23 of 32 for further scrutiny particularly on facts, of the claims of the respondents, in their appeals which were presented before the said forum to challenge the orders of attachment, as confirmed by the adjudicating authority in the five cases. This may be illustrated hereinbelow.

173. It does appear that the assets which have been the subject matter of attachment in the appeals at hand are not

tainted property, the same having been seemingly acquired prior to the criminal activity giving rise to accusations of money- laundering. But, they are sought to be attached and subjected to eventual confiscation on account of they being the alternative attachable properties or deemed tainted properties, which is permissible in law. The audi car (subject matter of first appeal) was acquired by a transaction which has no direct connection with the case of money-laundering. However, there is no clarity as to the value of proceeds of crime which are to be confiscated as against value of the attached property as indeed the extent of the debt yet to be recovered by the secured creditor. The monetary gains made by the transactions which are subject matter of the accusations of money-laundering on account of illicit foreign exchange transactions (third appeal) or the case of cheating by use of fabricated defence supply orders (fourth appeal), both involving public servants, require closer scrutiny as to the claim of the respondent banks of bonafide action. Though there is no such element of complicity on part of any of the officials of the respondent banks in the case relating to fictitious hospital equipment (second appeal) or the one involving consortium of banks (fifth appeal), scrutiny respecting legitimacy and bonafide of the claim on the touchstone, inter alia, of the subsisting value of the secured interest and chronology of events leading to attachment would be necessary.

174. It will be appropriate that such further scrutiny as is necessary on the touchstone of above principles is undertaken by the appellate tribunal after calling for further responses (and inputs) from each side.

175. Ordered accordingly.

176. Thus, the appeals are allowed. The impugned decisions of the appellate tribunal are set aside. The matters arising out of the appeals of the respondents stand revived and restored for further consideration by the appellate tribunal. The parties are directed to appear before the said forum on 15.04.2019.

177. The appeals, and the applications filed therewith, stand disposed of in above terms.

13. During the course of hearing the learned counsel for the Appellant Banks submitted the following;

a) All legal proceedings for recovery were initiated by the Banks prior to provisional attachment. FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016 Page 24 of 32

b) That it is clear that the Appellant Banks as institutions are not privy to or complicity in, the offence of money-laundering as;

i. The criminal proceedings against the borrowers were set in motion at the instance of Indian Overseas Bank. The F.I.R. has not been registered against the Appellants.

ii. That the security interests of the Appellants in the properties in question have been acquired lawfully and for adequate consideration.

c) That, due diligence was exercised by the Banks in taking the properties in question as security.

d) The subject properties are not tainted properties.

14. The bonafide as well as due diligence in sanctioning the loans by the appellants to M/s. CCL have not been doubted by the respondent no.1 at any point of time. It could not be explained by the respondent no.1 as to how the properties in question are acquired out of proceeds of crime.

15. The learned counsel for the appellants submits that the appellant banks are victims and not an offender, the public money is stuck due to the proceedings under PMLA.

16. The appellants are secured creditors and bonafide claimants of the properties. The security interests have been created on the properties in question and there are legitimate banking transactions. There is no allegation that the appellants have not exercised due diligence in sanctioning loans to purchase the properties in question. FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016 Page 25 of 32

17. The properties have been mortgaged much prior to the date of registering of FIR & ECIR. The Provisional Attachment Order has been passed on 29.03.2016.

18. The Honble High Court of Delhi in the recent decision of The Deputy Director, Directorate of Enforcement, Delhi Vs. Axis Bank & Ors., reported in 2019 SCC Online Del 7854 (hereinafter referred to as the Axis Bank Decision) has rightly held that the interest of a third party in the property of an accused, acquired prior to the commission of the proscribed offence cannot be defeated or frustrated by attachment of such property under Section 8 of the Act.

19. The Honble Delhi High Court further recognized the right of such third party to proceed with enforcement of its interest in accordance with law such that while the order of attachment under the Act would not be rendered irrelevant, yet it would take a backseat such that the State action would be restricted to such part of the value of the property as exceeds the claim of the third party, if any. (Reference Paragraph No. 162-164 of the Axis Bank Decision) speak for itself. In terms with the Axis Bank Decision, the claim of the Respondent to the properties would be restricted to such part of the aggregate value of the properties attached as exceeds the claim of the Appellants.

20. 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 under Section 26 of the Act and then before the Honble High Court under Section 42 of the Act against the order of this Tribunal. Accordingly, under the legislative and statutory scheme of the FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016 Page 26 of 32 Act, unless a party has exhausted its remedies in appeal right up to the Honble High Court, an order confirming the attachment cannot be said to have attained finality. Therefore, this Tribunal is fully equipped and 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.

21. There is no force in the arguments of learned counsel appearing on behalf of Enforcement Directorate that claims of third parties are to be solely adjudicated by the Special Court before whom trial is pending. The Honble High Court of Delhi in the Axis Bank Decision has held that the claim of a party asserting a bonafide and legitimate claim would be inquired into by the Special Court only if the order confirming the attachment has attained finality. An order cannot be said to have attained finality until and unless all the remedies under the Act have been exhausted. The Tribunal has only to examine the impugned order and is empowered under Section 26 of the Act as to whether the attachment order has been passed as per law or not. This Tribunal has the exclusive jurisdiction on this issue. The Appellant Banks are otherwise entitled to approach the Special Court for release of properties even during the pendency of appeals or after allowing the appeals. The validity of the confirmation of attachment order is only to be considered by this Tribunal.

22. The impugned order confirming the provisional attachment order is passed without application of mind and without understanding the law, it is liable to be quashed with regards to mortgaged properties in question. FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016 Page 27 of 32

23. No doubt, this tribunal is clear in its mind that if the properties in question acquired from proceeds of crime and at the time of creating security, the banks are aware and still the loans were sanctioned, then said properties can be attached even in lieu of value thereof if the borrowers has concealed or is concealing the proceeds of crime, but under those circumstances, there must be material or prima facie evidence on record before passing the provisional attachment order.

24. This order is being passed in relation to secured properties in favour of banks which are not purchased from proceeds of crime.

25. The appellants are always at liberty to approach the Special Court to initiate the proceedings for disposal of secured properties, if so desired, the appellants to deposit the excess amount if such situation will arise.

26. The Appellants have nothing to do and have no connection with the allegation of crime committed by the borrowers, so far as money transferred from bank accounts to acquire the properties in question directly. The secured properties are admittedly not derived from criminal activities or proceeds of crime. The scope of the PMLA is to punish the accused person and not to punish the innocent people who are not involved in the crime within the meaning of Section 2 (u) read with Section

3 of the Act.

27. There is no nexus whatsoever, between the alleged crime and the appellants who have secured properties by way of mortgage and are victims of the fraud and innocent party. The definition of proceeds of crime as per Section 2(1) (u) of the PML Act comprises of the property which is derived or obtained as a result of criminal activities. The FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016 Page 28 of 32 secured property is not acquired from proceeds of crime either directly or indirectly.

28. From the materials available on record it becomes clear that the money have been advanced for the purchase of the properties by the Appellant Banks. Undisputedly, the money was paid directly from the Bank accounts to the seller and thereafter the mortgages were created. It is also not disputed that the money released by the Banks was sanctioned for the said purpose and were part of the financing the project.

29. The Enforcement Directorate (Respondent no.1) does not dispute the fact that the Appellant Banks had initiated action under the SARFAESI Act, 2002 much before the registration of the case under the PMLA Act. The copy of the ECIR No. DLZO/10/2013 is dated 20.06.2013, whereas the Appellant Banks had issued notice under Section 13(2) of SARFAESI Act, 2002 on 13.08.2012 and in furtherance to the same had issued possession notice under section 13(4) on 22.11.2012, 24.11.2012 and 03.12.2012 which is prior to registering the ECIR and the respondent no. 1 was fully aware about all factual position.

30. The other undisputed fact is when the PAO was passed by the Respondent no.1 in 2016, the recovery suits filed by the Banks before the Ld. Debt Recovery Tribunal and action under SARFAESI Act, 2002 were pending and a stay order passed by the Ld. DRT, Delhi was operational since, 2013.

31. It appears from record that Respondent no.1 and the Adjudicating Authority is quite evident from the fact that in the confirmation order of Adjudicating Authority at Page 41 wherein the payment with regard to the properties of M/s. Century Communication Ltd. at 5th & 6th Floor FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016 Page 29 of 32 including 7th Floor Terrace Portion Landmark, Bandra (West Mumbai 400050) (1433 Sq. Ft. 1913 Sq. Ft. & 4319 Sq. Ft. Terrace Portion) the payment trail is shown to be made in 2006, whereas the Enforcement Directorate, itself record the fact that the ownership of the said property is with Respondent No.4 M/s. Century Communication Ltd. since 18.03.2004. The said properties are under the control of the Appellant Banks throughout mortgage since 13.08.2004 and the said fact which has been stated by the Appellants in their appeals has not been disputed by the Respondent no.1.

32. The properties of the Appellant Banks cannot be attached or confiscated when there is no illegality or unlawfulness in the title of the Appellant Banks and there is no charge of money laundering against the Banks. During the course of arguments, the learned counsel for the respondent no.1 submitted that some of the bank officials were involved and they are being prosecuted by the CBI. But there is no allegation against the Banks as institutions. The Banks are victims.

33. The mortgage of properties is the transfer under the Transfer of Property Act as there is no dispute as regards the origin of funds or the title of the properties. As far as the Appellant Banks are concerned, the Banks have to recover its outstanding dues by taking over the possession of the mortgaged properties in case the concerned borrowers are not able to pay back the credit facilities availed by them and by way of the SARFAESI provisions these properties are being taken in possession by the Appellant Banks so that recovery can be made.

34. From the discussion made above, I am of the view that there is no nexus whatsoever between the alleged offence and the Appellant Banks as institutions who are the mortgagee of the properties in question which were purchased from the banks money and mortgage of the same with FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016 Page 30 of 32 them. Thus, no case of money laundering is made out against Appellant Banks who had sanctioned the amounts which are untainted and pure money.

35. The Adjudicating Authority has not appreciated the facts and law involved in the matter. 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. The contentions raised by the Respondent's Advocate have no substance. The provisional attachment order in the present matters is bad in law, hence liable to be set aside.

36. In the present appeals, it is an admitted position that the loans were given by the banks in good faith who have suffered loss because of non-payment of money by the borrower. The borrowers are also arrayed as respondents in the appeals filed by the banks. It is evident from the said proviso that incase the claimant would be able to satisfy the Special Court that it has acted in good faith and suffered the loss despite of having taken all the reasonable precautions and is also not involved in the offence of money laundering then the Special Court is empowered to restore such properties during the trial of the case. In the facts of the present case, the mortgaged properties are not purchased from the proceeds of crime.

37. If paras 167 to 169 are read co-jointly with paras 163 and 165 of the order of Honble Delhi High Court order dated 02.04.2019, it is clear from the same that if the attachment has attained finality or if order of confiscation has been passed, the claim and legitimate interest will have to be inquired by the Special Court. The said findings are correct if the situation in the present appears are the same. In the present case, attachment has not attained finality or any confiscation has been passed FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016 Page 31 of 32 or any trial has commenced under the Section 4 of PMLA against the appellants. In fact, appellants are innocent parties and victims also. The trial against accused parties may take number of years.

38. In view of judgment passed by the High Court of Delhi, I am of the view that the Provisional Attachment Order dated 29.03.2016 passed by ED and impugned order dt. 22.09.2016 passed by the Adjudicating Authority, PMLA, confirming the Provisional Attachment Order is liable to be quashed and set aside.

39. The Honble High Court of Delhi, vide order dated 06.12.2019 passed in Crl.A.1090/2018 in the matter of Directorate of Enforcement Versus Indian Overseas Bank & Ors. has clarified the status quo order of Honble Supreme Court passed in the appeal against the order dated 02.04.2019 passed in the matter of Deputy Director, Directorate of Enforcement Versus Axis Bank & batch matters in CRL.A. No.143/2018. The order dated 06.12.2019 of Honble High Court of Delhi is reproduced below:

ORDER 06.12.2019 Crl.M.A.42109/2019 (Exemption) Allowed, subject to all just exceptions. This application is, accordingly, disposed of. Crl.M.A. 42108/2019 Vide the present application, the applicant/respondents seek clarification of the order dated 01.11.2019 as to whether the Tribunal shall proceed with the present matter. Vide order dated 01.11.2019, this court remanded the matter to the Appellate Tribunal for PMLA and directed the said Tribunal to restore the appeal and after hearing both the parties decide the same within six weeks from the receipt of this order. The said order was passed on the consent made by the parties and in view of the order passed by this court in Crl.A. 143/2018 in Deputy Director, Directorate of Enforcement, Delhi vs. Axix Bank & Ors. and other batch matters. FPA-PMLA-1530/DLI/2016, FPA-PMLA-1566/DLI/2016, FPA-PMLA-1550-1556/DLI/2016 & FPA-PMLA-1581/DLI/2016 Page 32 of 32 Learned counsel appearing on behalf of the non- applicants/petitioner submits that the Honble Supreme Court has granted status quo qua the property in question, however, there is no status quo to proceed with the matter by any court including the Appellate Tribunal of PMLA. This fact has not been disputed by counsel for the respondent. Thus, it is clarified that the order of the status quo of the Supreme Court is regarding the disposal of the property, therefore, Appellate Tribunal of PMLA is directed to comply with the order dated 01.11.2019 passed by this court within six weeks from today. In view of above directions, the application is disposed of. Copy of the order be given dasti under the signatures of Court Master.

In view of the said clarificatory order no order in respect of disposal of the property can be passed by this Appellate Tribunal.

40. In the light of above, the present appeals are allowed in terms of the Judgment dated 02.04.2019 passed by the Honble High Court of Delhi in Crl. A. No. 143/2018 in the matter of Dy. Director, Directorate of Enforcement, Delhi Vs. Axis Bank & other batch matters.

41. The impugned order dated 22.09.2016 is set-aside. Consequently, Provisional Attachment Order is also quashed in respect of questioned properties mortgaged with the appellants.