,,,
FPA-PMLA-2001/MUM/2017,,,
1. The Appellants have filed the present Appeal under Section 26 of the Prevention of Money Laundering Act, 2002, (hereinafter referred to as the",,,
“Actâ€) against Order dated 01.12.2016 passed by the Ld. Adjudicating Authority in O.C. No. 612/16 titled “Enforcement Directorate V/s,,,
Kingfisher Airlines Ltd &Ors†(hereinafter referred to as the “Impugned Order.,,,
2. By the impugned order, the Adjudicating Authority has confirmed the Provisional Attachment Order No. 11/2016 dated 16.06.2016 with respect to,",,,
inter-alia, “Under construction Flats in Kingfisher Tower, Bangalore to the extent of the remaining POC†(hereinafter referred to as",,,
“Kingfisher Towersâ€).,,,
3. This Tribunal is only concerned with the validity of attachment of orders with regard to Apartment bearing “No. 9A†on the 9th Floor of the,,,
Kingfisher Towers (“thePropertyâ€) which was booked by the appellant.,,,
4. The Appellantsare non-resident Indian who are currently residing in the United Arab Emirates and are industrialists engaged in the business of,,,
manufacture of pre-cast and modular construction materials and healthcare,,,
5. The appellant is not arrayed in the FIR or charge sheeted. He was not involved in schedule offence. No prosecution complaint is pending against,,,
the appellant.,,,
6. The Original Complaint No. 612/2016 was filed against Shri Vijay Mallya, M/s Kingfisher Airlines Ltd. &Ors., under Section 5(5) of the PMLA,",,,
2002, wherein certain properties (movable & immovable properties) have been attached provisionally under Provisional Attachment Order No.",,,
11/2016 dated 11.06.2016, under Section 8(3) of the PMLA, 2002.",,,
7. The Enforcement Directorate, Mumbai has registered a case against Shri Vijay Mallya, M/s Kingfisher Airlines Ltd. (KAL) and others under",,,
Prevention of Money Laundering Act (PMLA), 2002, in the matter of IDBI Loan of Rs. 900 Crore.",,,
8. The properties mentioned in the aforesaid Provisional Attachment Order have been provisionally attached under Section 5(5) of PMLA, and the",,,
same has been duly confirmed by the Adjudicating Authority in its order in Original Complaint No. 612/2016 dated 01/12/2016, which also includes the",,,
property as mentioned by the Appellant.,,,
9. It is submitted on behalf of respondent that the impugned provisional attachment has been made by invoking provision of Section 2(1)(u) of PMLA,",,,
2002, which empowers the Complainant (an authority under PMLA) to attach properties of equivalent value of Proceeds of crime to the offender.",,,
Hence, during the course of investigation, various properties held/owned/acquired by Shri Vijay Mallya, including those through various companies",,,
and/or special purpose vehicle, which were controlled directly or indirectly by him, through dummy Directors appointed by him were identified, which",,,
included the subject property held in the name of M/s United Breweries (Holdings) Ltd.,,,
10. It is admitted by the respondent that the appellants were not impleaded as Defendants in the proceedings before the Adjudicating Authority,",,,
despite of having knowledge about the transaction.,,,
11. There is no denial on behalf of respondent no. 1 during hearing that no notice was issued to the Appellants by the Adjudicating Authority nor were,,,
the Appellants given any opportunity to be heard, as mandated under the Proviso to Section 8(2) of the PMLA, despite the fact that Appellants says",,,
that he is “claimant†for the purposes of the said Proviso, being bona fide innocent purchasers of the Property and the existence of the claim of",,,
the Appellants as bona fide innocent purchasers was within the knowledge of both, Respondent No.1 and also Adjudicating Authority before passing",,,
of the Impugned Order. It is argued on behalf of appellant that the mandatory provisos of Section 5 and 8 have not been followed by both authorities.,,,
12. It is submitted by the Appellants that they are not involved in the commission of the scheduled offences allegedly committed by inter-alia the,,,
alleged accused parties. The source of the money utilized for purchase of the Property in question are not “proceeds of crime†which is a,,,
precursor for attachment of properties by the Respondent Adjudicating Authority under PMLA. It was a clean money which was paid through,,,
banking system as claimed by the appellant.,,,
13. It is further submitted that the Respondent has made wrong allegations against the appellant including those of conspiracy against the Appellants,,,
without any cogent evidence or material relied upon. Such details are missing if the material placed on record by the respondent no. 1. The appellant in,,,
the present appeal is only seeking the relief against the ED, who attached the property in which the appellant is claiming his right and interest.",,,
14. As per pleadings of the appellant, the brief facts are as follows:",,,
i) On 26.04.2010 Respondent No. 5 being the sole and absolute owner of the immovable property being land bearing Municipal No. 24 (Old Nos. 24,,,
and 33), VittalMallya Road, Bengaluru, situated in Ward No. 76 of Shantinagar Range, Bruhat Bangalore MahanagaraPalike, Bengaluru, admeasuring",,,
about 1,93,253 Sq. Ft., (which is described in greater detail in Schedule-A . The Respondent No. 5 had entered into a Joint Development Agreement",,,
dated 26.04.2010 with Respondent No. 8.,,,
ii) Under the said Joint Development Agreement, Respondent No. 8 had agreed to construct a multi storied luxury residential apartment complex with",,,
various amenities and deliver 55% of the built up area to Respondent No. 5, in consideration of Respondent No. 5 agreeing to permit Respondent No.",,,
8 to sell 45% of the built up area falling to its share and further agreeing to transfer the undivided share in the said property corresponding to the built,,,
up area of 45% falling to the share of Respondent No. 8. Thereafter, Respondent Nos. 5 and 8 prepared a detailed development plan and a",,,
construction plan and submitted it to the Bangalore Development Authority (“BDAâ€) and Bruhat Bangalore MahanagaraPalike (“BBMPâ€),",,,
respectively. Thereafter, by a resolution No. 84 of 2010 dated 27/04/2010, the BDA approved the development plan and issued necessary work order.",,,
Similarly, the BBMP also approved the construction plan by an order bearing LPNO.54/10-11 dated 21/10/2010. Subsequently, Respondent Nos. 5",,,
and. 8 entered into an Agreement dated 04.11.2010 with each other and agreed to name the said development and project referred in the Joint,,,
Development Agreement dated 26.04.2010 as “Kingfisher Towersâ€.,,,
iii) Pursuant thereto, Respondent No. 8 commenced the construction of the Kingfisher Towers, and simultaneously started marketing the sale of those",,,
units that would fall to its share. During 2012, a representative of Respondent Nos. 5 and 8 contacted the Appellants by claiming that it would be a",,,
world class high end luxury apartment, which is sold by invitation, exclusively to discerning clients. Thereafter, the representatives of Respondent Nos.",,,
5 and 8 had several meetings on the proposal of the sale of a unit in the Kingfisher Towers. During the said meetings, Respondent Nos. 5 and 8 had",,,
informed the Appellants that they would first need to enter into two agreements namely, an Agreement to Sell and a Construction Agreement with",,,
No.,Date of payment,"Payments under the
Agreement to Sell ( in
Rs.) ( Schedule B
Property)","Payment under the
Construction Agreement (in
Rs.) ( Schedule C Property)
1.,17.12.2012,"2,23,54,875.00","3,19,39,650.00
2.,28.02.2013,"20,00,000.00","93,58,165.00
3.,30.04.2013,"20,00,000.00","93,58,165.00
4.,30.06.2013,"20,00,000.00","93,58,165.00
5.,31.08.2013,"20,00,000.00","93,58,165.00
6.,31.10.2013,"20,00,000.00","93,58,165.00
7.,31.12.2013,"20,00,000.00","93,58,165.00
8.,28.02.2014,"20,00,000.00","93,58,165.00
9.,30.04.2014,"20,00,000.00","93,58,165.00
10.,30.06.2014,"20,00,000.00","93,58,165.00
11.,31.08.2014,"20,00,000.00","93,58,165.00
12.,31.10.2014,"20,00,000.00","93,58,165.00
13.,31.12.2014,"20,00,000.00","93,58,165.00
14.,28.02.2015,"20,00,000.00","93,58,165.00
15.,30.04.2015,"20,00,000.00","93,58,165.00
16.,30.06.2015,"20,00,000.00","93,58,165.00
,Total,"5,23,54,875.00","17,23,12,125.00
,Grand Total,"Rs. 22,46,67,000.00",
Indian Evidence Act and Copy of the letter dated 25.01.2017 arefiled as Annexure â€" A7 Colly.,,,
xii) On 04.02.2017 Respondent No. 8 sent a reply refusing to hand over the possession until necessary NOC was issued by Respondent No.5 despite,,,
there being no such clause as per the Agreement. The Reply stated that while the Schedule Property was ready for handover for the last several,,,
months after taking into account the detailed modifications requested by the Appellants, they would hand over the Schedule Property only upon receipt",,,
of a letter from Respondent No. 5 advising handover of the apartment for commencement of the interiors. Neither did Respondent No. 5 respond with,,,
their consent nor did Respondent No. 8 handover the Apartment Unit for fit outs. Copy of the Reply dated 04.02.2017 alongwith Certificate U/s 65B,",,,
Indian Evidence Act is filed as Annexure â€" A8.,,,
xiii) As per Clause 6 of the Agreement to Sell, Respondent No.5, being the seller, was required to execute the sale deed conveying the Schedule-C",,,
Property in favour of the Appellants, upon the payment of all amounts due under the Agreement to Sell and Construction Agreement. The Appellants,",,,
being the purchasers, had fulfilled all the terms and conditions by 07.06.2015 including the payment of all amounts due under the Agreement to Sell as",,,
well as the Construction Agreement, which date is well before the Respondent No. 8 was even ready to give possession. As such, Respondent No. 5",,,
was bound to convey the Schedule-C Property in favour of the Appellants. Similarly Respondent Nos. 8 and 5 were bound to deliver the possession of,,,
Schedule B Property in view of fulfilment of all terms and conditions, including the payment of amount due under the Construction Agreement. It is",,,
further submitted that in terms of the said Agreements, Respondent Nos. 5 and 8 were obligated to complete the construction of the said Flats and",,,
handover the same to the Appellants by 30.06.2015; though, the said Agreements also provided for a grace period of six months, and the same expired",,,
on 31.12.2015.,,,
xiv) The Agreement to Sell and the Construction Agreement do not empower the Appellants to terminate the contract on grounds other than non-,,,
payment. The Appellants, by performing all terms and conditions of the Agreement to Sell and Construction Agreement including the complete and",,,
total payment of the sale consideration have become de facto owners of the Schedule B & C Property. There are no other disputes between the,,,
Appellants and Respondent Nos.5 and8, regarding fulfilment of the terms and conditions under the aforesaid two agreements. Despite, repeated",,,
requests and reminders, Respondent No. 8 has not conveyed and delivered the Schedule Property.",,,
xv) The Appellant paid the entire Purchase Consideration from their own personal bank account having funds from his independent sources and,,,
earnings, which had no relation whatsoever with any of the Respondents named above nor was the purchase consideration part of, directly or",,,
indirectly, any transaction(s) with the Respondents named above.",,,
xvi) On 29.07.2015 pursuant to a Preliminary Enquiry, an FIR No. RCD BSM 2015 E 0006 dated 29.07.2015 U/s 409 IPC R/w S. 120-B IPC and",,,
Section 13(2) R/w 13(1) (d) of Prevention of Corruption Act, 1988 was registered by Central Bureau of Investigation (Banking, Security and Fraud",,,
Cell) against inter-alia Respondent Nos. 2, 3, 5. It is stated that the Appellants herein were not arraigned as Accused in the aforesaid FIR and have no",,,
relation to any of the entities/persons named in the FIR except to the extent that the Appellants are bona fide innocent purchasers of properties,,,
developed by the Respondent Nos.5 and 8 herein. It is also pertinent to note that the aforesaid specific facts and events came to the knowledge of the,,,
Appellants only upon receipt of the Impugned Order on 08.06.2017.,,,
xvii) On 29.01.2016 on the basis of the aforesaid FIR registered by the CBI, the Respondent No.1 registered an Enforcement case bearing number",,,
ECIR/03/MBZO/2016 dated 29-01-2016 (hereinafter referred to as the “ECIRâ€), naming inter alia Respondent Nos. 2, 5 and unknown officers of",,,
IDBI Bank as accused persons.,,,
xviii) On 11.06.2016, Respondent No. 1 passed the Provisional attachment Order bearing number 11/2016 dated 11-06-2016 (hereinafter referred to",,,
as the “PAOâ€). Vide which “Under construction Flats in Kingfisher Tower; Bangalore to the extent of the remaining POCâ€, i.e., the said",,,
Project which included the Schedule B Property and also the undivided proportionate share in the said Land. After the aforementioned provisional,,,
attachment, neither Respondent No.1 nor Respondent Nos.5 or 8 took any steps whatsoever to even intimate the Appellants regarding such",,,
attachment, despite being fully cognizant of the fact that the Appellants were the owners/bona fide innocent purchasers of the provisionally attached",,,
properties. It is submitted that the Appellants had been deliberately kept in the dark regarding the provisional attachment by Respondent Nos.1, 5 and",,,
8.,,,
15. On 01.12.2016, the Adjudicating Authority has passed the ImpugnedOrder confirming the attachment of inter-alia the Schedule B Property.Being",,,
aggrieved by the non-performance of the said Agreements by Respondent Nos.5 and 8, the Appellants have initiated proceedings before the Honâ€ble",,,
Karnataka High Court seeking the necessary direction to Respondent No. 5 to convey the Schedule-B and Schedule-C Property in favour of the,,,
Appellants by executing a Sale Deed.,,,
16. The appellant is not even named/mentioned in the FIR or the ECIR or the captioned Original Complaint. It is not even the case of the Enforcement,,,
Directorate/ Respondent No. 1 that the appellant is involved or connected in any manner with the alleged offence under PMLA or the predicate,,,
offence and at the time of issuance of Provisional Attachment Order, the ED/ Respondent No. 1 was aware of the purchase of the said property by",,,
the appellant and the appellant himself brought the same to the EDâ€s notice; however, the ED did not investigate it further or if it did investigate it,",,,
then the same did not result in any inculpatory findings.,,,
17. There is no material on record to show that the appellant has any link, association or relation with any of the defendants i the captioned Original",,,
Complaint. It is the case of appellant that the purchase of the said property was after arms-length negotiations.,,,
18. The Respondent EDâ€s allegation is that the Appellant has attempted to help the accused Vijay Mallya and has connived with him by entering into,,,
the Agreements to Sell is without any substance as there is no evidence or material on record.,,,
19. However, the Respondent ED has not able to establish prima facie that the Appellant has any link, nexus or connection whatsoever with the",,,
Accused Vijay Mallya directly or indirectly, except mere vague allegations are made. The appellant was not charge-sheeted or any complaint under",,,
PML Act, 2002 was filed against the appellant. If the appellant was involved, then why no action was taken by the ED and CBI or any authorities",,,
against him.,,,
20. It appears that the allegation of connivance is made by the Respondent ED without any basis. It is not denied by the ED that the entire payment,,,
was made through banking system. It is also not the case of respondent no. 1 that it was a tainted money or earned from the proceed of crime or by,,,
means of criminal activities.,,,
21. It is argued on behalf of the appellant that once the entire payment of the purchase consideration was made, the Appellant became owner of the",,,
said Property and had acquired proprietary rights and title a “claimant†to the said Property in terms of the Proviso to Section 8(2), Prevention of",,,
Money Laundering Act, 2002 being interested/aggrieved party.",,,
22. It is also correct that the Appellant is not even named/ mentioned in the FIR or the ECIR or the captioned Original Complaint. It was not even the,,,
case of the Enforcement Directorate/Respondent No. 1 that at the time of the PAO was issued and at the time of filing of the captioned O.C., that the",,,
Appellant is involved or connected in any offence or with the alleged offence under PMLA or the predicate offence. Almost on similar facts and legal,,,
issues involved in the present appeal, this tribunal in two appeals nos. FPA-PMLA-1772 and 1681 (MUM) 2017, on 13.08.2018 has set-aside the",,,
impugned order.,,,
23. It has been alleged by the Respondent No. 1 that the present appeal is not maintainable in view of the decree dated 19.01.2017 passed by the,,,
Honâ€ble Debt Recovery Tribunal wherein the Ld. Tribunal has directed the Respondent Nos. 2, 3 and KFIL to jointly and severally pay the sum of",,,
INR 6203,35,03,879 along with further interest at 11.5% yearly. The Respondent No. 1 alleges that the aforesaid decree has attained finality and",,,
therefore, the admission of the present appeal may tantamount to an interference with the decree. It is alleged by the appellant that the said allegation",,,
is not true for the followings reasons:,,,
a) The said submission rather than helping the Respondent No. 1, goes against it because this Tribunal has held in “Standard Chartered Bank vs.",,,
The Deputy Director Directorate of Enforcement, Mumbai FPA-PMLA-1604, 1711, 1760 & 1761/MUM/2017†that once there is an Order passed",,,
by the Honâ€ble Debt Recovery Tribunal, the same shall have precedence over the claim of the Respondent No. 1.",,,
b) Furthermore the present Appeal is limited to the determination of the validity and legality of the Order of Provisional Attachment within the four,,,
corners of the Act.,,,
c) Consequently, the issues for consideration before this Tribunal in the present Appeal are whether, firstly the Property is proceeds of crime and",,,
secondly whether the Appellants are in possession of the proceeds of crime. In this regard, it is submitted that the Property was attached vide the",,,
Impugned Order. However, at the prevalent time, there was no apprehension, as required under Section 5(1) of the Act, that the Property will be",,,
concealed, transferred or dealt with in a manner that will frustrate the proceedings under the Act. Interestingly Respondent No. 1 alongwith its reply",,,
has relied upon two orders passed by the Honâ€ble High Court at Karnataka which themselves demonstrate that on the day when the Investigating,,,
Officer passed the Order of provisional Attachment and also when the Impugned Order was passed, there existed absolutely no risk or chance",,,
whatsoever of the Property being “concealed, transferred or dealt with in a manner that will frustrate the proceedings under the Actâ€. The",,,
Honâ€ble High Court at Karnataka vide Order dated 13.09.2013 passed in WP No. 38870/2013 & WP Nos. 39048-39025/2013 & WP No.,,,
39053/2013 had already passed an Interim Order restraining Respondent No. 2, 3 and KFIL from transferring, alienating or disposing any moveable or",,,
immoveable properties.,,,
Thereafter the Honâ€ble High Court at Karnataka vide Order dated 26.11.2013 passed in OA No. 766/2013 disposing IA No. 2593/2013 to 2598/2013,,,
confirmed the earlier interim Order against the Respondent Nos. 2, 5 therefore the latter were restrained from transferring, alienating or disposing any",,,
moveable or immoveable properties during the pendency of the winding up petitions including the Property in question. Consequently, since the",,,
mandatory requirement under Section 5(1) of the Act was not fulfilled, the provisional attachment Order qua the Property should not have been",,,
confirmed.,,,
d) The Honâ€ble High Court at Madras has held in the case of “C. Chellamuthu vs. The Deputy Director, Prevention of Money Laundering Act,",,,
Directorate of Enforcement†reported in “2016 (2) CTC 90†that the Property in the hands of a subsequent bona fide purchaser, who purchased",,,
the property by paying legal consideration and without knowledge of the crime, cannot be attached. Moreover, it is pertinent to note that the aforesaid",,,
judgment of the Honâ€ble High Court of Madras has since been relied upon by this Honâ€ble Tribunal in “United Bank of India vs. The Joint,,,
Director, Directorate of Enforcement, Bhubaneshwar†reported in “MANU/ML/0032/2018†and in the case of “Punjab National Bank vs.",,,
The Deputy Director Directorate of Enforcement, Lucknow†reported in “MANU/ML/0029/2018†to set aside the attachment of properties that",,,
were purchased by innocent parties through untainted money.,,,
24. The said arguments have no force as the said proceedings have no bearing whatsoever on the adjudication of the present Appeal for the,,,
determination of which, this Tribunal ought only to determine the following:",,,
i) Issue 1 - Whether the Appellant has committed any offence under Section 3 of the Prevention of Money Laundering Act, 2002 (“Actâ€)?",,,
ii) Issue 2-Whether the subject property is proceeds of crime and the Appellant is in possession of proceeds of crime?,,,
25. With regard to issue 1, it is not even the case of the Respondent that the Appellant has committed any offence under Section 3 or is in any manner",,,
involved in the commission of the same. The Appellant is the purchaser of the subject property, for which he paid the complete consideration through",,,
duly documented legal banking channels, even prior to the date of registration of the FIR or the ECIR.",,,
26. On second issue, it is admitted position that the subject property has been attached as “value thereofâ€. The Appellant has vested rights in the",,,
subject property prior to the attachment by Respondent-ED. It is the case of the appellant the same could never have been attached as “value,,,
thereof†of the proceeds of crime. At the time of issuance of the Provisional Attachment Order there is no Confirmation Order that any proceeds of,,,
crime have flowed to UBHL.,,,
27. The next submission of the respondent is that since the application of the appellant for similar relief is pending before the Honâ€ble Court,",,,
therefore, the matter should not be heard. It is not denied by the appellant that the appellant has filed the application before the Honâ€ble High Court",,,
of Karnataka for registering the sale deed and possession of the flats. The said application is still pending. This tribunal is not passing any direction,,,
either to execute the sale deed nor the order of handing over the possession of the flats to the applicant as this tribunal has no jurisdiction to pass such,,,
orders.,,,
28. This tribunal is only to determine whether the subject Property falls within the ambit of the Act or to whether the subject Property is involved in,,,
money laundering. Thus, there is no force in submission of the respondent no. 1 this tribunal has no jurisdiction to even cannot consider the said issue",,,
and these proceedings should not continue till disposal of the said proceedings where the prayer for execution of sale deed is pending. The proceedings,,,
before the Debt Recovery Tribunal were inter alia between the secured creditor banks and M/s United Breweries [Holdings] Ltd., under a special",,,
enactment for recovery of dues.,,,
29. The respondent no. 1 cannot deny that at the time of passing the Provisional Attachment Order, the ED/Respondent No. 1 was aware of the",,,
purchase of the said Property by the Appellant, as is evident from the statement of Shri Manoj Kumar, an employee of M/S UB Group. Though the",,,
said fact has also been disputed by the ED, but the ED did not investigate the same or if it did investigate the same, otherwise the real position might",,,
have been different.,,,
30. The proviso of Section 8(1) and 8(2) of PMLA, 2002 are read as under:-",,,
“Provided that where a notice under this sub-section specifies any property as being held by a person on behalf of any other person, a",,,
copy of such notice shall also be served upon such other person:,,,
Provided further that where such property is held jointly by more than one person, such notice shall be served to all persons holding such",,,
property.,,,
(2) The Adjudicating Authority shall, after â€"",,,
(a) considering the reply, it any, to the notice issued under sub-section (1);",,,
(b) hearing the aggrieved person and the Director or any other officer authorized by him in this behalf, and",,,
(c) taking into account all relevant materials placed on record before him,",,,
by an order, record a finding whether all or any of the properties referred to in the notice issued under sub-section (1) are involved in",,,
money-laundering:,,,
Provided that if the property is claimed by a person, other than a person to whom the notice had been issued, such person shall also be",,,
given an opportunity of being heard to prove that the property is not involved in money-laundering.,,,
31. It is evident from the material available on record and from the Impugned Confirmation Order that the Enforcement Directorate/Respondent No. 1,,,
and the Adjudicating Authority were aware that the Appellant was a “Claimant†to the said Property in terms of proviso to Section 8(2), PMLA.",,,
The interest in the property by the appellant is not denied on behalf of the respondent no. 1 during hearing, except it was stated that the appellant was",,,
not necessary party, therefore no notice was required to be issued. The said arguments are wholly contrary to law and facts involved in the present",,,
appeal as the respondent no. 1 was aware who failed to investigate further in the matter.,,,
32. Despite of having full knowledge about the transaction, Respondent No. 1 and the Adjudicating Authority failed to issue notice to the Appellant or",,,
to afford a hearing to her, during the adjudication proceedings. Thus, the Respondent No. 1 and the Adjudicating Authority have failed to comply with",,,
the mandatory statutory requirement of the Proviso to Section 8(2), PMLA. The mandatory notice has not been issued. After recording the statement",,,
of Manoj Kumar, an employee of M/s. U.B. Group, no further investigation appears to have been done. The appellant had interest in the flat in",,,
question but no mandatory notice required under section 8(2) was served. Section 8(2) is a mandatory provision, it is mandated under the proviso that",,,
if property is claimed by a person other than accused, he shall also be given an opportunity of being heard to prove that the property is not involved in",,,
money laundering. Despite of clear language of the act, no notice was given. The prescribed period has already been expired. The appellant is no",,,
doubt claimant in the attached property. It is not understood why the requisite notice was not issued by the respondent no. 1 and Adjudicating,,,
Authority. Despite being Appellantâ€s claim to the said Property, Respondent No. 1 failed to fulfil its statutory duty, in terms of Rule 3(2) PML",,,
(Issuance of Provisional Attachment Order) Rules, 2013, to supply a copy of the Provisional Attachment Order to the Appellant at the time of the",,,
issuance of the same to the best reason known to respondent no. 1. It appears that after realizing its mistakes, the respondent no. 1 is now trying to",,,
justifying its lapse.,,,
33. Respondent No. 1 was having the details regarding the purchase of the said Property and was in possession of the relevant documents. Thus, the",,,
said Property could not have been attached as “proceeds of crimeâ€, even if one were to invoke the concept of “equivalent value†as the",,,
consideration paid for the purchase of the said Property had been remitted to HDFC Bank Ltd. (Respondent No. 9 herein), which was Defendant No.",,,
8 before the Adjudicating Authority and Respondent No. 1 was aware of this fact at the time of issuing the provisional attachment order.,,,
34. It is not the case of respondent no. 1 that the said amount which was in possession of the appellant was not proceed of crime as the appellant has,,,
given the untainted amount through bank channels. Even, there is no evidence or any material on record to show for the sake of argument that the",,,
appellant has received the said amount from main accused and thereafter it was deposited with the bank in order to help him. No such findings are,,,
rendered. Even many pleas/objections are raised first time in the written-submissions as those were not the part of pleadings of respondent no. 1.,,,
35. It is the contention of the Respondent No. 1 that the Appellants do not have a claim on the Property because the two Agreements have not been,,,
registered. The said allegation is falsified for the followings reasons:,,,
a) Firstly, the Appellants have paid the complete sale consideration at market value via banking channels, i.e. Rs. 22,46,67,000 (Rupees Twenty Two",,,
Crores Forty Six Lakhs Sixty Seven Thousand only).,,,
b) Secondly, both the Agreement to Sell and Construction Agreement have been notarized at maximum value as prescribed under Section 5 (e)-ii and",,,
(j) of the Karnataka Stamp Act, 1957, i.e. Rs. 20,000/- (Rupees Twenty Thousand only) and Rs. 3,00/- (Rupees Three Hundred only) respectively.",,,
Consequently, merely because the sale Deed had not yet been registered, does not mean that the claim of the Appellants over the Property gets",,,
defeated.,,,
36. The said arguments have no force as at the stage of adjudication under Section 8, PMLA and the onus upon any Claimant is only to show that the",,,
attached property is not involved in money laundering. It is not even the Respondentâ€s case that the subject property is involved in money laundering,",,,
rather it is the “value thereofâ€. It is not even the case of the Respondent that the Appellant is involved, in any manner, in the offence of money",,,
laundering. No such contention has been raised, except in the Written Submissions filed by the counsel of the respondent no. 1. New case in the",,,
written-submission cannot be set-up. There is no allegation that the money deposited in the bank by the appellant was tainted money or any cash,,,
deposit was made. All the payments were made through banking channel. Many of contentions raised in the written submissions are not part of the,,,
pleadings of respondent no.1.,,,
37. It appears from the material that the Appellant has executed Agreements to Sell, Construction Agreements and has also paid the full purchase",,,
consideration. Furthermore, all these documents were executed much prior to the registration of ECIR and FIR in the captioned Original Complaint.",,,
The Appellant has paid sufficient Stamp Duty on the Agreements to Sell and the Construction Agreements. It is not a civil dispute. It is also a matter,,,
of fact and it has come on record that the entire amount has already been paid. In the present case, the appellant definitely is a claimant and the flats",,,
were attached without any notice and hearing of the appellant nor any opportunity was given to raise his stand.,,,
38. Even at the stage of Section 8(8), PMLA, that is, confiscation, the only requirement upon a claimant to seek restoration of the subject-property is",,,
only to show that he has a “legitimate interest†in the subject-property. Even otherwise, the right acquired by an Agreement to Sell holder would",,,
prevail over a subsequent statutory attachment as hold in the case of VannarakkalKallalathilSreedharan v. Chandramaath Balakrishnan &Anr., (1990)",,,
3 SCC 291.,,,
39. The respondentâ€s contention is that the flats are not constructed and possession has not been handed over. The appellant has specifically made,,,
the statement that the subject-property/Flats have been fully constructed and is ready for delivery and even the vendor is ready to hand-over,,,
possession of the subject property, but it could not be given due to attachment order. The winding up was only passed in the year 2017. In 2012,",,,
merely the said petition was passed.,,,
40. Even otherwise, it is settled law that the rights in any asset of a company acquired by any person prior to initiation of the winding-up proceedings",,,
against the said company are absolute and cannot be defeated by the winding-up proceedings, subject to the transaction being an arms-length",,,
transaction.,,,
41. There is also no force in the submission of the respondent no. 1 that there was a connivance between the appellant and the accused parties as the,,,
filing of the winding of petition was published in the print as well as electronic media.,,,
42. In the case of Laxmi Raj Shetty and another vs. Tamil Nadu reported in (1988) 3 S.C.C. 319 in para â€" 25 the Honâ€ble Supreme Court hold that,,,
the courts cannot take judicial notice of the facts stated in a news item being in the nature of hearsay secondary evidence unless proved by evidence,,,
aliunde and presumption cannot be drawn under section 81 of the Evidence Act.,,,
In the present, the presumption can be attached that the appellant was aware about the news published in 2012 about the pendency of winding up",,,
petition. The funds were paid during the period 2012 to 2017 and the prayer in the winding up petition was allowed in 2017.,,,
43. In the present case, the Agreement to Sell entered into by the Appellant with M/s UBHL is of the year2012 (i.e. prior to even the initiation of the",,,
winding-up proceedings) and the entire purchase consideration was duly paid in the year 2015( i.e. much prior to the subject Provisional Attachment,,,
Order).,,,
It is not even the Respondent EDâ€s has established prima facie case that the purchase of the subject Property vide inter alia the Agreements to Sell,,,
was not an arms-length transaction.,,,
44. In VannarakkalKallalathilSreedharan Vs. Chandramaath Balakrishnan &Anr. (1990 (3) SCC 291 )a Bench of two Judges considered a question,,,
identical to the question raised before us. The question was whether the sale prevailed over the attachment. The facts were that 80 cents of land were,,,
agreed to be sold in favour of the appellant under an agreement dated October 9, 1978. Before the sale deed was executed, a third party in execution",,,
of a decree got the property attached on November 16, 1978. The sale deed was executed on November 23, 1978.",,,
In the above case, this Court has gone even to the extent that not only a sale deed but even an agreement of sale will prevail over attachment before",,,
judgment made subsequent to such agreement for sale. I do not want to express any opinion with regard to the case of an agreement for sale, but I",,,
am of the confirmed opinion that a sale deed having been executed prior to attachment before judgment, though registered subsequently will prevail",,,
over attachment before judgment.,,,
45. It has been further contended by the Respondent No. 1 that the Appellants did not file an application in the winding up petition pending before the,,,
Honâ€ble Karnataka High Court, which, according to the Respondent No. 1, is the proper remedy available to the Appellants. The said allegation is",,,
not true as peer appellant.,,,
As stated, the Appellants have already initiated proceedings before the Honâ€ble High Court at Karnataka by moving two applications, wherein the",,,
Appellants have firstly prayed for impleaded as parties to the Winding up Petition and secondly sought issuance of directions to Respondent no. 5 to,,,
execute the sale deed with respect to the Property in favour of the Appellants.,,,
46. The next submission of the respondent ED is that if the Appellant has any grievances against Mr. Vijay Mallya, the appellant must invoke the",,,
arbitration clause contained in the agreement. The said submission has no force as the Agreement to Sell has been entered into by the Appellant with,,,
M/s UBHL and not with Mr. Vijay Mallya. The Appellant may invoke the said arbitration clause against M/s UBHL in the event of breach of any,,,
covenants of the said Agreement, including non-handing over of possession or non-execution of sale deed in favour of the Appellant in due course.",,,
The said aspect cannot be determined in the present proceedings. In arbitration matter, the issue of attachment of property by ED and confirmation",,,
thereof cannot be determined.,,,
47. The Respondent EDâ€s next submission is that if the present Appeal is entertained by this Tribunal, it would result in according priority to the",,,
Appellantâ€s claims over the claims of other secured creditors is wholly misconceived. It is a matter of fact that the appellant is neither seeking any,,,
direction from this Tribunal that the Appellant be handed over the possession of the subject Property nor that the sale deed(s) in respect of the subject,,,
Property be executed by M/s UBHL in favour of the Appellant. The scope of the present Appeal is limited to the determination as to whether the,,,
subject Property is involved in money-laundering or not.,,,
48. As regard to plea as to whether right of the appellant would prevail over the rights of the other secured creditors, no opinion is being expressed.",,,
The said aspect would be considered by the Court where the prayer of execution of sale deed is pending or before the Special Court who is also,,,
empowered to pass such order under the proviso of amended provision of section 8(8) of the Act (Act of 2018). All secured creditors including DRT,,,
and banks are at liberty to raise the objection as per law as admittedly this tribunal is not deciding the fate of title of the flat in question.,,,
49. From the entire gamut of the matter, it is evident that the appellant was the claimant in the flats. By making the entire payment, the appellant is",,,
become stake-holder as the amount paid by the appellant was not proceed of crime. The appellant is also not involved in the money laundering. The,,,
question of link and nexus in the criminal activities directly or indirectly does not arise.,,,
50. As far as the impugned order dated 1.12.2016 is concerned, the same is not sustainable in law and the facts of the present case. The same is set-",,,
aside against the appellant with regard to flats in question. The provisional order is also quashed accordingly by allowing the appeal.,,,
51. However, it is clarified that this tribunal has decided the appeal pertaining to the order passed on the attachment of flats allegedly purchased by the",,,
appellant. The finding shall have no bearing with regard to merit of other proceedings pending against the accused parties including extradition,,,
proceedings. It is alleged that the flats in question is one of the assets in which the Official Liquidator is appointed, therefore, the appellant, the",,,
respondent nos. 3, 5 and 8, unless the final order is passed in his favour, shall not create third party interest directly or indirectly.",,,
52. No costs.,,,
