Siddhi Vinayak Logistic Ltd. Through Resolution Professional & Ors Vs Deputy Director Directorate Of Enforcement, Mumbai

FPA-PMLA-2107/MUM/2017& FPA-PMLA-2137, 2138 & 2139/MUM/2018

1. The present appeals have been filed u/s 26 of Prevention of Money Laundering Act, 2002 against the order dated 24.10.2017 Passed by the

Adjudicating Authority in O.C. no. 787/2017. Since these appeals are having identical facts, involve similar questions of law and arising out of the

same ECIR, P.A.O. O.C. and Impugned order, so taken up together for a common order.

The Common facts of the appeal in brief are as follows:-

2. On the complaint of the Bank of Maharastra an FIR bearing no. RCBSM2015E2007 dated 06.08.2015 was registered by CBI, BS & FC, Mumbai

invoking section 420,468,471,120(B) of IPC and sections 13(2) r/w 13(1)(d) of PC Act, 1988 against M/s SVLL, S/Shri Rupchand Baid, Deepak

Kumar Baid, Raj kumar Baid, Smt. Laxmi Devi Baid & others on the allegation that M/s SVLL and other persons during the period from September

2012 to March, 2015 were parties to the criminal conspiracy to cheat the banks, Pune and in pursuance to the said criminal conspiracy, the accused

directors/officials of M/s SVLL induced the Bank of Maharastra to sanction the disbursed 2804 vehicle loans (under “Chalak se Malak†scheme

devised by M/s SVLL) to M/s SVLL and its employees and its drivers on the basis of the false assurances and forged vehicle registration documents,

thereby availing credit facilities aggregating to Rs. 651.17 crore in the form of loans sanctioned to individuals drivers/employees of the said M/S.

SVLL in Model Colony Branch & Deccan Gymkhana Branch, Bank of Maharashtra, Pune.

3. On the basis of the above, the Enforcement Directorate i.e. respondent no. 1 registered ECIR no. ECIR/MBZO/10/2016 dated 16.11.2016 and

attached the properties involved in these appeals vide P.A.O./MBZO/II/05/2017 dated 08/06/2017 ordering to attach immovable and movable

properties as detailed in the P.A.O.

4. Consequent to the above, a common O.C. bearing 787/2017 was filed before the Adjudicating Authority praying for confirmation of the P.A.O..

The Adjudicating Authority, by the impugned order, allowed the O.C. confirming the P.A.O. on dated 24.10.2017 which is under challenge before this

Tribunal.

5. Case of M/s Siddhi Vinayak Logistic Ltd. (SVLL) (FPA-PMLA-2107/MUM/2017)

5.1 That the appellant is a company registered under the Companies Act, 1956/2013 having registered office at Plot No. 14/15, Bhatpore, GIDC,

Opposite ONGC Gate no. -2, Hazira, Surat-394510.

5.2 M/s SVLL has filed the present appeal through Mr. Dushyant C. Dave, Interim Resolution Professional (IRP), inter-alia, praying for setting aside

impugned order dated 5.10.2017 and vacation of Provisional Attachment Order with respect to properties of the appellant.

5.3 The following are the contentions of the IRP in the appeal memo in nut-shell:-

I. The IRP has been appointed by the Adjudicating Authority, NCLT, Ahmadabad Bench, dated 12.09.2017 as Interim Resolution Professional in

charge of the appellant company. Therefore, he has filed the representing the appellant.

II. The Enforcement Directorate (ED) has filed the Original Complaint (O.C.) u/s 5 (5) of PMLA, 2002 against the Sh. Rupchand Baid and others

and attached properties valued Rs. 19,62,33,903 belonging to the appellant provisionally on 08.06.2017

III. According to the appellant it is the case of ED that during the period from September 2012 to March, 2015 the Directors of the Appellant

Company and other persons were party to criminal conspiracy to cheat bank of Maharashtra (BOM), Pune and in pursuance of the said criminal

conspiracy the directors and officials of appellant induced bank of Maharashtra (BOM) to sanction and disburse 2804 vehicles loan to Appellant and

its employeeâ€s/driver on the basis of false assurances and forged vehicles registration documents, thereby availing credit facility aggregating to Rs.

651.17 crores and to sanction term loan of R. 160 crores sanctioned to appellant themselves and cash credit Limit (CC Limit) of Rs. 35 Crores.

IV. On the passing of the order National Company Law Tribunal (NCLT), Ahmedabad, Moratorium is declared on the proceedings against the

appellant with respect to all suits or proceedings before any court of law or authority

V. All suits or proceedings against the appellant stands suspended during the Corporate Insolvency Resolution Process, accepts the criminal

proceedings initiated under the PMLA and by the Central Bureau of Investigation (CBI).

VI. The proceedings under sanctions 8,9 & 10 of the PMLA before the Adjudicating Authority are not criminal proceedings but quasi-judicial

proceedings which is guided by the principal of natural justice, therefore, the present proceedings under sanctions 8, 9 & 10 of the PMLA against the

appellant cannot continue pursuant to the order of the Moratorium passed by the NCTL.

VII. The Appellant has quoted the provisions of U/Ss 6(15) and 11 of the PMLA and submitted that the Adjudicating Authority being quasi-judicial

proceedings is largely guided in letter and spirit of the Code of Civil Procedure, 1908 and natural justice, the same cannot be considered as criminal

proceedings and accordingly it is bound by the moratorium ordered by the Hon'ble NCLT under Section 14 of the Insolvency and Bankruptcy Code,

2016. That, in the meanwhile the Directors of the Company filed an Appeal before this Hon'ble Appellate Tribunal against the Order dated 20.09.2017

passed by the learned Adjudicating Authority refusing to stay the proceedings in view of the order passed by learned Adjudicating Authority, NCLT

dt. 12.09.2017.

The Honâ€ble Appellant Tribunal vide order dt. 05.10.2017 disposed of the Appeal directing the learned Adjudicating Authority to decide whether to

confirm the provisional attachment or not.

Whereas the learned Adjudicating Authority vide order dated 24.10.2017 confirmed the attachment of the provisional attachment.

VIII. Following are the main legal contentions of the appellant in brief:-

a. the Insolvency & Bankruptcy Code, 2016 (IB&C) being subsequent legislation overrides the Prevention of Money Laundering Act (PMLA), 2002

since the same is in the direct conflict with Section 14,17,18,19,20 & 25 and other sections of the Insolvency & Bankruptcy Code, 2016 which gives

power to Resolution Professional to manage the affairs of company.

b. The Adjudicating Authority failed toconsider that the proceedings before the Adjudicating Authority are quasi-judicial proceeding and not criminal

proceeding and accordingly moratorium order by NCLT is binding.

c. The Adjudicating Authority did not appreciate the non- obstante clause mentioned at Section 238 of the IB&C.

d. The Adjudicating Authority was at error in finding that as per Section 6(15) of PMLA, 2002 Adjudicating Authority ought to be considered as

criminal proceeding.

e. The criminal proceedings are held only for criminal courts which culminate by acquittal or conviction whereas the proceedings before the

Adjudicating Authority does not lead to so.

f. The proceedings before Adjudicating Authority are with respect to assets of persons not against the persons themselves and accrodingly cannot be

considered as criminal proceedings.

g. The Adjudicating Authority has failed to consider the object of the Insolvency and Bankruptcy Code (IBC).

h. Section 18 of the IBC stipulates that the IRP shall control and custody of all assets of the company as recorded in the balance sheet or other

records of the ownership.

i. The appellant has relied upon the following judgments of Honâ€ble Supreme Court in support of his contentions of overriding effect where there are

two special laws with obstante clause:-

(i) Allahabad Bank vs. Canara Bank dated 10.04.2000

(ii) Ashoka Marketing Limited & Anr. vs. Punjab National Bank & Anr.

6. Case of Sh. Rupchand Baid and others.( FPA-PMLA-2138/MUM/2017)

6.1. This joint appeal has been filed by Sh. Rupchand Baid, M/s P. R. Niryat Pvt. Ltd., M/s Siddhi Vinayak Farm Fresh Pvt. Ltd., M/s Raj Kamal

Logistics Pvt. Ltd., M/s Yashrite Tour and Travels Pvt. Ltd. & Smt. Lakshmi Devi Baid. These appellants are original defendant no. 1,3 to 6 and 8 in

the O.C. 787/2017.

6.2. These appellants are guarantors in all loans sanctioned in favour of SVLL(Appellant in appeal no. 1). It is the contention of the appellants that in

case of the recovery proceedings, upon failure of principal borrowers to repay the debts even after attachment and sale of property, it shall be the

personal liability of the guarantors i.e. the present appellants.

6.3. These appellants assailed the impugned order almost on similar facts and grounds as contended by M/s SVLL (appellant in appeal no. 1) Hence

are not repeated.

6.4. In addition these appellants have contended that the properties which are the subject matter was acquired and possessed by the owners much

prior to the period when the facility of the loan sanctioned to the borrowers and therefore no proceeds of crime were invested in these properties.

Hence, It cannot be said the claim in any manner these properties have been acquired out of the funds/loans availed from the complainant bank.

6.5. On the basis of the said factual and legal grounds these appellants (appellant in appeal no. 2) above have prayed for quashing and setting aside the

impugned order dated 24.10.2017 passed by the Adjudicating Authority in O.C. No. 787/2017 and order of PAO dated 08.06.2017 and addendum to

order of provisional attachment dt. 13.06.2017.

6.6. The further prayer made by these appellants to direct that the provisions of Insolvency and Bankruptcy Code, 2016 will have overriding effect

over the provisions attachment under the PMLA 2002.

7. Case of Sh. Rajkumar Baid (FPA-PMLA-2137/MUM/2017)

7.1 Rajkumar Baid, the appellant in appeal no. 3 above, is the son of Rupchand Baid i.e. (appellant no 1 in appeal no. 2 above) and husband of Laxmi

Devi Baid (appellant no. 6 in appeal no. 2 above). He is defendant no. 7 in O.C. 787/2017.

7.2 It is his contention that he is a guarantor in all loans sanctioned in favour of SVLL (Appellant in appeal no. 1). It is the contention of the appellants

that in case of the recovery proceedings, upon failure of principal borrower to repay the debts even after attachment and sale of property, it shall be

the personal liability of the guarantors i.e. the present appellant.

7.3 The relief sought by him is same as prayed by appellants in appeal no. 2 above. The factual and legal issues raised in these appeal are verbatim

same as contended by appellants in appeal no. 2. Hence, there is no repetition of the same.

8. Case of Sh. M/s Accumen Infrastructure Pvt. Ltd. (FPA-PMLA-2139/MUM/2017)

8.1 The present appeal has been filed through Sh. Alok Kumar Dubey, Director of M/s Accumen Infrastructure Pvt. Ltd.. The appellant herein is

defendant no. 9 in O.C. 787/2017.

8.2 It is his contention that the appellant is a guarantor in all loans sanctioned in favour of SVLL(Appellant in appeal no. 1). It is the contention of the

appellant that in case of the recovery proceedings, upon failure of principal borrower to repay the debts even after attachment and sale of property, it

shall be the personal liability of the guarantors i.e. the present appellant.

8.3 The relief sought by the appellant is same as prayed by appellants in appeal no. 2 & 3 above. The factual and legal issues raised in these appeal

are verbatim same as contended by appellants in appeal no. 2 & 3. Hence, there is no repetition of the same.

9. In the aforesaid appeals the Enforcement Directorate is respondent no. 1.

9.1 The Enforcement Directorate has contested in all the appeals and verbally submitted its arguments before this Tribunal. The ED has not filed any

reply in any of the appeals except in the appeal filed by Rajkumar Baid vide appeal no. FPA-PMLA-2137/MUM/2017. Since the factual and legal

issues in all these appeals are same so we have taken the contents of the reply herein as the reply in all these appeals.

9.2 The contention of the ED in the said reply are as follows:-

9.2.(a) The ED has filed complaint bearing no. 08/2017 under section 44(1) (b) read with section 45 of the PMLA, 2002 was filed before the PMLA

Special Court on 17.06.2017 for the offence of money laundering against the appellant which is triable under the Code of Criminal Procedure, 1973 for

the offence of money laundering punishable under section 4 of the PMLA, 2002.

9.2.(b). Under the provisions of section 44(1)(d) of the PMLA,2002, a Special Court while trying the scheduled offence or the offence of money

laundering shall hold trial in accordance of with the provisions of the Code of Criminal Procedure, 1973, as it applies to a trial before a Court of

Session.

9.2.(c). Under the provisions of the section 8 of the PMLA, 2002, the Adjudicating Authority shall, after considering the reply, hearing the aggrieved

and taking into account all relevant materials placed on record before him decides that any property is involved in money-laundering, He shall, by an

order in writing, confirm the attachment of the property made under sub-section (1) of section 5 and record a finding to that effect, whereupon such

attachment shall continue during the pendency of the proceedings relating to any offence under this Act before a court or under the corresponding law

of any other country, before the competent court of criminal jurisdiction outside India, as the case may be; and become final after an order of

confiscation is passed under sub-section (5) of sub-section (7) of section (8) or section 58B or sub-section (2A) of section 60 by the Adjudicating

Authority.

9.2.(d). Therefore, the proceedings before the Adjudicating Authority being intermediate proceedings related to the confiscation of the proceeds of

crime are the criminal proceedings.

9.2.(e). That the respondent submitted that the decision of the Honâ€ble Tribunal dated 14.07.2017 in FPA-PMLA-1026/KOL/2017 in the case of

State Bank of India Vs the Joint Director was challenged before the Honâ€​ble Calcutta High Court and is at admission stage.

9.2.(f). The Honâ€ble Tribunal in the Appeal FPA-PMLA-1368/GOA/2016 in the case of HDFC Bank relied on the decision in the appeal FPA-

PMLA-1026/KOL/2017 in the case of State Bank of India Vs the Joint Director released the properties attached. First Appeal 1413/2017 was filed

against the said decision and the Bombay High Court (Nagpur Bench) stayed the order of the PMLA Tribunal in respect of the appeal filed against

the order of the PMLA Tribunal.

9.3.(g). That the respondent submitted that the term “Proceeds of Crime†as has been defined under section 2(1) (u) of PMLA, 2002 is read as

under:

“proceeds of crime†means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity

relating to a scheduled offence or the value of any such property (or where such property is taken or held outside the country, then the

property equivalent is value held within the country).

As per the definition, Proceeds of crime are either the property derived or obtained as a result of criminal activities relating to a scheduled offence or

the value of such property.

In the present case the properties of the appellants were attached in terms of the provisions of the section 2(1)(u) being value of such property.

9.2.(h). That the respondent submitted that the Honâ€​ble Adjudicating Authority, NCLT is para 14 had held that,

“ The moratorium declared by this Adjudicating Authority is not applicable to the criminal proceedings, if any, initiated under the

provisions of Prevention of Money Laundering Act, 2002 by the Enforcement Directorate and to the criminal case, if any, initiated by the

Central Bureau of Investigation against the Respondent Companyâ€​.

That, in the present case, the complaint (08 of 2017) under section 43 of the PMLA, 2002 was filed before the PMLA Special Court on 17.06.2017

for the offence of money laundering against the appellants. Therefore, as the criminal proceedings were initiated against the appellants, the

moratorium declared is not applicable as ordered by the Adjudicating Authority, NCLT.

9.2.(i). That, further the objective of the IBC, 2016 and PMLA, 2002 are “to consolidate and amend the laws relating to reorganization and

insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of value of assets of such

persons, to promote entrepreneurship , availability of credit and balance the interests of all the stakeholders including alteration in the order of priority

of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India, and for matter connected therewith or incidental

theretoâ€​.

9.2.(j) That, where the objective of PMLA, 2002 is “to prevent money-laundering and to provide for confiscation of property derived from, or

involved in, money-laundering and for matters connected therewith or incidental thereto.â€​

9.2.(k) Therefore as seen from the objectives of IBC, 2016 and PMLA, 2016 the provisions therein are independent. Further, the PMLA, 2002 was

enacted as India is the Member state of the Political Declaration adopted by the Special Session of the United Nations General Assembly held on 8th

to 10th June, 1998 to adopt national money-laundering legislation and programme. Also, the PMLA, 2002 being Criminal Law and therefore have the

overriding provisions over the IBC, 2016 which is civil law.

9.2.(l) That the respondent submitted that the Central Bureau of Investigation had filed charge-sheet in Special Case No. CBI/100011/2018 against the

appellant on 27.02.2018 in the Scheduled Offence case.

9.2.(m) It is seen from the impugned order that the ED has made similar contentions before the Adjudicating Authority.

10. The Oriental Bank of Commerce, which is arrayed as respondent no. 11, in appeal no. 1, above has filed their reply regarding the property of

SVLL mortgaged with them. The Oriental Bank of Commerce has also filed a separate appeal against the impugned order. Union Bank of India and

Bank of Baroda also have filed separate appeals. The appeals of aforesaid banks are taken up together for a common order as similar questions of

Law involved in those appeals.

11. So far as the present appeals are concerned, the contentious legal issues raised by the appellant are the overriding effect of PMLA 2002 and the

IB&C, 2016 and that whether the moratorium provisions/order under the IB&C can be extended or applicable to a proceeding pending before the

Adjudicating Authority U/Ss 5,8 & 17 of PMLA, 2002. The third important legal issue raised for our consideration is whether the proceedings before

Adjudicating Authority are civil or criminal proceedings.

12. It is seen from the impugned order that these questions were also raised by the appellants and contested by the Enforcement Directorate before

the Adjudicating Authority under PMLA.

13. The appellants contended that the proceedings before the Adjudicating Authority under PMLA are quasi-Judicial and not criminal proceedings as

criminal proceedings are held only before criminal courts which culminate either by acquittal or conviction whereas the proceedings before the

Adjudicating Authority does not lead to acquittal or conviction and that not against the persons themselves. The appellant has relied upon the judgment

of honâ€ble High Court of Gujarat at Ahmedabad in the matter of “Foziya Samir Godil Vs UOI & Ors.†in Special Criminal Application no.

1725/2014, dated 9/05/2014 wherein it is held that the proceeding under 5,8 & 17 of the PMLA are civil in nature.

14. On the other hand it is the contention of the Enforcement Directorate that the proceedings before the Adjudicating Authority under PMLA are

criminal proceedings. The ED has referred to the order of learned Adjudicating Authority, NCLT wherein it is held that:-

“the moratorium declared by the this Adjudicating Authority it is not applicable by the Criminal proceedings, if any, initiated under the

provisions of PMLA, 2002 by the Enforcement Directorate and to the criminal case, if any, initiated by the Central Bureau against the

respondent companyâ€​.

It is further contended by the ED that “as the criminal proceedings were initiated against appellants by the Directorate, the moratorium declared is

not applicable as ordered by the Adjudicating Authority, NCLT. Further the proceedings under the PMLA, 2002 are criminal proceedings and not civil

proceedings.

15. The ED has contended that they have filed complaint (08/2017) u/s 45 of the PMLA, 2002 before the PMLA special court on 17/6/2017 for the

commission of offence of money laundering against the D-2 (SVLL) and other defendants.

16. So far as the other legal issues are concerned, it is the contention of the appellants that the IB&C,2016 is a Central legislation enacted by the

parliament and which came into effect from December, 2016. Section 18 of IB&C stipulates that the interim resolution professional shall take control

and custody of all assets of the company as recorded in the balance sheet or other records of ownership. It is also contended by the appellant herein

that section 238 of the IBC says that the provisions of the Code shall have effect, notwithstanding anything inconsistent therewith contained in any

other law for the time being in force or any instrument having effect by virtue of any such law in case of conflict. Though the PMLA and IBC are

central legislation, since IBC is a recent legislation and having non obstante clause (section 238 of IB&C), the same shall override the PMLA which is

the prior legislation having come in force since 2002. The appellants have relied upon the judgments of Honâ€​ble Supreme Court passed in

(i) Allahabad Bank vs. Canara Bank dated 10.04.2000 (Supra)

(ii) Ashoka Marketing Limited & Anr. vs. Punjab National Bank & Anr. (Supra).

(iii) Solidaire India limited vs Fairgrowth Financial Service Ltd.

Beside above the appellants have also relied upon the judgment and order passed by this Tribunal in the matter of “State Bank of India & Ors. Vs.

Joint Director, Directorate of Enforcement, Kolkata. Dated 14.07.2017â€​

17. In reply to the contention of the appellants, with regards to overriding effect, the respondent(ED) has contended that;

(a) In this connection, the objective of the IBC, 2016 and PMLA, 2002 are

IBC, 2016

“An Act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and

individuals in a time bound manner for maximization of value of assets of such person, to promote entrepreneurship, availability of credit and balance

the interests of all the stakeholders including alteration in the order of priority of payment of Government dues and to establish an insolvency and

Bankruptcy Board of Inida, and for matters connected therewith or incidental thereto.â€​

PMLA,2002

“An Act to Prevent money-laundering and to provide for confiscation of property derived from, or involved in, money-laundering and for matters

connected therewith or incidental thereto.â€​

(b) Therefor as seen from the objectives of IBC, 2016 and PMLA, 2016, the provisions therein are independent and therefore the contention of the

IRP that since IBC is a recent legislation and having non obstante clause, the same shall override the PMLA is not maintainable.

(c) It is further submitted that the contention of the IRP that since IBC shall override the PMLA is not maintainable for the following reasons:

• The PMLA, 2002 being Criminal Law and therefor have the overriding provisions over the IBC, 2016 which is a civil law and

• The PMLA, 2002 was enacted as India is the Member State of the Political Declaration adopted by the Special Session of the United Nations

General Assembly held on 8th to 10th June, 1998 to adopt national money-laundering legislation and programme.

18. It is also contended by the Respondent no. 1 that in the present case the properties of M/s SVLL were attached in terms of the provisions of

section 2(1)(u) of PMLA, 2002 being value of such property as such contentions of the IRP that the subject properties are not purchased out of

proceedings of crime is not maintainable.

Discussions and Findings of Adjudicating Authority, PMLA

19. The learned Adjudicating Authority in its discussions and findings on the aforesaid important legal issues, inter-alia, has held the followings:

(i) Provision of 71 of PMLA has overriding effect. It need to be borne in mind that the amendment by way of introduction of section 26(e) of the

SARFAESI Act 2002 and section 31(b) Recovery of Debt and Bankruptcy Act 1993 does not come into play with regard to the liability of attachment,

confirmation and confiscation of proceeds of crime. The section 26(e) above referred has provided that notwithstanding anything contained in any

other law for the time being in force, after the registration of security interest the debt due to any secure creditors shall be paid in priority over all other

debts and all other revenue, taxes and cess and other rates payable to the Central Government and State Government and local authority. So what is

referred are only (1) the other debts, (2) all (i) revenues(ii) taxes (iii) cesses (iv) other rates payable to the Central Government and the local authority.

Similarly section 31(b) above referred provides that notwithstanding anything contained in any other law for the time being in force, the rights of

secured creditors to realize secured debts due and payable to them by sale of assets over which security interest is created shall have priority and shall

be paid in priority over all over debts and government dues including revenues taxes, cesses and other rates due to the Central Government and State

Government or local authority. So what is referred are only(1) the other debts, (2) all Govt. dues including, (I revenues (ii) taxes, (iii) cesses (iv) other

rates due to the Central Government and the local authority. Thus there is no priority conferred on the secured creditors under the said acts, in respect

of the proceeds of crime in their hands. The PMLA is a Special Act and is an Act to prevent money-laundering and to provide for confiscation of

property derived from or involved in money laundering and for matters connected there with or incidental thereto. Section 3 of Act defines money

laundering as Whosever directly or indirectly attempts to indulge or knowingly assists or knowingly s a party or is actually involved in any process or

activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted

property shall be guilty of offence of money â€"laundering.

Thus the secured creditors does not and cannot have any priority over the attachment, confirmation and confiscation of proceeds of crime. It would be

against a public policy to permit the possession of proceeds of crime and its utilization, save and except in the manner provided under the PMLA.

(ii) There is no conclusive findings in the impugned order of the Adjudicating Authority on other legal issues raised by the IRP with regards to stay of

proceedings by virtue of order passed by the NCLT in a proceeding under IB&C and on whether the proceedings before it is civil or criminal nature

of proceedings

Discussion and findings of this Tribunal

20. We have perused and examined the material available on records. We have also heard the arguments of the learned counsels for both the parties

and gone through the written submission file by learned counsel appearing on behalf of IRP and reply filed by the ED in the appeal filed by Rajkumar

Baid.

21. This Tribunal has dealt with the aforesaid legal issue i.e., regarding priority of SARFAESI Act, 2002 (after the aforesaid amendment) in various

cases and it is the consistent view that, in the light of the aforesaid amendments, the SARFAESI Act, 2002 has priority over PML Act, 2002. The full

Bench of this Tribunal, in the matter of State Bank of India & Ors. Versus Joint Director, Directorate of Enforcement in FPA-PMLA-

1026/KOL/2015 dt,14.07.2017 and also in the matter of Smt. Nasreen Taj vs. Dy, Director, ED in FPA-PMLA-382/BNG/2012 vide common order dt.

18.09.2017 held the aforesaid view. Subsequent to the aforesaid judgments this Tribunal has passed several judgments on the same issue. In the said

judgments this Tribunal discussed judgments delivered by Honâ€ble Supreme Court and various High Courts as well as the relevant provisions of law.

On a recent judgment of this Tribunal, on the aforesaid issue, in the matter of IDBI Bank Ltd. Versus The Deputy Director, Directorate of

Enforcement & Ors. in FPA-PMLA-1247/DLI/2018 dated 10.05.2018.

22. So far as the overriding effect of PMLA over the SARFAESI is concerned this tribunal has already dealt with and decided the issue in several

appeals involving different banks. The first matter in this regard was decided in the matter of FPA-PMLA1026/KOL/2015 (State Bank of India vs.

Joint Director, Enforcement Directorate) on 14.07.2017. A score of decisions followed thereafter wherein this tribunal had relied on several Honâ€ble

Supreme Court and High Court judgments on this issue. Recently this tribunal has decided the matter of The relevant paras of our common judgment

and findings in the matter of “Stressed Assets Stabilization Funds (SASF) and Life Insurance Corporation of India vs. Joint Director, Directorate of

Enforcement, Hyderabad (FPA0PMLA-664/HYD/2014& FPA-PMLA-924/HYD/2015) respectively. The relevant paras of this judgment are re-

produced below:-

“13. The relevant portions of the tribunal order in state Bank of India matter (Supra) are re-produced below:

“7. Coming to the second question, there is no doubt that the 1985 Act is a special Act. Section 32(1) of the said Act reads as follows:

“32. Effect of the Act on other laws.â€"(1) The provisions of this Act and of any rules or schemes made there under shall have effect

notwithstanding anything inconsistent therewith contained in any other law except the provisions of the Foreign Exchange Regulation Act,

1973 (46 of 973) and the Urban Land (Ceiling and Regulation) Act, 1976 (33 of 1976) for the time being in force or in the Memorandum or

Articles of Association of an industrial company or in any other instrument having effect by virtue of any /law other than this Act.â€​

8. The effect of this provision is that the said Act will have effect notwithstanding anything inconsistent therewith contained in any other law

except to the provisions of the Foreign Exchange Regulation Act, 1973 and the Urban Land (Ceiling and Regulation) Act, 1976. A similar

non obstante provision is contained in Section 13 of the Special Court Act which reads as follows:

“13. Act to have overriding effect.â€"The provisions of this Act shall have effect notwithstanding anything inconsistent therewith

contained in any other law for the time being in force or in any instrument having effect by virtue of any law, other than this Act, or in any

decree or order of any Court, tribunal or other authority.â€​

9. It is clear that both these Acts are special Acts. This Court has laid down in no uncertain terms that in such an event it is the later Act

which must prevail. The decisions cited in the above context are as follows:

“Maharashtra Tubes Ltd. v. State Industrial & investment Corpn. Of Maharashtra Ltd.; Sarwan Singh v. Kasturi Lal;

AllahabadBankv.Canara Bank and Ram Narain v. Simla Banking & Industrial Co. Ltd.

10. We may notice that the Special Court had in another case dealt with a similar contention. In Bhoruka Steel Ltd. v. Fairgrowth Financial

Services Ltd. it had been contended that recovery proceedings under the Special Court Act should be stayed in view of the provisions of the

1985 Act. Rejecting this connection, the Special Court had come to the conclusion that the Special Court Act being a later enactment would

prevail. The headnote which brings out succinctly the ration of the said decision is as follows:

“Where there are two special statutes which contain non obstante clauses the later statute must prevail. This is because at the time of

enactment of the later statute, the Legislature was aware of the earlier legislation and its non obstante clause. If the Legislature still confers

the later enactment with a non obstante clause it means that the Legislature wanted that enactment to prevail. If the Legislature does not

want the later enactment to prevail then it could and would provide in the later enactment that the provisions of the earlier enactment

continue to apply.

The Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992, provides in Section 13 that its provisions are to

prevail over any other Act. Being a later enactment, it would prevail over the Sick Industrial Companies (Special Provisions) Act, 1985. Had

the Legislature wanted to exclude the provisions of the Sick Companies Act from the ambit of the said Act, the Legislature would have

specifically so provided. The fact that the Legislature did not specifically so provide necessarily means that the Legislature intended that the

provisions of the said Act were to prevail even over the provisions of the Sick Companies Act.

Under Section 3 of the 1992 Act, all properly of notified persons is to stand attached. Under Section 3(4), it is only the Special Court which

can give directions to the Custodian in respect of property of the notified party. Similarly, under Section 11(1), the Special Court can give

directions regarding property of a notified party. Under Section 11(2), the Special Court is to distribute the assets of the notified party in

the manner set out thereunder. Monies payable to the notified parties are assets of the notified party and are, therefore, assets which stand

attached. These are assets which have to be collected by the Special Court for the purposes of distribution under Section 11(2). The

distribution can only take place provided the assets are first collected. The whole aim of these provisions is to ensure that monies which are

siphoned off from hanks and financial institutions into private pockets are returned to the banks and financial institutions. The time and

manner of distribution is to be decided by the Special Court only. Under Section 22 of the 1985 Act, recovery proceedings can only be with

the consent of the Board for Industrial and Financial Reconstruction or the appellate authority under that Act. The Legislature being aware

of the provisions of Section 22 under the 1985 Act still empowered only the Special Court under the 1992 Act of the 1992 Act to give

directions to recover and to distribute the assets of the notified persons in the manner set down under Section 11 (2) of the 1992 Act. This

can only mean that the Legislature wanted the provisions of Section 11(2) of the 1992 Act to prevail over the provisions of any other law

including those of the Sick Industrial Companies (Special Provisions) Act, 1985.

It is a settled rule of interpretation that if one construction leads to a conflict, whereas on another construction, two Acts can he

harmoniously constructed then the latter must be adopted. If an interpretation is given that the Sick Industrial Companies (Special

Provisions) Acy 1985, is to prevail then there would be a clear conflict. However, there would be no conflict if it is held that the 1992 Act is

to prevail. On such an interpretation the objects of both would be fulfilled and there would be no conflict. It is clear that the Legislature

intended that public monies should be recovered first even from sick companies. Provided the sick company was in a position to first pay

back the public money, there would be no difficulty in reconstruction. The Board for Industrial and Financial Reconstruction whilst

considering a .scheme for reconstruction has to keep in mind the fact that it is to be paid off or directed by the Special Court. The Special

Court can, if it is convinced, grant time or installments.

There can, therefore, be no stay of any proceedings for recovery against a sick company so far as the Special Court under the 1992 Act is

concerned.

11. We are in agreement with the aforesaid decision of the case, more so when we find that whenever the legislature wishes to do so it

makes appropriate provisions in the Act in that behalf. Mr Shiraz Rustomjee has drawn our attention to Section 34 of the Recovery of Debts

Due to Banks and Financial Institutions Act, 1993 wherein after giving an overriding effect to the 1993 Act it is specifically provided that

the said Act will be in addition to and not in derogation of a number of other Acts including the 198.5 Act. Similarly under Section 32 of the

1985 Act the applicability of the Foreign Exchange Regulation Act and the Urban Land (Ceiling and Regulation) Act is not excluded. It is

clear that in the instant case there was no intention of the legislature to permit the 1985 Act to apply, notwithstanding the fact that

proceedings in respect of a company may be going on before the BIFR. The 1992 Act is to have an overriding effect notwithstanding any

provision to the contrary in another Act.â€​

31. The similar view was taken by the Bombay High Court in the case of Bhoruka Steel Ltd. Vs. Fairgrowth Financial Services Ltd. The

judgment rendered on 09.02.2016 reported in 1997 (89) company cases 547 (BOM) para 15 of the said judgment read as under:

“15. To be noted that in both the judgments, relied upon by counsel, the Supreme Court has held that generally where there are two

special statues, which contain non-obstante clauses, the later statute must prevail. This is because at the time of enactment of the later

statute, the Legislature was aware of the earlier legislation and its non-obstante clause. If the Legislature still confers the later enactment

with a non-obstante clause it means that the Legislature wanted that enactment to prevail. If the Legislature does not want the later

enactment to prevail then it could and would provide in the later enactment that the provisions of the earlier enactment continue to apply. In

the present case, the said Act is later. The said Act provides that its provisions are to prevail over any other Act. This would include the Sick

Companies Act. If the legislature wanted to provide otherwise, they would have specifically so provided.â€​

32. Recently, the Parliament has amended the twin legislations viz. (i) the SARFAESI Act, 2002 and (ii) the DRT Act, 1993(after amendment

titled as the Recovery of Debts and Bankruptcy Act, 1993) by the Enforcement of Security Interest and Recovery of Debts Laws and

Miscellaneous Provisions (Amendment) Act, 2016 and its provisions have been given effect from 01.09.2016.

33. The amended provisions give overriding effect over any other law and priority to the secured condition for the time being in force

including the provisions of PMLA in so far as recovery of the loan by the secured creditors is concerned.

The amended provisions are reproduced as under:

(i) Section 26E of the SARFAESI Act, 2002 :

“26E. Priority to secured creditors â€" Notwithstanding anything contained in any other law for the time being in force, after the

registration of security interest, the debts due to any secured creditor shall be paid in priority over all other debts and all revenues, taxes,

cesses and other rates payable to the Central Government or State Government or local authority.

Explanation : For the purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy

Code, 2016 (31 of 2016), in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower,

priority to secured creditors in payment of debt shall be subject to the provisions of that Code.â€​

(ii) Section 31B of the Recovery of Debts and Bankruptcy Act, 1993 :

31B. Priority to secured creditors â€" Notwithstanding anything contained in any other law for the time being in force, the rights of secured

creditors to realise secured debts due and payable to them by sale of assets over which security interest is created, shall have priority and

shall be paid in priority over all other debts and Government dues including revenues, taxes, cesses and other rates due to the Central

Government, State Government or local authority.

Explanation : For the purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy

Code, 2016 (31 of 2016), in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower,

priority to secured creditors in payment of debt shall be subject to the provisions of that Code.â€​

34. In Section 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 after the words ""the date of the application"",

and includes any liability towards debt securities which remains unpaid in full or part after notice of ninety days served upon the borrower

by the debenture trustee or any other authority in whose favour security interest is created for the benefit of holders of debt securities or;

is added which makes the said amendment or the 1993 Act applicable to all the debts which remains unpaid.

35. Thus, it is very clear from above that the secured creditor, get a priority over the rights of Central or State Government or any other

Local Authority. The amendment has been introduced to facilitate the rights of the secured creditors which are being hampered by way of

attachments of properties, belonging to the financial institutions/secured creditors, done by/in favour of the government institutions.

36. The Full Bench of the Madras High Court while acknowledging the amount of losses suffered by the Banks and while approving the

latest amended Section 31B of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 held in the case “The Assistant

Commissioner (CT), Anna Salai-III Assessment Circle Vs. The Indian Overseas bank and Ors.â€​

Thatâ€​

“There is, thus, no doubt that the rights of a secured creditor to realise secured debts due and payable by sale of assets over which

security interest is created, would have priority over all debts and Government dues including revenues, taxes, cesses and rates due to the

Central Government, State Government or Local Authority. This section introduced in the Central Act is with ''notwithstanding'' clause and

has come into force from 01.09.2016. Further it was also held that the law having now come into force, naturally it would govern the rights

of the parties in respect of even a lis pending.â€​

37. The Assistant Commissioner (CT) Vs. The Indian Overseas Bank, Madras High Court, WP No. 2675 of 2011 (Full Bench)

“2 We are of the view that if there was at all any doubt, the same stands resolved by view of the Enforcement of Security Interest and

Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016, Section 41 of the same seeking to introduce Section 31B in

the Principle Act, Which reads as under:-

“31B. Notwithstanding anything contained in any other law for the time being in force, the rights of secured creditors to realize secured

debts due and payable to them by sale of assets over which security interest is created, shall have priority and shall be paid in priority over

all other debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or local

authority.

Explanation. â€" for the purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy

Code, 2016, in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to

secured creditors in payment of debt shall be subject to the provisions of that Code.â€​

“3 There is, thus, no doubt that the rights of a secured creditor to realize secured debts due and payable by sale of assets over which

security interest is created, would have priority over all debts and Government dues including revenues, taxes, cesses and rates due to the

Central Government, State Government or Local Authority. This section introduced in the Central Act is with “notwithstanding†clause

and has come into force from 01.09.2016â€​

“4 The law having now come into force, naturally it would govern the rights of the parties in respect of even a lis pending.â€​

“5 The aforesaid would, thus, answer question (a) in favour of the financial institution, which is a secured creditor having the benefit of

the mortgaged property.â€​

38. In another Madras High Court judgment in the case of “Dr. V. M. Ganesan vs. The Joint Director, Directorate of Enforcement†has

explained the grievances faced by the financial institutions while holding that

“For instance, if LIC Housing Finance Limited, which has advanced money to the petitioner in the first writ petition and which

consequently has a right over the property, is able to satisfy the Adjudicating Authority that the money advanced by them for the purchase

of the property cannot be taken to be the proceeds of crime, then, the Adjudicating Authority is obliged to record a finding to that effect

and to allow the provisional order of attachment to lapse. Otherwise, a financial institution will be seriously prejudiced. I do not think that

the Directorate of Enforcement or the Adjudicating Authority would expect every financial institution to check up whether the contribution

made by the borrowers towards their share of the sale consideration was lawfully earned or represent the proceeds of crime. Today, if the

Adjudicating Authority confirms the provisional order of attachment and the property vests with the Central Government, LIC Housing

Finance Limited will also have to undergo dialysis, due to the illegal kidney trade that the petitioner in the writ petition is alleged to have

indulged in. This cannot be purport of the Act.â€​

39. In a case contested by one of the branches of the Appellant Bank, the High Court of Madras “State Bank of India Vs. The Assistant

Commissioner, Commercial Tax, Puraswalkam Assistant Circle and Ors.â€, while upholding the Amendment Act, 2016 to Section 26E of the

SARFAESI Act and reaffirming the view of the Full Bench of the same court in The Assistant Commissioner (CT), Anna Salai-III Assessment

Circle (supra) lifted the attachment entry and held that-

“In other words, not only should the amendment apply to pending lis, but the declaration that the right of a secured creditor to realise

the secured debts, would have priority over all debts, which would include, Government dues including revenues, taxes, etc., should hold

good qua 2002 Act as well.â€​

40. B. RAMA RAJU V. UOI AND ORS. Reported in (2011) 164 company case 149(AP)(D Bw)ho 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 from provisional

attachment by declining to pass an order of confirmation of the provisional attachment; either in respect of the whole or such part of the

property provisionally attached in respect whereof bona fide acquisition by a person is established, at the stage of the section 8(2)

process…â€​

41. The Supreme Court in (2010)8 Supreme Court Cases 110 (Before G.S. Singhvi and A.K. Ganguly, JJ) in the case of United Bank of

India V/s. Satyawati Tondon and Ors. In paras no. 6, 55 & 56 has held as under:-

6. To put it differently, the DRT Act has not only brought into existence special procedural mechanism for speedy recovery of dues of banks

and financial institutions, but also made provision for ensuring that defaulting borrowers are not able to invoke the jurisdiction of the civil

courts for frustrating the proceedings initiated by the banks and other financial institutions.

55. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability

of statutory remedies under the DRT Act and the SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have

serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High

Courts will exercise their discretion in such matters with greater caution, care and circumspection.

56. Insofar as this case is concerned, we are convinced that the High Court was not at all justified in injuncting the appellant from taking

action in furtherance of notice issued under Section 13(4) of the 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.â€​

In the subsequent changes in law and amendment in the another Special Act i.e. SARFAESI Act, 2002 the decisions referred by Mr. Matta in

the case of Solidaire (Supra) and Bhoruka Steel (Supra) does not help the case of the respondent no. 1 because the effect of overrding the

PMLA looses its validity once the amendment is made which even has been interpreted subsequently by the Full-Bench of the Chennai High

Court in the case of Assistant Commissioner CT (Supra) and other decision in the nature of the facts in the present matter.

42. It is also a matter of fact that after passing the impugned order the borrowers have also settled the loan amount with the complainant

â€" i.e. Union of India in order to pay the remaining out-standing amount. The undertaking in this regard is recorded in Court. It is written

agreement and the statement of the parties were recorded. Counsel for the borrowers has also informed us that his client also intent to pay

the remaining out-standing amount to the State Bank of India in order to clear their liabilities once the attached properties are sold and

even otherwise.

Copy of the settlement of the borrowers and the complainant Bank of India was filed before us. As far as the schedule offence is concerned,

we do not wish to make any comment. But we can only observe that in case of settlement, joint petition for quashing of FIR in the High

Court u/s 482 Cr. P.C. could be filed.

43. It is not denied on behalf of department that these provisional attachment was made, the proceedings of recovery of amount were

pending before the DRT for recovery against the borrowers and for sum of the properties, possession were with the bank. The mortgaged

deeds are also not disputed or/and validity of the same are not challenged on behalf of ED.

44. It is settled law that generally when the civil dispute between the parties are settled before the court particularly pertaining to the

recovery of out-standing amount, on joint petition, the High Court while exercising its discretion may quash the criminal petition u/s 482 Cr.

P.C. at the joint request of the parties.

45. Three Judge Bench in Narendra Lal Jain & Ors., (supra) held that during the investigation pertaining to the culpability of the accused

in the crime, the concerned bank had instituted suits for recovery of the amount claimed to be due from the respondents and the said suits

were disposed of in terms of the consent decrees. On the basis of the said consent decrees an application for discharge was filed which was

rejected by the trial court but eventually was allowed by the High Court. The charges in the matter were framed under Section 120-B/420

IPC by the learned trial Judge against the private parties. As far as bank officials are concerned, charges were framed under different

provisions of the Prevention of Corruption of Act, 1988. Being dissatisfied with the said order,, the CBI had preferred an appeal by

obtaining special leave and in that context the court observed that the accused respondent had been charged under Section 120-B/420 IPC

and the civil liability of the respondent to pay the amount had already been settled and further there was no grievance on the part of the

bank. Taking note of the fact that offence under Section 420 of IPC is compoundable and Section 120-B is not compoundable, the Court

eventually opined thus:-

“11. In the present case, having regard to the fact that the liability to make good the monetary loss suffered by the bank had been

mutually settled between the parties and the accused had accepted the liability in this regard, the High Court had thought it fit to invoke its

power under Section 482 Cr.P.C. We do not see how such exercise of power can be faulted or held to be erroneous. Section 482 of the

Code inheres in the High Court the power to make such order as may be considered necessary to, inter alia, prevent the abuse of the

process of law or to serve the ends of justice. While it will be wholly unnecessary to revert or refer to the settled position in law with regard

to the contours of the power available under Section 482 CR.P.C.it must be remembered that continuance of a criminal proceeding which is

likely to become oppressive or may partake the character of a lame prosecution would be good ground to invoke the extraordinary power

under Section 482 Cr. P.C.

In Sanjay Bhandari V/s. CBI, Crl. M.C. M.C. 5798/2014, Delhi High Court, dated 29.06.2015

“69….. By consent the parties have settled all disputes in the recovery suit, the consent decree of DRT stood to be disposed off as duly

satisfied. There is hence no force in the submission of respondents that the complainant bank has not exonerated the petitioners, first being

the Civil Procedure Code, and the second being the OTS Scheme of the Reserve Bank of India, which the petitioners have extensively

referred to in the original petition. The provisions of OTS Scheme prevent the complainant bank from entering into any compromise or

settlement under the said OTS Scheme in the cases of willful default, fraud and malfeasance. The complainant bank in choosing to enter into

such consent terms under the provisions of OTS Scheme has not only exonerated the petitioners, but for all intents and purposes given up

the perusal of the complaint and having no grievance against them in any other proceeding whether civil or criminal on the same set of

issues.â€​

“70. There is no doubt that the trial has been proceeding for offences for the last about 20 years ago. The dispute between the petitioner

and complainant Bank 33 years old. A long time has in fact been elapsed since the alleged commission of offences. Still the trial continues.

The present petition is maintainable as the same has been filed also on additional grounds and circumstances. No useful purpose would be

served if such oppressive trial may continue for many more years. Thus, ends of justice are served by quashing such a proceeding, as the

parties cannot be allowed to go through the rigmarole of criminal prosecution for long numbers of years in a matter, it is doubtful in the

mind of the Court in whose favour it would be decided.†“71. In view of above mentioned reasons, this Court is inclined to quash the

proceedings pending against the petitioners, arising out of R.C. No. 4A/94/SIU(X) dated 23rd May, 1994, titled ‗CBI vs. N. Bhojraj Shetty

& Ors.â€, being C.C. No.65/11, pending in the Court of Spl. Judge (CBI), Tis Hazari Courts, Delhi.†The said decision has been upheld by

the Honâ€​ble Supreme Court.

46. In the present case, it is undisputed facts that the attached property were purchased much prior to the period when the facility of loan

sanctioned to the borrowers. The banks while rendering the facilities were boanfide parties. It is not the case of the respondent that the

attached properties were purchased after the loan was obtained. The mortgaged of the properties were done as bonafide purposes. None of

the bank is involved in the schedule offence. No PMLA proceedings are pending except the complainant bank was arrayed as Column;-11

at the time of framing charges. Union Bank of India has not granted sanction against its employee to proceed against him in criminal

complaint. There is no criminal complaint under the schedule offence and PMLA is pending against the two banks. In case of failure on the

part of borrowers to comply with the terms of settlement, the contempt proceedings are maintainable in the Court where the settlement was

recorded.

47. In view of the entire gamut of the dispute, we are of the considered opinion that the conduct of the banks are always bonafide. Both

banks are innocent parties. They were legally entitled to inform the Adjudicating Authority about their innocence and they rightly did so but

their contention was rejected as appeared from the impugned order.

48. This Tribunal in the case of IPRS in appeal no. FPA-PMLA-1302/MUM/2016 decided on 22.06.2017 had dealt with the similar issue as

to whether the innocent party whose immovable properties are attached by the ED can approach the Adjudicating Authority for release of

the same in para no. 55 to 60 the same read as under:-

“55. Whether innocent party whose properties i.e. movable or immovable are attached can approach the Adjudicating Authority for

release of attached property.

The Scheme of Prevention of Money Laundering Act clearly provides the mechanism whereby the innocent parties can approach the

Adjudicating Authority for the purposes of release of properties which have been attached in terms of the provisions of Section 5 of the Act.

This can be seen by reading Section 8(1) and the proviso to Section 8(2) of the Act whereby Adjudicating Authority has to rule whether all

or any of the properties referred to in the notice are involved in money laundering or not.

“8. Adjudication.- (1) On receipt of a complaint under sub-section (5) of section 5, or applications made under sub-section (4) of section

17 or under subsection (10) of section 18, if the Adjudicating 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 income, earning or assets, out of which or by means of which he has acquired the property attached under

sub-section (1) of section 5, or, seized or frozen under section 17 or section

18, the evidence on which he relies and other relevant information and particulars, and to show cause why all or any of such properties

should not be declared to be the properties involved in money-laundering and confiscated by the Central Government: 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- (a) considering the reply, if any, to the notice issued under subsection (1); (b) hearing the

aggrieved person and the Director or any other officer authorised 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, section 58 B or sub-section (2 A) of section 60 by the Adjudicating Authority (4) Where the provisional order of attach

56. There are judicial pronouncements whereby it has been laid down that the innocent parties can approach the Adjudicating Authority for

release of property by showing their bonafides in their dealings with the property. In the case of Sushil Kumar Katiyar (Appellants) Vs UOI

and Ors. (Respondents) MANU/UP/0777/2016 decided on 10.05.2016 by Allahabad High Court, it has been observed by the Ld. Single

Judge after noticing the judgment of Karnataka High Court that the element of knowingly or mens rea have been provided under the Act so

that the aspect of implicating any innocent person can be ruled out. Relevant para 26 of judgment is reproduced below:-

“26. Thus, upon consideration of the law laid down by the Hon'ble Karnataka High Court, it is clear that the amendment incorporated in

the Money Laundering Act was not held unconstitutional and ultra virus, but it was observed by the Karnataka High Court that the property

of a person can be attached without there being any prosecution for the offence of Money Laundering, but so far as the prosecution of a

person for the offence of money laundering is concerned, the proceedings under section 3 of the PML Act can be initiated only in case the

person is held guilty of receiving proceeds of crime as a result of commission of scheduled offence. The Karnataka High Court has also

held that the complainant in such a case is not required to wait for the result of trial being held for the scheduled offence. A complaint can

still be filed against such person, but if ultimately the person is acquitted of the charge for the scheduled offence, his prosecution under

section 3 of the Act for the offence of Money-Laundering would also come to an end. It has also been kept open by the Karnataka High

Court that a person against whom complaint under section 3 of the PML Act has been filed and he is being prosecuted for the offence of

money-laundering, he can show before the court that he is innocent and has not received any proceeds of crime.â€​

It is clear that innocent person can approach the Adjudicating Authority of any competent court to demonstrate his innocence that he has

not received any proceeds of crime. The consequence of this is that while considering whether all or any of the properties provided under

notice issued u/S 8(1) are involved in money laundering, the Adjudicating Authority can take into consideration the plea of innocence

raised by any person and also the fact as to whether the property which has been attached has any nexus whatsoever with that of money

laundering or not if the person before the Tribunal/ Adjudicating Authority is able to demonstrate that he neither directly nor indirectly has

attempted to indulge nor with knowledge or ever assisted any process or activity in connection with proceeds or crime and the question of

his involvement does not arise as he is third party, then the Tribunal/ Adjudicating Authority can consider the said plea depending upon

whether there exist bona fide in the said plea or not and proceed to adjudicate the plea of innocence of the said party.

57. This is due to the reason that Section 8 allows the Adjudicating Authority to only retain the properties which are involved in money

laundering which means as to whether properties attached are involved in money laundering or not is a pre-condition prior to confirming

or attachment by Adjudicating Authority. Therefore, at that time, if the plea is raised that the party whose property is attached is innocent or

is without knowledge of any such transaction with respect to money laundering, then the Tribunal can consider the said plea and proceed to

release the said property out of the properties by holding that the said property is not involved in money laundering.

58. For the purposes of determining whether the property is involved in money laundering, the Court may consider the ingredients of

Section 3 which define offence of money laundering. The aspect of knowledge or involvement has been discussed by Ld. Single Judge of

Gujarat High Court in the case of Jafar Mohammed Hasanfatta and Ors (Appellants) Vs Deputy Director and Ors. (Respondents)

MANU/GJ/0219/2017 wherein Ld Single Judge has observed as under:-

“37. A holistic reading of this definition of 'proceeds of crime' and the penal provision under Section 3 of PMLA, which uses conjunctive

'and', makes it luminous that any persons concerned in any process or activity connected with such ""proceeds of crime"" relating to a

scheduled offence"" including its concealment, possession, acquisition or use can be guilty of money laundering, only if both of the two

prerequisites are satisfied i.e.-

“(i) Firstly, if he-

(a) directly or indirectly 'attempts' to indulge,

(b) “knowinglyâ€​ either assists or is a party, or

(c) is “actually involvedâ€​ in such activity; and

(ii) Secondly, if he also projects or claims it as untainted property;

38. The first of the two pre-requisite to attract Section 3 of PMLA shall thus satisfy any of the following necessary ingredients-

“A. RE: DIRECT OR INDIRECT ATTEMPT:

In State of Maharashtra v. Mohd.Yakub, MANU/SC/0239/1980 : (1980) 3 SCC 57, the Hon'ble Supreme Court observed that-

“13. Well then, what is an “attempt� ...In sum, a person commits the offence of ""attempt to commit a particular offence"" when (i) he

intends to commit that particular offence and (ii) he, having made preparations and with the intention to commit the offence, does an act

towards its commission; such an act need not be the penultimate act towards the commission of that offence but must be an act during the

course of committing that offence.

Thus, an “attempt to indulge†would necessarily require not only a positive ""intention"" to commit the offence, but also preparation for

the same coupled with doing of an act towards commission of such offence with such intention to commit the offence. Respondent failed to

produce any material or circumstantial evidence whatsoever, oral or documentary, to show any such 'intention' and 'attempt' on the part of

any of the petitioners.

B. RE: KNOWINGLY ASSISTS OR KNOWINGLY IS A PARTY:

In Joti Parshad v. State of Haryana, MANU/SC/0161/1993 : 1993 Supp (2) SCC 497 the Hon'ble Supreme Court has held as follows-

“5. Under the Indian penal law, guilt in respect of almost all the offences is fastened either on the ground of ""intention"" or ""knowledge

or ""reason to believe"". We are now concerned with the expressions “knowledge†and ""reason to believe"". “Knowledge†is an

awareness on the part of the person concerned indicating his state of mind. “Reason to believe†is another facet of the state of mind.

Reason to believe"" is not the same thing as “suspicion†or “doubt†and mere seeing also cannot be equated to believing.

“Reason to believe†is a higher level of state of mind. Likewise “knowledge†will be slightly on a higher plane than “reason to

believeâ€. A person can be supposed to know where there is a direct appeal to his senses and a person is presumed to have a reason to

believe if he has sufficient cause to believe the same.â€​

The same test therefore applies in the instant case where there is absolutely no material or circumstantial evidence whatsoever, oral or

documentary, to show that any of the petitioners, 'Knowingly', assisted or was a party to, any offence.

C. Actually involved:

Actually involved would mean actually involved into any process or activity connected with the proceeds of crime and thus scheduled

offence, including its concealment, possession, acquisition or use. There is absolutely no material or circumstantial evidence whatsoever,

oral or documentary, to substantiate any such allegation qua the petitioners,

D. Neither any of the petitioners is arraigned as accused in the 'Scheduled Offences' punishable under Indian Penal Code for direct or

indirect involvement, abetment, conspiracy or common intention, nor is any such case made out even on prima facie basis against any of

them.

39. The second of the two pre-requisite to attract Section 3 of PMLA would be satisfied only if the person also projects or claims proceeds

of crime as untainted property. For making such claim or to project 'proceeds of crime' as untainted, the knowledge of tainted nature i.e.

the property being 'proceeds of crime' derived or obtained, directly or indirectly, as a result of criminal activity relating to a scheduled

offence, would be utmost necessary, which however is lacking in the instant case.

59.These are four ingredients which are determinative factors on the basis of which it can be said that whether any person or any property

is involved in money laundering or not. If there is no direct / indirect involvement of any person or property with the proceeds of the crime

nor there is any aspect of knowledge in any person with respect to involvement or assistance nor the said person is party to the said

transaction, then it cannot be said that the said person is connected with any activity or process with the proceeds of the crime. The same

principle should be applied while judging the involvement of any property of any person in money laundering. This is due to the reason that

if the property has no direct involvement in the proceeds of the crime and has passed on hands to the number of purchasers which includes

the bona fide purchaser without notice, the said purchaser who is not having any knowledge about the involvement of the said property

with the proceeds of the crime nor being the participant in the said transaction ever, cannot be penalized for no fault of his. Therefore, it

cannot be the Scheme of the Act whereby bona fide person without having any direct/ indirect involvement in the proceeds of the crime or its

dealings can be made to suffer by mere attachment of the property at the initial stage and later on its confirmation on the basis of mere

suspicion when the element of mens rea or knowledge is missing.

60. Similar principle has been laid down by Chennai High Court in the case of C. Chellamuthu (Appellants) Vs The Deputy Director,

Prevention of Money Laundering Act, Directorate of Enforcement (Respondent) MANU/TN/4087/2015 decided on 14.10.2015, relevant

portion of which are reproduced below:-

“ 20. The said sections read as follows:--

“23. Presumption in inter-connected transactions Where money-laundering involves two or more interconnected transactions and one or

more such transactions is or are proved to be involved in money-laundering, then for the purposes of adjudication or confiscation (under

section 8 or for the trial of the money-laundering offence, it shall unless otherwise proved to the satisfaction of the Adjudicating Authority

or the Special Court), be presumed that the remaining transactions form part of such inter-connected transaction.

24. Burden of proof

In any proceeding relating to proceeds of crime under this Act,

(a) in the case of a person charged with the offence of money-laundering under Section 3, the Authority or Court shall, unless the contrary

is proved, presume that such proceeds of crime are involved in money-laundering; and

(b) in the case of any other person the Authority or Court, may presume that such proceeds of crime are involved in money-laundering.

21. In the present case, one G. Srinivasan is accused of having played fraud and obtained a loan of Rs. 15,00,00,000/- by producing bogus

and fabricated documents. From and out of the said amount, the property in question was purchased by him in the names of his Benamies.

One Ayyappan was appointed as their Power Agent. One Gunaseelan purchased the property through the Power Agent Ayyappan. The said

Gunaseelan was examined and his statement was recorded Under Section 50 of the Act. He had stated that he purchased the property for

cultivation. He developed the property but geologist gave opinion that property will not yield proper income. In the circumstances, he sold

the property to appellants. The respondent has not produced any document or material to disprove the statement of Gunaseelan. There is

nothing on record to show that the transaction in favour of the said Gunaseelan, is not genuine. It is not the case of respondent that the

said Gunaseelan is a Benami or employee of G. Srinivasan and that Gunaseelan did not pay any amount as sale consideration or the sale

consideration paid by Gunaseelan was not legitimate money. There is no material to show nexus and link of Gunaseelan with G. Srinivasan

and his Benamies. In the absence of any verification or investigation by respondent with regard to genuineness or otherwise of the

purchase by Gunaseelan; whether he was connected with G. Srinivasan or the sale consideration is legitimate or not the property in the

hands of Gunaseelan cannot be termed as proceeds of crime.

22. Further, the appellants have given statements under Section 50 of the Act. They have categorically stated that they possess agricultural

lands, cultivate GloriosaSuperba seeds and sell the same and derive considerable income. They have named the persons to whom they have

sold the GloriosaSuperba seeds and produced Bank statements. Some of the Appellants have stated that they sold their lands and borrowed

monies to purchase the property in question. There is nothing on record to show that the respondent had verified these statements.

Especially, the respondent has not verified the Bank statement produced by the Appellants to ascertain the genuineness of the same and

whether the money deposited came from genuine purchasers or from the persons involved in fraud and Money Laundering. The respondent

does not allege that Appellants are Benamies of G. Srinivasan or no sale consideration passed to the vendor.

23. Considering the materials on record and judgments reported in MANU/MH/1011/2010: 2010 (5)Bom CR 625 [supra] and : [2011] 164

Comp Cas 146(AP) [supra], I hold that appellants have rebutted the presumption that the property in question is proceeds of crime. The

respondent failed to prove any nexus or link of Appellants with G. Srinivasanand his benamies. Once a person proves that his purchase is

genuine and the property in his hand is untainted property, the only course open to the respondent is to attach sale proceeds in the hands

of vendor of the appellants and not the property in the hands of genuine legitimate bona fide purchaser without knowledge.

24. Before the Adjudicating Authority it was admitted by complainant that appellants had no knowledge that properties in the hands of their

vendor was proceeds of crime. It was also not disputed by complainant that the appellants did not have financial capacity to buy properties.

Paragraphs 21, 22, 23 and 24 of order of Adjudicating Authority is extracted herein for better appreciation.

“21. The CBIBS & FC (BLR) has filed a charge sheet in the court of Spl. Judge for CBI cases Coimbatore, against Sh. Arivarasu, Sh. R.

Manoharan, Sh. R. Selvakumar, Sh. G. Srinivasan, Sh. K. Martha Muthu, Sh. V. InduNesan, Sh. K. Vignesh, Sh. A. Sainthil Kumar, Sh. M.

Ram Krishnan, for the offences punishable under Section 120-B read with 420, 467, 471 IPC and section 13(2) read with 13(1)(d) of PC

Act 1988. The offences punishable under section 120-B, 420, 471 are schedule offence under Section 2(1)(y) of the PMLA and therefore on

of the condition for issuing provisional attachment order is satisfied. The other important point to be determined is whether the properties

attached vide Provisional attachment order are involved in money-laundering. The only defense or explanation raised by Defendants,

particularly Def No. 2 to 8 is that the landed properties attached by the complainant are not proceeds of crime. These properties were

purchased by these defendants without having any knowledge, whatsoever, that these properties were derived or obtained through criminal

activities relating to schedule offence. It has been demonstrated by them that they verified the title deeds relating to the properties and after

due verification of every details entered into the sale transactions as such these are bona fide deals entered by them against proper sale

consideration and the money paid to the seller is also well explained.

22. Against the above arguments vehemently raised by the defendants, the complainant without disputing that the deals are bona fide

heavily relied on the judgment of the Bombay High Court, dated 05.08.2010 in Mr. Radha Mohan Lakhotia Vs. Deputy Director, PMLA,

Directorate of Enforcement, Mumbai in first appeal No. 527/2010. In this case it held by the Bombay High Court that the property bought

without the knowledge that the same is tainted could be subjected to Provisional Attachment Order.

23. In the instant case the only point to be decided is whether the properties bought by any person against clean money and without any

knowledge that properties have been acquired directly or indirectly though scheduled offence could be subject matter of provisional

attachment order.

24. It is an admitted position that the Defendants (D-2 to D-8) had no knowledge that the properties in the hands of the vendor was

proceeds of crime. They have also verified the papers relating to these properties before the deal. No point has been raised with regard to

the financial capability of these Defendants to buy these properties. However, the Bombay High Court decision in Radha Mohan Lakhotia

has been pressed into service to make out a plea that the properties could be attached in such circumstances under the PMLA.

Provisional attachment was sought to be continued only based on the judgment of Bombay High Court in Radha Mohan Lakhotia's case.

25. A reading of paragraphs 21 to 24 clearly reveals that both the Adjudicating Authority as well as Appellate Authority failed to properly

appreciate the facts and findings in Radha Mohan lakhotia's case. In that case, the Department had placed substantial and acceptable facts

to prove that the property in the hands of third party was proceeds of crime. It is pertinent to note that in Mr. Radha Mohan Lokatia's case,

Department had proved the nexus and link between the person possessing the property and person accused of having committed an offence.

All the persons involved in that case were close relatives.

26. In the present case, the respondent failed to prove that the appellants did not have sufficient financial capacity to buy the property or

that the money paid by them as sale consideration was not legitimate money derived by agricultural activities. No material was produced to

show that the appellants are close relatives of person, who involved in criminal activities and the person, who sent monies to purchase the

property did not possess financial capacity to provide such huge amounts and that they are not genuine purchasers of agricultural products

of appellants. The respondent has not made any such investigation and has not produced any such material. Further, the Appellate

Authority in fact considered the additional documents produced before it, but rejected the same on the ground that Appellants have not

given any valid reasons for not filing the same before the Adjudicating Authority. Having considered the Additional documents, the

appellate authority failed to give any finding on merits after verifying with the concerned Bank.

14. The Respondent no. 1 has heavily relied on the judgment of the Hon'ble Supreme Court passed in the matter of KSL & Industries Ltd. vs.

Arihant Threades Ltd. & Others passed in the matter of Civil Appeal no. 5225 of 2008. The Hon'ble Three judges Bench of Hon'ble Supreme

Court has discussed various decision of the hon'ble Supreme Court, the RDDB Act and SICA. It is important to refer/quote the relevant

paras of the Judgment delivered by the Hon'ble Supreme court in KSL & Industries Ltd. vs. Arihant Threaders Ltd. & Ors. (supra).

“47. In a subsequent decision in Allahabad Bank Vs. Canara Bank, this Court held that with reference to the Companies Act, the RDDB

Act should be considered as a “special law†though both laws could be treated as “special laws†in respect of recovery of dues by

banks and financial institutions. In a later case the question arose in the context of Special Court (Trial of offences Relating to Transactions

in Securities) Act, 1992 and SICA. It was contended that in view of the special provisions contained in SICA no proceedings could have

been initiated under the Special Court Act. The Court observed that though Section 32 of the SICA contained a non-obstante clause, there

was a similar non-obstante clause in Section 13 of the Special Court Act. The Court observed:-

“9… This Court has laid down in no uncertain terms that in such an event it is the later Act which must prevail.â€​

48. This Court approved the observations of the Special Court to the effect that if the legislature confers a non-obstante clause on a later

enactment, it means that the legislature intends that the later enactment should prevail. Further, it is a settled rule of interpretation that if

one construction leads to a conflict, whereas on another construction two Acts can be harmoniously construed, then the latter must be

adopted.

49. In view of the observations of this Court in the decisions referred to and relied on by the learned counsel for the parties we find that,

the purpose of the two enactments is entirely different. As observed earlier, the purpose of one is to provide ameliorative measures for

reconstruction of sick companies, and the purpose of the other is to provide for speedy recovery of debts of banks and financial

institutions. Both the Acts are “special†in this sense. However, with reference to the specific purpose of reconstruction of sick

companies, the SICA must be held to be a special law, though it may be considered to be a general law in relation to the recovery of debts.

Whereas, the RDDB Act may be considered to be a special law in relation to the recovery of debts and the SICA may be considered to be a

general law in this regard. For this purpose we rely on the decision in LIC Vs. Vijay Bahadur (supra). Normally the latter of the two would

prevail on the principle that the Legislature was aware that it had enacted the earlier Act and yet chose to enact the subsequent Act with a

non- obstante clause. In this case, however, the express intendment of Parliament in the non-obstante clause of the RDDB Act does not

permit us to take that view. Though the RDDB Act is the later enactment, sub-section (2) of Section 34 specifically provides that the

provisions of the Act or the rules thereunder shall be in addition to, and not in derogation of, the other laws mentioned therein including

SICA.

50. The term “not in derogation†clearly expresses the intention of Parliament not to detract from or abrogate the provisions of SICA in

any way. This, in effect must mean that Parliament intended the proceedings under SICA for reconstruction of a sick company to go on and

for that purpose further intended that all other proceedings against the company and its properties should be stayed pending the process of

reconstruction. While the term “proceedings†under Section 22 did not originally include the RDDB Act, which was not there in

existence. Section 22 covers proceedings under the RDDB Act.

51. The purpose of the two Acts is entirely different and where actions under the two laws may seem to be in conflict, Parliament has wisely

preserved the proceedings under the SICA, by specifically providing for sub- section (2), which lays down that the later Act RDDB shall be

in addition to and not in derogation of the SICA.

52. We might add that this conclusion has been guided by what is considered to be one of the most crucial principles of interpretation viz.

giving effect to the intention of the Legislature. The difficulty arose in this case mainly due to the absence of specific words denoting the

intention of Parliament to cover applications for recovery of debts under the RDDB Act while enacting Section 22 of the SICA. As observed

earlier, the obvious reason for this absence is the fact that the SICA was enacted earlier. It is the duty of this Court to consider SICA, after

the enactment of the RDDB Act to ascertain the true intent and purpose of providing that no proceedings for execution or distraints or suits

shall lie or be proceeded with. Undoubtedly, in the narrower sense an application for recovery of debt can be giving a restricted meaning

i.e. a proceeding which commences on filing and terminates at the judgment. However, there is no need to give such a restricted meaning,

since the true purpose of an application for recovery is to proceed to the logical end of execution and recovery itself, that is by way of

execution and distraint. We thus have no hesitation in coming to the conclusion that Section 22 clearly covers and interdicts such an

application for recovery made under the provisions of the RDB Act. We might remind ourselves of the oft-quoted statement of the principles

of contextual construction laid down by this Court in Reserve Bank of India Versus Peerless General Finance and Investment Co. Ltd. &

Ors.[6], where this Court has observed:-

“33. Interpretation must depend on the text and the context. They are the bases of interpretation. One may well say if the text is the

texture, context is what gives the colour. Neither can be ignored. Both are important. That interpretation is best which makes the textual

interpretation match the contextual. A statute is best interpreted when we know why it was enacted. With this knowledge, the statute must be

read, first as a whole and then section by section, clause by clause, phrase by phrase and word by word. If a statute is looked at, in the

context of its enactment, with the glasses of the statute-maker, provided by such context, its scheme, the sections, clauses, phrases and words

may take colour and appear different than when the statute is looked at without the glasses provided by the context. With these glasses we

must look at the Act as a whole and discover what each section, each clause, each phrase and each word is meant and designed to say as to

fit into the scheme of the entire Act. No part of a statute and no word of a statute can be construed in isolation. Statutes have to be

construed so that every word has a place and everything is in its place.â€​

53. Moreover, we have found nothing contrary in the intention of the SICA to exclude a recovery application from the purview of Section

22, indeed there could be no reason for such exclusion since the purpose of the provision is to protect the properties of a sick company, so

that they may be dealt with in the best possible way for the purpose of its revival by the BIFR. In State of Punjab Vs. The Okara Grain

Buyers Syndicate Ltd.[7], the Court articulated the importance of preserving the beneficent purpose of the statute and observed:-

“14. …….. We shall therefore proceed to examine the provisions of the Act on the footing that the test for determining whether the

Government is bound by a statute is whether it is expressly named in the provision which it is contended binds it, or whether it “is

manifest that from the terms of the statute, that it was the intention of the legislature that it shall be boundâ€, and that the intention to bind

would be clearly made out if the beneficent purpose of the statute would be wholly frustrated unless the Government were bound.â€​

54. Having answered the reference, we hold that the provisions of SICA, in particular Section 22, shall prevail over the provision for the

recovery of debts in the RDDB Act. In these circumstances, as already directed by the two-Judge Bench of this Court, the Judgment and

Order dated 23.02.06 of the High Court of Delhi is set aside. As far as the writ petitions are concerned, whether on the ground that Section

22 of the SICA acts as a bar to the recovery proceedings under the RDDB Act or whether the protection of SICA is not available to the

appellant company since the recovery proceedings under the RDDB Act had been concluded, the writ petitions would have to be dismissed

and are accordingly dismissed. The present appeal is allowed.â€​

15. From the above i.e. the principle enunciated in the judgments discussed by us and the observations made by Hon'ble Supreme Court in

the matter of KSL & Industries ltd. (supra) we do not find any departure. When two special Acts have non-obstante clauses, the later statue

will prevail over the earlier statute. At the same time the aim and object of both the special Acts are to be looked into to decide such issue in

the manner and harmonious construction has to be arrived.

16. In the present case, the SARFAESI Act, RDDB Act and PMLA are special Acts. The SARFAESI Act and RDDB Act are enacted earlier to

PMLA. The RDDB Act and PMLA have non-obstante clause. Recently, the parliament has amended the twin legislations viz. (i) the

SARFAESI Act, 2002 and (ii) the DRT Act, 1993 (after amendment titled as the Recovery of Debts and Bankruptcy Act, 1993) by the

Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016 and its provisions have

been given effect from 01.09.2016. The Parliament in its wisdom has not excluded the application of the amended provisions to the

proceedings under PMLA. In other words, had the Parliament intended to exclude the application of non-obstante clause of SARFAESI Act

and RDDB Act to PMLA then it would have done so expressly as has been specifically prescribed in the amended provisions. It may also be

noted here that the judgment of Hon'ble Supreme Court in the matter of KSL & Industries Ltd (supra) has been delivered in the year 2014

whereas the amendment in aforesaid two Acts have been brought in the year 2016.

17. One more important thing to be noted that the Hon'ble Supreme Court in the aforesaid case KSL & Industries Ltd. (supra) matter has

held that the provisions of SICA, in particular section 22, shall prevail over the provisions for the recovery of debts in the RDDB Act

because of the fact that the non-obstante provision of RDDB Act has specifically excluded SICA from its application.

18. The conflict of non-obstante clause arising in respect of two or more enactments then the same have to be resolved by taking into

consideration of policy underlying the enactment and the language used in them. The Prevention of Money Laundering Act has been

enacted for forfeiture of crime involved in the money laundering which was considered necessary to deprive persons engaged in serious

illegal activities and have thereby been increasing their resources for operating in clandestine manner. the Act was created to forfeit illegal

properties and to prevent the money laundering activities which are threat to financial system of the country and its integrity and

sovereignty. Further the question of prevalence of a subsequent legislation will only come into picture when there is a conflict between the

two statutes. The Securitization Act has been enacted for the purpose of establishing a expeditious system for recovery of debts due to

Banks and for matters connected therewith or incidental thereto. It only lays down a procedure for recovery of debts due to Banks. The

Prevention of Money Laundering act vests the statutory authorities with a power to forfeit proceeds of crime involved in money laundering

to the State. There is thus no apparent conflict between the two statues. The two statues operate in their exclusive fields. The question is only

who will have his first claim on any property where the claim of the State concur with the claim of any other person. In the light of above a

harmonious construction has to be arrived that keeping in view the facts of the case vis. a vis the statues involved. In the present case the

aforesaid principle suggest that the amendments carried out in SARFAESI Act and RDDB Act in 2016 will prevail over PML Act, 2002

because the properties involved in the present appeal were untainted when the same were acquired. Even when the properties were

mortgaged with the appellant Bank the same were not tainted. The allegation of commission money laundering is after the mortgage of the

said properties with the appellant Bank. After the mortgage of the aforesaid properties a legal right has been accrued in favour of the

appellant Bank over the said properties which cannot be taken away in the given facts and circumstance of the case. As far as borrowers

are concerned (who are the accused parties) even we stress that as per law, they must face the trail in the complaint filed against them.

19. The Respondent has also heavily relied on the judgment or order passed by this Tribunal in the matter of Chief Manager, Syndicate

Bank Vs. Dy. Director, PMLA in Appeal no. FPA-PMLA-A-34/CAL/2009. We have gone through the said order from which it appears that

the facts of that appeal are quite different from the facts of the present appeal. In the said appeal proceeds of crime were used to acquired

properties and those acquired properties were mortgaged with the Bank. Para 2 of the said order of this Tribunal which reflects the brief

facts of the case is reproduced below to clear the cloud:-

2. Brief facts: M/s Hindustan International, Kolkata proprietor Sh. Gopinath Das operated and maintained current a/c 01000051007 and

03921011000797 with State Bank of India, Overseas Branch, Kolkata (in short SBI) and Oriental Bank of Commerce, Stand Road Branch,

Kolkata (in short OBC) respectively with the intention to defraud the bank and submitted fake and forged documents for export of goods

such as Invoice, Packing List, Quality and Quantify Certificate, SDF Declaration, Undertaking, Origin of Good Certificate, Shipping Bill,

Bill of lading etc. to the bank and god these bills discounted against L/C(s) and obtained an amount of Rs. 12,28,22,463/- and Rs.

1,30,43,433/- from State Bank of India and Rs. 6,76,65,000/-from Oriental Bank of Commerce. The funds which were credited to the above

current accounts, were withdrawn from bank for personal gain of Shri Gopinath Das and companies owned and managed by him. Out of

these funds, Sh. Gopinath Das has acquired several immovable properties as detailed in the impugned order and mortgaged them with

Syndicate Bank, Salt Lake Branch, Kolkata, the present appellant for availing credit facilities to the extent of Rs. 10 crores and got Rs. 4.5

crores fraudulently released from the appellant against fake and forged documents. As the amount of loan given by the appellant was not

repaid the account became Non Performing Asset (NPA) and the appellant proceeded u/s 13 of the Securitization and Reconstruction of

Financial Assets and Enforcement of Security Interest Act, 2002 (in short Securitisation Act) for recovery of its dues and claimed to have

taken possession of the properties on 30.11.2006.

20. Neither of the aforesaid judgments relied on by the Respondent no. 1 is of any help to their case in the given facts and circumstances of

the case. The facts in the referred cases are not similar.

21. It is an admitted fact that the properties herein are mortgaged with the appellant Bank. It is also a fact that the mortgaged properties are

not acquired out of any proceeds of crime. It has come on record that the properties mortgaged were acquired prior to the alleged

commission of crime. The relevant sale deed of the mortgaged properties are of 2003 so the date of acquisition is much prior to the date of

alleged commission of crime in the present case.

22. In the present case the Adjudicating Authority has come to a conclusion at para nos. 61, 63 & 65 of the impugned order that the

defendants are in possession of proceeds of crime and are involved in money laundering. The aforesaid conclusion has not be elucidated

by the Ld. Adjudicating Authority in his order. It appears that the only thing was in his mind that section 71 of PMLA has an overriding

effect. The provisions of PMLA shall have effect and prevail over provisions of any other Act or its provisions. To this we are not in

agreement with the Ld. Adjudicating Authority because of the amendment of 2016 made in SARFAESI Act RDDB Act. The IDBI Bank is the

rightful claimants of the said property which are already in its possession under SARFAESI Act. Even recovery certificate has been issued

by DRT.

23. The Honâ€ble Supreme Court of India in the case of Attorney General of India and Ors. (AIR 1994 SC 2179) while dealing with the

matter under Conservation of Foreign Exchange and Prevention of Smuggling Activities Act has defined the illegally acquired properties

and held that such properties are earned and acquired in ways illegal and corrupt, at the cost of the people and the state, hence these

properties must justly go back where they belong, the state. In the present case as they money belongs to the IDBI Bank it is public money.

The IDBI Bank has the right to property under the Constitution of India. The property of the IDBI Bank 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 mortgaged of

property is the transfer under the Transfer of Property Act. Even the respondent is not denying the fact that the Bank is a victim party who

is also innocent and is entitled to recover the loan amount. It is also not disputed by the respondent that the properties in dispute are

mortgaged with Bank and it has to go to Bank ultimately. The only submission of the respondent that u/s 8(8) of PMLA, the possession be

given to Bank after the trail and final outcome of criminal matters against the barrowers. We do not agree with the argument in this regard

in view of amendment in the two statutes. Even otherwise the trail would take number of years. The public money cannot be stalled otherwise

Banking system would be collapsed.

24. That the definition of “proceeds of crime†as per Section 2(u) of the PML Act comprises of the property which is derived or

obtained as a result of criminal activity. In the present case, both the properties have been purchased by the Respondent Sh. Arun Suri and

have been mortgaged with the IDBI much prior to the date of alleged offence which shows that no proceeds of crime are involved in the

acquiring of these properties and hence the same cannot be attached.

25. The Ld. Adjudicating Authority has failed to consider that the ED has attached the properties without examining the case of the bank.

The evidence on record suggests that the properties were acquired by the borrowers much before the alleged date of crime. No money

disbursed by the Bank from its loan account, has been invested in acquiring these properties. Furthermore, the Appellant Bank had created

charge over the property prior to the date of the crime. The Bank has already filed the suit for recovery and has also taken the action under

SARFAESI Act. The Ld. Adjudicating Authority failed to appreciate that depriving the Appellant Bank from its funds/property, without any

allegations or involvement of the Bank in the alleged fraud would be legally unjustified.

26. The properties attached cannot be attached under Section 5 of the PML Act because the properties are not purchased from the alleged

proceeds of crime. As per the provisions of Section 5(1) (c) the primary requirement for the attachment is that the proceeds of crime are

likely to be concealed, transferred or dealt with in any manner. In this case there was absence of such requirement. The said properties are

already in the possession of the Appellant Bank under the SARFAESI Act.

27. The property of the Appellant Bank cannot be attached or confiscated when there is no illegality or unlawfulness in the title of the

Appellant Bank and there is no charge of money laundering against the Bank. The mortgage of property 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 bank is concerned, the bank

had to recover its outstanding dues by taking over the possession of the mortgaged properties in case the Respondent no 3 to 5 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 Bank so that recovery can be made from the accounts which have become NPA.

28. From the discussion made above, we are of the view that there is no nexus whatsoever between the alleged crime and the Bank who is

mortgagee of the properties in question which were purchased before sanctioning the loan. Thus no case of money-laundering is made out

against Bank who has sanctioned the amount which is untainted and pure money. They have priority right to recover the loan amount/debts

by sale of assets over which security interest is created, which remains unpaid. The Ld. Adjudicating Authority has not appreciated the facts

and law involved in the matter and the primary objective of section 8 of PMLA is that the Adjudicating Authority to take a prima facie view

on available material and facts produced. The contentions raised by Mr. N.K. Mata, Advocate has no substance. The provisional attachment

in the present matter is bad and against the law.

29. In view of the aforesaid reasons and our decision, we are not going into other legal issues such as ""reason to believe"", ""retrospective

application provisions of PMLA"" etc.

30. In the circumstances available in the present case, the allegation of money laundering prima facie, so far as present appellant &

properties involved in this appeal, found to be unsustainable for the purpose of attachment under the PMLA, 2002.

31. In view of aforesaid facts and circumstances and for reasons referred above, we set aside the Impugned Order dated 27.11.2017 and

the Provisional Attachment Order dated 28.07.2017. The mortgaged properties attached under the PAO 06/2017, so far as, properties

concern in this appeal are released from attachment forthwith.â€​

g) The properties in question have been mortgaged with the appellants much prior to commission of alleged offences. The main allegation

against the SSIL and Shri G. Eswara Rao is that around a sum of Rs. 5,30,55,500/- have been paid to Respondent no.4 Company by

Respondent no.2 Company in February, 2009 as share application money against which no shares were allotted as such the properties of

Respondent no.4 has been termed as proceeds of crime and the property in question in the present appeals have been attached as value

thereof.

h) The properties in question which are already under mortgaged and under personal guarantee with the appellants cannot be attached as

value thereof. Since right of appellants have already been created over the questioned properties after being mortgaged and under

personal guarantee of said properties with them. It is further gathered from the materials on record that the appellants have already

initiated proceedings under SARFAESI Act against the properties of Respondent no. 4 Company and Shri G. Eswara Rao due to non-

payment of loan advanced by the appellants.

i) In view of the aforesaid reasons we are of the view that the appellants who are mortgagees of the properties in question which were

purchased before sanctioning the loan, no case of money laundering is made out so far as these properties in question are concerned. The

appellants have priority of right to recover the loan amount/debts. In the given facts and circumstances of the case, the Provisional

Attachment in the present matter is bad and against the law.

j) In the circumstances the allegation of money laundering, prima facie, so far as present appellants and properties are involved in these

appeals are concerned, we find that the impugned order is not sustainable under law, for the purpose of attachment under the PMLA, 2002.

k) We have not gone into other legal issues such as retrospective application of provisions of PMLA.

l) In view of the aforesaid facts & circumstances and for the reasons mentioned above, we set aside the impugned order dated 12.08.2014

passed by Adjudicating Authority in O. C. No. 288/2014. The mortgaged properties attached under the PAO No. 01/HZO/2014 dated

19.03.2014 in ECIR No. 03/HZO/2010, so far as properties concerned in these appeals, are released from attachment forthwith.

No Costâ€​

23. The facts of the present case so far as the banks are concerned, the Judgment passed in SASF and LIC matters are similar hence applicable in

these matter.

24. In these present appeals the Punjab National Bank has moved the NCLT, Ahmedabad Bench, under IB&C. The properties which are not

mortgaged with any bank but provisionally attached herein are undisputedly secured being the properties of the private appellants and M/s Accumen(

also an appellant) who are the guarantors and loan amount is liable to be recovered from their properties attached herein.

25. We have taken into consideration the stand of the enforcement directorate on the issue of overriding effect. We are not agreeing with their view

hence their arguments that the PMLA,2002 has overriding effect is negated.

26. The other legal issue i.e. whether the proceedings before the Adjudicating Authority should have been stayed in view of the order passed by

NCLT, Ahmedabad Bench, under IB&C in the matter of C.P.(I.B) No. 89/7/NCLT/AHM/2017.

It is revealed from the copy of the order passed by the learned Adjudicating Authority (NCLT) Ahmedabad Bench, that the Punjab National Bank

filed an application under section 7 of said code r/w rule 4 of Insolvency & Bankruptcy (application to Adjudicating Authority) Rule, 2016 with a

request to initiate Corporate Insolvency Resolution Process against the SVLL, treating it as “Corporate Debtorâ€​.

It is further revealed from the said order that the said applicant bank sanctioned letter dated 13th June, 2013 sanctioned term loan facility of Rs.

100.00 crores to SVLL. The SVLL executed various documents for the facilities availed by it by hypothecating 335 commercial vehicles valuing of

Rs. 125.37 crores to the PNB. The SVLL has also pledged fixed deposit of 10 crores with the bank. The SVLL also hypothecated the second-hand

vehicles having re-sale value of Rs. 10 crores with the bank. A Joint Deed of Guarantee by the SVLL besides undertaking dated 25.06.2013. The

charge so created was duly registered with the Registrar of Companies, Gujarat on 29.06.2013.

27. It is also revealed from the said order of the NCLT that:- (relevant paras of the order are reproduced below)

“1…………….

2……………..

3……………..

“ 4. On the request of the Respondent, Applicant Bank held a meeting of Joint Lenders on 9.12.2014 and restructured the financial facilities. After

the restructure of the financial facilities Respondent executed necessary loan and security documents, Deed of guarantee on 26.3.2015 in favour of

the Applicant Bank. Pursuant to the fresh Sanction Letter dated 9.3.2015 the account of the Respondent Company became irregular since July 2015.

Applicant classified the Respondent Company as *Non Performing Asset on 23.7.2015. Applicant issued notice under Section 13(2) of the

SARFAESI Act against the Respondent Company, its Directors and Guarantors to pay outstanding amount of Rs. 98,48,76,598/- as on 23.7.2015 with

further interest thereon.

i

5. Applicant proposed the name of Shri Dushyant C. Dave as Interim Resolution Professional' and filed his Written Communication.

6. Applicant filed all the documents executed by the Respondent Company pursuant to both the Sanction Letters. Applicant also filed Certificate of

Charge and CIBIL Report. Applicant stated that Bank filed Original Application No. 108 of 2017 before Debt Recovery Tribunal under Section 19 of

the Recovery of Debts Due to Banks & Financial Institutions Act, 1993, praying for order against the Respondent, its Directors and Guarantors for an

amount of Rs. 1,06,86,68,106/- and for taking possession of the hypothecated vehicles etc., and the said proceedings are pending. Applicant also filed

the documents giving details of security documents. Applicant also filed copy of Statement of Accounts and Interest Calculation Sheet calculating the

interest as 'Annexure D' and the Ledger Copies.

7………………………….

8………………………..

8.1……..

8.2……………..

8.3. Respondent denied the existence of default. But the documents filed by the Applicant clinchingly establish that Respondent has committed default

in payment of the amount. Applicant also filed Original Application No. 108 of 2017 before the Debt Recovery Tribunal, Ahmedabad under Section 19

of the Recovery of Debts Due to Banks & Financial Institutions Act, 1993. The Ledger Account of the Statement of Account also show that financial

debt is due from the Respondent/Corporate Debtor to the Applicant/Financial Creditor. Moreover, at the request of the Respondent Company the

loans were restructured. No doubt, there was a moratorium for payment of principal amount for 18 months and interest for 12 months.

8.4. It is contended by the learned counsel for the respondent that applicant bank treated the respondent company as “NPA†on 23rd July, 2015

inspite of the moratorium granted in the Restructuring Agreement.

8.4(a) The moratorium was only in respect of the principal amount for 18 months and the interest for 12 months. But the Respondent committed

default in payment of amount of interest and as well as principal amount and therefore the Applicant rightly classified the Respondent Company as

*NPA\ The contention, that classification of the account of the Respondent as 'NPA' on 23rd July, 2015 is a breach of the terms of Sanction dated

10th March, 2015 and is in violation of RBI Guidelines, does not merit acceptance, for the simple reason that no Reply was given to the notice issued

by the Applicant under the provisions of the SARFAESI Act. More over, any breach committed in repayment of the loan amount enables the Bankers

to treat the amount as 'NPA\ No material is placed on record by the Respondent to show that treating the Respondent as 'NPA' is against the terms

of the Sanction. The objection, that the Statements of Account are not duly certified under the Bankers' Books Evidence Act, has been cleared by the

Applicant by filing the Certificate under the Bankers' Books Evidence Act.

8.5. Respondent's learned Counsel stated that all the books of the Respondent Company were taken over by the Enforcement Directorate under the

provisions of Prevention of Money Laundering Act, 2002 and therefore Respondent is handicapped in making defence in this case. It is also stated in

the Objections that CBI investigation is going on against the Company on a complaint filed by Bank of Maharashtra.

8.5(a)……….

9…………….

10…………..

11……..

12. The Interim Insolvency Resolution Professional is hereby directed to cause public announcement of the initiation of 'Corporate Insolvency

Resolution Process' and call for submission of claims under Section 13(l)(b) read with Section 15 of the Code and Regulation 6 of Insolvency and

Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

13. This Adjudicating Authority hereby order moratorium under section 13(1)(a) of the IB Code prohibiting the following as referred to in section 14 of

the Code;

(a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or

order in any court of law, tribunal, arbitration panel or other authority;

(b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein;

(c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action

under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002);

(d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.

(i) However, the order of moratorium shall not apply in respect of supply of essential goods or services to Corporate Debtor.

(ii) The order of moratorium is not applicable to the transactions that may be notified by the Central Government in consultation with any financial

sector regulator.

(iii) The order of moratorium comes into force from the date of the order till the completion of corporate Insolvency Resolution Process subject to the

Proviso under sub-section (4) of Section 14.

14. The moratorium declared by this Adjudicating Authority is not applicable to the criminal proceedings, if any, initiated under the provisions of

Prevention of Money Laundering Act, 2002 by the Enforcement Directorate and to the criminal case, if any, initiated by the Central Bureau of

Investigation against the Respondent Company.

15………………………..

16…………………………….â€​

28. So far as the legal issue of overriding effect of IB&C, 2016 over PMLA 2002 is concerned, it is held that the IB&C has the overriding effect over

the Prevention of Money Laundering Act as the PMLA is a statue which came into effect much prior to the coming into force of IB &C. The IB&C

is a later statute which came into effect in the year 2016. The aim and object of both the statutes are not doubt different but they are in operation in

their respective fields. The legislature while framing the IB&C is quite aware of the existence of PMLA and other statutes. In spite of that they have

put provisions of overriding effect vide section 238 of IB&C which read as follows:

“238. Provisions of this Code to override other laws-The provisions of this code shall have effect, notwithstanding anything inconsistent

therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.â€​

Placing these provisions in IB&C the legislature is clearly indicated its intentions to give this law with overriding effect over other statutes which are in

effect before the coming into force of IB&C.

29. The intention of the legislature is more clear in this regard if the provisions of section 238 is read with section 14(1)(a) of IB&C. Section 14(1)(a)

of IB &C provides as below:

“ 14.Moratorium.-(1) Subject to provisions of sub-section (2) and (3), on the insolvency commencement date, the Adjudicating Authority

shall by order declare moratorium for prohibiting all of the following, namely:

a. The institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any

judgments decree or order in any court of law, tribunal, arbitration panel or other authority;â€​

30. The Adjudicating Authority under IB&C has passed an order of moratorium on the institution of suits and continuation of suits or proceedings

against the corporate debtor including execution of any judgments decree or order in any court of law, tribunal, arbitration panel or other authority is

barred. In the present case the Adjudicating Authority(NCLT) has allowed the application of PNB and declared moratorium under section 13(1)(a) of

IB&C in terms of section 14 of the same code. prohibiting the institution of suits or continuation of pending suits or proceedings against the corporate

debtor including execution of any judgments decree or order in any court of law, tribunal, arbitration panel or other authority amongst others. In para

14 of the said order of NCLT it is mentioned that “The moratorium declared by this Adjudicating Authority is not applicable to the criminal

proceedings, if any, initiated under the provisions of Prevention of Money Laundering Act, 2002 by the Enforcement Directorate and to the criminal

case, if any, initiated by the Central Bureau of Investigation against the respondent Company.â€​

31. The aforesaid orders of NCLT does not debar any criminal proceedings, if any, initiated under the provisions of PMLA by the ED and CBI.

32. So far as the principle of overriding effect of IB&C over PMLA is concerned, there are many judgments of Honâ€ble Supreme Court. We have

already discussed and relied on the judgments on Honâ€​ble Supreme Court about the above legal issue in the preceding para nos. 29.

33. Therefore in the giving circumstances, it is held that the IB&C has overriding effect over PMLA.

34. The next legal issue i.e. whether the proceedings before Adjudicating Authority PMLA is a civil proceedings or a criminal proceedings.

35. Section 5 of the PMLA reads as follow:

“5. Attachment of property involved in money-laundering-[(1) Where the Director, or any other officer not below the rank of Deputy

Director authorised by him for the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on

the basis of material in his possession, thatâ€

(a) any person is in possession of any proceeds of crime;

(b) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any

proceedings relating to confiscation of such proceeds of crime under this Chapter, he may,

by order in writing, provisionally attach such property for a prior of not exceeding one hundred and eighty days from the date of the order,

in such manner as may be prescribed:

Provided that no such order of attachment shall be made unless, in relation to the scheduled offence, a report has been forwarded to a

Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person authorized to

investigate the offence mentioned in that Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case

may be, or a similar report or complaint has been made or filed under the corresponding law of any other country:

Provided further that, notwithstanding anything contained in [first proviso], any property of any person may be attached under this section

if the Director or any other officer not below the rank of Deputy Director authorized by him for the purposes of this section has reason to

believe (the reasons for such belief to be recorded in writing), on the basis of material in his possession, that if such property involved in

money-laundering is not attached immediately under this Chapter, the non-attachment of the property is likely to frustrate any proceeding

under this Act.]

(2.) The Director, or any other officer not below the rank of Deputy Director, shall, immediately after attachment under sub-section (1),

forward a copy of the order, along with the material in his possession, referred to in that sub-section, to the Adjudicating Authority, in a

sealed envelope, in the manner as may be prescribed and such Adjudicating Authority shall keep such order and material for such period

as may be prescribed.

(3.) Every order of attachment made under sub-section (1) shall cease to have effect after the expiry of the period specified in that sub-

section or on the date of an order made under sub-section (2) of section 8, whichever is earlier.

(4.) Nothing in this section shall prevent the person interested in the enjoyment of the immovable property attached under sub-section (1)

from such enjoyment.

Explanation.â€" For the purposes of this sub-section “person interestedâ€, in relation to any immovable property, includes all persons

claiming or entitled to claim any interest in the property.

(5.) The Director or any other officer who provisionally attaches any property under sub-section (1) shall, within a period of thirty days

from such attachment, file a complaint stating the facts of such attachment before the Adjudicating Authority.â€​

36. Section 8 of PMLA reads as follow:

“Adjudication-(1) (1) On receipt of a complaint under sub-section (5) of section 5, or applications made under sub-section (4) of section

17 or under sub-section (10) of section 18, if the Adjudicating Authority has reason to believe that any person has committed an 13 [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 income, earning or assets, out of which or by means of which he has acquired the property attached under

sub-section (1) of section 5, or, seized under section 17 or section 18, the evidence on which he relies and other relevant information and

particulars, and to show cause why all or any of such properties should not be declared to be the properties involved in money-laundering

and confiscated by the Central Government:

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, afterâ€

(a) considering the reply, if any, to the notice issued under sub- section (1);

(b) hearing the aggrieved person and the Director or any other officer authorised 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.

(3) Where the Adjudicating Authority decides under sub-section (2) that any property is involved in money-laundering, he shall, by an order

in writing, confirm the attachment of the property made under sub-section (1) of section 5 or retention of property or record seized under

section 17 or section 18 and record a finding to that effect, such attachment or retention of the seized property or record shallâ€

(a) continue during the pendency of the proceedings relating to any [offence under this Act before a court or under the corresponding law

of any other country, before the competent court of criminal jurisdiction outside India, as the case maybe; and]

(b) become final after an order of confiscation is passed under sub-section (5) or sub-section (7) of section 8 or section 58B or sub-section

(2A) of section 60 by the [Special Court]

4. Where the provisional order of attachment made under sub-section (1) of section 5 has been confirmed under sub-section (3), the

Director or any other officer authorised by him in this behalf shall forthwith take[ the possession of the attached property under section 5

or frozen under sub-section(1A) of section 17, in such manner as may be prescribed:

Provided that if it is not practicable to take possession of a property frozen under sub-section(1A) of section 17, the order of confiscation

shall have the same effect as if the property had been taken possession of.]

5. Where on conclusion of a trial of an offence under this Act, the Special Court finds that the offence of money-laundering has been

committed, it shall order that such property involved in the money-laundering or which has been used for commission of the offence of

money-laundering shall stand confiscated to the Central Government]

[6. Where on conclusion of trail of an offence under this Act, the Special Court finds that the offence of money-laundering has not taken

place or the property is not involve in money-laundering, it shall order release of such property to the person entitled to receive it.]

[7. Where the trial under this Act cannot be conducted by reason of the death of the accused or the accused being declared a proclaimed

offender or for any other reasons or having commenced but could not be concluded, the Special Court shall, on an application moved by

the Director or a person claiming to be entitled to possession of a property in respect of which an order has been passed under sub-section

(3) of section 8, pass appropriate orders regarding confiscation or release of the property, as the case may be, involved in the offence of

money-laundering after having regard to the material before it.]

[8. Where a property stands confiscated to the Central Government under sub-section(5), the Special Court, in such manner as may be

prescribed, may also direct the central Government to restore such confiscated property or part thereof of a claimant with legitimate interest

in the property, who may have suffered a quantifiable loss as a result of the offence of money laundering;

Provided that the Special Court shall not consider such claim unless it is satisfied that the claimant has acted in good faith and has suffered

the loss despite having taken all reasonable precautions and is not involved in the offence of money laundering.]

37. These two provisions do not empower the Adjudicating Authority under PMLA, 2002 either to levy any penalty or impose punishment to any

persons involve in the proceedings. The Adjudicating Authority does not decide on the criminality of the offence.

 38. The proceedings before the Adjudicating Authority(PMLA) are quasi-judicial in nature. It is not bound by the procedure laid down by the Code

of Civil Procedure(CPC), 1908, but shall be guided by the principles of natural justice and, subject to the other provisions of this Act, the Adjudicating

Authority shall have powers to regulate its own procedure as provided under section 6(15) of PMLA. At the same time section 11 of PMLA has

empowered the Adjudicating Authority to exercise certain powers (of civil courts under CPC) prescribed in section 11 of PMLA.

39. The ED has vehemently contended that the proceedings under PMLA are criminal proceedings. They have not specifically contended regarding

the nature of proceedings before the Adjudicating Authority is a criminal proceedings or a civil proceedings. It is seen that when the question of

retrospective application of sections 5,8 &17 of PMLA are raised, the ED used to contend that the proceedings before the Adjudicating Authority are

civil proceedings. Without going into that if we take the case of ED in the matter of Special Criminal no. 1748 of 2014 filed by Foziya Samir Godil vs.

Union of India and 2 Ors., (Supra) it appears that the ED had taken the stand before the Honâ€ble High Court of Gujarat that the proceedings u/s 5 &

8 are civil proceedings. The contention of the ED has been upheld by the Honâ€ble High Court. The Honâ€ble High Court, after discussing different

provisions of PMLA, 2002 concerning attachment, adjudication, confiscation and retention, has held that the proceedings before the Adjudicating

Authority u/s 8 is authorized to undertake civil proceedings and adjudicate thereupon.

40. The Division Bench of Honâ€ble Kerala High Court passed judgment dated 26.07.2017 in the matter of MFA-no. 11 of 2016 filed by Kavitha G.

Pillai vs. Joint Director, Directorate of Enforcement has observed the following while dealing with the question i.e. Are the proceedings u/s of the 8

judicial proceedings:-

“104. Are the proceedings under Section 8 of the Act judicial proceedings? First, we must acknowledge that the line between the judicial

and quasi-judicial proceedings, if ever exists, is the thinnest. Almost invisible. Second, here whatever the label we give, the consequences

will not vary. An Adjudicating Authority puts the affected on notice, holds a hearing, examines and sifts through evidence, and passes

orders affecting--albeit as an interim measure-- the property, or civil rights of a person. The order is appealable. So the proceedings are

judicial. Then, are they criminal proceedings?

105. Criminal proceedings and civil proceedings once had a water-tight division. But later the complexity of crimes and the legal fictions

that have entered the adjudication have spawned quasi-criminal cases. Yet criminal proceedings have certain tell-tale signs:

(a) usually the person accused of a crime faces a formal charge; the state--not the victim, with certain exceptions though--prosecutes--for

the crime is supposed to be an offence against the society;

(b) the State must establish the accused's guilt beyond reasonable doubt, but occasionally the accused may have an evidential burden;

(c) the punishment usually is corporeal, such as jail term, though sometimes only penalty is levied;

(d) the accused has constitutional or statutory safeguards, such as the presumption of innocence, the right to silence, with no legal or

persuasive burden.

106. Examined further, the Act also reveals that the predicate offences, as well as the offences of money laundering, are triable by Special

Courts. Section 44 of the Act mandates that the Special Court may, upon perusal of a police report or ""upon a complaint made by an

authority"" under this Act, take cognizance of offence under section 3 of the Act. So the proceedings under Section 8 have nothing to do

with the trying of offences under Section 44 of the Act.â€​

Both the judgments of Honâ€ble High Courts of Gujarat and Kerala are applicable to the facts and circumstance of the case and binding on the ED as

they were parties to the aforesaid proceedings.

41. On the grounds stated above it is held that the proceeding u/s 8 of PMLA,2002 before the Adjudicating Authority is a civil proceeding and the

Adjudicating Authority should have stayed the proceedings on passing of the moratorium order by the NCLT. The continuation of the proceedings

from the date of commencement of the moratorium order is contrary to the intention of the legislature hence the consequential order of confirmation

of PAO is contrary to law. Hence liable to be set aside.

42. Therefore, the period of continuation of proceedings before the Adjudicating Authority, PMLA, and before this Tribunal till the passing of the

present judgment and order, from the date of commencement of the moratorium order, be treated as excluded while calculating limitation of the period

of completion of the Corporate Insolvency Resolution Process.

43. The appeals are allowed in terms of the order mentioned above.

No cost.