Gujarat High Court
Deputy Director Directorate Of ... vs Branch Manager Canara Bank on 23 August, 2021
Author: J. B. Pardiwala
Bench: J.B.Pardiwala, Vaibhavi D. Nanavati
C/FA/1224/2021 IA ORDER DATED: 23/08/2021
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
CIVIL APPLICATION (FOR STAY) NO. 1 of 2021
In R/FIRST APPEAL NO. 1224 of 2021
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DEPUTY DIRECTOR DIRECTORATE OF ENFORCEMENT SURAT ZONAL OFFICE Versus BRANCH MANAGER CANARA BANK ========================================================== Appearance:
for the PETITIONER(s) No. MR DEVANG VYAS for the PETITIONER(s) No. DS AFF.NOT FILED (N) for the RESPONDENT(s) No. ========================================================== CORAM:HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI Date : 23/08/2021 IA ORDER (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA)
1. On 28.06.2021, this Court passed the following order:-
"1. We have heard Mr. Devang Vyas, the learned Additional Solicitor General of India appearing for the applicant - original appellant.
2. By this Civil Application, the applicant prays for stay of the operation, implementation and execution of the order dated 17.01.2019 passed by the Appellate Tribunal, Prevention of Money Laundering Act, New Delhi. The order dated 17.01.2019 has been challenged by the applicant by way of First Appeal No.1224 of 2021. The First Appeal came to be admitted by this Court vide order dated 07.06.2021.
3. Let Notice be issued to the opponent - returnable on 12.07.2021. Till the next returnable date, the opponent shall maintain status quo as regards the nature, character and possession of the attached properties.
Direct service is permitted."
2. The matter was taken up for further hearing today. The time is not Page 1 of 5 Downloaded on : Wed Aug 25 21:13:24 IST 2021 C/FA/1224/2021 IA ORDER DATED: 23/08/2021 ripe enough to take up the main appeal for final hearing and decide the same. In such circumstances, we propose to pass further order in the civil application filed by the Directorate of Enforcement.
3. We may try to recapitulate the principal argument canvassed on behalf of the Bank, from day one that it has the first right or claim over the properties in question. The properties which we are talking about are the properties which came to be attached by the PMLA authority on the ground of those being the proceeds of crime.
4. Mr. Shah, the learned counsel appearing for the Bank seeks to place strong reliance on a decision of the Delhi High Court in the case of Deputy Director Directorate of Enforcement, Delhi V/s. Axis Bank and Others reported in 2019 SCC Online Del 7854. The Delhi High Court summarized its final conclusions in paragraph no. 171 of the judgment. The reliance is being placed on clause (xv) of the final conclusions which reads thus:-
(xv). If the bonafide third party claimant (as aforesaid) is a "secured creditor", pursuing enforcement of "security interest" in the property (secured asset) sought to be attached, it being an alternative attachable property (or deemed tainted property), it having acquired such interest from person(s) accused of (or charged with) the offence of money-laundering (or his abettor), or from any other person through such transaction (or inter-connected transactions) as involve(s) criminal activity relating to a scheduled offence, such third party (secured creditor) having initiated action in accordance with law for enforcement of such interest prior to the order of attachment under PMLA, the directions of such attachment under PMLA shall be valid and operative subject to satisfaction of the charge or encumbrance of such third party and restricted to such part of the value of the property as is in excess of the claim of the said third party.
5. Relying on the aforesaid, the argument of Mr. Shah is plain and simple. He would submit that the Bank is only concerned with the money which it has to recover from the original debtors. He would Page 2 of 5 Downloaded on : Wed Aug 25 21:13:24 IST 2021 C/FA/1224/2021 IA ORDER DATED: 23/08/2021 submit that the Bank is not concerned with the criminal prosecution that the Directorate of Enforcement has instituted under the provisions of the PMLA Act.
6. In the aforesaid context, Mr. Devang Vyas, the learned ASG appearing for the appellant would submit that there are two issues involved in the present appeal. The first is as regards the right or the precedence over the attached properties and secondly, some of the findings recorded by the Appellate Tribunal in the impugned order. Mr. Vyas invited the attention of this Court to the findings recorded by the Appellate Tribunal for PMLA Act, New Delhi, more particularly, paragraph no. 52 which reads thus:-
"52. The Adjudicating Authority did not appreciate that a bare perusal of the afore mentioned section 2(1) (u) of PMLA very clearly stipulates that the property can be attached under the provisions of ONLY WHEN, Such property has EITHER been derived or obtained, directly or indirectly as a result of a criminal activity relating to a scheduled offence.
However, the complainant has failed to prove/establish that the immovable property that has been lawfully Mortgages with the Appellant Bank has EITHER been derived or obtained, directly or indirectly as a result of a criminal activity relating to a scheduled offence.
The only reason given by the Respondent No.1 in the present OC 974/2018 is that proceeds of crime amounting to Rs.827.98 Cr. received by the Respondent No.2 Company through circular rotation (As alleged by the Respondent No.1) was either used for repayment of loans or for repayment of its terms loans as Advances by the Appellant Bank, therefore, the entire Plant and Machinery of M/s Nakoda Ltd and its factory building are "Proceeds of Crime" and the Factory land of M/s Nakoda is also liable for attachment under PMLA as "Value of Such Property.
It is admitted position that the said movebale/immoveable property is not a property that has been derived or acquired, directly or indirectly through the "Proceeds of crime". Thus, the said mortgaged property in which the bank is a secured creditor is not liable to be attached in lieu of even value therefore. Therefore, the OC 974/2018 is not maintainable as the Respondent No.1 had no jurisdiction to attach the aforementioned immoveable property under Page 3 of 5 Downloaded on : Wed Aug 25 21:13:24 IST 2021 C/FA/1224/2021 IA ORDER DATED: 23/08/2021 the provisions of the PMLA and that the PAO bearing No.01/2018 is quashed against the appellant."
7. The appellate Tribunal has recorded a finding that only those properties can be attached under the PMLA which have been derived or obtained directly or indirectly, as a result of a criminal activity relating to a scheduled offence. To put it in other words, the finding recorded is that the attached properties are not proceeds of crime. Mr. Vyas, the learned ASG is prima facie right in his submission that this particular finding recorded by the Appellate Tribunal would put an end to the criminal complaint filed by the appellant under the PMLA.
8. In view of the aforesaid, the first thing, we intend to do is to stay the operation of the entire impugned order dated 17.01.2019 passed by the Appellate Tribunal, Prevention of Money Laundering Act, New Delhi. We accordingly stay its operation.
9. The second thing, we intend to do is to try to secure the interest of both the side i.e. the Bank as a secured creditor and the Directorate of Enforcement as an authority under the PMLA.
10. According to the Bank, it had taken over the symbolic possession of all the properties much before the PMLA proceedings came to be initiated. However, the fact remains that the physical possession as on date remains with the appellant. The properties could be said to be under attachment at the instance of the appellant under the PMLA.
11. We have two options at this stage, either ask both the sides to maintain status quo or we may ask the bank as well as appellant to join hands and put the properties to auction, subject to final order that may be passed in an appeal, which has been filed by the accused persons before the appropriate authority under the PMLA Act.
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12. In other words, our suggestion is that the Bank and the appellant may jointly put the properties to auction and try to fetch a good price. If successful in this exercise, then the amount shall neither go to the Bank nor shall go to the appellant, but we may ask them to deposit the entire amount with the Registry of this Court or we may ask them to open an Escrow Bank Account and deposit the same. We shall decide above the precedence once the auction is successful.
13. Mr. Shah, the learned counsel appearing for the Bank and Mr. Vyas, the learned ASG shall sit together and discuss this suggestion of the Court and revert on the next date of hearing, so that further appropriate order can be passed.
14. Post this matter on 06.09.2021.
15. One copy each of this order shall be furnished to Mr. Shah, the learned counsel appearing for the Bank for its onwards communication and one copy to Mr. Vyas, the learned ASG appearing for the appellant for its onwards communication.
16. The interim order earlier passed stands modified to the aforesaid extent.
(J. B. PARDIWALA, J) (VAIBHAVI D. NANAVATI,J) VARSHA DESAI Page 5 of 5 Downloaded on : Wed Aug 25 21:13:24 IST 2021