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Judgment
Sl.
No.",Cheque No.,Date,Drawn on,Amount,"Details of Receipts
issued by Respondent
No.5
1.,"704165/
704166","April 5, 2012",HSBC,"15,000,000","UBHL/KFT/004
Dt.23.09.2013
2.,011887,"Sept. 1, 2012",HSBC,"43,545,635","UBHL/KFT/002
Dt.12.09.2013
and UBHL/KFT/004
Dt.23.09.2013
3.,066208,"March 12, 2013",HSBC,"43,545,635","UBHL/KFT/004
Dt.23.09.2013
4.,096567,"Sept. 02, 2013",HSBC,"43,110,175","UBHL/KFT/004
Dt.23.09.2013
5.,131197,"February 24,
2014",HSBC,"43,110,175","UBHL/KFT/007
Dt.28.02.2014
6.,745088,"August 27, 2014",HSBC,"43,110,175","UBHL/KFT/013
Dt.24.09.2014
7.,171592,"February 28,
2015",HSBC,"28,187,105","UBHL/KFT/017
Dt.09.03.2015
At the request of Respondent No. 5 and 8, the entire purchase consideration was remitted to an escrow account of HDFC Bank Limited",,,,,
(Respondent No. 9 herein), it was represented to the appellant, that the Respondent No. 9 was a creditor of Respondent No. 5. The property was",,,,,
mortgaged with the bank, therefore, the entire payment was made directly to the bank as per details mentioned in earlier para. The entire purchase",,,,,
consideration was remitted through normal/legal banking channels from the overseas account of the appellant. It is claimed that in light of the,,,,,
execution of the said Agreements and the payment of full consideration by the appellant, the latter became the beneficial owner of the said flat and the",,,,,
proportionate undivided area in the said land and acquired rights in the said flats, inter alia, highlighted in the Agreement to Sell dated 05.04.2012.",,,,,
Copies of the Receipts dated 12.09.2012, 23.09.2013, 28.02.2014, 24.09.2014 and 09.03.2015 and copies of cheques issued by Respondent No. 5 in",,,,,
respect of payment of purchase consideration by the appellant are filed along with the appeal.,,,,,
From the documents placed on record, it is evident that the appellant paid the entire purchase consideration from her personal bank account. She",,,,,
has no family relation whatsoever with any of the respondents named above. Even the purchase consideration part of, directly or indirectly, any",,,,,
transaction(s) with the respondents named above. The appellant has filed confirmation issued by the bankers HSBC confirming the details of the,,,,,
cheques issued in favour of UB Holdings â€" HDFC Bank Escrow Account and cleared from her account.,,,,,
The respondent no. 9 bank had also issued a No Objection Certificate to the sale of the said flat, subject to the condition that the entire sale",,,,,
consideration is deposited into their escrow account. The No Objection Certificate dated April 4, 2012 of the respondent no. 9 is also filed.",,,,,
As already mentioned that during the period 5.4.2012 to 28.2.2015, entire sale consideration remitted by the appellant to HDFC Bank. FIR",,,,,
registered for predicate offence on 29.7.2015 against the accused persons. Admittedly, the appellant was not named in the FIR. There is not even an",,,,,
allegation against the appellant in the FIR nor about link and nexus directly or indirectly as a result of criminal activity relating to a schedule offence.,,,,,
On the basis of FIR and allegation on 29.1.2016, ECIR No. ECIR/03/MBZO/2016 was registered on the basis of FIR. The appellant was not",,,,,
named in the ECIR. Admittedly, the appellant was not named in the ECIR. From a perusal of the PAO and the record of the Adjudicating Authority,",,,,,
she was not summoned nor any notice u/s 8(2) was issued.,,,,,
Provisional Attachment Order No. 11/2016 was passed on 11.6.2016. No role attributed to the Appellant in the PAO.,,,,,
Confirmation Order was passed by the Adjudicating Authority on 11.2.2016. There is no role attributed towards crime to the Appellant in the,,,,,
Confirmation Order. The said order has been challenged by the appellant,,,,,
The Enforcement Directorate, Mumbai has registered a case against Shri Vijay Mallya, M/s Kingfisher Airlines Ltd. (KAL) and others under",,,,,
Prevention of Money Laundering Act (PMLA), 2002 in matter of IDBI Loan of Rs. 900 Crore.",,,,,
In the impugned order, it was held by the respondent no. 1 prima facie that proceeds had been generated out of the criminal activities related to",,,,,
Scheduled Offences and that the same had been utilized by respondent no. 2 in inter alia servicing their existing debs and further that a significant,,,,,
amount there from had been siphoned out of India on false pretexts and on the basis of the aforesaid, respondent no. 1 also formed prima facie opinion",,,,,
that the respondent no. 2 and 5 had projected the proceeds of crime as untainted, thus committing the offence of Money Laundering defined under",,,,,
section 3 of PMLA.,,,,,
It is alleged on behalf of respondent no. 1 that the impugned provisional attachment was passed by invoking provision of Section 2(1)(u) of PMLA,",,,,,
2002, which empowers the Complainant (an authority under PMLA) to attach properties of equivalent value of Proceeds of crime of the offender.",,,,,
Hence, during the course of investigation, various properties held/owned/acquired by Shri Vijay Mallya, including those through various companies",,,,,
and/or special purposes vehicle, which were controlled directly or indirectly by him, through dummy directors appointed by him were identified, which",,,,,
included the subject property held in the name of M/s United Breweries (Holdings) Ltd (UBHL).,,,,,
20.1 In the appeal, oral arguments are addressed and written submission is also filed on behalf of respondent no. 1, the case in nut-shell is that the",,,,,
properties mentioned in the aforesaid Provisional Attachment Order have been provisionally attached under Section 5(5) of PMLA, 2002 and the",,,,,
same has been duly confirmed by the Adjudicating Authority in its Order in Original Complaint No. 612/2016 dated 01.12.2016, which also includes the",,,,,
property as mentioned by the appellant.,,,,,
20.2 Appellant has no locus standi to file the present appeal as appellant was neither the defendant before Adjudicating Authority nor has any rightful,,,,,
and legal claim.,,,,,
20.3 The appellant has attempted to help the accused person by entering into the so-called agreement for the purchase of the flat in Kingfisher Tower,,,,,
which has already been attached and the attachment is confirmed by the Adjudicating Authority.,,,,,
20.4 Agreements for the seven flats out of hundred of flats in Kingfisher were executed in spite of prohibition by way of Corporate guarantee,,,,,
executed in 2010 not to sell, create third party right given to the consortium of banks.",,,,,
20.5 The respondent during investigation found that the appellant was the director in one of the company UBL from 26.10.2009 onwards and taken,,,,,
due advantage by purchasing one of the flat in question in Kingfisher Towers.,,,,,
20.6 Connivance of the appellant with accused Vijay Mallya is apparent from the fact that the winding up petitions filed by the consortium bank,,,,,
26.03.2012 in COP No. 57/2012, before the Honâ€ble Karnataka High Court which were widely published both in print as well as electronic media.",,,,,
The appellant, therefore, must be aware about the said fact that the fraud committed by Vijay Mallya. The appellant did not care about it rather",,,,,
entered into an agreement dated 05.04.2012 after coming to know about the winding up petition and paid money between 2012-15, thus it shows that",,,,,
the present transaction was entered with a view to help Mr. Vijay Mallya, otherwise inspite of coming to know about the pendency of winding up",,,,,
petition and other action against Vijay Mallya, she would not have been paid the money.",,,,,
20.7 Agreement dated 05.04.2012, there is an arbitration clause and if the appellant has any grievances against Mallya she must invoke arbitration",,,,,
clause and merely by entering in to agreement that too unregistered she has no claim in attached property which is not even fully constructed, then",,,,,
how she can ask for possession or execution of sale deed.,,,,,
20.8 Now nothing is left in the present appeal in view of the decree dated 19.01.2017 is passed by the Debt Recovery Tribunal against these very,,,,,
assets including the flats in question directing KAL, Dr. Vijay Mallya and KFIL to jointly and severally pay the sum of Rs.6203,35,03,879.42 along",,,,,
with further interest at 11.5% yearly. Therefore, the said decree which has attained finality as such cannot be interfered.",,,,,
20.9 The appellant for the same relief had already filed an application before the Honâ€ble Division Bench of Karnataka High Court and the same is,,,,,
pending adjudication, therefore, the appellant cannot be allowed to go for forum hunting.",,,,,
20.10 The UBHL has also filed the interlocutory application before Karnataka High Court prosing to sell the assets to repay the debts and in the list of,,,,,
assets UBHL has also included the present flat then how the appellant making any claim over it.,,,,,
20.11 The Official Liquidator had filed its reply in response to the application filed by the appellant before the Karnataka High Court opposing their,,,,,
application.,,,,,
20.12 During the course of investigation, it was observed that the appellant had entered into an “Agreement to Sell†to purchase a flat in the said",,,,,
tower and had alleged made payments the same as was agreed between them with the developers of “Kingfisher Towersâ€. The appellant based,,,,,
on their “Agreement to Sell†claimed to have 8321/767870†undivided right, title, interest and ownership in the said Lands i.e. the proportionate",,,,,
undivided area in the said land where the tower is located. The towers have not yet been completely constructed. There is no sale deed entered into,",,,,,
nor the said agreement was registered with the Statutory Authority authenticating the genuinity of the said transaction.,,,,,
The counsel has referred the provision of Section 54 of the Transfer of Property Act, which very categorically states that â€"",,,,,
“Contract for Sale â€" A contract for sale of immovable property is a contract that a sale of such property shall take place on terms,,,,,
settled between the parties. It does not itself create any interest in or change on such propertyâ€.,,,,,
Mr. Rajiv Awasthi has also referred the case of B Rama Raju Vs. Union of India & Ors. 2011 SCC Onlie AP 15,2 in which the constitutional",,,,,
validity of Section 5 and 8 of the PMLA was challenged, the Division Bench of Andhra High Court while rejecting the Writ Petition, observed as",,,,,
follows:-,,,,,
“37 It further requires to be noticed that not only from the second proviso to Section 9 of the Act but on general principles of law as well,",,,,,
a person deprived of the property in his ownership, control or possession on account of confiscation proceedings under the Act, has a right",,,,,
of action against the transferor of such property to recover the value of such propertyâ€.,,,,,
And also the case of Suraj Lamp & Industries vs. State of Haryana & Ors. [(2012) 1 SCC 656] very aptly observed as follows:-,,,,,
“18. It is thus clear that a transfer of immovable property by way of sale can only be by a deed of conveyance (duly stamped and,,,,,
registered as required by law), no right, title or interest in an immovable property can be transferred.",,,,,
Any contract of sale (agreement to sell) which is not a registered deed of conveyance (deed of sale) would fall short of the requirements,,,,,
of Section 54 and 55 of the Transfer of Property Act and will not confer any title nor transfer any interest in an immovable property (except,,,,,
to the limited right granted under Section 53-A of the Transfer of Property Act). According to the Transfer of Property Act, an agreement of",,,,,
sale, whether this possession or without possession, is not a ……. Conveyance. Section 54 of the Transfer of Property Act enacts that the",,,,,
sale of immovable property can be made only by a registered instrument and an agreement of sale does not create any interest or charge on,,,,,
its subject matterâ€.,,,,,
It is submitted on behalf of respondent no. 1 that there is no Registered Sale Deed nor there is any handing over of the possession of the,,,,,
flat/property to the appellant since the building is still under construction. There was only an agreement of sale entered between the appellant and M/s.,,,,,
UBHL, which only denotes about the intention of selling of the Flat to the appellant.",,,,,
However, there is no registered Sale Deed nor the appellant is in possession of the impugned property/Flat in the Kingfisher Tower. Thus, it appears",,,,,
that the appellant does not have any legal ground to claim any title or interest in the said property i.e. the flat or the land on which it is being,,,,,
constructed. Appellant therefore cannot claim any relief from the Appellate Tribunal. Thus, learned counsel appearing on behalf of respondent no. 1",,,,,
has supported the impugned order and rely-upon the submission made by him as well as written-argument.,,,,,
From the material available on record and as per submissions made on behalf of respondent no. 1, it appears very clearly that the appellant was",,,,,
the claimant of the ownership of apartment/Flat bearing number 24A, along with the proportionate undivided area in the underlying land in a real estate",,,,,
project being jointly developed by Respondent No. 5 (M/s United Breweries (Holdings) Ltd.) and Respondent No. 8 (M/s Prestige Estates Projects,,,,,
Pvt. Ltd.).,,,,,
It has also come to record that the total purchase consideration for the purchase of the aforesaid Flat was Rs. 26,12,00,000/-. The entire purchase",,,,,
consideration was remitted through banking channels, from her personal bank account having funds from her earnings. Bankerâ€s certificate",,,,,
reflecting payments have been made from her account is annexed along with Affidavit filed on 09.07.2018. The entire purchase consideration was,,,,,
paid before the registration of the FIR pertaining to the predicate offence and the registration of the ECIR. The said factual position is available on,,,,,
record. It has also come on record that at the request of Respondent Nos. 5 and 8, the entire purchase consideration was remitted to an escrow",,,,,
account of HDFC Bank Limited (Respondent no. 9), since it was represented to the Appellant, that Respondent No. 9 was a creditor of Respondent",,,,,
No. 5. The “No-Objection†from HDFC Bank 4.05.2012 is filed as “A-6†of the Appeal.,,,,,
It is argued on behalf of the appellant that once the entire payment of the purchase consideration was made, the Appellant became owner of the",,,,,
said Property and had acquired proprietary rights and title a “claimant†to the said Property in terms of the Proviso to Section 8(2), Prevention of",,,,,
Money Laundering Act, 2002 being interested/aggrieved party.",,,,,
It is also correct that the Appellant is not even named/ mentioned in the FIR or the ECIR or the captioned Original Complaint. It was not even the,,,,,
case of the Enforcement Directorate/Respondent No. 1 that at the time of the PAO was issued and at the time of filing of the captioned O.C., that the",,,,,
Appellant is involved or connected in any offence or with the alleged offence under PMLA or the predicate offence.,,,,,
The respondent no. 1 cannot deny that at the time of passing the Provisional Attachment Order, the ED/Respondent No. 1 was aware of the",,,,,
purchase of the said Property by the Appellant, as is evident from the statement of Shri Manoj Kumar, an employee of M/S UB Group. Though the",,,,,
said fact has also been disputed by the ED, but the ED did not investigate the same or if it did investigate the same, otherwise the real position might",,,,,
have been different.,,,,,
There is also no material on record to show that the Appellant has any link, nexus or association or relation with the respondent nos. 5 and 8. As",,,,,
per the case of the appellant that the purchase of the said Property was after negotiations. The entire consideration was paid from the Appellantâ€s,,,,,
own income. The same is supported by the Appellantâ€s Bankerâ€s Confirmation Letter and her bank account statements.,,,,,
It is argued by the appellant that she is an innocent bona fide purchaser, and the said Property could not have been attached under Section 5,",,,,,
PMLA. It is also not the case of respondent no. 1 that the consideration paid by her is a tainted amount or it was belonged to Vijay Mallya, as",,,,,
admittedly all the amount was paid through banking channel.,,,,,
The proviso of Section 8(1) and 8(2) of PMLA, 2002 are read as under:-",,,,,
“Provided that where a notice under this sub-section specifies any property as being held by a person on behalf of any other person, a",,,,,
copy of such notice shall also be served upon such other person:,,,,,
Provided further that where such property is held jointly by more than one person, such notice shall be served to all persons holding such",,,,,
property.,,,,,
(2) The Adjudicating Authority shall, after â€"",,,,,
(a) considering the reply, it any, to the notice issued under sub-section (1);",,,,,
(b) hearing the aggrieved person and the Director or any other officer authorized by him in this behalf, and",,,,,
(c) taking into account all relevant materials placed on record before him,",,,,,
by an order, record a finding whether all or any of the properties referred to in the notice issued under sub-section (1) are involved in",,,,,
money-laundering:,,,,,
Provided that if the property is claimed by a person, other than a person to whom the notice had been issued, such person shall also be",,,,,
given an opportunity of being heard to prove that the property is not involved in money-laundering.,,,,,
It is evident from the material available on record and from the Impugned Confirmation Order that the Enforcement Directorate/Respondent No. 1,,,,,
and the Adjudicating Authority were aware that the Appellant was a “Claimant†to the said Property in terms of proviso to Section 8(2), PMLA.",,,,,
The alleged claim in the property by the appellant is not denied on behalf of the respondent no. 1 during hearing, except it was stated that the appellant",,,,,
was not necessary party, therefore no notice was required to be issued. The said arguments are wholly contrary to law and facts involved in the",,,,,
present appeal as the respondent no. 1 was aware who failed to investigate further in the matter.,,,,,
Despite of having full knowledge about the transaction, Respondent No. 1 and the Adjudicating Authority failed to issue notice to the Appellant or",,,,,
to afford a hearing to her, during the adjudication proceedings. Thus, the Respondent No. 1 and the Adjudicating Authority have failed to comply with",,,,,
the mandatory statutory requirement of the Proviso to Section 8(2), PMLA. The mandatory notice has not been issued. After recording the statement",,,,,
of Manoj Kumar, an employee of M/s. U.B. Group, no further investigation appears to have been done. The appellant had interest in the flat in",,,,,
question but no mandatory notice required under section 8(2) was served. Section 8(2) is a mandatory provision, it is mandated under the proviso that",,,,,
if property is claimed by a person other than accused, he shall also be given an opportunity of being heard to prove that the property is not involved in",,,,,
money laundering. Despite of clear language of the act, no notice was given. The prescribed period has already been expired. The appellant is no",,,,,
doubt claimant in the attached property. It is not understood why the requisite notice was not issued by the respondent no. 1 and Adjudicating,,,,,
Authority. Despite being Appellantâ€s claim to the said Property, Respondent No. 1 failed to fulfill its statutory duty, in terms of Rule 3(2) PML",,,,,
(Issuance of Provisional Attachment Order) Rules, 2013, to supply a copy of the Provisional Attachment Order to the Appellant at the time of the",,,,,
issuance of the same to the best reason known to respondent no. 1. It appears that after realizing its mistakes, the respondent no. 1 is now trying to",,,,,
justifying its lapse. The mandatory provision of Special Act line PML Act, 2002 cannot be ignored even different meaning cannot be given to the said",,,,,
provision.,,,,,
Respondent No. 1 was having the details regarding the purchase of the said Property and was in possession of the relevant documents. Thus, the",,,,,
said Property could not have been attached as “proceeds of crimeâ€, even if one were to invoke the concept of “equivalent value†as the",,,,,
consideration paid for the purchase of the said Property had been remitted to HDFC Bank Ltd. (Respondent No. 9 herein), which was Defendant No.",,,,,
8 before the Adjudicating Authority and Respondent No. 1 was aware of this fact at the time of issuing the provisional attachment order.,,,,,
It is argued on behalf of appellant that the respondent no. 1 has already attached the other properties of Vijay Mallya. There is no specific plea,,,,,
why the flat the appellant was attached under the concept of equivalent value without the notice and knowledge of the appellant.,,,,,
It is not the case of respondent no. 1 that the said amount which was in possession of the appellant was not proceed of crime. Even, there is no",,,,,
evidence or any material on record to show for the sake of argument that the appellant has received the said amount from main accused and,,,,,
thereafter it was deposited with the bank in order to help him. No such findings are rendered.,,,,,
The Respondent-ED even prima facie is not able to establish any collusion/connection of the Appellant with UBHL or Kingfisher Airlines Ltd. Or,,,,,
Mr. Vijay Mallya. The main allegation of the Respondent is that the Appellant was a Director in a company associated with the aforesaid companies,,,,,
appointed by Mr. Vijay Mallaya.,,,,,
In this regard the Appellant has filed a detailed Affidavit, alongwith documents, on 09.07.2018; the contents of the same may be read as underâ€"",,,,,
i. The Appellant has no connection whatsoever with UBHL or M/s Kingfisher Airlines Ltd., which are the companies alleged to be involved in the FIR",,,,,
and the ECIR in the present case.,,,,,
ii. The Appellant has never been a Shareholder or Director in UBHL or KAL, at any point of time. The Appellant has no other direct, or indirect",,,,,
interest, financial or otherwise, in UBHL or KAL.",,,,,
iii. The Appellanthas never received any remuneration or any pecuniary advantage from UBHL or KAL, at any point of time.",,,,,
iv. The Appellant hasbeen an “Independent Director†on the Board of M/s United Breweries Ltd. (“UBLâ€), which is a public listed company,",,,,,
since 26.10.2009. Further, to the best of the Appellantâ€s knowledge, UBL has neither been named in the FIR nor the ECIR. As per the Annual",,,,,
Report of UBL for FY 2016-17, which is available in the public domain, UBL has not received any communication from the Respondent ED in",,,,,
relation to the FIR and/or the ECIR in question.,,,,,
v. The fact that the Appellant is an Independent Director,by itself reflects that she has no relation whatsoever with UBL or any of its associate",,,,,
companies. Reliance is placed on section 149, Companies Act, 2013.",,,,,
vi. That, as an Independent Director, the Appellant received “sitting fee†and commission over the years, which is permissible under the",,,,,
provisions of the Companies Act, 2013. It is reiterated and clarified that the Appellant has not received any other amounts/pecuniary benefits, in any",,,,,
manner whatsoever, from UBL. Further, the amounts received by the Appellant can be confirmed from the Annual Reports of UBL, which are",,,,,
available in the public domain. Relevant extracts of the Annual Reports of UBL for the Financial Years 2009-10 to 2016-17 are already filed with the,,,,,
Appellantâ€s aforesaid Affidavit.,,,,,
vii. It is further submitted that the Appellant was been appointed as an Independent Director in view of her qualification and experience (and for no,,,,,
other reason). Reliance is placed on pages 10, 15, 19, 23, 34, 38 of the Affidavit filed on 09.07.2018.",,,,,
viii. It is further submitted that the Appellant has also been an Independent Director of M/s Infosys Ltd., a public limited company and a global leader",,,,,
in the IT business and in various other companies, which are completely unrelated to the UBHL and KAL.",,,,,
Section 149(6) (a) to (d) of the Companies Act, 2013 says that",,,,,
“(a) who, in the opinion of the Board, is a person of integrity and possesses relevant expertise and experience;â€",,,,,
“(b) (i) who is or was not a promoter of the company or its holding, subsidiary or associate company;",,,,,
(ii) who is not related to promoters or directors in the company, its holding, subsidiary or associate company;â€",,,,,
“(c) who has or had no pecuniary relationship with the company, its holding, subsidiary or associate company, or their promoters, or",,,,,
directors, during the two immediately preceding financial years or during the current financial year;",,,,,
“(d) none of whose relatives has or had pecuniary relationship or transaction with the company, its holding, subsidiary or associate",,,,,
company, or their promoters, or directors, amounting to two per cent. or more of its gross turnover or total income or fifty lakh rupees or",,,,,
such higher amount as may be prescribed, whichever is lower, during the two immediately preceding financial years or during the current",,,,,
financial year;â€,,,,,
It appears to me that the applicant was not active director of the company. She was merely an independent director and used to visit the company,,,,,
in the meeting conducted against the reasonable charges in view of her qualification and experience. She was not handling any business of any,,,,,
company of Vijay Mallya or of any activities. Hence, the arguments of the respondent no. 1 are without any substance. It has also come on record",,,,,
that she is also independent director of other well-known companies in Bangalore. It is not the case of respondent no. 1 that she has earned profits of,,,,,
any company of Vijay Mallya at any point of time or she was promoter and shareholder of any of his company.,,,,,
Next contention on behalf of respondent no. 1 is that the Agreement to Sell in favour of the Appellant is not registered. There is no sale deed, thus,",,,,,
the Appellant does not have any interest in the subject-property which is still under construction and possession has not been given to the Appellant.,,,,,
The said arguments have no force as at the stage of adjudication under Section 8, PMLA and the onus upon any Claimant is only to show that the",,,,,
attached property is not involved in money laundering. It is not even the Respondentâ€s case that the subject property is involved in money laundering,",,,,,
rather it is the “value thereofâ€. It is not even the case of the Respondent that the Appellant is involved, in any manner, in the offence of money",,,,,
laundering. No such contention has been raised, except in the Written Submissions filed by the counsel of the respondent no. 1. New case in the",,,,,
written-submission cannot be set-up. There is no allegation that the money deposited in the bank by the appellant was tainted money or any cash,,,,,
deposit was made. All the payments were made through banking channel.,,,,,
Many of contentions raised in the written submissions are not part of the pleadings of respondent no.1. Some of the plea have been taken first time,,,,,
in the written-submissions.,,,,,
It appears from the material that the Appellant has executed Agreements to Sell, Construction Agreements and has also paid the full purchase",,,,,
consideration. Furthermore, all these documents were executed much prior to the registration of ECIR and FIR in the captioned Original Complaint.",,,,,
The Appellant has paid sufficient Stamp Duty on the Agreements to Sell and the Construction Agreements. It is not a civil dispute. It is also a matter,,,,,
of fact and it has come on record that the entire amount has already been paid. In the present case, the appellant definitely is a claimant and the flat",,,,,
was attached without any notice and hearing of the appellant nor any opportunity was given to raise her stand.,,,,,
Even at the stage of Section 8(8), PMLA, that is, confiscation, the only requirement upon a claimant to seek restoration of the subject-property is",,,,,
only to show that she has a “legitimate interest†in the subject-property. Even otherwise, the right acquired by an Agreement to Sell holder would",,,,,
prevail over a subsequent statutory attachment as hold in the case of Vannarakkal Kallalathil Sreedharan v. Chandramaath Balakrishnan & Anr.,",,,,,
(1990) 3 SCC 291.,,,,,
The respondentâ€s contention that the flat is not constructed and possession has not been handed over. It is stated by the appellant who,,,,,
specifically made the statement that the subject-property/Flat has been fully constructed and is ready for delivery and even the vendor is ready to,,,,,
hand-over possession of the subject property, but it could not be given due to attachment order. The winding up was only passed in the year 2017. In",,,,,
2012, merely the said petition was passed. It is even prima facie established by the respondent no. 1 that she had the knowledge or the respondent no.",,,,,
1 has informed her.,,,,,
Even otherwise, it is settled law that the rights in any asset of a company acquired by any person prior to initiation of the winding-up proceedings",,,,,
against the said company are absolute and cannot be defeated by the winding-up proceedings, subject to the transaction being an arms-length",,,,,
transaction.,,,,,
There is also no force in the submission of the respondent no. 1 that there was a connivance between the appellant and the accused parties as the,,,,,
filing of the winding of petition was published in the print as well as electronic media.,,,,,
In the case of Laxmi Raj Shetty and another vs. Tamil Nadu reported in (1988) 3 S.C.C. 319 in para â€" 25 the Honâ€ble Supreme Court hold that,,,,,
the courts cannot take judicial notice of the facts stated in a news item being in the nature of hearsay secondary evidence unless proved by evidence,,,,,
aliunde and presumption cannot be drawn under section 81 of the Evidence Act.,,,,,
In the present, the presumption can be attached that the appellant was aware about the news published in 2012 about the pendency of winding up",,,,,
petition. The funds were paid during the period 2012 to 2015 and the prayer in the winding up petition was allowed in 2017 only.,,,,,
The respondent no. 1 therefore cannot be allowed to presume that the agreements were executed in order to have the accused and with mala fide,,,,,
intention.,,,,,
In the present case, the Agreement to Sell entered into by the Appellant with M/s UBHL is dated 05.04.2012 (i.e. prior to even the initiation of the",,,,,
winding-up proceedings) and the entire purchase consideration was duly paid by 28.02.2015 ( i.e.much prior to the subject Provisional Attachment,,,,,
Order). It is not even the Respondent EDâ€s case that the purchase of the subject Property vide inter alia the Agreement to Sell dated 05.04.2012 is,,,,,
not an arms-length transaction.,,,,,
In Vannarakkal Kallalathil Sreedharan Vs. Chandramaath Balakrishnan & Anr. (1990 (3) SCC 291 )a Bench of two Judges considered a question,,,,,
identical to the question raised before us. The question was whether the sale prevailed over the attachment. The facts were that 80 cents of land were,,,,,
agreed to be sold in favour of the appellant under an agreement dated October 9, 1978. Before the sale deed was executed, a third party in execution",,,,,
of a decree got the property attached on November 16, 1978. The sale deed was executed on November 23, 1978.",,,,,
On the above facts, it was held as under :",,,,,
“We may first draw attention to some of the relevant statutory provisions bearing on the question. Order XXXVIII Rule 10 of the Code of,,,,,
Civil Procedure provides that attachment before judgment shall not affect the rights existing prior to the attachment of persons not parties,,,,,
to the suit. Under Sec. 40 of the Transfer of Property Act, a purchaser under a contract of sale of land is entitled to the benefit of an",,,,,
obligation arising out of that contract and it provides that that obligation may be enforced inter alia against a transferee with notice. Sec.,,,,,
91 of the Trusts Act also recognises this principle that the transferee with notice of an existing contract of which specific performance can,,,,,
be enforced must hold the property for the benefit of the party to the contract. These are equitable rights though not amounting to interest in,,,,,
immovable property within the meaning of Sec. 54 of the Transfer of Property Act which declares that a contract of sale does not create an,,,,,
interest in the property. On this line of reasoning it has been held by the Madras High Court that the purchaser of (sic under) an antecedent,,,,,
agreement gets good title despite attachment.â€,,,,,
Their Lordships then considered that the same view has been taken by the Bombay and Calcutta High Courts. The view taken by Punjab & Haryana,,,,,
High Court in Mohinder Singh Vs. Nanak Singh ( AIR 1971 P & H, 381) was overruled. It was observed as under :",,,,,
“In our opinion, the view taken by the High Courts of Madras, Bombay, Calcutta and Travancore Cochin in the aforesaid cases appears",,,,,
to be reasonable and could be accepted as correct. The agreement for sale indeed creates an obligation attached to the ownership of,,,,,
property and since the attaching creditor is entitled to attach only the right, title and interest of the judgment-debtor, the attachment cannot",,,,,
be free from the obligations incurred under the contract for sale. Sec. 64 C.P.C. no doubt was intended to protect the attaching creditor,",,,,,
but if the subsequent conveyance is in pursuance of an agreement for sale which was before the attachment, the contractual obligation",,,,,
arising therefrom must be allowed to prevail over the rights of the attaching creditor. The rights of the attaching creditor shall not be,,,,,
allowed to override the contractual obligation arising from an antecedent agreement for sale of the attached property. The attaching,,,,,
creditor cannot ignore that obligation and proceed to bring the property to sale as if it remained the absolute property of the judgment-,,,,,
debtor. We cannot, therefore, agree with the view taken by the Punjab & Haryana High Court in Mohinder Singh’s case.â€",,,,,
In the above case this Court has gone even to the extent that not only a sale deed but even an agreement of sale will prevail over attachment,,,,,
before judgment made subsequent to such agreement for sale. I do not want to express any opinion with regard to the case of an agreement for sale,",,,,,
but I am of the confirmed opinion that a sale deed having been executed prior to attachment before judgment, though registered subsequently will",,,,,
prevail over attachment before judgment.,,,,,
Even in the case of B. Rama Raju Vs. UOI decided by (DB) of High Court of Judicature, Andhra Pradesh at Hyderabad, the Judgment reported",,,,,
in 2011 S.C.C on lines AP-152 in para â€" 103 and 104, it was hold 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 issued 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.",,,,,
A further opportunity of establishing bona fide acquisition of property or that the property in question is not proceeds of crime involved in,,,,,
money-laundering is available and mandated, prior to the adjudicating authority passing an order of confiscation, under Section 8(6).",,,,,
Proceedings for attachment and confiscation of proceeds of crime are a process distinct and dissimilar to the process for prosecution,,,,,
of the offence of money-laundering. Deprivation of property involved in money-laundering is the sanction in the first process while,,,,,
deprivation of personal liberty is the sanction enjoined in conviction for the offence. Mens rea is not a jurisprudentially non-derogable,,,,,
adjunct for visitation of civil consequences and therefore the legislative policy in this area is eminently within the domain of legislative,,,,,
choice. This challenge must therefore fail. Challenge to dispossession before conviction of the accused:,,,,,
It is clear from the above that two proceedings, one is before this tribunal and other proceedings where the criminal complaint pending before the",,,,,
Special Court where the trial of schedule offence is being conducted are distinct,,,,,
The next submission of the respondent no. 1 is that in view of other proceedings pending, the impugned order cannot be interferred. The",,,,,
proceedings relied upon by the ED are the following:,,,,,
a. O.A. No. 766/2013 before the Honâ€ble Debts Recovery Tribunal;,,,,,
b. Writ Petition No. 38870/2013, 39048-39052/2017 and 39053/2017;",,,,,
c. O.S.A. No. 5/2017; and,,,,,
d. Interlocutory Application No. 1/2018 in O.S.A. No. 5/2017, as referred in Para 21.",,,,,
The said arguments have no force as the said proceedings have no bearing whatsoever on the adjudication of the present Appeal for the,,,,,
determination of which, this Tribunal ought only to determine the following:",,,,,
i) Issue 1 - Whether the Appellant has committed any offence under Section 3 of the Prevention of Money Laundering Act, 2002",,,,,
(“Actâ€)?,,,,,
ii) Issue 2-Whether the subject property is proceeds of crime and the Appellant is in possession of proceeds of crime?,,,,,
With regard to issue 1, it is not even the case of the Respondent that the Appellant has committed any offence under Section 3 or is in any manner",,,,,
involved in the commission of the same. The Appellant is the purchaser of the subject property, for which she paid the complete consideration through",,,,,
duly documented legal banking channels, even prior to the date of registration of the FIR or the ECIR.",,,,,
On second issue, it is admitted position that the subject property has been attached as “value thereofâ€. The Appellant has vested rights in the",,,,,
subject,,,,,
property prior to the attachment by Respondent-ED. It is the case of the appellant the same could never have been attached as “value thereof†of,,,,,
the proceeds of crime. At the time of issuance of the Provisional Attachment Order there is no Confirmation Order that any proceeds of crime have,,,,,
flowed to UBHL.,,,,,
The next submission of the respondent is that since the two applications of the appellant are pending before the Honâ€ble Court, therefore, the",,,,,
matter should not be heard.,,,,,
It is true that the appellant has filed the following two applications in O.S.A. No. 5/2017 before the Honâ€ble Karnataka High Court:,,,,,
a. Interlocutory Application bearing No. 11 of 2017 seeking impleadment in O.S.A. No. 5/2017; and,,,,,
b. Interlocutory Application bearing No. 8 of 2017 seeking directions from the Honâ€ble Karnataka High Court to UBHL and the Official Liquidator,,,,,
to execute the Sale Deed(s) in the Appellantâ€s favour pursuant to the Agreement to Sell dated 05.04.2012.,,,,,
The above two applications are pending before the Honâ€ble High Court of Karnataka and are to be decided by the Honâ€ble High Court of,,,,,
Karnataka. This tribunal shall never pass an order by-passing the order of execution of sale deed or to pass any direction to hand over the possession,,,,,
to the appellant as this tribunal has no jurisdiction of the same.,,,,,
This tribunal is only to determine whether the subject Property falls within the ambit of the Act or to whether the subject Property is involved in,,,,,
money laundering. Thus, there is no force in submission of the respondent no. 1 this tribunal has no jurisdiction to even cannot consider the said issue",,,,,
and these proceedings should not continue till disposal of the said proceedings where the prayer for execution of sale deed is pending.,,,,,
The proceedings before the Debt Recovery Tribunal were inter alia between the secured creditor banks and M/s United Breweries [Holdings],,,,,
Ltd., under a special enactment for recovery of dues.",,,,,
The appellant is not seeking relief of delivery of possession or registration of Sale Deed from this. As such also, all submissions regarding the",,,,,
Corporate Guarantee and the Master Debt Recast Agreement are wholly irrelevant at this stage.,,,,,
Even respondent-ED has for the first time has argued about the issue of Guarantee and a Master Debt Recast Agreement (“MDRAâ€) who,,,,,
has failed to place the same on record.,,,,,
As far as the Corporate Guarantee is concerned, it is submitted on behalf of the appellant that HDFC bank was not even a party to the said",,,,,
Corporate Guarantee and therefore, the same has no relevance to the present Appeal. The corporate guarantee is executed between UBHL and",,,,,
certain secured creditors. The same is not registered either with the Ministry of Companies Affairs or the jurisdictional Registrar of Assurances and,,,,,
hence no public knowledge can be imputed to the Appellant.,,,,,
In the present case, HDFC bank had given “No-Objection†in respect of the subject-property which is placed on record at pg. 297 of the",,,,,
Appeal. The Property was mortgaged with HDFC Bank and not with the banks who are concerned with MDRA and the Corporate Guarantee. Since,,,,,
the entire payment was received by HDFC bank, the flat in question was released from the condition of mortgaged property. The contents of the said",,,,,
“No objection†issued reads as under:-,,,,,
“HSBC,,,,,
To Date: 18 February 2007,,,,,
Ms. Kiran Mazumdar,,,,,
Biocon India Pvt. Ltd.,,,,,
20th KM Hosur Road,,,,,
Hebbagudi,,,,,
Bangalore-560100,,,,,
Sir/Madam,,,,,
Sub: Cheque favouring details,,,,,
Ref: 071-060123-006,,,,,
Sl.
No.",Cheque No.,Cheque Date,Clearing Date,Debit Amount,
1,704165,05 Apr 2012,09 Apr 2012,"3,006,597",
2,704166,05 Apr 2012,09 Apr 2012,"11,993,403",
3,011887,01 Sep 2012,07 Sep 2012,"43,545,635",
4,066208,12 Mar 2013,16 Mar 2013,"43,545,635",
5,096567,02 Sep 2013,03 Sep 2013,"43,11,0175",
6,131197,24 Feb 2014,03 Mar 2014,"43,110,175",
7,745088,27 Aug 2014,26 Sep 2013,"43,110,175",
8,171592,28 Feb 2015,11 Mar 2015,"28,187,105",
As far as the impugned order dated 11.2.2016 is concerned, the said order is not sustainable in law and the facts of the present case. The same is",,,,,
set-aside against the appellant with regard to flat in question. The provisional order is also quashed accordingly by allowing the appeal.,,,,,
However, it is clarified that this tribunal has decided the appeal pertaining to the order passed on the attachment of flat allegedly purchased by the",,,,,
appellant. The finding shall have no bearing with regard to merit of other proceedings pending against the accused parties including extradition,,,,,
proceedings. It is alleged that the flat in question is one of the assets in which the Official Liquidator is appointed, therefore, the appellant, the",,,,,
respondent nos. 3, 5 and 8, unless the final order is passed in her favour, shall not create third party interest directly or indirectly.",,,,,
No costs.,,,,,