Delhi High Court
The Joint Director Directorate Of ... vs Naresh Grover & Anr. on 11 December, 2019
$~11
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CRL.A. 508/2019 & CRL.M.A 7990/2019 & CRL.M.A
7992/2019
THE JOINT DIRECTOR DIRECTORATE
OF ENFORCEMENT LUCKNOW & ORS ..... Appellants
Through: Mr Amit Mahajan, CGSC with
Mr Randeep Sachdeva and Ms
Mallika Hiremath, Advocates.
versus
NARESH GROVER & ANR. ..... Respondents
Through: Mr R.K. Handoo, Mr Amit
Shukla, Ms Neha Shukla and Mr
Deva Shukla, Advocates for R1.
Mr Pankaj Vivek, Mr Pares
Shreenath
Sharma, Mr Bidyarani Yumnum
and Mr Atul Tripathi, Advocates
for R2.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
ORDER
% 11.12.2019
VIBHU BAKHRU, J
1. The Enforcement Directorate has filed the present appeal under
Section 42 of the Prevention of Money Laundering Act, 2002 (hereafter
'PMLA'), inter alia, impugning an order dated 22.11.2018 (hereafter
'the impugned order') passed by the Appellate Tribunal.
2. By the impugned order, the appeal preferred by the respondent
under Section 26 of the PMLA, against an order dated 13.09.2017
passed by the Adjudicating Authority, was allowed. By the said order
dated 13.09.2017, the Adjudicating Authority had confirmed the order
dated 26.04.2017 passed by the Directorate of Enforcement, whereby
the attachment of certain immovable properties (B-42 Ashok Vihar
Phase -I, New Delhi and the factory premises at 1703-04 HSIIDC, Rai,
Sonepat, Haryana) was confirmed.
3. Before examining the present controversy, it is important to set
out the relevant facts necessary to address the same.
4. Super Cardiac Breaths Pvt. Ltd. (through its authorised director,
Naresh Grover, respondent no.1 herein) had acquired the property
bearing Plot No. 1703-04, HSIIDC Industrial Estate, Rai, Sonepat,
Haryana. The consideration for the same was paid in five tranches to
Haryana State Industrial and Infrastructure Development Corporation
(HSIIDC). These payments were made between the period 09.02.2001
to 08.09.2005. A conveyance deed relating to the said property was
executed by HSIIDC in favour of Super Cardiac Breaths Pvt. Ltd on
15.12.2005.
5. Thereafter, equitable mortgage of the said property at Haryana
was created by depositing the title deeds with respondent no. 2 bank.
This was to secure cash credit facility of ₹5 crores and a bank guarantee
of ₹2 crores and the permission was granted by HSIIDC on 14.03.2012.
On 24.02.2012, respondent no.2 bank sanctioned the abovementioned
facilities.
6. The Central Bureau of Investigation (CBI) alleges that
investigations had revealed that respondent no.1 had conspired with
public officials to sell sub-standard products through its companies
under the National Rural Health Scheme (NRHM). It is alleged that this
had caused a wrongful loss to the Government exchequer. In view of
the above, an FIR alleging offences, under Section 120B of the IPC read
with Section 409/420 of the IPC, was filed on 02.01.2012. On
25.02.2013, the chargesheet was filed. Since the alleged offences were
included in the Part A Paragraph I to the Schedule to the PMLA, an
ECIR was registered with the Lucknow Zonal Office of the appellant.
7. By the order dated 26.04.2017, Deputy Director, Enforcement
Directorate, Ministry of Finance passed a provisional order of
attachment, whereby the two following properties were attached:
S. No. Details of Property Value (INR)
1. B-42, Ashok Vihar, Phase-I, New ₹17,11,42,000/-
Delhi
2. Factory of M/s Surgicoin Medequip ₹5,50,00,000/-
Pvt. Ltd., 1703-04, HSIDC, Rai,
Sonepat, Haryana
8. On 13.09.2017, the Adjudicating Authority confirmed the
provisional order of 04.11.2017 accepting the view that the attached
properties were proceeds of crime. Thereafter, respondent no. 1 and
Bajaj Finance filed separate appeals before the Appellate Tribunal,
challenging the orders dated 26.04.2017 and 13.09.2017.
9. By a judgment dated 28.06.2018, the Tribunal allowed the appeal
of Bajaj Finance on the ground that the property (B-42, Ashok Vihar,
Phase-I, New Delhi) was purchased by respondent no.1 vide a sale deed
17.10.2002 and therefore, the same could not be proceeds of a crime
which was allegedly committed in the year 2012. Further, the said
property had been mortgaged to Bajaj Finance and thus, it had first
charge over it.
10. The controversy in this appeal relates to attachment of property
being no. 1703-04, HSIIDC, Rai, Sonepat, Haryana (hereafter 'the
factory premises'). As noted above, this property was mortgaged to
respondent no.2 (Bank of Baroda) for assistance extended to Surgicoin
Medequip Pvt Ltd.
11. The borrower, Surgicoin Medequip Pvt Ltd, failed to re-pay the
outstanding amounts to respondent no.2. This led respondent no.2 to
issue a statutory notice dated 04.07.2018 under Section 13(2) of the
Securitisation and Reconstruction of Financial Assets and Enforcement
of Securities Interest Act, 2002 (hereafter the 'SARFAESI Act').
Thereafter, respondent no.1 expressed his willingness to settle all
disputes and therefore, respondent no.2 refrained from initiating further
proceedings under the SARFAESI Act.
12. A tripartite agreement dated 14.09.2018 was entered into
between respondent no.2 bank, the prospective buyer and the borrower
(Surgicoin Medequip Pvt Ltd through its director - respondent no.1),
wherein it was agreed that the sale consideration of the factory premises
and plot would be deposited in the CC account of the borrower. And,
the amounts so received would be adjusted against the amounts due
from the borrower. The outstanding amount was approximately
₹6,55,11,000/-. Thereafter, a part payment of ₹1,00,00,000/- was made
by the prospective buyer and the balance payment was to be made in
terms of the said tripartite Agreement.
13. By a judgment dated 22.11.2018, the Tribunal took note of the
details of payments made for acquisition of the property bearing no.
1703-04, HSIIDC, Rai, Haryana and held that it was clear that the
consideration for acquiring the said property was paid in five
instalments during the period 09.02.2001 to 08.09.2005. The Tribunal
noted that the payments for the factory premises were made in the
regular course of business and thus, could not be considered as
"proceeds of crime". The Tribunal also noted that the date of acquisition
of the said property was prior to the date of alleged commission of the
scheduled crime. The Tribunal also observed that it was an admitted
fact that before passing the provisional attachment order or an order of
confirmation, the adjudicating authority was aware that the said
property was mortgaged and the Bank of Baroda was the mortgagee of
the same. In view of the above, the Tribunal set aside the provisional
order of attachment dated 26.04.2017 and the order confirming
attachment dated 13.09.2017.
14. Thereafter, the Enforcement Directorate filed an appeal before
the High Court of Allahabad, challenging the judgment dated
28.06.2018, whereby the Tribunal had set aside the attachment of the
property at B-42, Ashok Vihar, Phase-I, New Delhi. The Enforcement
Directorate has filed the present appeal before this Court, challenging
the judgment dated 22.11.2018, whereby the Tribunal had set aside the
attachment of the factory premises.
15. Admittedly, the factory premises were purchased in the year
2005. Therefore, the Tribunal accepted the contention that the said
property, which was mortgaged to Bank of Baroda, could not be subject
to attachment as proceeds of crime. Admittedly, the said properties had
been acquired prior to the commission of the alleged crime, which is
stated to be committed somewhere in 2011-12. Thus, the said properties
could not be stated to be assets which were derived from any criminal
activity.
16. Section 2(1)(u) of the PMLA, which defines the expression
'proceeds of crime', is set out below:
"2. Definitions.-
xxxx xxxx xxxx
xxxx
(u) "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 in value
held within the country [or abroad];"
17. It is contended on behalf of the appellant that 'proceeds of crime'
would not only mean the property derived or obtained directly as a
result of criminal activity, but also the value of any such property. It is
thus contended that notwithstanding that any asset may not be derived
by criminal activity; nonetheless, if it represents the value thereof, it can
be attached as proceeds of crime. In addition, it is submitted that the
provisions of the PMLA override the provisions of other statutes,
including the SARFAESI Act, as well as Recovery of Debts Due to
Banks and Financial Institutions Act, 1993.
18. As noticed above, the proceeds of crime are defined to mean any
property derived or obtained directly or indirectly by any person, as a
result of criminal activity relating to a scheduled offence. Indisputably,
the properties involved in this petition were not derived or obtained as
a result of any criminal activity as the same had been acquired much
prior to commission of the alleged scheduled crime. The contention that
the value of any property derived from criminal activity can also be
attached as proceeds of crime, is misconceived in the facts of this case.
Even if it is accepted that assets, which are not derived or obtained as a
result of criminal activity, can be attached in lieu of any assets having
equivalent value derived or obtained from any criminal activity, the
same can be attached only from the hands of a person who is guilty of
committing a scheduled crime or otherwise holds proceeds of crime.
19. It is an admitted fact that the properties, as sought to be attached
by the appellant, had been acquired and mortgaged by respondent no.1
prior to the commission of any scheduled offence. Thus, on the date of
commission of the offence and on the date of the attachment order, the
said properties did not vest with respondent no.1. Respondent no.1,
being the mortgagor, was left with equity of redemption and all interest
in the said property stood transferred to the mortgagee (respondent
no.2), prior to the order of provisional attachment. There is no dispute
that the respondent no.2 bank had acquired the mortgage of the property
in question for valuable consideration. Therefore, any interest in the
property acquired by them cannot, by any stretch, be considered as
proceeds of crime in the hands of the mortgagee bank.
20. In the aforesaid view, the said order dated 26.04.2017 of
Provisional Attachment, whereby the properties in question were
attached and the order dated 13.09.2017 passed by the Adjudicating
Authority confirming the said attachment, are wholly unsustainable.
21. The learned Counsel appearing for the respondent no.2 bank
states that in exercise of its powers, the bank has already exercised its
rights to enforce its security interest in respect of the factory premises.
It had sold the factory premises sought to be attached to a third party
and has thereby recovered the proceeds thereof. The said proceeds have
since been appropriated towards the amount due by respondent no.1 and
there is no surplus for distribution to respondent no.1 or the borrower.
22. In view of the above, this Court finds no reason to interfere with
the decision of the Tribunal to set aside the order dated 26.04.2014
passed by the Enforcement Directorate provisionally attaching the
aforementioned property and the order dated 13.09.2017 passed by the
Adjudicating Authority confirming the same. The appeal is,
accordingly, dismissed.
23. The pending applications are also disposed of.
VIBHU BAKHRU, J
DECEMBER 11, 2019
pkv
