Appellate Tribunal for SAFEMA, FEMA, PMLA, NDPS and PBPT Act: Justice Manmohan Singh (Chairman) allowed an appeal filed by a consortium of banks and set aside an order by the Adjudicating Authority which had attached properties of appellant herein (PMT Machines) mortgaged with the banks on the ground that the mortgaged properties were acquired much before the date of the alleged offence and the charge of properties are also much prior to the date of alleged offence committed.

The case of the appellants was that PMT Machines Limited was undergoing a corporate insolvency resolution process (CIRP). Meanwhile, by order of the Directorate of Enforcement (ED), its properties were attached under PMLA. The appellant banks were providing PMT Machines with financial facilities and PMT created charge and rights in favour of the banks. Banks (the creditors), in the instant appeal filed through the Resolution Professional of PMT Machines, were pressing for relief to enable them to maximise the value of assets and recover their debts.

Shri Rajshekhar Rao, on behalf of the appellants, contended that the allegations of money laundering in the complaint pertained to period after charge/mortgage was created. It was also submitted that the assets were acquired by PMT Machines much before the commission of the alleged offence. In addition to this, ED did include Banks as a Respondent in the proceedings before the Adjudicating Authority as required by Section 8(1) of the Prevention of Money Laundering Act, 2002. Due to such attachment, the CIRP was getting delayed and thus the objective of the Insolvency and Bankruptcy Code, 2016 was being defeated. 

Shri Nitesh Rana, on behalf of the respondents, argued that though the banks were entitled to recover the amount, they should approach the Special Court by filing the petition under Section 8(8) of PMLA.

The Appellate Tribunal accepted the contention that the mortgaged properties were acquired much before the date of the alleged offence and the charge of properties are also much prior to the date of the alleged offence committed. The Tribunal looked into the object of both the legislations (PMLA and IBC) and also relied on Delhi High Court Judgment in Directorate of Enforcement v. Axis Bank, 2019 SCC OnLine Del 7854, and opined that if a bonafide third party claimant had acquired interest in the property which is being subjected to attachment at a time anterior to the commission of the criminal activity, the product whereof is suspected as proceeds of crime, the acquisition of such interest in property by the third party cannot conceivably be on account of intent to defeat this law.

Similarly, when a secured creditor being a bonafide third party claimant initiates actions in accordance with law for enforcement of such interest prior to the order of attachment under PMLA, the initiation of the latter action unwittingly having the effect of frustrating the former since both actions are in accord with law, in order to co-exist and be in harmony with each other, it would be appropriate that the PMLA attachment, though remaining valid and operative, takes a back-seat allowing the secured creditor bonafide third-party claimant to enforce its claim by disposal of the subject property, the remainder of its value, if any, thereafter to be made available for purposes of PMLA. The tribunal ordered in favour of the banks and specifically mentioned that ED is not precluded to attach other private properties and assets of the accused. [PMT Machines Ltd. v. Directorate of Enforcement, Delhi, 2019 SCC OnLine ATPMLA 43, decided on 16-09-2019]

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