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2020 Supreme(Mad) 402
IN THE HIGH COURT OF JUDICATURE AT MADRAS
M.M. SUNDRESH, KIRSHNAN RAMASAMY, JJ.
Deputy Director, Office of the Joint Director, Directorate of Enforcement, Chennai - Appellant
Versus
Asset Reconstruction Company (India) Ltd., (Arcil), Mumbai & Others - Respondent
Writ Petition No. 29970 of 2019 & WMP. Nos. 29872 & 34971 of 2019
Decided On : 02-06-2020
For the Petitioner:G. Rajagopalan, Additional Solicitor General, Assisted by Rajnish Pathiyil, Advocate. For the Respondents:R1, AR.L. Sundaresan, S.C., Gaurav Chatterjee, R3, B. Kumar, S.C., S. Ramachandran, Advocate.
Headnote:
Insolvency & Bankruptcy Code, 2016 - Section 36 – Indian Penal Code, 1960 - Sections 420, 468 and 471 - Constitution of India ,1950- Article 226 - Quash - Writ of certiorari - Termination from Service - Though we are concerned with purely a legal issue jurisdiction of National Company Law Tribunal, Hyderabad Bench-I Hyderabad to adjudicate upon the issues sought to be raised before it through the applications filed by the first respondent before us, the factual matrix to the least extent possible are to be placed - Crux of complaint is that the officials of the said concern along with others hatched a criminal conspiracy at Chennai and Hyderabad during the period from to 2013 with the object of defrauding consortium of the bankers lead by the Central Bank of India. In furtherance of the said conspiracy Central Bank of India was made to submit a fraudulent Letter of Credit and the amount sanctioned was diverted for some other purpose other than the one sanctioned - Held, Tribunal has also made reliance upon the judgment of the Apex Court in Alchemist Asset Reconstruction Company Limited vs. Hotel Private Limited and others ((2018) 16 Supreme Court Cases 94). The matter was pertaining to the initiation and continuance of an arbitrary proceedings - It was nobodys case that NCLT did not have any jurisdiction - Criminal case was also registered after admission of application filed invoking Section 7 of the IBC - Hence court do not find any application in above said judgment to present case - As stated court are not inclined to go into merits of case in view of court conclusion arrived at - This would also include entitlement of petitioner to proceed against the asset which is also the one of the subject matters of proceeding before the Tribunal - As discussed proceedings have been initiated before the jurisdictional Court by the petitioner pursuant to the Final Report filed by the Central Bureau of Investigation within the territorial jurisdiction of this Court - Writ petition stands allowed
The case discussed in the provided legal document explicitly states that the attachment under Section 5 of the Prevention of Money Laundering Act (PMLA) is considered a civil sanction. The judgment describes the process of attachment as a civil proceeding that runs parallel to investigation and criminal action related to money laundering. It emphasizes that the objective of PMLA is distinct from other laws and that the attachment is a civil measure aimed at preventing money laundering and recovering proceeds of crime (!) (!) .
JUDGMENT
(Prayer: Writ Petition is filed under Article 226 of the Constitution of India to issue a writ of certiorari to call for the records of the NCLT pertaining to the impugned order dated 11.07.2019 passed in IA No.413 and 287 of 2019 by the NCLT in CP 9IB) No.2019/7/HBD/2017 and quash the same.)
M.M. Sundresh, J.
1. Challenge in this writ petition is to the order passed by the National Company Law Tribunal, Hyderabad Bench-I, Hyderabad in I.A.Nos.413 and 287 of 2019 in CP(IB) No.219/HDB/2017 filed under Section 60(5) of Insolvency and Bankruptcy Code, 2016. The applications filed seeking to set aside and grant stay on the impugned Provisional Attachment Order No.04/2019 with a consequential direction to Enforcement Directorate viz., the petitioner to raise the same are also on contest allowed.
2. BRIEF FACTS:-
2.1.Though we are concerned with purely a legal issue viz., the jurisdiction of the National Company Law Tribunal, Hyderabad Bench-I, Hyderabad, to adjudicate upon the issues sought to be raised before it through the applications filed by the first respondent before us, the factual matrix to the least extent possible are to be placed.
2.2. The Central Bureau of Investigation, BS & FC, Bangalore, has registered three criminal cases in FIRs vide RC.No.4(E)/2016/CBI/BS & FC/BLR dated 01.02.2016, RC No.04/2017 dated 03.02.2017 and RC No.14/2018 dated 16.07.2018 against M/s Best and Crompton Engineering Project Ltd., and their officials for the offences punishable under Sections 420, 468 and 471 of Indian Penal Code, 1960, among other offences on a complaint given by the Consortium of Banks lead by the Central Bank of India.
2.3. The crux of the complaint is that the officials of the said concern along with others hatched a criminal conspiracy at Chennai and Hyderabad during the period from 2010 to 2013 with the object of defrauding the consortium of the bankers lead by the Central Bank of India. In furtherance of the said conspiracy, Central Bank of India was made to submit a fraudulent Letter of Credit and the amount sanctioned was diverted for some other purpose other than the one sanctioned. Based upon the charge sheet laid, a prima facie case for an offence of money laundering appeared to have been made out leading to registration of case in ECIR No.CEZO/05/2016 on 27.04.2016.
2.4. The management of M/s Best and Crompton Engineering Project Ltd., was taken over by two persons through the acquisition of 100% shares on 29.03.2010, paper crony companies viz., M/s Global Forgings Ltd., M/s Tejaswini Engineering Private Ltd., M/s Ganga Exim Pvt., Ltd., and M/s Godavari Exports & Imports Pvt. Ltd., were created though not in existence. Imaginary transactions were made among them. The Forensic Audit conducted in the year 2014 indicated diversion through fictitious purchases and sales. One of the transactions as could be seen from the statement given under Section 50 of the Act brought to light a transfer of the sum of Rs.125 crores in favour of M/s Veceroy Hotels Ltd., through the company Mahal Hotel Pvt. Ltd.
2.5. Statements have also been obtained from various persons though a business transaction agreement was entered into, substantial amount was already paid even prior in favour of M/s Veceroy Hotels Ltd. Even though this was terminated by way of a Deed of confirmation of Termination dated 16.09.2013, no action was taken to get back the amount. Part of the amount was paid through M/s Bhagayanagar Investments & Trading Pvt. Ltd. This company is also stated to be one of the shell companies. Therefore, neither there existed a sale of any hotel nor a return of money in pursuant to the Deed of confirmation of Termination. According to the petitioner, multiple circular transactions were involved with the connivance of all the accused.
2.6. Thus, the petitioner is of the view that by fraud, M/s Best and Crompton Engineering Project Ltd., along with the accused persons through the various intermedia companies of Sujana Group by circula
