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Order allowing ED to attach firm's property mortgaged with PNB set aside

The PNB had approached the tribunal challenging the adjudicating authority's order allowing the ED to attach the company's properties mortagaged with the bank

Press Trust of India  |  New Delhi 

Punjab National bank

The Act (PMLA) has set aside an order of the adjudicating authority allowing the (ED) to attach a company's properties mortgaged with the

The tribunal's chairman, Justice Manmohan Singh, said that the PNB is a public sector bank and the are in crisis and no attempt should be made to block loan amount so as to avoid worsening of positions in the commercial market.

The PNB had approached the tribunal challenging the adjudicating authority's order allowing the ED to attach the company's properties mortagaged with the bank.

The company, Vandana Vidhyut Limited, had approached a consortium of for availing of a loan and Rs 546.77 crore was taken from the PNB, one of the of the consortium.

The ED had passed a provisional attachment order in March 2018, attaching movable and immovable property of the company which were hypothecated/equitably mortgaged to the bank.

In April, 2018, the Mumbai Bench of the (NCLT) had declared a moratorium against the company under Section 14 of the Insolvency and Bankruptcy Code, 2016, on an application made by (being a financial creditor as well as a member of the consortium of banks).

Even then, the Adjudicating Authority confirmed the attachment of the properties by passing an order on September 17, 2018, which was challenged by the PNB before the appellate tribunal.

The tribunal, in its order said that PNB is a public sector bank and the money must come to the public forthwith and not after the trial of criminal case against the borrowers which may take many years.

"The banks are in crisis, no attempt should be made to block the loan amount in order to avoid worsen positions in the commercial market. The trial may continue against the borrowers. One fails to understand why the bank loan amount be blocked in view of settled law," it said.

The tribunal said the ED has registered the case and passed the provisional attachment order after the moratorium order was passed by the NCLT.

"Thus, on the face of record, it is evident that the ED and the adjudicating authority have not understood the legal issues involved rather they have ignored the settled law and passed the impugned order.

"The serious situation is that ED has registered ECIR on the basis of FIR which was registered at the request of banks' complaint as borrowers had failed to pay the loan amount. The banks have now become victim. Therefore, both the impugned order and provision attachment order are set aside qua the appellant bank," the tribunal said.

It said the adjudicating authority should have stayed the proceedings on passing of the moratorium order by the NCLT and the continuation of the proceedings from the date of commencement of the moratorium order is contrary to the intention of the legislature.

"In the facts of the present case, it appears that hurdle has been created in the process after passing the order of NCLT which ought not to have been done. The question of registering ECIR does not arise. The passing of provisional attachment order was not application of mind and without consulting the facts and law," it said.

The tribunal held that there was no evidence to suggest that the property attached by the ED was acquired out of "proceeds of crime" as defined in Section 2(1)(u) of the PMLA, and therefore, the same cannot be attached under Section 5 of the by the ED.

It also observed that the tribunal has time and again held that the secured asset of a bank cannot be attached or confiscated when there is no illegality or unlawfulness in the title of the bank and that there is no charge of against the bank.

First Published: Fri, January 04 2019. 21:00 IST
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