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In the latest development in the Nirav Modi saga, a Special Judge at City Civil and Sessions Court, Mumbai on Monday allowed a plea to exempt from confiscation some of Modi's properties which were secured to obtain loans from the Punjab National Bank (PNB) and other consortium banks (Deputy Director, Directorate of Enforcement v. Nirav Deepak Modi and ors).
The exemption was allowed in view of Section 12 (7) of the Fugitive Economic Offenders Act (FEO Act), 2018 which allows such exemption where it is shown that others have interest in the property which was acquired bona fide and without knowledge of the fact that the property was proceeds of crime.
In respect of all other properties, the Court has allowed the Enforcement Directorate's (ED) application for attachment and confiscation of the same.
Once an offender has been declared a fugitive, the court can then confiscate all his properties in the favour of the Central Government. The scheme of the FEO Act is to directly confiscate the properties of the offender, in such a case.
After the declaration of Nirav Modi as the Fugitive Economic Offender, Punjab National Bank (PNB) and the consortium of banks had filed an application under Section 12(7) of the FEO Act as interested persons. This provision empowers the Special Court to exempt any property from confiscation while issuing a confiscation order.
The exemption from confiscation can be granted if the court is satisfied that the interested person has acquired the interest in such properties in a bona fide manner and without knowledge that the properties were proceeds of a crime.
PNB had sought the exemption of mortgaged, hypothecated, and guarantors’ properties wherein the PNB and the consortium have a one fide and legitimate legal interest in view of the mortgage deeds, hypothecation deeds and guarantees provided by companies promoted by Nirav Modi to secure the loans provided to them by PNB and other consortium members.
PNB argued that the said mortgaged, hypothecated, and guarantors’ properties are not proceeds of crime and were obtained much prior to the knowledge of the fraud which was discovered only in 2018.
While allowing the plea to exempt these properties, the order passed on Monday states that, "Exemption of the properties and exclusion thereof under Section 12 (7) I favour of respondent nos. 2, 5 to 11 (interested Banks), will only entitle them to proceed with their claim before the Competent Court, Authority or Tribunal in the manner provided by law."
As for the remaining unsecured properties that the ED had moved to confiscate, the order reads, "...other properties (i.e. excluding the properties claimed by the interested parties under Section 12 (7) of the FEO Act) shall be attached by the ED under the provisions of the FEO Act within a month. After attachment, the said properties shall stand confiscated to the Central Government under Section 12 (2) and (8) of the Fugitive Economic Offenders Act, 2018."
Also exempted from confiscation were “valuable paintings seized by the Income Tax Department.”
As far as these paintings are concerned, the Court has directed that the ED is "at liberty to prosecute a remedy as per law in respect of the paintings seized by Income Tax Department.”
The judge has also added that a supplementary application may be filed if further properties are identified. The order has been passed by Special Court judge, VC Barde.
The PNB and consortium of banks were represented by Shardul Amarchand Mangaldas & Co, led by Nitesh Jain, Partner, who also argued the matter. He was assisted by Senior Associate Aditya Malhotra and Associate, Adrish Guha Majumder.
Nirav Modi, the prime accused in the PNB Scam, has been in jail since March 2019. Last month, the UK High Court rejected Modi’s plea for bail a fifth time.
Read the order: